Canyon Services Group Inc. (TSX:FRC) reports strong first quarter 2009 results



    CALGARY, May 11 /CNW/ - Canyon Services Group Inc. today announced its
first quarter 2009 results. The following should be read in conjunction with
the Management's Discussion and Analysis, the consolidated financial
statements and notes of Canyon Services Group Inc. which are available on
SEDAR at www.sedar.com.

    OVERVIEW OF FIRST QUARTER 2009

    Canyon continues to expand its customer base, with several major projects
completed in the first quarter of 2009. Importantly, Canyon completed projects
in Northwest Alberta and Northeast British Columbia in the Montney for senior
exploration and production companies, resulting in a significant increase in
revenues per job in the Conventional Fracturing Division. The Company's High
Rate Fracturing Division successfully completed a 160 well stimulation program
that commenced in Q4 2008, employing the patented Grand Canyon proprietary
process. In March 2009, Canyon commenced a follow-on multi-well program
employing this technology, which will be completed over the balance of 2009.
In addition, Canyon is preparing to commence pilot projects in Q2 and Q3 2009,
employing the patented Grand Canyon proprietary process, which we anticipate
will further expand Canyon's customer base.
    The operating and financial highlights for the three months ended March
31, 2009 may be summarized as follows:

    
    Operating and Financial Highlights

    -   In Q1 2009, Canyon's revenues increased by 30% to $24.1 million from
        $18.5 million in Q1 2008, while jobs completed in the current quarter
        totaled 502, virtually unchanged from the 500 jobs completed in the
        prior year's quarter.

    -   Average fracturing revenue per job increased by 29% year-over-year to
        $47,959 per job.

    -   As a result of our efforts to expand our presence in deeper,
        horizontal segments of the market, the revenues generated by Canyon's
        Conventional Fracturing Division increased by 67% in Q1 2009 over the
        prior year's comparable quarter and the average revenue per job in
        this division increased 109% in the current quarter over Q1 2008.

    -   The Chemical Stimulation and Remedial Services Division increased
        revenues by 61% over the same periods.

    -   In Q1 2009, Canyon generated EBITDA before stock based compensation
        expense (see Non-GAAP Measures) of $4.0 million compared to
        $1.7 million in the prior year's quarter.

    -   In Q1 2009, Canyon generated income before income taxes of
        $1.4 million, a significant improvement over the loss before income
        taxes of ($1.3 million) in Q1 2008.

    -   In response to current economic and industry conditions, the Company
        implemented significant, company-wide cost reductions that will
        result in significant annual operating and administration savings.

    -   As at March 31, 2009, the Company's available credit facilities total
        $18.7 million.

    QUARTERLY COMPARATIVE STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                                     March 31,      March 31,
    Quarter Ended                                        2009           2008
    -------------------------------------------------------------------------
                                                   (unaudited)    (unaudited)

    Revenues                                      $24,075,659    $18,454,141

    Expenses
      Operating                                    18,286,419     15,022,341
      Selling, general and administrative           1,944,303      1,946,718
      Interest on long-term debt                      142,240        356,614
      Other interest                                   22,109         30,362
      Depreciation and amortization                 2,299,355      2,381,235
                                                  ---------------------------
    Income (loss) before income taxes               1,381,233     (1,283,129)
                                                  ---------------------------


      Income taxes-future (reduction)                 436,793       (299,312)
                                                  ---------------------------
                                                      436,793       (299,312)
                                                  ---------------------------
    Net income (loss) and comprehensive
     income (loss)                                   $944,440      $(983,817)
                                                  ---------------------------
                                                  ---------------------------

    EBITDA before stock option expense(1)          $4,016,693     $1,669,294
                                                  ---------------------------
                                                  ---------------------------

    Income (loss) per share:

      Basic                                             $0.04         ($0.04)
      Diluted                                           $0.04         ($0.04)
                                                  ---------------------------
                                                  ---------------------------

    Note (1):  See Non-GAAP Measures.
    

    Revenues

    In Q1 2009, the 30% increase in revenues over Q1 2008 was mostly the
result of Canyon's increased market penetration into the northern areas of the
Western Canadian Sedimentary Basin, resulting in the completion of larger jobs
for customers. As a result, average overall revenue per job increased by 29%
to $47,959 in Q1 2009 from $37,303 for the prior year's comparable quarter.

    Operating Expenses

    Operating expenses increased by 22% to $18.3 million in Q1 2009 from
$15.0 million in Q1 2008. This increase is due to higher variable costs
attributable to completing larger jobs for customers, as well as higher fixed
operating costs as Canyon expanded operations in 2008 to satisfy increased
activity levels. Canyon opened operating bases in Grande Prairie and Medicine
Hat in 2008. In March 2009, the Company implemented significant, company-wide
cost reductions that will result in significant annual operating and
administration savings for the balance of 2009.

    Selling, General and Administrative Expenses

    Selling, general and administrative expenses remained unchanged at $1.9
million in Q1 2009 compared to Q1 2008. Selling, general and administrative
expense includes non-cash stock-based compensation expense of $0.2 million in
Q1 2009, unchanged from the prior year's comparable quarter.

    EBITDA (See Non-GAAP Measures)

    In Q1 2009, EBITDA (before stock option expense) has increased
significantly to $4.0 million from $1.7 million in Q1 2008, due to the
increase in revenues. The Q1 2009 amount of $4.0 million consists of income
before income taxes of $1.4 million, plus depreciation and amortization of
$2.3 million, plus interest on long-term debt and other interest of $0.1
million, plus stock option expense of $0.2 million. The comparable Q1 2008
amount of $1.7 million consists of loss before income taxes of ($1.3) million,
plus depreciation and amortization of $2.4 million, plus interest on long-term
debt and other interest of $0.4 million, plus stock option expense of $0.2
million.

    Interest Expense

    Interest on long-term debt and other interest was $0.1 million for Q1
2009, compared to $0.4 million for Q1 2008. The decrease is mostly due to
lower debt levels and interest rates in Q1 2009.

    Depreciation Expense

    Depreciation expense was recorded at $2.3 million in Q1 2009, down
slightly from the $2.4 million recorded in Q1 2008.

    Income Tax Expense

    At the expected combined income tax rate of 29%, income before income
taxes for Q1 2009 of $1.4 million would have resulted in income tax expense of
approximately $0.4 million. The future income tax expense was increased by
$0.1 million as a result of the effect of stock based compensation and other
non-deductible expenses, with an offsetting decrease of $0.1 million as a
result of a benefit from income tax rate reductions.

    Net Income (Loss) and Comprehensive Income (Loss) per Share

    Net income totaled $0.9 million for Q1 2009, a significant improvement
over the net loss of ($1.0 million) in Q1 2008, primarily due to the 30%
increase in revenues in the current quarter.
    For the quarter ended March 31, 2009, basic and diluted income per share
was $0.04, compared to loss per share of ($0.04) recorded in Q1 2008.

    NON-GAAP MEASURES

    The Company's Consolidated Financial Statements are prepared in
accordance with Canadian Generally Accepted Accounting Principles ("GAAP") and
are reported in Canadian currency.
    The term "EBITDA" is used in this document to refer to Earnings from
continuing operations before interest, taxes, depreciation and amortization.
EBITDA before stock compensation expense is also used in this document. EBITDA
is not a term recognized under Canadian GAAP and does not have a standardized
meaning prescribed by GAAP. While management of the Company believes that
EBITDA is commonly used, and is a useful measure for readers in evaluating
financial performance of the Company, the Company's method of calculating
EBITDA may differ from, and therefore, not be comparable to similar measures
provided by other reporting issuers.
    The following table provides a reconciliation of net income (loss) under
GAAP as disclosed in the consolidated statements of operations to EBITDA
before stock compensation expense.

    
    -------------------------------------------------------------------------
                                                      Three months ended
                                                           March 31
    -------------------------------------------------------------------------
                                                         2009           2008
    -------------------------------------------------------------------------
    EBITDA before stock compensation expense       $4,016,693     $1,669,294
    -------------------------------------------------------------------------
    Add (Deduct):
      Depreciation and amortization                (2,299,355)    (2,381,235)
      Interest on long-term debt                     (142,240)      (356,614)
      Other interest                                  (22,109)       (30,362)
      Stock-based compensation                       (171,756)      (184,212)
      Income taxes                                   (436,793)       299,312
    -------------------------------------------------------------------------
    Net income (loss) and comprehensive
     income (loss)                                   $944,440      $(983,817)
    -------------------------------------------------------------------------
    

    FORWARD-LOOKING STATEMENTS

    This document contains certain forward-looking information and statements
within the meaning of applicable securities laws. The use of any of the words
"expect", "anticipate", "continue", "estimate", "guidance", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans", "intends",
"budget", "strategy" and similar expressions are intended to identify
forward-looking information or statements. In particular, but without limiting
the foregoing, this document contains forward-looking information and
statements pertaining to the following: future oil and natural gas prices;
future results from operations; future liquidity and financial capacity and
financial resources; future costs, expenses and royalty rates; future interest
costs; future capital expenditures; future capital structure and expansion;
the making and timing of future regulatory filings; and the Company's ongoing
relationship with major customers.
    The forward-looking information and statements contained in this document
reflect several material factors and expectations and assumptions of the
Company including, without limitation: that the Company will continue to
conduct its operations in a manner consistent with past operations; the
general continuance of current or, where applicable, assumed industry
conditions; the continuance of existing (and in certain circumstances, the
implementation of proposed) tax, royalty and regulatory regimes; certain
commodity price and other cost assumptions; the continued availability of
adequate debt and/or equity financing and cash flow to funds its capital and
operating requirements as needed; and the extent of its liabilities. The
Company believes the material factors, expectations and assumptions reflected
in the forward-looking information and statements are reasonable but no
assurance can be given that these factors, expectations and assumptions will
prove to be correct.
    The forward-looking information and statements included in this document
are not guarantees of future performance and should not be unduly relied upon.
Such information and statements involve known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking information or statements
including, without limitation: changes in commodity prices; changes in the
demand for or supply of the Company's services; unanticipated operating
results; changes in tax or environmental laws, royalty rates or other
regulatory matters; changes in the development plans of third parties;
increased debt levels or debt service requirements; limited, unfavourable or a
lack of access to capital markets; increased costs; a lack of adequate
insurance coverage; the impact of competitors; reliance on industry partners;
and certain other risks detailed from time to time in the Company's public
disclosure documents (including, without limitation, those risks identified in
this document and the Company's Annual Information Form).
    The forward-looking information and statements contained in this document
speak only as of the date of the document, and none of the Company or its
subsidiaries assumes any obligation to publicly update or revise them to
reflect new events or circumstances, except as may be required pursuant to
applicable laws.





For further information:

For further information: Brad Fedora, President, Canyon Technical
Services Ltd, Suite 1600, 510-5th Street S.W., Calgary, Alberta, T2P 3S2,
Phone (403) 290-2491, Fax: (403) 355-2211; Or Barry O'Brien, Vice President,
Finance and CFO, Canyon Technical Services Ltd, Suite 1600, 510-5th Street
S.W., Calgary, Alberta, T2P 3S2, Phone (403) 290-2478, Fax: (403) 355-2211

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Canyon Services Group Inc.

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