CCS Income Trust third quarter results and highlights



    Q3 Interim Report
    Three and nine months
    ended September 30, 2007

    CALGARY, Nov. 13 /CNW/ -

    
    -   On September 5, 2007 the Trust unitholders and exchangeable
        shareholders approved a proposed going-private transaction involving
        an investor group led by the President and C.E.O. of CCS. Details of
        the proposed transaction, initially announced on June 29, 2007, can
        be found in the Management Information Circular dated August 3, 2007.
        Subject to satisfaction of closing conditions, it is anticipated that
        the proposed transaction will close on or before November 15, 2007.

    -   In September 2007, the Trust entered into an arrangement to purchase
        a 20 percent interest in Altela, Inc. ("Altela"), for $5.2 million.
        Based in Albuquerque, New Mexico, Altela is involved with energy-
        saving water remediation and water desalination products for the
        treatment of wastewater.

    (UNAUDITED)      Three months ended Sept.30    Nine months ended Sept.30
    -------------------------------------------------------------------------
    (000s) except per                        %                             %
     unit amounts        2007      2006 change        2007       2006 change
    -------------------------------------------------------------------------
    Revenue          $512,530  $476,400     8%  $1,449,820 $1,202,289    21%

    EBITDA(1)          73,652    80,439    (8%)    205,920    203,912     1%
    Income before
     non-controlling
     interest          40,051    53,664   (25%)    105,463    127,014   (17%)

    Net income         30,708    41,624   (26%)     81,206     98,690   (18%)

      per unit -
       diluted           0.58      0.81   (28%)       1.55       2.02   (23%)
    -------------------------------------------------------------------------
    Funds from
     operations(1)     69,285    70,392    (2%)    187,737    176,196     7%

      per unit -
       diluted           1.01      1.07    (6%)       2.76       2.81   (2)%
    -------------------------------------------------------------------------
    Capital
     expenditures(2)   58,837    58,059     1%     170,923    130,581    31%
    -------------------------------------------------------------------------
    Weighted average
     trust units       52,468    47,955     9%      52,468     47,955     9%

    Exchangeable
     shares(3)         15,581    14,853     5%      15,581     14,853     5%
    -------------------------------------------------------------------------
    Weighted average
     trust units -
     diluted           68,049    62,808     8%      68,049     62,808     8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Non-GAAP financial measures are identified and defined in the
        attached Management's Discussion and Analysis.
    (2) Does not include business acquisitions.
    (3) Assuming all exchangeable shares at September 30, 2007 converted at
        the period-end exchange ratio of 2.78376:1 (2006 - 2.63499:1).



    MANAGEMENT'S DISCUSSION AND ANALYSIS

    November 13, 2007

    This Management's Discussion and Analysis ("MD&A") should be read in
conjunction with the attached unaudited, interim consolidated financial
statements of CCS Income Trust (the "Trust" or "CCS"), and readers should also
refer to the audited consolidated financial statements and the MD&A included
in the CCS Income Trust 2006 Annual Report.

    CCS INCOME TRUST - QUARTERLY DATA
    (UNAUDITED)

    -------------------------------------------------------------------------
                                           2007                     2006
    (000s except per unit
     amounts)                     Q3        Q2        Q1        Q4        Q3
    -------------------------------------------------------------------------

    REVENUE                 $512,530  $419,913  $517,377  $471,530  $476,400

    EXPENSES

    Operating                432,772   372,130   418,402   395,188   389,805
    General and
     administrative            6,106     7,165     7,325     6,160     6,156
    Depreciation and
     amortization             24,133    21,284    19,622    25,027    16,640
    Financing charges          5,883     5,423     4,819     4,404     3,559
    -------------------------------------------------------------------------
    Income before
     non-controlling
     interest                 40,051    12,746    52,666    33,443    53,664
    Net income                30,708     9,735    40,763    25,664    41,624
    per unit - diluted          0.58      0.19      0.78      0.48      0.81
    -------------------------------------------------------------------------
    Funds from operations(2)  69,285    37,662    80,790    69,100    70,392
    per unit - diluted          1.01      0.55      1.20      1.02      1.07
    -------------------------------------------------------------------------
    Capital expenditures(3)   58,837    63,396    48,690    63,528    58,059
    Long-term debt           413,103   355,346   374,336   359,001   265,575
    Non-controlling
     interest                127,842   117,734   113,952   101,745    93,514
    Unitholders' equity      610,095   611,829   636,002   621,854   619,453
    Distributions per unit      0.52      0.53      0.53      0.53      0.46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ---------------------------------------------------------------
                                      2006               2005(1)
    (000s except per unit
     amounts)                   Q2(1)     Q1(1)       Q4        Q3
    ---------------------------------------------------------------

    REVENUE                 $355,997  $369,892  $325,511  $257,193

    EXPENSES

    Operating                302,808   288,806   252,475   203,300
    General and
     administrative            5,996     4,806     6,024     3,369
    Depreciation and
     amortization             13,804    11,745    11,976    10,319
    Financing charges          2,577     2,520     2,357     2,127
    ---------------------------------------------------------------
    Income before
     non-controlling
     interest                 26,121    47,229    38,829    27,722
    Net income                21,880    35,186    29,207    20,665
    per unit - diluted          0.39      0.82      0.69      0.48
    ---------------------------------------------------------------
    Funds from operations(2)  41,169    64,635    54,959    41,888
    per unit - diluted          0.62      1.12      0.97      0.74
    ---------------------------------------------------------------
    Capital expenditures(3)   45,154    27,368    43,604    27,899
    Long-term debt           211,626   202,533   156,397   154,507
    Non-controlling
     interest                 81,332    81,619    69,582    63,552
    Unitholders' equity      586,781   280,429   259,986   241,086
    Distributions per unit      0.45      0.38      0.35      0.32
    ---------------------------------------------------------------
    ---------------------------------------------------------------

    (1) Certain comparative figures have been reclassified to conform to the
        presentation adopted in the third quarter of 2006.
    (2) Non-GAAP financial measures are identified and defined in this MD&A.
    (3) Does not include business acquisitions.
    


    This MD&A contains certain statements that are not historical in nature
and are forward-looking statements. These forward-looking statements include
statements relating to the Trust's plans, strategies, objectives,
expectations, intentions and resources. They are not guarantees as to the
Trust's future results since there are inherent difficulties in predicting
future results. When used throughout this report, the words "anticipate,"
"expect," "project," "believe," "estimate," "forecast," "intend" or similar
expressions identify forward-looking statements, which include statements
relating to pending and proposed projects and business activities. Such
statements are subject to certain risks, uncertainties and assumptions
pertaining to completion of the previously announced going-private transaction
of the Trust, operating performance, regulatory parameters, weather and
economic conditions and, in the case of pending and proposed projects, risks
relating to design and construction, regulatory processes, obtaining financing
and performance of other parties, including partners, contractors and
suppliers. Accordingly, actual results could differ materially from those
expressed or implied in forward-looking statements.

    This MD&A contains references to certain financial measures that do not
have any standardized meaning prescribed by Canadian Generally Accepted
Accounting Principles ("GAAP") and may not be comparable to similar measures
presented by other companies or trusts. These measures are provided to assist
investors in determining the Trust's ability to generate cash from operations
and to provide additional information regarding the use of its cash resources.
These financial measures are identified and defined below:

    
    -   "EBITDA" (earnings before interest, taxes, depreciation and
        amortization, and for the Trust, before the gas delivery obligation
        valuation) is determined from the consolidated statements of income
        and accumulated earnings and is defined as operating margin less
        general and administrative expenses.

                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    Operating margin      $    79,758  $    86,595  $   226,516  $   220,870
    Less: General and
     administrative
     expense                    6,106        6,156       20,596       16,958
    -------------------------------------------------------------------------
    EBITDA                $    73,652  $    80,439  $   205,920  $   203,912
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -   "Funds from operations" is derived from the consolidated statements
        of cash flows and is calculated as cash provided by operating
        activities before changes in non-cash working capital and asset
        retirement obligations fulfilled.


                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    Cash provided by
     operating activities $    37,998  $    34,233  $   200,851  $   117,710
    Change in non-cash
     working capital           31,264       36,023      (13,514)      58,152
    Asset retirement
     obligations
     fulfilled                     23          136          400          334
    -------------------------------------------------------------------------
    Funds from
     operations           $    69,285  $    70,392  $   187,737  $   176,196
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -   "Growth capital expenditures" include amounts incurred to add new
        facilities, equipment or services and to replace utilized capacity
        and expand engineered landfills and waste-disposal caverns.
    -   "Maintenance capital expenditures" refer to capital expenditures
        required to maintain existing levels of service.
    -   "Cash available for distribution and growth capital expenditures" is
        calculated as funds from operations (see above), less required
        principal repayments of long-term debt, maintenance capital
        expenditures and amortization of capacity, which is funds designated
        for the replacement of engineered landfill and cavern capacity. This
        amount is calculated in the CCS Cash Distributions table disclosed
        later in this document.
    -   "Payout ratio" is calculated as cash distributions for the period
        divided by cash available for distribution and growth capital
        expenditures, as referenced in the CCS Cash Distributions table
        disclosed later in this document.
    -   "Net debt" is comprised of the Trust's current and long-term portion
        of debt less the value of cash and cash equivalents. Net debt is used
        as a key indicator of the Trust's leverage and the overall strength
        of its balance sheet. Net debt is directly related to the Trust's
        operating cash flows and capital investment activities.

    CCS reports results of its operations through four main business segments:

    CCS Midstream Services Division (Midstream Services)

    This division owns and operates treatment, recovery and disposal (TRD) and
cavern facilities throughout western Canada and in the Gulf Coast region of
the United States. This division, previously known as 'CCS Energy Services'
has been rebranded to 'CCS Midstream Services' to better reflect the
production nature of the business and the breadth of services offered.
Services are provided in the following areas:

    -   Emulsion treatment;
    -   Water treatment and disposal;
    -   Waste processing;
    -   Naturally occurring radioactive material (NORM) processing;
    -   Drilling mud disposal;
    -   Tank/truck washing;
    -   Crude oil terminalling;
    -   Cavern disposal;
    -   Well abandonment and facility decommissioning; and
    -   Transporting of water and waste for disposal.

    CCS Energy Marketing Division (CEM)

    Responding to the opportunity to maximize the return on the marketing of
recovered crude oil, CEM extracts additional value and operating margin on
waste and recovered oil volumes from the Midstream Services facilities. The
division captures the incremental value created through the marketing chain
with the following revenue streams:

    - Lease purchases;
    - Single shipper/optimization; and
    - Bulk purchases.

    HAZCO Environmental Services Division (HAZCO)

    This division is an industry leader providing a wide range of specialized
services including:

    - Site remediation;
    - Decommissioning;
    - Waste services;
    - Scrap metal processing;
    - Environmental construction;
    - Environmental technologies;
    - Emergency response;
    - Engineered landfill disposal;
    - Sulphur services;
    - Environmental and geotechnical drilling; and
    - Other specialty services.
    

    HAZCO operates a network of industrial and engineered landfills,
bioremediation facilities and hazardous waste transfer stations across western
Canada. HAZCO provides services primarily throughout Canada, with select
services provided in the United States and Peru.

    Concord Well Servicing Division (Concord)

    This division owns and operates 143 rigs, forming one of the most modern
fleets in the Canadian oil and gas services sector. Established in 1979,
Concord provides a variety of contract services from its strategically located
offices in western Canada. HiAlta Energy Services ("HiAlta"), an oilfield
rental business, is reported within the Concord division.

    
    DISCUSSION OF FINANCIAL RESULTS

                                Three months ended         Nine months ended
    (000s except per unit                 Sept. 30                  Sept. 30
     amounts)                    2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenue               $   512,530  $   476,400  $ 1,449,820  $ 1,202,289
    % change from prior
     period                        8%          85%          21%          96%
    -------------------------------------------------------------------------
    EBITDA(1)                  73,652       80,439      205,920      203,912
    % change from prior
     period                       (8%)         59%           1%          66%
    -------------------------------------------------------------------------
    Income before
     non-controlling
     interest                  40,051       53,664      105,463      127,014
    % change from prior
     period                      (25%)         94%         (17%)         89%
    -------------------------------------------------------------------------
    Net income                 30,708       41,624       81,206       98,690
    % change from prior
     period                      (26%)        101%         (18%)         98%
      per unit - diluted         0.58         0.81         1.55         2.02
    -------------------------------------------------------------------------
    Funds from
     operations(1)        $    69,285  $    70,392  $   187,737  $   176,196
    % change from prior
     period                       (2%)         68%           7%          68%
      per unit - diluted         1.01         1.07         2.76         2.81
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Non-GAAP financial measures are identified and defined in this MD&A.
    


    Results for the third quarter of 2007 continued to be impacted by lower
levels of capital spending by many of the oil and gas producers, and to a
certain extent, wet weather conditions. However, all of the divisions, except
for Concord, reported increased revenue and improved operating margins over
the third quarter of the previous year. The Concord division's quarterly
results were lower than anticipated, with quarterly utilization rates at 43
percent, compared to 70 percent in the third quarter of 2006.
    Overall, funds from operations for the third quarter declined by only
two percent over the prior year and increased by seven percent on a
year-to-date basis, indicating that, despite the less than favourable economic
conditions, the Trust's cashflow has been sustained at prior year levels with
no impact to our unit distribution policy and capital expansion plans.

    CASH DISTRIBUTIONS

    Monthly distributions declared per trust unit, for the three months ended
September 30, 2007, were $0.175 per unit, with total distributions paid of
$27.4 million (2006 - $24.0 million). The following summary outlines the
principal utilization of funds from operations for the three and nine month
periods ended September 30, 2007 and 2006:

    
                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    Funds from
     operations(1)        $    69,285  $    70,392  $   187,737  $   176,196
    Required principal
     repayments of
     long-term debt            (1,068)        (461)      (2,244)      (2,470)
    Maintenance capital
     expenditures(1)          (11,914)     (13,246)     (45,668)     (31,955)
    Amortization of
     landfill and cavern
     capacity(2)               (4,115)      (2,348)      (9,346)      (7,245)
    -------------------------------------------------------------------------
    Cash available for
     distribution and
     growth capital
     expenditures(1)(b)        52,188       54,337      130,479      134,526
    Cash retained for
     growth and capital
     expenditures             (24,788)     (30,271)     (48,373)     (71,515)
    -------------------------------------------------------------------------
    Cash distributions
     declared(a)               27,400       24,066       82,106       63,011
    Accumulated cash
     distributions,
     beginning of period      287,832      181,783      233,126      142,838
    -------------------------------------------------------------------------
    Accumulated cash
     distributions, end
     of period            $   315,232  $   205,849  $   315,232  $   205,849
    -------------------------------------------------------------------------
    Payout ratio(1)
    (a)/(b)                       53%          44%          63%          47%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Non-GAAP financial measures are identified and defined in this MD&A.
    (2) Based on the amortization expense in the consolidated statements of
        income and accumulated earnings, these are funds retained to replace
        utilized engineered landfill and cavern capacity.
    


    The payout ratio for the third quarter of 2007 increased due to higher
levels of activity in the caverns and landfills business units, with a
corresponding increase in amortization expense along with increased
distributions. On a year-to-date basis, the higher payout ratio was primarily
attributable to increased expenditures on maintenance capital and to the
increase in cash distributions declared. The increase in maintenance capital
expenditures was primarily attributable to facility expansion in the HAZCO and
Concord divisions.
    The Trust's cash distribution policy is focused on maintaining a level of
distributions that are sustainable for the longer term, while retaining funds
for ongoing maintenance capital expenditures, replacement of capacity in the
engineered landfills and caverns and for the funding of planned growth
initiatives, if determined beneficial to do so. Cash distributions are
proposed by management and are subject to the approval and discretion of the
Board of Directors. The Board reviews cash distributions in conjunction with
its review of operating and financial results throughout the year.
    Management monitors and assesses distribution levels through forecasts
which incorporate the most recent operating and financial results, maintenance
and growth capital requirements as well as market activity and conditions. The
Trust is exposed to a number of business risks which are also taken into
consideration when establishing distribution levels. The business environment
in which CCS operates involves risks with respect to the overall demand for
services, oil and gas prices, environmental requirements and general
competition. Treatment and waste disposal services are largely dependent on
the willingness of customers to outsource their waste management activities.
Environmental regulations do not prohibit numerous internal options available
to oilfield waste generators, such as bioremediation, land spreading, road
spreading and deep well disposal options. As such, the demand for CCS'
services could be curtailed by a trend towards internal waste management.
    Please refer to the Trust's 2006 Annual Report and Annual Information
Form for further details. Other risks identified are as follows:

    
    -   Capital requirements;
    -   Access to qualified and experienced personnel;
    -   Credit risk;
    -   Interest rate and commodity price risks;
    -   Foreign exchange risk; and
    -   Critical accounting estimates.
    

    The Trust is required to make principal payments on some of its credit
facilities, including repayment of the revolving credit facility at the end of
its three-year term. However, the Trust has the option to make a request for
extension of the facility, which would extend the period of repayment. The
Trust is required, under its credit facilities and private placement senior
notes, to remain in compliance with specific financial covenants, with, among
other possible ramifications, the Trust no longer entitled to make
distributions upon receipt of a notice of default. As at September 30, 2007,
the Trust was in compliance with all such covenants. Please refer to the
"Liquidity and Capital Resources" section of this MD&A.
    The exchangeable shares issued by CCS Inc. are reported in the
consolidated financial statements as non-controlling interest and are
comprised of the carrying value of the exchangeable shares upon issuance plus
accumulated earnings attributable to the non-controlling interest. The
exchangeable shares, upon conversion to trust units, become eligible for trust
unit distributions. If all or a substantial amount of the exchangeable shares
are converted to trust units, there may be an increase in the payout ratio.
The cash distributions table does not take into consideration the conversion
of exchangeable shares, as distributions are not guaranteed and there is no
obligation to maintain distribution levels per unit upon conversion.
    The income trust model is based on the flow-through of income and the tax
liabilities associated with this income to Trust unitholders, resulting in
increased cash available for distribution by the Trust. On June 22, 2007, the
federal government passed legislation to apply a tax, at the trust level, on
distributions of certain income from publicly traded mutual fund trusts, at
rates of tax comparable to the combined federal and provincial corporate tax
rates and to treat such distributions as dividends to the unitholders. This
legislation does not take effect until January 1, 2011 for trusts that
commenced trading prior to November 2006, providing the Trust only experiences
"normal growth" and no "undue expansion" before then. Implementation of this
legislation is expected to result in adverse tax consequences to the Trust and
certain Unitholders (most particularly Unitholders that are tax deferred or
non-residents of Canada). Cash distributions from the Trust may also be
impacted due to the requirement of the Trust to pay a 32 percent tax on
distributions paid.
    While the distribution policy is focused on mitigating the risk of a
reduction in monthly per unit distributions, changes to the current business
environment, legislation enacted by the Canadian federal government on the
taxation of trusts, required expenditures on asset retirement obligations or
failure to achieve forecast financial performance may result in the
requirement to reduce future cash distributions.

    
    REVENUE
                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    CCS Midstream
     Services             $    75,129  $    61,694  $   218,529  $   175,292
      % change from prior
       period                     22%          46%          25%          49%
    -------------------------------------------------------------------------
    Concord Well
     Servicing                 39,182       62,580      142,303      140,269
      % change from prior
       period                    (37%)        192%           1%         126%
    -------------------------------------------------------------------------
    HAZCO                      98,788       96,276      269,760      234,894
      % change from prior
       period                      3%           6%          15%          27%
    -------------------------------------------------------------------------
    CCS Energy Marketing      299,431      255,850      819,228      651,834
      % change from prior
       period                     17%         148%          26%         162%
    -------------------------------------------------------------------------
    Total                 $   512,530  $   476,400  $ 1,449,820  $ 1,202,289
      % change from prior
       period                      8%          85%          21%          96%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Midstream Services

    The TRD and caverns business unit reported a 14 percent increase in
revenue in the third quarter of the year, over the same period in 2006.
Incremental revenue generated from the new TRD facility at South Grande
Prairie, Alberta, increased activity at the disposal caverns and capital
expended on facility upgrades all contributed to this increase. Despite
weakened industry conditions, activity levels for this business unit were
comparable to the third quarter of 2006, with higher waste volumes received in
certain geographic areas.
    Revenue reported on the sale of oil recovered from waste increased by
34 percent in the third quarter of 2007, over the same period in 2006, with
the increase attributable to a 35 percent increase in the volume of oil
recovered.
    The U.S. Midstream operations reported a 61 percent increase in third
quarter revenue. The acquisitions of Mobley Oilfield Services, LP and Pride
Oilfield Services, LLC, (collectively "Mobley") in the first half of the year
contributed $6.9 million to revenue in the third quarter of 2007. Revenue at
the Shreveport, Louisiana facility was negatively impacted by the cancellation
of the Louisiana Department of Environmental Quality ("LDEQ") discharge permit
in the second quarter of the year. The interim solution of utilizing the
Publicly Operated Treatment Works ("POTW") permit required a shutdown of the
facility for most of July to ensure the facility would operate in compliance
with this permit. Daily discharge volumes under the POTW permit are 85 percent
lower than under the previous permit, with approval received in late September
to increase daily discharge volumes to 40 percent of previous capacity.
Application for renewal of the discharge permit is expected to be received in
the second quarter of 2008. The Gulf Coast Waste Disposal business unit
reported a decrease in revenue of 16 percent over the same quarter in 2006.
This decrease stems from reduced volumes as the business unit continues to
operate in an extremely competitive pricing environment in the Gulf Coast
Region.
    Year-to-date revenue for the TRD and caverns business unit increased by
11 percent over the prior year, due primarily to increased activity in the
disposal caverns and to higher volumes of oil recovered and sold. On a
year-to-date basis, revenue for the U.S. Midstream Services division increased
by 76 percent to $42.9 million, with Mobley contributing incremental revenue
of $15.1 million and ARKLA contributing incremental revenue of $7.2 million.
The Gulf Coast Waste Disposal business unit reported $19.8 million in
year-to-date revenue.

    Concord

    Revenue for the third quarter of 2007 declined by 37 percent over the
same period of 2006, but increased by 62 percent over the second quarter of
2007. Reduced capital spending by many of the oil and gas producers continued
to drive lower utilization rates; 43 percent for the third quarter of 2007
compared to 70 percent for the same period in 2006. Rig hours worked for the
third quarter of 2007 totalled 53,210 hours compared to 86,618 hours for the
same period in 2006.
    On a year-to-date basis, revenue in this division has been impacted by
the low levels of drilling activity and reduced capital spending programs by
many oil and gas producers. Utilization rates for the nine months ended
September 30, 2007 were 48 percent, compared to 69 percent for the same period
in 2006.

    HAZCO

    The HAZCO division reported a three percent quarter-over-quarter increase
in revenue for the third quarter of the year. The geotechnical drilling
business unit reported a 34 percent increase in revenue, due primarily to
increased activity levels and the incremental contribution from the purchase
of an additional eight rigs late in 2006 and early 2007. Increased throughput
capacity at the HMI facility generated a 43 percent increase in third quarter
revenue for this business unit. Revenue in the project services business unit
declined by six percent over the same period in 2006, due mainly to the
completion of a project in the U.S. The Landfill Services business unit
reported an eight percent increase in quarter-over-quarter revenue, due
primarily to incremental revenue generated by the Judy Creek and Janvier
landfill facilities.
    For the nine months ended September 30, 2007, this division reported a
15 percent increase in year-over-year revenue. This growth resulted from the
acquisition of HMI in the second quarter of 2006 and the subsequent expansion
of the facility, along with sustained high levels of activity in the
geotechnical drilling business unit. The Landfill Services business unit was
down 11 percent in revenue from 2006, due primarily to the reduced levels of
drilling activity and unfavourable weather conditions.

    CCS Energy Marketing

    The third quarter and year-to-date revenue increase in this division was
attributable to an increase in the purchase and sale of third-party lease
volumes.

    
    OPERATING MARGINS

                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    CCS Midstream
     Services             $    37,047  $    33,723  $   103,335  $    93,946
      % of division
       revenue                    49%          55%          47%          54%
    -------------------------------------------------------------------------
    Concord                    10,054       22,144       39,110       49,746
      % of division
       revenue                    26%          35%          27%          35%
    -------------------------------------------------------------------------
    HAZCO                      25,499       24,299       64,459       61,925
      % of division
       revenue                    26%          25%          24%          26%
    -------------------------------------------------------------------------
    CCS Energy Marketing        7,158        6,429       19,612       15,253
      % of division
       revenue                     2%           3%           2%           2%
    -------------------------------------------------------------------------
    Total                 $    79,758  $    86,595  $   226,516  $   220,870
      % of consolidated
       revenue                    16%          18%          16%          18%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Midstream Services

    For this division, operating margin, as a percentage of revenue, declined
by six percent on a quarter-over-quarter basis due, in large part, to the
addition of lower margin business units reported under this division. The
following business units report under the Midstream Services division, with
many of the acquired business units generating operating margins lower than
what was historically reported when the division was comprised mainly of the
Canadian TRD and cavern business units:

    
    -   TRD and cavern facilities (Canada);
    -   Midstream Services (U.S.), including the Gulf Coast Waste Disposal
        business unit, ARKLA and Mobley;
    -   Hardisty Caverns Limited Partnership;
    -   Normcan;
    -   Lionhead; and
    -   ProDrill.
    

    Operating margin, as a percentage of revenue, for the TRD and caverns
business unit remained unchanged in the third quarter of 2007, over the same
period in 2006. Operating margin dollars for this business unit increased by
14 percent on a quarter-over-quarter basis due to increased activity levels at
the disposal caverns, new facilities opened and increased volumes of recovered
oil sold.
    In the U.S. Midstream Services division, third quarter operating margin
dollars of $2.6 million were generated by the Mobley business unit. This
operating margin was completely offset by operating losses in the Gulf Coast
Waste Disposal and ARKLA business units due to the operational issues
discussed above.
    On a year-to-date basis, operating margin, as a percentage of revenue,
for the Midstream Services division declined by seven percent, to 47 percent.
Three percent of this decline was attributable to the TRD and caverns business
unit and the reduced levels of activity reported in the first half of the
year. On a year-over-year basis, operating margin dollars increased, due
mainly to the Mobley and Lionhead acquisitions. Operating margin for the U.S.
Midstream Services division continues to be negatively impacted by operational
issues with respect to the Gulf Coast Waste Disposal business unit.
Restrictions on volumes accepted by third party landfill operators and
increased costs for disposal at these landfills has impacted operating
margins. Price increases implemented earlier this year, combined with a very
competitive market, have reduced the volume of activity within this business
unit.

    Concord

    The return to higher utilization rates in the third quarter of 2007 did
not materialize to the extent anticipated. With reduced utilization rates, the
fixed costs of the business have a larger impact on operating margin and this
is reflected in both the quarterly and year-to-date results. Operating margin,
as a percentage of revenue improved by 23 percent over the second quarter of
2007, however was nine percent lower than the same quarter in 2006.
    On a year-over-year basis, operating margin, as a percentage of revenue,
was down by eight percent. This was directly attributable to the economic
environment, as discussed previously, as lower utilization rates result in
lower revenue.

    HAZCO

    On a quarter-over-quarter basis, HAZCO's operating margin, as a
percentage of revenue, was relatively unchanged, with the geotechnical
drilling business unit generating higher operating margins due to high
utilization rates, increased activity levels and capital expansion. The
Landfill Services business unit reported a five percent decline in operating
margin, as a percentage of revenue, with operating margin dollars reported for
the third quarter of 2007 comparable to those reported for the same period in
2006. Higher operating costs for labour, trucking and equipment rental
contributed to the decline in operating margin for the quarter.
    Year-to-date operating margin for this division, as a percentage of
revenue, declined by two percent over the prior year. The decline was
primarily attributable to reduced drilling and reclamation activity during the
year, along with increased costs to manage leachate volumes in the Landfill
Services business unit.

    CCS Energy Marketing

    The operating margin for this division remains fairly constant, in the
range of one to three percent of revenue. The business model is focused on
capturing the incremental value in marketing crude oil through CCS facilities.
The division is not expected to generate operating margin, as a percentage of
revenue, significantly different from that reflected to date. Revenue is
recorded at its gross value, and, as a result, the financial statements
reflect a higher dollar value for both revenue and operating expense, creating
a lower operating margin as a percentage of revenue.

    
    GENERAL AND ADMINISTRATIVE EXPENSES

                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    General and
     administrative
     expenses             $     6,106  $     6,156  $    20,596  $    16,958
      % change from prior
       period                     (1%)         83%          21%          78%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the third quarter of 2007, general and administrative expenses
relating to salaries and benefits have increased on a quarter-over-quarter
basis, however effective cost management in the current economic environment
resulted in total expenses remaining relatively unchanged.
    On a year-to-date basis, the increase in general and administrative
expenses was primarily the result of increased salaries and benefits
associated with the growth of the Trust in 2006.
    Administrative costs directly related to the individual business segments
are included in operating expenses for that division.

    
    DEPRECIATION AND AMORTIZATION

                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    Depreciation          $    18,535  $    13,913  $    51,517  $    33,600
      % change from prior
       period                     33%          79%          53%          57%
    -------------------------------------------------------------------------
    Amortization of
     engineered landfills
     and caverns                4,115        2,348        9,346        7,245
      % change from prior
        period                    75%           3%          29%          40%
    -------------------------------------------------------------------------
    Amortization of
     intangibles                1,483          379        4,176        1,344
      % change from prior
       period                    291%          42%         211%          11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Trust's capital assets continue to increase, with capital programs
and acquisitions completed earlier this year and in 2006, impacting
depreciation expense for the quarter and year-to-date. The increased activity
in the caverns business unit resulted in higher depletion charges for the
third quarter of 2007 and year-to-date, with depletion expense for Landfill
Services higher due to additional depletion reported on new landfills opened
in the year.
    The amortization expense associated with intangible assets may fluctuate
from quarter to quarter depending on the nature of intangible assets acquired
and their estimated useful life. An annual impairment test is conducted for
all intangible assets with any impairment in value reflected in amortization
expense. As at September 30, 2007, the Trust has not reported any impairment
to intangible assets acquired.

    
    INCOME TAXES

                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    Income before income
     taxes and non-
     controlling interest $    43,119  $    61,443  $   121,580  $   153,593
    Provision for income
     taxes                      3,068        7,779       16,117       26,579
    Effective tax rate             7%          13%          13%          17%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Trust follows the asset and liability method of accounting for income
taxes. Under this method, future tax assets and liabilities are measured using
enacted or substantially enacted rates of tax expected to apply to taxable
income in the years in which temporary differences are anticipated to be
recovered or settled. In 2006, Canadian and provincial governments enacted
various reductions in corporate rates, with combined rates declining by
approximately four percent over a four-year period.
    On June 22, 2007, the federal government passed and enacted legislation
eliminating the deduction of distributions from taxable income for certain
publicly traded mutual fund trusts. This legislation does not take effect
until January 1, 2011 for trusts that commenced trading prior to November
2006, providing the Trust only experiences "normal growth" and no "undue
expansion" before then. This legislation also introduced a reduction in
federal corporate tax rates by 0.5 percent starting in 2011. The consolidated
financial statements of the Trust reflect the impact of this legislation.
    The provision for current income taxes in the third quarter of 2007 was
$nil (2006 - $9.1 million), with future income tax expense of $3.0 million
(2006 - $1.3 million recovery).
    The year-to-date effective tax rate for the Trust decreased by
four percent to 13 percent as a result of the corporate tax rate reductions
mentioned above.

    
    FINANCING

                                Three months ended         Nine months ended
                                          Sept. 30                  Sept. 30
    (000s)                       2007         2006         2007         2006
    -------------------------------------------------------------------------
    Interest expense      $     5,883  $     3,559  $    16,125  $     8,656
      % change from prior
       period                     65%          67%          86%          39%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Financing charges in 2007 reflect the interest expense associated with
increased levels of debt. Long-term debt increased by $147.5 million on a
year-over-year basis to September 30, 2007. The average interest rate paid on
long-term debt for the nine-month period in 2007 was 5.4 percent, essentially
unchanged from the average interest rate in 2006. The Trust reduced its
exposure to floating interest rates in December 2006 through the closing of
its fixed-rate private placement debt financing. As at September 30, 2007,
approximately 23 percent of the Trust's debt outstanding was subject to
floating-rate interest (2006 - 70 percent).
    The significant transactions impacting long-term debt and financing
requirements on a quarter-over-quarter basis are as follows:

    
    -   The acquisition of Mobley with cash consideration totalling
        $48.8 million in the first quarter of 2007;
    -   Year-to-date capital spending of $170.9 million in 2007 (2006 -
        $130.6 million); and
    -   A non-cash reclassification of $5.2 million in deferred financing
        costs on January 1, 2007, as an offset to long-term debt, on adoption
        of the new rules and regulations under GAAP, with respect to
        financial instruments.

    LIQUIDITY AND CAPITAL RE

SOURCES As at As at Sept. 30 Dec. 31 (000s) 2007 2006 ------------------------------------------------------------------------- Capital data Current portion of long-term debt $ 2,977 $ 2,657 Long-term debt 413,103 359,001 Less: cash and cash equivalents (7,724) (54,399) ------------------------------------------------------------------------- Net debt(1) 408,356 307,259 Unitholders' equity 610,095 621,854 Non-controlling interest 127,842 101,745 ------------------------------------------------------------------------- Total capitalization $ 1,146,293 $ 1,030,858 Net debt to total capitalization 36% 30% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Non-GAAP financial measures are identified and defined in this MD&A. The Trust uses net debt and net debt to total capitalization as key indicators of its leverage and to monitor the strength of the balance sheet. At September 30, 2007, the net debt to total capitalization ratio increased to 36 percent, due to the financing of acquisitions and capital expenditures. Credit Facilities, Swaps and Bonds As at September 30, 2007, the Trust had the following credit facilities available: - $400.0 million, three-year extendible revolving facility bearing interest, at CCS' option, at the bank's prime rate, bankers' acceptance rate or LIBOR rate plus zero to 175 basis points ("bps"), depending on CCS' ratio of Funded Debt to EBITDA. At September 30, 2007, the Trust had borrowed $98.6 million on this facility, with outstanding letters of credit of $50.9 million reducing the amount of credit available on this facility. - $270.0 million, non-amortizing, private placement senior notes, with a weighted average interest rate of 5.2 percent. Maturity and repayment terms range from seven to 12 years. - $30.0 million, seven-year, non-revolving, non-amortizing term facility with a fixed interest rate of 6.4 percent. This facility is fully drawn and repayable in full on December 10, 2011. - $11.0 million for the financing of capital equipment, with interest charged on a transactional basis. Fixed and floating-rate options are available. Interest under the fixed option is currently charged at a maximum rate of four percent. Contracts under the floating option charge interest at prime minus 0.7 percent to prime minus 3.5 percent. Repayment terms cannot extend beyond five years. At September 30, 2007, the amount outstanding on this facility was $2.8 million. CCS will continue to utilize this facility if the cost to do so minimizes overall borrowing costs to the Trust. - $5.3 million of bonds outstanding with the Caddo-Bossier Parishes Port Commission (the "Port"). These bonds are carried by CCS Energy Services LLC pursuant to a lease agreement dated October 1, 2004. The bonds were issued to finance the acquisition, construction, renovation and equipping of a facility to clean and process industrial waste water in Shreveport, Louisiana. The bonds bear interest at a rate of five percent and mature on November 1, 2024. Interest and payments of principal on the bonds are due monthly. The bonds, along with accrued interest, can be repaid at any time without penalty. In accordance with the terms of its credit facilities, CCS must remain in compliance with certain financial and non-financial covenants, as defined by its lenders. As at September 30, 2007, the Trust was in compliance with all such covenants. The Trust issues surety bonds to secure bids tendered, to provide for environmental liabilities and for completion of work with respect to its operating divisions. These bonds do not impact the amount of credit available under the credit facilities; however, the total amount of bonds outstanding at any point in time cannot exceed $60.0 million. At September 30, 2007, the Trust had $18.9 million of surety bonds outstanding. In 2003, the Trust entered into a five-year amortizing swap arrangement for $20.0 million at a fixed rate of 4.1 percent, of which $3.0 million remained outstanding at September 30, 2007. The fair value of this swap is recognized in the consolidated financial statements of the Trust. UNITHOLDERS' EQUITY As at As at Sept. 30 Dec. 31 (000s) 2007 2006 ------------------------------------------------------------------------- Trust units 52,202 51,958 Exchangeable shares(1) 15,581 15,074 ------------------------------------------------------------------------- Total 67,783 67,032 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Converted at an exchange ratio of 2.78376:1 at September 30, 2007 (December 31, 2006 - 2.67427:1). The increase in the number of trust units outstanding at September 30, 2007 was attributable to the issuance of trust units with respect to the Mobley acquisition and the exercising of stock options. CAPITAL EXPENDITURES Three months ended Nine months ended Sept. 30 Sept. 30 2007 2006 2007 2006 ------------------------------------------------------------------------- Capital expenditures(1) $ 58,837 $ 58,059 $ 170,923 $ 130,581 % change from prior period 1% 108% 31% 106% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Excludes business acquisitions. Midstream Services The following projects contributed to this division's total capital expenditures of $29.6 million in the third quarter of 2007: - $11.3 million for ongoing construction of the new Peace River TRD facility; - $6.2 million on facility upgrades; - $2.4 million in new trucks and equipment for the Mobley business unit; and - $1.3 million on a new disposal well at the Boundary Lake, Alberta TRD facility. On a year-to-date basis, this division incurred $67.9 million in expansion capital and $4.4 million in maintenance capital expenditures. Concord Capital expenditures for the third quarter of 2007 totalled $9.0 million, of which $5.7 million related to maintenance capital expenditures for the refitting of rigs and requisite upgrading of aging mobile equipment. A total of $1.4 million was spent on the development of three new rigs, for a total of $3.4 million spent year to date, all of which will be fully operational in the fourth quarter. The Acheson facility, which opened in the second quarter of the year, incurred $1.4 million in capital expenditures as the remaining areas of the facility became operational. On a year-to-date basis, expansion capital for this division totalled $17.9 million, with maintenance capital expenditures totalling $21.8 million. HAZCO Development and expansion of the HAZCO head office and feasibility costs associated with the development of a sulphur forming facility near Edmonton, Alberta contributed to $6.7 million of expansion capital spending for the third quarter of 2007 (excluding Landfill Services). Third quarter maintenance capital expenditures of $2.6 million consisted primarily of the purchase of heavy equipment to replace aging units. Capital spending by the Landfill Services business unit totalled $9.5 million for the third quarter of 2007. Construction of the Janvier landfill was completed in the quarter, with $2.1 million of capital incurred. Capacity replacement expenditures at the Judy Creek and Mitsue landfills totalled $3.9 million. On a year-to-date basis, this division incurred $38.5 million in expansion capital and $19.5 million in maintenance capital expenditures. BUSINESS OUTLOOK Drilling activity in the western Canadian sedimentary basin did not rebound as anticipated in the third quarter of 2007; a result of lower projected natural gas prices and reduced capital spending programs by oil and gas producers. The lower level of drilling activity continued to negatively impact revenue in the Concord business unit in the third quarter, with average utilization rates reported at 43 percent. The Trust believes that the heavier exposure of its operations to the production side of the oil and gas industry will continue to insulate its performance, to some extent, from this reduced level of drilling activity. However, a portion of our revenue in the areas of waste processing, well servicing and engineered landfills results from drilling activities and, should lower levels of drilling activity continue, this will impact year-over-year results for the remainder of 2007. On October 25, 2007, the Government of Alberta announced a new royalty framework which is scheduled to take effect on January 1, 2009. Royalty rates will be increased on conventional oil, natural gas and the oil sands, with overall royalties expected to increase by approximately 20 percent or $1.4 billion over previous estimated royalty revenues for 2010, according to the Government of Alberta. CCS is not a direct royalty payer to the Government of Alberta and the full impact on CCS of changes to the royalty system depends on the new oil and gas drilling capital spending by our customers. We believe that CCS' exposure to reductions in new oil and gas drilling in response to the new royalty framework may be mitigated when compared to that of drilling focused oil and gas field services companies due to each of our division's exposure to oil and gas production related activities, HAZCO's exposure to industrial end markets and our strong market share in deep well servicing rigs in our Concord division. As mentioned above, a portion of our revenue results from drilling activities and, should lower levels of drilling activity continue, this will impact the financial results of the Trust. CCS plans to continue with its previously announced growth capital spending plan for 2007. Growth capital spending for 2007 is now expected to total between $242.0 and $252.0 million, representing an increase of between $7.0 and $17.0 million over previously announced growth capital spending. This increased spending is attributable to increased costs on previously announced projects. Midstream Services Third quarter results for 2007 continued to be impacted by lower than anticipated drilling activity, but not to the extent as was experienced in the first half of the year. Waste volume related to production activity continued to increase and is attributable to the aggressive drilling programs over the past few years. Construction of the TRD at Peace River, Alberta is expected to be completed in mid-November, with expansion of the High Prairie TRD now expected to be completed in the first quarter of 2008. The extended completion date for the High Prairie facility relates to delays in construction. The U.S. Midstream Services division has completed its restructuring and integration initiatives, with the recently acquired Mobley and Pride companies consolidating fleet operations under the Mobley name, and the relocation of the U.S. headquarters to Houston, Texas completed. The Gulf Coast Waste Disposal business unit continues to face challenges as a result of the competitive pricing environment and on-going volume limitations encountered with third-party disposal operators. In order to secure an acceptable long-term solution, the business unit acquired two water disposal wells in the third quarter of 2007. These wells require rework to bring them up to operational standards and it is expected that the favourable impact on revenue, as a result of this solution, will not be realized until late in the fourth quarter of the year. As a result of the current operating environment, this business unit is expected to report a net loss of $1.4 million for the fourth quarter of 2007. The Shreveport facility has not operated at previously anticipated levels due to daily discharge volume limitations encountered while operating under the POTW permit. Capital projects for the remainder of 2007 consist of ongoing permitting and development of the Weeks Island cavern. The permitting process for Weeks Island continues, with a permit expected to be issued by the end of the third quarter in 2008, and the facility operational early in the second quarter of 2009. On November 7, 2007, the Trust voluntarily disclosed to the Environmental Protection Agency ("EPA") and the Louisiana Department of Environmental Quality ("LDEQ") potential non-compliance with the Federal Water Pollution Control Act and related state laws at the Trust's Shreveport, Louisiana facility. The potential non-compliance relates to allegedly intentional discharges of wastewater by certain employees in violation of federal and/or state law. The matter was brought to the attention of the Trust by facility employees and was the subject of an internal investigation by the Trust. The EPA and the LDEQ may now investigate these activities and, if the EPA determines that an illegal discharge did occur, the Trust could be subjected to criminal fines and/or civil penalties. If criminal wrongdoing is found to have occurred, the EPA could refer the matter to the United States Department of Justice ("USDOJ") for enforcement. At this time, the Trust cannot predict whether the EPA and/or the LDEQ will proceed with enforcement (civil or criminal), and if pursued, the amount of any potential criminal fines or civil penalties (if any), the extent of any sanctions or other costs to the Trust. The Trust does not presently anticipate any material adverse financial impact. Concord Reduced industry activity levels, low gas pricing and poor weather have continued to impact operating results for this division. Utilization rates to date in the fourth quarter of 2007 are approximately 50 percent, compared to 43 percent in the third quarter of this year and 61 percent in the fourth quarter of 2006. HAZCO Demand for services in the project services group is expected to remain strong for the remainder of the year. Historically fourth quarter revenue has been, to a certain extent, dependent upon favourable weather conditions. Annual operating margin for the division, excluding landfills, is anticipated to continue in the 13 to 15 percent range. The Landfill Services business unit will continue to be impacted by the reduced levels of drilling activity. However, the outlook remains positive for remediation and reclamation projects scheduled for the remainder of the year. Despite an anticipated increase in the receipt of volumes at the landfills during the second half of the year, it is not expected that the increased disposal activity from remediation projects will fully offset prior year revenue generated from drilling-related waste disposal. CCS Energy Marketing This division's revenue and expenses are impacted by fluctuating oil prices and the volume of oil marketed through CCS' facilities. Operating margin, as a percentage of revenue, is expected to remain fairly constant in the one to three percent range. The business model for this division continues to focus on the marketing of crude oil recovered or purchased at the Midstream Services facilities, with growth dependent on optimization and lease purchase opportunities. SEASONALITY OF OPERATIONS The majority of the Trust's operations take place in Canada where the ability to move heavy equipment in the oil and gas fields is dependent on weather conditions. As warm weather returns in the spring, the winter's frost comes out of the ground, rendering many secondary roads and oil and gas production sites incapable of supporting the weight of heavy equipment until they thoroughly dry out. The duration of this "spring breakup" has a direct impact on activity levels of the Trust and its customers. As a result, each year the Trust tends to record lower revenues and operating profit in the second fiscal quarter. The Trust's operations on the U.S. Gulf Coast are affected by the seasonal differences in weather patterns in the Gulf of Mexico. The rainy weather, tropical storms and hurricanes prevalent in the Gulf of Mexico and along the Gulf Coast at various times of the year may affect operating results, depending on weather patterns experienced in any particular reporting period. CRITICAL ACCOUNTING POLICIES AND ESTIMATES These interim consolidated financial statements are prepared in accordance with GAAP on a basis consistent with those followed in the most recent annual consolidated financial statements, except for the changes in accounting policies or estimates noted below. Because a precise determination of the valuation of certain revenues, expenses, assets and liabilities is dependent upon future events, the preparation of periodic financial statements necessarily involves the use of estimates and approximations. CCS uses estimates which are based on certain factors, assumptions and methods which are subject to judgement. Accordingly, actual results could differ from those estimates. The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the Trust's accounting policies. The components of the Trust's financial statements which incorporate significant assumptions or estimates include asset retirement obligations, amortization of engineered landfills and caverns, and the Trust's outstanding gas purchase obligation. For further details please refer to the MD&A disclosure in the Trust's 2006 Annual Report. CHANGES IN ACCOUNTING POLICIES OR ESTIMATES Financial Instruments As of January 1, 2007, the Trust adopted, on a retroactive basis, four new Handbook Sections issued by the Canadian Institute of Chartered Accountants ("CICA") relating to financial instruments. These new accounting standards are effective for fiscal years beginning on or after October 1, 2006 and are identified as follows: - Section 1530 - "Comprehensive Income"; - Section 3855 - "Financial Instruments - Recognition and Measurement"; - Section 3861 - "Financial Instruments - Disclosure and Presentation"; and - Section 3865 - "Hedges". The new standards address the recognition and measurement of financial assets, financial liabilities and non-financial derivatives. These standards, and the impact on the Trust's financial statements, are disclosed in Note 2f of the consolidated financial statements, with no restatement of opening accumulated earnings required. Accounting Changes The CICA released revisions to Handbook Section 1506 - "Accounting Changes", applicable to interim and annual financial statements issued after January 1, 2007. The revisions in this section address changes in accounting policies, accounting estimates and the correction of errors. A change in accounting policy is recommended only if the change is required by a primary source of GAAP, or results in the financial statements providing reliable and more relevant information. The Trust has adopted the requirements of this section and will apply these standards to any future changes in accounting policies and/or estimates. DISCLOSURE CONTROLS AND PROCEDURES RELATED TO FINANCIAL REPORTING For the three months ended September 30, 2007, no changes were made in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. CONSOLIDATED BALANCE SHEETS (UNAUDITED) As at Sept. 30, Dec. 31, 2007 2006 (000s) $ $ ------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents 7,724 54,399 Accounts receivable 191,878 229,410 Inventory and other current assets 20,015 14,385 ------------------------------------------------------------------------- 219,617 298,194 Property, plant and equipment (note 4) 1,006,949 890,916 Goodwill (note 4) 94,037 86,313 Intangible assets (note 4) 30,493 22,508 Deferred financing costs (note 2f) - 5,196 Investments and other long-term assets 5,413 180 ------------------------------------------------------------------------- 1,356,509 1,303,307 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable and accrued liabilities 92,448 110,932 Income taxes payable (recoverable) (4,859) 275 Distributions payable 9,135 9,093 Current portion of long-term debt 2,977 2,657 Current portion of long-term purchase obligations 1,256 1,168 Current portion of asset retirement obligations (note 5) 4,328 3,922 ------------------------------------------------------------------------- 105,285 128,047 ------------------------------------------------------------------------- Long-term debt 413,103 359,001 Long-term purchase obligations 5,058 5,000 Future income tax 61,485 51,887 Asset retirement obligations (note 5) 32,919 35,074 Other long-term liabilities 722 699 ------------------------------------------------------------------------- 513,287 451,661 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Contingencies (note 9) ---------------------- Non-controlling interest (note 8) 127,842 101,745 ------------------------------------------------------------------------- UNITHOLDERS' EQUITY Unitholders' capital (note 6a) 524,613 522,114 Accumulated other comprehensive income (loss) (notes 2f and 12) (14,937) 948 Contributed surplus (note 6c) 5,109 2,582 Accumulated earnings 95,310 96,210 ------------------------------------------------------------------------- Total unitholders' equity 610,095 621,854 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total liabilities and unitholders' equity 1,356,509 1,303,307 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED EARNINGS (UNAUDITED) Three months ended Nine months ended Sept. 30 Sept. 30 (000s except per 2007 2006 2007 2006 unit amounts) $ $ $ $ ------------------------------------------------------------------------- REVENUE CCS Midstream Services 75,129 61,694 218,529 175,292 Concord Well Servicing 39,182 62,580 142,303 140,269 HAZCO Environmental Services 98,788 96,276 269,760 234,894 CCS Energy Marketing 299,431 255,850 819,228 651,834 ------------------------------------------------------------------------- 512,530 476,400 1,449,820 1,202,289 ------------------------------------------------------------------------- Operating expenses (note 10) 432,136 389,237 1,221,751 980,021 Asset retirement accretion expense (note 5) 636 568 1,553 1,398 ------------------------------------------------------------------------- 432,772 389,805 1,223,304 981,419 ------------------------------------------------------------------------- Operating margin 79,758 86,595 226,516 220,870 ------------------------------------------------------------------------- EXPENSES General and administrative (notes 7 and 10) 6,106 6,156 20,596 16,958 Financing 5,883 3,559 16,125 8,656 Depreciation and amortization 24,133 16,640 65,039 42,189 Gas delivery obligation valuation (153) (3) 1,029 93 Foreign exchange loss (gain) 615 (1,284) 1,785 (870) Loss (gain) on sale of assets 55 84 362 251 ------------------------------------------------------------------------- 36,639 25,152 104,936 67,277 ------------------------------------------------------------------------- Income before income taxes and non-controlling interest 43,119 61,443 121,580 153,593 ------------------------------------------------------------------------- Income taxes Current 50 9,100 5,796 23,400 Future 3,018 (1,321) 10,321 3,179 ------------------------------------------------------------------------- 3,068 7,779 16,117 26,579 ------------------------------------------------------------------------- Income before non-controlling interest 40,051 53,664 105,463 127,014 Non-controlling interest (note 8) (9,343) (12,040) (24,257) (28,324) ------------------------------------------------------------------------- Net income for the period 30,708 41,624 81,206 98,690 Accumulated earnings, beginning of period 92,002 80,265 96,210 62,144 Distributions (note 3) (27,400) (24,066) (82,106) (63,011) ------------------------------------------------------------------------- Accumulated earnings, end of period 95,310 97,823 95,310 97,823 ------------------------------------------------------------------------- Net income per unit (note 6b) Basic 0.59 0.82 1.56 2.07 Diluted 0.58 0.81 1.55 2.02 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three months ended Nine months ended Sept. 30 Sept. 30 2007 2006 2007 2006 (000s) $ $ $ $ ------------------------------------------------------------------------- Net income for the period 30,708 41,624 81,206 98,690 Other comprehensive income (loss) (note 12) Gain (loss) on foreign currency translation of self-sustaining subsidiaries (net of tax) (6,774) 149 (14,937) (708) ------------------------------------------------------------------------- Other comprehensive income (loss) for the period (6,774) 149 (14,937) (708) ------------------------------------------------------------------------- Comprehensive income for the period 23,934 41,773 66,269 97,982 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended Nine months ended Sept. 30 Sept. 30 2007 2006 2007 2006 (000s) $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net income for the period 30,708 41,624 81,206 98,690 Add (deduct) non-cash items: Non-controlling interest 9,343 12,040 24,257 28,324 Unit-based compensation (notes 6c and 7a) 949 556 2,743 1,463 Depreciation and amortization 24,133 16,640 65,039 42,189 Asset retirement accretion expense 636 568 1,553 1,398 Loss (gain) on gas delivery obligation valuation (153) (3) 1,029 93 Loss (gain) on sale of assets 55 84 362 251 Future income taxes 3,018 (1,321) 10,321 3,179 Other non-cash operating items 596 204 1,227 609 ------------------------------------------------------------------------- 69,285 70,392 187,737 176,196 Change in non-cash working capital (31,264) (36,023) 13,514 (58,152) Asset retirement obligations fulfilled (note 5) (23) (136) (400) (334) ------------------------------------------------------------------------- Cash provided by operating activities 37,998 34,233 200,851 117,710 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of long-term debt 60,422 49,062 62,269 106,514 Issuance of long-term liabilities (298) - (298) - Repayment of long-term debt (1,068) (461) (2,244) (2,470) Deferred financing costs (316) - (316) (560) Payments under purchase obligations (246) (264) (883) (932) Exercise of trust unit options (notes 6a and c) 1,549 157 2,794 765 Trust unit issue (net of costs) (2) (98) (2) 231,773 Distribution payments (note 3) (27,388) (24,028) (82,064) (60,090) ------------------------------------------------------------------------- Cash (used in) provided by financing activities 32,653 24,368 (20,744) 275,000 ------------------------------------------------------------------------- ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of property, plant and equipment (58,837) (58,059) (170,923) (130,581) Proceeds on disposal of property, plant and equipment 411 430 2,528 2,733 Acquisitions (note 4) - (5,895) (48,789) (265,655) Funding of retention bonus - - - 161 Investments and other long-term assets (5,169) 2,733 (5,233) 771 Change in non-cash working capital (5,524) 4,157 (4,365) 2,179 ------------------------------------------------------------------------- Cash used in investing activities (69,119) (56,634) (226,782) (390,392) ------------------------------------------------------------------------- Increase in cash and cash equivalents 1,532 1,967 (46,675) 2,318 Cash and cash equivalents, beginning of period 6,192 3,977 54,399 3,626 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 7,724 5,944 7,724 5,944 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplementary cash flow information: ------------------------------------------------------------------------- Cash taxes paid 11 4,716 11,235 40,086 ------------------------------------------------------------------------- Cash interest paid 2,397 3,383 6,801 8,002 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 2007 and 2006 (000s except unit and per unit amounts) 1. NATURE OF THE ORGANIZATION CCS Income Trust (the "Trust" or "CCS") was formed for the purpose of effecting an arrangement (the "Arrangement") under the Business Corporations Act (Alberta), involving, among other things, the exchange of Canadian Crude Separators Inc. ("Canadian Crude Separators") securities on a one-to-one basis, for either trust units of the Trust or Series A Exchangeable Shares ("exchangeable shares") of CCS Inc., a wholly-owned subsidiary of the Trust. The effective date of the Arrangement was May 22, 2002. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Basis of presentation The consolidated financial statements of the Trust have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). The consolidated financial statements include the accounts of the Trust, its subsidiaries and its proportionate share of joint venture and partnership interests. Non-controlling interest, which exists through the exchangeable shares in the Trust's wholly owned subsidiary, CCS Inc., is reported on the consolidated balance sheets and statements of income and accumulated earnings. These interim consolidated financial statements follow the same accounting policies and methods of application as described in the notes to the most recent annual audited consolidated financial statements for the year ended December 31, 2006, except for note 2f. These interim consolidated financial statements do not include all of the disclosures required in the annual financial statements, and should be read in conjunction with the audited consolidated financial statements included in the Trust's 2006 Annual Report. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements necessarily involves the use of estimates and approximations. Accordingly, actual results could differ significantly from those estimates. The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the Trust's accounting policies summarized below. All amounts reported in these statements are in Canadian dollars, unless otherwise stated. b) Inventory Inventory of drilling fluids, oilfield supplies and scrap metal is stated at the lower of cost and net realizable value. Crude oil inventory is recorded at fair value at the balance sheet date. c) Derivative financial instruments Derivative financial instruments are utilized by the Trust in the management of its interest rate exposures. The Trust enters into interest rate swaps in order to manage the impact of fluctuating interest rates on its floating rate debt and to manage the overall cost of borrowing on its total debt portfolio. The interest rate swap agreements require the periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. These instruments are recorded at fair value at the balance sheet date, with any change in fair value reported as a net gain or loss to financing expense. The CCS Energy Marketing division utilizes derivative instruments in the trading of crude oil through the use of commodity contracts which are settled with physical delivery. The contracts are recorded at fair value. d) Foreign currency translation The Trust's U.S. operations, which are considered financially and operationally independent, are translated into Canadian dollars using the current rate method, with cumulative translation adjustments included as a separate component of accumulated other comprehensive income in unitholders' equity: - Assets and liabilities are translated at the period-end exchange rate; and - Revenues and expenses are translated using average exchange rates during the period. The Peruvian operations of the Trust are considered to be integrated operations and are translated into Canadian dollars using the temporal method, with any translation gains or losses included in net income for the period: - Monetary items are translated at the period-end exchange rate; - Non-monetary items are translated using historical rates, unless such items are carried at market, in which case the period-end exchange rate is used; - Revenues and expenses are recorded using average exchange rates during the period; and - Depreciation and amortization are translated at the same exchange rates as the assets to which they relate. Other monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates of exchange in effect at the end of each reporting period. e) Measurement uncertainty Certain items recognized in the financial statements are subject to measurement uncertainty as they are based on management's estimates using current information and judgement. The effect on the consolidated financial statements of changes in such estimates in future periods could be significant. The recognized items include: - Property, plant and equipment, goodwill and intangible assets, the values of which are subject to market conditions in the oil and gas and environmental remediation industries; - Amortization of engineered landfills, the expense of which is impacted by the type of waste received, compaction, and weather and leachate factors; - Amortization of disposal caverns, the expense of which is impacted by the type of waste received, the ability to recover and process waste oil in the caverns, and uncertainty over total cavern capacity available; - The quality, quantity and recoverability of oil contained in the disposal caverns, which accumulates through the waste disposal process; the value of recovered oil is recognized when sold; - Gas delivery obligation, the cost of which is dependent on future gas prices; and - Asset retirement obligations; the nature, timing and costs of the remediation process are managed by the CCS Environmental department, with estimates based upon CCS' "best practices" and current regulatory requirements. f) New accounting pronouncements Financial instruments On January 1, 2007, the Trust adopted the recommendations of four new Handbook Sections issued by the Canadian Institute of Chartered Accountants ("CICA") on the recognition and measurement of financial assets, financial liabilities and non-financial derivatives. The new sections are as follows: - Section 1530 - "Comprehensive Income"; - Section 3855 - "Financial Instruments - Recognition and Measurement"; - Section 3861 - "Financial Instruments - Disclosure and Presentation"; and - Section 3865 - "Hedges". Upon initial adoption of these standards, the Trust measured all financial instruments at fair value and classified them into one of the following five categories: 1) loans and receivables; 2) assets held-to- maturity; 3) assets available-for-sale; 4) other financial liabilities; or 5) held-for-trading. Financial instruments classified as available-for-sale or held-for- trading are revalued to fair value each reporting period. Gains and losses on financial instruments classified as held-for-trading are recognized in net income in the period in which they arise, with the exception of gains and losses arising from certain financial instruments that qualify for hedge accounting. Gains and losses on financial instruments classified as available-for-sale are deferred in other comprehensive income until sold or impaired. Subsequent measurement of all other financial instruments is at amortized cost. Other comprehensive income is comprised of revenues, expenses and gains and losses that are included in comprehensive income, but excluded from net income. Under this new standard, unrealized gains and losses on the translation of self-sustaining foreign operations and other comprehensive income components are disclosed separately as accumulated other comprehensive income on the consolidated balance sheet and reclassified to net income when realized. Except for other comprehensive income, the Trust has applied these accounting standards on a retroactive basis with no restatement of opening accumulated earnings required. The following is a summary of the impact of these new accounting standards on the consolidated financial statements of the Trust: - The Trust's inventory of crude oil is classified as held-for-trading and therefore measured at fair value, which is based upon quoted market prices. Crude oil inventory was previously valued at the lower of weighted average cost or net realizable value. On initial adoption, this change in valuation did not have a material impact on inventory values, with no retroactive adjustment made to retained earnings; inventory is normally sold the month after purchase, with very little difference between weighted average cost and net realizable value. These new standards may materially impact future financial results if the market experiences volatile oil prices. - The CCS Energy Marketing division enters into physical purchase and sales contracts at stated market values that settle the following month. The division does not use financial derivatives to hedge or fix pricing, and as a result, these new accounting standards do not impact the current method of accounting for revenue and expenses. The current value recorded for accounts receivable and accounts payable approximates fair value. - The Trust had two interest rate swaps outstanding which were recognized as financial derivatives and classified as held-for-trading. The difference between the accounting value and fair value of these swaps on January 1, 2007 was $165; this was charged to financing expense upon initial adoption of the new standards. - Deferred financing charges are no longer presented separately on the consolidated balance sheet but incorporated as a component of long-term debt, which resulted in a reduction of $5,196 to long-term debt on January 1, 2007. Deferred financing charges are now amortized to income using the effective interest method over the term of the debt facility to which they relate. Application of this method did not result in a retroactive adjustment to opening accumulated earnings. - The Trust's unrealized gains and losses on the translation of self- sustaining foreign operations, net of tax, are presented as a component of other comprehensive income and reclassified to net income when realized. Please refer to the Consolidated Statements of Comprehensive Income and Note 12. Accounting changes Effective January 1, 2007, the Trust adopted the revised recommendations of CICA Handbook Section 1506 relating to accounting changes. The revisions in this section address changes in accounting policies, accounting estimates and the correction of errors. A change in accounting policy is recommended only if the change is required by a primary source of GAAP or results in the financial statements providing reliable and more relevant information. The revised recommendations also require disclosure when an entity has not applied a new primary source of GAAP that has been issued but is not yet effective. As a result, the Trust has assessed new and revised accounting pronouncements issued but not yet effective and determined that the following may impact the Trust's disclosure in the future: - As of January 1, 2008, current Handbook Section 3861 "Financial Instruments - Disclosure and Presentation" will be replaced with two new standards: Section 3862 "Financial Instruments - Disclosures" and Section 3863 "Financial Instruments - Presentation". The new disclosure requirements increase the emphasis on the risks associated with both recognized and unrecognized financial instruments and how those risks are managed. The new presentation standard carries forward the former presentation requirements. - As of January 1, 2008, Handbook Section 1535 "Capital Disclosures" will require companies to disclose their objectives, policies and processes for managing capital. Disclosure must include whether companies have complied with externally imposed capital requirements. The Trust is assessing the possible impact of these new standards on the consolidated financial statements. g) Reclassification Certain information for prior years has been reclassified to conform to the presentation adopted in 2007. 3. DISTRIBUTIONS For the nine month period ended September 30, 2007, the Trust paid distributions to unitholders in the amount of $82,064 (2006 - $60,090) and declared distributions of $82,106 (2006 - $63,011) in accordance with the following schedule: Period covered Date of record Date of distribution Per unit $ ------------------------------------------------------------------------- December 1, 2006 to 12/29/06 01/15/07 0.175 December 31, 2006 January 1, 2007 to 01/31/07 02/15/07 0.175 January 31, 2007 February 1, 2007 to 02/28/07 03/15/07 0.175 February 28, 2007 March 1, 2007 to 03/30/07 04/16/07 0.175 March 31, 2007 April 1, 2007 to 04/30/07 05/15/07 0.175 April 30, 2007 May 1, 2007 to 05/31/07 06/15/07 0.175 May 31, 2007 June 1, 2007 to 06/29/07 07/16/07 0.175 June 30, 2007 July 1, 2007 to 07/31/07 08/15/07 0.175 July 31, 2007 August 1, 2007 to 08/31/07 09/17/07 0.175 August 31, 2007 September 1, 2007 to 09/28/07 10/15/07 0.175 September 30, 2007 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 4. ACQUISITIONS On March 7, 2007, the Trust, through its wholly-owned subsidiary, CCS Energy Services, LLC, acquired all of the operating assets of Mobley Oilfield Services LP ("Mobley") for cash consideration of $44,212. Mobley is an integrated oilfield services company providing trucking and on-site storage and disposal of waste produced in the drilling, completion and ongoing production of oil and gas wells. Service areas include the states of Oklahoma, Arkansas, Louisiana and Texas. On April 5, 2007, the Trust completed an asset purchase agreement with Pride Oilfield Services, LLC ("Pride"). Headquartered in Benton, Louisiana, Pride collects produced water from various generators within the east Texas and northern Louisiana areas and hauls it to various locations for disposal. The purchase price for these assets was $5,578, consisting of $4,577 in cash and $1,001 in trust units. Trust units issued are held in escrow, to be released in equal amounts over the next five years, beginning April 2008. The purchase price for these transactions has been allocated, on a preliminary basis, as follows: Mobley Pride Total Net assets acquired: $ $ $ ------------------------------------------------------------------------- Working capital 3,135 - 3,135 Property, plant and equipment 20,637 1,441 22,078 Goodwill 8,808 978 9,786 Intangibles 11,632 3,055 14,687 Future income tax - 104 104 ------------------------------------------------------------------------- 44,212 5,578 49,790 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consideration paid: ------------------------------------------------------------------------- Cash 43,910 4,513 48,423 Trust units - 1,001 1,001 Transaction costs 302 64 366 ------------------------------------------------------------------------- 44,212 5,578 49,790 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 5. ASSET RETIREMENT OBLIGATIONS The Trust estimates the undiscounted cash flows related to asset retirement obligations, to be incurred over an estimated period of 20 to 30 years, will total approximately $86,375 (2006 - $63,761) using an annual inflation rate of two percent (2006 - three percent). The fair value at September 30, 2007 was $37,247 (2006 - $23,823) using a discount rate of 5.8 percent (2006 - eight percent). For the nine months ended September 30, 2007 and 2006, the Trust recorded the following activity related to the liability: Three months ended Nine months ended Sept. 30 Sept. 30 2007 2006 2007 2006 $ $ $ $ ------------------------------------------------------------------------- Asset retirement obligations, beginning of period 36,755 22,781 38,996 20,326 New obligations and revised estimates (121) 610 (2,902) 2,433 Obligations fulfilled (23) (136) (400) (334) Accretion expense 636 568 1,553 1,398 ------------------------------------------------------------------------- Asset retirement obligations, end of period 37,247 23,823 37,247 23,823 Less: current portion 4,328 3,089 4,328 3,089 ------------------------------------------------------------------------- Long-term portion 32,919 20,734 32,919 20,734 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 6. UNITHOLDERS' EQUITY a) Unitholders' capital Authorized - Unlimited number of voting trust units ------------------------------------------------------------------------- Trust Units $ ------------------------------------------------------------------------- December 31, 2006 51,958,249 522,114 Issued upon conversion of exchangeable shares for trust units 107,714 92 Issued upon exercise of employee trust unit options 103,870 3,010 Issued upon acquisitions (net of costs) 31,832 999 Adjustment for exchangeable share conversions and trust unit dilution - (1,932) Units vested on retention bonus (note 7b) - 330 ------------------------------------------------------------------------- September 30, 2007 52,201,665 524,613 ------------------------------------------------------------------------- ------------------------------------------------------------------------- b) Weighted average trust units As at September 30, 2007 and 2006, respectively, diluted net income per trust unit has been calculated based on the following: 2007 2006 ------------------------------------------------------------------------- Weighted average trust units outstanding - basic 52,110,742 47,769,882 Trust units issuable on conversion of exchangeable shares 15,580,532 14,852,822 Dilutive options 357,304 184,868 ------------------------------------------------------------------------- Dilutive trust units and exchangeable shares 68,048,578 62,807,572 ------------------------------------------------------------------------- ------------------------------------------------------------------------- c) Contributed surplus The balance as at September 30, 2007 and 2006 is comprised of the following: 2007 2006 $ $ ------------------------------------------------------------------------- Balance, beginning of period 2,582 605 Unit-based compensation expense 2,743 1,463 Transferred to unitholders' capital on exercise of options (216) (36) ------------------------------------------------------------------------- Balance, end of period 5,109 2,032 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 7. UNIT-BASED COMPENSATION a) Unit option plan Under the Trust's unit option plan, directors, officers, employees and consultants of the Trust are eligible to receive options to acquire trust units, with terms not to exceed five years from the date of the grant. The exercise price is based on the weighted average price of the units for the five trading days immediately prior to the grant date, which may differ from the closing price on the Toronto Stock Exchange for such units on the day of the grant. For options granted to date, the exercise price was not materially different from the trading price of the units on the grant date. Under the unit option plan, vesting periods are determined by the Board of Directors of CCS Inc. at the time of the grant. For all options granted to September 30, 2007, 25 percent of the options are exercisable annually on the anniversary of the original grant. The maximum number of trust units issuable under this plan may not exceed ten percent of the Trust's outstanding units. Outstanding units include the issued and outstanding units on a non-diluted basis, plus all units issuable on conversion of all exchangeable shares, at any time, which at September 30, 2007 totalled 67,782,197. Option transactions for the period are as follows: 2007 2006 ------------------------------------------------------------------------- Weighted Weighted average average exercise exercise Nine months ended price price September 30 Units $ Units $ ------------------------------------------------------------------------- Options outstanding, beginning of period 1,647,891 31.32 769,500 24.14 Granted 1,198,500 36.46 1,005,500 36.26 Exercised (103,870) 26.88 (33,624) 22.74 Forfeited (107,670) 34.01 (85,360) 28.31 ------------------------------------------------------------------------- Options outstanding, end of period 2,634,851 33.73 1,656,016 31.31 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Options outstanding Options exercisable ------------------------------------------------------------------------- Weighted Outstanding average Weighted Options Weighted at remaining average exercisable average Sept. 30, contractual exercise at Sept. 30, exercise Range of prices 2007 life (years) price ($) 2007 price ($) ------------------------------------------------------------------------- $22.04 - $27.00 356,464 2.3 22.04 139,287 22.04 $27.01 - $32.00 220,287 2.6 27.89 103,591 27.82 $32.01 - $37.00 2,033,600 3.9 36.36 197,225 36.23 $37.01 - $38.15 24,500 3.8 37.78 6,125 37.78 ------------------------------------------------------------------------- Total 2,634,851 3.6 33.73 446,228 29.87 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The estimated weighted average fair value of trust unit options granted to date is $5.58 per option. The fair value of each option grant was estimated on the date of the grant and determined using the Black-Scholes option-pricing model with the following assumptions: ------------------------------------------------------------------------- Weighted average As at September 30 assumptions ------------------------------------------------------------------------- Dividend yield 4.99% Discount for forfeiture 3.00% Risk-free interest rate 3.87% Expected life of options 4.1 years Expected volatility factor of the future expected market price of trust units 27.28% ------------------------------------------------------------------------- ------------------------------------------------------------------------- The Trust recorded compensation expense, included as part of general and administrative expense, of $2,743 (2006 - $1,463) with an offsetting increase to contributed surplus in respect of the options granted as of September 30, 2007. The Trust announced that unitholders and exchangeable shareholders approved a proposed going-private transaction, anticipated to close on or before November 15, 2007 (please refer to Note 15). Upon closing, the period of vesting of trust unit options would be accelerated, with the related expense recorded as a component of general and administrative expense at that time. b) Retention bonus The Board of Directors of CCS Inc. approved a one-time retention bonus for executives of CCS Inc. on December 17, 2004. The retention bonus was funded in June 2005 through the purchase of 40,849 units of the Trust on the open market at a cost of $1,231. The units vest to the executives in equal amounts on January 1, 2006, 2007, and 2008, provided the executives are employed with the Trust at the time of vesting. The trust unit purchase was charged to unitholders' capital until the units vest and are distributed. For the nine months ended September 30, 2007, $247 (2006 - $209) was accrued and charged to general and administrative expense. The January 1, 2007 vesting of units carried a total cost of $330 and was charged to unitholders' capital at the time of vesting. 2007 2006 As at September 30 $ $ ------------------------------------------------------------------------- Balance, beginning of period (660) (1,231) Vesting on January 1 330 410 Proceeds on sale - 161 ------------------------------------------------------------------------- Balance, end of period (330) (660) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 8. NON-CONTROLLING INTEREST ("NCI") Exchangeable shares are accounted for in accordance with the CICA's recommendations in EIC-151 "Exchangeable Securities Issued by Subsidiaries of Income Trusts". In accordance with this accounting abstract, the exchangeable shares issued by CCS Inc. are considered transferable to third parties and must therefore be reflected as non-controlling interest. a) Non-controlling interest Non-controlling interest on the consolidated balance sheets is comprised of the carrying value of the exchangeable shares upon issuance plus the accumulated earnings attributable to the non-controlling interest. The net income attributable to the non-controlling interest on the consolidated statements of income and accumulated earnings represents the cumulative portion of net income attributable to the non-controlling interest, based on the proportion of trust units issuable for exchangeable shares to total trust units issued and issuable at the end of each period. 2007 2006 As at September 30 $ $ ------------------------------------------------------------------------- Carrying value of exchangeable shares 14,867 14,955 Accumulated earnings attributable to NCI - prior years 86,878 54,627 ------------------------------------------------------------------------- Balance, beginning of period 101,745 69,582 NCI interest in net income 24,257 28,324 Adjustment for trust unit dilution of NCI interest (note 6a) 1,932 (4,304) Redeemed upon conversion to trust units (note 6a) (92) (88) ------------------------------------------------------------------------- Balance, end of period 127,842 93,514 ------------------------------------------------------------------------- ------------------------------------------------------------------------- b) Exchangeable shares The exchangeable shares are convertible at the option of the holder into trust units at any time. All exchangeable shares are required to be converted on or before May 21, 2012, subject to extension to such other later date that the Board of Directors may determine at its sole discretion. The number of trust units issuable upon conversion is based upon the exchange ratio in effect at the conversion date. The exchange ratio, which was initially equal to one-to-one, is cumulatively adjusted each time a distribution is made to unitholders. The adjustment to the exchange ratio is based on the cash distributions paid to unitholders divided by a weighted average trust unit price. The exchange ratio at September 30, 2007 was 2.78376 (September 30, 2006 - 2.63499). 2007 2006 As at September 30 Shares $ Shares $ ------------------------------------------------------------------------- Balance, beginning of period 5,636,766 14,867 5,670,143 14,955 Redeemed upon conversion to trust units (39,828) (92) (33,377) (88) ------------------------------------------------------------------------- Balance, end of period 5,596,938 14,775 5,636,766 14,867 Exchange ratio, end of period 2.78376 - 2.63499 - ------------------------------------------------------------------------- Trust units issuable upon conversion 15,580,532 14,775 14,852,822 14,867 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 9. CONTINGENCIES On November 7, 2007, the Trust voluntarily disclosed to the Environmental Protection Agency ("EPA") and the Louisiana Department of Environmental Quality ("LDEQ") potential non-compliance with the Federal Water Pollution Control Act and related state laws at the Trust's Shreveport, Louisiana facility. The EPA and the LDEQ may now investigate these activities and, if the EPA determines that an illegal discharge did occur, the Trust could be subjected to criminal fines and/or civil penalties. At this time, the amount of such fines or penalties, if imposed, cannot be reasonably estimated. The Trust does not presently anticipate any material adverse financial impact. 10. RELATED-PARTY TRANSACTIONS a) Fractional interest The Trust has a 50 percent fractional interest in a Piaggio Avanti P-180 aircraft for use in CCS' operations. Corpac Canada Ltd. ("Corpac"), a company controlled by the Chairman and CEO of CCS Inc. until March 1, 2007, provides management services and operates the aircraft on behalf of the Trust. To March 1, 2007, the Trust incurred management fee expense, operating costs and costs for contract air services with Corpac totalling $117 (for the nine months ended September 30, 2006 - $407). b) Other On April 30, 2007, the Trust acquired approximately 19 acres of land in Edmonton, Alberta and nine acres in Richmond, B.C. by acquiring the shares of HAZCO Industrial Services Limited Partnership, an entity controlled by certain members of HAZCO's management and their immediate families. The purchase price for the two parcels of land was equal to its appraised fair market value of $5,100 and $5,675, respectively. The land had previously been leased by the Trust for use in its operations. To the date of purchase, lease fees totalled $155 (2006 - $329). All related-party transactions are recorded at the exchange amount and charged to operating or general and administrative expense, or property, plant and equipment. 11. FINANCIAL INSTRUMENTS a) Designation and valuation of financial instruments Initial adoption of Section 3855 of the CICA Handbook requires an entity to classify its financial instruments into one of the following five categories: - loans and receivables; - assets held-to-maturity; - assets available-for-sale; - other financial liabilities; and - held-for-trading (assets and liabilities). Section 3855 also requires that all financial instruments be initially measured at their fair value. Effective January 1, 2007, the Trust elected to classify its financial instruments as follows: September 30, 2007 December 31, 2006 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value ------------------------------------------------------------------------- Loans and receivables Accounts receivable(1) 191,878 191,878 229,410 229,410 ------------------------------------------------------------------------- Available-for-sale Investments and other long-term assets 5,413 5,413 180 180 ------------------------------------------------------------------------- Other financial liabilities(1) Accounts payable and accrued liabilities 92,448 92,448 110,932 110,932 Income taxes payable (recoverable) (4,859) (4,859) 275 275 Distributions payable 9,135 9,135 9,093 9,093 Long-term debt(2,3) 416,080 416,080 356,462 356,462 Other long-term liabilities 722 722 699 699 ------------------------------------------------------------------------- Held-for-trading (assets and liabilities) Crude oil inventory 1,020 1,020 2,819 2,819 Purchase obligations 6,314 6,314 6,168 6,168 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Due to the nature and/or short maturity of these financial instruments, carrying value approximates fair value. (2) Includes both current and long-term portions net of deferred financing charges. (3) Long-term debt has been valued using the effective interest method. Derivatives The Trust is party to a five-year amortizing swap arrangement for $20,000 at a fixed rate of 4.1 percent. At September 30, 2007, the fair value of this derivative was $(9), the value of which is reported under other accounts receivable. The Trust has entered into a commitment to deliver a specified volume of gas over a 13-year period. The gas delivery obligation is recorded at fair market value based on the present value of the future delivery obligation using a future gas price curve. For the nine months ended September 30, 2007, a loss of $1,029 was recognized in earnings to reflect the change in the estimated fair market value of the obligation. b) Risks i) Credit Risk The Trust provides environmental solutions for waste management, crude oil sales and marketing, contract oilwell services, rental of oilfield equipment and sales of drilling fluids to the oil and gas industry. This results in a concentration of credit risk. The Trust generally extends unsecured credit to these customers, and therefore the collection of accounts receivable may be affected by changes in economic or other conditions and may accordingly impact the Trust's overall credit risk. Management believes the risk is mitigated by the size, reputation and diversified nature of the companies to which the Trust extends credit. Credit exposure on financial instruments, which consists of interest rate swaps, arises from the possibility that a counter-party in which the Trust has an unrealized gain fails to perform according to the terms of the contract. Management believes the risks of non-performance are minimal as the counter-parties are major financial institutions. Credit exposure on cash and cash equivalents arises as the Trust holds those assets with major financial institutions. Management believes the risk is mitigated by the size and financial strength of those major financial institutions. ii) Interest rate risk The Trust is exposed to interest rate risk with respect to fluctuating interest rates on its revolving credit facilities. At September 30, 2007, approximately 23 percent of the Trust's debt outstanding was subject to floating rate interest. The Trust manages this exposure through interest rate swap initiatives, thereby fixing a portion of the interest on outstanding floating interest rate debt. iii) Foreign exchange risk The Trust is exposed to foreign exchange risk with respect to its U.S. operations. Acquisitions in the U.S. of equity interests and operating assets along with the subsequent funding of capital and working capital requirements results in the exchange of Canadian dollars for U.S. dollars on an ongoing basis. The Trust is also exposed to foreign exchange risk on the translation of its U.S. operations to Canadian dollars on consolidation of financial results. The cumulative translation adjustment is reported in accumulated other comprehensive income as a separate component of unitholders' equity. The Trust has foreign operations through its subsidiary, HAZCO del Peru S.A., which operates in Peru. Service contracts and bank accounts are denominated in U.S. dollars, with local operating expenses incurred in the local currency (Nuevos Soles). Excess cash earned by this company is transferred to a U.S. dollar bank account in Canada. 12. ACCUMULATED OTHER COMPREHENSIVE INCOME The Trust's accumulated other comprehensive income includes the unrealized gain (loss) on the translation of self-sustaining foreign operations. Three months ended Nine months ended Sept. 30 Sept. 30 2007 2006 2007 2006 $ $ $ $ ------------------------------------------------------------------------- Balance, beginning of period (8,163) (857) 948 - Unrealized gain (loss) on translation of self-sustaining subsidiaries (6,774) 149 (16,020) (708) ------------------------------------------------------------------------- Tax effect of unrealized gain (loss) on translation of self-sustaining subsidiaries - - 135 - ------------------------------------------------------------------------- Balance, end of period (14,937) (708) (14,937) (708) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 13. SEASONALITY The majority of the Trust's operations take place in Canada where the ability to move heavy equipment in the oil and natural gas fields is dependent on weather conditions. As warm weather returns in the spring, the winter's frost comes out of the ground, rendering many secondary roads and oil and natural gas production sites incapable of supporting the weight of heavy equipment until they thoroughly dry out. The duration of "spring breakup" has a direct impact on activity levels of the Trust and its customers. As a result, each year the Trust tends to earn lower revenues and operating margin in the second fiscal quarter. The Trust's operations on the U.S. Gulf Coast are affected by seasonal differences in weather patterns in the Gulf of Mexico. The rainy weather, tropical storms and hurricanes prevalent in the Gulf of Mexico and along the Gulf Coast during the year may affect operating results depending on the weather patterns in any particular reporting period. 14. SEGMENTED INFORMATION The Trust's reportable operating segments consist of the following divisions: CCS Midstream Services ("Midstream Services"); Concord Well Servicing ("Concord"); HAZCO Environmental Services ("HAZCO"); and CCS Energy Marketing ("CEM"). - The Midstream Services operating segment owns and operates treatment, recovery and disposal (TRD) facilities, transfer stations and cavern facilities throughout western Canada and the Gulf Coast region of the U.S. Services are provided in the areas of emulsion treatment, water processing and disposal, waste processing, drilling mud disposal, tank/truck washing, crude oil terminalling, cavern disposal, well and site abandonment, trucking, on site storage and processing of naturally occurring radioactive material (NORM). - Concord provides contract oilfield services including well completions, workovers, abandonments and, through the HiAlta business unit, the rental of oilfield equipment. Concord operates 143 rigs in western Canada. - HAZCO provides a wide range of specialized services including site remediation, decommissioning, waste services, environmental construction and technologies, emergency response, engineered landfill disposal, sulphur and other specialty services. HAZCO also operates a network of industrial and engineered landfills, bioremediation facilities and hazardous waste transfer stations that span western Canada. Through its HMI business unit, HAZCO provides scrap metal collection and processing services. HAZCO provides services primarily throughout Canada, with select services provided in the U.S. and Peru. - CEM extracts additional value and operating margin on waste and recovered oil volumes from the Midstream Services facilities. This division captures the incremental value created through the marketing chain with revenue streams of lease purchases, single shipper/optimization and bulk purchases. Business activity among the divisions is recorded at market rates. Inter- segment eliminations adjust revenue, expenses and profit on inter-segment activity. The accounting policies followed by these operating segments are the same as those described in the summary of significant accounting polices. General and administrative expenses directly related to the individual business segments are included in the operating expenses of that division. The following tables provide information by operating and geographic segment for the three and nine months ended September 30, 2007 and 2006: For the nine Midstream Consoli- months ended Services Concord HAZCO CEM dated Sept. 30, 2007 $ $ $ $ $ ------------------------------------------------------------------------- Revenue prior to inter-segment eliminations 222,079 142,985 271,649 845,891 1,482,604 Inter-segment eliminations (3,550) (682) (1,889) (26,663) (32,784) ------------------------------------------------------------------------- Net revenue 218,529 142,303 269,760 819,228 1,449,820 Operating expenses prior to inter-segment eliminations 117,064 103,203 208,802 826,297 1,255,366 Inter-segment eliminations (1,870) (10) (3,501) (26,681) (32,062) ------------------------------------------------------------------------- Net expenses 115,194 103,193 205,301 799,616 1,223,304 ------------------------------------------------------------------------- Operating margin 103,335 39,110 64,459 19,612 226,516 Gas delivery obligation valuation 1,029 - - - 1,029 Loss (gain) on sale of assets 28 191 102 41 362 Depreciation and amortization 23,130 18,334 22,452 35 63,951 ------------------------------------------------------------------------- Income before corporate items 79,148 20,585 41,905 19,536 161,174 ------------------------------------------------------------------------- General and administrative 20,596 Financing 16,125 Depreciation and amortization 1,088 Foreign exchange loss 1,785 Income taxes 16,117 ------------------------------------------------------------------------- Income before non-controlling interest 105,463 Non-controlling interest (24,257) ------------------------------------------------------------------------- Net income for the period 81,206 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets 569,964 438,777 338,515 9,253 1,356,509 ------------------------------------------------------------------------- Goodwill 27,427 9,286 57,324 - 94,037 ------------------------------------------------------------------------- Capital expenditures 72,274 39,747 57,973 929 170,923 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operations related to Canada and foreign countries are as follows: For the nine months ended Canada International Total Sept. 30, 2007 $ $ $ ------------------------------------------------------------------------- Revenue 1,399,676 50,144 1,449,820 ------------------------------------------------------------------------- Capital assets and goodwill 1,024,840 76,146 1,100,986 ------------------------------------------------------------------------- Total assets 1,238,603 117,906 1,356,509 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the nine Midstream Consoli- months ended Services Concord HAZCO CEM dated Sept. 30, 2006 $ $ $ $ $ ------------------------------------------------------------------------- Revenue prior to inter-segment eliminations 176,890 140,405 236,228 675,662 1,229,185 Inter-segment eliminations (1,598) (136) (1,334) (23,828) (26,896) ------------------------------------------------------------------------- Net revenue 175,292 140,269 234,894 651,834 1,202,289 Operating expenses prior to inter-segment eliminations 82,680 90,534 174,556 660,409 1,008,179 Inter-segment eliminations (1,334) (11) (1,587) (23,828) (26,760) ------------------------------------------------------------------------- Net expenses 81,346 90,523 172,969 636,581 981,419 ------------------------------------------------------------------------- Operating margin 93,946 49,746 61,925 15,253 220,870 Gas delivery obligation valuation 93 - - - 93 Loss (gain) on sale of assets (71) 42 334 (54) 251 Depreciation and amortization 15,978 10,139 15,200 50 41,367 ------------------------------------------------------------------------- Income before corporate items 77,946 39,565 46,391 15,257 179,159 ------------------------------------------------------------------------- General and administrative 16,958 Financing 8,656 Depreciation and amortization 822 Foreign exchange loss (gain) (870) Income taxes 26,579 ------------------------------------------------------------------------- Income before non-controlling interest 127,014 Non-controlling interest (28,324) ------------------------------------------------------------------------- Net income for the period 98,690 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets 442,873 434,710 281,519 10,536 1,169,638 ------------------------------------------------------------------------- Goodwill 15,578 9,286 57,324 - 82,188 ------------------------------------------------------------------------- Capital expenditures 65,904 31,884 29,855 2,938 130,581 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operations related to Canada and foreign countries are as follows: For the nine months ended Canada International Total Sept. 30, 2006 $ $ $ ------------------------------------------------------------------------- Revenue 1,173,978 28,311 1,202,289 ------------------------------------------------------------------------- Capital assets and goodwill 872,678 45,709 918,387 ------------------------------------------------------------------------- Total assets 1,103,662 65,976 1,169,638 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the three Midstream Consoli- months ended Services Concord HAZCO CEM dated Sept. 30, 2007 $ $ $ $ $ ------------------------------------------------------------------------- Revenue prior to inter-segment eliminations 76,093 39,222 99,198 310,538 525,051 Inter-segment eliminations (964) (40) (410) (11,107) (12,521) ------------------------------------------------------------------------- Net revenue 75,129 39,182 98,788 299,431 512,530 Operating expenses prior to inter-segment eliminations 38,491 29,133 74,290 303,380 445,294 Inter-segment eliminations (409) (5) (1,001) (11,107) (12,522) ------------------------------------------------------------------------- Net expenses 38,082 29,128 73,289 292,273 432,772 ------------------------------------------------------------------------- Operating margin 37,047 10,054 25,499 7,158 79,758 Gas delivery obligation valuation (153) - - - (153) Loss (gain) on sale of assets 10 (22) 67 - 55 Depreciation and amortization 8,389 6,403 8,960 13 23,765 ------------------------------------------------------------------------- Income before corporate items 28,801 3,673 16,472 7,145 56,091 ------------------------------------------------------------------------- General and administrative 6,106 Financing 5,883 Depreciation and amortization 368 Foreign exchange loss 615 Income taxes 3,068 ------------------------------------------------------------------------- Income before non-controlling interest 40,051 Non-controlling interest (9,343) ------------------------------------------------------------------------- Net income for the period 30,708 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets 569,964 438,777 338,515 9,253 1,356,509 ------------------------------------------------------------------------- Goodwill 27,427 9,286 57,324 - 94,037 ------------------------------------------------------------------------- Capital expenditures 29,579 9,001 20,257 - 58,837 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operations related to Canada and foreign countries are as follows: For the three months ended Canada International Total Sept. 30, 2007 $ $ $ ------------------------------------------------------------------------- Revenue 496,442 16,088 512,530 ------------------------------------------------------------------------- Capital assets and goodwill 1,024,840 76,146 1,100,986 ------------------------------------------------------------------------- Total assets 1,238,603 117,906 1,356,509 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the three Midstream Consoli- months ended Services Concord HAZCO CEM dated Sept. 30, 2006 $ $ $ $ $ ------------------------------------------------------------------------- Revenue prior to inter-segment eliminations 62,771 62,649 96,621 263,365 485,406 Inter-segment eliminations (1,077) (69) (345) (7,515) (9,006) ------------------------------------------------------------------------- Net revenue 61,694 62,580 96,276 255,850 476,400 Operating expenses prior to inter-segment eliminations 28,784 40,447 72,575 256,936 398,742 Inter-segment eliminations (813) (11) (598) (7,515) (8,937) ------------------------------------------------------------------------- Net expenses 27,971 40,436 71,977 249,421 389,805 ------------------------------------------------------------------------- Operating margin 33,723 22,144 24,299 6,429 86,595 Gas delivery obligation valuation (3) - - - (3) Loss (gain) on sale of assets 7 45 86 (54) 84 Depreciation and amortization 7,010 5,053 4,262 17 16,342 ------------------------------------------------------------------------- Income before corporate items 26,709 17,046 19,951 6,466 70,172 ------------------------------------------------------------------------- General and administrative 6,156 Financing 3,559 Depreciation and amortization 298 Foreign exchange loss (gain) (1,284) Income taxes 7,779 ------------------------------------------------------------------------- Income before non-controlling interest 53,664 Non-controlling interest (12,040) ------------------------------------------------------------------------- Net income for the period 41,624 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets 442,873 434,710 281,519 10,536 1,169,638 ------------------------------------------------------------------------- Goodwill 15,578 9,286 57,324 - 82,188 ------------------------------------------------------------------------- Capital expenditures 30,205 13,641 12,907 1,306 58,059 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operations related to Canada and foreign countries are as follows: For the three months ended Canada International Total Sept. 30, 2006 $ $ $ ------------------------------------------------------------------------- Revenue 464,451 11,949 476,400 ------------------------------------------------------------------------- Capital assets and goodwill 872,678 45,709 918,387 ------------------------------------------------------------------------- Total assets 1,103,662 65,976 1,169,638 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 15. SUBSEQUENT EVENTS On September 5, 2007 the Trust announced that unitholders and exchangeable shareholders approved a proposed going-private transaction, involving an investor group led by the current President and C.E.O. of CCS. Details of the proposed transaction, initially announced on June 29, 2007, can be found in the Management Information Circular dated August 3, 2007. Subject to satisfaction of closing conditions, it is anticipated that the proposed transaction will close on or before November 15, 2007. CORPORATE INFORMATION EXECUTIVE MANAGEMENT DAVID P. WERKLUND CCS INCOME TRUST Founder, Chairman of the Board, Corporate Office President and Chief Executive Watermark Tower Officer Calgary, AB T2P 3S8 Telephone: 403.233.7565 JOHN BEAN, CA Fax: 403.261.5612 President, HAZCO Division Website: www.ccsincometrust.com DONALD E. FRIESEN STOCK TRADING INFORMATION Vice President, Business CCS Income Trust units are Development, HAZCO Division listed on the Toronto Stock Exchange (TSX) under the DAVID FULTON symbol CCR.UN. Vice President, Human Resources TRANSFER AGENT AND REGISTRAR RALPH C. HESJE, P. Eng. Computershare Trust Company President, CCS Midstream of Canada Services Division Calgary, Alberta ALEX LEMMENS BANKERS Vice President, Corporate Toronto Dominion Bank Marketing Calgary, Alberta JIM McMAHON AUDITORS Vice President, Business Ernst & Young LLP Development Calgary, Alberta MARSHALL L. McRAE, CA Chief Financial Officer BLAINE G. MELNYK General Counsel and Corporate Secretary DOUGLAS B. OLSON, CA Vice President, Finance GORDON N. VIVIAN President, Concord Well Servicing Division RICK M. WISE, P.Eng. Vice President, Engineering, Regulatory and Midstream Development DIANE YUILL, CA Corporate Controller %SEDAR: 00017961E

For further information:

For further information: CORPORATE COMMUNICATIONS: Shauna Lowry,
Manager, Corporate Communications, Telephone: (403) 233-7565, Fax: (403)
261-5612, Email: info@ccsincometrust.com; INVESTOR RELATIONS: Marshall McRae,
CA, Chief Financial Officer, Telephone: (403) 233-7565, Fax: (403) 261-5612,
Email: mmcrae@ccsincometrust.com

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CCS CORPORATION

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