Trican- 2008 Second Quarter Results

Wed. July 30, 2008; Posted: 07:20 PM

Financial Review ----------------------------------------------- Three months ended Six months ended ($ millions, except June June March June June per share amounts; 30, 30, 31, 30, 30, unaudited) 2008 2007 2008 2008 2007 ---------------------------------------------------------------------------- Revenue $ 162.3 $ 139.4 $ 244.2 $ 406.5 $ 411.9 Operating income (1) 3.4 9.8 44.9 48.3 97.8 Net income (loss) before stock-based compensation (1) (11.8) 4.2 24.7 12.9 62.5 Net income (loss) before stock-based compensation per share (1) (basic) $ (0.10) $ 0.03 $ 0.20 $ 0.10 $ 0.52 (diluted) $ (0.09) $ 0.03 $ 0.20 $ 0.10 $ 0.51 Net income (loss) (14.4) 0.9 21.3 6.8 56.0 Net income (loss) per share (basic) $ (0.12) $ 0.01 $ 0.17 $ 0.06 $ 0.47 (diluted) $ (0.12) $ 0.01 $ 0.17 $ 0.05 $ 0.46 Funds provided by operations (1) 9.6 14.3 22.5 32.4 28.0 ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Results for the second quarter reflect a strong year-over-year recovery in Trican's Canadian operations, weaker year-over-year results from our US operations, and continued challenging conditions for our Russian operations. Activity in Canada was impacted by spring break-up which extended later than usual. However, strength in North American natural gas prices over the first half of the year resulted in a surge in activity late in the quarter. Our US operations improved relative to the first quarter of 2008, but continue to face stiff price competition, as we work to recover market share lost early in the year due to limited availability of fracturing sand. During the quarter, our Russian management team conducted discussions with some of our largest customers regarding pricing for services and the cost inflation we have experienced. These discussions are still ongoing but, thus far, have been positive.

Revenue for the quarter was $162 million, an increase of 16% from the same period last year. Growth in revenue from our Canadian and Russian operations more than offset the slight decline in revenue from our US operations. Net loss for the quarter was $14 million compared to a $1 million gain for the same period in the prior year reflecting lower operating margins from our Russian and US operations and a $7 million reduction in foreign exchange gains. As a result, net loss per share, excluding the impact of stock-based compensation, was $0.10 ($0.09 diluted), down from net income per share, excluding the impact of stock-based compensation, of $0.03 ($0.03 diluted) for the comparable period in 2007.

Sequentially, consolidated results reflect improved revenue and operating margins in the US, the impact of spring break-up that weakened operating results in Canada, and consistent results in Russia.

Funds from operations were $10 million for the second quarter of 2008, a decrease of 33% over the comparable period in 2007. The decrease was primarily a result of lower earnings.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis (MD&A) should be read in conjunction with the unaudited interim consolidated financial statements of Trican as at, and for, the three and six months ended June 30, 2008 and 2007 and should also be read in conjunction with the audited consolidated financial statements and MD&A contained in Trican's annual report for the year ended December 31, 2007. The interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). This MD&A is dated July 30, 2008. Additional information, including the Company's Annual Information Form is available on SEDAR at www.sedar.com.

Trican provides a comprehensive array of specialized products, equipment and services that are used during the exploration and development of oil and natural gas reserves. Trican provides services to oil and gas producers as they maintain production on existing wells or attempt to increase production by drilling new wells. The Company's pressure pumping operations are predominantly in western Canada, Russia and the United States.

Effective January 1, 2008, we have realigned the structure of our financial reporting to better reflect the way in which management oversees the business. Formerly we provided comments on the operations and financial results of our Well Service, Production Services and Corporate Divisions. Effective January 1, we are now providing comments by our operating divisions: Canada, Russia, United States and Corporate. Algerian operations are included in the results for the Russian operations. Prior year information has been restated for comparative purposes.

COMPARATIVE QUARTERLY INCOME STATEMENTS ---------------------------------------------------------------------------- ($ thousands, unaudited) Quarter- Over- Three months ended % of % of Quarter % June 30, 2008 Revenue 2007 Revenue Change Change ---------------------------------------------------------------------------- Revenue 162,342 100.0% 139,434 100.0% 22,908 16% Expenses Materials and operating 147,861 91.1% 120,183 86.2% 27,678 23% General and administrative 11,088 6.8% 9,453 6.8% 1,635 17% ---------------------------------------------------------------------------- Operating income(1) 3,393 2.1% 9,798 7.0% (6,405) -65% Interest expense 3,791 2.3% 2,599 1.9% 1,192 46% Depreciation and amortization 22,212 13.7% 15,876 11.4% 6,336 40% Foreign exchange gain (728) -0.4% (7,448) -5.3% 6,720 -90% Other income (1,267) -0.8% (217) -0.2% (1,048) 483% ---------------------------------------------------------------------------- Income / (loss) before income taxes and non- controlling interest (20,615) -12.7% (1,012) -0.7% (19,605) 1937% Provision for income taxes (6,508) -4.0% (3,087) -2.2% (3,421) 111% ---------------------------------------------------------------------------- Income / (loss) before non-controlling interest (14,107) -8.7% 2,075 1.5% (16,184) -780% Non-controlling interest 283 0.2% 1,147 0.8% (864) -75% ---------------------------------------------------------------------------- Net Income / (loss) (14,390) -8.9% 928 0.7% (15,320) -1651% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis. CANADIAN OPERATIONS ---------------------------------------------------------------------------- Three months ended, ($ thousands, June 30, % of June 30, % of March 31, % of unaudited) 2008 Revenue 2007 Revenue 2008 Revenue ---------------------------------------------------------------------------- Revenue 64,029 41,903 156,565 Expenses Materials and operating 64,022 100.0% 54,427 129.9% 108,969 69.6% General and administrative 4,274 6.7% 4,968 11.9% 5,525 3.5% -------- -------- ------- Total expenses 68,296 106.7% 59,395 141.7% 114,494 73.1% Operating income / (loss)(1) (4,267) -6.7% (17,492) -41.7% 42,071 26.9% Number of jobs Well service 2,525 1,788 7,061 Production services 615 472 818 Revenue per job Well service 21,753 19,758 20,353 Production services 11,257 11,088 12,328 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Operations Review

Activity in the quarter was reduced by spring break-up during which time road weight restrictions and reduced accessibility to remote areas limit oil field activity. This year, heavy rainfall extended break-up late into May, after which time drilling activity increased rapidly. Most of the drilling activity in western Canada targets natural gas prospects. Recent strength in natural gas prices pushed drilling activity past the prior year's levels. Industry activity, as measured by the number of active drilling rigs, increased almost 30% during the quarter relative to the same period in 2007.

The first half of the year has seen increasing levels of interest in unconventional natural gas plays in western Canada, including the Montney (northeastern British Columbia and northwestern Alberta) and Horn River (northeastern British Columbia) areas. Work performed today in these areas suggests that they will require a greater volume of fracturing services than traditional Western Canadian Sedimentary Basin development. We also benefited from an increase in activity relating to oil prospects in areas of southern Saskatchewan. We were very active in all of these areas, and our significant operating capacity and technical expertise position us well to service these emerging trends.

Current Quarter versus Q2 2007

Revenue for the quarter increased 53%, to $64 million, reflecting the overall increase in activity and the size of fracturing jobs relative to last year.

Well service activity, which includes cementing, fracturing, deep coiled tubing and nitrogen services, is directly impacted by changes in drilling activity. This activity represented 85% of total Canadian revenue for the quarter, up from 82% last year.

Revenue from well service activity for the quarter increased 59% to $55 million as the number of jobs increased 41% and the revenue per job increased 10%. The increase in job count was slightly higher than the increase in industry activity as measured by the number of active drilling rigs. The increase in revenue per job reflects the much larger fracturing jobs performed in new areas of interest within western Canada, partially offset by the continuing impact of high discounts as a result of the competitive pricing environment experienced over the last year. With the recent increase in industry activity, we expect pricing pressure to reverse in coming quarters.

Fracturing services, which include coalbed methane fracturing, accounted for 53.2% of the Canadian well service operations revenue versus 41.5% in the second quarter of 2007. Cementing represented 31.7% of Canadian well service operations revenue versus 41.0% in the second quarter of 2007. Coiled tubing accounted for 6.4% of revenue versus 10.3% in the comparable period of 2007, while nitrogen increased to 6.8% from 5.8%. Other services made up 2.0% of revenue in the quarter versus 1.4% for the same period last year.

Production services made up 15% of total Canadian revenue for the period, down from 18% last year. Production service activities, which include acidizing, intermediate depth coiled tubing and industrial services, are less impacted by changes in drilling activity. Revenue for the quarter increased 26% to $9.4 million as a result of higher pipeline activity in the quarter relative to the prior year.

Materials and operating expenses declined as a percentage of revenue to 100.0% compared to 129.9% for the same period in 2007. Higher activity levels increased operational leverage on our fixed cost structure. This gain was partially offset by higher fuel costs and overall margin contraction stemming from higher price discounts. In dollar terms, general and administrative expenses decreased 14% due to lower stock-based compensation and lower general and administrative staffing levels.

Current Quarter versus Q1 2008

Revenue for the second quarter decreased sequentially as drilling activity is typically highest in Canada during the first quarter. Late in the first quarter through May, drilling activity reduces substantially as spring thaws result in seasonal road bans.

Materials and operating expenses increased as a percentage of revenue to 100.0% compared to 69.6% for the first quarter 2008, as a result of lower utilization and reduced operating leverage. In dollar terms, general and administrative expenses decreased 23% due to a reduction in stock-based compensation and profit sharing expenses.

RUSSIAN OPERATIONS ---------------------------------------------------------------------------- Three months ended, ($ thousands, June 30, % of June 30, % of March 31, % of unaudited) 2008 Revenue 2007 Revenue 2008 Revenue ---------------------------------------------------------------------------- Revenue 67,833 64,047 67,542 Expenses Materials and operating 58,690 86.5% 48,521 75.8% 58,650 86.8% General and administrative 1,662 2.5% 1,734 2.7% 1,884 2.8% -------- -------- ------- Total expenses 60,352 89.0% 50,255 78.5% 60,534 89.6% Operating income (1) 7,481 11.0% 13,792 21.5% 7,008 10.4% Number of jobs 757 533 634 Revenue per job 90,067 120,996 106,679 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Operations Review

Russian operations, which include operations in Kazakhstan and Algeria, achieved strong growth in activity levels during the quarter, achieving the highest job count for a quarter in our history.

Activity in Russia was impacted by seasonal slow downs, but less significantly than typically experienced in Canada. Additional fracturing and cementing capacity relative to last year as well as the introduction of coiled tubing services drove higher levels of activity in the quarter.

During the quarter, Trican undertook pricing reviews with some of our major customers. These discussions are ongoing but have been positive to date. We have also undertaken a cost control program which will reduce personnel, administrative and infrastructure costs. We expect these combined measures to strengthen operating margins in the second half of the year.

Current Quarter versus Q2 2007

Revenue for the quarter increased 6% to $68 million as a result of a 42% increase in job count offset by a 26% decrease in revenue per job. The number of jobs completed increased due to increased operational reach and additional equipment capacity in the fracturing and cementing service lines as well as the introduction of coiled tubing services. The decrease in revenue per job relative to last year was the result of lower contract rates, smaller fracturing job sizes undertaken on the Yuganskneftegas project, and a decrease in the proportion of revenue from fracturing. Fracturing typically has higher revenue per job than cementing and coiled tubing services.

Fracturing represented 84% of total Russian revenues for the quarter, down from 95% last year. Cementing accounted for 7% versus 5% in the previous year, and coiled tubing accounted for 9% versus nil in the second quarter of 2007.

Materials and operating expenses for the quarter increased as a percentage of revenue to 86.5% compared to 75.8% for the same period in 2007. The increase was due to margin contraction resulting from lower contract rates and higher domestic inflation that had a particular impact on fuel and personnel costs. The price of diesel increased sharply at the end of 2007 and has averaged 40% higher in the first half of 2008 than the first half of 2007.

Current Quarter versus Q1 2008

Revenue and operating income were consistent with the first quarter of 2008. The number of jobs completed increased 19% due to a significant increase in coiled tubing and cementing activity. Revenue per job decreased 16% from the previous quarter as a result of smaller fracturing job sizes and a decrease in the proportion of fracturing revenue to total revenue.

UNITED STATES OPERATIONS ---------------------------------------------------------------------------- Three months ended, ($ thousands, June 30, % of June 30, % of March 31, % of unaudited) 2008 Revenue 2007 Revenue 2008 Revenue ---------------------------------------------------------------------------- Revenue 30,480 33,484 20,075 Expenses Materials and operating 23,686 77.7% 16,223 48.5% 15,896 79.2% General and administrative 2,385 7.8% 977 2.9% 2,385 11.9% -------- -------- ------- Total expenses 26,071 85.5% 17,200 51.4% 18,281 91.1% Operating income (1) 4,409 14.5% 16,284 48.6% 1,794 8.9% Number of jobs 380 236 205 Revenue per job 80,212 141,879 97,947 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Operations Review

Trican acquired Liberty Pressure Pumping LP late in the first quarter of 2007, marking the Company's entry into the US pressure pumping market. Operations for the quarter benefitted from having adequate supplies of fracturing sand available and the Company is once again focused on regaining market share.

An influx of operating capacity in our areas of operations has impacted pricing. Relative to the second quarter of 2007, average quarterly discounts increased by almost 10%.

During the quarter, Trican opened an operating base in Woodward, in northwestern Oklahoma. The base sits in the northern portion of the Anadarko Basin, which extends through western Oklahoma, the Texas Panhandle and southern Kansas. This basin consists of numerous tight sand formations and is home to some of the deepest wells ever drilled in the world. We believe that the new base will strengthen our US market position.

Current Quarter versus Q2 2007

Revenue for the quarter decreased 9% over the second quarter of 2007. A 61% increase in job count was more than offset by a 43% reduction in revenue per job. Job count was up due to increased equipment capacity compared to the second quarter of 2007. Revenue per job fell due to a combination of a weakening US dollar relative to the Canadian dollar, an almost 10% increase in discounts and smaller job sizes compared to the previous year.

Materials and operating expenses as a percentage of revenue were 77.7% in the quarter compared to 48.5% in the prior year. The increase can be attributed mainly to margin contraction from increased discounts, but also to higher fuel, sand transportation and storage costs. In dollar terms, general and administrative expenses increased $1.4 million due to additional administrative costs associated with the addition of bases in Searcy, Arkansas and Woodward, Oklahoma.

Current Quarter versus Q1 2008

Revenue increased by $10.4 million, or 52%, on a sequential basis. Job count was up 85% over the first quarter as sand supply shortages were resolved late in the first quarter supporting higher levels of utilization throughout the second quarter. Revenue per job was negatively impacted by a further 4% increase in discounts compared to the first quarter of 2008.

Materials and operating expenses as a percentage of revenue decreased sequentially due to increased operational leverage resulting from higher utilization of equipment offset by margin contraction resulting from higher discounts offered to customers. In dollar terms, general and administrative expenses were consistent with the previous quarter.

CORPORATE DIVISION ---------------------------------------------------------------------------- Three months ended, ($ thousands, June 30, % of June 30, % of March 31, % of unaudited) 2008 Revenue 2007 Revenue 2008 Revenue ---------------------------------------------------------------------------- Expenses Materials and operating 1,463 0.9% 1,012 0.7% 1,881 0.8% General and administrative 2,767 1.7% 1,774 1.3% 4,094 1.7% -------- -------- ------- Total expenses 4,230 2.6% 2,786 2.0% 5,975 2.4% Operating loss (1) (4,230) (2,786) (5,975) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Corporate Division expenses consist of salary expenses, stock-based compensation and office costs related to corporate employees, as well as public company costs.

Current Quarter versus Q2 2007

Corporate Division expenses were up $1.4 million from the same quarter last year due to higher deferred share unit expenses, an increase in salaries relating to the corporate restructuring, and higher travel costs to support geographic expansion.

Current Quarter versus Q1 2008

Corporate Division expenses were down $1.7 million from the previous quarter due to a reduction in profit sharing and deferred share unit expenses.

OTHER EXPENSES AND INCOME

Interest expense increased $1.2 million to $3.8 million relative to the comparable quarter in 2007 as a result of higher average debt balances.

Depreciation and amortization increased by $6.3 million for the quarter relative to the same period in 2007 as a result of investment in equipment and operations facilities.

Foreign exchange gains decreased by $6.7 million as a result of foreign currency rate movements in the quarter.

Other income increased $1.0 million as a result of interest on a loan issued to an unrelated third party.

INCOME TAXES

Trican's income tax recovery increased to $6.5 million for the quarter relative to $3.1 million for the comparable period of 2007 primarily as a result of increased losses. The Company's effective tax rate for the quarter was 31.6%. OTHER COMPREHENSIVE INCOME

The consolidated statement of other comprehensive income for the quarter includes $5.1 million in unrealized losses on translating the financial statements of our self-sustaining foreign operations. The change related to translating the net assets of our US and Russian operations using the current rate method, given that the subsidiaries are considered self-sustaining for Canadian GAAP purposes. The Canadian dollar strengthened 1% and 1/4% respectively against the US dollar and the Russian ruble, decreasing the value of our net asset position in these subsidiaries in Canadian dollar terms.

COMPARATIVE YEAR-TO-DATE INCOME STATEMENTS Year- Over- Six months ended % of % of Year % June 30, 2008 Revenue 2007 Revenue Change Change ($ thousands; unaudited) ---------------------------------------------------------------------------- Revenue 406,524 100.0% 411,910 100.0% (5,386) -1% Expenses Materials and operating 333,256 82.0% 294,774 71.6% 38,482 13% General and administrative 24,977 6.1% 19,332 4.7% 5,645 29% ---------------------------------------------------------------------------- Operating income(1) 48,291 11.9% 97,804 23.7% (49,513) -51% Interest expense 7,187 1.8% 3,363 0.8% 3,824 114% Depreciation and amortization 41,453 10.2% 28,115 6.8% 13,338 47% Foreign exchange gain (7,259) -1.8% (11,481) -2.8% 4,222 -37% Other income (1,941) -0.5% (1,149) -0.3% (792) 69% ---------------------------------------------------------------------------- Income before income taxes and non-controlling interest 8,851 2.2% 78,956 19.2% (70,105) -89% Provision for income taxes 1,939 0.5% 21,403 5.2% (19,464) -91% ---------------------------------------------------------------------------- Income before non-controlling interest 6,912 1.7% 57,553 14.0% (50,641) -88% Non-controlling interest 66 0.0% 1,526 0.4% (1,460) -96% ---------------------------------------------------------------------------- Net income 6,846 1.7% 56,027 13.6% (49,181) -88% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis. CANADIAN OPERATIONS ---------------------------------------------------------------------------- Six months ended June 30, % of % of Y-Over-Y ($ thousands, unaudited) 2008 Revenue 2007 Revenue Change ---------------------------------------------------------------------------- Revenue 220,594 243,460 -9% Expenses Materials and operating 172,990 78.4% 177,324 72.8% -2% General and administrative 9,800 4.4% 10,011 4.1% -2% --------- --------- Total expenses 182,790 82.9% 187,335 76.9% -2% Operating income(1) 37,804 17.1% 56,125 23.1% -33% Number of jobs Well service 9,586 9,312 3% Production services 1,433 1,288 11% Revenue per job Well service 20,722 24,173 -14% Production services 11,868 10,526 13% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Revenue for the six months ended June 30, 2008 decreased 9%. Industry activity, as measured by the average number of active drilling rigs, increased 4% on a year-to-date basis relative to the same period in 2007. While Trican's increase in job count for well service work was consistent with the increase in active drilling rigs, higher discounts provided to customers resulted in a 14% decrease in revenue per job compared to the prior year. The job count and revenue per job for production services were both up due to increased pipeline activity which has higher revenue per job than other production services work.

Materials and operating expenses increased as a percentage of revenue to 78.4% from 72.8% for the comparable period in 2007 as a result of higher fuel costs and overall margin contraction due to increased price competition. General and administrative costs decreased slightly from the prior year due to a reduction in general and administrative staffing levels.

RUSSIAN OPERATIONS ---------------------------------------------------------------------------- Six months ended June 30, % of % of Y-Over-Y ($ thousands, unaudited) 2008 Revenue 2007 Revenue Change ---------------------------------------------------------------------------- Revenue 135,375 122,889 10% Expenses Materials and operating 117,340 86.7% 93,282 75.9% 26% General and administrative 3,546 2.6% 2,936 2.4% 21% --------- -------- Total expenses 120,886 89.3% 96,218 78.3% 26% Operating income(1) 14,489 10.7% 26,671 21.7% -46% Number of jobs 1,391 994 40% Revenue per job 97,638 124,115 -21% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Revenue increased by $12.5 million, or 10%, versus the prior year due to a 40% increase in job count partially offset by a 21% decrease in revenue per job. Job count has increased due to increased equipment capacity in the fracturing and cementing service lines as well as the addition of coiled tubing services. The decrease in revenue per job relative to last year was due to lower contract rates, smaller fracturing job sizes undertaken on the Yuganskneftegas project in the second quarter, and the decrease in the proportion of fracturing revenue to total revenue from Russian operations.

Materials and operating expenses increased as a percentage of revenue from 75.9% to 86.7% due to margin contraction resulting from lower contract rates combined with inflationary pressures on fuel and personnel costs. In dollar terms, general and administrative expenses increased $0.6 million due to increased personnel costs.

UNITED STATES OPERATIONS ---------------------------------------------------------------------------- Six months ended June 30, % of % of Y-Over-Y ($ thousands, unaudited) 2008 Revenue 2007 Revenue Change ---------------------------------------------------------------------------- Revenue 50,555 45,561 11% Expenses Materials and operating 39,582 78.3% 21,933 48.1% 80% General and administrative 4,770 9.4% 1,450 3.2% 229% -------- -------- Total expenses 44,352 87.7% 23,383 51.3% 90% Operating income(1) 6,203 12.3% 22,178 48.7% -72% Number of jobs 585 312 88% Revenue per job 86,427 146,029 -41% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Revenue increased by $5.0 million, or 11%, versus the prior year due to an 88% increase in job count partially offset by a 41% decrease in revenue per job. Job count increased due to greater equipment capacity and a full six months of operations in 2008. Revenue per job fell due to a combination of a weakening of the US dollar relative to the Canadian dollar, an increase in discounts offered to customers and smaller job sizes.

Materials and operating expenses as a percentage of revenue were 78.3% in the quarter compared to 48.1% in the prior year. The increase can be attributed mainly to margin contraction from increased discounts, but also higher fuel and higher sand transportation and storage costs.

CORPORATE DIVISION ---------------------------------------------------------------------------- Six months ended June 30, % of % of Y-Over-Y ($ thousands, unaudited) 2008 Revenue 2007 Revenue Change ---------------------------------------------------------------------------- Expenses Materials and operating 3,344 0.8% 2,235 0.5% 50% General and administrative 6,861 1.7% 4,935 1.2% 39% ------- ------- Total expenses 10,205 2.5% 7,170 1.7% 42% Operating loss(1) (10,205) (7,170) 42% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) See last page of Management's Discussion and Analysis.

Corporate Division expenses were up $3.0 million compared to last year due to higher deferred share unit expenses, an increase in salaries relating to the corporate restructuring, and higher travel costs to support geographic expansion.

OTHER EXPENSES AND INCOME

Interest expense increased $3.8 million to $7.2 million relative to the comparable period in 2007 as a result of higher average debt balances.

Depreciation and amortization increased by $13.3 million compared to 2007 as a result of investment in equipment and operations facilities, the addition of Liberty's operations, and the amortization of intangible assets associated with the Liberty and CBM Solutions acquisitions.

Foreign exchange gains decreased by $4.2 million due to year-to-date foreign currency rate movements.

Other income increased $0.8 million as a result of interest on a loan issued to an unrelated third party.

INCOME TAXES

Trican's income tax expense decreased to $1.9 million for the six month period ended June 30, 2008 relative to $21.4 million for the comparable period of 2007 primarily as a result of lower earnings. The Company's effective tax rate was 21.9% versus 27.1% for the same period last year. The reduction in the Company's effective tax rate can be attributed to lower statutory corporate income tax rates in Canada and an increase in income taxed in lower rate jurisdictions.

OTHER COMPREHENSIVE INCOME

The consolidated statement of other comprehensive income for the first six months includes $13.5 million in unrealized gains on translating the financial statements of our self-sustaining foreign operations. The change related to translating the net assets of our US and Russian operations using the current rate method, given that the subsidiaries are considered self-sustaining for Canadian GAAP purposes. The Canadian dollar weakened 3% and almost 7% respectively against the US dollar and the Russian ruble, increasing the value of our net asset position in these subsidiaries in Canadian dollar terms.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Funds provided by operations during the quarter decreased to $10 million from $14 million in the second quarter of last year primarily as a result of lower earnings.

At June 30, 2008, Trican had working capital of $181 million versus $182 million at the end of 2007.

Investing Activities

Capital expenditures for the quarter totaled $28 million compared with $49 million for the same period in 2007.

During the first quarter, Trican paid $3.4 million to increase our ownership in R-Can Services Ltd. by 0.6% to 98.8%. During the second quarter, Trican paid $5.9 million to increase our ownership in Liberty Pressure Pumping by 1.8% to 95%.

Trican had a number of ongoing capital projects at the end of the second quarter, and we estimate that we will require $95 million of additional investment to complete them. We continue to review opportunities for growth in North America, Russia and the former CIS, Latin and South America, and other parts of the world. Our planned capital expenditures may be increased if we identify viable business opportunities.

Financing Activities

On February 15, 2008, we expanded the $120 million (or US dollar equivalent) three year extendible revolving acquisition and capital expenditure Term Credit Facility to $220 million (or US dollar equivalent) until November 17, 2008, at which time the facility will be reduced to $120 million. Other than the facility amount, terms of this facility are unchanged.

As at July 29, 2008, Trican had 125,277,335 common shares and 7,209,698 employee stock options outstanding.

BUSINESS RISKS

A complete discussion of business risks faced by Trican may be found under "Management's Discussion and Analysis" in our 2007 Annual Report.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING DURING SECOND QUARTER 2008

There have been no changes in Trican's internal controls over financial reporting during the period ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

INTERNATIONAL FINANCIAL REPORTING STANDARDS UPDATE FOR THE SECOND QUARTER 2008

The Canadian Accounting Standards Board has confirmed that use of International Financial Reporting Standards (IFRS) will be required for years beginning on or after January 1, 2011 for profit-oriented publicly accountable entities. Therefore, the Company must be in a position to report its results and comparatives in accordance with IFRS beginning January 1, 2011. The Company is assessing the potential impacts of this transition and developing its project plan accordingly.

CHANGE IN ACCOUNTING POLICIES

Inventories

Effective January 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") section 3031, "Inventories," which replaced CICA section 3030 of the same name. This section provides new guidance on the recognition, measurement, and disclosure of inventories which include: the elimination of the LIFO method of accounting for inventory; the requirement to measure inventories at the lower of cost and net realizable value; the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories; and the inclusion of spare parts inventory not consumed as part of the regular maintenance program as property and equipment. In addition, disclosure requirements have been enhanced. Inventory policies, carrying amounts, amounts recognized as an expense, write-downs and the reversals of write-downs are now required to be disclosed. The revised guidance requires the Company to determine the proportion of the spare parts inventories that are not consumed as part of regular maintenance and include as property and equipment.

Financial Instruments

Effective January 1, 2008, the Company adopted CICA section 3862, "Financial Instruments -Disclosures" and CICA section 3863, "Financial Instruments - Presentation," which replaced CICA section 3861, "Financial Instruments - Disclosure and Presentation." Section 3862 outlines the disclosure requirements for financial instruments and non-financial derivatives. This guidance prescribes an increased importance on risk disclosures associated with recognized and unrecognized financial instruments and how such risks are managed. Specifically, section 3862 requires disclosure of the significance of financial instruments on the Company's financial position. In addition, the guidance outlines revised requirements for the disclosure of qualitative and quantitative information regarding exposure to risks arising from financial instruments. The presentation requirements under section 3863 are relatively unchanged from section 3861. Refer to Note 7, "Financial Instruments - Disclosures" for the additional disclosures under section 3862.

Capital Management Disclosures

Effective January 1, 2008, the Company adopted CICA section 1535, "Capital Disclosures." This new guidance requires disclosure about the Company's objectives, policies and processes for managing capital. These disclosures include a description of what the Company manages as capital, the nature of externally imposed capital requirements, how the requirements are incorporated into the Company's management of capital, whether the requirements have been complied with, or consequence of noncompliance and an explanation of how the Company is meeting its objectives for managing capital. In addition, quantitative disclosures regarding capital are required. Refer to Note 8, "Capital Management Disclosures."

OUTLOOK

Canada

Our outlook for Canada is much stronger than we expected as we went into 2008. Over the winter, North American natural gas inventories were drawn down to more normal levels, which in turn supported a strong increase in natural gas prices. With commodity prices remaining high through the second quarter, producers have generated cash flows in excess of their original estimates. The excess cash flows have resulted in increases to producers' 2007 capital plans as confirmed by the recent surge in drilling activity.

Unconventional natural gas plays in northeastern British Columbia and northwestern Alberta and oil prospects in areas of southern Saskatchewan have sparked renewed interest in the Western Canadian Sedimentary Basin, and are expected to increase activity for the remainder of the current year and into 2009, increasing demand for Trican's services. With our significant operating capacity and technical expertise, we expect to continue to be well positioned to service these emerging areas. Additional demand for services should stabilize pricing in the second half of the year and could lead to price recovery late in 2008 or early in 2009.

Russia

Results for the quarter and the year to date reflect positive growth in our operations, supported by expanded equipment capacity and a growing geographic reach. However, these positive developments are overshadowed by weaker financial results caused by pricing pressure and domestic inflation.

We are currently reviewing pricing arrangements with customers and implementing cost control measures; however, operating margins are expected to remain below prior year levels for the balance of the year.

Looking into 2009, tax relief proposals currently under consideration by the Russian government could, if implemented, increase customer spending and demand for services which should improve financial performance from these operations.

United States

With stabilized supplies of sand allowing Trican to compete for market share and increasing demand for services reducing pricing pressure, we expect improved operating results from our US operations for the reminder of the year.

We plan to begin offering cementing services in the third quarter through our existing bases. Initial interest in these services has been positive, however Trican expects that market acceptance will be achieved over time, as we demonstrate operational and technical proficiency.

Summary of Quarterly Results ($ millions, except per share amounts; unaudited) ---------------------------------------------------------------------------- 2008 2007 2006 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 ---------------------------------------------------------------------------- Revenue 162.3 244.2 195.8 228.7 139.4 272.5 208.3 244.1 Net income / (loss) (14.4) 21.2 18.2 37.6 0.9 55.1 35.3 54.6 Earnings / (loss) per share Basic (0.12) 0.18 0.15 0.31 0.01 0.47 0.31 0.47 Diluted (0.12) 0.18 0.15 0.30 0.01 0.46 0.30 0.46 ----------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

This document contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements include, among others, the Company's prospects, expected revenues, expenses, profits, expected developments and strategies for its operations, and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "achieve", "achievable," "believe," "estimate," "expect," "intend", "plan", "planned", and other similar terms and phrases. Forward-looking statements are based on current expectations, estimates, projections and assumptions that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; and availability of products, qualified personnel, manufacturing capacity and raw materials. If any of these uncertainties materialize, or if assumptions are incorrect, actual results may vary materially from those expected.

(1) Trican makes reference to operating income, net income before stock-based compensation expense and funds from operations. These are measures that are not recognized under Canadian generally accepted accounting principles (GAAP). Management believes that, in addition to net income, operating income, net income before stock-based compensation expense, net income before stock-based compensation expense per share and funds from operations are useful supplemental measures. Operating income provides investors with an indication of earnings before depreciation, taxes and interest. Net income before stock-based compensation expense provides investors with information on net income excluding the non-cash affect of stock-based compensation expense. Funds from operations provide investors with an indication of cash available for capital commitments, debt repayments and other expenditures. Investors should be cautioned that operating income, net income before stock-based compensation expense, and funds from operations should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of Trican's performance. Trican's method of calculating operating income, net income before stock-based compensation expense and funds from operations may differ from that of other companies and accordingly may not be comparable to measures used by other companies.

Headquartered in Calgary, Alberta, Trican is a multinational provider of a comprehensive array of specialized products, equipment and services used during the exploration and development of oil and gas reserves. Trican services customers in Canada, Russia, Kazakhtan, the United States and Algeria. These countries have some of the world's most active pressure pumping markets.

CONSOLIDATED BALANCE SHEETS ---------------------------------------------------------------------------- June 30, December 31, (Stated in thousands of dollars; unaudited) 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ASSETS Current assets Cash and short-term deposits $ 15,890 $ 23,370 Accounts receivable 141,028 138,226 Income taxes recoverable 6,716 5,651 Inventory 117,682 93,209 Prepaid expenses 21,404 15,576 ---------------------------------------------------------------------------- 302,720 276,032 Property and equipment 595,472 555,104 Intangible assets (note 3) 38,293 40,659 Future income tax assets 3,351 1,070 Other assets 23,462 8,782 Goodwill (note 3) 178,390 167,417 ---------------------------------------------------------------------------- $ 1,141,688 $ 1,049,064 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank loans (note 5) $ 19,685 $ 15,584 Accounts payable and accrued liabilities 72,687 70,529 Deferred consideration (note 3) 2,259 2,146 Dividend payable 6,259 6,123 Current portion of long-term debt (note 6) 20,772 - ---------------------------------------------------------------------------- 121,662 94,382 Long-term debt (note 6) 221,860 188,810 Future income tax liabilities 55,106 67,531 Deferred consideration (note 3) 2,259 4,292 Non-controlling interest (note 3) 6,842 10,380 Shareholders' equity Share capital (note 4) 239,787 196,165 Contributed surplus 13,255 20,675 Retained earnings 546,798 546,211 Accumulated other comprehensive income (65,881) (79,382) ---------------------------------------------------------------------------- 733,959 683,669 ---------------------------------------------------------------------------- $ 1,141,688 $ 1,049,064 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS ---------------------------------------------------------------------------- Three Months Three Months Six Months Six Months (Stated in thousands, Ended Ended Ended Ended except per share amounts; June 30, June 30, June 30, June 30, unaudited) 2008 2007 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue $ 162,342 $ 139,434 $ 406,524 $ 411,910 Expenses Materials and operating 147,861 120,183 333,256 294,774 General and administrative 11,088 9,453 24,977 19,332 ---------------------------------------------------------------------------- Operating income 3,393 9,798 48,291 97,804 Interest expense on long-term debt and bank loans 3,791 2,599 7,187 3,363 Depreciation and amortization 22,212 15,876 41,453 28,115 Foreign exchange gain (728) (7,448) (7,259) (11,481) Other income (1,267) (217) (1,941) (1,149) ---------------------------------------------------------------------------- Income/(loss) before income taxes and non-controlling interest (20,615) (1,012) 8,851 78,956 Provision for current income taxes (6,285) (3,961) 16,741 74,562 Provision for future income taxes (223) 874 (14,802) (53,159) ---------------------------------------------------------------------------- Income/(loss) before non-controlling interest (14,107) 2,075 6,912 57,553 Non-controlling interest 283 1,147 66 1,526 ---------------------------------------------------------------------------- Net income/(loss) $ (14,390) $ 928 $ 6,846 $ 56,027 ---------------------------------------------------------------------------- Earnings/(loss) per share Basic $ (0.12) $ 0.01 $ 0.06 $ 0.47 Diluted $ (0.12) $ 0.01 $ 0.05 $ 0.46 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Dividend per share $ 0.05 $ 0.05 $ 0.05 $ 0.05 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Weighted average shares outstanding - basic 124,324 121,454 123,696 119,217 Weighted average shares outstanding - diluted 126,034 124,766 125,191 123,022 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME ---------------------------------------------------------------------------- Three Months Three Months Six Months Six Months Ended Ended Ended Ended (Stated in thousands of June 30, June 30, June 30, June 30, dollars; unaudited) 2008 2007 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net Income/(loss) $ (14,390) $ 928 $ 6,846 $ 56,027 Other comprehensive income Unrealized gains/(losses) on translating financial statements of self-sustaining foreign operations (5,135) (38,545) 13,501 (41,092) ---------------------------------------------------------------------------- Other comprehensive income/(loss) $ (19,525) $ (37,617) $ 20,347 $ 14,935 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND ACCUMULATED OTHER COMPREHENSIVE INCOME Three Months Three Months Six Months Six Months Ended Ended Ended Ended (Stated in thousands of June 30, June 30, June 30, June 30, dollars; unaudited) 2008 2007 2008 2007 ---------------------------------------------------------------------------- Retained earnings, beginning of period $ 567,447 $ 501,705 $ 546,211 $ 446,606 Dividend (6,259) (6,079) (6,259) (6,079) Net income/(loss) (14,390) 928 6,846 56,027 ---------------------------------------------------------------------------- Retained earnings, end of period $ 546,798 $ 496,554 $ 546,798 $ 496,554 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Accumulated other comprehensive income, beginning of period $ (60,746) $ (9,684) $ (79,382) $ (7,137) Unrealized gains/(losses) on translating financial statements of self-sustaining foreign operations (5,135) (38,545) 13,501 (41,092) ---------------------------------------------------------------------------- Accumulated other comprehensive income, end of period $ (65,881) $ (48,229) $ (65,881) $ (48,229) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements. CONSOLIDATED CASH FLOW STATEMENTS ---------------------------------------------------------------------------- Three Months Three Months Six Months Six Months Ended Ended Ended Ended (Stated in thousands June 30, June 30, June 30, June 30, of dollars; unaudited) 2008 2007 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Cash Provided By/(Used In): Operations Net income/(loss) $ (14,390) $ 928 $ 6,846 $ 56,027 Charges to income not involving cash: Depreciation and amortization 22,212 15,876 41,453 28,115 Future income tax provision (223) 874 (14,802) (53,159) Non-controlling interest 283 1,147 66 1,526 Stock-based compensation 2,577 3,244 6,005 6,478 Gain/(loss) on disposal of property and equipment 53 25 12 (201) Realized foreign exchange gain from financing activities - (9,270) - (9,270) Unrealized foreign exchange gain/(loss) (658) 1,521 (7,216) (1,508) ---------------------------------------------------------------------------- Funds provided by operations 9,854 14,345 32,364 28,008 Net change in non-cash working capital from operations (26,619) 47,116 (26,393) 72,340 ---------------------------------------------------------------------------- Net cash provided by/ (used in) operating activities (16,765) 61,461 5,971 100,348 Investing Purchase of property and equipment (28,353) (49,494) (67,938) (84,351) Proceeds from the sale of property and equipment 17 430 122 997 Purchase of other assets - - (1,319) - Issuance of loan (6,337) - (12,961) - Business acquisitions, net of cash acquired (5,861) (274) (9,287) (255,740) Payment of deferred consideration - - (1,166) - Net change in non-cash working capital from the purchase of property and equipment 2,167 (1,828) 2,058 (1,073) ---------------------------------------------------------------------------- (38,367) (51,166) (90,491) (340,167) Financing Net proceeds from issuance of share capital 22,744 5,433 29,142 15,832 Net issuance of long-term debt 15,634 11,781 54,873 164,390 Partnership distribution (1,046) (427) (1,046) (427) Dividend paid - - (6,123) (5,760) ---------------------------------------------------------------------------- 37,332 16,787 76,846 174,035 Effect of exchange rate changes on cash (222) - 194 - ---------------------------------------------------------------------------- Increase / (decrease) in cash and short-term deposits (18,022) 27,082 (7,480) (65,784) Cash and short-term deposits, beginning of period 33,912 1,844 23,370 94,710 ---------------------------------------------------------------------------- Cash and short-term deposits, end of period $ 15,890 $ 28,926 $ 15,890 $ 28,926 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Supplemental information Income taxes paid 10,763 25,066 17,806 71,111 Interest paid 1,875 2,599 5,667 3,363 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2008 (Unaudited)

The Company's interim financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual financial statements. The Company's interim financial statements should be read in conjunction with the most recent annual financial statements. The Company's interim financial statements follow the same accounting policies and methods of their application as of the most recent annual financial statements, except where any change has been noted in the interim financial statements.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index