Calfrac Announces Fourth Quarter and Year-End Results



    CALGARY, March 1 /CNW/ - Calfrac Well Services Ltd. ("Calfrac") (TSX-CFW)
is pleased to announce its financial and operating results for the three
months and year ended December 31, 2006.

    
    HIGHLIGHTS

    -------------------------------------------------------------------------
                           Three Months Ended              Years Ended
                              December 31,                 December 31,
                         2006        2005 Change      2006        2005 Change
    -------------------------------------------------------------------------
    (000s, except          ($)         ($)   (%)        ($)         ($)   (%)
     per share and
     unit data)
    (unaudited)

    Financial
    Revenue            118,322     111,634    6     426,418     314,325   36
    Gross margin(1)     34,488      43,336  (20)    135,362     109,098   24
    Net income          16,907      27,372  (38)     72,450      60,113   21
      Per share
        - basic           0.47        0.75  (37)       2.00        1.66   20
        - diluted         0.46        0.75  (39)       1.98        1.64   21
    Cash flow from
     operations(2)      25,507      33,794  (25)    101,932      80,592   26
      Per share
        - basic           0.70        0.93  (25)       2.81        2.23   26
        - diluted         0.70        0.92  (24)       2.79        2.20   27
    EBITDA(3)           28,421      34,131  (17)    109,533      79,611   38
      Per share
        - basic           0.78        0.94  (17)       3.02        2.20   37
        - diluted         0.78        0.93  (16)       3.00        2.18   38
    Working capital     31,225      39,396  (21)     31,225      39,396  (21)
    Shareholders'
     equity            303,510     234,021   30     303,510     234,021   30
    Weighted average
     common shares
     outstanding
     (No.)
      Basic             36,270      36,283    -      36,286      36,216    -
      Diluted           36,384      36,679   (1)     36,547      36,601    -
    -------------------------------------------------------------------------
    (unaudited)                                        (No.)       (No.)  (%)
    Operating Assets
    as at December 31
    Fracturing
      Conventional                                       21          17   24
      Coalbed methane                                     4           4    -
    -------------------------------------------------------------------------
      Total                                              25          21   19
    Coiled tubing units                                  14          11   27
    Cementing units                                      13           9   44
    -------------------------------------------------------------------------
    (1) Gross margin is defined as revenue less operating expenses excluding
        depreciation and amortization. Gross margin 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.

    (2) Cash flow is defined as "funds provided by operations," as reflected
        in the consolidated statement of cash flows. Cash flow and cash flow
        per share are measures that provide shareholders and potential
        investors with additional information regarding the Company's
        liquidity and its ability to generate funds to finance its
        operations. Management utilizes these measures to assess the
        Company's ability to finance operating activities and capital
        expenditures. Cash flow and cash flow per share are not measures that
        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 income before interest, taxes, depreciation and
        amortization. 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 summarize the Company's financial performance and
operational highlights for the three months and year ended December 31, 2006
as well as provide an outlook for 2007.

    Financial Summary

    The Company had the following financial results for the three months
ended December 31, 2006:

    
    -  increased consolidated revenue 6% to $118.3 million;
    -  recorded net income of $16.9 million or $0.47 per share (basic); and
    -  realized cash flow from operations before changes in non-cash working
       capital of $25.5 million or $0.70 per share (basic).

       For the year ended December 31, 2006, Calfrac:

    -  grew revenue 36% to $426.4 million from $314.3 million in 2005;
    -  improved net income to $72.5 million or $2.00 per share (basic), an
       increase of 21% from $60.1 million or $1.66 per share (basic) recorded
       in 2005; and
    -  achieved cash flow from operations before changes in non-cash working
       capital of $101.9 million or $2.81 per share (basic) compared to
       $80.6 million or $2.23 per share (basic) in the prior year.
    

    Operational Highlights

    Activity in the pressure pumping services industry in Canada lagged
expectations throughout the fourth quarter due to the impact of lower natural
gas prices and CBM land access, licensing and infrastructure issues.
Consequently, the Company reallocated some of its equipment and personnel to
other regions within this market that were active in deep basin projects. By
year-end, Calfrac was operating 15 conventional and 4 CBM fracturing spreads
in the Canadian market. In keeping with the Company's philosophy of securing a
certain level of business with long-term contracts, Calfrac currently has
long-term contracts on four of its Canadian fracturing spreads that will
support a minimum level of activity during 2007.
    Calfrac continued to enhance the scope of its cementing operations in
Western Canada with a strategic focus on the deeper, more technically
challenging basins of northern Alberta and northeastern British Columbia.
During the fourth quarter of 2006, the Company increased its cementing
equipment fleet from 11 at the beginning of October to 13 at year-end with the
deployment of 2 new twin pumping units to service the region's intermediate
and deep basins. In December, a new cementing base and a staging base for
fracturing and coiled tubing operations opened in Edson, Alberta in order to
extend the Company's operating reach to a growing list of customers in the
region. During the first quarter of 2007, the Company plans to add four
cementing units to its operating fleet.
    During the past year, Calfrac progressed its international expansion
strategy by deploying additional equipment to the Rocky Mountain region of the
United States. In order to better service the Company's growing base of
customers in the Grand Junction district, an additional multi-pumper
fracturing spread was deployed in December of 2006 for a total of five
conventional fracturing spreads operating in the U.S. at year-end. In
addition, a long-term take-or-pay contract was signed late in the year with a
major U.S. oil and gas company to provide fracturing services to a new
operating district encompassing Arkansas and eastern Oklahoma. As a result, it
is expected that a multi-pumper fracturing spread will be deployed to the
Company's new operating base located in Beebe, Arkansas late in the first
quarter of 2007, thereby further strengthening the Company's United States
operations.
    Calfrac continued to grow its presence in the Russian well services
market by opening a new operating base in Khanty-Mansiysk, Western Siberia in
May 2006. During the year, the Company deployed its first multi-pumper
fracturing spread and a deep coiled tubing unit to this new operating region.
At year-end, the Company was operating one conventional fracturing spread as
well as three deep coiled tubing units in Russia. In February 2007, the
Company deployed a second fracturing spread to its newest operating base
located in Pourpay, Western Siberia. Two additional deep coiled tubing units
are expected to be delivered to Russia by the end of the first quarter of
2007. This equipment is operating under three term commitments negotiated with
two of Russia's largest oil and gas companies. Contrary to Calfrac's North
American operations, its Russian operations are more heavily weighted to the
oil well pressure pumping services market. For 2007, it is anticipated that
the larger scale of Russian operations will help drive continued corporate
growth and, to some extent, mitigate the impact of a possible slowdown in
activity in certain segments of the North American pressure pumping markets.

    Outlook

    Calfrac believes that the fundamentals for natural gas prices over the
long-term are strong, but concerns surrounding short-term natural gas pricing
may negatively impact 2007 drilling activity levels in Western Canada,
specifically in the CBM market. While Canadian drilling activity is expected
to be lower than the record levels experienced in the recent past, it still is
anticipated to be relatively strong from a historical perspective. The Company
is focused on continuing to grow in the pressure pumping markets of the
deeper, more technical areas of the Western Canadian Sedimentary Basin.
Despite the weakness in near-term natural gas prices, activity levels in the
deeper regions of northern Alberta and northeastern British Columbia were
strong throughout 2006 and are expected to remain steady in 2007. Calfrac
anticipates that the low levels of activity experienced in the Canadian CBM
market during the past year will continue to be mitigated by the Company's
contracts servicing these operations. Shallow gas activity is expected to
remain strong for at least the first quarter as a result of the Company's
contractual relationship with a major customer.
    The strong performance of Calfrac's United States fracturing operations
was a major driver of the Company's 2006 financial results. Unlike the
Canadian market, drilling activity levels in the United States have remained
robust. Calfrac's newest operating base located in Beebe, Arkansas will begin
operations servicing the Fayetteville and Arkoma Basins by the end of the
first quarter of 2007, further diversifying the Company's fracturing
operations within the United States market. From this operating base, there is
potential for additional growth as more equipment could be deployed into the
area to better serve this new market. In 2007, Calfrac anticipates that the
United States operating segment will continue to generate strong financial and
operating results.
    Building on the momentum of Russia's improved operating and financial
performance during the fourth quarter of 2006, Calfrac believes that these
operations have attained a sufficient critical mass and are well positioned
for future growth. The expanded equipment fleet combined with commitments,
based on awarded bids, with two of Russia's largest oil and gas companies, is
expected to drive improved financial and operating performance from this
geographic segment throughout the upcoming year and provide a more significant
contribution to the Company's consolidated financial results.
    The Company's financial position was strengthened further as a result of
the closing of its recent US$135 million debt financing. The offering provides
the Company with additional financial flexibility to grow organically, and
alternatively, may also allow the Company to pursue strategic acquisition
opportunities that may arise in the future.
    Calfrac will continue to maximize equipment utilization and profitability
by redeploying equipment to higher activity regions within its global
operating reach.

    On behalf of the Board of Directors,


    Douglas R. Ramsay
    President & Chief Executive Officer

    February 28, 2007


    MANAGEMENT'S DISCUSSION AND ANALYSIS

    This Management's Discussion and Analysis ("MD&A") for Calfrac Well
Services Ltd. ("Calfrac" or the "Company") has been prepared by management as
of February 26, 2007 and is a review of the financial condition and results of
operations of the Company based on accounting principles generally accepted in
Canada. Its focus is primarily a comparison of the financial performance for
the three months and years ended December 31, 2006 and 2005 and should be read
in conjunction with the audited consolidated financial statements and
accompanying notes for those periods as well as the MD&A for the year ended
December 31, 2005. The annual consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting principles
("GAAP").
    All financial amounts and measures presented in this MD&A are expressed
in Canadian dollars unless otherwise indicated. The definitions of certain
non-GAAP measures used within this MD&A have been included at the end of this
MD&A.

    Fourth Quarter 2006 Performance Summary

    
       For the three months ended December 31, 2006, the Company:

    -  increased revenue 6% to $118.3 million compared to $111.6 million in
       the same period of 2005;
    -  recorded net income of $16.9 million or $0.47 per share (basic), a
       decrease of 38% from the $27.4 million or $0.75 per share (basic)
       recorded in the fourth quarter of 2005;
    -  realized cash flow from operations before changes in non-cash working
       capital of $25.5 million or $0.70 per share (basic) compared to
       $33.8 million or $0.93 per share (basic) in the same three-month
       period a year ago; and
    -  increased income tax provision 63% to $3.2 million due to higher
       profitability of U.S. operations.
    

    Canadian Operations

    Revenue from Canadian operations for the fourth quarter of 2006 decreased
17% to $79.8 million compared to $96.0 million in the same quarter of 2005.
Canadian fracturing revenue for the quarter totaled $68.8 million, a decrease
of 25% from the $91.5 million earned in the corresponding period of 2005. This
decrease was primarily due to lower coalbed methane ("CBM") and east central
Alberta drilling activity compared to a year ago. During the fourth quarter of
2006, Calfrac completed 1,244 Canadian fracturing jobs for average revenue of
$55,295 per job compared to 2,063 jobs for average revenue of $44,346 per job
in the same period of 2005. Improved per job revenues were primarily due to a
substantial increase in the amount of work completed in the deeper, more
technically challenging basins of northern Alberta and northeastern British
Columbia as well as higher book prices.
    For the three months ended December 31, 2006, revenue from Canadian
coiled tubing operations increased 195% to $5.2 million compared to
$1.8 million for the same period in 2005. During the fourth quarter of 2006,
the Company completed 1,922 jobs for average revenue of $2,694 per job
compared to 1,723 jobs for average revenue of $1,020 per job in 2005. The
increase in the average revenue per job was due primarily to the deployment of
two coiled tubing units during the second quarter of 2006 into the deeper,
more technically challenging basins of Western Canada. During the 2005
three-month period, the Company's Canadian coiled tubing fleet was focused on
shallow gas operations, which traditionally earn lower revenue on a per job
basis.
    Revenue from Calfrac's cementing operations was $5.9 million, a 112%
increase from the $2.8 million recorded in the fourth quarter of 2005. During
the 2006 three-month period, the Company completed 480 jobs for average
revenue of $12,234 per job compared to 289 jobs for average revenue of $9,604
per job in the comparable period of 2005. The improved financial and operating
results were due primarily to an expanded equipment fleet serving the deeper
basin markets of northern Alberta and northeastern British Columbia combined
with a more integrated sales and marketing approach.

    United States Operations

    During the fourth quarter of 2006, revenue from the Company's United
States operations doubled to $29.0 million from $14.4 million recorded in the
same period of 2005. For the three months ended December 31, 2006, the Company
completed 385 U.S. fracturing jobs for average revenue of $75,427 per job
compared to 233 jobs for average revenue of $61,816 per job in 2005. The
increase in total and per job revenues was due primarily to stronger activity
levels in the Piceance Basin of western Colorado and a larger fleet of
equipment operating in the United States in the fourth quarter of 2006
compared to the corresponding three-month period in 2005. The increase in the
reported revenue from the Company's U.S. operations was partially offset by a
stronger Canadian dollar.

    Russian Operations

    The Company's revenue from Russian operations in the fourth quarter of
2006 increased 30% to $9.4 million from $7.3 million in the third quarter of
2006 due primarily to higher fracturing activity levels. As Calfrac commenced
Russian coiled tubing operations late in 2005, the prior year's fourth quarter
results were not significant for analytical purposes.

    Gross Margin

    Fourth quarter consolidated gross margin was $34.5 million in 2006, a 20%
decrease from the $43.3 million recorded in the corresponding period in 2005.
As a percentage of revenue, consolidated gross margin was 29% for the three
months ended December 31, 2006 compared to 39% a year ago. The decrease in
consolidated gross margin was primarily a result of competitive pricing
pressures in Canada and higher Russian revenues that have lower gross margins.
This reduction was somewhat offset by improved financial results in the United
States.

    Expenses

    Operating Expenses

    During the fourth quarter of 2006, operating costs increased 23% to
$83.8 million from $68.3 million in the corresponding three-month period of
2005 due primarily to a larger fleet of equipment, increased levels of
activity in the United States and Russia, and higher district expenses as a
result of a larger scale of operations in the Company's three geographic
markets. In 2006, Calfrac opened a new district office in Khanty-Mansiysk,
Russia and expanded its Grande Prairie and Red Deer, Alberta bases to better
serve the Company's growth into the deeper and more technical basins of
northern Alberta and northeastern British Columbia.

    Selling, General and Administrative Expenses

    Selling, general and administrative ("SG&A") expenses were $7.9 million
for the quarter ended December 31, 2006 compared to $9.1 million in 2005. As a
percentage of revenue, SG&A expenses for the fourth quarter of 2006 declined
to 7% compared to 8% in the corresponding period a year ago. The decrease in
SG&A expenses during the fourth quarter of 2006 was primarily related to a
reduction in bonus expenses due to lower Company profitability partially
offset by higher SG&A costs related to the growing United States and Russian
operations and an increase in stock-based compensation expenses. In the fourth
quarter of 2006, stock-based compensation expenses were $0.9 million compared
to $0.3 million in the same period of 2005.

    Interest, Depreciation and Other Expenses

    The Company recorded net interest expense of $702,000 for the quarter
ended December 31, 2006 compared to $67,000 in the comparable period of 2005.
During 2006, higher long-term debt levels were required to partially finance
Calfrac's capital expenditures, which resulted in increased interest costs.
    Depreciation expense in the fourth quarter of 2006 grew 61% to
$7.6 million from $4.7 million in the corresponding quarter of 2005. The
increase in depreciation expense is directly related to the Company's larger
fleet of equipment operating in North America and Russia and the full impact
of 2005 capital expenditures on depreciation expense.

    Income Tax

    The Company recorded income tax expense of $3.2 million for the quarter
ended December 31, 2006 compared to $2.0 million in the same period of 2005.
Current tax expense for the quarter was $2.9 million compared to $0.8 million
in 2005, which was largely attributed to profitability of the Company's U.S.
operations. Calfrac recorded a future income tax expense of $0.3 million for
the three months ended December 31, 2006 compared to $1.1 million recorded in
the fourth quarter of 2005. The future income tax provision for the fourth
quarters of 2006 and 2005 was primarily related to the drawdown of the
Company's tax pools as a result of profitability in the quarter as well as the
timing of deductibility of certain expenses for tax purposes.

    Net Income

    During the fourth quarter of 2006, the Company's net income totaled
$16.9 million or $0.47 per share (basic), a 38% decrease from the
$27.4 million or $0.75 per share (basic) recorded in the same quarter a year
ago. This decrease was primarily related to lower profitability in Canadian
operations due to competitive pricing pressures and lower shallow gas and CBM
activity levels.

    Cash Flow

    Cash flow from operations before changes in non-cash working capital for
the three months ended December 31, 2006 decreased 25% to $25.5 million or
$0.70 per share (basic) compared to $33.8 million or $0.93 per share (basic)
in 2005.

    Liquidity and Capital Resources

    During the 2006 three-month period, the Company incurred capital
expenditures of $44.4 million compared to $20.6 million in the same period of
2005. The majority of these costs related to the completion of the Company's
2006 capital program, which included the deployment of two fracturing spreads
and two cementing units during the quarter, as well as the construction of two
conventional fracturing spreads, two coiled tubing units and four cementing
units that are expected to be deployed in the first quarter of 2007.


    
    Summary of Quarterly Results
    -------------------------------------------------------------------------
    Three Months Ended                     Mar.31,  Jun.30,  Sep.30,  Dec.31,
                                             2005     2005     2005     2005
    -------------------------------------------------------------------------
    (000s, except per share                    ($)      ($)      ($)      ($)
     and unit data)
    (unaudited)

    Revenue                                80,694   44,619   77,377  111,634
    Gross margin(1)                        32,437    7,630   25,694   43,336
    Net income                             21,670   (1,876)  12,947   27,372
      Per share
        - basic                              0.60    (0.05)    0.36     0.75
        - diluted                            0.59    (0.05)    0.35     0.75
    Cash flow from operations(2)           26,015    2,280   18,503   33,794
      Per share
        - basic                              0.72     0.06     0.51     0.93
        - diluted                            0.71     0.06     0.51     0.92
    EBITDA(3)                              25,339    1,907   18,234   34,131
      Per share
        - basic                              0.70     0.05     0.50     0.94
        - diluted                            0.69     0.05     0.50     0.93
    Capital expenditures                   22,108   25,653   29,241   20,612
    Working capital                        49,103   22,301   12,962   39,396
    Shareholders' equity                  197,091  192,508  207,679  234,021
    -------------------------------------------------------------------------
    Fracturing spreads (No.)
      Conventional fracturing                  13       13       13       17
      Coalbed methane                           3        4        4        4
    -------------------------------------------------------------------------
      Total                                    16       17       17       21
    Coiled tubing units (No.)                  11       11       11       11
    Cementing units (No.)                       5        6        8        9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    Three Months Ended                     Mar.31,  Jun.30,  Sep.30,  Dec.31,
                                             2006     2006     2006     2006
    -------------------------------------------------------------------------
    (000s, except per share                    ($)      ($)      ($)      ($)
     and unit data)
    (unaudited)

    Revenue                               126,010   66,973  115,112  118,322
    Gross margin(1)                        49,927   14,446   36,500   34,488
    Net income                             34,556    1,569   19,418   16,907
      Per share
        - basic                              0.95     0.04     0.54     0.47
        - diluted                            0.94     0.04     0.53     0.46
    Cash flow from operations(2)           41,656    7,208   27,560   25,507
      Per share
        - basic                              1.15     0.20     0.76     0.70
        - diluted                            1.13     0.20     0.76     0.70
    EBITDA(3)                              42,736    8,761   29,614   28,421
      Per share
        - basic                              1.18     0.24     0.82     0.78
        - diluted                            1.16     0.24     0.81     0.78
    Capital expenditures                   50,631   36,501   23,931   44,415
    Working capital                        37,071   28,741   31,158   31,225
    Shareholders' equity                  271,084  267,559  287,616  303,510
    -------------------------------------------------------------------------
    Fracturing spreads (No.)
      Conventional fracturing                  18       19       19       21
      Coalbed methane                           4        4        4        4
    -------------------------------------------------------------------------
      Total                                    22       23       23       25
    Coiled tubing units (No.)                  12       14       14       14
    Cementing units (No.)                       9       11       11       13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Gross margin is defined as revenue less operating expenses excluding
        depreciation and amortization. Gross margin 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.

    (2) Cash flow is defined as "funds provided by operations," as reflected
        in the consolidated statement of cash flows. Cash flow and cash flow
        per share are measures that provide shareholders and potential
        investors with additional information regarding the Company's
        liquidity and its ability to generate funds to finance its
        operations. Management utilizes these measures to assess the
        Company's ability to finance operating activities and capital
        expenditures. Cash flow and cash flow per share are not measures that
        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 income before interest, taxes, depreciation and
        amortization. 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.


    2006 Year-End Performance Summary

       For the year ended December 31, 2006, Calfrac:

    -  increased revenue 36% to $426.4 million compared to $314.3 million in
       2005;
    -  grew net income to $72.5 million or $2.00 per share (basic), an
       increase of $12.3 million or $0.34 per share (basic) from the previous
       year;
    -  achieved record cash flow from operations before changes in non-cash
       working capital of $101.9 million or $2.81 per share (basic) compared
       to $80.6 million or $2.23 per share (basic) in 2005;
    -  improved year-over-year EBITDA 38% to $109.5 million versus
       $79.6 million a year ago; and
    -  incurred capital expenditures of $155.5 million to expand its
       equipment fleet across all geographic markets and service lines.
    

    Revenue

    Canadian Operations

    Revenue from Canadian operations for 2006 increased 14% to $318.0 million
compared to $280.1 million in 2005 primarily as a result of higher activity in
the deeper, more technical areas of the Western Canadian Sedimentary Basin
offset by lower activity due to the impact of weaker natural gas prices and
CBM regulatory delays. Canadian fracturing revenue totaled $278.2 million, an
increase of $15.4 million or 6% from the prior year. During 2006, the Company
completed 5,238 Canadian fracturing jobs for average revenue of $53,105 per
job compared to 6,063 jobs for $43,334 per job in 2005. The revenue per job
for Canadian fracturing operations was higher in 2006 due primarily to
significant increases in the number of jobs completed in the deeper basins of
northern Alberta and British Columbia, price book increases for services
effective January 1, 2006 and a reduction in the number of CBM and shallow gas
jobs completed during the year.
    The Company's revenue from coiled tubing operations increased
$9.3 million in 2006 to $18.2 million compared to $8.9 million in the previous
year. In 2006, 5,875 jobs were completed for average revenue of $3,102 per job
compared to 5,262 jobs for $1,698 per job in 2005. Year-over-year Canadian
coiled tubing revenue and revenue per job increased primarily as a result of
the deployment of two new coiled tubing units during the second quarter of
2006, which enabled the Company to generate higher levels of activity in the
deeper markets of Western Canada. Additionally, the Company's coiled tubing
operations throughout 2005 were mainly focused on shallow gas operations in
southern Alberta, which historically produce lower revenue on a per job basis.
In 2006, these operations were negatively impacted by decreased drilling
activity similar to fracturing operations. As well, during 2005 two coiled
tubing units were transferred to Russia during the second and third quarters,
which negatively impacted activity and revenue from this service line during
the previous year.
    For the year ended December 31, 2006, revenue from Calfrac's cementing
operations totaled $21.6 million versus $8.4 million in 2005. This 158%
increase was due primarily to a larger equipment fleet, expanded service area,
including the deeper basin markets of northern Alberta and northeastern
British Columbia, as well as the integration of cementing operations into its
sales and marketing team. During 2006, the Company completed 1,974 jobs for
average revenue of $10,959 per job compared to 1,007 jobs for average revenue
of $8,336 per job in 2005.

    United States Operations

    During 2006, revenue from Calfrac's United States operations totaled
$86.3 million, up 161% from $33.0 million the previous year. This increase was
primarily a result of a larger fracturing equipment fleet combined with higher
levels of activity. In late 2005, a fracturing spread was deployed to eastern
Colorado and another deep fracturing spread began operating in the Piceance
Basin of western Colorado during March 2006. For the year ended December 31,
2006, the Company completed 1,284 U.S. fracturing jobs for average revenue of
$67,037 per job compared to 509 jobs for $64,921 per job recorded a year ago.
The year-over-year increase in the reported revenue per job was partially
offset by a stronger Canadian dollar.

    Russian Operations

    Revenue from Calfrac's Russian operations increased $20.9 million to
$22.1 million in 2006 from $1.2 million a year ago. The Company initially
deployed two deep coiled tubing units to Russia during the fourth quarter of
2005. A third deep coiled tubing unit was added in May 2006, and in June the
Company began operating its first Russian fracturing spread in the
Khanty-Mansiysk region of Western Siberia. A second fracturing spread began
operating from Calfrac's newest Russian operating district in Pourpay, Western
Siberia during the first quarter of 2007. Two additional coiled tubing units
are anticipated to be deployed to Russia late in the first quarter of 2007.
These expanded and more diversified operations have reached a critical mass
and are expected to drive further improvement in the Company's future
financial and operating performance in this market.

    Gross Margin

    Consolidated gross margin for the year ended December 31, 2006 increased
24% to $135.4 million from $109.1 million in 2005 primarily as a result of a
larger fleet of equipment in all geographic segments and strong activity
levels in the deeper basin markets of Western Canada and the United States.
Consolidated gross margin as a percentage of revenue decreased to 32% from 35%
in 2005 as a result of the impact of pricing pressures in the Canadian market
during the latter half of 2006 and increased revenue from Russia, which has
lower gross margins. This was partially offset by improved financial
performance in the United States.

    Expenses

    Operating Expenses

    Calfrac's total 2006 operating expenses increased 42% to $291.1 million
compared to $205.2 million in 2005 due primarily to a larger fleet of
equipment and a larger global operating presence, as well as higher activity
levels and district overhead expenses. During 2006, district expenses
increased as a result of the Company's growing scale of operations in each of
its three geographic markets; more specifically, the expansion of existing
Canadian districts servicing the deeper basins of Western Canada and the
opening of a new district office in Russia. Additionally, Calfrac incurred the
full year cost impact of new operating bases that were opened in the latter
half of 2005 in Strathmore, Alberta; Grand Junction, Colorado; and Noyabrsk,
Russia.

    Selling, General and Administrative Expenses

    During 2006, Calfrac's selling, general and administrative ("SG&A")
expenses declined 4% to $28.4 million compared to $29.5 million in the
previous year primarily relating to lower stock-based compensation expenses,
which decreased to $2.9 million from $4.3 million recorded in 2005. As a
percentage of revenue, SG&A expenses decreased to 7% in 2006 compared to 9% in
2005. During 2005, the Company's higher relative stock price resulted in
higher than normal expenses related to performance and deferred stock units.

    Interest, Depreciation and Other Expenses

    Net interest expense increased to $2.3 million during 2006 compared to
$0.1 million of net interest income in 2005 as a result of higher long-term
debt incurred primarily to finance the Company's capital expenditures program.
A public offering of Calfrac's shares in August 2004 for net proceeds of
$26.8 million resulted in a stronger cash position and higher interest revenue
during 2005 as compared to 2006.
    In 2006, depreciation expense increased 50% or $8.6 million to
$25.7 million primarily as a result of the deployment of four fracturing
spreads, three coiled tubing units, four cementing units and other related
equipment as well as a full year of depreciation relating to 2005 equipment
additions.

    Income Tax

    During 2006, the Company recorded an income tax expense of $9.0 million
compared to $2.5 million a year ago. The current tax expense for 2006 was
$7.5 million, an increase of $6.4 million from 2005. As a result of the
business combination with Denison Energy Inc. ("Denison") in 2004, Calfrac
significantly reduced its current income tax related to Canadian operations
during 2005 and 2006. The increase in the current tax provision for 2006 was
mainly attributed to the increased profitability of the Company's U.S.
operations. For the year ended December 31, 2006, Calfrac recorded a future
income tax expense of $1.5 million, up from $1.4 million in 2005. This
provision is largely related to the drawdown of tax pools as a result of the
Company's profitability.

    Net Income

    For the year ended December 31, 2006, Calfrac's net income was
$72.5 million or $2.00 per share (basic) compared to $60.1 million or $1.66
per share (basic) in 2005. This growth in earnings was primarily due to
improved financial performance from the Company's Canadian deep basin and
United States operations, a larger and more diversified fleet of equipment and
less weather related issues than in 2005.

    Cash Flow

    The Company's cash flow from operations before changes in non-cash
working capital was $101.9 million in 2006, an increase of $21.3 million or
26% from $80.6 million recorded the previous year. This increase was primarily
a result of:

    
    -  consolidated revenue growing 36% or $112.1 million to $426.4 million

    that was partially offset by:

    -  operating expenses that increased 42% or $85.8 million to
       $291.1 million;
    -  net interest expense that rose $2.4 million to $2.3 million; and
    -  a $6.4 million increase in the current income tax provision to
       $7.5 million.

       In both 2006 and 2005, cash flow was used to partially finance the
       Company's capital expenditures.


    Liquidity and Capital Resources
    -------------------------------------------------------------------------
    Years Ended December 31,                                2006        2005
    -------------------------------------------------------------------------
    (000s)                                                    ($)         ($)

    Cash provided (used in):
      Operating activities                               110,518      59,005
      Financing activities                                42,756        (128)
      Investing activities                              (136,881)    (97,520)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and cash equivalents      16,393     (38,643)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating Activities

    The Company's 2006 cash flow from operations, excluding changes in
non-cash working capital, was $101.9 million compared to $80.6 million in
2005. The increase in cash flow was primarily due to higher revenues in all
geographic markets partially reduced by increased expenses. As at December 31,
2006, Calfrac had positive working capital of $31.2 million compared to
working capital of $39.4 million in 2005. The reduction in working capital was
primarily due to higher trade payables related to the Company's capital
expenditures.

    Financing Activities

    In 2006, total long-term debt increased to $60.0 million from
$10.6 million a year ago. During the fourth quarter of 2006, the Company
finalized the documentation to increase its available credit facilities to
$150 million with a syndicate of Canadian chartered banks. The operating line
of credit was increased from $20 million to $25 million with advances bearing
interest at either the bank's prime rate, U.S. base rate, LIBOR plus 1% or
bankers' acceptances plus 1%. The revolving term loan was increased to
$125 million from $50 million and bears interest at either the bank's prime
rate plus 0.25%, U.S. base rate plus 0.25%, LIBOR plus 1.25% or bankers'
acceptances plus 1.25%. On February 13, 2007, Calfrac completed a private
placement of unsecured senior notes for an aggregate principal of
US$135 million. These notes are due on February 13, 2015 and bear interest at
7.75%. As a result of this debt offering, the Company's revolving term loan
facility was reduced by $60 million to $65 million. A portion of the proceeds
received from these notes was used to repay the outstanding amounts related to
the existing operating and revolving term credit facilities. As of the date of
this report, the Company has unused credit facilities in the amount of
$90 million and approximately US$50 million of cash invested in short-term
investments.
    On February 7, 2005, the shareholders of the Company voted in favour of a
two-for-one subdivision of the Company's common shares. Common shares began
trading on a split basis on the Toronto Stock Exchange on February 17, 2005.
As at the date of this report, the Company has 36,390,408 common shares
outstanding.
    In May 2005, Calfrac's Board of Directors adopted a semi-annual dividend
policy of $0.05 per common share. In accordance with this policy, the Company
most recently paid a common share dividend on January 5, 2007 totaling
$1.8 million to all shareholders of record on December 19, 2006. The Company's
dividends qualify as "eligible dividends" as defined by the Canada Revenue
Agency.

    Investing Activities

    During 2006, net cash used for investing activities increased to
$136.9 million from $97.5 million in 2005. For the year ended December 31,
2006, capital expenditures totaled $155.5 million, up from $97.6 million a
year ago. This increase in capital expenditures was primarily due to:

    
    -  the construction and deployment of four multi-pumper conventional
       fracturing spreads, with one spread allocated to each of the Company's
       Canadian and Russian markets and two spreads serving the U.S. market;
    -  the construction and deployment of two deep coiled tubing units to
       Canada and one deep coiled tubing unit to serve the well services
       market in Western Siberia;
    -  the completion of four cementing units to serve the deeper basin
       markets of Western Canada; and
    -  construction costs related to the remaining two additional fracturing
       spreads, two coiled tubing units and four cementing units from the
       2006 capital program.
    

    During December 2006, the Company entered into a long-term contract with
a leading independent U.S. oil and gas company for fracturing services in
Arkansas and eastern Oklahoma. Under the terms of this contract, Calfrac will
provide a multi-pumper fracturing spread for a two-year term with minimum work
commitments that will be serviced by Calfrac's existing fleet of equipment as
well as equipment being manufactured pursuant to the Company's 2007 capital
program. This contract is consistent with Calfrac's philosophy of having a
prescribed level of its equipment fleet operating under long-term contracts.
In addition, the Company was awarded a one-year contract with a new customer
in Pourpay, Russia for the provision of a multi-pumper fracturing spread. At
the end of the first quarter of 2007, it is anticipated that Calfrac will be
operating 27 fracturing spreads, 16 coiled tubing units and 17 cementing
units.
    On February 11, 2005, the Company acquired the remaining 30% interest in
Ram Cementers Inc. ("Ram"), thereby making Ram a wholly owned subsidiary of
Calfrac. Subsequent to this acquisition, Ram was wound-up into Calfrac and all
operating, marketing and financial activities became fully integrated within
the Company.
    With its current working capital position, available credit facilities
and anticipated cash flow from operations, the Company expects to have
adequate resources to fund its financial obligations for 2007.


    
    Contractual Obligations and Contingencies
    -------------------------------------------------------------------------
                                                Payment Due by Period
                                        -------------------------------------
                                        Less than    1 - 3    4 - 5    After
                                   Total   1 Year    Years    Years  5 Years
    -------------------------------------------------------------------------
    (000s)                            ($)      ($)      ($)      ($)      ($)

    Long-term debt                60,000        -   19,200   40,800        -
    Operating leases              26,137    6,649    6,688    5,363    7,437
    Purchase obligations          18,373   16,925    1,448        -        -
    -------------------------------------------------------------------------
    Total contractual
     obligations                 104,510   23,574   27,336   46,163    7,437
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Calfrac has various contractual obligations related to debt, leasing of
vehicles and office space and raw material purchase commitments as outlined
above.

    Greek Legal Proceedings

    As described in note 8 to the interim consolidated financial statements,
the Company is involved in a number of legal proceedings in Greece. Management
evaluates the likelihood of potential liabilities being incurred and the
amount of such liabilities after careful examination of available information
and discussions with its legal advisors. As these proceeding have yet to reach
a status where the direction of a court's decision can be determined with any
reliability, management is unable to evaluate its potential exposure to these
legal proceedings at this time. The Company does not expect these claims to be
material.

    Evaluation of Disclosure Controls and Procedures and
    Internal Control Over Financial Reporting

    The President & Chief Executive Officer ("CEO") and Vice-President,
Finance & Chief Financial Officer ("CFO") of Calfrac are responsible for
establishing and maintaining disclosure controls and procedures ("DC&P") and
internal control over financial reporting ("ICFR") for the Company.
    In accordance with the requirements of Multilateral Instrument 52-109
Certification of Disclosure in Issuers' Annual and Interim Filings,
evaluations of the design and operating effectiveness of DC&P and the design
effectiveness of ICFR were carried out under their supervision as of the end
of the period covered by this report.
    Based on these evaluations, the CEO and CFO have concluded that the
Company's DC&P are designed and operating effectively to provide reasonable
assurance that material information relating to the Company, including its
consolidated subsidiaries, is made known to them by others within those
entities. They have also concluded that the Company's ICFR is designed
effectively to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
    There was no change to the Company's internal control over financial
reporting that occurred during the most recent interim period that has
materially affected, or is reasonably likely to materially affect, the
Company's ICFR.

    Outlook

    Calfrac believes that the long-term fundamentals for natural gas prices
are strong, but concerns surrounding short-term natural gas pricing may
negatively impact 2007 drilling activity levels in Western Canada,
specifically in the CBM market. The Canadian drilling forecast for 2007 from
the Petroleum Services Association of Canada estimates that 21,500 wells will
be drilled during the year. Although this is a reduction from the record
drilling levels experienced in the last several years, it still represents
historically strong activity levels.
    The Company is focused on the growing pressure pumping markets of the
deeper, more technical areas of the Western Canadian Sedimentary Basin.
Despite the weakness in near-term natural gas prices, activity levels in the
deeper regions of northern Alberta and northeastern British Columbia were
strong throughout 2006 and are expected to remain steady in 2007. New coiled
tubing and cementing equipment related to the Company's 2006 capital program
was deployed in the fourth quarter and additional units are expected to become
operational by the end of the first quarter of 2007 to service these deeper
regions. Calfrac anticipates that the low levels of activity experienced in
the Canadian CBM market during the past year will continue to be mitigated by
the Company's contracts related to two fracturing spreads servicing these
operations. Calfrac also expects that the utilization of its shallow gas
fracturing spreads will be strong for at least the first quarter of 2007 as a
result of its contractual relationship with a major customer.
    The strong performance of Calfrac's United States fracturing operations
was a major driver of the Company's 2006 financial results. Unlike the
Canadian market, drilling activity levels in the U.S. Rocky Mountain region
have remained robust, primarily in the Piceance Basin of western Colorado.
Fracturing activity in eastern Colorado and the Denver Julesberg Basin gained
momentum throughout the year with the number of jobs increasing during the
fourth quarter of 2006. Calfrac's newest operating base located in Beebe,
Arkansas is operational and the Company expects to complete its first
fracturing job in March 2007, thereby further diversifying the Company's
fracturing operations within the United States market. One multi-pumper
fracturing spread will serve the Fayetteville and Arkoma Basins in Arkansas as
well as eastern Oklahoma under the terms of a long-term contract with a
leading U.S. oil and gas company. From this operating base, there is potential
for additional growth as more equipment is deployed into the area to better
serve this new market. In 2007, Calfrac anticipates that this important
geographic segment will continue to generate strong financial and operating
results.
    During the last half of 2006, the Company operated one fracturing spread
and three coiled tubing units in Russia. In early 2007, an additional
fracturing spread was deployed to a new operating base in Pourpay, Western
Siberia. Two additional coiled tubing units are expected to be operational by
the end of the first quarter of 2007. Building on the momentum of Russia's
improved operating and financial performance during the fourth quarter of
2006, Calfrac believes that these operations have attained sufficient critical
mass and are well positioned for future growth and profitability. The expanded
equipment fleet combined with the Company's relationships with two of Russia's
largest oil and gas companies, is expected to drive improved financial and
operating performance from this geographic segment throughout the upcoming
year and provide a more significant contribution to the Company's consolidated
financial results.
    The Company's financial position was strengthened further as a result of
the closing of its recent US$135 million debt financing. The offering provides
the Company with additional financial flexibility to grow organically, and
alternatively, may also allow the Company to pursue strategic acquisition
opportunities that may arise in the future.
    Calfrac will continue to maximize equipment utilization and profitability
by redeploying equipment to higher activity regions within its global
operating reach.

    Conference Call

    Calfrac will be conducting a conference call for interested analysts,
brokers, investors and media representatives to review its fourth quarter and
year-end results at 10:00 a.m. (Calgary time) on Thursday, March 1, 2007. The
conference call dial-in number is 1-800-732-1073 or 416-644-3434. The
seven-day replay numbers are 1-877-289-8525 or 416-640-1917 and enter 21218774
followed by the pound key. A webcast of the conference call may be accessed
via the Company's website at www.calfrac.com.

    Calfrac is an independent provider of specialized oilfield services in
Canada, the United States and Russia, including fracturing, coiled tubing,
cementing and other well stimulation services. The Company has established a
leadership position through an expanding geographic network, increased
operating fleet and growing customer base. The common shares of Calfrac are
listed for trading on the Toronto Stock Exchange under the symbol CFW. For
additional information, visit the Company's website at www.calfrac.com.

    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 future plans and operations, certain statements
contained in this press release constitute forward-looking statements or
information ("forward-looking statements"). Forward-looking statements
contained in this report, including statements that may contain words such as
"anticipate," "can," "may," "expect," "believe," "intend," "forecast," or
similar words suggesting future outcomes or statements regarding an outlook.
These statements may include, but are not limited to, future capital
expenditures, future financial resources, future oil and gas well activity,
outcome of specific events and trends in the oil and gas industry. Readers are
cautioned that the foregoing list of significant factors is not exhaustive.
These statements are derived from certain assumptions and analysis 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. These statements are subject to
a number of known and unknown risks and uncertainties, which are discussed
previously in this report, that could cause actual results to differ
materially from the Company's expectations. Although Calfrac believes that the
expectations presented by these forward-looking statements are reasonable,
there can be no assurances that actual results or developments anticipated by
the Company will be realized or such expectations will prove to be correct.
Furthermore, the forward-looking statements contained in this document are
made as of the date of this news release and Calfrac assumes no obligation to
update publicly any such forward-looking information whether as a result of
new information, future events or otherwise. The forward-looking statements
contained in this press release are expressly qualified under this cautionary
statement.

    Non-GAAP Measures

    Certain measures in this press release do not have any standardized
meaning as prescribed under Canadian GAAP, such as gross margin, cash flow
from operations, cash flow, cash flow per share (diluted), cash flow per share
(basic), EBITDA, EBITDA per share (diluted) and EBITDA per share (basic), and
therefore, are considered non-GAAP measures. 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 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. can be accessed
on the Company's website at www.calfrac.com or under the Company's public
filings found at www.sedar.com.



    
    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
    As at December 31,                                      2006        2005
    -------------------------------------------------------------------------
    (000s) (unaudited)                                        ($)         ($)

    Assets
    Current assets
      Cash and cash equivalents                            5,580           -
      Accounts receivable                                 84,481      91,693
      Inventory                                           13,387       6,145
      Prepaid expenses and deposits                        7,463       2,219
    -------------------------------------------------------------------------
                                                         110,911     100,057
    Capital assets                                       327,832     198,302
    Long-term investment                                     396         324
    Goodwill                                               6,003       6,003
    Future income taxes                                    9,048      32,129
    -------------------------------------------------------------------------
                                                         454,190     336,815
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Bank indebtedness                                        -      10,813
      Accounts payable and accrued liabilities (note 7)   77,344      46,748
      Income taxes payable                                 2,342         485
      Current portion of long-term debt                        -       2,615
    -------------------------------------------------------------------------
                                                          79,686      60,661
    Long-term debt                                        60,000       8,000
    Other long-term liabilities                            4,743       6,306
    Deferred credit                                        6,251      27,827
    -------------------------------------------------------------------------
                                                         150,680     102,794
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 4)                               139,841     138,767
    Shares held in trust (note 5)                         (3,869)     (1,385)
    Contributed surplus                                    4,393       2,317
    Retained earnings                                    163,145      94,322
    -------------------------------------------------------------------------
                                                         303,510     234,021
    -------------------------------------------------------------------------
                                                         454,190     336,815
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

    -------------------------------------------------------------------------
                                  Three Months Ended             Years Ended
                                         December 31,            December 31,
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    (000s, except per share data)     ($)         ($)         ($)         ($)
    (unaudited)

    Revenue                      118,322     111,634     426,418     314,325

    -------------------------------------------------------------------------
    Expenses
      Operating                   83,834      68,298     291,056     205,227
      Selling, general and
       administrative              7,929       9,147      28,350      29,467
      Depreciation                 7,621       4,740      25,699      17,143
      Amortization of intangibles      -           -           -          36
      Interest expense (income)      702          67       2,341        (129)
      Equity share of income
       from long-term investments      -           -         (72)       (324)
      Foreign exchange (gains)
       losses and other           (1,837)         61      (2,516)        192
      (Gain) loss on disposal
       of capital assets             (25)         (3)         67         152
    -------------------------------------------------------------------------
                                  98,224      82,310     344,925     251,764
    -------------------------------------------------------------------------
    Income before income taxes    20,098      29,324      81,493      62,561
    -------------------------------------------------------------------------
    Income taxes
      Current                      2,903         844       7,538       1,069
      Future                         288       1,108       1,505       1,400
    -------------------------------------------------------------------------
                                   3,191       1,952       9,043       2,469
    -------------------------------------------------------------------------
    Income before non-
     controlling interest         16,907      27,372      72,450      60,092
    Non-controlling interest           -           -           -         (21)
    -------------------------------------------------------------------------
    Net income for the period     16,907      27,372      72,450      60,113
    Retained earnings,
     beginning of period         148,052      68,764      94,322      37,832
    Dividends                     (1,814)     (1,814)     (3,627)     (3,623)
    -------------------------------------------------------------------------
    Retained earnings,
     end of period               163,145      94,322     163,145      94,322
    -------------------------------------------------------------------------
    Earnings per share
      Basic                         0.47        0.75        2.00        1.66
      Diluted                       0.46        0.75        1.98        1.64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                                  Three Months Ended             Years Ended
                                        December  31,            December 31,
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    (000s) (unaudited)                ($)         ($)         ($)         ($)

    Cash provided by (used in):
    Operating activities
      Net income for the period   16,907      27,372      72,450      60,113
      Items not involving cash
        Depreciation and
         amortization              7,621       4,740      25,699      17,179
        Stock-based
         compensation                716         577       2,283       2,093
        Equity share of income
         from long-term
         investments                   -           -         (72)       (324)
        (Gain) loss on disposal
         of capital assets           (25)         (3)         67         152
        Future income taxes          288       1,108       1,505       1,400
        Non-controlling interest       -           -           -         (21)
    -------------------------------------------------------------------------
      Funds provided by
       operations                 25,507      33,794     101,932      80,592
      Net change in non-cash
       operating assets and
       liabilities                  (257)    (30,912)      8,586     (21,587)
    -------------------------------------------------------------------------
                                  25,250       2,882     110,518      59,005
    -------------------------------------------------------------------------
    Financing activities
      Issue of long-term debt     11,583      10,000      56,583      12,013
      Long-term debt repayments   (1,908)     (2,534)     (7,198)     (9,000)
      Dividends                   (1,814)     (1,814)     (3,627)     (3,623)
      Purchase of common shares
       (note 5)                        -           -      (3,869)     (1,385)
      Net proceeds on issuance
       of common shares               85         207         867       1,867
    -------------------------------------------------------------------------
                                   7,946       5,859      42,756        (128)
    -------------------------------------------------------------------------
    Investing activities
      Purchase of capital assets (44,415)    (20,612)   (155,478)    (97,614)
      Proceeds on disposal of
       capital assets                130           3       4,289          52
      Acquisition of subsidiary,
       net of cash acquired            -           -           -      (3,000)
      Net change in non-cash
       working capital from
       purchase of capital
       assets                     11,542       5,181      14,308       3,042
    -------------------------------------------------------------------------
                                 (32,743)    (15,428)   (136,881)    (97,520)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash position                   453      (6,687)     16,393     (38,643)
    Cash and cash equivalents
     (bank Indebtedness),
     beginning of period           5,127      (4,126)    (10,813)     27,830
    -------------------------------------------------------------------------
    Cash and cash equivalents
     (bank indebtedness),
     end of period                 5,580     (10,813)      5,580     (10,813)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    For the Three Months and Years Ended December 31, 2006 and 2005
    (000s, except per share data) (unaudited)

    1.  Basis of Presentation

        These financial statements do not conform in all respects to the
        requirements of generally accepted accounting principles for annual
        financial statements. These financial statements should be read in
        conjunction with the most recent annual audited financial statements.

    2.  Seasonality of Operations

        The business of Calfrac Well Services Ltd. (the "Company") is
        seasonal in nature. The lowest activity levels are experienced during
        the second quarter of the year when road weight restrictions are in
        place and access to wellsites in Canada is reduced.

    3.  Summary of Significant Accounting Policies

        These financial statements follow the same accounting policies and
        methods of their application as the most recent annual audited
        financial statements.

    4.  Capital Stock

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

        The continuity of issued common shares and related values are as
        follows:

        ---------------------------------------------------------------------
                                                          Shares      Amount
        ---------------------------------------------------------------------
                                                            (No.)         ($)

        December 31, 2004                             18,107,277     136,473
        Two-for-one split, February 17, 2005          18,107,277           -
        Issued upon exercise of stock options            118,722       2,294
        ---------------------------------------------------------------------
        December 31, 2005                             36,333,276     138,767
        Issued upon exercise of stock options             55,132       1,074
        ---------------------------------------------------------------------
        December 31, 2006                             36,388,408     139,841
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        On February 7, 2005, the shareholders of the Company voted in favour
        of a two-for-one subdivision of the Company's common shares that took
        effect on February 17, 2005. Comparative per share information has
        been restated to reflect the two-for-one split.

    5.  Shares Held in Trust

        The Company has established a Trust to purchase and hold Company
        stock on behalf of certain employees who have elected to receive a
        portion of their annual bonus entitlement in the form of Company
        shares. During 2006, 113,508 shares were purchased on the open market
        at a cost of $3,869 (2005 - 43,637 shares at a cost of $1,385). These
        shares vest with employees in March of the year following their
        purchase at which time they are distributed to those individuals
        participating in the plan. These shares are not considered
        outstanding for purposes of calculating basic earnings per share, but
        are included in the calculation of diluted earnings per share.

    6.  Stock Options

        ---------------------------------------------------------------------
        Continuity of
         Stock Options                 2006                    2005
        ---------------------------------------------------------------------
                                             Average                 Average
                                            Exercise                Exercise
                                 Options       Price     Options       Price
        ---------------------------------------------------------------------
                                    (No.)         ($)       (No.)         ($)

        Outstanding, January 1   818,578       18.39     840,200       16.07
        Granted during the year  776,550       25.89     140,100       29.92
        Exercised for common
         shares                  (55,132)      15.73    (118,722)      15.73
        Forfeited                (34,200)      27.18     (43,000)      17.97
        ---------------------------------------------------------------------
        Balance, December 31   1,505,796       22.15     818,578       18.39
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The number of options outstanding at January 1, 2005 has been
        adjusted to reflect the two-for-one common share split on
        February 17, 2005.

        All stock options vest equally over three years and expire three and
        one-half years from the date of grant. The estimated fair value of
        options granted is determined by using the Black-Scholes option
        pricing model with the following assumptions: risk-free interest rate
        of 4%, average expected life of 2.83 years, expected volatility of
        34% to 36% and expected dividends of $0.10 per annum. This amount is
        charged to compensation expense over the vesting period. When stock
        options are exercised, the proceeds, together with the amount of
        compensation expense previously recorded in contributed surplus, is
        added to capital stock.

    7.  Related Party Transactions

        During 2006, the Company purchased $26,890 (2005 - $17,487) of
        products and services from a company in which it holds a 30% equity
        interest. At December 31, 2006, accounts payable included $7,234 of
        indebtedness to the related party (December 31, 2005 - $2,941).

    8.  Contingencies

        Greek Operations

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

        In 1998, a consortium in which a Greek subsidiary of Denison
        participated, terminated employees in Greece as a result of the
        cessation of its oil and gas operations in that country. Several
        groups of employees have filed claims 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 compensation was due to the 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 employees has filed an appeal with
        the Supreme Court of Greece, which is scheduled to be heard on
        May 29, 2007.

        Several other smaller groups of employees have filed similar cases in
        various courts in Greece. Some of these cases were heard in 2004. In
        general, the finding of these courts has been that the termination of
        the employees was valid and in some instances have awarded the
        employees immaterial amounts of additional compensation and in one
        case have referred the matter back to a lower court to be reheard
        based on more specific grounds.

        As a result of the above-mentioned court hearings, a majority of the
        number of former employees with respect to these smaller groups of
        claimants have received payment of the immaterial amounts awarded to
        them and waived their right of recourse to the Supreme Court of
        Greece. The remainder have filed an appeal to the Supreme Court of
        Greece or have advised that they are waiting for the outcome of the
        May 29, 2007 hearing of the Supreme Court of Greece before proceeding
        further.

        The direction and financial consequence of the potential decision in
        these actions cannot be determined at this time.

    9.  Segmented Information

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

        ---------------------------------------------------------------------
                                                            Inter-
                                                           segment
                                                  United   Elimin-  Consoli-
                              Canada    Russia    States    ations     dated
        ---------------------------------------------------------------------
                                  ($)       ($)       ($)       ($)       ($)
        Three Months Ended
         December 31, 2006
        Revenue               79,837     9,446    29,039         -   118,322
        Operating income
         (loss)(1)            16,746       671     9,142         -    26,559
        Segmented assets(2)  438,879    66,012    35,547   (86,248)  454,190
        Capital expenditures  33,313     7,934     3,235       (67)   44,415
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        Three Month Ended
         December 31, 2005
        Revenue               96,019     1,212    14,403         -   111,634
        Operating income
         (loss)(1)            33,434    (2,489)    3,244         -    34,189
        Segmented assets(2)  336,018    14,061    21,133   (34,397)  336,815
        Capital expenditures  14,018    10,175       567    (4,148)   20,612
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        Year Ended
         December 31, 2006
        Revenue              318,018    22,123    86,277         -   426,418
        Operating income
         (loss)(1)            81,033    (2,389)   28,368         -   107,012
        Segmented assets(2)  438,879    66,012    35,547   (86,248)  454,190
        Capital expenditures 114,402    35,615     5,216       245   155,478
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        Year Ended
         December 31, 2005
        Revenue              280,068     1,212    33,045         -   314,325
        Operating income
         (loss)(1)            77,468    (2,489)    4,652         -    79,631
        Segmented assets(2)  336,018    14,061    21,133   (34,397)  336,815
        Capital expenditures  85,566    10,175     6,021    (4,148)   97,614
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Operating income (loss) is defined as revenue less operating
            expenses (excluding depreciation and amortization) and selling,
            general and administration expenses.

        (2) Assets operated by the Company's U.S. subsidiary were acquired
            through a lease arrangement with the Canadian parent company. The
            cost base of these assets was $63.3 million at December 31, 2006
            ($35.1 million at December 31, 2005).


        The following table sets forth consolidated revenue by service line:

        ---------------------------------------------------------------------
                                  Three Months Ended             Years Ended
                                         December 31,            December 31,
                                    2006        2005        2006        2005
        ---------------------------------------------------------------------
                                      ($)         ($)         ($)         ($)

        Fracturing               103,531     105,890     374,096     295,782
        Coiled Tubing              8,919       2,969      30,689      10,149
        Cementing                  5,872       2,775      21,633       8,394
        ---------------------------------------------------------------------
                                 118,322     111,634     426,418     314,325
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. Subsequent Events

        On February 13, 2007, the Company completed a private placement of
        unsecured senior notes for an aggregate amount of US$135.0 million.
        The notes are due in full on February 13, 2015 and bear interest at
        7.75% payable semi-annually. A portion of the proceeds of the
        offering was used to repay the Company's existing operating and
        revolving term credit facilities. In conjunction with the offering,
        the Company's existing revolving term credit facility was reduced
        from $125.0 million to $65.0 million.
    

    %SEDAR: 00002062E




For further information:

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


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