Calfrac Announces Fourth Quarter and Year-End Results



    CALGARY, Feb. 28 /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, 2007.

    
    HIGHLIGHTS
    -------------------------------------------------------------------------
                         Three Months Ended               Year Ended
                            December 31,                  December 31,
                      2007      2006    Change      2007      2006    Change
    -------------------------------------------------------------------------
    (000s, except       ($)       ($)       (%)       ($)       ($)       (%)
     per share and
     unit data)
    (unaudited)

    Financial
    Revenue        114,450   118,322        (3)  460,320   426,418         8
    Gross
     margin(1)      28,612    34,488       (17)  131,779   135,362        (3)
    Net income       3,653    16,907       (78)   38,568    72,450       (47)
      Per share
        - basic       0.10      0.47       (79)     1.06      2.00       (47)
        - diluted     0.10      0.46       (78)     1.06      1.98       (46)
    Cash flow from
     operations(2)  19,582    25,507       (23)   87,642   101,932       (14)
      Per share
        - basic       0.53      0.70       (24)     2.40      2.81       (15)
        - diluted     0.53      0.70       (24)     2.40      2.79       (14)
    EBITDA(3)       18,790    28,421       (34)   97,789   109,533       (11)
      Per share
        - basic       0.51      0.78       (35)     2.68      3.02       (11)
        - diluted     0.51      0.78       (35)     2.68      3.00       (11)
    Working
     capital        92,156    31,225       195    92,156    31,225       195
    Shareholders'
     equity        350,915   303,510        16   350,915   303,510        16
    Weighted
     average
     common shares
     outstanding
     (No.)
      Basic         36,757    36,270         1    36,463    36,286         -
      Diluted       36,844    36,384         1    36,538    36,547         -
    -------------------------------------------------------------------------
                                                    (No.)     (No.)       (%)
    Operating
    Fracturing
     spreads at
     period end
      Conventional
       fracturing                                     24        21        14
      Coalbed methane                                  4         4         -
    -------------------------------------------------------------------------
      Total                                           28        25        12
    Coiled tubing units                               18        14        29
    Cementing units                                   16        13        23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    1.  Gross margin is defined as revenue less operating expenses excluding
        depreciation. 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 present the highlights for the three months and year
ended December 31, 2007 and provide an outlook for the remainder of the year.
During the fourth quarter, our Company:

    
    -   purchased the fracturing assets of a local Canadian competitor at a
        discount to replacement cost, and subsequently deployed these assets
        to our highest activity regions;
    -   commenced fracturing operations in the Burgos field of northern
        Mexico; and
    -   prepared for the start-up of our cementing operations in Argentina
        which are expected to commence early in the second quarter of 2008.

    Financial Highlights

        For the three months ended December 31, 2007, the Company:

    -   realized revenue of $114.5 million, a decrease of 3 percent from the
        comparable period in 2006;
    -   earned net income of $3.7 million or $0.10 per share (basic); and
    -   recorded cash flow from operations before changes in non-cash working
        capital of $19.6 million or $0.53 per share (basic).

        For the year ended December 31, 2007, Calfrac:

    -   increased revenue by 8 percent to $460.3 million;
    -   earned net income of $38.6 million or $1.06 per share (basic);
    -   recorded cash flow from operations before changes in non-cash working
        capital of $87.6 million or $2.40 per share (basic); and
    -   improved average consolidated revenue per fracturing job by 10% to
        $62,466 from $56,759 in 2006.
    

    Operational Highlights

    Canada

    The fourth quarter of 2007 in western Canada proved to be more
challenging than the previous quarter due to uncertainty over proposed changes
to Alberta's royalty regime combined with a continued low price for natural
gas and stronger Canadian dollar. The result was lower than expected activity
levels and continued price discounting. However, the Company did complete a
large number of CBM jobs and its shallow gas and deep coiled tubing operations
were more active than the comparable quarter of 2006.

    United States and Mexico

    Calfrac's U.S. operations experienced lower revenue on a sequential basis
primarily as a result of pricing pressures in the Fayetteville shale basin of
Arkansas. Activity in Arkansas remained strong in the fourth quarter, although
not at the same pace as experienced in the third quarter of 2007. We were
successful in diversifying our customer base and service lines in this region
providing a solid foundation for future growth in 2008 and beyond.
    Activity in the Rocky Mountain region of the United States was hampered
somewhat by natural gas pipeline constraints. While many operators actively
drilled in the fourth quarter of 2007, completions were delayed until late
2007 and into 2008 to coincide with the Express Pipeline being placed into
service.
    The Company completed its first Mexican fracturing job during
mid-November. Equipment related to the start-up of Mexican operations was
redeployed from Calfrac's existing North American operating fleet. We have
assembled a quality management team and are working to grow these operations
in the future. Fourth quarter results for Mexican operations resulted in a net
start-up loss of approximately $0.03 per share. We do, however, expect
improved financial results from our Mexican operations on a go-forward basis.

    Russia

    Calfrac established record revenues for its Russian operations during the
fourth quarter of 2007. Both fracturing and coiled tubing operations
experienced a very active quarter. Unfortunately, higher fuel and maintenance
costs reduced operating margins in the quarter. The higher fuel costs were
directly related to the colder than normal weather, which also resulted in
longer rig-in times in the month of December.

    Outlook

    Calfrac believes that the long-term fundamentals for natural gas prices
are strong. The recent rise in the price of natural gas provides cautious
optimism for activity levels throughout the remainder of 2008 and into 2009.
While this optimism provides the foundation for future growth it does not
distract us from our continued focus of operating our Company as efficiently
as possible through a period of potentially lower levels of activity in
selected geographical markets.
    In Canada, the appreciation of the Canadian dollar during 2007 and
uncertainty surrounding the proposed new royalty regime in Alberta may
negatively impact 2008 drilling activity levels in the Western Canada
Sedimentary Basin. While many drilling forecasts for Canada expect reduced
levels of activity in 2008, our operations to date have been very strong.
Pricing appears to have leveled off and discussions with our customers as to
their plans for the remainder of the year have provided positive momentum for
a stronger 2008 than many in the industry previously expected. Drilling
activity in the deeper, more technical areas of northern Alberta and northeast
British Columbia, as well as the shallow gas regions of southern Alberta, are
forecast to remain a focus for natural gas producers in the coming year.
Calfrac continues to experience a move towards larger fracturing jobs in
Canada which require additional horsepower. This could provide the foundation
for growth in Canada in 2008 and beyond. In the short-term, well recompletion
and workover activity in 2008 is expected to increase and offset some of the
decline in new drilling activity. Calfrac anticipates that the lower levels of
activity experienced in the CBM market during 2007 will continue into 2008,
but will be mitigated somewhat by the Company's long-term contracts.
    Overall, strong demand is expected for the Company's services in the
United States during 2008 and these operations are expected to continue to be
a major driver of the Company's consolidated financial performance. As
discussed earlier, natural gas takeaway issues in Colorado are believed to
have been resolved with the commissioning of the Express Pipeline in January
2008. Activity in the Piceance Basin thus far in 2008 has been significantly
higher than that experienced in the latter part of 2007, which should lead to
significant increases in activity on a year-over-year basis. Additionally, the
Company's growing customer base in Arkansas is expected to result in strong
fracturing and cementing activity levels throughout 2008. We still remain very
optimistic on future development in the Fayetteville shale play, and potential
opportunities in the Arkoma basin in Oklahoma. As is the case in Canada, the
Company continues to experience a move towards higher rate jobs in all regions
in the U.S. due to the continued evolution of the development of tight gas and
shale gas plays which fits well with Calfrac's capital program for additional
horsepower capacity.
    Calfrac's Russian operations in 2008 will be supported by two recently
signed annual contracts with one of Russia's largest oil and natural gas
companies. Consequently, the Company's current equipment fleet of three
multi-pumper fracturing spreads and five deep coiled tubing units is expected
to be highly utilized throughout 2008. With the Company's larger operating
fleet throughout 2008 and continued focus on improving its operating
efficiencies during the upcoming year, we expect our Russian operations to
continue to provide a meaningful contribution to the financial performance of
the Company.
    In Mexico, Calfrac plans to continue to grow its operations through the
start-up phase and improve its financial and operating performance. As well,
the Company intends to pursue new opportunities to enhance its operating
presence within this new geographic market.
    In Argentina, Calfrac plans to commence cementing operations early in the
second quarter of 2008, anchored by a negotiated arrangement with a leading
oil and natural gas company in that country. The Company has redeployed
certain cementing equipment from its Canadian operations and has constructed
the remaining support equipment locally. This fifth geographical market
continues Calfrac's strategy of diversification into new regions that are not
dependant upon the natural gas drilling markets of North America.

    On behalf of the Board of Directors,

    Douglas R. Ramsay
    President & Chief Executive Officer

    February 28, 2008


    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 27, 2008 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 years ended December 31, 2007 and 2006 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, 2006. 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 2007 Performance Summary

    Calfrac is an independent provider of specialized oilfield services in
Canada, the United States, Russia, Mexico and Argentina, including fracturing,
coiled tubing, cementing and other well stimulation services. The Company has
established a leadership position through an expanding geographic network,
larger operating fleet and growing customer base. For the three months ended
December 31, 2007, the Company:

    
    -   earned revenue of $114.5 million compared to $118.3 million in the
        same period of 2006;
    -   recorded net income of $3.7 million or $0.10 per share (basic) versus
        $16.9 million or $0.47 per share (basic) in the same period of 2006;
        and
    -   realized cash flow from operations before changes in non-cash working
        capital of $19.6 million or $0.53 per share (basic) compared to
        $25.5 million or $0.70 per share (basic) in the same period of 2006.
    

    Revenue

    Canada

    Revenue from Canadian operations for the fourth quarter of 2007 decreased
by 20 percent to $63.5 million from $79.8 million in the same three-month
period of 2006. Canadian fracturing revenue for the quarter totalled
$53.8 million, a decrease of 22 percent from the $68.8 million earned in the
corresponding quarter of 2006. This decrease was primarily due to lower
fracturing activity levels in the deeper basins of western Canada than in the
previous year and relatively high activity levels in the CBM and shallow gas
regions of Alberta. During the fourth quarter of 2007, the Company completed
1,287 Canadian fracturing jobs for average revenue of $41,806 per job compared
to 1,244 jobs for average revenue of $55,295 per job in the same period of
2006. The decline in per job revenues from the previous year was primarily due
to significant competitive pricing pressures in the Canadian market and a
higher percentage of total activity being derived from CBM fracturing
operations.
    For the three months ended December 31, 2007, revenue from Canadian
coiled tubing operations decreased by 12 percent to $4.6 million from
$5.2 million for the same period in 2006. During the fourth quarter of 2007,
the Company completed 862 jobs for average revenue of $5,305 per job compared
to 1,922 jobs for average revenue of $2,694 per job in 2006. The increase in
the average revenue per job was due primarily to higher activity in the
deeper, more technically challenging basins of western Canada.
    Revenue from Calfrac's cementing operations in the fourth quarter of 2007
was $5.1 million, a 13 percent decrease from the $5.9 million recorded in the
fourth quarter of 2006. The Company completed 820 jobs for average revenue of
$6,221 per job in the fourth quarter of 2007 compared to 480 jobs for average
revenue of $12,234 per job in the same period of 2006. The decrease in the
average cementing revenue per job was primarily due to a higher proportion of
shallow cementing jobs completed as compared to the prior year's quarter as
well as the impact of competitive pricing pressures in western Canada.

    United States and Mexico

    During the fourth quarter of 2007, revenue from the Company's United
States operations increased by 8 percent to $31.5 million from $29.0 million
in the same period of 2006. In Mexico, Calfrac recorded revenue of
$1.7 million during the three months ended December 31, 2007. These operations
commenced in 2007 and, accordingly, there is no comparable revenue in the 2006
period. The increase in U.S. revenue was due primarily to the commencement of
fracturing operations in Arkansas during March 2007 offset by lower activity
levels in western and eastern Colorado and a weaker U.S. dollar. On a
year-over-year basis, the appreciation of the Canadian dollar negatively
impacted reported revenues by approximately $5.1 million. For the three months
ended December 31, 2007, the Company completed 412 U.S. fracturing jobs for
average revenue of $74,898 per job compared to 385 jobs for average revenue of
$75,427 per job in the fourth quarter of 2006. The lower revenue per job was
mainly due to competitive pricing pressures in the Piceance Basin and a
stronger Canadian dollar offset slightly by Calfrac's entry into the Arkansas
fracturing market during 2007.

    Russia

    Calfrac's revenue from operations in Russia during the fourth quarter of
2007 increased by 89 percent to $17.9 million from $9.4 million in the same
three-month period of 2006, due primarily to a larger equipment fleet and
higher fracturing and coiled tubing activity levels offset slightly by a
stronger Canadian dollar. If the U.S./Canadian dollar exchange rate for the
fourth quarter of 2007 had remained consistent with the same period in 2006,
the reported revenue for the Company's Russian operations would have increased
by approximately $2.9 million.

    Gross Margin

    Fourth quarter consolidated gross margin was $28.6 million in 2007, a
17 percent decrease from the $34.5 million recorded in the corresponding
period in 2006. As a percentage of revenue, consolidated gross margin was
25 percent in the fourth quarter of 2007 compared to 29 percent in the same
period of 2006. The decrease in consolidated gross margin was primarily a
result of lower activity levels and competitive pricing pressures in Canada,
extremely cold weather in Russia during December 2007, which increased
operating costs, and start-up expenses in Mexico, all of which were offset
slightly by improved financial results in the United States.

    Expenses

    Operating Expenses

    During the fourth quarter of 2007, operating costs increased by 2 percent
to $85.8 million from $83.8 million in the corresponding three-month period of
2006, due primarily to higher levels of activity and broader scale of
operations in the United States and Russia as well as start-up expenses
related to the Company's new operations in Mexico, all of which were offset by
lower activity levels in Canada combined with the impact of a stronger
Canadian dollar.

    SG&A Expenses

    SG&A expenses were $8.7 million for the quarter ended December 31, 2007
compared to $7.9 million in the same period of 2006. As a percentage of
revenue, SG&A expenses for the fourth quarter of 2007 increased slightly to
8 percent from 7 percent in the same period of 2006. The increase in SG&A
expenses during the fourth quarter of 2007 was primarily related to higher
administrative costs to support broader worldwide operations partially offset
by a reduction in bonus expenses due to lower Company profitability and a
weaker U.S. dollar.

    Interest, Depreciation and Other Expenses

    The Company recorded net interest expense of $2.3 million for the quarter
ended December 31, 2007 compared to $0.7 million in the comparable period of
2006. The higher interest expense in 2007 was mainly related to the issuance
of senior unsecured notes in February 2007 for US$135.0 million offset
partially by interest earned on the Company's surplus cash.
    Depreciation expense in the fourth quarter of 2007 increased by
38 percent to $10.5 million from $7.6 million in the corresponding quarter of
2006 mainly as a result of the Company's larger fleet of equipment operating
in North America.

    Income Tax

    The Company recorded income tax expense of $2.3 million for the quarter
ended December 31, 2007 compared to $3.2 million in the same period of 2006.
Total income tax expense was lower than in the respective quarter of 2006
primarily due to lower profitability in Canada. During the fourth quarter of
2007, the Company recorded a current tax recovery of $2.2 million compared to
an expense of $2.9 million in 2006. Calfrac recorded a future income tax
expense of $4.6 million for the three months ended December 31, 2007 compared
to $0.3 million in the same quarter of 2006. The effective income tax rate for
the three months ended December 31, 2007 was 39 percent compared to 16 percent
in the same period of 2006. The increase in total income tax expense and
overall rate was a result of a greater proportion of the Company's earnings
being generated from the United States, where Calfrac's operations are subject
to income tax at full statutory rates.

    Net Income

    During the fourth quarter of 2007 the Company's net income totalled
$3.7 million or $0.10 per share (basic), a 78 percent decrease from the
$16.9 million or $0.47 per share (basic) recorded in the same quarter of 2006.
Net income during the fourth quarter of 2007 decreased as compared to the same
period in 2006 primarily as a result of a lower gross margin combined with
higher depreciation and interest expenses as well as the realization of
foreign exchange losses instead of the foreign exchange gains that were
recorded in 2006.

    Cash Flow

    Cash flow from operations before changes in non-cash working capital for
the three months ended December 31, 2007 decreased by 23 percent to
$19.6 million or $0.53 per share (basic) from $25.5 million or $0.70 per share
(basic) in 2006. The decline in cash flow from operations was mainly due to
lower profitability from the Company's Canadian operations.

    
    Summary of Quarterly Results

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

    Financial
    Revenue                               126,010   66,973  115,112  118,322
    Gross margin(1)                        49,927   14,446   36,500   34,488
    Net income (loss)                      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
    -------------------------------------------------------------------------
                                             (No.)    (No.)    (No.)    (No.)
    Operating
    Fracturing spreads
      Conventional                             18       19       19       21
      Coalbed methane                           4        4        4        4
    -------------------------------------------------------------------------
      Total                                    22       23       23       25
    Coiled tubing units                        12       14       14       14
    Cementing units                             9       11       11       13
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Three Months Ended                     Mar.31,  Jun.30,  Sep.30,  Dec.31,
                                             2007     2007     2007     2007
    -------------------------------------------------------------------------
    (000s, except per share                    ($)      ($)      ($)      ($)
     and unit data)
    (unaudited)

    Financial
    Revenue                               128,507   87,778  129,585  114,450
    Gross margin(1)                        38,222   22,095   42,851   28,612
    Net income (loss)                      18,777     (303)  16,441    3,653
      Per share
        - basic                              0.52    (0.01)    0.45     0.10
        - diluted                            0.52    (0.01)    0.45     0.10
    Cash flow from operations(2)           28,827   10,835   28,398   19,582
      Per share
        - basic                              0.79     0.30     0.78     0.53
        - diluted                            0.79     0.30     0.78     0.53
    EBITDA(3)                              30,324   14,569   34,107   18,790
      Per share
        - basic                              0.84     0.40     0.94     0.51
        - diluted                            0.83     0.40     0.93     0.51
    Capital expenditures                   48,521   19,972   11,345   12,101
    Working capital                       105,549   86,971   99,696   92,156
    Shareholders' equity                  326,184  321,218  336,858  350,915
    -------------------------------------------------------------------------
                                             (No.)    (No.)    (No.)    (No.)
    Operating
    Fracturing spreads
      Conventional                             23       23       24       24
      Coalbed methane                           4        4        4        4
    -------------------------------------------------------------------------
      Total                                    27       27       28       28
    Coiled tubing units                        14       15       17       18
    Cementing units                            15       15       16       16
    -------------------------------------------------------------------------

    1.  Gross margin is defined as revenue less operating expenses excluding
        depreciation. 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.


    2007 Year-End Performance Summary

    For the year ended December 31, 2007, Calfrac:
    -   increased revenue by 8 percent to $460.3 million from $426.4 million
        in 2006;
    -   earned net income of $38.6 million or $1.06 per share (basic), a
        decrease of $33.9 million or $0.94 per share (basic) from the
        previous year;
    -   recorded cash flow from operations before changes in non-cash working
        capital of $87.6 million or $2.40 per share (basic) compared to
        $101.9 million or $2.81 per share (basic) in 2006;
    -   achieved EBITDA of $97.8 million versus $109.5 million a year ago;
        and
    -   incurred capital expenditures of $91.9 million primarily to expand
        the pumping capacity of its fracturing equipment fleet.
    

    Revenue

    Canada

    Revenue from Canadian operations for 2007 decreased by 22 percent to
$249.5 million from $318.0 million in 2006 primarily as a result of decreased
fracturing activity in western Canada, a higher percentage of shallow gas jobs
performed, which tend to have lower revenues on a per job basis, and
competitive pricing pressures across all service lines, especially in the CBM
fracturing market. Canadian fracturing revenue totalled $215.7 million, a
decrease of $62.5 million or 22 percent from 2006. During 2007, the Company
completed 4,481 Canadian fracturing jobs for average revenue of $48,130 per
job compared to 5,238 jobs for $53,105 per job in the prior year. This
decrease in fracturing job count during 2007 correlates closely with the
decline in overall industry drilling activity experienced in western Canada
during the same period. The revenue per job for Canadian fracturing operations
was lower in 2007 due primarily to significant price competition in the CBM
market and a higher proportion of shallow gas fracturing jobs completed during
the current year, which tend to have lower per job revenues.
    The Company's revenue from coiled tubing operations decreased by
$2.0 million in 2007 to $16.2 million from $18.2 million in the previous year.
In 2007, 3,798 jobs were completed for average revenue of $4,258 per job
compared to 5,875 jobs for $3,102 per job in 2006. Canadian coiled tubing
revenue per job increased year-over-year primarily as a result of a
proportionate increase in the number of deeper coiled tubing jobs completed in
western Canada during 2007.
    For the year ended December 31, 2007, revenue from Calfrac's cementing
operations totalled $17.6 million versus $21.6 million in 2006. This
19 percent decrease was due primarily to a larger percentage of cementing jobs
being completed in the shallower regions of southern Alberta and competitive
pricing pressures. During 2007, the Company completed 1,933 jobs for average
revenue of $9,121 per job compared to 1,974 jobs for average revenue of
$10,959 per job in 2006.

    United States and Mexico

    During 2007, revenue from Calfrac's United States operations was
$145.1 million, up by 68 percent from $86.3 million in 2006. The Company had
revenue of $1.7 million from its recently initiated operations in Mexico. For
the year ended December 31, 2007, the Company completed 1,679 U.S. fracturing
jobs for average revenue of $85,940 per job compared to 1,284 jobs for $67,037
per job recorded in the previous year. The substantial increase in total and
per job revenue during 2007 from the prior year was primarily due to the
commencement of fracturing operations in Arkansas, combined with strong levels
of activity in the DJ Basin, only somewhat offset by lower activity in the
Piceance Basin and a stronger Canadian dollar.

    Russia

    In Russia, Calfrac's revenue from operations increased year-over-year by
$41.9 million to $64.0 million in 2007 primarily as a result of a larger fleet
of equipment and operating scale. During 2007, the Company deployed two
additional multi-pumper fracturing spreads and two new deep coiled tubing
units into western Siberia and currently operates three fracturing spreads and
five coiled tubing units in this geographical market. The Company believes
that these operations have attained sufficient size to generate solid
operating and financial results into 2008.

    Gross Margin

    Consolidated gross margin for the year ended December 31, 2007 decreased
by 3 percent to $131.8 million from $135.4 million in 2006 primarily due to
improved financial performance from Calfrac's United States and Russia
operations being slightly more than offset by the impact of competitive
pricing pressures and lower activity levels in western Canada. Consolidated
gross margin as a percentage of revenue decreased to 29 percent from
32 percent in 2006 mainly due to pricing pressures and lower activity levels
in the Canadian market.

    Expenses

    Operating Expenses

    Calfrac's operating expenses in 2007 increased by 13 percent to
$328.5 million from $291.1 million in the prior year primarily due to higher
activity in the United States and Russia as well as costs related to new
district locations, offset partially by lower activity in Canada and the
impact of a stronger Canadian dollar. During the past year, the Company
incurred higher expenses related to the commencement of new district
operations in Edson, Alberta; Beebe, Arkansas; Reynosa, Mexico; and Purpe,
Russia.
    Selling, General and Administrative (SG&A) Expenses

    SG&A expenses for the Company in 2007 totalled $31.7 million, an increase
of 12 percent or $3.3 million from the previous year. These higher costs were
primarily a result of the growth in Calfrac's scale of operations and revenue
base in North America and Russia offset slightly by lower bonus expenses due
to lower Company profitability. As a percentage of revenue, SG&A expenses were
7 percent in 2007, consistent with 2006.

    Interest, Depreciation and Other Expenses

    Net interest expense increased to $9.5 million in 2007 from $2.3 million
in 2006 mainly as a result of interest pertaining to the issuance of
US$135.0 million of senior unsecured notes in February 2007 offset slightly by
interest earned on the Company's cash balances. In 2007, depreciation expense
increased by 44 percent or $11.4 million to $37.1 million primarily as a
result of the deployment of three fracturing spreads, four coiled tubing
units, three cementing units and other related equipment as well as a full
year of depreciation on 2006 equipment additions.

    Income Tax

    During 2007 Calfrac recorded an income tax expense of $12.7 million
compared to $9.0 million in the prior year. Current tax expense for the year
ended December 31, 2007 decreased to $3.9 million from $7.5 million in 2006.
The Company recorded future income tax expense of $8.8 million for the year
ended December 31, 2007, up from $1.5 million in 2006. For 2007 the effective
rate of income tax increased to 25 percent from 11 percent in the previous
year primarily due to a higher proportion of the Company's profits being
earned in the United States and Russia, which are taxed at full statutory
rates, and to lower taxable earnings in Canada, which have a significantly
lower effective income tax rate due to tax attributes from the amalgamation
with Denison Energy Inc.

    Net Income

    For the year ended December 31, 2007, Calfrac's net income was
$38.6 million or $1.06 per share (basic) compared to $72.5 million or
$2.00 per share (basic) in 2006. The decline in net income from 2006 was
primarily due to a lower gross margin combined with higher depreciation,
interest and income tax expenses as well as the realization of foreign
exchange losses instead of the foreign exchange gains that were recorded in
2006.

    Cash Flow

    The Company's cash flow from operations before changes in non-cash
working capital was $87.6 million in 2007, a 14 percent decrease from the
previous year. This reduction was primarily a result of:

    
    -   a 13 percent increase in operating expenses to $328.5 million; and
    -   net interest expense that rose to $9.5 million from $2.3 million in
        the prior year;

    partially offset by:

    -   total revenue increasing by 8 percent or $33.9 million to
        $460.3 million; and
    -   a $3.7 million decrease in the current income tax provision to
        $3.9 million.

    In 2007 and 2006, cash flow was used to partially finance the Company's
capital expenditures program.

    Liquidity and Capital Resources

    -------------------------------------------------------------------------
    Years ended December 31,                                2007        2006
    -------------------------------------------------------------------------
    (000s)                                                    ($)         ($)

    Cash provided (used in):
      Operating activities                                79,483     110,518
      Financing activities                                89,918      42,756
      Investing activities                              (123,610)   (136,881)
      Effect of exchange rate changes on cash
       and cash equivalents                              (12,267)          -
    -------------------------------------------------------------------------
    Increase in cash and cash equivalents                 33,524      16,393
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating Activities

    The Company's 2007 cash flow from operations, excluding changes in
non-cash working capital, was $87.6 million compared to $101.9 million in
2006. The decrease in cash flow was primarily due to lower revenues in Canada
resulting from lower activity levels and competitive pricing pressures
partially offset by improved financial performance of Calfrac's operations in
the United States and Russia. As at December 31, 2007, Calfrac had working
capital of $92.2 million compared to working capital of $31.2 million in 2006.
The increase in working capital was primarily due to a higher cash balance as
a result of the issuance of the senior unsecured notes in February 2007.

    Financing Activities

    Total long-term debt increased to $129.5 million at December 31, 2007
from $60.0 million at the end of the prior year. On February 13, 2007, Calfrac
completed a private placement of senior unsecured notes for an aggregate
principal of US$135.0 million. These notes are due on February 15, 2015 and
bear interest at 7.75 percent per annum. The Company has additional available
credit facilities of $90.0 million with a syndicate of Canadian chartered
banks. The operating line of credit is $25.0 million with advances bearing
interest at either the bank's prime rate, U.S. base rate, LIBOR plus 1 percent
or bankers' acceptances plus 1 percent. The revolving term loan is
$65.0 million and bears interest at either the bank's prime rate plus
0.25 percent, U.S. base rate plus 0.25 percent, LIBOR plus 1.25 percent or
bankers' acceptances plus 1.25 percent. At this date, the Company has unused
credit facilities in the amount of $90.0 million.
    At December 31, 2007, the Company also had cash and cash equivalents of
$39.1 million. A portion of these funds were invested in short term
investments, none of which were exposed to the liquidity issues surrounding
asset-backed securities.
    The common shares of the Company trade on the Toronto Stock Exchange and,
at this date, Calfrac has 37,372,832 common shares outstanding. The Company
pays semi-annual dividends to shareholders of $0.05 per common share at the
discretion of the Board of Directors and they qualify as "eligible dividends"
as defined by the Canada Revenue Agency. These dividends are funded by cash
flow from operations, excluding changes in non-cash working capital, and
totalled $3.7 million in 2007 and $3.6 million in 2006.

    Investing Activities

    During 2007, net cash used for investing activities decreased to
$123.6 million from $136.9 million in 2006. For the year ended December 31,
2007, capital expenditures totalled $91.9 million, down from $155.5 million in
the prior year. The current year's capital expenditures were primarily related
to increasing the pumping capacity of the Company's fracturing equipment fleet
throughout Canada, the United States, Mexico and Russia as well as
supplementing the fracturing and coiled tubing fleet in Russia. A portion of
these expenditures was related to the completion of the 2006 capital program,
including:

    
    -   the completion of two additional fracturing spreads;
    -   one new deep coiled tubing unit deployed to Russia and another into
        western Canada; and
    -   the deployment of four cementing units. Two units were deployed into
        the Deep Basin markets in Canada and the remaining two units were
        transferred to Calfrac's operations in Arkansas.
    

    In November 2007, the Company purchased certain fracturing assets of a
Canadian competitor for total consideration of $24.9 million. The purchase
price for the acquisition was satisfied through the payment of an aggregate of
approximately $13.9 million in cash and the issuance of 597,526 common shares.
    With its strong working capital position, available credit facilities and
anticipated cash flow from operations, the Company expects to have adequate
resources to fund its financial obligations and budgeted plans for 2008 and
beyond.

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

    Operating leases              24,985    7,250    7,741    4,796    5,198
    Purchase obligations          44,007   16,999   25,907    1,101        -
    -------------------------------------------------------------------------
    Total contractual
     obligations                  68,992   24,249   33,648    5,897    5,198
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As outlined above, Calfrac has various contractual obligations related to
the leasing of vehicles, equipment and facilities as well as raw material
purchase commitments.

    Greek Legal Proceedings

    As described in note 11 to the 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 the Company's potential exposure
to these legal proceedings at this time.

    Outlook

    Calfrac believes that the long-term fundamentals for natural gas prices
are strong, but the appreciation of the Canadian dollar during the last year
and uncertainty surrounding the proposed new royalty regime in Alberta may
negatively affect 2008 drilling activity levels in the Western Canada
Sedimentary Basin. The Petroleum Services Association of Canada estimates that
14,500 wells will be drilled during 2008, a decrease of 22 percent from 2007,
which was substantially lower than 2006.
    The Company anticipates that this significant forecast reduction in
activity may lead to increased price competition, higher levels of merger and
acquisition activity and a possible consolidation in the Canadian pressure
pumping service sector during 2008. Drilling activity in the deeper, more
technical areas of northern Alberta and northeast British Columbia as well as
the shallow gas regions of southern Alberta are forecast to remain a focus for
natural gas producers in the coming year. Additionally, well recompletion
activity in 2008 is expected to increase and offset some of the decline in new
drilling activity. Calfrac anticipates that the lower levels of activity
experienced in the CBM market during 2007 will continue into 2008, but be
mitigated somewhat by the Company's long-term contracts.
    Overall, strong demand is expected for the Company's services in the
United States during 2008 and these operations are expected to continue to be
a major driver of the Company's consolidated financial performance. During the
fourth quarter of 2007, the Company began to experience stronger competitive
pricing pressures throughout its fracturing operations and these lower pricing
levels are expected to remain essentially unchanged in the upcoming year.
Natural gas takeaway issues in the Piceance Basin are believed to have been
resolved with the commissioning of the Express Pipeline in January 2008. This
should lead to significant increases in activity on a year-over-year basis.
Drilling activity levels in the Denver Julesburg Basin in 2008 are anticipated
to remain comparable with the previous year. Additionally, the Company's
growing customer base in Arkansas is expected to result in strong fracturing
and cementing activity levels throughout 2008.
    In Mexico, Calfrac plans to continue to grow its operations through the
start-up phase and improve its financial and operating performance. As well,
the Company intends to pursue new opportunities to expand its operating
presence within this new geographical market.
    Calfrac's Russian operations in 2008 will be supported by two recently
signed annual contracts with one of Russia's largest oil and natural gas
companies. Consequently, the Company's current equipment fleet of three
multi-pumper fracturing spreads and five deep coiled tubing units is expected
to be highly utilized throughout 2008. Unlike past years, in which the Company
has grown its operating scale through the deployment of additional equipment,
Calfrac in 2008 will focus on improving its operating efficiencies during the
upcoming year to enhance the financial performance of this geographic segment.
    In Argentina, Calfrac plans to commence cementing operations early in the
second quarter of 2008, anchored by negotiated arrangements with a leading oil
and natural gas company in that country. The Company has redeployed certain
cementing equipment from its Canadian operations and has constructed the
remaining support equipment locally. This fifth geographical market continues
Calfrac's strategy of diversification into new regions that are not dependant
upon the natural gas drilling markets of North America.

    Fourth Quarter Conference Call

    Calfrac will be conducting a conference call for interested analysts,
brokers, investors and media representatives to review its 2007 fourth quarter
results at 10:00 a.m. (Calgary time) on Friday, February 29, 2008. The
conference call dial-in number is 1-800-732-1073 or 416-644-3423. The
seven-day replay numbers are 1-877-289-8525 or 416-640-1917 and enter 21263870
followed by the number sign. A webcast of the conference call may be accessed
via 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 plans and future operations, certain statements
contained in this Press Release constitute forward-looking statements or
information. Forward-looking statements contained in this report include
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 natural gas well activity, outcome of specific events and
trends in the oil and natural 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 and 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 that such expectations will prove to be correct. Furthermore,
the forward-looking statements contained in this Press Release are made as at
the date of this report and Calfrac assumes no obligation to update publicly
any such forward-looking information whether as a result of new information,
future events or otherwise, except as required pursuant to applicable
securities laws. 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 (basic), cash flow per share
(diluted), EBITDA, EBITDA per share (basic) and EBITDA per share (diluted)
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,                                       2007       2006
    -------------------------------------------------------------------------
    (000s) (unaudited)                                         ($)        ($)

    Assets
    Current assets
      Cash and cash equivalents (note 3)                   39,104      5,580
      Accounts receivable                                  86,980     84,481
      Income taxes recoverable                                786          -
      Inventory                                            25,013     13,387
      Prepaid expenses and deposits                         5,611      7,463
    -------------------------------------------------------------------------
                                                          157,494    110,911
    Capital assets                                        388,987    327,832
    Long-term investment                                      928        396
    Goodwill                                                6,003      6,003
    Future income taxes                                     5,498      9,048
    -------------------------------------------------------------------------
                                                          558,910    454,190
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Accounts payable and accrued liabilities             65,338     77,344
      Income taxes payable                                      -      2,342
    -------------------------------------------------------------------------
                                                           65,338     79,686
    Long-term debt (note 4)                               129,535     60,000
    Other long-term liabilities                             1,882      4,743
    Future income taxes                                     7,135          -
    Deferred credit                                         4,105      6,251
    -------------------------------------------------------------------------
                                                          207,995    150,680
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 5)                                155,254    139,841
    Shares held in trust (note 6)                          (2,199)    (3,869)
    Contributed surplus (note 7)                            6,025      4,393
    Retained earnings                                     198,039    163,145
    Accumulated other comprehensive income
     (loss) (note 2)                                       (6,204)         -
    -------------------------------------------------------------------------
                                                          350,915    303,510
    -------------------------------------------------------------------------
                                                          558,910    454,190
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contingencies (note 11)
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

    -------------------------------------------------------------------------
                                    Three Months Ended            Year Ended
                                           December 31,          December 31,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s, except per share data)
     (unaudited)                         ($)        ($)        ($)        ($)

    Revenue                         114,450    118,322    460,320    426,418
    -------------------------------------------------------------------------
    Expenses
      Operating                      85,838     83,834    328,541    291,056
      Selling, general and
       administrative                 8,740      7,929     31,685     28,350
      Depreciation                   10,526      7,621     37,107     25,699
      Interest, net                   2,295        702      9,450      2,341
      Equity share of income from
       long-term investments             68          -       (532)       (72)
      Foreign exchange losses
       (gains)                        1,014     (1,837)     2,299     (2,516)
      Loss (gain) on disposal of
       capital assets                     -        (25)       538         67
    -------------------------------------------------------------------------
                                    108,481     98,224    409,088    344,925
    -------------------------------------------------------------------------
    Income before income taxes        5,969     20,098     51,232     81,493
    -------------------------------------------------------------------------
    Income tax expense
      Current                        (2,241)     2,903      3,865      7,538
      Future                          4,557        288      8,799      1,505
    -------------------------------------------------------------------------
                                      2,316      3,191     12,664      9,043
    -------------------------------------------------------------------------
    Net income for the period         3,653     16,907     38,568     72,450
    Retained earnings, beginning
     of period                      196,241    148,052    163,145     94,322
    Dividends                        (1,855)    (1,814)    (3,674)    (3,627)
    -------------------------------------------------------------------------
    Retained earnings, end of
     period                         198,039    163,145    198,039    163,145
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share (note 5)
      Basic                            0.10       0.47       1.06       2.00
      Diluted                          0.10       0.46       1.06       1.98
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND ACCUMULATED
    OTHER COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                                    Three Months Ended            Year Ended
                                           December 31,          December 31,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s) (unaudited)                   ($)        ($)        ($)        ($)

    Net income for the period         3,653     16,907     38,568     72,450
    Other comprehensive income
     (loss)
      Change in foreign currency
       translation adjustment          (148)         -     (6,204)         -
    -------------------------------------------------------------------------
    Comprehensive income              3,505     16,907     32,364     72,450
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (loss), beginning of
     period                          (6,056)         -          -          -
      Other comprehensive income
       (loss) for the period           (148)         -     (6,204)         -
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (loss), end of period    (6,204)         -     (6,204)         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                                    Three Months Ended            Year Ended
                                           December 31,          December 31,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s) (unaudited)                   ($)        ($)        ($)        ($)

    Cash provided by (used in)
    Operating activities
      Net income for the period       3,653     16,907     38,568     72,450
      Items not involving cash
        Depreciation                 10,526      7,621     37,107     25,699
        Amortization of debt issue
         costs                          140          -        570          -
        Stock-based compensation        638        716      2,592      2,283
        Equity share of income from
         long-term investments           68          -       (532)       (72)
        Loss on disposal of capital
         assets                           -        (25)       538         67
        Future income taxes           4,557        288      8,799      1,505
    -------------------------------------------------------------------------
      Funds provided by operations   19,582     25,507     87,642    101,932
      Net change in non-cash
       operating assets and
       liabilities                   16,389       (257)    (8,159)     8,586
    -------------------------------------------------------------------------
                                     35,971     25,250     79,483    110,518
    -------------------------------------------------------------------------
    Financing activities
      Issue of long-term debt
       (note 4)                         159     11,583    199,949     56,583
      Long-term debt repayments           -     (1,908)  (107,546)    (7,198)
      Dividends                      (1,855)    (1,814)    (3,674)    (3,627)
      Purchase of common shares
       (note 6)                        (169)         -     (2,207)    (3,869)
      Net proceeds on issue of
       common shares                    880         85      3,396        867
    -------------------------------------------------------------------------
                                       (985)     7,946     89,918     42,756
    -------------------------------------------------------------------------
    Investing activities
      Purchase of capital assets    (12,101)   (44,415)   (91,939)  (155,478)
      Proceeds on disposal of
       capital assets                     -        130        416      4,289
      Acquisition of subsidiary
       (note 10)                    (13,854)         -    (13,854)         -
      Net change in non-cash
       working capital from
       purchase of capital
       assets                        (3,084)    11,542    (18,233)    14,308
    -------------------------------------------------------------------------
                                    (29,039)   (32,743)  (123,610)  (136,881)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and cash
     equivalents                       (131)         -    (12,267)         -
    -------------------------------------------------------------------------
    Increase in cash position         5,816        453     33,524     16,393
    Cash and cash equivalents
     (bank indebtedness),
     beginning of period             33,288      5,127      5,580    (10,813)
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                   39,104      5,580     39,104      5,580
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    For the Three Months and Year Ended December 31, 2007
    (000s) (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 financial statements.

    2.  Summary of Significant Accounting Policies

        These financial statements follow the same accounting policies and
        methods of their application as the most recent annual financial
        statements, except as follows:

        (a)   Foreign Currency Translation

              During the first quarter of 2007, the Company's U.S.
              subsidiaries were reclassified from integrated to self-
              sustaining foreign operations. As a result, the Company
              prospectively adopted the current rate method of translating
              its U.S. operations into Canadian dollars whereby assets and
              liabilities are translated at the rate of exchange at the
              balance sheet date, revenues and expenses are translated at
              average monthly exchange rates, and gains and losses in
              translation are deferred and included in the shareholders'
              equity section as accumulated other comprehensive income in
              accordance with the Canadian Institute of Chartered Accountants
              (CICA) Handbook Section 1530, Comprehensive Income. Prior to
              this reclassification, the Company's U.S. operations were
              translated into Canadian dollars using the temporal method,
              which the Company continues to follow in respect of its other
              foreign operations. Under the temporal method, monetary assets
              and liabilities are translated at the rate of exchange at the
              balance sheet date, while non-monetary items are translated at
              the historical rate applicable on the date of the transaction
              giving rise to the non-monetary balance. Revenues and expenses
              are translated at monthly average exchange rates and gains or
              losses in translation are recognized in income as they occur.

        (b)   Comprehensive Income

              The Company adopted CICA Handbook Section 1530, Comprehensive
              Income on January 1, 2007. The new standard introduced
              comprehensive income, which consists of net income and other
              comprehensive income (OCI). For the Company, OCI is currently
              comprised of the changes in the foreign currency translation
              adjustment balance.

              The cumulative changes in OCI are included in accumulated other
              comprehensive income (AOCI), which is presented as a new
              category within shareholders' equity in the consolidated
              balance sheets. The Company's consolidated financial statements
              now include a statement of AOCI, which provides the continuity
              of the AOCI balance.

        (c)   Financial Instruments

              On January 1, 2007, the Company adopted CICA Section 3855,
              Financial Instruments - Recognition and Measurement. This
              standard establishes the recognition and measurement criteria
              for financial assets, liabilities and derivatives. All
              financial instruments are required to be measured at fair value
              on initial recognition of the instrument, except for certain
              related-party transactions. Measurement in subsequent periods
              depends on whether the financial instrument has been classified
              as "held-for-trading", "available-for-sale", "held-to-
              maturity", "loans and receivables" or "other financial
              liabilities" as defined by the standard.

              Cash equivalents are designated as "held-for-trading" and are
              measured at fair value. Accounts receivable are designated as
              "loans and receivables" and are carried at cost. Accounts
              payable are designated as "other financial liabilities" and are
              carried at cost. Long-term debt is designated as "other
              financial liabilities" and carried at amortized cost using the
              effective interest rate method. The financing costs associated
              with the Company's US$135,000 private placement of senior
              unsecured notes on February 13, 2007 are included in the
              amortized cost of the debt. These costs are amortized to
              interest expense over the term of the debt.

    3.  Bank Indebtedness

        The Company has an operating loan facility of $25,000 bearing
        interest at the bank's prime rate. The facility is secured by a
        General Security Agreement over all Canadian assets of the Company.
        The balance outstanding on the facility has been netted against cash
        on deposit in these financial statements (December 31, 2007 -
        $518, December 31, 2006 - $3,407).

    4.  Long-Term Debt

        ---------------------------------------------------------------------
                                                             2007       2006
        ---------------------------------------------------------------------
        (000s)                                                 ($)        ($)

        US$135,000 senior unsecured
         notes, due February 15, 2015
         bearing interest at 7.75%,
         payable semi-annually                            129,535          -

        Extendible revolving capital
         equipment facility totaling
         $125,000 bearing interest at
         the bankers' acceptance rate
         plus stamping fees of 1.25%,
         requiring fixed principal
         payments of $2,400 per quarter
         commencing March 31, 2008,
         and a final payment of $24,000
         on December 31, 2011, secured
         by a General Security Agreement
         over all Canadian assets
         of the Company                                         -     60,000

        ---------------------------------------------------------------------
                                                          129,535     60,000

        Current portion of long-term debt                       -          -
        ---------------------------------------------------------------------
                                                          129,535     60,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In conjunction with the issuance of the US$135,000 of senior
        unsecured notes on February 13, 2007, the Company fully repaid
        amounts outstanding on its extendible revolving capital equipment
        facility. This facility was reduced to $65,000 and remains undrawn as
        at December 31, 2007.

        Long-term debt as at December 31, 2007 is presented net of $4,290 of
        unamortized financing costs related to the issuance of the senior
        unsecured notes. Interest expense for the year ended December 31,
        2007 includes amortization of debt issue costs in the amount of $570.

    5.  Capital Stock

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

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

        ---------------------------------------------------------------------
                                                           Shares     Amount
        ---------------------------------------------------------------------
                                                             (No.)    ($000s)
        ---------------------------------------------------------------------
        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
        Issued on acquisition of subsidiary (note 10)     597,526     11,058
        Issued upon exercise of stock options             215,938      4,355
        ---------------------------------------------------------------------
        December 31, 2007                              37,201,872    155,254
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The weighted average number of common shares outstanding for the year
        ended December 31, 2007 was 36,463,220 basic and 36,537,763 diluted
        (2006 - 36,286,332 basic and 36,547,182 diluted). The difference
        between basic and diluted shares is attributable to the dilutive
        effect of stock options issued by the Company and the shares held in
        trust (see note 6).


    6.  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. At December 31, 2007, the Trust held 91,414 shares which were
        purchased on the open market at a cost of $2,199 (December 31, 2006 -
        113,508 shares at a cost of $3,869). 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.

    7.  Contributed Surplus

        The continuity of contributed surplus is as follows:

        ---------------------------------------------------------------------
                                                             2007       2006
        ---------------------------------------------------------------------
        (000s)                                                 ($)        ($)

        Balance, January 1                                  4,393      2,317
        Stock options expensed                              2,591      2,283
        Stock options exercised                              (959)      (207)
        ---------------------------------------------------------------------
        Balance, December 31                                6,025      4,393
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  Stock-Based Compensation

        (a)   Stock Options

              ---------------------------------------------------------------
              Continuity of Stock
               Options                     2007                 2006
              ---------------------------------------------------------------
                                               Average               Average
                                              exercise              exercise
                                    Options      price    Options      price
              ---------------------------------------------------------------
                                       (No.)        ($)      (No.)        ($)
              Outstanding,
               January 1          1,505,796      22.15    818,578      18.39
              Granted during the
               year                  30,000      20.20    776,550      25.89
              Exercised for common
               shares              (215,938)     15.73    (55,132)     15.73
              Forfeited             (95,635)     26.46    (34,200)     27.18
              ---------------------------------------------------------------
              Balance,
               December 31        1,224,223      22.90  1,505,796      22.15
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              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 percent, average expected life of
              2.83 years, expected volatility of 34 - 36 percent 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, are added to capital stock.

        (b)   Stock Units

              The Company grants deferred stock units to its outside
              directors. These units vest one year from the date of grant and
              are settled in either cash (equal to the market value of the
              underlying shares at the time of exercise) or in Company shares
              purchased on the open market. The fair value of the deferred
              stock units is recognized equally over the one-year vesting
              period, based on the current market price of the Company's
              shares. During the year ended December 31, 2007, $435 of
              compensation expense was recognized for deferred stock units
              (2006 - $328).

              The Company grants performance stock units to the Company's
              most senior officers who are not included in the stock option
              plan. The amount of the grants earned is linked to corporate
              performance and the grants vest one year from the date of
              grant. As with the deferred stock units, performance stock
              units are settled in either cash or Company shares purchased on
              the open market. During the year ended December 31, 2007, $278
              of compensation expense was recognized for performance stock
              units (2006 - $265).

              Changes in the Company's obligations under the deferred and
              performance stock unit plans, which arise from fluctuations in
              the market value of the Company's shares underlying these
              compensation programs, are recorded as the share value changes.

    9.  Related-Party Transactions

        During 2007, the Company purchased $26,620 (2006 - $26,890) of
        products and services from a company in which it holds a 30% equity
        interest. At December 31, 2007, accounts payable included $2,743 of
        indebtedness to the related party (December 31, 2006 - $7,234).

    10. Acquisition

        On November 14, 2007, the Company acquired all of the shares of
        1361745 Alberta Ltd. for cash and share consideration totaling
        $24,912. The Company issued 597,526 common shares with a value of
        $11,058 in conjunction with the acquisition, in addition to $13,854
        of cash. One-hundred percent of the consideration paid was assigned
        to capital assets, as the acquired company had no other assets or
        liabilities.

    11. 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 natural gas operations in that country.
        Several groups of former 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 amounting to approximately $12,400 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 damages. On February 12, 2008 the
        scheduled hearing date for the appeal was postponed until June 3,
        2008 to enable counsel to the Company to seek a judicial order
        entitling the Company 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. The Company intends to vigorously defend the
        appeal decision before the Athens Court of Appeal both in relation to
        the merits of the plaintiffs' case and in respect of the quantum of
        any damages which may be awarded. In the event that an adverse ruling
        is issued by the Athens Court of Appeal, the Company intends to
        assess its rights of appeal to the Supreme Court of Greece as well as
        any other court in any jurisdiction where such an appeal is
        warranted.

        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 damages of
        approximately $50, before interest. The Company has appealed this
        decision, but no date has been set for the hearing of such appeal.
        Another one of the lawsuits 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. The remaining
        action has been postponed indefinitely pending the outcome of the
        lawsuit involving the largest group of plaintiffs discussed above.

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


    12. Segmented Information

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

        ---------------------------------------------------------------------
                                                            Inter
                                                 United   segment
                                                 States  Elimina-   Consoli-
                          Canada     Russia  and Mexico     tions      dated
        ---------------------------------------------------------------------
        (000s)                ($)        ($)        ($)        ($)        ($)

        Three Months Ended
         December 31, 2007

        Revenue           63,478     17,852     33,120          -    114,450
        Operating
         income(1)         8,630      2,201      9,041          -     19,872
        Segmented
         assets(2)       399,057    105,806    190,047   (136,000)   558,910
        Capital
         expenditures        483      3,257      8,361          -     12,101
        Goodwill           6,003          -          -          -      6,003
        ---------------------------------------------------------------------

        Three Months Ended
         December 31, 2006
        Revenue           79,837      9,446     29,039          -    118,322
        Operating
         income(1)        16,746        671      9,142          -     26,559
        Segmented
         assets(2)       438,879     64,832     35,547    (85,068)   454,190
        Capital
         expenditures     33,313      7,867      3,235          -     44,415
        Goodwill           6,003          -          -          -      6,003
        ---------------------------------------------------------------------

        Year Ended
         December 31,
         2007
        Revenue          249,473     64,041    146,806          -    460,320
        Operating
         income(1)        41,788     12,070     46,236          -    100,094
        Segmented
         assets(2)       399,057    105,806    190,047   (136,000)   558,910
        Capital
         expenditures     23,810     32,022     36,107          -     91,939
        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      64,832     35,547    (85,068)   454,190
        Capital
         expenditures   114,402      35,860      5,216          -    155,478
        Goodwill          6,003           -          -          -      6,003
        ---------------------------------------------------------------------
        (1)   Operating income (loss) is defined as revenue less operating
              expenses (excluding depreciation) and selling, general and
              administration expenses.
        (2)   Assets operated by the Company's U.S. subsidiary during 2006
              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. During 2007, these assets were sold to
              the U.S. subsidiary by the parent company.

        The following table sets forth consolidated revenue by service line:

        ---------------------------------------------------------------------
                                    Three Months Ended            Year Ended
                                           December 31,          December 31,
                                       2007       2006       2007       2006
        ---------------------------------------------------------------------
        (000s)                           ($)        ($)        ($)        ($)

        Fracturing                   98,417    103,531    403,844    374,096
        Coiled tubing                10,329      8,919     37,992     30,689
        Cementing                     5,704      5,872     18,484     21,633
        ---------------------------------------------------------------------
                                    114,450    118,322    460,320    426,418
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. Subsequent Event

        On January 11, 2008, the Company acquired the remaining 70 percent of
        the common shares of ChemErgy Ltd. ("ChemErgy") that it did not
        previously own for aggregate consideration of $6,638. The purchase
        price was satisfied through the payment to the vendors of $4,843 in
        cash, the transfer of real property previously owned by ChemErgy at a
        value of $512, and the issuance of 71,581 common shares of the
        Company at a deemed value of $1,283. ChemErgy's operations were
        subsequently wound up into the Company's and ChemErgy was dissolved
        on January 31, 2008. This acquisition is expected to generate
        synergies associated with bringing the Company's chemical supply and
        development requirements in-house.
    

    %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, Senior Vice President, Finance and Chief Financial Officer,
Telephone: (403) 266-6000, Fax: (403) 266-7381


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