CE Franklin Ltd. announces 2009 First Quarter Results



    CALGARY, April 28 /CNW/ - CE FRANKLIN LTD. (TSX.CFT, NASDAQ.CFK) reported
net income of $0.33 per share (basic) for the first quarter ended March 31,
2009, a decrease of 3% from $0.34 per share earned in the first quarter ended
March 31, 2008.

    
    Financial Highlights
    --------------------

                                                          Three Months Ended
    (millions of Cdn.$ except per share data)                  March 31
                                                      -----------------------
                                                            2009        2008
                                                      ----------- -----------
                                                              (unaudited)

    Sales                                             $    140.7  $    140.6

    Gross profit                                            26.4        27.1
    Gross profit - % of sales                              18.8%       19.2%

    EBITDA(1)                                                9.5        10.2
    EBITDA(1) % of sales                                    6.8%        7.2%

    Net income                                        $      6.0  $      6.3

    Per share - basic                                 $     0.33  $     0.34
              - diluted                               $     0.33  $     0.34

    Net working capital(2)                            $    153.2  $    117.4
    Bank operating loan(2)                            $     40.2  $     21.8
    

    "Our diversification strategies continue to progress, offsetting the
decline in activity levels that has affected our core oilfield supply
business," said Michael West, President and CEO.
    Net income for the first quarter of 2009 was $6.0 million, down $0.3
million from the first quarter of 2008. Sales were $140.7 million, consistent
with the first quarter of 2008. Capital project business comprised 62% of
total sales (2008 - 55%), and increased $9.5 million (12%) over the prior year
period due to continued growth of oil sands revenues. Gross profit was down
$0.7 million with margins reducing by 0.4% from the prior year period.
Selling, general and administrative expenses remained flat at $16.9 million
for the quarter with increased facility costs being offset by lower variable
compensation costs and reduced selling and marketing costs. Lower interest
expense was associated with lower floating interest rates in the first quarter
of 2009 compared to the same period in 2008. Income taxes decreased by $0.2
million (3%) in the first quarter compared to the prior year period due to
lower pre-tax earnings. The weighted average number of shares outstanding
during the first quarter decreased by 0.3 million shares (2%) from the prior
year period principally due to shares purchased for cancellation pursuant to
the Company's Normal Course Issuer Bid. Net income per share (basic) was $0.33
in the first quarter of 2009, down 3% from that earned in the first quarter
2008.

    Business Outlook

    The recent upheaval in global credit markets has contributed to
significant capital market volatility, resulting in deleveraging, repricing of
risk and ultimately the retrenchment of consumption. Oil and gas markets have
experienced similar upheaval. While crude oil prices have recently rebounded
from first quarter lows, natural gas prices are currently at the lowest levels
seen in a decade. Our customers continue to assess the impact of these changes
on their businesses and capital expenditure plans in 2009. Oil and gas well
completions and rig counts have declined sharply at the end of the first
quarter compared to 2008 levels and we expect the decline will continue
through 2009 and into 2010. Approximately 60% of the Company's sales are
driven by our customers' capital project expenditures.
    The Company expects these conditions will contribute to increased
consolidation of oil and gas customers, stable to deflationary product costs
and improved labour availability. For the balance of 2009, sales levels are
expected to decline compared to 2008 as expected lower oilfield sales are
partially offset by expected increased sales to oil sands, midstream and
industrial product end use markets. The Company has a strong balance sheet and
is positioned to pursue our strategies to increase market share in both the
conventional oilfield and oil sands markets.
    Over the medium to longer term, the Company is confident that it can
continue to strengthen and improve the profitability of its distribution
network by expanding its product lines, supplier relationships and capability
to service additional oil and gas and industrial end use markets.

    
    (1) EBITDA represents net income before interest, taxes, depreciation and
        amortization. EBITDA is a supplemental non-GAAP financial measure
        used by management, as well as industry analysts, to evaluate
        operations. Management believes that EBITDA, as presented, represents
        a useful means of assessing the performance of the Company's ongoing
        operating activities, as it reflects the Company's earnings trends
        without showing the impact of certain charges. The Company is also
        presenting EBITDA and EBITDA as a percentage of sales because it is
        used by management as supplemental measures of profitability. The use
        of EBITDA by the Company has certain material limitations because it
        excludes the recurring expenditures of interest, income tax, and
        amortization expenses. Interest expense is a necessary component of
        the Company's expenses because the Company borrows money to finance
        its working capital and capital expenditures. Income tax expense is a
        necessary component of the Company's expenses because the Company is
        required to pay cash income taxes. Amortization expense is a
        necessary component of the Company's expenses because the Company
        uses property and equipment to generate sales. Management compensates
        for these limitations to the use of EBITDA by using EBITDA as only a
        supplementary measure of profitability. EBITDA is not used by
        management as an alternative to net income, as an indicator of the
        Company's operating performance, as an alternative to any other
        measure of performance in conformity with generally accepted
        accounting principles or as an alternative to cash flow from
        operating activities as a measure of liquidity. A reconciliation of
        EBITDA to Net income is provided within the Company's Management
        Discussion and Analysis. Not all companies calculate EBITDA in the
        same manner and EBITDA does not have a standardized meaning
        prescribed by GAAP. Accordingly, EBITDA, as the term is used herein,
        is unlikely to be comparable to EBITDA as reported by other entities.

    (2) Net working capital is defined as current assets less accounts
        payable and accrued liabilities, income taxes payable and other
        current liabilities, excluding the bank operating loan. Net working
        capital and bank operating loan are as at quarter end.

    Additional Information
    ----------------------

    Additional information relating to CE Franklin, including its first
quarter 2009 Management Discussion and Analysis and interim consolidated
financial statements and its Form 20-F/Annual Information Form, is available
under the Company's profile on the SEDAR website at www.sedar.com and at
www.cefranklin.com

    Conference Call and Webcast Information
    ---------------------------------------
    

    A conference call to review the 2009 first quarter results, which is open
to the public, will be held on Wednesday, April 29, 2009 at 11:00 a.m. Eastern
Time (9:00 a.m. Mountain Time).
    Participants may join the call by dialing 1-416-644-3416 in Toronto or
dialing 1-800-733-7571 at the scheduled time of 11:00 a.m. Eastern Time. For
those unable to listen to the live conference call, a replay will be available
at approximately 1:00 p.m. Eastern Time on the same day by calling
1-416-640-1917 in Toronto or dialing 1-877-289-8525 and entering the Passcode
of 21302002 followed by the pound sign and may be accessed until midnight
Monday, May 11, 2009.
    The call will also be webcast live at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2602160 and will be
available on the Company's website at http://www.cefranklin.com.
    Michael West, President and Chief Executive Officer will lead the
discussion and will be accompanied by Mark Schweitzer, Vice President and
Chief Financial Officer. The discussion will be followed by a question and
answer period.

    About CE Franklin

    For more than half a century, CE Franklin has been a leading supplier of
products and services to the energy industry. CE Franklin distributes pipe,
valves, flanges, fittings, production equipment, tubular products and other
general oilfield supplies to oil and gas producers in Canada as well as to the
oilsands, refining, heavy oil, petrochemical, forestry and mining industries.
These products are distributed through its 44 branches, which are situated in
towns and cities serving particular oil and gas fields of the western Canadian
sedimentary basin.

    Forward-looking Statements: The information in this news release may
contain "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and other applicable securities legislation. All statements, other than
statements of historical facts, that address activities, events, outcomes and
other matters that CE Franklin plans, expects, intends, assumes, believes,
budgets, predicts, forecasts, projects, estimates or anticipates (and other
similar expressions) will, should or may occur in the future are
forward-looking statements. These forward-looking statements are based on
management's current belief, based on currently available information, as to
the outcome and timing of future events. When considering forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements and refer to the Form 20-F or our annual information form for
further detail.

    
    Management's Discussion and Analysis as at April 28, 2009

    The following Management's Discussion and Analysis ("MD&A") is provided
    to assist readers in understanding CE Franklin Ltd.'s ("CE Franklin" or
    the "Company") financial performance and position during the periods
    presented and significant trends that may impact future performance of CE
    Franklin. This discussion should be read in conjunction with the
    Company's interim consolidated financial statements for the three month
    period ended March 31, 2009 and the Management's Discussion and Analysis
    and the consolidated financial statements for the year ended December 31,
    2008.

    All amounts are expressed in Canadian dollars and in accordance with
    Canadian generally accepted accounting principles ("Canadian GAAP"),
    except where otherwise noted.
    

    Overview

    CE Franklin is a leading distributor of pipe, valves, flanges, fittings,
production equipment, tubular products and other general industrial supplies
primarily to the oil and gas industry in Canada through its 44 branches
situated in towns and cities that serve oil and gas fields of the western
Canadian sedimentary basin. In addition, the Company distributes similar
products to the oil sands, midstream, refining, and petrochemical industries
and non-oilfield related industries such as forestry and mining.
    The Company's branch operations service over 3,000 customers by providing
the right materials where and when they are needed, and for the best value.
Our branches, supported by our centralized Distribution Centre in Edmonton,
Alberta, stock over 25,000 stock keeping units. This infrastructure enables us
to provide our customers with the products they need on a same day or over
night basis. Our centralized inventory and procurement capabilities allow us
to leverage our scale to enable industry leading hub and spoke purchasing and
logistics capabilities. The branches are also supported by services provided
by the Company's corporate office in Calgary, Alberta including sales,
marketing, product expertise, logistics, invoicing, credit and collection and
other business services.
    The Company's shares trade on the TSX ("CFT") and NASDAQ ("CFK") stock
exchanges. Smith International Inc., a major oilfield service company based in
the United States, owns 55% of the Company's shares.

    Business and Operating Strategy

    The Company is pursuing the following strategies to grow its business
profitably:

    
    -   Expand the reach and market share serviced by our distribution
        network. We are focusing our sales efforts and product offering on
        servicing complex, multi-site needs of large and emerging customers
        in the energy sector. In 2008, we continued to invest in our
        distribution network by opening a branch operation in Red Earth,
        Alberta and by expanding our facilities at five existing branch
        operations. Last spring, we successfully completed the move to our
        new 153,000 square foot Distribution Centre and nine acre pipe yard
        located in Edmonton, Alberta which positions us to service our
        growing distribution network. Organic growth is expected to be
        complemented by selected acquisitions such as the December 2007
        acquisition of JEN Supply which increased our market share in two
        existing markets and expanded our presence in two additional markets.

    -   Expand our production equipment service capability to capture more of
        the product life cycle requirements for the equipment we sell such as
        down hole pump repair, oilfield engine maintenance, well optimization
        and on site project management. This will differentiate our service
        offering from our competitors and deepen our relationship with
        customers. In the first quarter of 2009, we have opened a valve
        actuation centre at our Distribution Centre, to service our
        customers' valve automation requirements. The acquisition of Full
        Tilt in July 2007 provided us with the capability to service oilfield
        engines and parts that we were previously selling, and, by doing so,
        position us to attract new customers to our core oilfield equipment
        distribution business.

    -   Focus on the oil sands and industrial project and MRO business by
        leveraging our existing supply chain infrastructure, product and
        project expertise. The Company is expanding its product line and
        supplier relationships and expertise to provide the automation,
        instrumentation and other specialty products that these customers
        require.
    

    Business Outlook

    The recent upheaval in global credit markets has contributed to
significant capital market volatility, resulting in deleveraging, repricing of
risk and ultimately the retrenchment of consumption. Oil and gas markets have
experienced similar upheaval. While crude oil prices have recently rebounded
from first quarter lows, natural gas prices are currently at the lowest levels
seen in a decade. Our customers continue to assess the impact of these changes
on their businesses and capital expenditure plans in 2009. Oil and gas well
completions and rig counts have declined sharply at the end of the first
quarter compared to 2008 levels and we expect the decline will continue
through 2009 and into 2010. Approximately 60% of the Company's sales are
driven by our customers' capital project expenditures.
    The Company expects these conditions will contribute to increased
consolidation of oil and gas customers, stable to deflationary product costs
and improved labour availability. For the balance of 2009, sales levels are
expected to decline compared to 2008 as expected lower oilfield sales are
partially offset by expected increased sales to oil sands, midstream and
industrial products. The Company has a strong balance sheet and is positioned
to pursue our strategies to increase market share in both the conventional
oilfield and oil sands markets.
    Over the medium to longer term, the Company is confident that it can
continue to strengthen and improve the profitability of its distribution
network by expanding its product lines, supplier relationships and capability
to service additional oil and gas and industrial end use markets.

    
    Operating Results

    The following table summarizes CE Franklin's results of operations:

    (in millions of Cdn.
     dollars except per
     share data)                        Three Months Ended March 31
                              -----------------------------------------------
                                        2009                    2008
                              ----------------------- -----------------------

    Sales                     $    140.7      100.0%  $    140.6      100.0%
      Cost of sales               (114.3)    (81.2)%      (113.5)    (80.8)%
                              ----------- ----------- ----------- -----------
      Gross profit                  26.4       18.8%        27.1       19.2%

    Selling, general and
     administrative expenses       (16.9)    (12.0)%       (16.9)    (12.0)%
                              ----------- ----------- ----------- -----------

    EBITDA(1)                        9.5        6.8%        10.2        7.2%
    Amortization                    (0.6)     (0.4)%        (0.6)     (0.4)%
    Interest                        (0.2)     (0.1)%        (0.4)     (0.3)%
                              ----------- ----------- ----------- -----------
    Income before taxes              8.7        6.2%         9.2        6.5%
    Income tax expense              (2.7)     (1.9)%        (2.9)     (2.0)%
                              ----------- ----------- ----------- -----------
    Net income                       6.0        4.3%         6.3        4.5%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Net income per share
      Basic                   $     0.33              $     0.34
      Diluted                 $     0.33              $     0.34

    Weighted average number
     of shares outstanding
     (000's)
      Basic                       18,013                  18,333
      Diluted                     18,189                  18,523

    (1) EBITDA represents net income before interest, taxes, depreciation and
        amortization. EBITDA is a supplemental non-GAAP financial measure
        used by management, as well as industry analysts, to evaluate
        operations. Management believes that EBITDA, as presented, represents
        a useful means of assessing the performance of the Company's ongoing
        operating activities, as it reflects the Company's earnings trends
        without showing the impact of certain charges. The Company is also
        presenting EBITDA and EBITDA as a percentage of sales because it is
        used by management as supplemental measures of profitability. The use
        of EBITDA by the Company has certain material limitations because it
        excludes the recurring expenditures of interest, income tax, and
        amortization expenses. Interest expense is a necessary component of
        the Company's expenses because the Company borrows money to finance
        its working capital and capital expenditures. Income tax expense is a
        necessary component of the Company's expenses because the Company is
        required to pay cash income taxes. Amortization expense is a
        necessary component of the Company's expenses because the Company
        uses property and equipment to generate sales. Management compensates
        for these limitations to the use of EBITDA by using EBITDA as only a
        supplementary measure of profitability. EBITDA is not used by
        management as an alternative to net income, as an indicator of the
        Company's operating performance, as an alternative to any other
        measure of performance in conformity with generally accepted
        accounting principles or as an alternative to cash flow from
        operating activities as a measure of liquidity. A reconciliation of
        EBITDA to Net income is provided within the table above. Not all
        companies calculate EBITDA in the same manner and EBITDA does not
        have a standardized meaning prescribed by GAAP. Accordingly, EBITDA,
        as the term is used herein, is unlikely to be comparable to EBITDA as
        reported by other entities.
    

    First Quarter Results

    Net income for the first quarter of 2009 was $6.0 million, down $0.3
million from the first quarter of 2008. Sales were $140.7 million, consistent
with the first quarter of 2008. Capital project business comprised 62% of
sales (2008 - 55%), and increased $9.5 million (12%) over the prior year
period due to continued growth of oil sands revenues. Gross profit was down
$0.7 million with margins reducing by 0.4% from the prior year period due to
the increase in lower margin oil sands and increased competitive pressure.
Selling, general and administrative expenses remained flat at $16.9 million
for the quarter with increased facility costs being offset by lower variable
compensation costs and reduced selling and marketing costs. Lower interest
expense was associated with lower floating interest rates in the first quarter
of 2009 as compared to the same period in 2008. Income taxes decreased by $0.2
million (3%) in the first quarter compared to the prior year period due to
lower pre-tax earnings. The weighted average number of shares outstanding
during the first quarter decreased by 0.3 million shares (2%) from the prior
year period, principally due to shares purchased for cancellation pursuant to
the Company's Normal Course Issuer Bid. Net income per share (basic) was $0.33
in the first quarter of 2009, down 3% from that earned in the first quarter of
2008.

    Sales

    Sales for the quarter ended March 31, 2009 were $140.7 million and are
consistent with sales for the quarter ended March 31, 2008, as detailed above
in the "First Quarter Results" discussion.

    
    (in millions of Cdn. $)                    Three months ended March 31
                                          -----------------------------------
                                                  2009              2008
                                          ----------------- -----------------
    End use sales demand                       $        %        $        %
    Capital projects                         87.5       62     78.0       55
    Maintenance, repair and operating
     supplies (MRO)                          53.2       38     62.6       45
                                          ----------------- -----------------
    Total sales                             140.7      100    140.6      100


    Note: Capital project end use sales are defined by the Company as
    consisting of tubulars and 80% of pipe, flanges and fittings; and valves
    and accessories product sales respectively; MRO Sales are defined by the
    Company as consisting of pumps and production equipment, production
    services; general product and 20% of pipes, flanges and fittings; and
    valves and accessory product sales respectively.
    

    The Company uses oil and gas well completions and average rig counts as
industry activity measures to assess demand for oilfield equipment used in
capital projects. Oil and gas well completions require the products sold by
the Company to complete a well and bring production on stream and are a good
general indicator of energy industry activity levels. Average drilling rig
counts are also used by management to assess industry activity levels as the
number of rigs in use ultimately drives well completion requirements. The
relative level of oil and gas commodity prices are a key driver of industry
capital project activity as product prices directly impact the economic
returns realized by oil and gas companies. Well completion, rig count and
commodity price information for the first quarter 2009 and 2008 are provided
in the table below.

    
                                                  Q1 Average
                                          -----------------------        %
                                                2009        2008      change
                                          ----------- ----------- -----------
    Gas - Cdn. $/gj (AECO spot)                $4.94       $7.92        (38%)
    Oil - Cdn. $/bbl (Synthetic Crude)        $56.23      $97.81        (24%)

    Average rig count                            310         481        (36%)

    Well completions:
      Oil                                        954       1,302        (27%)
      Gas                                      2,993       3,293         (9%)
                                          ----------- ----------- -----------
    Total well completions                     3,947       4,595        (14%)

    Average statistics are shown except for well completions.

    Sources: Oil and Gas prices - First Energy Capital Corp.; Rig count
    data - CAODC; Well completion data - Daily Oil Bulletin
    

    Sales of capital project related products were $87.5 million in the first
quarter of 2009, up 12% ($9.5 million) from the first quarter of 2008 due to
increased oil sands, midstream and industrial project sales. Total well
completions decreased by 14% in the first quarter of 2009 and the average
working rig count decreased by 36% compared to the prior year period. Gas
wells comprised 76% of the total wells completed in western Canada in the
first quarter of 2009 compared to 72% in the first quarter of 2008. Spot gas
and oil prices ended the first quarter at $3.81 per GJ (AECO) and $62.27 per
bbl (Synthetic Crude), a decrease of 22% and an increase of 11%, respectively,
from first quarter average prices. Oil and gas capital expenditure activity
has been declining through the first quarter as a result of continued
depressed oil and gas prices and reduced access to capital experienced by the
oil and gas industry. This is expected to result in reduced industry cash
flow, access to capital and capital expenditure economics, which in turn is
expected to decrease demand for the Company's products through the remainder
of 2009.
    MRO product sales are related to overall oil and gas industry production
levels and tend to be more stable than capital project sales. MRO product
sales for the quarter ended March 31, 2009 decreased by $9.4 million (15%) to
$53.2 million compared to the quarter ended March 31, 2008 and comprised 38%
of the Company's total sales.
    The Company's strategy is to grow profitability by focusing on its core
western Canadian oilfield equipment service business, complemented by an
increase in the product life cycle services provided to its customers, and the
focus on the emerging oil sands capital project and MRO sales opportunities.
Sales results of these initiatives to date are provided below:

    
                                                Q1 2009           Q1 2008
                                          ----------------- -----------------
    Sales ($ millions)                         $        %        $        %
    Oilfield                                126.3       90    133.8       95
    Oil sands                                12.4        9      2.5        2
    Production services                       2.0        1      4.3        3
                                          ----------------- -----------------
    Total sales                             140.7      100    140.6      100
    

    Sales of oilfield products to conventional western Canada oil and gas end
use applications were $126.3 million for the first quarter of 2009, down 6%
from the first quarter of 2008. This decrease was driven by the 14% decrease
in well completions compared to the prior year period, partially offset by
increased midstream and industrial project revenue.
    Sales to oil sands end use applications increased to $12.4 million in the
first quarter compared to $2.5 million in the first quarter of 2008. The
Company continues to position its sales focus and Distribution Centre and Fort
McMurray branch to penetrate this emerging market for capital project and MRO
products.
    Production service sales were $2.0 million in the first quarter of 2009
compared to $4.3 million in the first quarter of 2008 as customers deferred
maintenance activities in the face of challenging commodity prices.

    
    Gross Profit

                                                         Q1 2009     Q1 2008
                                                      ----------- -----------

    Gross profit (millions)                                $26.4       $27.1
    Gross profit margin as a % of sales                    18.8%       19.2%

    Gross profit composition by product sales category:
    Tubulars                                                 11%          8%
    Pipe, flanges and fittings                               41%         34%
    Valves and accessories                                   18%         20%
    Pumps, production equipment and services                 11%         15%
    General                                                  19%         23%
                                                      ----------- -----------
    Total gross profit                                      100%        100%
    

    Gross profit was $26.4 million in the first quarter of 2009, and gross
profit margins were 18.8%, a decrease of $0.7 million and 0.4% from the prior
year first quarter. Gross profit composition in the first quarter of 2009 saw
a shift from pumps, production equipment, services and general categories into
pipe, fitting and flange categories reflecting the increase in capital
projects sales and the reduction in MRO sales.

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

                                                Q1 2009           Q1 2008
                                          ----------------- -----------------
    ($ millions)                               $        %        $        %
    People costs                             10.1       60     10.3       61
    Selling costs                             1.7       10      2.1       12
    Facility and office costs                 3.4       20      2.7       16
    Other                                     1.7       10      1.8       11
                                          ----------------- -----------------
    SG&A costs                               16.9      100     16.9      100
    SG&A costs as % of sales                  12%               12%
    

    SG&A costs for the first quarter of 2009 were flat with the prior year
period at 12% of sales. The decrease in people costs of $0.2 million is mainly
due to decreased variable compensation based on a lower profit outlook this
year compared to 2008. Selling costs were down $0.4 million compared to the
prior year period due mainly to reduced advertising and promotion expense and
accounts receivable bad debt allowances. Facility and office costs have
increased in the first quarter of 2009 as the Company moved into a new, larger
Distribution Centre in Edmonton in the second quarter of 2008 and a larger
branch facility in Lloydminster during the first quarter of 2009, combined
with continued occupancy cost pressure in western Canada. The Company leases
34 of its 44 branch locations as well as its corporate office in Calgary and
Edmonton Distribution Centre. Five branch locations are owned and five are
operated by agents. The Company is taking steps to reduce its variable and
fixed costs to adjust to expected lower industry activity levels.

    Amortization Expense

    Amortization expense of $0.6 million in the first quarter of 2009 was
comparable to the first quarter of 2008.

    Interest Expense

    Interest expense was $0.2 million in the first quarter of 2009, down $0.2
million (56%) from the first quarter of 2008 due to a decline in average
floating interest rates offset slightly by higher average borrowing levels.

    Foreign Exchange (Gain) Loss

    Foreign exchange (gains) and losses were nominal in both the first
quarter of 2009 and the first quarter of 2008, despite significant exchange
rate volatility.

    Income Tax Expense

    The Company's effective tax rate for the first quarter of 2009 was 31.4%,
comparable to the first quarter of 2008.

    Summary of Quarterly Financial Data

    The selected quarterly financial data presented below is presented in
Canadian dollars and in accordance with Canadian GAAP. This information is
derived from the Company's unaudited quarterly financial statements.

    
    (in millions of Cdn. dollars except per share data)

    Unaudited            Q2     Q3     Q4     Q1     Q2     Q3     Q4     Q1
                       2007   2007   2007   2008   2008   2008   2008   2009
                     ------ ------ ------ ------ ------ ------ ------ -------

    Sales            $ 82.9 $116.8 $112.3 $140.6 $ 96.4 $149.3 $161.2 $140.7

    Gross profit       16.8   21.0   20.4   27.1   19.0   27.8   33.9   26.4
    Gross profit %    20.3%  18.0%  18.2%  19.2%  19.7%  18.6%  21.0%  18.8%

    EBITDA              2.2    7.4    5.1   10.2    2.3    9.1   14.3    9.5
    EBITDA as a %
     of sales          2.7%   6.4%   4.5%   7.2%   2.4%   6.1%   8.9%   6.8%

    Net income          0.6    4.1    2.4    6.3    1.0    5.7    8.8    6.0
    Net income as
     a % of sales      0.7%   3.6%   2.1%   4.5%   1.0%   3.8%   5.5%   4.3%

    Net income
     per share
      Basic          $ 0.03 $ 0.22 $ 0.13 $ 0.34 $ 0.05 $ 0.31 $ 0.48 $ 0.33
      Diluted        $ 0.03 $ 0.22 $ 0.13 $ 0.34 $ 0.05 $ 0.31 $ 0.47 $ 0.33

    Net working
     capital(1)       127.0  128.7  134.7  117.4  114.9  123.1  142.8  153.2
    Bank operating
     loan(1)           36.0   35.4   44.3   21.8   18.4   20.9   34.9   40.2

    Total well
     completions      3,057  3,877  5,026  4,595  2,607  4,392  6,971  3,947

    (1) Net working capital and bank operating loan amounts are as at quarter
        end.
    

    The Company's sales levels are affected by weather conditions. As warm
weather returns in the spring each year, the winter's frost comes out of the
ground rendering many secondary roads incapable of supporting the weight of
heavy equipment until they have dried out. In addition, many exploration and
production areas in northern Canada are accessible only in the winter months
when the ground is frozen. As a result, the first and fourth quarters
typically represent the busiest time for oil and gas industry activity and the
highest sales activity for the Company. Sales levels drop dramatically during
the second quarter until such time as roads have dried and road bans have been
lifted. This typically results in a significant reduction in earnings during
the second quarter, as the decline in sales typically out paces the decline in
SG&A costs as the majority of the Company's SG&A costs are fixed in nature.
Net working capital (defined as current assets less accounts payable and
accrued liabilities, income taxes payable and other current liabilities,
excluding the bank operating loan) and bank operating loan borrowing levels
follow similar seasonal patterns as sales.

    Liquidity and Capital Resources

    The Company's primary internal source of liquidity is cash flow from
operating activities before net changes in non-cash working capital balances.
Cash flow from operating activities and the Company's 364-day bank operating
facility are used to finance the Company's net working capital, capital
expenditures required to maintain its operations, and growth capital
expenditures.
    As at March 31, 2009, borrowings under the Company's bank operating loan
were $40.2 million, an increase of $5.2 million from December 31, 2008.
Borrowing levels have increased due to a $10.3 million increase in net working
capital, $0.5 million in capital and other expenditures and $1.6 million for
the purchase of shares to resource stock compensation obligations and the
repurchase of shares under the Company's Normal Course Issuer Bid ("NCIB").
This was offset by $7.1 million in cash flow from operating activities, before
net changes in non-cash working capital balances.
    Net working capital was $153.2 million at March 31, 2009, an increase of
$10.3 million from December 31, 2008. Accounts receivable decreased by $9.9
million (10%) to $90.6 million at March 31, 2009 from December 31, 2008 due to
decreased sales in the first quarter compared to the fourth quarter of 2008.
Days sales outstanding in accounts receivable ("DSO") in the first quarter of
2009 was 52 days compared to 51 days in the fourth quarter of 2008 and 67 days
in the first quarter of 2008. The improvement in DSO performance compared to
the first quarter of 2008 was due to a more efficient invoicing process
implemented in the first quarter of 2008 and a general improvement in
collections performance. DSO is calculated using average sales per day for the
quarter compared to the period end accounts receivable balance. Inventory
decreased by $4.9 million (4%) at March 31, 2009 from December 31, 2008.
Inventory turns for the first quarter of 2009 decreased to 4.0 times compared
to 4.2 times in the fourth quarter of 2008 and 5.8 times in the first quarter
of 2008. Inventory turns are calculated using cost of goods sold for the
quarter on an annualized basis compared to the period end inventory balance.
The Company plans to adjust its investment in inventory to align with
anticipated lower industry activity levels and compressed supplier lead times
in order to improve inventory turnover efficiency. Accounts payable and
accrued liabilities decreased by $29.4 million (35%) to $53.8 million at March
31, 2009 from December 31, 2008 responsive to the decreased activity levels.
    Capital expenditures in the first quarter of 2009 were $0.5 million,
comparable to $0.9 million in the prior year period.
    The Company has a 364 day bank operating loan facility in the amount of
$60.0 million arranged with a syndicate of three banks that matures in July
2009. The loan facility bears interest based on floating interest rates and is
secured by a general security agreement covering all assets of the Company.
The maximum amount available under the facility is subject to a borrowing base
formula applied to accounts receivable and inventories, and a covenant
restricting the Company's average debt to 2.25 times trailing twelve month
EBITDA. As at March 31, 2009, the Company's average debt to EBITDA ratio was
0.8 times (March 31, 2008 - 1.3 times) which provides a maximum borrowing
ability of $60 million under the facility. As at March 31, 2009, the ratio of
the Company's debt to total capitalization (debt plus equity) was 22% (March
31, 2008 - 24%).

    Contractual Obligations

    There have been no material changes in off-balance sheet contractual
commitments since December 31, 2008.

    Capital Stock

    As at March 31, 2009 and 2008, the following shares and securities
convertible into shares were outstanding:

    
    (millions)                              March 31, 2009    March 31, 2008
                                                    Shares            Shares
                                          ----------------- -----------------
    Shares outstanding                                17.8              18.3
    Stock options                                      1.2               1.3
    Share units                                        0.5               0.2
                                          ----------------- -----------------
    Shares outstanding and issuable                   19.5              19.8
    

    The weighted average number of shares outstanding during the first
quarter 2009 was 18.0 million, a decrease of 0.3 million shares from the prior
year's first quarter due principally to the purchases of common shares under
its NCIB and to resource restricted share unit obligations. The diluted
weighted average number of shares outstanding was 18.2 million, a decrease of
0.3 million shares from the prior year's first quarter.
    The Company has established an independent trust to purchase common
shares of the Company on the open market to resource restricted share unit
obligations. During the three month period ended March 31, 2009, 50,000 common
shares were acquired by the trust at an average cost per share of $5.00 (March
31, 2008 - 75,000 at an average cost per share of $6.62). As at March 31,
2009, the trust held 363,258 shares (March 31, 2008 - 126,761 shares).
    On January 6, 2009, the Company announced a NCIB to purchase for
cancellation, up to 900,000 common shares representing approximately 5% of its
outstanding common shares. As at March 31, 2009 the Company had purchased
302,800 shares at an average cost of $4.57 per share.

    Critical Accounting Estimates

    There have been no material changes to critical accounting estimates
since December 31, 2008. The Company is not aware of any environmental or
asset retirement obligations that could have a material impact on its
operations.

    Change in Accounting Policies

    Effective January 1, 2009 the Company adopted section 3064 - Goodwill and
Intangible Assets. The standard addresses the accounting treatment of
internally developed intangibles and the recognition of such assets. The
adoption of this Standard has had no impact on the Company.
    The Company has developed a high level IFRS project plan, a detailed
project charter including resources required and timelines, and has commenced
assessing the differences between IFRS and Canadian GAAP.

    Controls and Procedures

    Internal control over financial reporting ("ICFR") is designed to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and its compliance with Canadian GAAP in its financial statements.
The President and Chief Executive Officer and the Vice President and Chief
Financial Officer of the Company have evaluated whether there were changes to
its ICFR during the three months ended March 31, 2009 that have materially
affected or are reasonably likely to materially affect the ICFR. No such
changes were identified through their evaluation.

    Risk Factors

    The Company is exposed to certain business and market risks including
risks arising from transactions that are entered into the normal course of
business, which are primarily related to interest rate changes and
fluctuations in foreign exchange rates. During the reporting period, no events
or transactions for year ended December 31, 2008 have occurred that would
materially change the information disclosed in the Company's Form 20F.

    Forward Looking Statements

    The information in this MD&A may contain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements, other than
statements of historical facts, that address activities, events, outcomes and
other matters that CE Franklin plans, expects, intends, assumes, believes,
budgets, predicts, forecasts, projects, estimates or anticipates (and other
similar expressions) will, should or may occur in the future are
forward-looking statements. These forward-looking statements are based on
management's current belief, based on currently available information, as to
the outcome and timing of future events. When considering forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this MD&A, including those in under the caption "Risk factors".

    
    Forward-looking statements appear in a number of places and include
statements with respect to, among other things:

    -   forecasted oil and gas industry activity levels in 2009 and 2010;

    -   planned capital expenditures and working capital and availability of
        capital resources to fund capital expenditures and working capital;

    -   the Company's future financial condition or results of operations and
        future revenues and expenses;

    -   the Company's business strategy and other plans and objectives for
        future operations;

    -   fluctuations in worldwide prices and demand for oil and gas;

    -   fluctuations in the demand for the Company's products and services.
    

    Should one or more of the risks or uncertainties described above or
elsewhere in this MD&A occur, or should underlying assumptions prove
incorrect, the Company's actual results and plans could differ materially from
those expressed in any forward-looking statements.
    All forward-looking statements expressed or implied, included in this
MD&A and attributable to CE Franklin are qualified in their entirety by this
cautionary statement. This cautionary statement should also be considered in
connection with any subsequent written or oral forward-looking statements that
CE Franklin or persons acting on its behalf might issue. CE Franklin does not
undertake any obligation to update any forward-looking statements to reflect
events or circumstances after the date of filing this MD&A, except as required
by law.

    
    Additional Information
    ----------------------

    Additional information relating to CE Franklin, including its first
quarter 2009 Management Discussion and Analysis and interim consolidated
financial statements and its Form 20-F/Annual Information Form, is available
under the Company's profile on the SEDAR website at www.sedar.com and at
www.cefranklin.com



    CE Franklin Ltd.
    Interim Consolidated Balance Sheets - Unaudited

    -------------------------------------------------------------------------

                                                       March 31  December 31
    (in thousands of Canadian dollars)                     2009         2008
    -------------------------------------------------------------------------
    Assets

    Current assets
      Accounts receivable                                90,647      100,513
      Inventories                                       114,569      119,459
      Other                                               1,837        9,529
    -------------------------------------------------------------------------
                                                        207,053      229,501

    Property and equipment                                9,522        9,528
    Goodwill                                             20,570       20,570
    Future income taxes (note 4)                            964        1,186
    Other                                                   530          649
    -------------------------------------------------------------------------
                                                        238,639      261,434
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities

    Current liabilities
      Bank operating loan                                40,155       34,948
      Accounts payable and accrued liabilities           53,834       83,258
      Income taxes payable (note 4)                           -        3,405
    -------------------------------------------------------------------------
                                                         93,989      121,611

    Long term debt                                          500          500
    -------------------------------------------------------------------------
                                                         94,489      122,111
    -------------------------------------------------------------------------

    Shareholders' Equity
      Capital stock                                      22,275       22,498
      Contributed surplus                                18,876       18,835
      Retained earnings                                 102,999       97,990
    -------------------------------------------------------------------------
                                                        144,150      139,323
    -------------------------------------------------------------------------
                                                        238,639      261,434
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to these interim consolidated financial
    statements.



    CE Franklin Ltd.
    Interim Consolidated Statements of Operations and Comprehensive Income
    - Unaudited

    -------------------------------------------------------------------------
                                                          Three months ended
                                                          ------------------
    (in thousands of Canadian dollars                           March 31
     except shares and per share amounts)                  2009         2008
    -------------------------------------------------------------------------

    Sales                                               140,732      140,582
    Cost of sales                                       114,367      113,521
    -------------------------------------------------------------------------
    Gross profit                                         26,365       27,061
    -------------------------------------------------------------------------

    Other expenses
      Selling, general and administrative expenses       16,857       16,873
      Amortization                                          555          617
      Interest expense                                      193          438
      Foreign exchange loss/(gain)                            1           (2)
    -------------------------------------------------------------------------
                                                         17,606       17,926
    -------------------------------------------------------------------------

    Income before income taxes                            8,759        9,135

    Income tax expense/(recovery) (note 4)
      Current                                             2,535        2,931
      Future                                                222          (78)
    -------------------------------------------------------------------------
                                                          2,757        2,853
    -------------------------------------------------------------------------

    Net and comprehensive income for the period           6,002        6,282
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per share (note 3e)
      Basic                                                0.33         0.34
      Diluted                                              0.33         0.34
    -------------------------------------------------------------------------

    Weighted average number of shares
     outstanding (000's)
      Basic                                              18,013       18,333
      Diluted (note 3e)                                  18,189       18,523
    -------------------------------------------------------------------------

    See accompanying notes to these interim consolidated financial
    statements.



    CE Franklin Ltd.
    Interim Consolidated Statements of Cash Flow - Unaudited

    -------------------------------------------------------------------------
                                                          Three months ended
                                                          ------------------
                                                       March 31     March 31
    (in thousands of Canadian dollars)                     2009         2008
    -------------------------------------------------------------------------

    Cash flows from operating activities
      Net income for the period                           6,002        6,282
      Items not affecting cash -
        Amortization                                        555          617
        Future income tax expense/(recovery)                222          (79)
        Stock based compensation expense                    304          293
    -------------------------------------------------------------------------
                                                          7,083        7,113
    Net change in non-cash operating working
     capital balances
      Accounts receivable                                 9,866      (23,039)
      Inventories                                         4,890        8,515
      Other current assets                                8,003        1,620
      Accounts payable and accrued liabilities          (29,423)      27,767
      Income taxes payable                               (3,625)       2,646
    -------------------------------------------------------------------------
                                                         (3,206)      24,622
    -------------------------------------------------------------------------

    Cash flows from/(used in) financing activities
      Increase/(decrease) in bank operating loan          5,207      (23,190)
      Issuance of capital stock                             155            1
      Purchase of capital stock through normal
       course issuer bid                                 (1,384)           -
      Purchase of capital stock in trust for
       Share Unit Plans                                    (250)        (496)
    -------------------------------------------------------------------------
                                                          3,728      (23,685)
    -------------------------------------------------------------------------

    Cash flows used in investing activities
      Purchase of property and equipment                   (522)        (937)
    -------------------------------------------------------------------------
                                                           (522)        (937)
    -------------------------------------------------------------------------

    Change in cash and cash equivalents
     during the period                                        -            -

    Cash and cash equivalents - Beginning
     and end of period                                        -            -
    -------------------------------------------------------------------------

    Cash paid during the period for:
      Interest on bank operating loan                       193          438
      Income taxes                                        6,160          163
    -------------------------------------------------------------------------

    See accompanying notes to these interim consolidated financial
    statements.



    CE Franklin Ltd.
    Interim Consolidated Statements of Changes in Shareholders' Equity
    - Unaudited

    -------------------------------------------------------------------------
    (in thousands of
     Canadian dollars
     and number of
     shares)            Capital Stock
                   ----------------------                             Share-
                   Number of             Contributed    Retained     holders'
                      Shares        $        Surplus    Earnings      Equity
    -------------------------------------------------------------------------
    Balance -
     December 31,
     2007             18,370      24,306      17,671      76,243     118,220

    Stock based
     compensation
     expense               -           -         293           -         293
    Stock options
     exercised             2           6          (5)          -           1
    Share Units
     exercised             3          54         (54)          -           -
    Purchase of
     shares in trust
     for Share Unit
     Plans               (75)       (496)          -           -        (496)
    Net income             -           -           -       6,282       6,282
    -------------------------------------------------------------------------
    Balance -
     March 31, 2008   18,300      23,870      17,905      82,525     124,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance -
     December 31,
     2008             18,094      22,498      18,835      97,990     139,323
    Stock based
     compensation
     expense               -           -         304           -         304
    Normal Course
     Issuer Bid         (303)       (391)          -        (993)     (1,384)
    Stock options
     exercised            52         372        (217)          -         155
    Share Units
     exercised            31          47         (47)          -           -
    Purchase of
     shares in trust
     for Share Unit
     Plans               (50)       (250)          -           -        (250)
    Net income             -           -           -       6,002       6,002
    -------------------------------------------------------------------------
    Balance -
     March 31, 2009   17,824      22,275      18,876     102,999     144,150
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to these interim consolidated financial
    statements.



    CE Franklin Ltd.
    Notes to Interim Consolidated Financial Statements - Unaudited
    -------------------------------------------------------------------------
    (tabular amounts in thousands of Canadian dollars except share and per
     share amounts)

    Note 1 - Accounting Policies

    These interim consolidated financial statements have been prepared in
    accordance with accounting principles generally accepted in Canada
    applied on a consistent basis with CE Franklin Ltd.'s (the "Company")
    annual consolidated financial statements for the year ended December 31,
    2008. These interim consolidated financial statements should be read in
    conjunction with the annual consolidated financial statements and the
    notes thereto for the year ended December 31, 2008.

    Effective January 1, 2009 the Company adopted section 3064 - Goodwill and
    Intangible Assets. The standard addresses the accounting treatment of
    internally developed intangibles and the recognition of such assets. The
    adoption of this Standard has had no impact on the Company.

    These unaudited interim consolidated financial statements reflect all
    adjustments which are, in the opinion of management, necessary for a fair
    presentation of the results for the interim periods presented; all such
    adjustments are of a normal recurring nature.

    Note 2 - Inventory

    Inventories consisting primarily of goods purchased for resale are valued
    at the lower of average cost or net realizable value. Inventory
    obsolescence expense was recognized in the three month period ending
    March 31, 2009 of $945,000 (2008 - $236,000). As at March 31, 2009 and
    December 31, 2008 the Company had recorded reserves for inventory
    obsolescence of $3.7 million and $2.8 million respectively.

    Note 3 - Share Data

    At March 31, 2009, the Company had 17.8 million common shares and
    1.2 million options outstanding to acquire common shares at a weighted
    average exercise price of $5.95 per common share, of which 751,055
    options were vested and exercisable at a weighted average exercise price
    of $4.97 per common share.

    a) Stock options

    Option activity for each of the three month periods ended March 31 was as
    follows:

    000's                                                  2009         2008
    -------------------------------------------------------------------------

    Outstanding at January 1                              1,294        1,262
    Granted                                                   -           75
    Exercised                                               (52)          (2)
    Forfeited                                               (31)          (1)
    -------------------------------------------------------------------------
    Outstanding at March 31                               1,211        1,334
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    There were no options granted during the three month period ended
    March 31, 2009. A total of 75,588 share options were granted at a
    weighted average strike price of $6.26 in the three month period ended
    March 31, 2008 for a fair value of $274,000. The fair value of the
    options granted was estimated as at the grant date using the Black-
    Scholes option pricing model, using the following assumptions:

                                                           2008
                                                           ----
    Dividend yield                                          Nil
    Risk-free interest rate                               3.88%
    Expected life                                       5 years
    Expected volatility                                     50%


    Stock Option compensation expense recorded in the three month period
    ended March 31, 2009 was $178,000 (2008 - $170,000).

    b) Share Unit Plans

    The Company has Restricted Share Unit ("RSU"), Performance Share Unit
    ("PSU") and Deferred Share Unit ("DSU") plans (collectively the "Share
    Unit Plans"), where by RSU's, PSU's and DSU's are granted entitling the
    participant, at the Company's option, to receive either a common share or
    cash equivalent value in exchange for a vested unit. For the PSU plan the
    number of units granted is dependent on the Company meeting certain
    return on net asset ("RONA") performance thresholds during the year of
    grant. The multiplier within the plan ranges from 0% - 200% dependant on
    performance. The vesting period for RSU's and PSU's is three years from
    the grant date. DSU's vest on the date of grant. Compensation expense
    related to the units granted is recognized over the vesting period based
    on the fair value of the units at the date of the grant and is recorded
    to compensation expense and contributed surplus. The contributed surplus
    balance is reduced as the vested units are exchanged for either common
    shares or cash. Share Unit Plan activity for the three month periods
    ended March 31 was as follows:

    000's                     2009         Total          2008         Total
    -------------------------------------------------------------------------
                        RSU    PSU    DSU           RSU    PSU    DSU
    Outstanding at
     January 1          161      -     70    231    178      -     37    215
    Granted             172    161      -    333      -      -      -      -
    Exercised           (30)     -      -    (30)    (3)     -      -     (3)
    Forfeited             -      -      -      -      -      -      -      -
    -------------------------------------------------------------------------
    Outstanding at
     March 31           303    161     70    534    175      -     37    212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Share unit plan compensation expense recorded in the three month period
    ended March 31, 2009 was $126,000 (2008 - $123,000).

    c) The Company purchases its common shares on the open market to satisfy
    Share Unit Plan obligations through an independent trust. The trust is
    considered to be a variable interest entity and is consolidated in the
    Company's financial statements with the number and cost of shares held in
    trust, reported as a reduction of capital stock. During the three month
    period ended March 31, 2009, 50,000 common shares were acquired by the
    trust (2008 - 75,000) at a cost of $250,000 (2008 - $496,000).

    d) Normal course issuer bid ("NCIB")

    On January 6, 2009, the Company announced a NCIB to purchase for
    cancellation, up to 900,000 common shares representing approximately 5%
    of its outstanding common shares. As at March 31, 2009, the Company had
    purchased 302,800 shares at a cost of $1,384,000.

     e) Reconciliation of weighted average number of diluted common shares
        outstanding (in 000's)

    The following table summarizes the common shares in calculating net
    earnings per share:

                                                        Three Months Ended
                                                        ------------------
                                                       March 31     March 31
                                                           2009         2008
    -------------------------------------------------------------------------

    Weighted average common shares
     outstanding - basic                                 18,013       18,333
    Effect of Stock options and Share Unit Plans            176          190
    -------------------------------------------------------------------------
    Weighted average common shares
     outstanding - diluted                               18,189       18,523


    Note 4 - Income taxes

    a)  The difference between the income tax provision recorded and the
        provision obtained by applying the combined federal and provincial
        statutory rates is as follows:

                                                   Three Months Ended
                                           ----------------------------------
                                                        March 31
                                             2009        %     2008        %
    -------------------------------------------------------------------------

    Income before income taxes              8,759             9,135
    Income taxes calculated at
     expected rates                         2,565     29.3    2,736     30.0
    Non-deductible items                      166      1.9       83      0.9
    Capital taxes                              16      0.2        8      0.1
    Adjustments on filing returns & other      10      0.1       26      0.3
    -------------------------------------------------------------------------
                                            2,757     31.5    2,853     31.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As of March 31, 2009 included in other current assets are income taxes
    receivable of $221,000 (December 31, 2008 - $3,405,000 payable).

    b)  Future income taxes reflect the net effects of temporary difference
        between the carrying amounts of assets and liabilities for financial
        reporting purposes and the amounts used for income tax purpose.

        Significant components of future income tax assets and liabilities
        are as follows:

    As at March 31                                         2009         2008
    -------------------------------------------------------------------------
    Assets
      Property and equipment                                836          891
      Share Unit Plan expense                               208          674
      Other                                                 274          291
    -------------------------------------------------------------------------
                                                          1,318        1,856
    Liabilities
      Goodwill and other                                    354          375
    -------------------------------------------------------------------------
    Net future income tax asset                             964        1,481
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company believes it is more likely than not that all future income
    tax assets will be realized.

    Note 5 - Capital Management

    The Company's primary source of capital is its shareholders equity and
    cash flow from operating activities before net changes in non-cash
    working capital balances. The Company augments these capital sources with
    a $60 million, 364 day bank operating loan facility which is used to
    finance its net working capital and general corporate requirements. The
    bank operating facility is arranged through a syndicate of three banks
    and matures in July 2009. The Company anticipates that its bank operating
    facility will be extended for an additional 364 day period in the normal
    course.

    The maximum amount available to borrow under this facility is subject to
    a borrowing base formula applied to accounts receivable and inventories,
    and a covenant restricting the Company's average guaranteed debt to 2.25
    times trailing 12 month earnings before interest, amortization and taxes.
    As at March 31, 2009, this ratio was 0.8 times (December 31, 2008 - 0.7
    times) and the maximum amount available to be borrowed under the facility
    was $60 million. In management's opinion, the Company's available
    borrowing capacity under its bank operating facility and ongoing cash
    flow from operations, are sufficient to resource its anticipated
    contractual commitments. The facility contains certain other restrictive
    covenants, which the Company was in compliance with as at March 31, 2009.

    Note 6 - Financial Instruments and Risk Management

    a)  Fair Values

    The Company's financial instruments recognized on the consolidated
    balance sheet consist of accounts receivable, accounts payable and
    accrued liabilities, bank operating loan, long term debt and obligations
    under capital leases. The fair values of these financial instruments,
    excluding the bank operating loan, long term debt and obligations under
    capital leases, approximate their carrying amounts due to their short-
    term maturity. At March 31, 2009, the fair value of the bank operating
    loan, long term debt and obligations under capital leases approximated
    their carrying values due to their floating interest rate nature and
    short term maturity.

    b)  Credit Risk

    A substantial portion of the Company's accounts receivable balance is
    with customers in the oil and gas industry and is subject to normal
    industry credit risks. The Company follows a program of credit
    evaluations of customer's and limits the amount of credit extended when
    deemed necessary.

    The Company maintains provisions for possible credit losses that are
    charged to selling, general and administrative expenses by performing and
    analysis of specific accounts. Movement of the allowance for credit
    losses for the three month periods ended March 31 was as follows:

    As at March 31                                         2009         2008
    -------------------------------------------------------------------------
    Opening balance                                       2,776        1,454
    Increase during period                                  168          698
    Write-offs                                             (425)           -
    -------------------------------------------------------------------------
    Closing balance                                       2,519        2,152
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Trade receivables over 90 days were 10% of total trade receivables as at
    March 31, 2009 (2008 - 9%).

    c)  Market Risk

    The Company is exposed to market risk from changes in the Canadian prime
    interest rate which can impact its borrowing costs. The Company purchases
    certain products in US dollars and sells such products to its customer
    typically priced in Canadian dollars. As a result, fluctuations in the
    value of the Canadian dollar relative to the US dollar can result in
    foreign exchange gains and losses.

    d)  Risk Management

    From time to time the Company enters into foreign exchange forward
    contracts to manage its foreign exchange market risk by fixing the value
    of its liabilities and future purchase commitments. The Company's foreign
    exchange risk arises principally from the settlement of the United States
    dollar denominated net working capital balances as a result of product
    purchases denominated in United States dollars. As at March 31, 2009, the
    Company had contracted to purchase US$2.0 million at fixed exchange rates
    with terms not exceeding six months. The fair market value of the
    contract was nominal.

    Note 7 - Related Party Transactions

    Smith International Inc. ("Smith") owns approximately 55% of the
    Company's outstanding shares. The Company is the exclusive distributor in
    Canada of down hole pump production equipment manufactured by Wilson
    Supply, a division of Smith. Purchases of such equipment conducted in the
    normal course on commercial terms were as follows:

                                                       March 31     March 31
                                                           2009         2008
    -------------------------------------------------------------------------

    Cost of sales for the Three months ended              1,674        3,056

    Inventory                                             4,286        4,295

    Accounts Payable and accrued liabilities                128          943


    The Company pays facility rental expense to an operations manager in the
    capacity of landlord, reflecting market based rates. For the three month
    period ended March 31, 2009, these costs totaled $210,000 (2008 $24,000).

    Note 8 - Segmented reporting

    The Company distributes oilfield products principally through its network
    of 44 branches located in western Canada to oil and gas industry
    customers. Accordingly, the Company has determined that it operated
    through a single operating segment and geographic jurisdiction.
    





For further information:

For further information: Investor Relations, 1-800-345-2858, (403)
531-5604, investor@cefranklin.com

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