Pure Energy Services Ltd.
TSX : PSV

Pure Energy Services Ltd.

November 12, 2009 08:30 ET

Pure Energy Services Ltd. Announces Results for the Third Quarter Ended September 30, 2009

CALGARY, ALBERTA--(Marketwire - Nov. 12, 2009) - Pure Energy Services Ltd. (TSX:PSV)



Selected Consolidated Financial Information

----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
($ thousands, except per share
amounts)(unaudited) 2009 2008 2009 2008
----------------------------------------------------------------------------

Revenue $ 30,533 $ 38,726 $ 77,622 $ 102,080
Gross margin $ 3,444 $ 9,836 $ 10,252 $ 25,673
Gross margin % 11% 25% 13% 25%
General and administrative
expenses $ 5,274 $ 5,540 $ 13,596 $ 15,175
EBITDA (2) $ (1,933) $ 4,243 $ (3,359) $ 10,450
EBITDAS (2) $ (1,699) $ 4,456 $ (2,952) $ 11,525
Net (loss) income $ (3,999) $ 719 $ (10,274) $ (1)
(Loss) income per share:
Basic $ (0.17) $ 0.04 $ (0.55) $ -
Diluted $ (0.17) $ 0.05 $ (0.55) $ -
Funds flow from operations (3) $ (1,840) $ 4,627 $ (4,860) $ 9,341
Net (loss) income from
discontinued operations $ (1,305) $ 755 $ (14,725) $ (215)
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September 30, December 31,
2009 2008
---------------------------------
Total assets (including discontinued
operations) $ 193,468 $ 227,810
Total long-term debt $ 50,121 $ 65,314
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(1) Reflect results from continuing operations, unless otherwise stated.

(2) EBITDA and EBITDAS do not have standardized meanings prescribed by
Canadian generally accepted accounting principles ("GAAP"). Management
believes that, in addition to net income, EBITDA and EBITDAS are useful
supplemental measures. EBITDA and EBITDAS are provided as measures of
operating performance without reference to financing decisions,
amortization or income tax impacts, which are not controlled at the
operating management level. EBITDAS also excludes stock-based
compensation expense as it is also not controlled at the operating
management level. Investors should be cautioned that EBITDA and EBITDAS
should not be construed as alternatives to net income determined in
accordance with GAAP as an indicator of the Corporation's performance.
The Corporation's method of calculating EBITDA and EBITDAS may differ
from that of other corporations and accordingly may not be comparable to
measures used by other corporations. The Corporation calculates EBITDA
and EBITDAS as follows:

Three months ended Nine months ended
September 30, September 30,
($ thousands) 2009 2008 2009 2008
----------------------------------------------------------------------------
(Loss) income from continuing
operations before income tax $ (5,926) $ 947 $ (13,670) $ 15
Add: Depreciation expense 3,270 2,580 8,729 8,374
Interest expense 723 716 1,582 2,061
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EBITDA (1,933) 4,243 (3,359) 10,450
Add: Stock-based compensation
expense 234 213 407 1,075
----------------------------------------------------------------------------
EBITDAS $ (1,699) $ 4,456 $ (2,952) $ 11,525
----------------------------------------------------------------------------

(3) Funds flow from operations is defined as cash from operating activities
before changes in non-cash working capital, as presented on the
Corporation's statement of cash flows. Funds flow from operations is a
measure that provides investors with additional information regarding
the Corporation's liquidity and its ability to generate funds to finance
its operations. Funds flow from operations does not have a standardized
meaning prescribed by GAAP and may not be comparable to similar measures
provided by other corporations.


Business Overview

The Corporation is an oilfield services company which currently conducts operations in the Western Canadian Sedimentary Basin ("WCSB") and in the United States ("US") in Colorado, North Dakota, Wyoming and Pennsylvania through its wholly-owned subsidiaries, Pure Energy Services (USA) Inc. ("Pure USA"), Canadian Sub-Surface Energy Services Corp. ("CanSub"), Ross Wireline Services (2005) Ltd., Motorworks Drilling Solutions Inc. and its partnership, Pure Energy Services Partnership (the "Partnership"). References to "Pure" or the "Corporation" refer to the Corporation, its subsidiaries and the Partnership.

The Corporation's operations are divided into three separate reporting segments: Canadian Completions Services ("CCS"), US Completions Services ("USCS") and Drilling Services. The CCS segment conducts operations in the WCSB providing production testing and wireline services. The USCS segment conducts operations in Colorado, North Dakota, Wyoming and Pennsylvania providing production testing and wireline services. The Drilling Services segment operates ten drilling rigs in the WCSB through its Quintera drilling rig division and provides motor rental services through its Motorworks division.

Third Quarter Highlights From Continuing Operations

The business focus of Pure has changed considerably over the last two quarters. During the second quarter, Pure merged its Canadian Completions operations with CanSub which resulted in a combined production testing and wireline equipment fleet that is one of the largest in the WCSB. During the third quarter, Pure sold its well fracturing operations for net proceeds of $38.8 million, substantially all of which was used to pay down debt. As a result of these two transactions, Pure has significantly strengthened its financial position and is now focusing its completions services operations on production testing and wireline which are the traditional core businesses of both Pure and CanSub.

Integration efforts continued during the third quarter to combine the Pure and CanSub operations. A number of significant strides have been made to date including:

- A new management team has been established to run the combined Canadian Completions Segment;

- Consolidation of facilities and operating assets has begun resulting in the opportunity for Pure to begin selling redundant assets such as real estate and older parked equipment; and

- Operating and general administrative expenses have been reduced as a result of integration and optimization initiatives implemented during the third quarter. Cost reductions have already been evidenced, as reported third quarter general and administrative expenses were approximately 25% lower than the combined Pure/CanSub quarterly general and administrative expense run rate for the first half of 2009.

To date the integration of Pure and CanSub has been positively received by the Corporation's customers and employees. Further operating efficiencies will be generated as the Corporation continues with the integration process.

These positive events over the last two quarters have positioned Pure to better respond to the continuing challenging industry environment. Drilling and completions activity levels continue to be depressed in both the WCSB and the US due primarily to low natural gas prices. This has resulted in low equipment utilization rates, lower pricing and reduced margins and earnings.

As a result of lower activity, consolidated revenue during the quarter declined to $30.5 million from $38.7 million recognized in Q3 2008. The addition of the CanSub operations allowed revenue in the CCS segment to increase in the quarter versus the third quarter of 2008, however, this increase was not sufficient to offset the revenue declines experienced in the USCS and Drilling segments due to lower activity.

As a result of the erosion in pricing and lower activity, gross margin percentages declined from 25% (or $9.8 million) in Q3 2008 to 11% (or $3.4 million) in the current quarter. Consistent with the decline in gross margin, consolidated EBITDA decreased $6.2 million quarter over quarter to negative $1.9 million in Q3 2009 versus the positive $4.2 million EBITDA generated in Q3 2008. Partially offsetting the impact of the lower gross margin on EBITDA was a $0.3 million decline in general and administrative expenses. The full extent of cost reductions in both field and general and administrative expenses will be realized over the next few quarters as integration and optimization efforts continue.

The lower operating results resulted in a net loss from continuing operations during Q3 2009 of $4.0 million ($0.17 per share), versus the $0.7 million in net income ($0.04 per share) generated in Q3 2008.

The lower activity experienced in the third quarter is consistent with the reduced activity experienced in the first two quarters of the year. As a result, consolidated revenue has declined to $77.6 million year to date versus $102.1 million in the first nine months of 2008. While the addition of the CanSub operations has positively impacted revenues generated by the Corporation's CCS segment during Q3 2008, this additional revenue has not been sufficient to offset the revenue declines experienced by all of the Corporation's other divisions through 2009.

Similar to the discussion above for the third quarter margins, the lower activity and revenue rates experienced year to date have resulted in a $15.4 million decline in gross margin to $10.3 million (or 13% of revenue) year to date compared to $25.7 million (25% of revenue) in the first nine months of 2008. This decline in gross margin was also reflected in the lower EBITDA of negative $3.4 million versus a positive EBITDA of $10.5 million in the comparative nine-month period in 2008. A $1.6 million reduction in general and administrative expenses year to date has helped to mitigate the impact of lower operating results on EBITDA.

The lower operating results year to date resulted in a net loss from continuing operations of $10.3 million ($0.55 per share) versus the break-even result achieved in the first nine months of 2008.

As a result of the disposition of the well fracturing operation during Q3 2009, the financial results for this division have been separately disclosed as a discontinued operation and excluded from the financial results presented above.

Well Fracturing Division Disposition (Discontinued Operations)

On August 14, 2009 the Corporation sold its well fracturing assets and associated inventory to a competitor in the fracturing business for net proceeds of $38.8 million. Approximately $1.2 million of the proceeds were deferred and are guaranteed to be received by August 13, 2010 in reimbursement of prepaid inventories used by the purchaser from August 14, 2009 to August 13, 2010. In addition, depending on the level of inventory purchases by the acquiring company from Pure's former sand supplier, the Corporation could receive up to an additional US $2.5 million in volume rebates from the acquiring company. Given the uncertainty of the amounts to be received for these rebates, no amount has been accrued in the Corporation's financial results to date.

A significant amount of capital resources and management time have been invested over the last four years developing Pure's well fracturing operations. Management is proud of the operational success generated from the perseverance and hard work of Pure's employees in developing this business. However, due to the significant capital resources required to further grow and support this business and the limited return achieved on this investment, management determined that a more defined focus on the Corporation's existing and largest completions segments, production testing and wireline services, would provide Pure and its shareholders with a greater long-term return on capital invested.

The net loss generated during the quarter from the well fracturing division was $1.3 million versus net income of $0.8 million in the third quarter of 2008. The lower result is due to reduced activity combined with a loss on final sale of the well fracturing assets of $0.6 million, net of income taxes. On a year to date basis, the well fracturing operation has generated a loss of $14.7 million versus a loss of $0.2 million in the comparative period in 2008. The year to date loss reflects an $11.8 million asset impairment, net of income taxes, related to the fracturing assets which was recorded in the second quarter to reflect the estimated difference between the carrying value of the fracturing assets compared to the sales price.





Results of Continuing Operations

US Completion Services (1)

----------------------------------------------------------------------------
Three months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------

Revenue $ 8,955 $ 12,703 $ (3,748) (30%)
Operating expenses 7,049 8,513 (1,464) (17%)
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Gross margin $ 1,906 $ 4,190 $ (2,284) (55%)
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Gross margin % 21% 33% (12%) (36%)

Average units available during the
period:
Production testing 36.3 33.0 3.3 10%
Wireline 6.0 3.3 2.7 82%
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Number of jobs completed:
Production testing 1,553 2,165 (612) (28%)
Wireline 432 326 106 33%
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Nine months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------
Revenue $ 28,792 $ 33,079 $ (4,287) (13%)
Operating expenses 21,751 23,179 (1,428) (6%)
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Gross margin $ 7,041 $ 9,900 $ (2,859) (29%)
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Gross margin % 24% 30% (6%) (20%)

Average units available during the
period:
Production testing 34.5 30.2 4.3 14%
Wireline 6.0 3.1 2.9 94%
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Ending units:
Production testing 37.0 33.0 4.0 12%
Wireline 6.0 4.0 2.0 50%
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Number of jobs completed:
Production testing 4,232 6,014 (1,782) (30%)
Wireline 1,128 732 396 54%
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(1) The above financial results exclude the well fracturing division results
as this division was sold on August 14, 2009. The well fracturing
division results are discussed under the discontinued operations section
of this press release.


Low industry activity combined with competitive pricing pressure for Pure's services caused revenue in the USCS segment to decline to $9.0 million during Q3 2009 from the $12.7 million generated in Q3 2008. The largest activity and revenue decline was experienced in the segment's production testing operations which experienced a 28% reduction in the number of jobs completed in the quarter versus Q3 2008.

Activity in the segment's production testing division was negatively impacted by low natural gas prices which caused a sharp decline in industry activity in Wyoming. In addition, activity in the division's oil-focused North Dakota operation has been slow to recover following the lengthy second quarter spring break-up period in the state.

On a positive note, activity in the division's Colorado operations remained strong during the quarter as the division operated at near 100% capacity performing multi-well production testing services in this area. In addition, the USCS segment successfully expanded its production testing operations to Pennsylvania with the completion of its first job in that state during the quarter. The USCS production testing division now has four units operating in Pennsylvania servicing the unconventional Marcellus resource play.

Activity increased for the USCS segment's wireline operations in Q3 2009 versus Q3 2008. The higher job count attained by the division in the quarter was due to the increase in wireline units combined with the division's strong customer relationships and operational performance. The wireline division has successfully retained the perforating work it previously provided to the USCS' well fracturing customers. In addition, wireline activity for the division's Wyoming operation continues to improve and steps are being taken to expand wireline operations into North Dakota by leveraging off of existing production testing customer relationships in the state.

The lower overall activity levels generated in the USCS segment during the quarter combined with fixed operating costs associated with the segment's wireline division caused gross margin as a percentage of revenue to decline to 21% in Q3 2009 from the 33% gross margin attained in Q3 2008. On a dollar basis, gross margin declined to $1.9 million during Q3 2009 from $4.2 million in Q3 2008.

To help mitigate the impact of the lower equipment utilization and reductions in pricing for services, the USCS segment has implemented a number of cost saving initiatives including staff reductions, wage rollbacks, and negotiated discounts on goods and services purchased from suppliers. However, fixed operating and general and administrative costs prevented the cost reduction initiatives from fully offsetting the impact of the lower activity levels and revenue rate reductions experienced in the quarter.

On a year to date basis, the USCS segment has generated $28.8 million in revenue which is lower than the $33.1 million in revenue generated by the segment in the first nine months of 2008. The lower revenue reflects the reduced activity levels experienced in the segment's production testing division due primarily to significantly lower natural gas prices in the current year.

The lower year to date activity and pricing for services resulted in a reduced gross margin percentage in the first nine months of 2009 of 24% compared to 30% gross margin in the comparable period of 2008. The lower revenue base and gross margin percentage in the current nine-month period resulted in gross margin on a dollar basis of $7.0 million year to date versus $9.9 million in the comparative period of 2008.



Canadian Completion Services

----------------------------------------------------------------------------
Three months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------
Revenue $ 18,525 $ 13,947 $ 4,578 33%
Operating expenses 16,859 11,221 5,638 50%
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Gross margin $ 1,666 $ 2,726 $ (1,060) (39%)
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Gross margin % 9% 20% (11%) (55%)

Average units available during the
period:
Production testing 87.0 33.0 54.0 164%
Wireline & Swabbing 94.0 36.7 57.3 156%
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Number of jobs completed:
Production testing 1,600 1,376 224 16%
Wireline & Swabbing 3,033 1,457 1,576 108%
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----------------------------------------------------------------------------
Nine months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------
Revenue $ 36,241 $ 39,410 $ (3,169) (8%)
Operating expenses 34,543 31,781 2,762 9%
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Gross margin $ 1,698 $ 7,629 $ (5,931) (78%)
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Gross margin % 5% 19% (14%) (74%)

Average units available during the
period:
Production testing 53.8 36.5 17.3 47%
Wireline & Swabbing 55.6 36.9 18.7 51%
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Ending units:
Production testing 87.0 33.0 54.0 (164%)
Wireline & Swabbing 94.0 36.0 58.0 (161%)
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Number of jobs completed:
Production testing 3,434 4,272 (838) (20%)
Wireline & Swabbing 4,624 3,801 823 22%
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As a result of the merger with CanSub late in Q2 2009, revenue for Pure's CCS segment increased by 33% to $18.5 million in Q3 2009 from $13.9 million recognized Q3 2008. While revenue has been positively impacted by the addition of CanSub, continued weak industry activity has curtailed the full impact that the combined Pure and CanSub operations could generate in a more robust industry environment.

Industry activity remained low coming out of the second quarter due to continued low natural gas prices and uncertainty surrounding a number of changes in Alberta provincial royalty rates that came into effect January 1, 2009. Although temporary royalty incentives were introduced in Alberta during the first quarter of 2009 in an effort to promote drilling during 2009, low cash flows caused by low commodity prices, have limited the ability of oil and natural gas exploration and production companies to increase their investment in the province at this time.

As a result of the Alberta royalty uncertainties, some of the Corporation's customers have re-focused their efforts into the neighbouring provinces of British Columbia and Saskatchewan with more stable royalty regimes. In addition, the significant technology advances in the recovery of oil and natural gas in unconventional resource plays found in these provinces has further stimulated activity levels in these areas. The CCS segment has facilities and an estimated 50% of its wireline and production testing fleet servicing these unconventional plays, and the segment has seen increased equipment utilization rates in these areas. Pure's fleet of high pressure wireline and production testing equipment and expertise is ideally suited for these developing resource plays.

As a result of the lower equipment utilization and reduced pricing, gross margin for the CCS segment declined to $1.7 million (or 9% of revenue) in Q3 2009 from $2.7 million (or 20% of revenue) in Q3 2008.

The CCS segment margins were also negatively impacted by high fixed operating costs as the Corporation continues to integrate the Pure and CanSub operations. Integration initiatives occurred throughout the third quarter and will continue for the remainder of 2009. Consolidation of the field operating locations has begun and new management teams have been established. Over the next two quarters the focus will be on integrating the Pure and CanSub financial and operating systems and processes with the goal of the organizations being fully integrated by early 2010. Once this integration is complete, management expects that further operating cost reductions will be possible with improved operational and administrative efficiencies.

In response to the lower activity levels and reduced margins, the CCS segment implemented a number of cost reduction measures commencing in Q1 2009, including staffing reductions, wage rollbacks, reduction in support costs, and the reduction of discretionary spending. The CCS segment has also chosen to temporarily park excess wireline and low pressure production testing units to eliminate all variable costs related to these units. These units will be brought back into service once industry conditions improve.

In addition to the future reduction in operating costs, the CanSub integration efforts will include the sale of redundant owned operating facilities and older excess equipment in certain operating locations in Canada. Proceeds from the sale of these redundant assets will allow the Corporation to reduce debt or invest in other operating assets. To date the Corporation has been able to successfully negotiate the sale of one of its four redundant operating facilities. The sale of this facility is scheduled to close in early November with gross proceeds of $2.1 million.

On a year to date basis, the CCS segment has generated $36.2 million in revenue versus $39.4 million generated in the first nine months of 2008. The lower year to date revenue is due to a reduction in industry activity levels which has been partially offset by the additional revenue contribution from the CanSub operations added late in June 2009.

The lower revenue and activity levels have resulted in the segment's gross margin declining to $1.7 million year to date versus $7.6 million in the first nine months of 2008. The stronger activity levels in the prior period reflected more robust oil and natural gas prices along with better access to capital (debt and equity) which allowed oil and gas producers to more easily finance their drilling and completion programs.



Drilling Services

----------------------------------------------------------------------------
Three months ended September 30 Variance % Change
($ thousands) (unaudited) 2009 2008
----------------------------------------------------------------------------
Revenue $ 3,053 $ 12,076 $ (9,022) (75%)
Operating expenses 3,180 9,156 (5,976) (65%)
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Gross margin $ (127) $ 2,920 $ (3,046) (105%)
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Gross margin % (4%) 24% (28%) (117%)

Average units available during the
period:
Drilling rigs 10.0 10.0 - 0%
Mud motors 61.3 59.0 2.3 4%

Utilization(1):
Drilling rigs 22% 44% (22%) (50%)
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----------------------------------------------------------------------------
Nine months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------

Revenue $ 12,589 $ 29,593 $(17,004) (57%)
Operating expenses 11,075 21,452 (10,377) (48%)
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Gross margin $ 1,514 $ 8,141 $ (6,627) (81%)
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Gross margin % 12% 28% (16%) (57%)

Average units available during the
period:
Drilling rigs 10.0 10.0 - 0%
Mud motors 59.3 59.0 0.3 1%
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Ending units:
Drilling rigs 10.0 10.0 - 0%
Mud motors 61.0 59.0 2.0 3%
----------------------------------------------------------------------------

Utilization(1):
Drilling rigs 22% 44% (22%) (50%)
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(1) Utilization % for the Corporation's drilling rigs is defined as the
number of spud to rig release days for the period divided by the number
of available rig days for the period.


The low second quarter drilling industry activity continued into the third quarter of 2009. The low industry activity experienced during the third quarter was akin to the low activity levels normally experienced during the seasonal second quarter spring break up period and was the lowest third quarter drilling activity since 1992 (source: Daily Oil Bulletin). Utilization of the segment's drilling rigs was 22% during the quarter which was slightly higher than the 20% utilization achieved by the industry in the WCSB during the quarter (source: CAODC). While average rig activity was lower than expected during the quarter, the segment experienced a significant increase in activity at the end of the quarter which has carried on into the fourth quarter. Currently the drilling division is operating at approximately 60% utilization, compared to approximately 20% at the start of the third quarter.

As a result of the significantly lower activity levels during the quarter, revenue declined to $3.1 million versus $12.1 million in Q3 2008. Lower pricing levels for the segment's drilling services also negatively impacted revenue, with average revenue of $13,200 per operating day in the current quarter versus $17,120 per operating day in Q3 2008. Revenue in the drilling services segment was also negatively impacted by a sharp decline in revenue generated from the segment's directional drilling operations. In the third quarter of 2008, the directional drilling operations contributed $5.1 million in revenue versus only $0.4 million during the third quarter of 2009.

As a result of the renewed focus of the Corporation to concentrate on its core businesses, Pure exited the directional drilling business during the quarter and will now focus solely on mud motor rentals and related services which was the original core competency of this division. This change has allowed the segment to reduce its fixed operating costs as the mud motor rental operations require lower support services than directional drilling.

The lower activity and pricing caused gross margin in the Drilling segment to decline to negative $0.1 million during the quarter from the positive $2.9 million in gross margin achieved in Q3 2008. The lower margins resulted in less contribution to fixed operating costs during the quarter. Additional operating costs were incurred in preparation for the start-up of additional rigs to meet customer demand for drilling that materialized near the end of the quarter. The segment's operating costs were also negatively impacted by fixed operating costs associated with the directional drilling operations. These costs have since been reduced with the decision to refocus this division's operations to solely mud motor rentals.

The lower activity experienced in the third quarter is consistent with the lower activity experienced in the first nine months of 2009, resulting in the Drilling Services segment generating $12.6 million in revenue year to date versus the $29.6 million generated in the first nine months of 2008. Year to date utilization for the drilling rig industry in the WCSB as a whole was only 22% versus the 44% experienced in the first nine months of 2008 (source: CAODC). Pure's rig utilization rates were consistent with these industry rates. This 50% decline in utilization rates is the primary contributor to the 57% decline in the segment's drilling rig division's revenue year to date versus the comparative period in 2008. A $6.3 million decline in revenue contribution from the segment's directional drilling operations also negatively impacted revenue year to date.

Similar to the third quarter results, the lower year to date activity levels and pricing have caused gross margin to decline to $1.5 million year to date versus $8.1 million in the first nine months of 2008.

General and Administrative Expenses

General and administrative expenses during Q3 2009 of $5.3 million were slightly less than the $5.5 million incurred during Q3 2008. The decrease in general and administrative costs was achieved even though the Corporation more than doubled its Canadian completions operations through the merger with CanSub. This positive result has been achieved through a focus on cost reduction initiatives implemented during 2009. These cost reductions included layoffs and wage rollbacks in addition to a reduction in discretionary spending.

Year to date, general and administrative expenses were $13.6 million versus the $15.2 million incurred in the first nine months of 2008. In addition to the impact of cost reduction initiatives, general and administrative expenses have benefited year to date from the receipt of $0.7 million from the Corporation's former US legal counsel in settlement of a malpractice claim initiated by the Corporation. General and administrative costs also benefited from lower stock-based compensation expense which reduced to $0.4 million year to date versus $1.1 million in the first nine months of 2008.

Depreciation and Amortization Expense

Depreciation and amortization expense totalled $3.3 million during the quarter which was $0.7 million higher than the $2.6 million recorded in the Q3 2008. The higher depreciation was related to the higher average net book value of property and equipment during Q3 2009.

On a year to date basis, depreciation and amortization expense was $8.7 million versus the $8.4 million incurred in the first nine months of 2008. Consistent with the increase experienced in depreciation for the third quarter of 2009, the higher depreciation year to date is due to the higher average net book values of property and equipment. Partially offsetting the higher deprecation expense from asset additions, was lower depreciation from the Corporation's drilling assets due to the lower activity levels experienced year to date. Depreciation for the drilling assets is recognized based on activity levels for the rigs, therefore, as a result of the lower activity, less depreciation was recognized.

Interest Expense

While average debt increased $17.0 million in the quarter versus the third quarter of 2008, a 53% decline in prime interest rates, plus the use of lower rate bankers acceptances during the quarter, resulted in interest expense being consistent with the third quarter of 2008 at $0.7 million. Interest expense was also positively impacted during the quarter relative to the first and second quarters of 2009 due to the sale of the Corporation's well fracturing division during the quarter. The net $38.8 million in proceeds received from the sale of the well fracturing division were applied against outstanding debt thus reducing interest expense in the quarter.

The lower average interest rates year to date have also resulted in interest expense declining to $1.6 million year to date versus $2.1 million in the first nine months of 2008.

Other (Income) Expenses

Other expenses in the third quarter are comprised of $0.4 million in foreign exchange losses offset by a $0.3 million gain on the sale of older and redundant production testing equipment.

Year to date the Corporation has recognized $0.5 million in gains on the sales of assets, which have been partially offset by $0.2 million in foreign exchange losses from it US operations.

Income Tax Expense

Due to the net loss incurred during the quarter, Pure recorded an income tax expense recovery of $1.9 million during the quarter. This tax recovery represents an effective tax rate of 32.5% versus the Corporation's statutory rates for its Canadian and US operations of 29.2% and 37.6%, respectively.

As at September 30, 2009 the Corporation had non-capital losses and other operating expense pools that can be used to reduce future taxable income in Canada and the US of $73.5 million and $32.8 million, respectively. In addition, the Corporation had $89.7 million of depreciable capital property in Canada and $6.1 million in the US to apply against future taxable income. Based on management's estimate, the future income tax asset related to the aforementioned losses and expense pools is more likely than not going to be realized in future periods and as such a future income tax asset has been included on the balance sheet.



Discontinued Operations

Well Fracturing Services

----------------------------------------------------------------------------
Three months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------

Revenue $ 3,812 $ 14,465 $(10,653) (74%)
Operating expenses 5,000 11,864 (6,864) (58%)
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Gross margin $(1,188) $ 2,601 $ (3,789) (146%)
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Gross margin % (31%) 18% (49%) (272%)

Average units available during the
period:
Fracturing spreads 1.5 3.0 (1.5) (50%)
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Number of jobs completed:
Fracturing 130 398 (268) (67%)
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----------------------------------------------------------------------------
Nine months ended September 30
($ thousands) (unaudited) 2009 2008 Variance % Change
----------------------------------------------------------------------------
Revenue $ 21,233 $ 29,893 $ (8,660) (29%)
Operating expenses 21,223 26,714 (5,491) (21%)
----------------------------------------------------------------------------
Gross margin $ 10 $ 3,179 $ (3,169) (100%)
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Gross margin % 0% 11% (11%) (100%)

Average units available during the
period:
Fracturing spreads 2.5 3.0 (.5) (17%)
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Number of jobs completed:
Fracturing 499 918 (419) (46%)
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On August 14, 2009 the Corporation sold its well fracturing division. As a result, the third quarter financial results for this division only include the business operations up until the date of sale. Due to the shortened period combined with low industry activity, revenue generated from the well fracturing division was $10.7 million lower than the revenue generated in the third quarter of 2008, which enjoyed a more robust industry environment.

The well fracturing division generated a negative gross margin of $1.2 million during the quarter due to the lower revenue levels not being sufficient to offset fixed operating costs. In addition, the division incurred a full month of fixed overhead costs for August despite the field operations discontinuing on August 14, 2009. These fixed overhead costs primarily related to management personnel, facilities and field trucks which were not transferred to the purchaser. Subsequent to the sale, the Corporation has reduced personnel that directly supported the well fracturing division and the process has begun to find a sublease tenant for the Corporation's former well fracturing facility.

On a year to date basis, the well fracturing division generated $21.2 million in revenue versus the $29.9 million generated in the first nine months of 2008. While the well fracturing division generated stronger financial results in the first quarter of 2009 versus the first quarter of 2008, a sharp decline in industry activity and services pricing resulted in lower financial results for the division in the second and third quarters of 2009 versus the comparable periods in 2008. The lower activity and services pricing, combined with the continued fixed costs of the division post closing of the sale resulted in gross margin declining to break-even year to date versus a positive gross margin of $3.2 million in the first nine months of 2008.

In addition to the operating results discussed above, the Corporation recognized a $16.9 million impairment ($11.8 million net of income taxes) on the value of the well fracturing assets in the second quarter of 2009 which represented the difference between the initially estimated sale proceeds and the estimated value of the US well fracturing assets at the time of sale. A further loss on sale of assets of $0.8 million ($0.6 million net of income taxes) was recognized in the third quarter of 2009 once these values were finalized. The additional loss recognized over and above the second quarter impairment was due to post closing adjustments and changes between the actual and estimated exchange rate used in the impairment calculation.



Summary of Quarterly Results(1)

----------------------------------------------------------------------------
($ thousands,
except per 2009 2008 2007
share amounts) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
----------------------------------------------------------------------------

Revenue 30,533 13,153 33,936 40,394 38,726 20,620 42,734 28,400
Gross margin 3,444 (590) 7,398 10,000 9,836 2,558 13,279 7,291
Gross margin % 11% (4%) 22% 25% 25% 12% 31% 26%
General and
administrative
expenses 5,274 4,247 4,074 5,115 5,540 4,543 5,092 5,378
EBITDA (1,933) (5,116) 3,693 4,512 4,243 (1,967) 8,174 4,200
EBITDAS (1,699) (5,035) 3,785 4,553 4,456 (1,785) 8,854 4,552
Net (loss)
income (2) (3,999) (6,157) (118) 429 719 (3,804) 3,084 1,923
(Loss) income
per share:
Basic (0.17) (0.37) (0.01) 0.03 0.05 (0.24) 0.19 0.12
Diluted (0.17) (0.37) (0.01) 0.03 0.05 (0.24) 0.19 0.12
Funds flow from
operations (1,840) (5,534) 2,516 2,001 4,627 (2,769) 7,482 529
----------------------------------------------------------------------------
Net (loss)
income from
discontinued
operation (1,305)(13,497) 77 1,079 755 56 (1,026) (863)

(1) Reflect results from continuing operations, unless otherwise stated.

(2) Prior periods have been restated to reflect the change in accounting
policy adopted by the Corporation related to the accounting for
intangible assets. Prior periods have also been restated to reflect
the reclassification of balances related to the discontinued well
fracturing operations.


Two distinct operating environments have existed for Pure during the last eight quarters. The Corporation's Canadian operations were focused on navigating through the challenges of lower industry activity levels, whereas the US operations were focused on expanding their operations to capitalize on robust US industry activity during 2007 and 2008. This robust US activity significantly declined subsequent to the fourth quarter of 2008 in response to lower commodity prices.

During 2006 and 2007, the Corporation undertook a significant expansion of its US operations through the investment in the construction of three well fracturing spreads. Construction of the first two fracturing spreads was completed by the end of the first quarter of 2007, however, delays in the start-up of the Corporation's fracturing sand supplier operations curtailed fracturing operations into early 2008. While the Corporation's fracturing operations were curtailed by the sand supply delays, the Corporation's US production testing and wireline operations enjoyed robust activity.

The continued slowdown in industry activity in Canada resulted in the Corporation recording a $1.2 million impairment of its goodwill balance during the fourth quarter of 2007. This goodwill was recorded from two acquisitions completed in 2005 and 2006. In contrast, the Corporation's US operations continued to develop with the awarding of a significant well fracturing contract and the sale of the sand supply mine to a new owner. An additional two production testing units and one wireline unit were transferred from Canada to the US operations during that quarter.

As a result of the sale of the sand supply mine to a new owner, the Corporation was able to recover $4.9 million from the new mine owner representing partial repayment of a note receivable previously written-off by the Corporation and the reimbursement of certain operating expenses. The transition of the mine ownership was a significant event for the Corporation as it marked the beginning of the development of a secure sand supply which the Corporation required for its well fracturing operations.

The Corporation enjoyed strong activity for its drilling rig fleet during the first quarter of 2008. This improved performance was due to successful marketing efforts to migrate to more active customers during the quarter. Activity in the US continued to be strong resulting in the additional transfer of two production testing units from Canada to the US, which was later followed by five more units transferred in the second quarter and one more unit in the fourth quarter. An additional two wireline units were also transferred into the US during the second half of 2008.

Improved sand supply allowed activity for the well fracturing operations to begin to significantly increase during the second quarter of 2008, resulting in the first quarter of positive income contribution from the division. The contribution from the well fracturing operations continued to increase in the third and fourth quarters of 2008 resulting in the well fracturing division generating $34.6 million in revenue during the second half of 2008 versus only $5.0 million in the comparative period in 2007. This significant increase in well fracturing revenue combined with the continued strength of the US production testing and wireline operations offset the continued lower activity levels experienced in the Corporation's CCS segment. However, on a positive note for the Corporation's operations in Canada, was the improvement in utilization of the Corporation's drilling rigs. This improvement was a direct result of the improved marketing efforts initiated in late 2007 and early 2008.

The impact of a global recession combined with significantly reduced oil and natural gas prices caused a sharp decline in industry activity in the US and further declines from already low activity levels in Canada during the first quarter of 2009. The number of drilling rigs operating in the US during the quarter was approximately 50% lower than the peak number of rigs operating in the US during 2008. Drilling activity in Canada during the quarter was also the lowest seen during a first quarter since 1999 (source: Daily Oil Bulletin). These lower industry activity levels resulted in lower operating results for the Corporation during the quarter.

Activity levels continued to fall in the second quarter of 2009 for all of the Corporation's operating segments. The impact of lower industry activity in both Canada and the US was further exacerbated by the seasonal activity decline in the Corporation's Canadian and North Dakota operations associated with spring break-up conditions that prevented the movement of equipment for the majority of the quarter. In response to the lower activity levels and competitive pricing pressure for the Corporation's services experienced in the first and second quarters of 2009, the Corporation undertook a number of cost cutting measures intended to reduce operating costs. These cost cutting measures helped to mitigate some of the impact of the margin compression caused by the lower activity levels and reduced pricing for services.

On June 22, the Corporation merged its Canadian completions operations with CanSub creating one of the largest wireline and production testing services providers in the WCSB. The 2009 second quarter results include eight days of revenue and operating results from CanSub.

On August 14, the Corporation sold its well fracturing assets for net proceeds of $38.8 million. As a result of this sale, an $11.8 million impairment, net of income taxes, was recognized in the second quarter results to reflect the lower proceeds received on the sale versus the carrying value of the related assets. A further $0.6 million loss, net of income taxes, was recorded in the third quarter of 2009 due to post closing adjustments and changes in the estimated exchange rate value for the Corporation's US fracturing assets. The financial results for the well fracturing operation for the previous eight quarters has been disclosed as discontinued operations.

Liquidity and Capital Resources

Pure exited Q3 2009 with $2.4 million in cash and $50.1 million outstanding on the Corporation's debt facilities compared to $4.2 million in cash and $65.3 million outstanding on these facilities as at December 31, 2008. Net debt (ie long-term debt less working capital), decreased to $33.4 million at September 30, 2009 from $35.1 million as at December 31, 2008 and $63.9 million as at June 30, 2009 (following the merger with CanSub). The decrease in net debt as at September 30, 2009 versus June 30, 2009 is due primarily to proceeds received from the sale of the Corporation's well fracturing division during the third quarter for net proceeds of $38.8 million.

The proceeds generated from the sale of the well fracturing division offset the addition of $18.8 million in net debt added through the CanSub merger plus the incurrence of $3.7 million in related transaction costs. In addition, the Corporation had year to date negative funds flow from operations of $5.6 million (including discontinued operations) and year to date property and equipment acquisitions of $7.1 million (including discontinued operations).

As discussed in the results of operations for the CCS segment, the merger with CanSub has allowed the Corporation to begin to rationalize its investment in real estate and redundant operating assets. The proceeds from these sales will be used to further reduce the Corporation's outstanding debt or reinvest into other growth areas of the Corporation's current business operations.

The Corporation's board of directors has approved a nominal $2.0 million capital budget for 2009. These expenditures are primarily for maintenance of the Corporation's existing operating capacity and capabilities and equipment with high customer demand. These capital expenditures are in addition to approximately $6.0 million in capital expenditures which were carried over from 2008.

In addition to the capital expenditures discussed above, the Corporation has the following operating and debt commitments over the next five years:



----------------------------------------------------------------------------
Payments Due by Period
----------------------------------------------------------------------------
Contractual
Obligations Less than 1 1 - 3 4 - 5 After 5
($ thousands) Total year years years years
----------------------------------------------------------------------------
Long-term debt
obligations(1) $ 50,121 $ 6,394 $ 43,727 $ - $ -
Operating leases 37,967 8,036 11,530 8,952 9,449
----------------------------------------------------------------------------
Total Contractual
Obligations $ 88,088 $ 14,430 $ 55,257 $ 8,952 $ 9,449
----------------------------------------------------------------------------

(1) Long-term debt obligations represent balances outstanding under the
extendible revolving loan facility and the non-revolving loan facility
and the obligations in the table above assumes the revolving facility
is not renewed by March 31, 2010.


In conjunction with the CanSub merger, the Corporation renewed and expanded its existing credit facilities to provide a secured $18.0 million demand revolving operating credit facility ("Operating Facility") and a secured $80.0 million one year extendible revolving credit facility ("Revolving Facility"). The Revolving Facility is subject to renewal on March 31, 2010, and if not extended would term out with 25% of the outstanding balance being repaid over one year and the remaining balance due upon expiry of the one year amortization period. Borrowings under the Operating Facility will bear interest at either: (i) the lender's prime rate plus 1.50%, or (ii) bankers acceptance rates plus 2.75%. Borrowings under the Revolving Facility will bear interest at either: (i) the lender's prime rate plus 2.50%, or (ii) bankers acceptance rates plus 4.00%. The other terms of the new facilities, including financial covenants and borrowing limits, are similar to those contained in Pure's previous credit facilities. The Corporation was in compliance with all of the debt covenants at September 30, 2009.

Pure has forecasted its financial results for the year ended December 31, 2009 using its best estimate of industry activity levels and associated operating conditions. Due to the continuing challenging industry environment, the Corporation is forecasting a breach of one of its debt covenants at December 31, 2009 which relates to trailing 12 month earnings before interest, taxes, depreciation, amortization and stock-based compensation expense ("EBITDAS"). Pure's banker has agreed to provide forbearance of this forecasted covenant breach and amended the covenant calculation for calendar 2010 such that the calculation is no longer based on the trailing 12 month EBITDAS but based on year to date EBITDAS for 2010.

In addition, the bank has reduced the amount available to be drawn under the Revolving Facility from $80 million to $60 million effective November 6, 2009. The reduced facility is not expected to have any impact on Pure's operations.

Pure's financial position has improved significantly with the disposition of the Corporation's well fracturing assets. With these proceeds from sale combined with Pure's existing debt facilities, management believes the Corporation is positioned to manage through the weakness in industry activity levels that are expected to continue into 2010.

As at November 10, 2009, the Corporation had 23,740,647 common shares issued and outstanding and 2,051,667 stock options issued and outstanding, of which 393,500 were vested.

Changes in Accounting Policies

On January 1, 2009, the Corporation adopted new accounting standards dealing with Intangible Assets issued by the Canadian Institute of Chartered Accountants ("CICA"). These new standards, which apply to fiscal years beginning on or after October 1, 2008 have been adopted retrospectively resulting in a restatement of prior period financial statements. The revisions to the various accounting standards align the definition of Intangible Assets under Canadian GAAP with that under IFRS. Section 1000, "Financial Statement Concepts" was revised to remove material that permitted the recognition of assets that might not otherwise meet the definition of an asset and to add guidance from the IASB's "Framework for the Preparation and Presentation of Financial Statements" that will help distinguish assets from expenses. Section 3064 "Goodwill and Intangible Assets", which replaces Section 3052 "Goodwill and Other Intangible Assets", gives guidance on the recognition of intangible assets as well as the recognition and measurement of internally developed intangible assets.

As a result of the adoption of the new Section 3064, the intangible assets related to pre-operating expenditures for start-up activities in the United States have been reversed and balances for prior periods restated to reflect the change. The resulting impact on the comparative December 31, 2008 balance sheet is as follows:



----------------------------------------------------------------------------
Previously
($ thousands) Reported Restated
----------------------------------------------------------------------------
Opening retained earnings, January 1, 2008 25,310 24,322
Ending retained earnings, December 31, 2008 26,322 25,614
Intangible assets 1,671 266
Future income taxes 4,886 4,366
Accumulated other comprehensive income 4,349 4,172
----------------------------------------------------------------------------
----------------------------------------------------------------------------


For the comparative income statement, amortization for the three and nine months ended September 30, 2008 decreased by $0.1 million and $0.3 million, respectively, and future income tax expense increased by $0.0 million and $0.1 million respectively.

In January 2009, the CICA issued additional new or revised Canadian accounting standards for business combinations, consolidated financial statements and accounting for non-controlling interests and transactions with non-controlling interest holders. In June 2009, the CICA issued revised Canadian accounting standards for financial instruments and capital disclosures. The purpose of these standards and revisions are to further align the Canadian GAAP with IFRS. These standards are to be applied prospectively to transactions on or after January 1, 2011. The Corporation does not anticipate that these standards will have a material impact on the Corporation's financial statements unless the Corporation completes a business combination or creates a non-controlling interest in a subsidiary.

In February 2008, the CICA Accounting Standards Board ("AcSB") confirmed Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards ("IFRS") for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. There are a number of differences between IFRS and Canadian generally accepted accounting principles ("GAAP") which may result in a number of changes to the Corporation's accounting policies and disclosures as a result of the transition to IFRS.

The transition from current GAAP to IFRS is a significant undertaking. The Corporation is in the process of reviewing the potential impact of IFRS on the Corporation's financial accounting and reporting processes. The Corporation has established an IFRS conversion steering committee which continues to review the Corporation's existing accounting policies and disclosures and is assessing the impact to these policies and disclosures in reference to standards differences between IFRS and GAAP.

Based on an initial review of the differences between IFRS and GAAP, the Corporation's steering committee has identified a number of areas which may result in significant adjustments to the Corporation's accounting policies and disclosures. The Committee's primary focus during 2009 will be on those areas where significant effort has been required to adjust the Corporation's current accounting policies to conform to IFRS. The Committee anticipates completing its assessment of high impact areas during 2009 and based on this assessment, the Committee will begin to undertake the process of quantifying the impact of these IFRS changes on the Corporation's financial statements at the end of 2009 and into 2010.

Risks and uncertainties

A complete discussion on business risks faced by the Corporation may be found under "Risk Factors" in the Corporation's Annual Information Form dated March 18, 2009 which is available under the Corporation's profile at www.sedar.com.

Outlook

Sentiment in the industry appears to be improving with the recent increase in oil and natural gas commodity prices. More industry analysts are now beginning to predict a return to higher activity levels in 2010. The definition of "higher" activity is a relative term in that analysts generally anticipate industry activity to be higher in 2010 than the activity experienced in 2009, however the 2010 levels are still expected to be well below the robust levels seen in 2005 to 2008.

Recognizing the challenges still facing the industry, the Corporation's recent strategic decisions to merge with CanSub and divest of its well fracturing division provide Pure with a more focused business operation and improved financial position to manage through the current industry weakness and grow as industry activity recovers. The merger with CanSub positioned Pure as one of the largest providers of production testing and wireline services in western Canada, and more importantly, has positioned the Corporation as a leading provider of these services to the growing non-conventional resource plays in the WCSB.

Pure's management team also continues to focus on expansion of the profitable and growing US production testing and wireline operations. Additional equipment continues to move into the US from the Corporation's Canadian operations to take advantage of recently identified opportunities in the Marcellus natural gas shale resource play in Pennsylvania and Virginia.

In Canada the focus for the Completions Services Segment in 2009 continues to be completing the integration of CanSub with Pure's Canadian operations. A number of operational and administrative efficiencies have already been implemented, with further synergies expected over the next six months as full integration is completed. The operational focus will continue to be on expanding the Corporation's presence in the non-conventional natural gas resource plays in northern Alberta and northeastern British Columbia and the non-conventional oil resource Bakken play in southeastern Saskatchewan. The Corporation is currently experiencing high activity levels in these areas of operation and additional opportunities for growth in these areas are being identified.

Pure's drilling fleet in Canada is currently outperforming industry utilization rates with six to seven rigs operating during the beginning of the fourth quarter. This level of activity is expected to continue for the remainder of the fourth quarter with positive signs also being seen for continued strong activity in the first quarter of 2010. This is a positive step in an otherwise challenging year, and may be an indication that the worst is now behind the industry.

Forward-looking Statements

This document contains certain forward-looking statements and other information that are based on the Corporation's current expectations, estimates, projections and assumptions made by management in light of its experience and perception of historical trends, current conditions, anticipated future developments and other factors believed by management to be relevant.

All statements and other information contained in this document that address expectations or projections about the future are future-looking statements. Some of the forward-looking statements may be identified by words such as "may", "would", "could", "will", "intends", "expects", "believes", "plans", "anticipates", "estimates", "continues", "maintains", "projects", "indicates", "outlook", "proposed", "objective" and other similar expressions. These statements speak only as of the date of this document. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed below and under "Risks and uncertainties" discussed in the Corporation's MD&A of the audited December 31, 2008 financial statements and the most recent Annual Information Form, Information Circular, quarterly reports, material change reports and news releases. The Corporation cannot assure investors that actual results will be consistent with the forward-looking statements and readers are cautioned not to place undue reliance on them. The forward-looking statements are provided as of the date of this document and, except as required pursuant to applicable securities laws and regulations, the Corporation assumes no obligation to update or revise such statements to reflect new events or circumstances.

The forward-looking statements and information contained in this document reflect several major factors, expectations and assumptions of the Corporation, including without limitation, that the Corporation will continue to conduct its operations in a manner substantially consistent with past operations, other than its well fracturing operations; the general continuance of current or, if applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) taxation, royalty and regulatory regimes; certain commodity prices and other cost assumptions; certain conditions regarding natural gas storage in North America; and the continued availability of adequate debt and/or equity financing and cash flow from the Corporation's operations to fund its capital and operating requirements as needed and the extent of its liabilities. Many of these factors, expectations and assumptions are based on management's knowledge and experience in the industry and on public disclosure of industry participants and analysts relating to anticipated exploration and development programs of oil and gas producers, the effect of changes to regulatory, taxation and royalty regimes, expected active rig counts and industry equipment utilization in the WCSB and the US Rocky Mountain region and other matters. The Corporation believes that the material factors, expectations and assumptions reflected in the forward-looking statements and information are reasonable; however, no assurances can be given that these factors, expectations and assumptions will prove to be correct.

In particular, this document contains forward-looking information pertaining to the following: ability to reduce costs in response to lower industry activity levels; success of marketing programs; capital expenditure programs; ability to move equipment within operating locations; availability of debt financing and ability to renew the Corporation's existing facilities, at acceptable terms; supply and demand for oilfield services and industry activity levels; oil and natural gas prices; oil and natural gas drilling activity; treatment under governmental royalty, collection of accounts receivable; operating risk liability; expectations regarding market prices and costs; expansion of services and operations in Canada and the United States; the anticipated synergies, operating efficiencies and cost savings resulting from the merger of the Corporation and CanSub; and competitive conditions.

The Corporation's actual results could differ materially from those anticipated in such forward-looking statements as a result of the risk factors set forth below and elsewhere in this document: failure to realize anticipated benefits from the merger of the Corporation and CanSub; general economic conditions in Canada and the United States; changes in the level of capital expenditures made by oil and natural gas producers and the resultant effect on demand for oilfield services during drilling and completion of oil and natural gas wells; volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oilfield services generally; risks inherent in the Corporation's ability to generate sufficient cash flow from operations to meet its current and future obligations; increases in debt service charges; the Corporation's ability to access external sources of debt and equity capital; changes in legislation and the regulatory environment, including uncertainties with respect to implementing binding targets for reductions of emissions; uncertainties in weather and temperature affecting the duration of the oilfield service periods and the activities that can be completed; competition; sourcing, pricing and availability of raw materials, consumables, component parts, equipment, suppliers, facilities, and skilled management, technical and field personnel; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; ability to integrate technological advances and match advances of competition; credit risk to which the Corporation is exposed in the conduct of its business; and changes to the royalty regimes applicable to entities operating in the WCSB or the Rocky Mountain region.



PURE ENERGY SERVICES LTD.
Consolidated Balance Sheets
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Unaudited, stated in thousands of dollars)

----------------------------------------------------------------------------
September 30, December 31,
2009 2008
As restated
----------------------------------------------------------------------------

Assets

Current assets
Cash and cash equivalents $ 2,352 $ 4,201
Accounts receivable 20,510 37,304
Inventory 3,506 5,041
Deposits and prepaid expenses 2,092 1,996
Current assets of discontinued operation 1,342 -
----------------------------------------------------------------------------
29,802 48,542

Property and equipment 134,848 179,002
Future income taxes 28,818 -
Intangible assets - 266
----------------------------------------------------------------------------
$ 193,468 $ 227,810
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities
Accounts payable and accrued liabilities $ 12,426 $ 16,598
Income taxes payable 430 1,455
Deferred government grant 205 270
Current portion of long-term debt 6,394 7,909
----------------------------------------------------------------------------
19,455 26,232
Long-term debt 43,727 57,405
Future income taxes 5,898 4,366
----------------------------------------------------------------------------
69,080 88,003
----------------------------------------------------------------------------
Shareholders' equity
Share capital 120,913 106,510

Contributed surplus 3,918 3,511
Accumulated other comprehensive (loss) income (1,058) 4,172
Retained earnings, as restated 615 25,614
----------------------------------------------------------------------------
124,388 139,807
----------------------------------------------------------------------------

$ 193,468 $ 227,810
----------------------------------------------------------------------------
----------------------------------------------------------------------------


PURE ENERGY SERVICES LTD.
Consolidated Statements of (Loss) Income and Retained Earnings
For the three and nine months ended September 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Unaudited, stated in thousands of dollars, except per share amounts)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------------------------
2009 2008 2009 2008
As restated As restated
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 30,533 $ 38,726 $ 77,622 $ 102,080
Operating expenses 27,089 28,890 67,370 76,407
----------------------------------------------------------------------------
Gross margin 3,444 9,836 10,252 25,673

Expenses
Selling, general and
administrative 5,274 5,540 13,596 15,175
Depreciation and
amortization 3,270 2,580 8,729 8,374
Impairment of intangible
assets - - 247 -
Interest on long-term debt 713 598 1,567 1,853
Other interest 10 118 15 208
Gain on sale of equipment (319) - (474) (13)
Foreign exchange loss 422 53 242 61
----------------------------------------------------------------------------
(Loss) income before income
taxes (5,926) 947 (13,670) 15
----------------------------------------------------------------------------

Income taxes
Current (reduction) expense (479) (884) 233 118
Future (reduction) expense (1,448) 1,112 (3,629) (102)
----------------------------------------------------------------------------
(1,927) 228 (3,396) 16
----------------------------------------------------------------------------
Net (loss) income from
continuing operations (3,999) 719 (10,274) (1)
Net (loss) income from
discontinued operation (1,305) 755 (14,725) (215)
----------------------------------------------------------------------------
Net (loss) income (5,304) 1,474 (24,999) (216)
Retained earnings,
beginning of period, as
re-stated 5,919 22,632 25,614 24,322
----------------------------------------------------------------------------

Retained earnings, end of
period $ 615 $ 24,106 $ 615 $ 24,106
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(Loss) income per share
from continuing operations
Basic and diluted $ (0.17) $ 0.04 $ (0.55) $ 0.00

(Loss) income per share
from discontinued
operation
Basic and diluted $ (0.05) $ 0.05 $ (0.78) $ (0.01)

(Loss) income per common
share
Basic and diluted $ (0.22) $ 0.09 $ (1.33) $ (0.01)


PURE ENERGY SERVICES LTD.
Consolidated Statements of Comprehensive (Loss) Income and Accumulated Other
Comprehensive (Loss) Income

For the three and nine months ended September 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Unaudited, stated in thousands of dollars)

Comprehensive (loss) income

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------------------------
2009 2008 2009 2008
As restated As restated
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net (loss) income $ (5,304) $ 1,474 $ (24,999) $ (216)

Other comprehensive (loss)
income
Foreign currency translation
adjustment (3,472) 1,554 (5,472) 2,373
Realized foreign exchange
loss 422 - 242 -
----------------------------------------------------------------------------
(3,050) 1,554 (5,230) 2,373

----------------------------------------------------------------------------
Comprehensive (loss) income $ (8,354) $ 3,028 $ (30,229) $ 2,157
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Accumulated other comprehensive (loss) income

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------------------------
2009 2008 2009 2008
As restated As restated
----------------------------------------------------------------------------

Balance, beginning of
period $ 1,992 $ (3,142) $ 4,172 $ (3,961)
Unrealized and realized
(loss) / gain on
translation of foreign
operations (3,050) 1,554 (5,230) 2,373
----------------------------------------------------------------------------
Balance, end of period $ (1,058) $ (1,588) $ (1,058) $ (1,588)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


PURE ENERGY SERVICES LTD.
Consolidated Statements of Cash Flows
For the three and nine months ended September 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Unaudited, stated in thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------------------------
2009 2008 2009 2008
As restated As restated
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by (used
in)
Operating activities
Net (loss) income from
continuing operations $ (3,999) $ 719 $ (10,274) $ (1)
Items not involving
cash:
Depreciation and
amortization 3,270 2,580 8,729 8,374
Impairment of
intangible assets - - 247 -
Future income tax
(reduction) expense (1,448) 1,112 (3,629) (102)
Stock-based
compensation 234 213 407 1,075
Gain on sale of
equipment (319) - (474) (13)
Foreign exchange loss 422 3 134 8
----------------------------------------------------------------------------
(1,840) 4,627 (4,860) 9,341
Changes in non-cash
working capital
balances (7,324) (7,327) 11,413 (4,577)
----------------------------------------------------------------------------
Continuing operations (9,164) (2,700) 6,553 4,764
Discontinued
operations 458 1,097 5,081 804
----------------------------------------------------------------------------
(8,706) (1,603) 11,634 5,568
----------------------------------------------------------------------------
Investing activities
Purchases of property
and equipment (1,235) (5,220) (3,793) (9,145)
Proceeds from the sale
of equipment 346 - 2,038 76
Business acquisition,
net of cash acquired - - (5,524) -
Changes in non-cash
working capital
balances (80) 362 (2,292) (1,030)
Discontinued
operations 34,989 (507) 32,000 (6,650)
----------------------------------------------------------------------------
34,020 (5,365) 22,429 (16,749)
----------------------------------------------------------------------------
Financing activities
Operating loan - 8,702 - 11,338
Net (repayment) of /
proceeds from
revolving
term loans (21,794) 270 (27,710) 3,829
Repayment of fixed
term loans (410) (103) (4,209) (3,777)
Government grant
received - 245 - 245
Issue of share
capital, net of
issuance costs - - (20) 50
Discontinued
operations (3,522) (75) (3,699) 3,460
----------------------------------------------------------------------------
(25,726) 9,039 (35,638) 15,145
----------------------------------------------------------------------------
(Decrease) increase in
cash (412) 2,071 (1,575) 3,964
Effect of translation
on foreign currency
cash and cash
equivalents (198) 103 (274) 198
Cash, beginning of
period 2,962 4,031 4,201 2,043
----------------------------------------------------------------------------

Cash, end of period $ 2,352 $ 6,205 $ 2,352 $ 6,205
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Contact Information

  • Pure Energy Services Ltd.
    Kevin Delaney
    CEO
    (403) 262-4000
    (403) 262-4005 (FAX)
    kdelaney@pure-energy.ca
    or
    Pure Energy Services Ltd.
    Chris Martin
    Chief Financial Officer
    (403) 262-4000
    (403) 262-4005 (FAX)
    cmartin@pure-energy.ca
    or
    Pure Energy Services Ltd.
    10th Floor, 333 - 11th Avenue S.W.
    Calgary, AB
    T2R 1L9