ShawCor Ltd. announces third quarter results



    (TSX:SCL.A, SCL.B)

    TORONTO, Nov. 1 /CNW/ -

    
    Financial Summary

    (In thousands of
     Canadian dollars           Three Months Ended         Nine Months Ended
     except per share                     Sept. 30                  Sept. 30
     amounts)                    2007         2006         2007         2006
    -------------------------------------------------------------------------
                                          Restated                  Restated
    Operating Results                      (note 3)                  (note 3)
    Revenue               $   264,892  $   251,324  $   762,661  $   783,304
    EBITDA (note 1)            55,374       37,019      150,831      129,176
    Operating income
     from continuing
     operations                45,500       23,676      120,509       96,989
    Income from continuing
     operations                30,191       16,549       83,766       66,202
    Income (loss) from
     discontinued
     operations                   (59)           7         (162)        (220)
    Net income (loss)          30,132       16,556       83,604       65,982

    Net income (loss)
     per share (Class A
     and B) - Basic
      Continuing
       operations                0.42         0.22         1.15         0.89
      Discontinued
       operations                0.00         0.00         0.00         0.00
      Total                      0.42         0.22         1.15         0.89

    Net income (loss)
     per share (Class A
     and B) - Diluted
      Continuing
       operations                0.42         0.22         1.14         0.89
      Discontinued
       operations                0.00         0.00         0.00         0.00
      Total                      0.42         0.22         1.14         0.89
    -------------------------------------------------------------------------
    Cash Flow
    Cash from continuing
     operating activities      33,701       64,859       90,361      143,009
    Purchases of property,
     plant and equipment       23,943       22,710       63,304       42,591
    -------------------------------------------------------------------------
    Financial Position
    Working capital                                     287,584      307,781
    Total assets                                        931,959      948,565
    Shareholders' equity
     per share (Class A
     and B)                                         $      8.25  $      7.89
    -------------------------------------------------------------------------

    Note 1: EBITDA is a non-GAAP measure calculated by adding back to income
    from continuing operations, the sum of interest (income)/expense, taxes
    and depreciation/amortization. EBITDA does not have a standardized
    meaning prescribed by GAAP and is not necessarily comparable to similar
    measures prescribed by other companies. EBITDA is used by many analysts
    in the oil and gas industry as one of several important analytical tools.
    Note 2: Shareholders' equity per share is a non-GAAP measure calculated
    by dividing shareholders' equity by the number of Class A and Class B
    shares outstanding at the date of the balance sheet.
    Note 3: During the fourth quarter of 2006, ShawCor Ltd. adopted the
    proportionate consolidation method of accounting for its 30% investment
    in the Arabian Pipecoating Company Limited ("APCO"). The Company
    previously accounted for this investment using the equity method. This
    change in accounting policy has been applied retroactively and as a
    result, revenue, operating expenses and certain balance sheet accounts
    for previous periods have been restated. Refer to note 2 of the 2006
    annual consolidated financial statements.
    

    Consolidated revenue from continuing operations for the third quarter
totaled $264.9 million, 5% higher than in the third quarter of last year, with
the growth broadly-based across all divisions of the Company. This growth was
achieved despite the adverse impact of the stronger Canadian dollar in the
quarter, which increased by an average of 8% versus the third quarter of last
year, when compared to the U.S. dollar. On a year-to-date basis, consolidated
revenue from continuing operations totaled $762.7 million for the nine months
ended September 30, 2007, 97% of the level achieved in the same period of 2006
with the shortfall attributable to the strengthening of the Canadian dollar
during the period.
    Net income in the quarter totaled $30.1 million ($0.42 per diluted
share), compared to $16.6 million ($0.22 per diluted share) in the third
quarter of last year, with the improvement primarily reflecting a significant
improvement in operating margins. Consolidated operating margins (operating
income from continuing operations divided by revenue from continuing
operations) were 17.2% in the quarter compared to 9.4% in the third quarter of
last year. Net income for the first nine months of the year totaled
$83.6 million ($1.14 per diluted share) compared to $66.0 million ($0.89 per
diluted share) in the same period of 2006.
    The Company's backlog at September 30 remained strong at $411.2 million,
an increase of 9% from June 30. This strong backlog, together with continuing
high levels of bidding activity, is indicative of the increasing investments
in energy infrastructure globally and supports the Company's potential for
strong growth in the years ahead.

    MANAGEMENT'S DISCUSSION AND ANALYSIS

    The following is management's interim discussion and analysis of
operations and financial position and should be read in conjunction with the
Consolidated Financial Statements and Management's Discussion and Analysis
included in the Company's 2006 Annual Report.

    Revenue, Income from Operations and Net Income

    Consolidated Results

    Consolidated revenue from continuing operations for the third quarter
totaled $264.9 million, 5% higher than in the third quarter of last year, with
the growth broadly-based across all divisions of the Company. This growth was
achieved despite the adverse impact of the stronger Canadian dollar in the
quarter. The Canadian dollar versus the U.S. dollar was 8% stronger on average
this quarter compared with the third quarter of last year. This adversely
impacted the translation of the Company's U.S.-denominated revenue into
Canadian dollars by approximately $13 million. Net income in the quarter
totaled $30.1 million ($0.42 per diluted share), compared to $16.6 million
($0.22 per diluted share) in the third quarter of last year, with the
improvement reflecting both increased revenue and improved operating margins,
partially offset by the adverse impact of the stronger Canadian dollar. The
impact of the appreciation of the Canadian dollar on the translation of the
Company's U.S. dollar-denominated revenue and operating expenses reduced
reported net income by approximately $3 million. Consolidated operating
margins (operating income from continuing operations divided by revenue from
continuing operations) were 17.2% in the quarter compared to 9.4% in the third
quarter of last year.
    Consolidated revenue from continuing operations in the third quarter
decreased 4% from the levels in the second quarter of this year, due in part
to the impact of the 5% strengthening of the Canadian dollar, versus the U.S.
dollar. Net income in the third quarter was slightly higher than in the prior
quarter, despite the lower revenue, due primarily to a quarter over quarter
improvement in foreign exchange gains of $3.3 million, mainly reflecting the
maturity of hedging instruments in the period. Diluted earnings per share in
the third quarter were $0.01 per share higher than in the previous quarter due
to the impact on diluted shares of share repurchases made under the Normal
Course Issuer Bid.
    On a year-to-date basis, consolidated revenue from continuing operations
totaled $762.7 million for the nine months ended September 30, 2007, 97% of
the level achieved in the same period of 2006 with the shortfall attributable
to the strengthening of the Canadian dollar during the period. The average
exchange rate between the Canadian and U.S. dollars strengthened by 3% during
the first nine months of 2007 versus the comparable period of last year. Net
income for the first nine months of the year totaled $83.6 million ($1.14 per
diluted share) compared to $66.0 million ($0.89 per diluted share) in the same
period of 2006.
    ShawCor classifies its revenue and income from operations in two industry
segments: Pipeline and Pipe Services, and Petrochemical and Industrial.
Discussion of the operating results of each of these segments follows:

    Pipeline and Pipe Services

    
    -------------------------------------------------------------------------
    Three months ended                    Sept. 30      June 30     Sept. 30
    (In thousands of Canadian dollars)        2007         2007         2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations    $227,779     $238,964     $216,889
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Income from continuing operations      $42,738      $46,378      $24,075
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                         18.8%        19.4%        11.1%
    -------------------------------------------------------------------------
    

    Current Quarter versus Q3 2006
    In the Pipeline and Pipe Services segment, revenue from continuing
operations totaled $227.8 million in the quarter and was 5% higher than in the
third quarter of last year, driven by strong results at Bredero Shaw,
Canusa-CPS and Shaw Pipeline Services. At Bredero Shaw, revenue increased over
the third quarter of last year reflecting strength in North America and the
Far East, partially offset by continuing softness in the North Sea market and
the impact of the temporary closure of the Ras Al Khaimah plant during an
upgrade and expansion program. In North America, pipe coating of the Rockies
Express and Corridor projects at the division's plant in Camrose, Alberta,
together with the Golden Pass project in the United States contributed to the
strong result while higher revenue in the Far East region was underpinned by
the Medgaz project at the division's plant in Kuantan, Malaysia. The North Sea
region of Bredero Shaw was adversely impacted by continuing softness in that
market. In the segment's other business units, revenue in the quarter at Shaw
Pipeline Services and Canusa-CPS grew strongly from levels in the third
quarter of last year as a result of international project work, while revenue
at Guardian was marginally lower reflecting continuing softness in Western
Canadian drilling activity. Operating income from continuing operations for
the segment of $42.7 million in the quarter was 78% higher than in the third
quarter of last year and reflected the impact of the higher revenue as well as
higher operating margins. Operating margins in the quarter of 18.8% were 7.7
percentage points higher than in the same quarter of 2006, reflecting improved
project execution and improved factory through-put resulting from the higher
business activity.

    Current Quarter versus Q2 2007
    Revenue for the segment in the quarter was 95% of the level achieved in
the second quarter of this year, with the shortfall mainly reflecting the
impact of the stronger Canadian dollar on the translation of the segment's
primarily U.S. dollar-based revenue. Operating income in the quarter was
$3.6 million lower than in the prior quarter due to the revenue decrease and
the unfavourable impact of the stronger Canadian dollar on operating margins.
Operating margins in the quarter were 0.6 percentage points lower than in the
previous quarter.
    On a year-to-date basis, revenue from continuing operations for the
Pipeline and Pipe Services segment totaled $649.1 million compared to
$678.4 million in the first nine months of 2006. Operating income from
continuing operations for period totaled $113.7 million (17.5% of revenue),
compared to $97.7 million (14.4% of revenue) last year.

    Petrochemical and Industrial

    
    -------------------------------------------------------------------------
    Three months ended                    Sept. 30      June 30     Sept. 30
    (In thousands of Canadian dollars)        2007         2007         2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations     $37,517      $38,178      $34,910
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Income from continuing operations       $6,274       $6,500       $5,039
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                         16.7%        17.0%        14.4%
    -------------------------------------------------------------------------
    

    Current Quarter versus Q3 2006
    In the Petrochemical and Industrial segment, revenue totaled
$37.5 million, 7% higher than in the third quarter of last year and reflected
increased business activity at both DSG-Canusa and ShawFlex, which both
experienced modest revenue growth. Operating income from continuing operations
in the quarter of $6.3 million increased 25% from the level recorded in the
third quarter of 2006, and reflected both the increased revenue and improved
operating margins. Operating margins in the quarter increased 2.3 percentage
points from the third quarter of last year to 16.7%.

    Current Quarter versus Q2 2007
    Revenue for the segment in the quarter was 98% of the level achieved in
the second quarter of the year with the decrease largely due to the
strengthening of the Canadian dollar compared to both the U.S. dollar and the
Euro. On average, the Canadian dollar was 5% stronger versus the U.S. dollar
and 3% stronger versus the Euro, compared to the prior quarter. This had an
adverse effect on the translation of the segment's revenue, particularly for
DSG-Canusa, whose business in mainly conducted in the U.S.A. and Europe.
Operating income for the segment decreased 3% from the previous quarter
reflecting the lower revenue and marginally lower operating margins.
    On a year-to-date basis, revenue for the segment totaled $115.2 million,
compared to $106.1 million in the first nine months of 2006, while operating
income from continuing operations totaled $19.8 million (17.1% of revenue),
compared to $13.6 million (12.8% of revenue) in the same period of last year.

    Financial and Corporate

    Financial and corporate costs consist of corporate office costs not
charged to the operating divisions and other non-operating items including
foreign exchange gains and losses on cash balances. Financial and corporate
costs for the quarter, before net foreign exchange gains of $1.5 million,
totaled $5.0 million compared to $6.9 million in the third quarter of last
year, before net foreign exchange gains of $1.5 million. Prior year financial
and corporate expenses were unusually high and included costs related to the
unsuccessful Garneau acquisition as well as increased management compensation
costs in line with the improved financial results of 2006.
    Financial and corporate expenses in the quarter were $905 thousand higher
than in the second quarter of the year, excluding foreign exchange gains and
losses, mainly the result of increased provision for management compensation
expenses reflective of improvements in the year's financial performance
outlook. Foreign exchange gains in the quarter totaled $1.5 million compared
to losses of $1.8 million in the prior quarter.
    On a year-to-date basis, financial and corporate costs totaled
$13.3 million, before foreign exchange gains of $428 thousand, compared to
$16.3 million before foreign exchange gains of $2.0 million in the first nine
months of 2006.

    Interest Income

    Net interest income totaled $811 thousand in the quarter, compared to
$881 thousand in the third quarter of last year. Net interest income was
however reduced from the $1.2 million earned in the second quarter of this
year as a result of lower average cash balances held during each period.
    On a year-to-date basis, net interest income totaled $3.6 million
compared to $1.4 million in the first nine months of last year.

    Income Taxes

    Income tax expense in the quarter was $15.9 million (34.4% of income
before income taxes) compared to $7.9 million (32.4% of income before taxes)
in the third quarter of 2006. Income tax expense in the second quarter of 2007
was $18.3 million (37.8% of income before taxes) and reflected the impact of
losses at the Company's Nigerian operations for which tax benefits were not
recorded.

    Cash Flow

    Cash flow generated from continuing operating activities in the quarter
totaled $33.7 million compared to $30.8 million in the prior quarter and
reflected increased investment in working capital compared to the previous
quarter. Cash flow from continuing operating activities in the third quarter
of 2006 was $64.9 million and reflected a significant reduction in working
capital balances during that period. On a year-to-date basis, cash flow
generated from continuing operating activities totaled $90.4 million compared
to $143.0 million in the first nine month of 2006, with the decrease due to
increased investment in working capital to support increased business levels,
partially offset by the impact of higher earnings compared to in 2006.
    Cash flow used in continuing investing activities in the quarter totaled
$23.4 million compared to $26.6 million last quarter and $31.8 million in the
third quarter of last year, and was comprised of capital expenditures of
$23.9 million, partially offset by proceeds received on the disposal of
property, plant and equipment of $503 thousand. Major capital additions in the
quarter included the pipe coating plant capacity expansions in Camrose,
Alberta and Ras Al Khaimah.
    Cash flow used in continuing financing activities in the quarter totaled
$4.5 million, compared to $70.6 million last quarter and $7.5 million in the
third quarter of 2006, and consisted of dividends paid of $4.1 million,
decreases in bank indebtedness of $351 thousand and $1.2 million paid to
repurchase 34,500 Class A Subordinate Voting Shares ("Class A Shares) at an
average price of $33.62, partially offset by $1.0 million received from the
issuance of Class A Shares on the exercise of stock options.

    Other Comprehensive Loss

    Other comprehensive loss in the quarter totaled $15.4 million and was
mainly comprised of an unrealized foreign currency translation loss of
$15.2 million, net of hedging activities, reflecting the significant
strengthening of the Canadian dollar versus the U.S. dollar in the quarter. On
a year-to-date basis, other comprehensive loss totaled $38.0 million and is
comprised of unrealized losses of $38.4 million, net of hedging activities, on
the translation of the financial statements of the Company's foreign
subsidiaries and a $1.1 million unrealized loss on an available-for-sale
financial asset, the Company's investment in a publicly listed company,
partially offset by an unrealized gain of $1.5 million on derivative financial
instruments designated as cash flow hedges.

    Liquidity and Capitalization

    At September 30, 2007, the Company recorded a working capital ratio (the
ratio of current assets to current liabilities) of 2.26 to 1 compared to 2.30
to 1 at the beginning of the quarter and 2.39 to 1 at the beginning of the
year. Operating working capital, excluding cash, cash equivalents and bank
indebtedness increased $6.9 million during the quarter to $71.8 million,
mainly reflecting increases in accounts receivable stemming from the high
levels of sales experienced at the end of the second quarter and the early
part of the third quarter, together with increased prepaid expenses related to
preparation for upcoming pipe coating projects.

    Change in Accounting Policies

    On January 1, 2007, the Company adopted the Canadian Institute of
Chartered Accountants' Handbook Section 1530, Comprehensive Income; Section
3855, Financial Instruments - Recognition and Measurement; Section 3861,
Financial Instruments - Disclosure and Presentation; and Section 3865, Hedges.
These changes require the Company to classify all financial assets as
held-for-trading, designated at fair value, available-for-sale,
held-to-maturity, or loans and receivables. The new accounting standards also
require the Company to measure all financial assets, including derivatives and
excluding loans and receivables, debt securities classified as
held-to-maturity and available-for-sale equities that do not have quoted
market values in an active market, at fair values. Changes in the fair values
of financial assets classified as held-for-trading and of derivatives that are
not considered effective hedges are charged to net income. Changes in the fair
values of financial assets classified as available-for-sale and derivatives
that are considered effective hedges are charged to other comprehensive
income. As required, these new accounting standards have been applied as an
adjustment to opening retained earnings and accumulated other comprehensive
income. Prior period figures have not been restated. Refer to note 1 to the
third quarter 2007 interim financial statements for further information.

    Financial Instruments

    The following table sets out the notional amounts outstanding under
foreign exchange contracts, the average contractual exchange rates and the
settlement of these contracts as at September 30, 2007:

    
    (in thousands)
    -------------------------------------------------------------------------
                          Maturity
    -------------------------------------------------------------------------
    U.S. dollars sold for Canadian dollars
    -------------------------------------------------------------------------
      Less than one year                                           US$11,750
    -------------------------------------------------------------------------
      Weighted average rate                                           1.1108
    -------------------------------------------------------------------------
    

    At September 30, 2007, the Company had notional amounts of $11.8 million
of forward contracts outstanding (December 31, 2006 - $38.7 million) with the
fair value of the Company's net benefit of all foreign exchange forward
contracts totaling $1.3 million (December 31, 2006 - $3.1 million liability).

    Critical Accounting Estimates

    The preparation of the consolidated financial statements in conformity
with Canadian Generally Accepted Accounting Principles ("GAAP") requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. These estimates and assumptions are made with
management's best judgment given the information available at the time;
however, actual results could differ from the estimates. Critical estimates
used in preparing the consolidated financial statements were materially
unchanged during the quarter, as compared to those disclosed in the Company's
last annual Management's Discussion and Analysis contained in the Company's
2006 annual report.

    Risks and Uncertainties

    Operating in an international environment, servicing predominantly the
oil and gas industry, ShawCor faces a number of business risks and
uncertainties that could materially adversely affect the Company's
projections, businesses, results of operations and financial condition. There
were no material changes in the nature or magnitude of such business risks
during the quarter. A more complete outline of the risks and uncertainties
facing the Company are included in the annual Management's Discussion and
Analysis.

    Contractual Obligations

    There were no material changes to the Company's contractual obligations
during the quarter, other than those that would be expected in the ordinary
course of business.

    Summary of Quarterly Results

    The following is a summary of selected financial information for the
eleven most recently completed quarters:

    
    (In thousands
     of Canadian
     dollars
     except per
     share
     amounts)      First       Second        Third       Fourth    Full Year
    -------------------------------------------------------------------------
    Revenue
     (Restated
     - see note
     below)
      2007   $   221,329  $   276,440  $   264,892  $            $
      2006       262,547      269,433      251,324      276,315    1,059,619
      2005       244,952      231,995      241,639      293,867    1,012,453

    Operating
     income
     from
     continuing
     operations
     (Restated
     - see note
     below)
      2007        27,972       47,036       45,500
      2006        37,478       35,835       23,677       41,790      138,780
      2005        29,326       12,509       21,882       31,737       95,454

    Income from
     continuing
     operations
      2007        23,308       30,267       30,191
      2006        24,755       24,898       16,549       26,722       92,924
      2005        18,688        7,516       34,806       21,780       82,790

    Income
     (loss) from
     discontinued
     operations
      2007           (55)         (48)         (59)
      2006           (35)        (192)           7          (69)        (289)
      2005          (930)       2,224       55,946       (1,190)      56,050

    Net income
      2007        23,253       30,219       30,132
      2006        24,720       24,706       16,556       26,653       92,635
      2005        17,758        9,740       90,752       20,590      138,840

    Operating
     income from
     continuing
     operations
     per share
     (Classes
     A and B)
    Basic
      2007          0.38         0.64         0.63
      2006          0.51         0.48         0.32         0.56         1.87
      2005          0.39         0.17         0.29         0.42         1.27

    Diluted
      2007          0.37         0.63         0.63
      2006          0.51         0.48         0.32         0.56         1.87
      2005          0.39         0.17         0.29         0.42         1.27

    Income from
     continuing
     operations
     per share
     (Classes
     A and B)
    Basic
      2007          0.31         0.41         0.42
      2006          0.33         0.34         0.22         0.36         1.25
      2005          0.25         0.10         0.45         0.30         1.10

    Diluted
      2007          0.31         0.41         0.42
      2006          0.33         0.34         0.22         0.36         1.25
      2005          0.25         0.10         0.45         0.30         1.10

    Income
     (loss) from
     discontinued
     operations
     per share
     (Classes
     A and B)
    Basic and
     Diluted
      2007          0.00         0.00         0.00
      2006          0.00         0.00         0.00         0.00         0.00
      2005         (0.01)        0.03         0.75        (0.02)        0.75

    Net income
     per share
     (Classes
     A and B)
    Basic
      2007          0.31         0.41         0.42
      2006          0.33         0.34         0.22         0.36         1.25
      2005          0.24         0.13         1.20         0.28         1.85

    Diluted
      2007          0.31         0.41         0.42
      2006          0.33         0.34         0.22         0.36         1.25
      2005          0.24         0.13         1.20         0.28         1.85
    -------------------------------------------------------------------------

    Note: Quarterly revenue and operating income from continuing operations
    figures have been restated to reflect the change in accounting treatment
    for the Company's investment in the Arabian Pipecoating Company Limited
    adopted in the fourth quarter of 2006. Please refer to note 2 to the 2006
    annual Consolidated Financial Statements.
    

    The following are key factors affecting the comparability of quarterly
financial results.
    The Company's operations in the Pipeline and Pipe Services segment,
representing more than 80% of the Company's consolidated revenue, are largely
project-based. The nature and timing of projects can result in variability in
the Company's quarterly revenue and profitability. In addition, certain of the
Company's operations are subject to a degree of seasonality particularly in
the Pipeline and Pipe Services market segment. The following are additional
key factors impacting the comparability of the quarterly information disclosed
above:

    
        The majority of the Company's revenue is transacted in currencies
        other than Canadian dollars, with a majority transacted in
        U.S. dollars. Changes in the rates of exchange between the Canadian
        dollar and other currencies could have a significant effect on the
        amount of this revenue when it is translated into Canadian dollars.

        On November 3, 2004, the Company announced the closure of its Mobile,
        Alabama facility. This event had a significant impact on the
        financial results for the fourth quarter of 2004. Operations at the
        facility ceased in the fourth quarter of 2005 and discontinued
        operations accounting treatment was adopted in that quarter with
        prior quarters restated on a comparable basis.

        On September 30, 2005, the Company completed the sale of its OMSCO
        drill pipe manufacturing division. The division has been accounted
        for as a discontinued operation.
    

    Outstanding Share Capital

    As at October 30, 2007, the Company had 58,642,770 Class A Subordinate
Voting Shares ("Class A") outstanding and 13,078,142 Class B Multiple Voting
Shares ("Class B") outstanding. Each Class B share is convertible into a Class
A share at the option of the holder. In addition, as at October 30, 2007, the
Company had stock options outstanding to purchase up to 2,240,280 Class A
shares.

    Management's Health, Safety and Environmental Commitment

    The Company is committed to providing a safe and healthy workplace and
ensuring that all business activities are conducted in a manner that protects
the environment. This commitment includes designing and operating its plants
and individual processes in compliance with applicable government requirements
regulating the discharge of substances into the environment or otherwise
relating to the protection of the environment. The Company's program for
health, safety and environmental management is further described in the
Company's Annual Information Form under Health, Safety, and Environmental
Policy.

    Outlook

    The Company's consolidated order backlog at September 30, 2007,
representing the value of firm customer purchase orders expected to be
completed within one year, was $411.2 million, 9% higher than at the end of
the second quarter, and reflected several new projects including a U.S.
$57 million portion of the U.S. $85 million Pluto project, announced
October 9, which is expected to be completed within twelve months.
    The Company's current outlook for 2007 indicates that revenue will be
slightly reduced from 2006 as a result of weakness in the fourth quarter from
the continued strength of the Canadian dollar and a temporary decline in pipe
coating activity from the levels experienced during the second and third
quarters of the year, due in part to the slippage of pipe coating projects in
Ras Al Khaimah and Brazil into the first quarter of 2008. The slow down is
expected to be short-term and activity levels are expected to increase again
in the first quarter of 2008. The Company continues to pursue significant
business opportunities globally, and is in the process of bidding major
offshore pipeline projects in Northern Europe. Success in securing these
projects, together with the buoyant market outlook in North America, the
Middle East and the Far East could result in significant revenue growth during
the next few years.

    Forward Looking Information

    This document includes certain statements that reflect management's
expectations and objectives for ShawCor's future performance, opportunities
and growth which constitute forward-looking information under applicable
securities laws. Such statements, except to the extent that they contain
historical facts, are forward-looking and accordingly involve estimates,
assumptions, judgments and uncertainties. These statements may be identified
by the use of forward-looking terminology such as "may," "will," "should",
"anticipate," "expect", "believe", "predict", "estimate," "continue,"
"intend," "plan," and variations of these words or other similar expressions.
These statements are based on assumptions, estimates and analysis made by
ShawCor in light of its experience and perception of trends, current
conditions and expected developments as well as other factors believed to be
reasonable and relevant in the circumstances. Although ShawCor believes that
the expectations reflected in these forward-looking statements are based on
reasonable assumptions in light of currently available information, ShawCor
can give no assurance that such expectations will be achieved.
    Forward-looking statements involve known and unknown risks and
uncertainties that could cause actual results to differ materially from those
predicted, expressed or implied by the forward-looking statements. Significant
risks facing ShawCor include, but are not limited to: changes in global
economic activity and changes in energy supply and demand which impact on the
level of drilling activity and pipeline construction; political, economic and
other risks arising from ShawCor's international operations; compliance with
environmental, trade and other laws; liability claims; fluctuations in foreign
exchange rates; fluctuations in prices of raw materials, as well as other
risks and uncertainties.

    Other information relating to the Company, including its Annual
Information Form, is available on SEDAR at www.sedar.com.

    ShawCor will be hosting a Shareholder and Analyst Conference Call and
Webcast on November 2, 2007 at 10:00 a.m. ET to discuss the Company's third
quarter 2007 financial results. Please visit our website at www.shawcor.com
for further details.


    
    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars except per share data)

    CONSOLIDATED STATEMENTS OF INCOME

                             Three Months Ended         Nine Months Ended
                                September 30               September 30
                          ------------------------- -------------------------
                              2007         2006         2007         2006
                                         Restated                  Restated
                                         (note 1)                  (note 1)
                          ------------ ------------ ------------ ------------

    Revenue               $   264,892  $   251,324  $   762,661  $   783,304
                          ------------ ------------ ------------ ------------
    Operating expenses
     (notes 2,  3 and 4)      207,431      212,876      607,219      648,828
    Amortization               10,050       13,397       29,783       33,215
    Research and
     development                1,911        1,375        5,150        4,272
                          ------------ ------------ ------------ ------------
                              219,392      227,648      642,152      686,315
                          ------------ ------------ ------------ ------------
    Operating income from
     continuing operations     45,500       23,676      120,509       96,989
    Interest income (note 5)      811          881        3,638        1,364
                          ------------ ------------ ------------ ------------
    Income before income
     taxes and non-
     controlling interest      46,311       24,557      124,147       98,353

    Income taxes               15,943        7,954       40,920       31,123
                          ------------ ------------ ------------ ------------
    Income before non-
     controlling interest      30,368       16,603       83,227       67,230
    Non-controlling interest     (177)         (54)         539       (1,028)
                          ------------ ------------ ------------ ------------

    Income from continuing
     operations                30,191       16,549       83,766       66,202
    Income (loss) from
     discontinued
     operations (note 7)          (59)           7         (162)        (220)
                          ------------ ------------ ------------ ------------
    Net income            $    30,132  $    16,556  $    83,604  $    65,982
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Earnings per share,
     Class A and B - Basic
     (note 19)
      Continuing
       operations         $      0.42  $      0.22  $      1.15  $      0.89
      Discontinued
       operations                   -            -            -            -
                          ------------ ------------ ------------ ------------
      Total               $      0.42  $      0.22  $      1.15  $      0.89
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Earnings per share
     Class A and B -
     Diluted (note 19)
      Continuing
       operations         $      0.42  $      0.22  $      1.14  $      0.89
      Discontinued
       operations                   -            -            -            -
                          ------------ ------------ ------------ ------------
      Total               $      0.42  $      0.22  $      1.14  $      0.89
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

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


    SEGMENTED INFORMATION
                              Three Months Ended        Nine Months Ended
                                 September 30              September 30
                          ------------------------- -------------------------
                              2007         2006         2007         2006
                                         Restated                  Restated
                                         (note 1)                  (note 1)
                          ------------ ------------ ------------ ------------
    Revenue
      Pipeline and Pipe
       Services           $   227,779  $   216,889  $   649,111  $   678,377
      Petrochemical and
       Industrial              37,517       34,910      115,215      106,143
      Intersegment
       Eliminations              (404)        (475)      (1,665)      (1,216)
                          ------------ ------------ ------------ ------------
                          $   264,892  $   251,324  $   762,661  $   783,304
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Income (loss) from
     operations
      Pipeline and Pipe
       Services           $    42,738  $    24,075  $   113,652  $    97,667
      Petrochemical and
       Industrial               6,274        5,039       19,757       13,603
      Financial and
       Corporate               (3,512)      (5,438)     (12,900)     (14,281)
                          ------------ ------------ ------------ ------------
                          $    45,500  $    23,676  $   120,509  $    96,989
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars)

    CONSOLIDATED STATEMENTS OF CASH FLOW

                             Three Months Ended         Nine Months Ended
                                 September 30              September 30
                          ------------------------- -------------------------
                              2007         2006         2007         2006
                                         Restated                  Restated
                                         (note 1)                  (note 1)
                          ------------ ------------ ------------ ------------
    Operating activities:
      Income from
       continuing
       operations         $    30,191  $    16,549  $    83,766  $    66,202
      Items not requiring
       an outlay of cash:
        Amortization of
         property plant
         and equipment         10,050       13,397       29,783       33,215
        Amortization of
         deferred financing
         costs                    146          140          433          368
        Stock-based
         compensation
         (note 2)                 696          738        2,068        2,139
        Accretion expense
         on asset
         retirement
         obligations              160           58          549          174
        Future income taxes      (496)      (1,793)         139       (4,680)
        Non-controlling
         interest in
         earnings of
         subsidiaries             177           54         (539)       1,028
        Change in employee
         future benefits          457          675        2,219          853
        Change in non-cash
         working capital
         and other             (7,680)      35,041      (28,057)      43,710
                          ------------ ------------ ------------ ------------
    Cash provided by
     continuing operating
     activities                33,701       64,859       90,361      143,009
                          ------------ ------------ ------------ ------------

    Investing activities:
      Purchases of property,
       plant and equipment    (23,943)     (22,710)     (63,304)     (42,591)
      Proceeds on disposal of
       property, plant and
       equipment                  503           76          705          117
      Acquisition of
       subsidiary (note 18)         -       (8,555)      (2,579)      (8,555)
      Investment in shares          -            -         (301)           -
      Remeditaion of asset
       retirement
       obligations                 47         (565)      (2,506)        (565)
                          ------------ ------------ ------------ ------------
    Cash used in continuing
     investing activities     (23,393)     (31,754)     (67,985)     (51,594)
                          ------------ ------------ ------------ ------------

    Financing activities:
      Decrease in bank
       indebtedness              (351)      (1,027)      (4,018)      (1,793)
      Issue of shares           1,028          378        4,712          956
      Purchase of shares
       for cancellation        (1,161)      (3,609)     (77,923)      (7,797)
      Dividends paid to
       shareholders            (4,054)      (3,275)     (12,413)      (6,557)
                          ------------ ------------ ------------ ------------
    Cash used in continuing
     financing activities      (4,538)      (7,533)     (89,642)     (15,191)
                          ------------ ------------ ------------ ------------

    Foreign exchange on
     foreign cash and
     cash equivalents          (8,637)          (5)     (20,403)      (5,726)
                          ------------ ------------ ------------ ------------
    Net cash provided by
     (used in) continuing
     operations                (2,867)      25,567      (87,669)      70,498

    Net cash used in
     discontinued
     operations (note 7)       (3,896)        (957)      (5,842)        (695)

    Cash and cash
     equivalents at
     beginning of period      222,574      245,528      309,322      200,335
                          ------------ ------------ ------------ ------------
    Cash and cash
     equivalents at end
     of period            $   215,811  $   270,138  $   215,811  $   270,138
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars)

    CONSOLIDATED BALANCE SHEETS

                                                      Sept. 30      Dec. 31
                                                        2007         2006
                                                    ------------ ------------
    Assets
    Current assets
      Cash and cash equivalents                     $   215,811  $   309,322
      Accounts receivable                               192,019      188,865
      Inventories                                        85,644       79,662
      Taxes receivable                                    3,194        4,293
      Prepaid expenses                                   17,079       12,897
      Derivative financial instruments                    1,301            -
      Future income taxes                                   807            -
      Current assets of discontinued operation
       (note 7)                                               2          156
                                                    ------------ ------------
                                                        515,857      595,195
    Property, plant and equipment, net                  226,896      202,078
    Goodwill                                            161,297      175,813
    Future income taxes                                  21,256       25,404
    Other assets (note 8)                                 6,653        9,536
                                                    ------------ ------------
                                                    $   931,959  $ 1,008,026
                                                    ------------ ------------
                                                    ------------ ------------
    Liabilities
    Current liabilities
      Bank indebtedness (note 9)                    $        76  $     4,094
      Accounts payable and accrued liabilities          155,308      169,387
      Deferred revenues                                  22,092       10,907
      Taxes payable                                      48,842       57,010
      Current liabilities of discontinued operation
       (note 7)                                           1,955        7,789
                                                    ------------ ------------
                                                        228,273      249,187
    Long-term debt                                       73,834       87,480
    Future income taxes                                  25,642       30,496
    Other non-current liabilities (note 10)               8,909        5,923
                                                    ------------ ------------
                                                        336,658      373,086
                                                    ------------ ------------

    Non-controlling interest in subsidiaries              3,453        5,013

    Shareholders' Equity
    Capital stock (note 11)                             204,379      206,852
    Contributed surplus (note 12)                        11,139       10,603
    Retained earnings                                   499,987      498,001
    Accumulated other comprehensive loss (note 13)     (123,657)     (85,529)
                                                    ------------ ------------
                                                        591,848      629,927
                                                    ------------ ------------
                                                    $   931,959  $ 1,008,026
                                                    ------------ ------------
                                                    ------------ ------------



    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars)

    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                              Three Months Ended        Nine Months Ended
                                 September 30              September 30
                          ---------------------------------------------------
                              2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
    Balance at beginning
     of period            $   474,950  $   464,292  $   498,001  $   421,547
    Net income                 30,132       16,556       83,604       65,982
                          ------------ ------------ ------------ ------------
                              505,082      480,848      581,605      487,529
    Excess of purchase
     price paid over
     stated value of
     shares (Note 11)          (1,041)      (2,957)     (69,205)      (6,356)
    Dividends paid             (4,054)      (3,275)     (12,413)      (6,557)
                          ------------ ------------ ------------ ------------
    Balance at end
     of period            $   499,987  $   474,616  $   499,987  $   474,616
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                    Three Months Ended    Nine Months Ended
                                       September 30          September 30
                                  --------------------- ---------------------
                                     2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------

    Net income                    $  30,132  $  16,556  $  83,604  $  65,982
    Other comprehensive income
     (loss), net of income taxes:
      Unrealized loss on
       translating financial
       statements of self-
       sustaining foreign
       operations                   (19,553)      (860)   (48,778)    (5,135)
      Gain on hedges of unrealized
       foreign currency
       translation                    5,198          -     12,473          -
      Income tax expense               (883)         -     (2,120)         -
                                  ---------- ---------- ---------- ----------
    Unrealized foreign currency
     translation loss, net
     of hedging activites           (15,238)      (860)   (38,425)    (5,135)
                                  ---------- ---------- ---------- ----------
      Unrealized loss on
       available-for-sale
       financial assets arising
       during the period               (312)         -     (1,595)         -
      Income tax benefit                106          -        542          -
                                  ---------- ---------- ---------- ----------
    Change in unrealized loss on
     available-for-sale
     financial assets                  (206)         -     (1,053)         -
                                  ---------- ---------- ---------- ----------
      Gain on derivatives
       designated as cash
       flow hedges                    1,151          -      3,296          -
      Income tax expense               (393)         -     (1,121)         -
      Gain on derivatives
       designated as cash flow
       hedges in prior periods
       transferred to net income
       in the current period         (1,104)         -     (1,070)         -
      Income tax expenses
       transferred to net income
       in the current period            376          -        364          -
                                  ---------- ---------- ---------- ----------
    Change in gain on derivatives
     designated as cash flow hedges      30          -      1,469          -
                                  ---------- ---------- ---------- ----------

    Other comprehensive loss        (15,414)       (860)  (38,009)    (5,135)
                                  ---------- ---------- ---------- ----------

    Comprehensive income          $  14,718  $   15,696  $ 45,595  $  60,847
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    ShawCor Ltd.

    Notes to the Consolidated Financial Statements (Unaudited)

    1.  Accounting policies

    The accompanying unaudited interim consolidated financial statements of
    ShawCor Ltd. (the "Company") have been prepared in accordance with
    Canadian generally accepted accounting principles ("GAAP") for the
    preparation of interim financial statements. They do not include all of
    the information and disclosures required by GAAP for annual consolidated
    financial statements. Except as noted below, these unaudited interim
    financial statements have been prepared in accordance with accounting
    policies outlined in the Company's audited financial statements for the
    year ended December 31, 2006. Accordingly, these interim financial
    statements should be read in conjunction with the Company's annual
    consolidated financial statements.

    In the fourth quarter of 2006, the Company adopted the proportionate
    consolidation method of accounting for its 30% investment in the Arabian
    Pipecoating Company. This change in accounting policy was applied
    retroactively with comparative figures restated. The Company previously
    accounted for this investment using the equity method.

    On January 1, 2007, the Company adopted the Canadian Institute of
    Chartered Accountants' Handbook Section 1530, Comprehensive Income;
    Section 3251, Equity, Section 3855, Financial Instruments - Recognition
    and Measurement; Section 3861, Financial Instruments - Disclosure and
    Presentation; and Section 3865, Hedges. As required, these new accounting
    standards have been adopted prospectively with an adjustment to
    accumulated other comprehensive income. Prior period figures have not
    been restated. The following adjustments were made to the Company's
    balance sheet as a result of these changes:

    (in thousands of Canadian dollars)                          Jan. 1, 2007
    -------------------------------------------------------------------------

    Increase (decrease) in assets
      Other assets                                               $      (760)
                                                                 ------------
    Total increase (decrease) in assets                          $      (760)
                                                                 ------------
                                                                 ------------

    Increase (decrease) in liabilities
      Derivative financial instruments liability                 $       925
      Current future taxes payable                                      (315)
      Future taxes                                                       253
      Long-term debt                                                  (1,504)
                                                                 ------------
    Total increase (decrease) in liabilities                            (641)
                                                                 ------------

    Increase (decrease) in shareholders' equity
      Accumulated other comprehensive income related to
       available-for-sale financial assets                               491
      Accumulated other comprehensive income related to
       cash flow hedges                                                 (611)
                                                                 ------------
    Total increase (decrease) in shareholders' equity                   (119)
                                                                 ------------
    Total increase (decrease) in liabilities and shareholders'
     equity                                                      $      (760)
                                                                 ------------
                                                                 ------------

    The following is a description of the accounting policies adopted by the
    Company as a result of implementing these accounting changes:

    a)  Comprehensive income

    The Company's comprehensive income is comprised of net income and other
    comprehensive income, which is made up of unrealized foreign currency
    gains or losses on the translation of the financial statements of self-
    sustaining foreign operations, unrealized gains or losses on available-
    for-sale financial assets and changes in unrealized gains or losses on
    derivatives designated as effective cash flow hedges.

    b)  Accumulated other comprehensive income

    Accumulated other comprehensive income is included on the consolidated
    balance sheet as a separate component of shareholders' equity and
    includes accumulated unrealized foreign currency gains or losses on the
    translation of the financial statements of self-sustaining foreign
    operations, accumulated unrealized gains or losses on available-for-sale
    financial assets and accumulated unrealized gains or losses on
    derivatives designated as effective cash flow hedges.

    c)  Financial instruments

    Held-for-trading financial assets are financial assets which are acquired
    for resale prior to maturity. Held-for-trading financial assets are
    reflected in the consolidated balance sheet at fair value with changes in
    fair value during a period charged to operating expenses. Held-to-
    maturity financial assets are non-derivative financial assets with a
    fixed maturity which the Company intends to hold until maturity. Such
    assets are measured at amortized cost. Available-for-sale financial
    assets are those non-derivative financial assets which are so designated
    by the Company or that do not fall into another category. Available-for-
    sale financial assets are carried on the consolidated balance sheet at
    fair value with gains or losses from changes in fair value in a period
    included in other comprehensive income. Derivative financial instruments
    designated as effective cash flow hedges are reflected in the
    consolidated balance sheet at fair value with any gains or losses
    resulting from fair value changes included in other comprehensive income
    to the extent of hedge effectiveness. Derivatives with positive exposures
    are classified as assets while those with negative exposures are
    classified as liabilities. Derivative financial instruments not
    designated as effective cash flow hedges are carried at fair value in the
    consolidated balance sheet with gains or losses resulting from changes in
    fair value in a period charged to operating expenses. Loans and
    receivables and other liabilities not held for trading are accounted for
    at amortized cost.

    The following is a summary of the classes of financial instruments
    included in the Company's consolidated balance sheet as well as their
    designation by the Company under the new accounting standards:

    -------------------------------------------------------------------------
            Balance sheet item                       Designation
    -------------------------------------------------------------------------
    Cash and cash equivalents                  Held-for-trading
    -------------------------------------------------------------------------
    Accounts receivable                        Loans and receivables
    -------------------------------------------------------------------------
    Long-term investments                      Available-for-sale
    -------------------------------------------------------------------------
    Accounts payable and accrued liabilities   Other liabilities
    -------------------------------------------------------------------------
    Long-term debt                             Other liabilities
    -------------------------------------------------------------------------
    Bank indebtedness                          Held-for-trading
    -------------------------------------------------------------------------

    d)  Transaction costs

    Transaction costs related to the acquisition or issue of held-for-trading
    financial instruments are charged to net income as incurred. Transaction
    costs related to financial instruments not designated as held-for-trading
    are included in the financial instrument's initial recognition amount.

    2.  Stock-based compensation

    The compensation cost from the continuing amortization of granted stock
    options for the three months and nine months ended September 30, 2007,
    included in operating expenses, is $696 thousand and $2.1 million,
    respectively (September 30, 2006 - $738 thousand and $2.1 million,
    respectively).

    3.  Foreign exchange gains and losses

    Included in operating expenses for the three months ended
    September 30, 2007 are foreign exchange gains totaling $1.5 million,
    while foreign exchange gains for the nine months ended September 30, 2007
    totaled $428 thousand (September 30, 2006 - gains of $1.5 million and
    $2.0 million, respectively). These gains arise from foreign currency
    transactions and from the translation of the financial statements of
    foreign integrated subsidiaries.

    4.  Employee future benefits

    The Company's cost under both defined benefit and defined contribution
    arrangements included in operating expenses for the three months and nine
    months ended September 30, 2007 is $2.3 million and $7.2 million,
    respectively (September 30, 2006 - $2.8 million and $8.0 million,
    respectively)

    5.  Interest income (expense)

                             Three Months Ended         Nine Months Ended
    (in thousands of              Sept. 30                  Sept. 30
     Canadian dollars)        2007         2006         2007         2006
    -------------------------------------------------------------------------

    Interest on short-term
     deposits             $     2,291  $     2,275  $     8,099  $     6,313
    Interest on bank
     indebtedness                (225)        (115)        (531)        (973)
    Interest on long-term
     debt                      (1,255)      (1,279)      (3,930)      (3,976)
                          ---------------------------------------------------
                          $       811  $       881  $     3,638  $     1,364
                          ---------------------------------------------------
                          ---------------------------------------------------

    Net interest paid during the three months and nine months ended
    September 30, 2007 totaled $811 thousand and $4.7 million, respectively
    (September 30, 2006 - $945 thousand and $1.4 million, respectively).

    6.  Income taxes

    Net income taxes paid during the three months and nine months ended
    September 30, 2007 totaled $11.5 million and $49.5 million, respectively
    (September 30, 2006 - $8.8 million and $31.8 million, respectively).

    7.  Discontinued operations

    On November 2, 2004, the Company announced its decision to close the
    Mobile, Alabama pipe-coating facility and operations at the facility
    ceased in the fourth quarter of 2005. The Company adopted discontinued
    operations accounting treatment for the Mobile facility in the fourth
    quarter of 2005.

    The following table summarizes the financial results and cash flows from
    discontinued operations for the three months and nine months ended
    September 30, 2007 and 2006 and the assets and liabilities of the
    discontinued operations as at those dates, respectively:

                             Three Months Ended         Nine Months Ended
    (in thousands of               Sept. 30                  Sept. 30
     Canadian dollars)        2007         2006         2007         2006
    -------------------------------------------------------------------------

    Revenue               $         -  $         -  $         -  $        60
                          ---------------------------------------------------

    Loss from operations          (59)           7         (162)        (220)
    Interest expenses                                         -            -
                          ---------------------------------------------------
    Loss from discontinued
     operations before
     income taxes                 (59)           7         (162)        (220)
    Income tax expense              -            -            -            -
                          ---------------------------------------------------
    Loss from discontinued
     operations           $       (59) $         7  $      (162) $      (220)
                          ---------------------------------------------------
                          ---------------------------------------------------

                          ---------------------------------------------------
    Cash flow from
     (used in) operating
     activities           $    (3,896) $      (957) $    (5,842) $      (695)
                          ---------------------------------------------------
                          ---------------------------------------------------

    Current assets                                  $         2  $       108
    Property, plant and
     equipment, net                                           -        4,659
    Current liabilities                             $     1,955  $     7,770


    8.  Other assets

                                                      Sept. 30      Dec. 31
    (in thousands of Canadian dollars)                  2007         2006
    -------------------------------------------------------------------------

    Long-term investment                            $     2,325  $     2,875
    Deferred financing costs                                483        2,089
    Accrued employee future benefit asset                 3,845        4,572
                                                    -------------------------
      Total                                         $     6,653  $     9,536
                                                    -------------------------
                                                    -------------------------

    Other assets include a long-term investment in Garneau Inc., a Canadian-
    based, publicly traded pipe-coating company. This investment is
    classified as available-for-sale under the new accounting standards
    related to financial instruments and accordingly, subsequent to
    January 1, 2007, is carried at fair value with changes in fair value
    charged to other comprehensive income.

    9.  Bank indebtedness

    At September 30, 2007, the Company had operating credit lines of
    $175.0 million (December 31, 2006 - $204.1 million), net of $75.6 million
    of various standby letters of credit for performance and bid bonds
    (December 31, 2006 - $74.1 million) and bank indebtedness of nil
    (December 31, 2006 - $3.0 million), excluding the Company's proportionate
    share of the bank indebtedness of its joint venture, Arabian Pipecoating
    Company Limited.

    10.  Other non-current liabilities

                                                      Sept. 30      Dec. 31
    (in thousands of Canadian dollars)                  2007         2006
    -------------------------------------------------------------------------

    Non-current asset retirement obligations        $     5,055  $     3,561
    Accrued employee future benefit obligations           3,854        2,362
                                                    -------------------------
      Total                                         $     8,909  $     5,923
                                                    -------------------------
                                                    -------------------------

    11. Capital stock

    (in thousands of Canadian dollars                 Sept. 30,    Dec. 31,
     except share information)                          2007         2006
    -------------------------------------------------------------------------
    Number of shares: Class A
    Balance, beginning of the period                 60,914,175   61,006,045
    Issued - stock options                              303,195      331,157
    Conversions Class B to Class A                            -        9,873
    Purchase and cancelled under Normal Course
     Issuer Bid                                      (2,574,600)    (432,900)
                                                    -------------------------
    Balance, end of the period                       58,642,770   60,914,175
                                                    -------------------------
    Number of shares: Class B                        13,078,142   13,078,142
                                                    -------------------------
    Total number of shares                           71,720,912   73,992,317
                                                    -------------------------
                                                    -------------------------

    Stated value: Class A
    Balance, beginning of the period                $   205,848  $   203,716
    Issued - stock options                                6,245        3,573
    Conversion Class B to Class A                             -            -
    Purchased and cancelled under Normal Course
     Issuer Bid                                          (8,718)      (1,441)
                                                    -------------------------
    Balance, end of the period                          203,375      205,848
                                                    -------------------------
    Stated Value: Class B                                 1,004        1,004
                                                    -------------------------
    Total stated value Class A and Class B          $   204,379  $   206,852
                                                    -------------------------
                                                    -------------------------

    During the three months and nine months ending September 30, 2007, the
    Company repurchased and cancelled 34,500 and 2,574,600 Class A
    Subordinated Voting Shares ("Class A shares"), respectively
    (September 30, 2006 - 197,000 and 432,900, respectively) under the terms
    of a Normal Course Issuer Bid ("NCIB"). The excess of cost over stated
    capital of the acquired shares, which for the three and nine months ended
    September 30, 2007 totaled $1.0 million and $69.2 million, respectively
    (September 30, 2006 - $3.0 million and $6.4 million, respectively), was
    charged to retained earnings. Under the terms of the NCIB, which expires
    on November 30, 2007, the Company is entitled to repurchase up to
    2,675,400 more Class A shares.

    12. Contributed surplus

                             Three Months Ended         Nine Months Ended
    (in thousands of              Sept. 30                  Sept. 30
     Canadian dollars)        2007         2006         2007         2006
    -------------------------------------------------------------------------

    Balance, beginning
     of period            $    10,823  $    10,351  $    10,603  $     9,231
    Adjustment for stock-
     based compensation             -            -            -            -
    Stock compensation
     expense (note 2)             696          738        2,069        2,139
    Fair value of stock
     options exercised           (380)        (138)      (1,533)        (419)
                          ---------------------------------------------------
    Balance, end of
     period               $    11,139  $    10,951  $    11,139  $    10,951
                          ---------------------------------------------------
                          ---------------------------------------------------

    13. Accumulated other comprehensive loss


                             Three Months Ended         Nine Months Ended
    (in thousands of              Sept. 30                  Sept. 30
     Canadian dollars)        2007         2006         2007         2006
    -------------------------------------------------------------------------
    Balance, beginning
     of period            $  (108,243) $  (104,535) $   (85,529) $  (100,260)
    Transitional
     adjustment on
     adoption of new
     accounting policies
     (note 1)                       -            -         (119)           -
    Unrealized foreign
     currency translation
     losses, net of hedging
     activities               (15,238)        (860)     (38,425)      (5,135)

    Unrealized loss on
     available-for-sale
     financial assets            (206)           -       (1,053)           -
    Gain on derivatives
     designated as  cash
     flow hedges                   30            -        1,469            -
                          ---------------------------------------------------
    Balance, end of
     period               $  (123,657) $  (105,395) $  (123,657) $  (105,395)
                          ---------------------------------------------------
                          ---------------------------------------------------

    14. Stock option plans

    A summary of the status of the Company's stock option plans and changes
    during the period are presented below:

                                              Sept. 30, 2007
    -------------------------------------------------------------------------
                                                                   Weighted
                                                                    Average
                       Market Growth       Other        Total      Exercise
                             Plan (1)      Plans       Shares       Price
    -------------------------------------------------------------------------
    Balance outstanding,
     beginning of year          7,875    2,261,520    2,269,395  $     15.76
    -------------------------------------------------------------------------
    Granted                         -      371,800      371,800        25.02
    -------------------------------------------------------------------------
    Exercised                  (2,955)    (300,240)    (303,195)       15.73
    -------------------------------------------------------------------------
    Forfeited                       -            -            -            -
    -------------------------------------------------------------------------
    Expired                    (4,920)     (92,800)     (97,720)       16.72
    -------------------------------------------------------------------------
    Balance outstanding,
     end of period                  -    2,240,280    2,240,280        17.25
    -------------------------------------------------------------------------


                                 Dec. 31, 2006
    -----------------------------------------------
                             Weighted     Weighted
                             Average       Average
                              Total       Exercise
                              Shares       Price
    -----------------------------------------------
    Balance outstanding,
     beginning of year      2,578,165  $     15.76
    -----------------------------------------------
    Granted                   457,700        17.27
    -----------------------------------------------
    Exercised                (331,157)       16.43
    -----------------------------------------------
    Forfeited                 (66,890)       15.75
    -----------------------------------------------
    Expired                  (368,423)       17.31
    -----------------------------------------------
    Balance outstanding,
     end of period          2,269,395  $     15.76
    -----------------------------------------------

    (1) This maximum number is achieved only when the market value of the
        shares at the time of exercise is equal to no less than four times
        the value at the date of the grant.


                    Options Outstanding                  Options Exercisable
    -------------------------------------------------------------------------
       Range of     Outstanding    Weighted   Weighted Exercisable  Weighted
       exercise              at     average    average  at Sep 30,   average
        prices          Sep 30,   remaining   exercise       2007   exercise
                           2007 contractual      price                 price
                                    life in
                                      years
    -------------------------------------------------------------------------
     $10.00 to $15.00    534,120       4.07     $12.70    400,976     $12.81
    -------------------------------------------------------------------------
     $15.01 to $20.00  1,297,560       6.71     $16.81    658,928     $16.71
    -------------------------------------------------------------------------
     $20.01 to $25.00     40,000       7.76     $20.90     11,200     $21.19
    -------------------------------------------------------------------------
     $25.01 to $30.00    368,600       9.26     $25.02          -          -
    -------------------------------------------------------------------------
                       2,240,280                        1,071,104
    -------------------------------------------------------------------------


                   Options Outstanding                  Options Exercisable
    -------------------------------------------------------------------------
       Range of     Outstanding    Weighted   Weighted Exercisable  Weighted
       exercise              at     average    average  at Dec. 31,  average
        prices          Dec. 31,  remaining   exercise       2007  exercise
                           2007 contractual      price                 price
                                       life
    -------------------------------------------------------------------------
    $10.00 to $15.00     626,920       6.13     $12.78    626,920     $12.78
    -------------------------------------------------------------------------
    $15.01 to $20.00   1,600,475       7.26     $16.79  1,237,275     $16.75
    -------------------------------------------------------------------------
    $20.01 to $25.00      42,000       8.53     $20.90      4,000     $21.90
    -------------------------------------------------------------------------
                       2,269,395                        1,868,195
    -------------------------------------------------------------------------

    15. Financial instruments


    The Company has determined the estimated fair values of its financial
    instruments based on appropriate valuation methodologies; however,
    considerable judgment is required to develop these estimates.
    Accordingly, these estimated fair values are not necessarily indicative
    of the amounts the Company could realize in a current market exchange.
    The estimated fair value amounts can be materially affected by the use of
    different assumptions or methodologies. The methods and assumptions used
    to estimate the fair value of financial instruments as well as related
    interest rate credit and foreign exchange risk are described below:

    a) Accounts receivable, accounts payable and accrued liabilities, and
    income taxes

    Due to the short period to maturity of the financial instruments, the
    carrying values as presented in the consolidated balance sheet are
    reasonable estimates of fair values.

    b) Long-term debt

    The fair value of the Company's long-term debt is based on current rates
    for debt with similar terms and maturities and is not materially
    different from its carrying values.

    The following are key risks associated with the Company's financial
    instruments:

    a) Interest rate risk

    The following table summarizes the Company's exposure to interest rate
    risk at September 30, 2007:

    -------------------------------------------------------------------------
                                            Fixed interest rate
    (in thousands of Canadian dollars)          maturing in
    -------------------------------------------------------------------------
                             Floating       1 year      Greater        Total
                                 rate      or less         than
                                                         1 year
    -------------------------------------------------------------------------
    Financial assets
    -------------------------------------------------------------------------
      Cash and cash
       equivalents        $   215,811  $         -  $         -  $   215,811
    -------------------------------------------------------------------------
    Total                 $   215,811  $         -  $         -  $   215,811
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Financial liabilities
    -------------------------------------------------------------------------
      Bank indebtedness   $        76  $         -  $         -  $        76
    -------------------------------------------------------------------------
      Long-term debt                -            -       73,834       73,834
    -------------------------------------------------------------------------
    Total                 $        76  $         -  $    73,834  $    73,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average fixed
     rates of debt                  -            -         5.11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    b)  Credit risk

    Certain of the Company's financial assets are exposed to credit risk.

    Cash and cash equivalents consist of deposits and short-term term
    deposits, with major financial institutions, which are readily
    convertible into cash.

    The Company, in the normal course of business, is exposed to credit risk
    from its customers, substantially all of which are in the energy
    industry. These accounts receivable are subject to normal industry credit
    risks.

    The Company is also exposed to credit risk from the potential default by
    any of its counterparties on its foreign exchange forward contracts. The
    Company mitigates this credit risk by dealing with counterparties who are
    major financial institutions and which the Company anticipates will
    satisfy their obligations under the contracts.

    c)  Foreign exchange risk

    The Company operates in several countries, which gives rise to a risk
    that its earnings and cash flows may be adversely impacted by
    fluctuations in foreign exchange. The Company utilizes foreign exchange
    forward contracts to manage foreign exchange risk from its underlying
    customer contracts. In particular, the Company uses foreign exchange
    forward contracts for the sole purpose of hedging a portion of its
    projected foreign currency inflows, consisting primarily of foreign
    currency sales to the Company's customers. Gains or losses on these
    hedging instruments are recognized in other comprehensive income to the
    extent of hedge effectiveness and then transferred to net income in the
    same period as, and as part of, the hedged transactions. The Company does
    not enter into foreign exchange contracts for speculative purposes. The
    Company does not generally attempt to hedge the net investment and equity
    of self-sustaining foreign operations, except that the U.S. dollar long-
    term note payable is designated as a hedge of a portion of its net
    investment in Bredero Shaw's U.S. dollar-based operations. The following
    table sets out the notional amounts outstanding under foreign exchange
    contracts, the average contractual exchange rates and the settlement of
    these contracts as at September 30, 2007:

    (in thousands)
    -------------------------------------------------------------------------
                   Maturity
    -------------------------------------------------------------------------
    U.S. dollars sold for Canadian dollars
    -------------------------------------------------------------------------
      Less than one year                                           US$11,750
    -------------------------------------------------------------------------
      Weighted average rate                                           1.1108
    -------------------------------------------------------------------------

    Foreign exchange options and forward exchange contracts are used to hedge
    foreign exchange exposures related to commercial activities. They are not
    used by the Company for speculative purposes. At September 30, 2007, the
    Company had notional amounts of $11.8 million of forward contracts
    outstanding (December 31, 2006 - $38.7 million). These amounts are used
    to express the volume of transactions and are not recognized in the
    consolidated financial statements. These financial instruments are
    contracted with major, chartered banks; as a result, credit and liquidity
    risks related to these instruments are considered to be low.

    The fair values of foreign exchange forward contracts represent an
    approximation of the amounts the Company would have paid to or received
    from counterparties to unwind its positions at September 30, 2007. The
    fair value of the Company's net benefit for all foreign exchange forward
    contracts at September 30, 2007 was $1.3 million (December 31, 2006 -
    $3.1 million net liability) and has been recognized on the consolidated
    balance sheet through a charge to other comprehensive income. If these
    contracts ceased to be effective as hedges, unrecognized gains or losses
    pertaining to the portion of the hedging transactions in excess of
    projected foreign-denominated cash flows would be transferred from
    accumulated other comprehensive income and recognized in net income at
    the time this condition was identified.

    16. Segmented information

    The company classifies its operations into two general segments of the
    global energy industry: Pipeline and Pipe Services and Petrochemical and
    Industrial. Revenue and income (loss) from operations for the three and
    nine months ended September 30, 2007 and 2006, and goodwill and total
    assets as of those dates by segments are as follows:

                              Three Months Ended        Nine Months Ended
    (in thousands)                 Sept. 30                  Sept. 30
    -------------------------------------------------------------------------
    Revenue                   2007         2006         2007         2006
                                        -restated                 -restated
                          -----------  -----------  -----------  ------------
        Pipeline and
         Pipe Services    $   227,779  $   216,889  $   649,111  $   678,377
        Petrochemical
         and Industrial        37,517       34,910      115,215      106,143
        Intersegment
         Eliminations            (404)        (475)      (1,665)      (1,216)
                          -----------  -----------  -----------  ------------
                          $   264,892  $   251,324  $   762,661  $   783,304
                          -----------  -----------  -----------  ------------
                          -----------  -----------  -----------  ------------

    Income (loss) from operations
        Pipeline and
         Pipe Services    $    42,738  $    24,075  $   113,652  $    97,667
        Petrochemical
         and Industrial         6,274        5,039       19,757       13,603
        Financial and
         Corporate             (3,512)      (5,438)     (12,900)     (14,281)
                          -----------  -----------  -----------  ------------
                          $    45,500  $    23,676  $   120,509  $    96,989
                          -----------  -----------  -----------  ------------
                          -----------  -----------  -----------  ------------

                                                     Sept. 30,     Dec 31,
                                                        2007         2006
    Goodwill
      Pipeline and
       Pipe Services                                $   144,645  $   159,218
      Petrochemical
       and Industrial                                    16,652       16,595
                                                    -----------  ------------
                                                    $   161,297  $   175,813
                                                    -----------  ------------
                                                    -----------  ------------

    Total assets                                    $            $
        Pipeline and
        Pipe Services                                  924,390     1,011,029
        Petrochemical
         and Industrial                                 81,255        79,612
        Financial and
         Corporate                                     941,744     1,170,083
        Elimination                                 (1,015,430)   (1,252,698)
                                                    -----------  ------------
                                                    $  931,959   $ 1,008,026
                                                    -----------  ------------
                                                    -----------  ------------

    17. Joint venture operations

    The Company's joint venture operations consist of its 50% interests in
    Bredero Shaw Revestimentos de Tubos Ltda. and Thermotite Brasil Ltda. and
    its 30% interest in the jointly controlled Arabian Pipecoating Company
    Limited. These investments have been accounted for through proportionate
    consolidation with the Company's share of each joint venture's assets,
    liabilities, revenue, expenses, net income and cash flows consolidated
    based on the Company's ownership position. The figures related to these
    joint ventures included in the Company's consolidated financial
    statements are summarized as follows:

                               Three Months Ended        Nine Months Ended
    (in thousands)                 Sept. 30                  Sept. 30
    -------------------------------------------------------------------------
                               2007         2006         2007        2006
                          -----------  -----------  -----------  ------------
    Revenue               $    18,785  $     6,941  $    44,528  $    18,262
    Operating and
     other expenses            13,540        5,496       32,542       13,822
    Net income before
     income taxes               5,245        1,445       11,986        4,440
    Provision for taxes           375           59        1,085          289
                          -----------  -----------  -----------  ------------
    Net income            $     4,870  $     1,386  $    10,901   $    4,151
                          -----------  -----------  -----------  ------------
                          -----------  -----------  -----------  ------------

    Cash provided by (used in):
    Operating activities  $       962  $     4,091  $    (1,373)  $    3,892
    Investing activities           69       (1,175)          69       (1,948)
    Financing activities        4,108       (2,273)       4,108       (1,324)

    Current assets                                  $    19,058   $   11,310
    Property, plant and
     equipment, net                                      11,130        7,992
    Goodwill                                              4,366        4,828
    Current liabilities                                  13,382        6,723

    18. Acquisition

    On June 6, 2007, the Company purchased all of the outstanding shares of
    X-Tek Industrial Limited from X-Tek Systems Limited. The name of the
    company was subsequently changed to Shaw Inspection Systems Limited
    ("SISL"). SISL provides specialized, real-time/digital non-destructive
    weld testing services to the onshore and offshore pipeline industry and
    is based in the United Kingdom. The allocation of the purchase price has
    not yet been finalized pending the completion of an appraisal of the
    acquired assets and liabilities. This is expected to be completed in the
    forth quarter of the year. The following are the preliminary details of
    the acquisition. These details may be adjusted pending the finalization
    of the purchase equation:

    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
    Net assets acquired at assigned values:
      Current assets                                                   1,708
      Property, plant and equipment                                    1,059
      Goodwill                                                         1,335
      Current liabilities                                             (1,523)
    -------------------------------------------------------------------------
                                                                       2,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration given:
      Cash                                                             2,579
    -------------------------------------------------------------------------
                                                                       2,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    19. Earnings per share

    The weighted average number of common shares for the purpose of the
    earnings per share calculations was as follows:

                                  Three Months             Nine Months
                                 Ended Sept. 30           Ended Sept. 30
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
     Basic
       Class A             58,613,020   60,969,096   59,807,549   60,969,096
       Class B             13,078,142   13,078,142   13,078,142   13,078,142
                          -----------  -----------  -----------  ------------
     Total                 71,691,162   74,047,238   72,885,691   74,047,238
                          -----------  -----------  -----------  ------------
                          -----------  -----------  -----------  ------------

     Diluted
       Class A             59,534,305   60,937,045   60,610,245   60,937,045
       Class B             13,078,142   13,078,142   13,078,142   13,078,142
                          -----------  -----------  -----------  ------------
     Total                 72,612,447   74,015,187   73,688,387   74,015,187
                          -----------  -----------  -----------  ------------
                          -----------  -----------  -----------  ------------

    20. Contingent liability

    Dirt, Inc. has brought suit in Alabama against Bredero Price Company,
    Bredero Shaw LLC, Halliburton Energy Services, Inc., and ShawCor Ltd.,
    claiming that Bredero Price, during the time it operated as a joint
    venture between ShawCor Ltd. and Halliburton Energy Services, Inc., began
    disposal of hazardous waste in a construction materials landfill owned by
    Dirt, Inc. The operations of Bredero Price Company were acquired by
    Bredero Shaw LLC on October 1, 2002. Bredero had offered to take
    responsibility for remediation of the site. The plaintiff has not
    accepted that offer, and the amount of such remediation cost is disputed,
    with expert opinions ranging from $6 million to $135 million. The
    plaintiff is also seeking punitive damages, which under Alabama law could
    be an amount up to three times actual damages; we believe, however, that
    we have valid legal defenses to the imposition of any punitive damages.
    The trial commenced October 22, 2007 and we are vigorously defending this
    action. We have accrued in a prior year an amount which is near the low
    end of the range of possible outcomes, for our 50% portion of an estimate
    of what we believe, based on technical advice from our environmental
    consultant, it will cost to remediate the site.

    21. Comparative figures

    Comparative figures have been reclassified where necessary to correspond
    with the current year's presentation.

    





For further information:

For further information: Gary Love, Vice President, Finance and CFO,
Telephone: (416) 744-5818, e-mail: glove@shawcor.com, website:
www.shawcor.com

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ShawCor Ltd.

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