Calfrac Announces First Quarter Results

CALGARY, May 5 /CNW/ - Calfrac Well Services Ltd. ("Calfrac" or "the Company") (TSX-CFW) announces its financial and operating results for the three months ended March 31, 2010.

HIGHLIGHTS

    
    -------------------------------------------------------------------------
                                                 Three Months Ended March 31,
                                                  2010       2009     Change
    -------------------------------------------------------------------------
    (000s, except per share and unit data)          ($)        ($)        (%)
    (unaudited)

    Financial
    Revenue                                    227,123    180,388         26
    Operating income(1)                         38,908     27,427         42
    Net income                                  13,636      5,528        147
      Per share - basic                           0.32       0.15        113
      Per share - diluted                         0.31       0.15        107
    Funds provided by operations(2)             36,512     22,713         61
      Per share - basic                           0.85       0.60         42
      Per share - diluted                         0.84       0.60         40
    EBITDA(3)                                   40,867     25,945         58
      Per share - basic                           0.95       0.69         38
      Per share - diluted                         0.94       0.69         36
    Working capital (end of period)            157,688    129,532         22
    Shareholders' equity (end of period)       474,718    402,537         18
    Weighted average common
    shares outstanding (No.)
      Basic                                     42,988     37,742         14
      Diluted                                   43,508     37,742         15
    -------------------------------------------------------------------------

    Operating (end of period)
    Pumping horsepower (000s)                      465        303         53
    Coiled tubing units (No.)                       28         18         56
    Cementing units (No.)                           21         20          5
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    (1) Operating income is defined as net income (loss) before depreciation,
        interest, foreign exchange gains or losses, gains or losses on
        disposal of capital assets, income taxes and non-controlling
        interest. Management believes that operating income is a useful
        supplemental measure as it provides an indication of the financial
        results generated by Calfrac's business segments prior to
        consideration of how these segments are financed or how they are
        taxed. Operating income is a measure that does not have any
        standardized meaning under generally accepted accounting principles
        ("GAAP") and, accordingly, may not be comparable to similar measures
        used by other companies.

    (2) Funds provided by operations is defined as cash provided by operating
        activities before net change in non-cash operating assets and
        liabilities. Funds provided by operations is a measure that provides
        shareholders and potential investors with additional information
        regarding the Company's liquidity and its ability to generate funds
        to finance its operations. Management utilizes this measure to assess
        the Company's ability to finance operating activities and capital
        expenditures. Funds provided by operations is a measure that does not
        have any standardized meaning prescribed under GAAP and, accordingly,
        may not be comparable to similar measures used by other companies.

    (3) EBITDA is defined as net income (loss) before interest, taxes,
        depreciation, amortization and non-controlling interest. EBITDA is
        presented because it is frequently used by securities analysts and
        others for evaluating companies and their ability to service debt.
        EBITDA is a measure that does not have any standardized meaning
        prescribed under GAAP and, accordingly, may not be comparable to
        similar measures used by other companies.
    

PRESIDENT'S MESSAGE

I am pleased to present Calfrac's operating and financial highlights for the three months ended March 31, 2010 and discuss our prospects for the remainder of 2010. During the first quarter, our Company:

    
    -   achieved record revenue for Calfrac resulting from high levels of
        fracturing and coiled tubing activity within the unconventional
        natural gas and oil plays of western Canada;
    -   experienced strong levels of fracturing and cementing activity in
        Arkansas and the Rocky Mountain region of the United States;
    -   completed the first full quarter of operations since the acquisition
        of Century Oilfield Services Inc. ("Century") in November 2009; and
    -   signed eight annual contracts in Russia with two of that country's
        largest oil and natural gas companies.

    Financial Highlights
    -------------------------------------------------------------------------

    For the three months ended March 31, 2010, the Company recorded:

    -   revenue of $227.1 million versus $180.4 million in the first quarter
        of 2009 led by higher year-over-year activity in Canada;
    -   operating income of $38.9 million versus $27.4 million in the
        comparable period in 2009 resulting from strong financial performance
        in Canada;
    -   net income of $13.6 million or $0.32 per share compared to $5.5
        million or $0.15 per share in the comparable 2009 period; and
    -   working capital of $157.7 million, an increase of 23 percent from the
        end of 2009.

    Operational Highlights
    -------------------------------------------------------------------------
    

Canada

The Company experienced strong demand for its fracturing and coiled tubing services throughout the Western Canada Sedimentary Basin during the first quarter of 2010. Activity continued to be concentrated in the unconventional natural gas resource plays of northern Alberta and northeast British Columbia as well as growing unconventional oil plays such as the Cardium, Viking, Lower Shaunavon and Bakken plays. The Company is very encouraged by the positive momentum generated in the first quarter focused on the light oil plays in western Canada. Calfrac anticipates that activity will continue to build throughout 2010 and beyond. The first quarter of 2010 marked the first full quarter of operations since the acquisition of Century in November 2009. The operational capacity of approximately 70,000 hydraulic horsepower and 10 coiled tubing units, high-quality modern equipment and experienced workforce acquired from Century were integral to achieving record levels of quarterly revenue. The Company's strong safety record in Canada also continued to improve. As the demand for pressure pumping services in Canada increased significantly from the fourth quarter of 2009, pricing and operating margins in this market also strengthened during the first quarter.

United States

Fracturing activity levels in the Rocky Mountain region were higher than expected during the first quarter due to increased pipeline capacity alleviating previous natural gas takeaway issues. In the Fayetteville basin of Arkansas, fracturing and cementing activities remained strong, but were impacted slightly by unseasonably cold weather in January and February, which hampered operations. As a result of the operating flexibility arising from the acquisition of fracturing assets from Pure Energy Services Ltd. ("Pure"), Calfrac entered the Marcellus play in Pennsylvania in October 2009 with the transfer of a large fracturing fleet from the Company's Grand Junction district. Calfrac's operations remain in the start-up phase in this market with drilling activity beginning to increase and the Company expects higher well completion activities and improved financial performance throughout 2010. As compared to the first quarter of 2009, the financial results for this segment were impacted by the 16 percent depreciation in the value of the United States dollar as compared to the Canadian dollar. Towards the end of the first quarter, the Company began to experience improved pricing levels, the full impact of which is anticipated to be realized during the remainder of 2010 leading to improved financial performance.

Russia

During the first quarter, the Company signed eight annual contracts with two of Russia's largest oil and natural gas companies. In order to meet these contractual commitments, Calfrac deployed an additional fracturing spread and coiled tubing unit into Western Siberia in January 2010. Fracturing and coiled tubing operations during the quarter were significantly impacted by long periods of cold winter weather in January, which continued into early February. The Company's reported financial results were also impacted by a 5 percent decline in the value of the Russian rouble from the first quarter of 2009. However, Calfrac expects higher levels of equipment utilization and stronger financial results throughout the remainder of the year as a result of its contracts and broader operating scale.

Mexico

In Mexico, Pemex continued to focus its drilling and completion activities during the first quarter on the Chicontepec field where Calfrac currently operates two fracturing spreads and five cementing units. The Company expects that oilfield service activity in this region during the remainder of 2010 will be focused primarily on completion activities which should result in high utilization for Calfrac's fleet in Mexico. Fracturing activity in the Burgos natural gas field of northern Mexico, however, was lower than anticipated and the Company expects that activity will not improve in a meaningful way in 2010.

Argentina

During the first quarter, activity in the Company's cementing operations in Argentina was relatively strong and continued to generate favourable operating results. Calfrac continues to develop new market opportunities as the Argentine business environment evolves.

    
    Outlook and Business Prospects
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The recent improvement in the global economy facilitated higher drilling and completion activity in Canada and the United States during the first quarter of 2010. Exploration and development activity in these regions remains focused on horizontal wells incorporating multi-stage fracturing technology and coiled tubing completions in unconventional oil and natural gas resource plays. This industry trend is expected to result in an increase in overall utilization levels for the pressure pumping service industry during 2010.

In Canada, the Company expects fracturing and coiled tubing activity in the Horn River shale gas play of northeast British Columbia to recommence late in the second quarter with a majority of the activity occurring in the third quarter. Calfrac is currently augmenting its infrastructure in Dawson Creek and Fort Nelson to enhance the operating efficiency and effectiveness of its fracturing and coiled tubing operations. Overall, the energy sector's ongoing focus on unconventional natural gas and oil plays is anticipated to result in high levels of pressure pumping equipment utilization in Canada throughout the remainder of the year and continue to drive the financial performance of Calfrac's Canadian operations. The renewed focus on exploiting light oil basins with new technologies is particularly encouraging. Activity in the Cardium, Viking and Bakken oil plays is expected to continue to be very robust. This industry trend has led to significantly greater commodity-based diversification for the Company's Canadian operations.

In the Fayetteville shale play of Arkansas, fracturing and cementing activity is expected to remain strong during 2010 due to high overall demand for pressure pumping services. As a result of increased pipeline infrastructure, which alleviated most of the takeaway issues in the Rocky Mountain region of Colorado, fracturing activity levels in this region are expected to continue the positive momentum throughout the remainder of the year. Calfrac diversified its operations in the United States by commencing fracturing operations in the Marcellus shale play of Pennsylvania during the fourth quarter of 2009. The Company expects that drilling and completion activity in this new play will increase significantly as the year progresses and lead to improved financial results in this market. Pricing levels in the U.S. market have recently begun to improve which is anticipated to drive improved financial results during the remainder of the year.

Calfrac signed eight annual contracts with two of Russia's largest oil and natural gas companies during the first quarter of 2010 and currently operates four fracturing spreads and six coiled tubing units in this oil-focused market. With a larger equipment fleet, broader customer base and fewer anticipated weather-related issues as spring arrives, the Company expects improved financial performance in this region during the remainder of 2010.

Fracturing activity levels in the Chicontepec oil and natural gas field of central Mexico are anticipated to remain strong throughout 2010. However, the Company's fracturing operations in the Burgos natural gas field of northern Mexico are anticipated to decline slightly as Pemex focuses on the development of its onshore oil-producing areas such as the Chicontepec region. In Argentina, utilization of Calfrac's three cementing units and acidizing equipment is expected to be relatively strong during the remainder of the year. Calfrac's Latin America management team is continuing to evaluate future opportunities for growth in the Latin America market.

Overall, demand for North American pressure pumping services in the short term is expected to continue to grow from 2009 levels and the long-term outlook for the pressure pumping industry remains positive due primarily to the diversity, magnitude and continued anticipated growth of unconventional natural gas and oil plays. The Company believes that unconventional natural gas plays will remain economic at relatively low commodity prices. Calfrac continues to focus on streamlining its cost structure and improving operating efficiencies. The Company will continue to execute its business strategy by capitalizing on future growth opportunities while using a conservative financial approach in order to maintain a strong balance sheet and overall financial flexibility.

I am pleased to announce that our Board of Directors has approved a $44 million increase to the Company's 2010 capital budget for a revised total of $116 million, including carryforward capital. The majority of this new capital will be focused on the addition of 60,000 hydraulic horsepower to Calfrac's North American fracturing equipment fleet and will increase the Company's total pumping capacity to 530,000 horsepower upon completion of this program. Delivery of these pumping units is anticipated to take place evenly throughout the next year and the final decision regarding deployment will be determined as market opportunities evolve. In addition, this revision to the capital budget includes the equipment related to the deployment of a fifth fracturing spread for the Russian market. It is expected that approximately $16 million of this capital program will be expended in the first half of 2011.

Martin Lambert, a founding director of Calfrac Well Services Ltd., will not be standing for re-election at the Annual General Meeting. We thank Martin for his many outstanding contributions to the growth of Calfrac over the last six years and wish him the best of luck in his future endeavours.

    
    On behalf of the Board of Directors,

    Douglas R. Ramsay
    President & Chief Executive Officer

    May 5, 2010

    First Quarter 2010 Overview
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    In the first quarter of 2010, the Company:

    -   achieved record quarterly revenue of $227.1 million, an increase of
        26 percent from the first quarter of 2009 driven primarily by strong
        growth in Calfrac's Canadian operations and the contribution from the
        acquisition of Century in November 2009;
    -   reported operating income of $38.9 million versus $27.4 million in
        the same quarter of 2009, an increase of 42 percent, that was mainly
        the result of high levels of fracturing and coiled tubing activity in
        the unconventional natural gas and oil plays of western Canada;
    -   reported net income of $13.6 million or $0.32 per share compared to
        net income of $5.5 million or $0.15 per share in the first quarter of
        2009;
    -   generated funds provided by operations of $36.5 million or $0.85 per
        share versus $22.7 million or $0.60 per share in the first quarter of
        2009;
    -   completed the first full quarter of operations since the acquisition
        of Century in November 2009;
    -   signed eight annual contracts in Russia with two of that country's
        largest oil and natural gas companies; and
    -   increased its period-end working capital by 23 percent over
        December 31, 2009 to $157.7 million at March 31, 2010.

    Financial Overview - Three Months Ended March 31, 2010 Versus 2009
    -------------------------------------------------------------------------

    Canada

    -------------------------------------------------------------------------
    Three Months Ended March 31,                  2010       2009     Change
    -------------------------------------------------------------------------
    (000s, except operational information)          ($)        ($)        (%)
    (unaudited)

    Revenue                                    133,631     85,074         57
    Expenses
      Operating                                 89,944     73,017         23
      Selling, general and administrative
       (SG&A)                                    4,262      2,720         57
                                             --------------------------------
                                                94,206     75,737         24
                                             --------------------------------
    Operating income(1)                         39,425      9,337        322
    Operating income (%)                         29.5%      11.0%        168
    Fracturing revenue per job ($)             120,735     83,859         44
    Number of fracturing jobs                    1,021        865         18
    Coiled tubing revenue per job ($)           32,479     17,862         82
    Number of coiled tubing jobs                   319        545        (41)
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    (1) Refer to "Non-GAAP Measures" on page 11 for further information.
    

Revenue

Revenue from Calfrac's Canadian operations during the first quarter of 2010 was $133.6 million versus $85.1 million in the comparable three-month period of 2009. The 57 percent increase in revenue was primarily due to the completion of larger jobs in the unconventional resource plays located in northern Alberta and northeast British Columbia, an increase in oil-related fracturing in the resource plays of Saskatchewan and west central Alberta and improved pricing as the quarter progressed. This increase was partially driven by incremental revenue as a result of the acquisition of Century in mid-November 2009, which added 70,000 horsepower to the Canadian equipment fleet. These factors were partially offset by lower shallow gas fracturing activity in southern Alberta.

Operating Expenses

Operating expenses in Canada increased by 23 percent to $89.9 million during the first quarter of 2010 from $73.0 million in the same period of 2009. The increase in Canadian operating expenses was mainly due to higher overall fracturing activity levels and larger job sizes in the unconventional oil and natural gas resource plays of western Canada.

SG&A Expenses

SG&A expenses for Calfrac's Canadian operations during the first quarter of 2010 increased from the corresponding period in 2009 by 57 percent to $4.3 million, primarily due to an increase in personnel and related costs following the acquisition of Century in November 2009.

United States

    
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    Three Months Ended March 31,                  2010       2009     Change
    -------------------------------------------------------------------------
    (000s, except operational and                   ($)        ($)        (%)
     exchange rate information)
    (unaudited)

    Revenue                                     56,033     68,542        (18)
    Expenses
      Operating                                 50,051     49,163          2
      SG&A                                       1,896      2,140        (11)
                                             --------------------------------
                                                51,947     51,303          1
                                             --------------------------------
    Operating income(1)                          4,086     17,239        (76)
    Operating income (%)                          7.3%      25.2%        (71)
    Fracturing revenue per job ($)              54,996    105,865        (48)
    Number of fracturing jobs                      976        593         65
    Cementing revenue per job ($)               18,122     22,256        (19)
    Number of cementing jobs                       130        259        (50)
    Cdn$/US$ average exchange rate(2)           1.0404     1.2453        (16)
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    (1) Refer to "Non-GAAP Measures" on page 11 for further information.
    (2) Source: Bank of Canada.
    

Revenue

Revenue from Calfrac's United States operations decreased during the first quarter of 2010 to $56.0 million from $68.5 million in the comparable quarter of 2009. The decrease was due primarily to the 16 percent decline in the United States dollar against the Canadian dollar, competitive pricing pressures and lower cementing activity levels. This was partially offset by higher fracturing activity levels in the Rocky Mountain region and the commencement of fracturing operations in Pennsylvania.

Operating Expenses

Operating expenses in the United States were $50.1 million for the first quarter of 2010, an increase of 2 percent from the comparative period in 2009. The increase in operating expenses was primarily due to the larger equipment fleet as a result of the acquisition of fracturing assets from Pure during the third quarter of 2009 combined with start-up expenses related to the commencement of fracturing operations in the Marcellus shale play of Pennsylvania. In addition, unseasonably cold weather in Arkansas during January and February combined with higher equipment repair expenses due to the increase in fracturing activity in the unconventional resource plays of the United States also contributed to this increase in operating expenses. These factors were offset partially by the impact of the depreciation of the United States dollar.

SG&A Expenses

SG&A expenses in the United States during the first quarter of 2010 decreased by 11 percent from the comparable period in 2009 to $1.9 million primarily due to the impact of the decline in the value of the U.S. dollar. This decrease was offset slightly by higher personnel expenses related to the Company's larger scope of operations resulting from the acquisition of Pure's fracturing assets during August 2009 and the expansion into the Marcellus basin during the fourth quarter of 2009.

Russia

    
    -------------------------------------------------------------------------
    Three Months Ended March 31,                  2010       2009     Change
    -------------------------------------------------------------------------
    (000s, except operational and                   ($)        ($)        (%)
     exchange rate information)
    (unaudited)

    Revenue                                     17,576     14,965         17
    Expenses
      Operating                                 15,878     10,911         46
      SG&A                                       1,041        878         19
                                             --------------------------------
                                                16,919     11,789         44
                                             --------------------------------
    Operating income(1)                            657      3,176        (79)
    Operating income (%)                          3.7%      21.2%        (83)
    Fracturing revenue per job ($)              82,180     75,211          9
    Number of fracturing jobs                      144        134          7
    Coiled tubing revenue per job ($)           43,504     44,831         (3)
    Number of coiled tubing jobs                   132        109         21
    Cdn$/rouble average exchange rate(2)        0.0349     0.0367         (5)
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    (1) Refer to "Non-GAAP Measures" on page 11 for further information.
    (2) Source: Bank of Canada.
    

Revenue

During the first quarter of 2010, the Company's revenue from Russian operations increased by 17 percent to $17.6 million from $15.0 million in the corresponding three-month period of 2009. The increase in revenue was mainly due to higher coiled tubing and fracturing activity levels due to a larger equipment fleet and customer base combined with an increase in fracturing job sizes. This increase in revenue was offset partially by the impact of long periods of cold weather on equipment utilization during January and February 2010 and the depreciation of the Russian rouble by 5 percent versus the Canadian dollar.

Operating Expenses

Operating expenses in Russia in the first quarter of 2010 were $15.9 million compared to $10.9 million in the corresponding period of 2009. The increase in operating expenses was primarily due to the higher revenue base, the provision of proppant for a new customer in Western Siberia and higher fuel consumption and downtime as a result of persistent cold weather in Western Siberia during the first two months of 2010, offset partially by the depreciation in the Russian rouble against the Canadian dollar.

SG&A Expenses

SG&A expenses in Russia were $1.0 million for the three-month period ended March 31, 2010 versus $0.9 million in the same quarter of 2009. The increase in SG&A expenses was primarily due to higher personnel expenses resulting from the Company's broader scope of operations in Western Siberia, offset partially by the depreciation of the Russian rouble.

Latin America

    
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    Three Months Ended March 31,                  2010       2009     Change
    -------------------------------------------------------------------------
    (000s, except operational and                   ($)        ($)        (%)
     exchange rate information)
    (unaudited)

    Revenue                                     19,883     11,807         68
    Expenses
      Operating                                 17,634      9,073         94
      SG&A                                         672        423         59
                                             --------------------------------
                                                18,306      9,496         93
                                             --------------------------------
    Operating income (loss)(1)                   1,577      2,311        (32)
    Operating income (loss) (%)                   7.9%      19.6%        (60)
    Cdn$/Mexican peso average
     exchange rate(2)                           0.0815     0.0867         (6)
    Cdn$/Argentine peso average
     exchange rate(2)                           0.2669     0.3444        (23)
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    (1) Refer to "Non-GAAP Measures" on page 11 for further information.
    (2) Source: Bank of Canada.
    

Revenue

Calfrac's Latin America operations generated total revenue of $19.9 million during the first quarter of 2010 versus $11.8 million in the comparable three-month period in 2009. For the three months ended March 31, 2010 and 2009, revenue generated through subcontractors was $5.3 million and $3.2 million, respectively. The increase in revenue was primarily due to higher fracturing activity with the expansion of the Company's fracturing operations into the Chicontepec region during the second quarter of 2009 and the commencement of cementing operations in Mexico during the third quarter of 2009. This increase was partially offset by the depreciation of the Mexican and Argentine peso versus the Canadian dollar, lower fracturing activity and smaller job sizes in the Burgos field of northern Mexico, combined with smaller job sizes in Argentina.

Operating Expenses

Operating expenses in Latin America for the three months ended March 31, 2010 increased by 94 percent from the comparative period in 2009 to $17.6 million. The increase was primarily due to a broader scale of fracturing operations in Mexico combined with higher product costs related to fracturing activity in the Chicontepec region. In addition, operating expenses increased due to the start-up and commencement of cementing operations in Mexico during the third quarter of 2009. This increase in operating expenses was partially offset by the impact of the decline in the Mexican and Argentine pesos versus the Canadian dollar.

SG&A Expenses

SG&A expenses in Latin America increased to $0.7 million from $0.4 million in the comparable quarter of 2009 primarily due to the Company's expanded scale of operations in Mexico and Argentina, offset by the impact of the depreciation of the Mexican and Argentine peso.

Corporate

    
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    Three Months Ended March 31,                  2010       2009     Change
    -------------------------------------------------------------------------
    (000s)                                          ($)        ($)        (%)
    (unaudited)

    Expenses
      Operating                                  1,220        779         57
      SG&A                                       5,617      3,857         46
                                             --------------------------------
                                                 6,837      4,636         47
    Operating loss(1)                           (6,837)    (4,636)       (47)
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    (1) Refer to "Non-GAAP Measures" on page 11 for further information.
    

Operating Expenses

Operating expenses primarily relate to global operations and R&D personnel located in the corporate headquarters who directly support the Company's global field operations. The 57 percent increase in corporate operating expenses from the first quarter of 2009 is mainly due to higher compensation expenses as a result of an increase in the number of personnel supporting the Company's operations as a result of the acquisition of Century and Pure's fracturing assets.

SG&A Expenses

For the three months ended March 31, 2010, corporate SG&A expenses increased by 46 percent from the comparable 2009 period to $5.6 million, mainly due to higher personnel expenses, an increase in stock-based compensation expenses and additional corporate personnel supporting the Company's broader scale of operations.

Interest and Depreciation Expenses

The Company's net interest expense of $6.2 million for the first quarter of 2010 represented an increase of $2.5 million from $3.7 million in the comparable period of 2009. This increase was primarily due to the issuance of an additional US$100.0 million in senior unsecured notes during December 2009 and a larger drawdown on the Company's revolving term loan facility, partially offset by lower interest expense related to the Company's unsecured senior notes resulting from the depreciation of the United States dollar.

For the three months ended March 31, 2010, depreciation expense increased by 31 percent to $19.6 million from $14.9 million in the corresponding quarter of 2009. The increase is mainly a result of a larger fleet of equipment operating in North America, the Company's 2009 acquisition of fracturing assets from Pure and the fracturing and coiled tubing equipment acquired in the acquisition of Century in November 2009, offset partially by the depreciation of the United States dollar.

Foreign Exchange Losses or Gains

The Company realized a foreign exchange gain of $2.1 million during the first quarter of 2010 versus a $1.6 million loss in the comparative three-month period of 2009. Foreign exchange gains and losses arise primarily from the translation of Calfrac's international operations in Russia, Mexico and Argentina using the temporal method. The foreign exchange gain recorded in the first quarter of 2010 was primarily related to the translation of a U.S. dollar-denominated inter-company loan from a subsidiary in the United States to the parent company. As the U.S. subsidiary is translated using the current rate method, the associated foreign exchange loss is recorded in the Statement of Other Comprehensive Income.

Income Tax Expenses

The Company recorded an income tax expense of $1.5 million during the first quarter of 2010 compared to income tax expense of $1.8 million in the comparable period of 2009. The effective income tax rate for the three months ended March 31, 2010 was 10 percent versus 24 percent in the comparable quarter of 2009. The decrease in total income tax expense was primarily due to losses in the United States, offset partially by higher profitability in Canada and Mexico. The lower effective tax rate was primarily a result of a greater proportion of the Company's earnings being generated from Canada, where Calfrac's operations are subject to income taxes as a rate significantly lower than the statutory rate due to tax attributes resulting from the amalgamation with Denison Energy Inc. in 2004. This is reflected in the $2.5 million drawdown of the remaining deferred credit balance in the first quarter of 2010.

Summary of Quarterly Results

    
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    Three Months Ended              June 30,  Sept. 30,   Dec. 31,   Mar. 31,
                                       2008       2008       2008       2009
    -------------------------------------------------------------------------
    (000s, except per share              ($)        ($)        ($)        ($)
     and unit data)
    (unaudited)

    Financial
    Revenue                          94,657    151,650    172,430    180,388
    Operating (loss) income(1)       (1,008)    27,812     25,658     27,427
    Net (loss) income               (15,469)    11,203      7,861      5,528
      Per share - basic               (0.41)      0.30       0.21       0.15
      Per share - diluted             (0.41)      0.30       0.21       0.15
    Funds provided by operations(1)      (9)    27,128     24,838     22,713
      Per share - basic                   -       0.72       0.66       0.60
      Per share - diluted                 -       0.72       0.66       0.60
    EBITDA(1)                          (813)    26,983     26,740     25,945
      Per share - basic               (0.02)      0.71       0.71       0.69
      Per share - diluted             (0.02)      0.71       0.71       0.69
    Capital expenditures             19,341     18,414     32,233     15,857
    Working capital
     (end of period)                 94,056    104,700    100,575    129,532
    Shareholders' equity
     (end of period)                364,068    378,890    393,476    402,537
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    Operating (end of period)
    Pumping horsepower (000s)           255        287        287        303
    Coiled tubing units (No.)            18         18         18         18
    Cementing units (No.)                17         18         18         20
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    -------------------------------------------------------------------------
    Three Months Ended              June 30,  Sept. 30,   Dec. 31,   Mar. 31,
                                       2009       2009       2009       2010
    -------------------------------------------------------------------------
    (000s, except per share              ($)        ($)        ($)        ($)
     and unit data)
    (unaudited)

    Financial
    Revenue                         104,727    133,261    173,124    227,123
    Operating (loss) income(1)        4,052     16,499     23,157     38,908
    Net (loss) income               (14,770)     2,842        864     13,636
      Per share - basic               (0.39)      0.08       0.02       0.32
      Per share - diluted             (0.39)      0.08       0.02       0.31
    Funds provided by operations(1)     128     12,199     19,580     36,512
      Per share - basic                   -       0.32       0.48       0.85
      Per share - diluted                 -       0.32       0.48       0.84
    EBITDA(1)                         4,340     15,112     23,398     40,867
      Per share - basic                0.11       0.40       0.58       0.95
      Per share - diluted              0.11       0.40       0.57       0.94
    Capital expenditures              9,862     58,212     18,245     14,938
    Working capital
     (end of period)                111,864    103,331    128,243    157,688
    Shareholders' equity
     (end of period)                380,515    378,972    459,932    474,718
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    Operating (end of period)
    Pumping horsepower (000s)           319        371        456        465
    Coiled tubing units (No.)            18         18         28         28
    Cementing units (No.)                20         21         21         21
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    (1) Refer to "Non-GAAP Measures" on page 11 for further information.


    Liquidity and Capital Resources
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Three Months Ended March 31,                             2010       2009
    -------------------------------------------------------------------------
    (000s)                                                     ($)        ($)
    (unaudited)

    Cash (used in) provided by
      Operating activities                                    (74)    13,985
      Financing activities                                 16,297     15,000
      Investing activities                                (17,656)   (22,292)
      Effect of exchange rate changes on cash and
       cash equivalents                                    (3,961)     2,082
    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents                  (5,394)     8,775
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Operating Activities

The Company's cash used in operating activities for the three months ended March 31, 2010 was $0.1 million versus cash provided by operating activities of $14.0 million in 2009. The decrease was due primarily to a $27.9 million net decrease in non-cash working capital that was partially offset by a $13.8 million increase in funds provided by operations (refer to "Non-GAAP Measures" on page 11). At March 31, 2010, Calfrac's working capital was approximately $157.7 million, an increase of 23 percent from December 31, 2009. The Company reviewed its year-end accounts receivable in detail and determined that a provision for doubtful accounts receivable totalling $1.4 million was adequate. The majority of this provision related to a customer that filed for Chapter 11 restructuring under United States bankruptcy law.

Financing Activities

Net cash provided by financing activities during the first quarter of 2010 was $16.3 million compared to $15.0 million in 2009. During the first quarter of 2010, the Company issued long-term debt for a total of $15.0 million and received proceeds of $1.8 million from the issuance of common shares.

On September 29, 2009, the Company increased its credit facilities from $90.0 million to $170.0 million with a syndicate of Canadian chartered banks, and further increased these facilities on December 22, 2009 to $175.0 million. The facilities consist of an operating facility of $10.0 million and an extendible revolving term syndicated facility of $165.0 million. The terms of the renewed credit facility are based upon parameters of certain bank covenants with advances bearing interest at rates ranging from prime plus 1 percent to prime plus 1.75 percent. As of March 31, 2010, the Company had drawn $41.4 million on its syndicated facility, including letters of credit, leaving a further $133.6 million in available credit.

On December 16, 2009, Calfrac completed an additional private placement of senior unsecured notes for an aggregate principal amount of US$100.0 million. The Company's combined total of US$235.0 million of senior unsecured notes are due on February 15, 2015 and bear interest at 7.75 percent per annum, which is paid semi-annually.

At March 31, 2010, the Company had cash and cash equivalents of $19.7 million. A portion of these funds was invested in short-term investments, which consisted primarily of an overnight money market fund.

Investing Activities

For the three months ended March 31, 2010, Calfrac's net cash used for investing activities was $17.7 million versus $22.3 million for 2009. Capital expenditures were $14.9 million in 2010 compared to $15.9 million in 2009. Capital expenditures were primarily related to supporting the Company's fracturing operations throughout North America.

On November 10, 2009, the Company acquired all of the issued and outstanding common shares of Century, a privately held fracturing services company operating in Western Canada. Under the terms of the agreement, the purchase price of $90.0 million consisted of approximately $13.5 million of cash plus 5,144,344 common shares of the Company, with an agreed value of $76.5 million. For accounting purposes, the shares issuable in the transaction had a fair value of approximately $82.2 million based on the weighted average price of the Company's shares for the three trading days preceding and the three trading days following the date of the announcement of the agreement. The fair value of the share consideration for accounting purposes is calculated on a different basis than the agreed value and results in a higher recorded purchase price. Including transaction costs, the total consideration was $100.9 million for accounting purposes.

Additionally, net cash used for investing activities was impacted by the net change in non-cash working capital from the purchase of capital assets.

The effect of changes in foreign exchange rates on the Company's cash and cash equivalents during the first quarter of 2010 was a loss of $4.0 million versus a gain of $2.1 million during the same period of 2009. These gains and losses relate to cash and cash equivalents held by the Company in a foreign currency.

With its strong working capital position, unutilized credit facilities and anticipated funds provided by operations, the Company expects to have adequate resources to fund its financial obligations and planned capital expenditures for 2010 and beyond.

Outstanding Share Data

The Company is authorized to issue an unlimited number of common shares. Employees have been granted options to purchase common shares under the Company's shareholder-approved stock option plan. The number of shares reserved for issuance under the stock option plan is equal to 10 percent of the Company's issued and outstanding common shares. As at April 30, 2010, there were 43,047,015 common shares issued and outstanding, and 3,336,224 options to purchase common shares.

    
    Advisories
    -------------------------------------------------------------------------
    

Forward-Looking Statements

In order to provide Calfrac shareholders and potential investors with information regarding the Company and its subsidiaries, including management's assessment of Calfrac's plans and future operations, certain statements contained in this press release, including statements that contain words such as "anticipates", "can", "may", "might", "could", "potential", "expect", "believe", "intend", "forecast", "will", or similar words suggesting future outcomes, are forward-looking statements. Forward-looking statements in this document include, but are not limited to, statements with respect to future capital expenditures, future financial resources, future oil and natural gas well activity, outcome of specific events, trends in the oil and natural gas industry and the Company's growth prospects including, without limitation, its international growth strategy and prospects. These statements are derived from certain assumptions and analyses made by the Company based on its experience and interpretation of historical trends, current conditions, expected future developments and other factors that it believes are appropriate in the circumstances, including assumptions related to commodity pricing, North American drilling activity and the expectation that access to capital will continue to be restricted for many of Calfrac's customers. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from the Company's expectations. The most significant risk factors to Calfrac relate to prevailing economic conditions; commodity prices; sourcing, pricing and availability of raw materials, component parts, equipment, suppliers, facilities and skilled personnel; dependence on major customers; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; and regional competition. Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Further information about these risks and uncertainties may be found under "Business Risks" below.

Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and there can be no assurance that actual results or developments anticipated by the Company will be realized, or that they will have the expected consequences or effects on the Company or its business or operations. The Company assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities laws.

Business Risks

The business of Calfrac is subject to certain risks and uncertainties. Prior to making any investment decision regarding Calfrac, investors should carefully consider, among other things, the risk factors set forth in the Company's most recently filed Annual Information Form, which are incorporated by reference herein.

The Annual Information Form is available through the Internet on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR), which can be accessed at www.sedar.com. Copies of the Annual Information Form may also be obtained on request without charge from Calfrac at 411 - 8th Avenue S.W., Calgary, Alberta T2P 1E3, or at www.calfrac.com, or by facsimile at 403-266-7381.

Non-GAAP Measures

Certain measures in this press release do not have any standardized meaning as prescribed under Canadian GAAP and are therefore considered non-GAAP measures. These measures include operating income, funds provided by operations and EBITDA. These measures may not be comparable to similar measures presented by other entities. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. Management's use of these measures has been disclosed further in this press release as these measures are discussed and presented.

Additional Information

Further information regarding Calfrac Well Services Ltd., including the most recently filed Annual Information Form, can be accessed on the Company's website at www.calfrac.com or under the Company's public filings found at www.sedar.com.

First Quarter Conference Call

Calfrac will be conducting a conference call for interested analysts, brokers, investors and news media representatives to review its 2010 first quarter results at 10:00 a.m. (Mountain Time) on Thursday, May 6, 2010. The conference call dial-in number is 1-888-231-8191 or 647-427-7450. The seven-day replay numbers are 1-800-642-1687 or 416-849-0833 (once connected, enter 68528814). A webcast of the conference call may be accessed via the Company's website at www.calfrac.com.

    
    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    As at                                                  March    December
                                                              31,         31,
                                                            2010        2009
    -------------------------------------------------------------------------
    (000s) (unaudited)                                        ($)         ($)

    ASSETS
    Current assets
      Cash and cash equivalents                           19,676      25,070
      Accounts receivable                                196,877     135,775
      Income taxes recoverable                             1,626       1,780
      Inventory                                           49,770      44,297
      Prepaid expenses and deposits                        7,212       6,746
    -------------------------------------------------------------------------
                                                         275,161     213,668
    Capital assets                                       567,248     579,233
    Goodwill (note 4)                                     12,725      10,523
    Future income taxes                                   32,386      37,466
    -------------------------------------------------------------------------
                                                         887,520     840,890
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
      Accounts payable and accrued liabilities           111,510      82,212
      Current portion of long-term debt (note 5)           4,727       1,996
      Current portion of capital lease obligations
       (note 6)                                            1,236       1,217
    -------------------------------------------------------------------------
                                                         117,473      85,425
    Long-term debt (note 5)                              272,117     267,351
    Capital lease obligations (note 6)                     3,493       3,808
    Other long-term liabilities                            1,168       1,227
    Future income taxes                                   18,355      20,474
    Deferred credit                                            -       2,505
    Non-controlling interest                                 196         168
    -------------------------------------------------------------------------
                                                         412,802     380,958
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 7)                               253,527     251,282
    Contributed surplus (note 8)                          11,693      10,808
    Retained earnings                                    215,719     202,083
    Accumulated other comprehensive loss                  (6,221)     (4,241)
    -------------------------------------------------------------------------
                                                         474,718     459,932
    -------------------------------------------------------------------------
                                                         887,520     840,890
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contingencies (note 11)

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Three Months Ended March 31,                            2010        2009
    -------------------------------------------------------------------------
    (000s, except per share data) (unaudited)                 ($)         ($)
    Revenue                                              227,123     180,388
    -------------------------------------------------------------------------
    Expenses
      Operating                                          174,727     142,944
      Selling, general and administrative                 13,488      10,017
      Depreciation                                        19,562      14,928
      Interest, net                                        6,153       3,688
      Foreign exchange (gains) losses                     (2,139)      1,554
      Loss (gain) on disposal of capital assets              180         (72)
    -------------------------------------------------------------------------
                                                         211,971     173,059
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest                             15,152       7,329
    -------------------------------------------------------------------------
    Income tax expense
      Current                                                411         634
      Future                                               1,077       1,128
    -------------------------------------------------------------------------
                                                           1,488       1,762
    -------------------------------------------------------------------------
    Income before non-controlling interest                13,664       5,567
    Non-controlling interest                                  28          39
    -------------------------------------------------------------------------
    Net income for the period                             13,636       5,528
    Retained earnings, beginning of period               202,083     211,652
    -------------------------------------------------------------------------
    Retained earnings, end of period                     215,719     217,180
    -------------------------------------------------------------------------
    Earnings per share (note 7)
      Basic                                                 0.32        0.15
      Diluted                                               0.31        0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND
    ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Three Months Ended March 31,                            2010        2009
    -------------------------------------------------------------------------
    (000s) (unaudited)                                        ($)         ($)
    Net income for the period                             13,636       5,528
    Other comprehensive (loss) income
      Change in foreign currency translation adjustment   (1,980)      2,558
    -------------------------------------------------------------------------
    Comprehensive income                                  11,656       8,086
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     (loss) income, beginning of period                   (4,241)      5,714
      Other comprehensive (loss) income for the period    (1,980)      2,558
    -------------------------------------------------------------------------
    Accumulated other comprehensive (loss) income,
     end of period                                        (6,221)      8,272
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Three Months Ended March 31,                            2010        2009
    -------------------------------------------------------------------------
    (000s) (unaudited)                                        ($)         ($)
    CASH (USED IN) PROVIDED BY
    OPERATING ACTIVITIES
      Net income for the period                           13,636       5,528
      Items not involving cash
        Depreciation                                      19,562      14,928
        Amortization of debt issue costs and debt discount   692         187
        Stock-based compensation                           1,337         975
        Loss (gain) on disposal of capital assets            180         (72)
        Future income taxes                                1,077       1,128
        Non-controlling interest                              28          39
    -------------------------------------------------------------------------
                                                          36,512      22,713
      Net change in non-cash operating assets
       and liabilities                                   (36,586)     (8,728)
    -------------------------------------------------------------------------
                                                             (74)     13,985
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Bank loan proceeds                                       -       5,000
      Issuance of long-term debt                          14,989      20,000
      Bank loan repayments                                     -     (10,000)
      Long-term debt repayments                             (188)          -
      Capital lease obligation repayments                   (297)          -
      Net proceeds on issuance of common shares            1,793           -
    -------------------------------------------------------------------------
                                                          16,297      15,000
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
      Purchase of capital assets                         (14,938)    (15,857)
      Proceeds on disposal of capital assets                 200          31
      Acquisitions (note 4)                               (2,202)          -
      Net change in non-cash working capital from
       purchase of capital assets                           (716)     (6,466)
    -------------------------------------------------------------------------
                                                         (17,656)    (22,292)
    -------------------------------------------------------------------------
    Effect of exchange rate changes on cash and
     cash equivalents                                     (3,961)      2,082
    -------------------------------------------------------------------------
    (Decrease) increase in cash and cash equivalents      (5,394)      8,775
    Cash and cash equivalents, beginning of period        25,070      36,492
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period              19,676      45,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    -------------------------------------------------------------------------

    FOR THE THREE MONTHS ENDED MARCH 31, 2010
    (figures in text and tables are in 000's except share data and certain
    other exceptions as indicated) (unaudited)

    1.  BASIS OF PRESENTATION

        The interim financial statements of Calfrac Well Services Ltd. (the
        "Company") do not conform in all respects to the requirements of
        generally accepted accounting principles (GAAP) for annual financial
        statements. The interim financial statements should be read in
        conjunction with the most recent annual financial statements.

    2.  SEASONALITY OF OPERATIONS

        The Company's Canadian business is seasonal in nature. The lowest
        activity levels are typically experienced during the second quarter
        of the year when road weight restrictions are in place due to spring
        break-up and access to wellsites in Canada is reduced.

    3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        (a) The interim financial statements follow the same accounting
            policies and methods of application as the most recent annual
            financial statements.

        (b) In February 2008, the Canadian Accounting Standards Board (AcSB)
            confirmed that International Financial Reporting Standards (IFRS)
            will replace Canadian GAAP in 2011 for profit-oriented Canadian
            publicly accountable enterprises. As a result, the Company will
            be required to report its results in accordance with IFRS
            beginning in 2011. The Company has developed a changeover plan to
            complete the transition to IFRS by January 1, 2011, including the
            preparation of required comparative information. The impact of
            IFRS on the Company's consolidated financial statements is not
            reasonably determinable at this time.

    4.  GOODWILL

        In March 2010, the Company acquired the non-controlling interest in
        one of its subsidiaries for $2,202. The agreement required an
        immediate cash payment of $1,527 as well as a second cash payment to
        be made in 2011, which is based upon a formula incorporating the
        earnings generated by the subsidiary during 2010. The second cash
        payment is estimated to be approximately $675. The acquisition was
        accounted for as a step acquisition and the consideration paid has
        been assigned to goodwill as the fair value of the subsidiary's
        tangible assets, net of liabilities, was nominal.

    5.  LONG-TERM DEBT

        ---------------------------------------------------------------------
        As at                                              March    December
                                                              31,         31,
                                                            2010        2009
        ---------------------------------------------------------------------
        (000s)                                                ($)         ($)
        US$235,000 senior unsecured notes, due
         February 15, 2015, bearing interest at 7.75%,
         payable semi-annually                           238,713     246,985
        Less: unamortized debt issue costs and
         unamortized debt discount                       (10,806)    (11,768)
        ---------------------------------------------------------------------
                                                         227,907     235,217
        ---------------------------------------------------------------------
        $165,000 extendible revolving term loan
         facility currently bearing interest at the
         Canadian prime rate plus 1%, secured by the
         Canadian and U.S. assets of the Company          39,699      24,699
        Less: unamortized debt issue costs                (1,028)     (1,128)
        ---------------------------------------------------------------------
                                                          38,671      23,571
        ---------------------------------------------------------------------
        Mortgage obligations maturing between June 2012
         and April 2013 bearing interest at rates ranging
         from 4.94% to 6.69%, repayable $69 per month
         principal and interest, secured by certain real
         property                                          7,276       7,379
        US$2,943 mortgage maturing May 16, 2018 bearing
         interest at U.S. prime less 1%, repayable
         US$35 per month principal and interest, secured
         by certain real property                          2,990       3,180
        ---------------------------------------------------------------------
                                                         276,844     269,347
        Less: current portion of long-term debt           (4,727)     (1,996)
        ---------------------------------------------------------------------
                                                         272,117     267,351
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the senior unsecured notes based on the closing
        market price at March 31, 2010 was $237,233 (December 31, 2009 -
        $239,575). The carrying value of the revolving credit facility
        approximates its fair value due to its variable interest rate and
        first priority security position. The carrying values of the mortgage
        obligations approximate their fair values as the interest rates are
        not significantly different than current mortgage rates for similar
        loans.

        The interest rate on the term revolving facility is based upon the
        parameters of certain bank covenants, and ranges from prime plus
        1 percent to prime plus 1.75 percent. The facility is repayable in
        seven equal quarterly principal instalments of $1,985 commencing
        December 31, 2010 plus a final payment of $25,805 on September 28,
        2012, assuming the facility is not extended. The term and
        commencement of principal repayments under the facility may be
        extended by one year on each anniversary at the request of the
        Company and acceptance by the lenders. The Company also has the
        ability to prepay principal without penalty.

        The Company also has an extendible operating loan facility which
        includes overdraft protection in the amount of $10,000. The interest
        rate is based upon the parameters of certain bank covenants and
        ranges from prime plus 1 percent to prime plus 1.75 percent.
        Drawdowns under this facility are repayable on September 28, 2012,
        assuming the facility is not extended. The term and commencement of
        principal repayments may be extended by one year on each anniversary
        at the request of the Company and acceptance of the lender. The
        operating facility is secured by the Canadian and U.S. assets of the
        Company.

    6.  OBLIGATIONS UNDER CAPITAL LEASES

        ---------------------------------------------------------------------
        As at                                              March    December
                                                              31,         31,
                                                            2010        2009
        ---------------------------------------------------------------------
        (000s)                                                ($)         ($)
        Capital lease contracts bearing interest at rates
         ranging from 5.68% to 6.58%, repayable $124 per
         month, secured by certain equipment               5,227       5,599
        Less: interest portion of contractual payments      (498)       (574)
        ---------------------------------------------------------------------
                                                           4,729       5,025
        ---------------------------------------------------------------------
        Less: current portion of capital lease
         obligations                                      (1,236)     (1,217)
        ---------------------------------------------------------------------
                                                           3,493       3,808
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The carrying values of the capital lease obligations approximate
        their fair values as the interest rates are not significantly
        different than current rates for similar leases.

    7.  CAPITAL STOCK

        Authorized capital stock consists of an unlimited number of common
        shares.

        ---------------------------------------------------------------------
        Continuity of Common Shares (year to date)        Shares      Amount
        ---------------------------------------------------------------------
                                                            (No.)     ($000s)
        Balance, January 1                            42,898,880     251,282
        Issued upon exercise of stock options            138,760       2,245
        ---------------------------------------------------------------------
        Balance, March 31                             43,037,640     253,527
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The weighted average number of common shares outstanding for the
        three months ended March 31, 2010 was 42,987,777 basic and 43,507,669
        diluted (three months ended March 31, 2009 - 37,741,561 basic and
        37,741,561 diluted). The difference between basic and diluted shares
        for the three months ended March 31, 2010 is attributable to the
        dilutive effect of stock options issued by the Company as disclosed
        in note 9.

    8.  CONTRIBUTED SURPLUS

        ---------------------------------------------------------------------
        Continuity of Contributed Surplus (year to date)                2010
        ---------------------------------------------------------------------
        (000s)                                                            ($)
        Balance, January 1                                            10,808
          Stock options expensed                                       1,337
          Stock options exercised                                       (452)
        ---------------------------------------------------------------------
        Balance, March 31                                             11,693
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  STOCK OPTIONS

        ---------------------------------------------------------------------
        Continuity of Stock Options        2010                    2009
         (year to date)
        ---------------------------------------------------------------------
                                             Average                 Average
                                            Exercise                Exercise
                                 Options       Price     Options       Price
        ---------------------------------------------------------------------
                                    (No.)         ($)       (No.)         ($)

        Balance, January 1     2,508,143       16.70   2,043,344       21.69
          Granted during the
           period              1,002,200       20.78     822,500        8.35
          Exercised for
           common shares        (138,760)      12.92           -           -
          Forfeited              (43,466)      19.23     (22,966)      19.15
          Expired                (54,768)      28.20     (35,000)      37.86
        ---------------------------------------------------------------------
        Balance, March 31      3,273,349       17.88   2,807,878       17.60
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Stock options vest equally over three or four years and expire three-
        and-one-half or five years from the date of grant. The exercise price
        of outstanding options ranges from $8.35 to $29.79 with a weighted
        average remaining life of 3.44 years. When stock options are
        exercised the proceeds, together with the amount of compensation
        expense previously recorded in contributed surplus, are added to
        capital stock.

    10. CAPITAL STRUCTURE

        The Company's capital structure is comprised of shareholders' equity
        and long-term debt. The Company's objectives in managing capital are
        (i) to maintain flexibility so as to preserve the Company's access to
        capital markets and its ability to meet its financial obligations,
        and (ii) to finance growth, including potential acquisitions.

        The Company manages its capital structure and makes adjustments in
        light of changing market conditions and new opportunities, while
        remaining cognizant of the cyclical nature of the oilfield services
        sector. To maintain or adjust its capital structure, the Company may
        revise its capital spending, adjust dividends paid to shareholders,
        issue new shares or new debt or repay existing debt.

        The Company monitors its capital structure and financing requirements
        using, amongst other parameters, the ratio of long-term debt to cash
        flow. Cash flow for this purpose is defined as cash provided by
        operating activities before the net change in non-cash operating
        assets and liabilities as reflected in the consolidated statement of
        cash flows. The ratio of long-term debt to cash flow does not have
        any standardized meaning prescribed under GAAP and may not be
        comparable to similar measures used by other companies.

        At March 31, 2010, the long-term debt to cash flow ratio was 4.05:1
        (December 31, 2009 - 4.93:1) calculated on a 12-month trailing basis
        as follows:

        ---------------------------------------------------------------------
        As at                                              March    December
                                                              31,         31,
                                                            2010        2009
        ---------------------------------------------------------------------
        (000s)                                                ($)         ($)
        Long-term debt (net of unamortized debt
         issue costs and debt discount) (note 5)         276,844     269,347
        Cash flow                                         68,419      54,620
        ---------------------------------------------------------------------
        Long-term debt to cash flow ratio                 4.05:1      4.93:1
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company is subject to certain financial covenants relating to
        working capital, leverage and the generation of cash flow in respect
        of its operating and revolving credit facilities. These covenants are
        monitored on a monthly basis. The Company is in compliance with all
        such covenants.

        The Company's capital management objectives, evaluation measures and
        targets have remained unchanged over the periods presented.

    11. CONTINGENCIES

        Greek Operations

        As a result of the acquisition and amalgamation with Denison Energy
        Inc. ("Denison") in 2004, the Company assumed certain legal
        obligations relating to Denison's Greek operations.

        In 1998, North Aegean Petroleum Company E.P.E. ("NAPC"), a Greek
        subsidiary of a consortium in which Denison participated (and which
        is now a majority-owned subsidiary of the Company), terminated
        employees in Greece as a result of the cessation of its oil and gas
        operations in that country. Several groups of former employees have
        filed claims against NAPC and the consortium alleging that their
        termination was invalid and that their severance pay was improperly
        determined.

        In 1999, the largest group of plaintiffs received a ruling from the
        Athens Court of First Instance that their termination was invalid and
        that salaries in arrears amounting to approximately $9,341 (6,846
        euros) plus interest was due to the former employees. This decision
        was appealed to the Athens Court of Appeal, which allowed the appeal
        in 2001 and annulled the above-mentioned decision of the Athens Court
        of First Instance. The said group of former employees filed an appeal
        with the Supreme Court of Greece, which was heard on May 29, 2007.
        The Supreme Court of Greece allowed the appeal and sent the matter
        back to the Athens Court of Appeal for the consideration of the
        quantum of awardable salaries in arrears. On June 3, 2008, the Athens
        Court of Appeal rejected NAPC's appeal and reinstated the award of
        the Athens Court of First Instance, which decision was further
        appealed to the Supreme Court of Greece. The matter was heard on
        April 20, 2010 and a decision is expected to be rendered during the
        second half of 2010. In the event that an adverse ruling is issued by
        the Supreme Court of Greece, NAPC and the Company intend to assess
        available rights of appeal to any other levels of court in any
        jurisdiction where such an appeal is warranted. Counsel to NAPC has
        obtained a judicial order entitling NAPC to obtain certain employment
        information in respect of the plaintiffs which is required in order
        to assess the extent to which the plaintiffs have mitigated any
        damages which may otherwise be payable.

        Several other smaller groups of former employees have filed similar
        cases in various courts in Greece. One of these cases was heard by
        the Athens Court of First Instance on January 18, 2007. By judgment
        rendered November 23, 2007, the plaintiff's allegations were
        partially accepted, and the plaintiff was awarded compensation for
        additional work of approximately $48 (35 euros), plus interest. The
        appeal of this decision was heard on June 2, 2009, at which time an
        additional claim by the plaintiff seeking damages of $304 (223
        euros), plus interest, was also heard. A decision in respect of the
        hearing has been rendered which accepted NAPC's appeal and rejected
        the additional claim of the plaintiff. Another one of the lawsuits
        seeking salaries in arrears of $175 (128 euros), plus interest, was
        heard by the Supreme Court of Greece on November 6, 2007, at which
        date the appeal of the plaintiffs was denied for technical reasons
        due to improper service. A rehearing of this appeal scheduled for
        September 22, 2009 was postponed until September 21, 2010. The
        remaining action, which is seeking salaries in arrears of
        approximately $599 (439 euros) plus interest, was scheduled to be
        heard before the Athens Court of First Instance on October 1, 2009,
        but was adjourned until November 18, 2011 as a result of the recently
        held Greek elections.

        The Company has signed an agreement with a Greek exploration and
        production company pursuant to which it has agreed to assign
        approximately 90 percent of its entitlement under an offshore licence
        agreement for consideration including a full indemnity in respect of
        the Greek legal claims described above. The completion of the
        transactions contemplated by such agreement is subject to certain
        conditions precedent, the fulfillment of which is not in the
        Company's control.

        The direction and financial consequences of the potential decisions
        in these actions cannot be determined at this time and, consequently,
        no provision has been recorded in these financial statements.

        Potential Claim

        The Company has a potential claim related to a contract the outcome
        of which is not reasonably determinable at this time. The amount of
        the claim on an after-tax basis is estimated to be approximately
        $2,600.

    12. SEGMENTED INFORMATION

        The Company's activities are conducted in four geographic segments:
        Canada, Russia, the United States and Latin America. All activities
        are related to fracturing, coiled tubing, cementing and well
        stimulation services for the oil and natural gas industry.

        ---------------------------------------------------------------------
                                                                      United
                                              Canada      Russia      States
        ---------------------------------------------------------------------
        (000s)                                    ($)         ($)         ($)

        Three Months Ended March 31, 2010
        Revenue                              133,631      17,576      56,033
        Operating income (loss)(1)            39,425         657       4,086
        Segmented assets                     495,143     112,188     229,596
        Capital expenditures                   6,991       1,347       6,183
        Goodwill                               7,236         979       2,308
        ---------------------------------------------------------------------
        Three Months Ended March 31, 2009
        Revenue                               85,074      14,965      68,542
        Operating income (loss)(1)             9,337       3,176      17,239
        Segmented assets                     308,251     112,733     279,236
        Capital expenditures                   9,805         360       4,994
        Goodwill                               7,236         979       2,308
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
                                               Latin                  Consol-
                                             America   Corporate      idated
        ---------------------------------------------------------------------
        (000s)                                    ($)         ($)         ($)

        Three Months Ended March 31, 2010
        Revenue                               19,883           -     227,123
        Operating income (loss)(1)             1,577      (6,837)     38,908
        Segmented assets                      50,593           -     887,520
        Capital expenditures                     417           -      14,938
        Goodwill                               2,202           -      12,725
        ---------------------------------------------------------------------
        Three Months Ended March 31, 2009
        Revenue                               11,807           -     180,388
        Operating income (loss)(1)             2,311      (4,636)     27,427
        Segmented assets                      24,428           -     724,648
        Capital expenditures                     698           -      15,857
        Goodwill                                   -           -      10,523
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (1) Operating income (loss) is defined as net income (loss) before
            depreciation, interest, foreign exchange gains or losses, gains
            or losses on disposal of capital assets, income taxes and non-
            controlling interest.

        The following table sets forth consolidated revenue by service line:

        ---------------------------------------------------------------------
        Three Months Ended March 31,                        2010        2009
        ---------------------------------------------------------------------
        (000s)                                                ($)         ($)
        Fracturing                                       200,528     152,792
        Coiled tubing                                     16,103      14,622
        Cementing                                          5,169       9,822
        Other                                              5,323       3,152
        ---------------------------------------------------------------------
                                                         227,123     180,388
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
    

%SEDAR: 00002062E

SOURCE Calfrac Well Services Ltd.

For further information: For further information: Douglas R. Ramsay, President and Chief Executive Officer, Telephone: (403) 266-6000, Fax: (403) 266-7381; Laura A. Cillis, Senior Vice President, Finance and Chief Financial Officer, Telephone: (403) 266-6000, Fax: (403) 266-7381; Tom J. Medvedic, Senior Vice President, Corporate Development, Telephone: (403) 266-6000, Fax: (403) 266-7381


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