Calfrac's Third Quarter Results Reflect Continued Benefits of Geographic Diversification



    CALGARY, Nov. 5 /CNW/ - Calfrac Well Services Ltd. ("Calfrac") (TSX-CFW)
is pleased to announce its financial and operating results for the three and
nine months ended September 30, 2007.

    
    HIGHLIGHTS
    -------------------------------------------------------------------------
                            Three Months Ended             Nine Months Ended
                                  September 30,                 September 30,
                      2007      2006    Change      2007      2006    Change
    -------------------------------------------------------------------------
    (000s, except
     per share and
     unit data)         ($)       ($)       (%)       ($)       ($)       (%)
    (unaudited)

    Financial
    Revenue        129,585   115,112        13   345,870   308,096        12
    Gross
     margin(1)      42,851    36,500        17   103,168   100,873         2
    Net income      16,441    19,418       (15)   34,915    55,543       (37)
      Per share
       - basic        0.45      0.54       (17)     0.96      1.53       (37)
       - diluted      0.45      0.53       (15)     0.96      1.52       (37)
    Cash flow from
     operations(2)  28,398    27,560         3    68,060    76,425       (11)
      Per share
       - basic        0.78      0.76         3      1.87      2.11       (11)
       - diluted      0.78      0.76         3      1.87      2.09       (11)
    EBITDA(3)       34,107    29,614        15    78,999    81,111        (3)
      Per share
       - basic        0.94      0.82        15      2.17      2.23        (3)
       - diluted      0.93      0.81        15      2.17      2.21        (2)
    Working
     capital        99,696    31,158       220    99,696    31,158       220
    Shareholders'
     equity        336,858   287,616        17   336,858   287,616        17
    Weighted
     average
     common
     shares
     outstanding
     (No.)
      Basic         36,396    36,265         -    36,364    36,292         -
      Diluted       36,479    36,497         -    36,434    36,627        (1)
    -------------------------------------------------------------------------
                                                    (No.)     (No.)       (%)
    Operating
    Fracturing
     spreads at
     period end
      Conventional
       fracturing                                     24        19        26
      Coalbed
       methane                                         4         4         -
    -------------------------------------------------------------------------
      Total                                           28        23        22
    Coiled tubing units                               17        14        21
    Cementing units                                   16        11        45
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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 and nine-month
periods ended September 30, 2007 and provide an outlook for the remainder of
year. During the third quarter, our Company:

    
    -   increased activity throughout our Canadian operating districts amid
        very competitive and uncertain market conditions;

    -   operated our second multi-pumper fracturing spread in Arkansas
        throughout the entire three-month period;

    -   commenced cementing operations in the Fayetteville shale play out of
        our Beebe, Arkansas district;

    -   expanded the scale of our coiled tubing and fracturing operations in
        Russia;

    -   prepared for the start-up of our Mexican fracturing district with
        operations commencing during the fourth quarter; and

    -   incorporated a subsidiary in Argentina and intends to begin cementing
        operations in that country during the first quarter of 2008.

    Financial Highlights

    For the three months ended September 30, 2007, the Company:

    -   realized revenue of $129.6 million, an increase of 13% from the
        comparable period in 2006;

    -   earned net income of $16.4 million or $0.45 per share (basic);

    -   recorded cash flow from operations before changes in non-cash working
        capital of $28.4 million or $0.78 per share (basic); and

    -   increased average consolidated revenue per fracturing job by 22% to
        $64,216 versus the same three-month period a year ago.

    For the nine months ended September 30, 2007, Calfrac:

    -   realized revenue of $345.9 million;

    -   earned net income of $34.9 million or $0.96 per share (basic);

    -   recorded cash flow from operations before changes in non-cash working
        capital of $68.1 million or $1.87 per share (basic); and

    -   improved average consolidated revenue per fracturing job by 19% to
        $65,234 from the same period in 2006.
    

    Operational Highlights

    Canadian Operations

    The proactive rationalization measures initiated by the Company during
the second quarter of 2007 resulted in lower overhead costs and assisted in
preserving Calfrac's Canadian operating margins during the third quarter.
Additional fracturing and cementing equipment was reallocated from the
Company's Canadian fleet to our operations in Mexico and the United States,
respectively, which contributed to improved equipment utilization in Canada.
We believe that Calfrac's long-term contractual arrangements and strong
customer mix will provide a solid base of activity for our Canadian service
lines throughout the remainder of the year and into 2008.

    United States Operations

    Calfrac's United States operations generated record revenues during the
third quarter and continued to be a major contributor to the Company's
consolidated financial results. Fracturing activity in Colorado's DJ Basin
remained strong as a result of serving an expanded customer base in this
region, while activity levels in the Piceance Basin were impacted by gas
takeaway issues. As a result, Calfrac's fracturing operations in this region
were slower than anticipated early in the quarter, but improved through late
August and September. The financial and operating results from our Arkansas
district continued to be robust during the period and were augmented by the
deployment of a second multi-pumper fracturing spread in early June as well as
the start-up of cementing operations in July.

    Russian Operations

    Calfrac continues to strategically diversify its Russian operations
through an expanding customer base and organic growth. During the quarter, an
additional deep coiled tubing unit and multi-pumper fracturing spread were
deployed into the Russian well services market, building on the service line
diversification throughout the Company's three operating districts in Western
Siberia. As a result, Calfrac presently operates three conventional fracturing
spreads and five coiled tubing units in Western Siberia, which are supported
by annual contracts with two of Russia's largest oil and gas companies. We
believe that these operations have achieved a sufficient critical mass to
continue to positively contribute to the Company's overall financial and
operating performance throughout the remainder of 2007 and into the future.

    Outlook

    The Company believes that the uncertainty surrounding the impact of
Alberta's new royalty regime, combined with the current low natural gas price
environment and the stronger Canadian dollar, will continue to negatively
impact drilling levels in the Western Canadian Sedimentary Basin throughout
the remainder of the year and, potentially, into 2008. Consequently, we
believe that the pressure pumping market in Western Canada will remain highly
competitive for the foreseeable future. Some of the decline in Canadian
drilling activity levels will be mitigated by Calfrac's long-term contracts
with major customers involved in the coalbed methane, shallow and deep gas
markets as well as our overall customer mix. The Company is committed to
further expanding its customer base in the deeper basins of northern Alberta
and northeastern British Columbia and, where necessary, streamlining its
operations in response to lower activity levels.
    In each of our United States operating districts, we believe that
activity will continue to be strong throughout the remainder of 2007 and into
2008, but anticipate that competitive pricing pressures may begin to impact
these operations. The Company currently operates six conventional fracturing
spreads throughout its U.S. operating districts as well as two cementing units
in Arkansas. We expect that these operations will continue to be a significant
driver of the Company's overall financial performance.
    Throughout 2007, Calfrac has continued to organically grow the scale of
its operations in Western Siberia, and as a result, currently operates three
fracturing spreads and five deep coiled tubing units in this international
pressure pumping market. We are currently involved in several bid tenders for
annual contractual commitments related to the provision of fracturing and
coiled tubing services in 2008. These contracts are expected to be awarded by
the end of this year and we anticipate keeping our equipment highly utilized
throughout the coming year. We believe that this larger scale of operations,
supported by our annual contractual commitments with two of Russia's major oil
and gas producers, provides the foundation for strong future financial and
operating performance.
    In mid-July, we announced our intention to enter Mexico's pressure
pumping services market pursuant to the terms of a three-year contract awarded
by the country's state oil company, Pemex. In October, Calfrac opened a new
district office in Reynosa to support hydraulic fracturing operations in the
Burgos field of northern Mexico. The equipment for this new international
operation was primarily redeployed from our existing North American fleet,
thereby increasing the overall utilization of our fleet of equipment. The
entry into the Mexican well services market represents a continuation of
Calfrac's strategy to diversify geographically into new markets that are not
as dependent on natural gas drilling as the Canadian and United States
markets.
    In late October, Calfrac incorporated a subsidiary in Argentina and
intends to commence cementing operations in that country during the first
quarter of 2008. Calfrac has partnered with an experienced local management
team to assist with our expansion into this fifth geographic market. Certain
of Calfrac's Canadian cementing assets will be mobilized to Argentina with the
remainder of the required equipment to be constructed locally.
    The Company's 2007 capital program was focused on enhancing the pumping
capacity of the Company's fracturing equipment fleet and, by the end of the
third quarter, was primarily complete. This new equipment was deployed into
our growing markets within the United States, Russia and Mexico as well as the
deeper basin markets in Canada. As at September 30, 2007, we had the capacity
to operate 28 fracturing spreads, 17 coiled tubing units and 16 cementing
units in our four geographic markets.
    At the end of the third quarter, the Company's balance sheet remained
very strong with cash of $33.3 million, working capital of $99.7 million and
undrawn credit facilities of $90.0 million. Consequently, Calfrac has the
financial strength and flexibility to sustain an extended downturn in Canadian
activity and pursue future growth either organically or through prudent
acquisitions.
    Despite the current uncertain market conditions in Western Canada, we are
excited about the future prospects for Calfrac and I look forward to reporting
our progress at year-end.

    On behalf of the Board of Directors,

    Douglas R. Ramsay
    President & Chief Executive Officer

    November 5, 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 November 5, 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 and nine months ended September 30, 2007 and 2006 and should be read
in conjunction with the unaudited interim consolidated financial statements
and accompanying notes for those periods as well as the audited financial
statements and MD&A for the year ended December 31, 2006. Readers should also
refer to the "Forward-Looking Statements" legal advisory at the end of this
MD&A.
    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.

    Third Quarter 2007 Performance Summary

    Calfrac Well Services Ltd. is an independent provider of specialized
oilfield services in Canada, the United States, Russia and Mexico, including
fracturing, coiled tubing, cementing and other well stimulation services. The
Company has established, and continues to maintain, a leadership position by
providing high quality, responsive service through an expanding geographic
network, increased operating fleet and growing customer base. Despite the
year-over-year decline in overall Canadian drilling activity, for the three
months ended September 30, 2007, Calfrac:

    
    -   increased revenue by 13% to $129.6 million compared to $115.1 million
        in the third quarter of 2006;

    -   earned net income of $16.4 million or $0.45 per share (basic)
        compared to net income of $19.4 million or $0.54 per share (basic)
        recorded in the same three-month period of 2006;

    -   realized cash flow from operations before changes in non-cash working
        capital of $28.4 million or $0.78 per share (basic) compared to
        $27.6 million or $0.76 per share (basic) in the same quarter a year
        ago; and

    -   maintained a strong balance sheet with working capital of
        $99.7 million and long-term debt of $129.7 million.
    

    Revenue

    Canadian Operations

    Revenue from Canadian operations for the third quarter of 2007 decreased
19% to $70.1 million compared to $86.5 million during the same quarter of
2006. Canadian fracturing revenue for the three months ended September 30,
2007 totaled $60.1 million compared to $73.9 million recorded in the same
three-month period of the prior year. Revenue was negatively impacted by a
decline in drilling activity related to lower natural gas commodity prices and
a stronger Canadian dollar, which resulted in competitive pricing pressures
throughout the well services markets of the Western Canadian Sedimentary Basin
("WCSB"). During the third quarter of 2007, Calfrac completed 1,253 Canadian
fracturing jobs for average revenue of $47,957 per job compared to 1,530 jobs
for $48,307 per job in the corresponding period of 2006. The slight
year-over-year decrease in the Company's Canadian fracturing revenue per job
was primarily a result of competitive pricing pressures in the WCSB, mainly in
the coalbed methane ("CBM") markets of central Alberta, offset partially by
the completion of a greater percentage of fracturing jobs in the technically
challenging basins of northern Alberta and northeastern British Columbia.
    For the quarter ended September 30, 2007, revenue from coiled tubing
operations was $5.6 million compared to $6.0 million for the same period of
2006. The total number of jobs completed in the 2007 three-month period was
1,020 for average revenue of $5,518 per job compared to 1,781 jobs for $3,367
per job in 2006. The higher average revenue per job in the third quarter of
2007 was primarily due to higher activity levels in the deeper basin markets
of northern Alberta and northeastern British Columbia.
    Revenue from the Company's cementing operations totaled $4.3 million for
the three months ended September 30, 2007 compared to $6.6 million recorded in
the third quarter of 2006. The total number of jobs completed in the third
quarter of 2007 was 501 for average revenue of $8,659 per job compared to 558
jobs for $11,739 per job in the same period of 2006. Revenue and revenue per
job decreased in the 2007 three-month period primarily as a result of a larger
proportion of cement jobs being completed in the shallower basins of southern
and central Alberta compared to the same quarter last year.

    United States Operations

    Revenue from Calfrac's United States operations in the third quarter of
2007 doubled to $42.8 million compared to $21.4 million recorded in the same
period of 2006. This increase in revenue was primarily due to the commencement
of fracturing operations in Arkansas during the first quarter of 2007 as well
as strong activity in the DJ Basin being slightly offset by lower activity in
the Piceance Basin and a stronger Canadian dollar. If the U.S./Canadian
exchange rate for the quarter ended September 30, 2007 would have remained
consistent with the same period in 2006, the reported revenue for the
Company's operations in the United States would have increased by
approximately $3.0 million. For the three months ended September 30, 2007, the
Company completed 419 fracturing jobs in the United States for average revenue
of $101,463 per job compared to 316 jobs for $67,532 per job in the same
period of 2006. The increase in the reported revenue per job during the third
quarter of 2007 was primarily related to the entry into the Fayetteville shale
fracturing market during 2007 partially offset by a weaker U.S. dollar.

    Russian Operations

    In July 2007, Calfrac deployed an additional multi-pumper fracturing
spread and coiled tubing unit into Russia and was operating a combined fleet
of three multi-pumper fracturing spreads and five coiled tubing units by the
end of the third quarter. For the three months ended September 30, 2007, the
Company's revenue from Russian operations totaled $16.8 million, an increase
of $9.5 million from the third quarter of 2006. This 130% increase was
primarily due to a larger equipment fleet and higher levels of fracturing and
coiled tubing activity throughout the Company's Western Siberian operations.

    Gross Margin

    Consolidated gross margin for the third quarter of 2007 was
$42.9 million, a 17% increase from $36.5 million recorded in the same period
of 2006. As a percentage of revenue, consolidated gross margin was 33% for the
three months ended September 30, 2007 compared to 32% in the corresponding
period of 2006. The increase in consolidated gross margin and gross margin
percentage was primarily a result of a significant improvement in the
financial performance of the Company's United States and Russian operations
offset by the impact of lower activity and industry pricing pressures in
Western Canada as well as the appreciation of the Canadian dollar.

    Expenses

    Operating Expenses

    Operating expenses for the third quarter of 2007 totaled $86.7 million
compared to $78.6 million in the corresponding three-month period of 2006. The
10% year-over-year increase was due primarily to the expanded scale of
operations within North America and Russia as well as higher district expenses
incurred during the quarter related to Calfrac's newest operating regions in
Beebe, Arkansas and Purpe, Western Siberia.

    Selling, General and Administrative ("SG&A") Expenses

    During the three months ended September 30, 2007, SG&A expenses totaled
$8.8 million compared to $7.4 million in the same three-month period of 2006.
This increase in SG&A expenses was primarily a result of the Company's larger
operating scale and revenue base. SG&A expenses as a percentage of revenue
were 7% for the three months ended September 30, 2007 versus 6% for the
comparable quarter of the previous year.

    Interest and Depreciation Expenses

    The Company recorded net interest expense of $2.7 million for the quarter
ended September 30, 2007 compared to $0.8 million in the corresponding period
of 2006. The higher interest expense was primarily a result of the closing of
a private placement of senior unsecured notes in February 2007 for an
aggregate amount of US$135.0 million offset slightly by interest earned on the
Company's surplus cash. Depreciation expense during the second quarter of 2007
increased 44% to $9.9 million from $6.9 million recorded in the comparable
period of 2006 primarily due to a larger equipment fleet operating across the
Company's North American and international operations.

    Income Tax

    Income tax expense for the three months ended September 30, 2007 totaled
$5.0 million compared to $2.5 million recorded in the comparable quarter of
2006. Current tax expense for the three-month period ended September 30, 2007
was $3.7 million compared to $1.9 million in 2006. Future income tax expense
for the quarter ended September 30, 2007 was $1.3 million, an increase of
$0.7 million from the same period a year ago. The increase in total income tax
expense was primarily related to significantly higher profitability in the
United States and Russia offset partially by lower taxable earnings in Canada
during the quarter. The higher effective tax rate for the third quarter of
2007 was primarily due to a greater proportion of the Company's profitability
being generated from the United States and Russia, which are taxed at full
statutory rates compared to Canada that is currently taxed at a significantly
lower rate as a result of tax attributes from the amalgamation with Denison
Energy Inc.

    Net Income

    For the quarter ended September 30, 2007, the Company earned net income
of $16.4 million or $0.45 per share (basic) compared to $19.4 million or $0.54
per share (basic) during the third quarter of 2006. The decline in net income
was primarily a result of lower activity levels in Canada due to concerns over
natural gas prices, competitive pricing pressures in the Canadian well
services market, higher interest, depreciation and income tax expenses offset
partially by improved financial results of the Company's United States and
Russian operations.

    Cash Flow

    Cash flow from operations before changes in non-cash working capital for
the three months ended September 30, 2007 increased to $28.4 million or $0.78
per share (basic) from $27.6 million or $0.76 per share (basic) recorded in
the comparable quarter of 2006. For the three months ended September 30, 2007,
cash flow from operations was used primarily to finance the Company's
operations and capital expenditures.

    
    Summary of Quarterly Results
    -------------------------------------------------------------------------
    Three Months    Dec.31,   Mar.31,   Jun.30,   Sep.30,   Dec.31,   Mar.31,
     Ended            2005      2006      2006      2006      2006      2007
    -------------------------------------------------------------------------
    (000s, except
     per share and
     unit data)         ($)       ($)       ($)       ($)       ($)       ($)
    (unaudited)

    Financial
    Revenue        111,634   126,010    66,973   115,112   118,322   128,507
    Gross
     margin(1)      43,336    49,927    14,446    36,500    34,488    38,222
    Net income
     (loss)         27,372    34,556     1,569    19,418    16,907    18,777
      Per share
       - basic        0.75      0.95      0.04      0.54      0.47      0.52
       - diluted      0.75      0.94      0.04      0.53      0.46      0.52
    Cash flow from
     operations(2)  33,794    41,656     7,208    27,560    25,507    28,827
      Per share
       - basic        0.93      1.15      0.20      0.76      0.70      0.79
       - diluted      0.92      1.13      0.20      0.76      0.70      0.79
    EBITDA(3)       34,131    42,736     8,761    29,614    28,421    30,324
      Per share
       - basic        0.94      1.18      0.24      0.82      0.78      0.84
       - diluted      0.93      1.16      0.24      0.81      0.78      0.83
    Capital
     expenditures   20,612    50,631    36,501    23,931    44,415    48,521
    Working
     capital        39,396    37,071    28,741    31,158    31,225   105,549
    Shareholders'
     equity        234,021   271,084   267,559   287,616   303,510   326,184
    -------------------------------------------------------------------------
                      (No.)     (No.)     (No.)     (No.)     (No.)     (No.)

    Operating
    Fracturing
     spreads
      Conventional      17        18        19        19        21        23
      Coalbed
       methane           4         4         4         4         4         4
    -------------------------------------------------------------------------
      Total             21        22        23        23        25        27
    Coiled tubing
     units              11        12        14        14        14        14
    Cementing units      9         9        11        11        13        15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Summary of Quarterly Results
    ---------------------------------
    Three Months    Jun.30,   Sep.30,
     Ended            2007      2007
    ---------------------------------
    (000s, except
     per share and
     unit data)         ($)       ($)
    (unaudited)

    Financial
    Revenue         87,778   129,585
    Gross
     margin(1)      22,095    42,851
    Net income
     (loss)           (303)   16,441
      Per share
       - basic       (0.01)     0.45
       - diluted     (0.01)     0.45
    Cash flow from
     operations(2)  10,835    28,398
      Per share
       - basic        0.30      0.78
       - diluted      0.30      0.78
    EBITDA(3)       14,569    34,107
      Per share
       - basic        0.40      0.94
       - diluted      0.40      0.93
    Capital
     expenditures   19,972    11,345
    Working
     capital        86,971    99,696
    Shareholders'
     equity        321,218   336,858
    ---------------------------------
                      (No.)     (No.)

    Operating
    Fracturing
     spreads
      Conventional      23        24
      Coalbed
       methane           4         4
    ---------------------------------
      Total             27        28
    Coiled tubing
     units              15        17
    Cementing units     15        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.
    

    Nine Months 2007 Performance Summary

    Calfrac achieved the following financial results during the nine months
ended September 30, 2007:

    
    -   increased revenue by 12% to $345.9 million compared to $308.1 million
        in the first nine months of 2006;

    -   earned net income of $34.9 million or $0.96 per share (basic)
        compared to $55.5 million or $1.53 per share (basic) recorded in the
        same period a year ago; and

    -   realized cash flow from operations before changes in non-cash working
        capital of $68.1 million or $1.87 per share (basic) compared to
        $76.4 million or $2.11 per share (basic) in the same nine-month
        period of 2006.
    

    Revenue

    Canadian Operations

    For the first nine months of 2007, revenue from Canadian operations
decreased 22% to $186.0 million compared to $238.2 million during the same
period of 2006. Canadian fracturing revenue totaled $161.9 million compared to
$209.4 million recorded in the first nine months of 2006. Revenue was
negatively impacted by lower activity levels as a result of concerns related
to the price of natural gas as well as increased price competition and an
extended spring breakup in Western Canada. During the first nine months of
2007, Calfrac completed 3,194 Canadian fracturing jobs for average revenue of
$50,678 per job compared to 3,994 jobs for $52,422 per job in the
corresponding period of 2006. The year-over-year decrease in the Company's
Canadian fracturing revenue per job was primarily a result of competitive
pricing pressures in Western Canada and a significant increase in the number
of shallow gas jobs completed thus far in 2007 offset slightly by the
completion of fewer but larger fracturing jobs in the technically challenging
basins of northern Alberta and northeastern British Columbia.
    For the nine months ended September 30, 2007, revenue from coiled tubing
operations was $11.6 million compared to $13.0 million for the same period of
2006. The total number of jobs completed in the first nine months of 2007 was
2,936 for average revenue of $3,951 per job compared to 3,953 jobs for $3,300
per job in 2006. The slightly higher average revenue per job in the first nine
months of 2007 was primarily due to less coiled tubing activity in the
shallower basins of southern Alberta.
    The Company's revenue from cementing operations totaled $12.5 million for
the first nine months of 2007 compared to $15.8 million recorded in the same
period of 2006. The 21% decrease in revenue can be primarily attributed to
lower overall activity levels in the WCSB. The total number of jobs completed
in the first nine months of 2007 was 1,113 for average revenue of $11,257 per
job compared to 1,494 jobs for $10,549 per job a year ago. The higher revenue
per job in the 2007 nine-month period was primarily as a result of a larger
proportion of deeper cement jobs being completed in Western Canada.

    United States Operations

    Revenue from Calfrac's United States operations in the first nine months
of 2007 almost doubled to $113.7 million compared to $57.2 million recorded in
the same period of 2006. This increase was primarily due to the start-up of
the Company's new Arkansas district and strong activity in its Colorado
operating districts compared to the same period of the prior year. For the
nine months ended September 30, 2007, the Company completed 1,267 fracturing
jobs in the United States for average revenue of $89,530 per job compared to
899 jobs for $63,446 per job in the same period a year ago. The increase in
the reported revenue per job for the first nine months of 2007 was primarily
related to the commencement of operations in Arkansas during March 2007 offset
slightly by a depreciating U.S. dollar.

    Russian Operations

    During the nine months ended September 30, 2007, Calfrac's year-over-year
revenue from Russian operations increased $33.5 million to $46.2 million due
to a larger equipment fleet and broader scale of operations. The Company
considers its Russian operations to have reached a critical mass with the
deployment of a third multi-pumper fracturing spread and fifth coiled tubing
unit in July 2007. Calfrac expects that the financial results of its Russian
operations will continue to positively impact the Company's consolidated
financial performance in future periods.

    Gross Margin

    Consolidated gross margin for the first nine months of 2007 increased 2%
to $103.2 million from $100.9 million in the corresponding period of 2006. The
higher consolidated gross margin in the first nine months of 2007 was
primarily due to improved financial results from the Company's United States
and Russian operations offset by the impact of lower levels of field activity
in the WCSB, competitive pricing pressures in Canada, higher operating
expenses and a stronger Canadian dollar. As a percentage of revenue,
consolidated gross margin was 30% for the nine months ended September 30, 2007
compared to 33% in the corresponding period of 2006. The lower consolidated
gross margin percentage was primarily a result of the impact of competitive
pricing pressures experienced in Western Canada, a higher proportion of total
revenue being earned from comparatively lower margin regions of Western
Siberia and the appreciation of the Canadian dollar.

    Expenses

    Operating Expenses

    For the nine months ended September 30, 2007, operating expenses totaled
$242.7 million versus $207.2 million in the comparable period of 2006. The 17%
year-over-year increase was due primarily to a broader scale of operations in
North America and Russia as well as higher district expenses related to
Calfrac's newest operating regions in Beebe, Arkansas as well as
Khanty-Mansiysk and Purpe, Western Siberia.

    Selling, General and Administrative ("SG&A") Expenses

    During the first nine months of 2007, SG&A expenses totaled $22.9 million
compared to $20.4 million in the same period of 2006. These higher expenses
are primarily a result of Calfrac's growth in operating scale and revenue
base. SG&A expenses as a percentage of revenue were 7% for the nine months
ended September 30, 2007, consistent with the same period a year ago.

    Interest and Depreciation Expenses

    The Company recorded net interest expense of $7.2 million for the nine
months ended September 30, 2007 compared to $1.6 million in the same period of
2006. The higher interest expense was primarily a result of the closing in
February 2007 of a private placement of US$135.0 million of senior unsecured
notes and increased debt levels incurred to finance the Company's capital
programs offset slightly by interest earned on the Company's cash balances.
Depreciation expense during the first nine months of 2007 increased 47% to
$26.6 million from $18.1 million recorded in the corresponding period of 2006
primarily due to a larger equipment fleet operating across Calfrac's North
American and international operations. Subsequent to September 30, 2006, the
Company has deployed five new fracturing spreads, three additional coiled
tubing units and five cementing units as well as other support equipment into
its four operating regions.

    Income Tax

    Income tax expense for the first nine months of 2007 totaled
$10.3 million compared to $5.9 million recorded in the same period of the
prior year. Current tax expense for the nine months ended September 30, 2007
was $6.1 million, an increase of $1.5 million from the comparable nine-month
period in 2006. Future tax expense for the 2007 nine-month period was
$4.2 million versus $1.2 million a year ago. The increase in income tax
expense was primarily related to higher profitability in the United States and
Russia.

    Net Income

    For the nine months ended September 30, 2007, net income was
$34.9 million or $0.96 per share (basic) compared to $55.5 million or $1.53
per share (basic) in 2006. The decline in net income was primarily a result of
lower activity levels and competitive pricing pressures in Canada, especially
in the CBM markets of central Alberta, a $1.3 million foreign exchange loss
related to the translation of the Company's net investment in Russia as well
as higher depreciation, interest and income tax expenses.

    Cash Flow

    Cash flow from operations before changes in non-cash working capital for
the nine months ended September 30, 2007 decreased to $68.1 million or $1.87
per share (basic) from $76.4 million or $2.11 per share (basic) recorded in
the same period of 2006.

    Liquidity and Capital Resources

    Operating Activities

    As at September 30, 2007, Calfrac had positive working capital of
$99.7 million, long-term debt totaled $129.7 million and undrawn credit
facilities were $90.0 million. The increase in the Company's working capital
position from December 31, 2006 was primarily due to a higher cash balance as
a result of the issuance of senior unsecured notes in February 2007. As at the
date of this report, the Company had 36,564,112 common shares issued and
outstanding.

    Financing Activities

    On February 13, 2007, the Company completed a private placement of senior
unsecured notes for an aggregate principal amount of US$135.0 million. These
notes bear interest at 7.75% and are due on February 15, 2015. The Company
also has an operating line of credit of $25.0 million with advances bearing
interest at either the bank's prime rate, U.S. base rate, LIBOR plus 1% or
bankers' acceptances plus 1%. In addition, Calfrac has a $65.0 million
revolving term loan credit facility that 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'
acceptance plus 1.25% and is secured by a general security agreement over all
of the North American assets of the Company. Calfrac used a portion of the
note proceeds on the closing date to repay its existing credit facilities.

    Investing Activities

    Capital expenditures for the three and nine months ended September 30,
2007 totaled $11.3 million and $79.8 million, respectively, and were primarily
focused on increasing the Company's fracturing pumping capabilities of its
four geographic markets: Canada, the United States, Mexico and Russia. A
portion of these expenditures related to the completion of the 2006 capital
program, including the completion of two additional fracturing spreads (one
spread to each of the Canadian and Russian well services markets) during 2007,
a deep coiled tubing unit deployed to Western Siberia and three cementing
units that were deployed to the deep basin markets of Western Canada and
Arkansas.
    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 and beyond.

    Internal Control Over Financial Reporting

    There have been no changes in the Company's internal control over
financial reporting that occurred during the most recent interim period ended
September 30, 2007 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

    Accounting Policies and Estimates

    Changes in Accounting Policies

    Comprehensive Income

    The Company adopted the Canadian Institute of Chartered Accountants
("CICA") Handbook Section 1530, Comprehensive Income, on January 1, 2007. The
new standard introduces 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 accumulated other
comprehensive income, which provides the continuity of the AOCI balance.

    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 and cash equivalents are designated as "held-for-trading" and are
measured at carrying value, which approximates fair value due to the
short-term nature of these instruments. 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 method. The financing costs associated with
the Company's US$135.0 million 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, which matures on
February 15, 2015.

    Foreign Currency Translation

    During the first quarter of 2007, the Company's U.S. subsidiaries were
reclassified from integrated to self-sustaining foreign operations.
Consequently, Calfrac prospectively began translating the financial accounts
of its United States subsidiaries using the current rate translation method.
Under this method, assets and liabilities are translated into Canadian dollars
from their functional currency using the exchange rate in effect at the
consolidated balance sheet date. Revenues and expenses are translated to
Canadian dollars at monthly average exchange rates. Gains or losses in
translation are deferred and included in accumulated other comprehensive
income in the shareholders' equity section of the consolidated balance sheet
in accordance with CICA Section 1530, Comprehensive Income. Prior to this
reclassification, the temporal method of translation was used to translate the
U.S. subsidiaries and will continue to be used to translate the financial
accounts of the Company's Russian subsidiaries into Canadian currency.

    Critical Accounting Policies and Estimates

    This MD&A is based on the Company's annual consolidated financial
statements that have been prepared in accordance with Canadian GAAP.
Management is required to make assumptions, judgements and estimates in the
application of GAAP. Calfrac's significant accounting policies are described
in note 2 to the annual consolidated financial statements and note 3 to the
interim consolidated financial statements. The preparation of the consolidated
financial statements requires that certain estimates and judgements be made
concerning the reported amount of revenues and expenses and the carrying
values of assets and liabilities. These estimates are based on historical
experience and management's judgement. Anticipating future events involves
uncertainty, and consequently, the estimates used by management in the
preparation of the consolidated financial statements may change as future
events unfold, additional experience is acquired or the environment in which
the Company operates changes. The following accounting policies and practices
involve the use of estimates that have a significant impact on the Company's
financial results.

    Depreciation

    Depreciation of the Company's property and equipment incorporates
estimates of useful lives and residual values. These estimates may change as
more experience is obtained or as general market conditions change, thereby
impacting the operation of the Company's property and equipment.

    Stock-Based Compensation

    As described in note 8 to the annual consolidated financial statements,
the fair value of stock options are estimated at the grant date using the
Black-Scholes option pricing model, which includes underlying assumptions
related to the risk-free interest rate, average expected option life,
estimated volatility of the Company's shares and anticipated dividends.

    Risk Factors

    This document contains forward-looking statements based on current
expectations that involve a number of business risks and uncertainties. The
factors that could cause results to differ materially include, but are not
limited to, national and global economic conditions, crude oil and natural gas
prices, foreign currency fluctuations, the impact of the Kyoto Protocol
accord, weather conditions, the ability of oil and gas companies to raise
capital, and other unforeseen circumstances that could impact the use of
services provided by Calfrac. A more comprehensive listing of business risks
pertaining to the Company's operations is contained within the most recently
filed Annual Information Form, which is available at www.sedar.com.

    Outlook

    As a consequence of lower natural gas prices, a stronger Canadian dollar
and a revised royalty regime in the Province of Alberta, drilling activity in
Western Canada is not expected to return to significantly higher levels in the
near-term. The Petroleum Services Association of Canada forecasts that the
number of wells drilled in 2008 will decline 17% from 2007 to approximately
14,500 wells. The Company will continue to rely on its strong customer base
and contractual arrangements to support its Canadian pressure pumping
operations. The diversification strategy undertaken over the last several
years within Canada, both geographically and by service line, has and should
continue to mitigate the risk of lower levels of activity in any one market of
the WCSB. Calfrac will continue to focus on prudently managing operating costs
and, where necessary, will further streamline its operations to improve its
future financial performance.
    The Company anticipates that demand will continue to be strong for its
U.S. operations over the remainder of the year. Activity has been particularly
strong in its newest district in Beebe, Arkansas and Calfrac has recently
deployed a second fracturing crew into this area. Cementing operations were
also added to this market during the third quarter to further diversify
Calfrac's operations in the region. The Company's operations in Colorado have
been impacted by gas production deliverability issues in this region, which
are expected to be resolved in the near future, and as a result, area activity
is anticipated to improve accordingly. The Company believes that its U.S.
operations will be a significant component of its overall financial results
for 2007 and beyond.
    Calfrac believes that its Russian operations have achieved a critical
mass with a current equipment fleet of three multi-pumper fracturing spreads
and five deep coiled tubing units. The Company is actively involved in the
tender process for 2008 contracts with the contracts likely to be awarded by
the end of this year. Calfrac expects that the financial results from this
geographic segment will continue to provide a meaningful contribution to the
financial results of the Company going forward.
    Calfrac recently announced its intention to enter the Mexican well
services market during the fourth quarter of 2007. A long-term contract was
awarded by Pemex for the provision of fracturing operations in the Burgos
field of northern Mexico. This is a strategic move for the Company as this new
geographic segment will further diversify its operations from the pressure
pumping markets of Canada, the United States and Russia as well as offer
significant opportunities for future expansion.

    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 made
in this MD&A may contain words such as "anticipate," "can," "may," "expect,"
"believe," "intend," "forecast," or similar words suggesting future outcomes
or statements regarding an outlook, which constitute forward-looking
statements or information ("forward-looking statements"). 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 MD&A, 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 MD&A are made as at the date of
this MD&A and Calfrac assumes no obligation to update publicly, except as
required by applicable securities laws, any such forward-looking information
whether as a result of new information, future events or otherwise. The
forward-looking statements contained in this MD&A are expressly qualified
under this cautionary statement.

    Non-GAAP Measures

    Certain measures in this MD&A 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 MD&A 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 MD&A as these measures are discussed and presented.

    Third Quarter Conference Call

    Calfrac will be conducting a conference call for interested analysts,
brokers, investors and media representatives to review its 2007 third quarter
results at 9:00 a.m. (Calgary time) on Tuesday, November 6, 2007. The
conference call dial-in number is 1-866-249-2165 or 416-644-3416. The
seven-day replay numbers are 1-877-289-8525 or 416-640-1917 and enter 21249992
followed by the number sign. A webcast of the conference call may be accessed
via the Company's website at www.calfrac.com.

    Additional Information

    Calfrac Well Services Ltd. is a leading provider of specialized oilfield
services, including fracturing, coiled tubing, cementing and well stimulation
services, which are designed to increase the production of hydrocarbons from
wells drilled throughout Western Canada, the United States, Mexico and Russia.
The common shares of Calfrac are listed for trading on the Toronto Stock
Exchange under the symbol CFW. Additional information relating to Calfrac Well
Services Ltd. can be accessed on the Company's website at www.calfrac.com or
under the Company's filings found at www.sedar.com.

    CONSOLIDATED BALANCE SHEETS

    
    -------------------------------------------------------------------------
                                                        September   December
                                                               30,        31,
    As at                                                    2007       2006
    -------------------------------------------------------------------------
    (000s) (unaudited)                                         ($)        ($)

    Assets
    Current assets
      Cash and cash equivalents                            33,288      5,580
      Accounts receivable                                  95,258     84,481
      Inventory                                            24,563     13,387
      Prepaid expenses and deposits                         7,264      7,463
    -------------------------------------------------------------------------
                                                          160,373    110,911
    Capital assets                                        362,987    327,832
    Long-term investment                                      996        396
    Goodwill                                                6,003      6,003
    Future income taxes                                     3,830      9,048
    -------------------------------------------------------------------------
                                                          534,189    454,190
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Accounts payable and accrued liabilities             57,814     77,344
      Income taxes payable                                  2,863      2,342
    -------------------------------------------------------------------------
                                                           60,677     79,686
    Long-term debt (note 4)                               129,716     60,000
    Other long-term liabilities                             1,933      4,743
    Deferred credit                                         5,005      6,251
    -------------------------------------------------------------------------
                                                          197,331    150,680
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 5)                                143,062    139,841
    Shares held in trust (note 6)                          (2,030)    (3,869)
    Contributed surplus (note 7)                            5,641      4,393
    Retained earnings                                     196,241    163,145
    Accumulated other comprehensive income (loss)
     (note 3)                                              (6,056)         -
    -------------------------------------------------------------------------
                                                          336,858    303,510
    -------------------------------------------------------------------------
                                                          534,189    454,190
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

    -------------------------------------------------------------------------
                                    Three Months Ended     Nine Months Ended
                                          September 30,         September 30,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s, except per share
     data) (unaudited)                   ($)        ($)        ($)        ($)

    Revenue                         129,585    115,112    345,870    308,096
    -------------------------------------------------------------------------
    Expenses
      Operating                      86,734     78,612    242,702    207,223
      Selling, general and
       administrative                 8,827      7,395     22,945     20,421
      Depreciation                    9,938      6,897     26,581     18,078
      Interest, net                   2,726        831      7,155      1,639
      Equity share of income
       from long-term
       investments                        -         (2)      (600)       (72)
      Foreign exchange
       losses (gains)                   (83)      (602)     1,286       (679)
      Loss on disposal of
       capital assets                     -         95        538         92
    -------------------------------------------------------------------------
                                    108,142     93,226    300,607    246,702
    -------------------------------------------------------------------------
    Income before income taxes       21,443     21,886     45,263     61,394
    -------------------------------------------------------------------------
    Income tax expense
      Current                         3,742      1,876      6,106      4,634
      Future                          1,260        592      4,242      1,217
    -------------------------------------------------------------------------
                                      5,002      2,468     10,348      5,851
    -------------------------------------------------------------------------
    Net income for the period        16,441     19,418     34,915     55,543
    Retained earnings,
     beginning of period            179,800    128,634    163,145     94,322
    Dividends                             -          -     (1,819)    (1,813)
    -------------------------------------------------------------------------
    Retained earnings, end of
     period                         196,241    148,052    196,241    148,052
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share
      Basic                            0.45       0.54       0.96       1.53
      Diluted                          0.45       0.53       0.96       1.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND ACCUMULATED
    OTHER COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                                    Three Months Ended     Nine Months Ended
                                          September 30,         September 30,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s) (unaudited)                   ($)        ($)        ($)        ($)

    Net income for the period        16,441     19,418     34,915     55,543
    Other comprehensive
     income (loss)
      Change in foreign
       currency translation
       adjustment                    (2,696)         -     (6,056)         -
    -------------------------------------------------------------------------
    Comprehensive income             13,745     19,418     28,859     55,543
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), beginning of
     period                          (3,360)         -          -          -
      Other comprehensive
       income (loss) for the
       period                        (2,696)         -     (6,056)         -
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), end of period           (6,056)         -     (6,056)         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                                    Three Months Ended     Nine Months Ended
                                          September 30,         September 30,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s) (unaudited)                   ($)        ($)        ($)        ($)

    Cash provided by (used in)
    Operating activities
      Net income for the period      16,441     19,418     34,915     55,543
      Items not involving cash
        Depreciation                  9,938      6,897     26,581     18,078
        Amortization of debt
         issue costs                    165          -        430          -
        Stock-based
         compensation                   594        560      1,954      1,567
        Equity share of income
         from long-term
         investments                      -         (2)      (600)       (72)
        Loss on disposal of
         capital assets                   -         95        538         92
        Future income taxes           1,260        592      4,242      1,217
    -------------------------------------------------------------------------
      Funds provided by
       operations                    28,398     27,560     68,060     76,425
      Net change in non-cash
       operating assets and
       liabilities                  (23,786)    (3,039)   (24,548)     8,843
    -------------------------------------------------------------------------
                                      4,612     24,521     43,512     85,268
    -------------------------------------------------------------------------
    Financing activities
      Issue of long-term debt             -          -    199,790     45,000
      Long-term debt repayments           -     (2,824)  (107,546)    (5,290)
      Net proceeds on issue of
       common shares                  1,301         79      2,515        782
      Dividends                           -          -     (1,819)    (1,813)
      Purchase of common shares           -          -     (2,037)    (3,869)
    -------------------------------------------------------------------------
                                      1,301     (2,745)    90,903     34,810
    -------------------------------------------------------------------------
    Investing activities
      Purchase of capital assets    (11,345)   (23,931)   (79,838)  (111,063)
      Proceeds on disposal of
       capital assets                     -          -        416      4,159
      Net change in non-cash
       working capital from
       purchase of capital
       assets                          (393)    (5,115)   (15,149)     2,766
    -------------------------------------------------------------------------
                                    (11,738)   (29,046)   (94,571)  (104,138)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and cash
     equivalents                     (5,227)         -    (12,136)         -
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash position                  (11,052)    (7,270)    27,708     15,940
    Cash and cash equivalents
     (bank indebtedness),
     beginning of period             44,340     12,397      5,580    (10,813)
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                   33,288      5,127     33,288      5,127
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    For the Nine Months Ended September 30, 2007
    (000s, except share data) (unaudited)

    1.  Basis of Presentation

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

    2.  Seasonality of Operations

        The 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

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

        (a)   Comprehensive Income

              The Company adopted the Canadian Institute of Chartered
              Accountants ("CICA") Handbook Section 1530, Comprehensive
              Income, on January 1, 2007. The new standard introduces
              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 accumulated other
              comprehensive income, which provides the continuity of the AOCI
              balance.

        (b)   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 and cash equivalents are designated as "held-for-trading"
              and are measured at carrying value, which approximates fair
              value due to the short-term nature of these instruments.
              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 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, which matures on February 15, 2015.

        (c)   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 has
              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 CICA Section 1530, Comprehensive Income. Prior
              to this reclassification, the Company's U.S. operations were
              translated into Canadian dollars using the temporal method,
              which continues to be followed in respect of the Company's
              Russian operations.

    4.  Long-Term Debt

        On February 13, 2007, the Company completed a private placement of
        senior unsecured notes for an aggregate amount of US$135,000. The
        notes are due in full on February 15, 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 this offering, the Company's
        existing revolving term credit facility was reduced from $125,000 to
        $65,000.

    5.  Capital Stock

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

        ---------------------------------------------------------------------
        Continuity of Common Shares (year-to-date)         Shares     Amount
        ---------------------------------------------------------------------
                                                             (No.)    ($000s)

        Balance, January 1, 2007                       36,388,408    139,841
          Issued upon exercise of stock options           159,934      3,221
        ---------------------------------------------------------------------
        Balance, September 30, 2007                    36,548,342    143,062
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    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 September 30, 2007, the Trust held 83,029 shares, which
        were purchased on the open market at a cost of $2,030 (September 30,
        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.
        Shares held within the Trust 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

        ---------------------------------------------------------------------
        Continuity of Contributed Surplus (year-to-date)              Amount
        ---------------------------------------------------------------------
        (000s)                                                            ($)

        Balance, January 1, 2007                                       4,393
          Stock options expensed                                       1,954
          Stock options exercised                                       (706)
        ---------------------------------------------------------------------
        Balance, September 30, 2007                                    5,641
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  Stock Options

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

        Balance, January 1, 2007                        1,505,796      22.15
          Granted during the period                        30,000      20.20
          Exercised for common shares                    (159,934)     15.73
          Forfeited                                       (78,868)     26.28
        ---------------------------------------------------------------------
        Balance, September 30, 2007                     1,296,994      22.69
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        All stock options vest equally over three years and expire three and
        one-half years from the date of grant. When stock options are
        exercised, the proceeds, together with the amount of compensation
        expense previously recorded in contributed surplus, is added to
        capital stock.

    9.  Related Party Transactions

        For the nine months ended September 30, 2007, the Company purchased
        $27,454 (2006 - $17,153) of products and services from a company in
        which it holds a 30% equity interest. At September 30, 2007, accounts
        payable included $5,810 of indebtedness to this related party
        (September 30, 2006 - $4,951).

    10. Contingencies

        Greek Operations

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

        In 1998, a consortium in which a 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 amounting to approximately $12.4 million was due to
        the employees. The Company appealed this decision to the Athens Court
        of Appeals, which allowed the appeal in 2001 and annulled the above-
        mentioned decision of the Athens Court of First Instance. In
        addition, this court ruled that the plaintiffs' case as it related to
        damages was vague and unassessable. The said group of 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 has
        sent the matter back to the Athens Court of Appeal for the
        consideration of damages. The plaintiffs will be required to provide
        evidence to substantiate their claim for damages and the defendants
        will be given an opportunity to refute such evidence and lead
        additional evidence in support of their case. The Company expects
        that a date for the Athens Court of Appeal to rehear this case will
        be set sometime in 2008. Legal counsel to the defendants intends to
        vigorously defend the plaintiff's claims before the Athens Court of
        Appeal, as well as at any other level of court or in any such other
        jurisdiction where such a defence is warranted.

        Several other smaller groups of employees have filed similar lawsuits
        in various Courts in Greece. One of these lawsuits will be heard by
        the Supreme Court of Greece on November 6, 2007, and the remaining
        actions had been postponed indefinitely pending the outcome of the
        May 29, 2007 appeal to the Supreme Court of Greece. Another
        employment related lawsuit was heard on January 18, 2007 by the
        Athens Court of First Instance and the decision is still pending.

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

        Legal Claim - ChemErgy

        On July 19, 2007, Calfrac was served with a statement of claim by its
        chemical supplier, ChemErgy, and three of its shareholders. The
        statement of claim alleges that Calfrac has taken unfair and
        oppressive actions with respect to the interests of the plaintiffs
        and seeks to restrain Calfrac from taking certain actions.

        On October 6, 2007, Calfrac's legal counsel and counsel to the
        plaintiffs, on behalf of their respective clients, agreed upon the
        material terms of settlement of the lawsuit, including the
        acquisition by Calfrac of the remaining 70% of ChemErgy that it does
        not presently own. Counsel to Calfrac and the plaintiffs are in the
        process of drafting the formal settlement agreement in respect of the
        settlement.

    11. Segmented Information

        The Company's activities are conducted in three geographic segments:
        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    Elimi-   Consol-
                              Canada    Russia    States   nations    idated
        ---------------------------------------------------------------------
        (000s)                    ($)       ($)       ($)       ($)       ($)

        Three Months Ended
         September 30, 2007

        Revenue               70,058    16,764    42,763         -   129,585
        Operating income(1)   14,263     4,189    15,572         -    34,024
        Segmented assets(2)  405,026   109,449   173,511  (153,797)  534,189
        Capital expenditures   2,536     3,336     5,473         -    11,345
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        Three Months Ended
         September 30, 2006
        Revenue               86,457     7,294    21,361         -   115,112
        Operating income
         (loss)(1)            22,021      (148)    7,232         -    29,105
        Segmented assets(2)  403,972    53,902    26,061   (70,653)  413,282
        Capital expenditures  21,539     2,288       104         -    23,931
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        Nine Months Ended
         September 30, 2007
        Revenue              185,996    46,189   113,685         -   345,870
        Operating income(1)   33,158     9,869    37,196         -    80,223
        Segmented assets(2)  405,026   109,449   173,511  (153,797)  534,189
        Capital expenditures  23,327    28,765    27,746         -    79,838
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        Nine Months Ended
         September 30, 2006
        Revenue              238,181    12,677    57,238         -   308,096
        Operating income
         (loss)(1)            64,288    (3,061)   19,225         -    80,452
        Segmented assets(2)  403,972    53,902    26,061   (70,653)  413,282
        Capital expenditures  81,089    27,993     1,981         -   111,063
        Goodwill               6,003         -         -         -     6,003
        ---------------------------------------------------------------------
        (1) Operating income (loss) is defined as revenue less operating
            expenses (excluding depreciation) and selling, general and
            administrative 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 $54.4 million at
            September 30, 2006. During the first quarter of 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     Nine Months Ended
                                          September 30,         September 30,
                                       2007       2006       2007       2006
        ---------------------------------------------------------------------
        (000s)                           ($)        ($)        ($)        ($)


        Fracturing                  113,469     98,343    305,427    270,564
        Coiled tubing                11,528     10,219     27,664     21,771
        Cementing                     4,588      6,550     12,779     15,761
        ---------------------------------------------------------------------
                                    129,585    115,112    345,870    308,096
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
    

    %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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