Builders Energy Services Trust
TSX : BET.UN

Builders Energy Services Trust

August 11, 2005 19:13 ET

Builders Energy Services Trust Reports Second Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 11, 2005) - Builders Energy Services Trust (TSX:BET.UN) ("Builders", or the "Trust") announced today that cash flow from operations(1) for the 157-day period ended June 30, 2005 was $9,120,000 ($0.75 per unit diluted) and $2,532,000 ($0.20 per unit diluted) for the second quarter. Builders commenced operations as a Trust on January 25, 2005. Builders' net earnings from January 25, 2005 to June 30, 2005, were $4,332,000 ($0.39 per unit diluted) and $83,000 ($0.01 per unit diluted) for the quarter.

"We continue to be very pleased with the contributions from each of our businesses" said Garnet Amundson, President and Chief Executive Officer of Builders. "We are optimistic about our operations and cash flow for the third and fourth quarters of 2005. The oil and gas industry in western Canada has never been stronger, and Builders' diverse services are well-positioned to capitalize on this strength."

HIGHLIGHTS

- Cash flow from operations(1) for the second quarter was $2,532,000 and $9,120,000 for the 157-day period ended June 30, 2005.

- Net earnings from January 25, 2005 to June 30, 2005 were $4,332,000 and net earnings of $83,000 in the quarter were in line with management's internal estimates, despite heavy rains impacting much of the oil and gas sector in Alberta.

- In early May, Builders obtained a $45 million credit facility with two major Canadian chartered financial institutions.

- Builders closed a $15 million bought deal private placement of Trust units on June 2, 2005.

- Tryton Tool Services Ltd. ("Tryton") acquisition was completed on June 1, 2005, and is expected to add an additional $5 million in annual cash flow and $18 million in annual revenue.

- Endeavor E-Line Services Inc. ("Endeavor") acquisition was completed on July 21, 2005, and is expected to add $8 million in annual cash flow and $29 million in annual revenue.



Financial summary

(in thousands of dollars, As at and for the As at and for the
except per unit amounts three months ended 157-day period
or otherwise noted) June 30, 2005 ended June 30, 2005
------------------------------------------------------------------------
Revenue $ 17,303 $ 37,524
------------------------------------------------------------------------
Gross margin(1) $ 4,361 $ 13,798
------------------------------------------------------------------------
Earnings before interest,
taxes, depreciation,
amortization, unit-based
compensation and other
non-cash charges
(EBITDA)(1) $ 1,887 $ 9,447
------------------------------------------------------------------------
Cash flow from operations(1) $ 2,532 $ 9,120
------------------------------------------------------------------------
Net earnings $ 83 $ 4,332
------------------------------------------------------------------------
Per unit - basic (2) $ 0.01 $ 0.42
Per unit - diluted (2) $ 0.01 $ 0.39
EBITDA(1)
Per unit - basic(1) $ 0.18 $ 0.92
Per unit - diluted(1) $ 0.15 $ 0.78
Cash flow(3)
Per unit - basic(1) (3) $ 0.24 $ 0.89
Per unit - diluted(1) (3) $ 0.20 $ 0.75
Distributions to unitholders
Per unit(1) $ 0.36 $ 0.63
As a percentage of cash flow(4)
- "Payout ratio" (1) 150% 71%
Gross margin(1) as a percentage of
revenue 25% 37%
General and administrative expenses
as a % of revenue 14% 12%
Capital expenditures (net) (5) $ 5,691 $ 7,422
Long-term debt
(including current portion) $ 16,821 $ 16,821
Unitholders' equity $ 108,709 $ 108,709
Working capital(6) $ 14,663 $ 14,663
Trust units - outstanding,
end of period (thousands) (7) 11,793 11,793
Trust units - weighted average,
basic (thousands) 10,565 10,298
Trust units - weighted average,
diluted (thousands) 12,388 12,093
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Refer to the "Non-GAAP measures" section for further detail.

(2) Refer to Note 8 of the Consolidated Financial Statements.

(3) Cash flow is defined as cash flow from operations before changes in
non-cash working capital.

(4) Distributions to unitholders as a percentage of cash flow
("Payout ratio") is defined as distributions to uniholders divided
by cash flow. (1)

(5) Capital expenditures exclude business acquisitions.

(6) Working capital is defined as current assets less current
liabilities excluding current portion of long-term debt.

(7) Trust units outstanding include Trust units and Subordinated units.


MANAGEMENT'S DISCUSSION AND ANALYSIS

The following interim Management's Discussion and Analysis ("MD&A") is an update to, and should be read in conjunction with, the March 31, 2005 quarterly report, and should also be read in conjunction with the attached financial statements as at and for the 157-day period ended June 30, 2005. This MD&A was prepared as of August 11, 2005.

No comparative information is provided because quarterly financial results for the comparative period are not available and are not considered directly comparable due to the complexity of harmonizing the accounting periods and policies for the financial information of the companies that have been acquired by Builders since its inception on January 25, 2005.

Formation of Builders and 157-day reporting period

On January 25, 2005, Builders completed its Initial Public Offering ("IPO") which included the concurrent closing of the acquisitions of nine oilfield service companies (the "Acquired Companies"). The operations and financial results of the Acquired Companies are included in the June 30, 2005 financial statements and MD&A of the Trust from the January 25, 2005 closing of the acquisitions. The operations and financial results of Tryton, an additional acquisition which closed on June 1, 2005, are included in the June 30, 2005 financial statements and MD&A of the Trust from June 1, 2005. The financial information for Builders is for the 157-day period ended June 30, 2005. Readers should bear in mind that this 157-day period does not represent a complete six months of operations.

Results of Operations

Builders' net earnings for the quarter ended June 30, 2005, and the 157-day period, were $83,000 and $4,332,000 respectively, and were in line with management's expectations. Cash flow from operations(1) during these periods was $2,532,000 and $9,120,000 respectively. During the quarter, Builders declared distributions of $3,808,000 to unitholders. Over the 157-day period, distributions declared were $6,500,000 resulting in a payout ratio of 71% of cash flow from operations(1).

Revenue for the quarter was $17,303,000 (157-day period, $37,524,000). Revenue of Builders is driven primarily by equipment and crew utilization and service pricing levels. During the second quarter, heavy rains in Alberta impacted the ability to provide certain oilfield services. In addition, second quarter oilfield service activity is typically the slowest period of the year as wet road conditions during spring break-up reduce the mobility of some oilfield equipment to well site locations. On an overall basis, revenues were in line with management's expectations.

Gross margin(1) for the quarter of $4,361,000 (25% of revenue), reflects both the impact of spring break-up, and the delay in getting back to the field as a result of the heavy rainfalls experienced in the month of June throughout much of Alberta. The slowdown in the quarter is also typical and allows for equipment maintenance which also impacts the gross margin as these additional costs are incurred. The gross margin for the 157-day period was $13,798,000 or 37% of revenue. Margins in the fourth quarter of the year may exceed 40% leading to an expected annualized gross margin of approximately 40%.

Operating expenses were $12,942,000 for the quarter and $23,726,000 for the 157-day period. Operating expenses include field staff payroll costs, vehicle operating costs and repairs and maintenance expense. For most of our business activities, payroll expenses are a mixture of salaried employees and hourly paid employees, the latter which are activity-driven by revenue generating activities. In periods of lower activity, the salaried employee cost has a greater proportionate impact on gross margin.

General and administrative expenses were $2,474,000 for the quarter and $4,351,000 for the 157-day period and are consistent with management's expectations for the periods. Builders' general and administrative expenses include primarily personnel and Calgary office costs and certain personnel in the field offices. General and administrative expenses as a percentage of revenue are typically higher in the second quarter because revenue is seasonally lower compared to other periods of the year. The second quarter general and administrative expenses are 14% of revenue (12% for the 157-day period ended June 30, 2005.)

Cash flow from Operations and Distributions

The table below highlights cash distributions from January 25, 2005, and the payout ratio. To date, cash distributions have been $0.12 per Trust unit per month, with the exception of the initial distribution of $0.15 per unit. The $0.15 distribution represented a distribution in respect of the five-week period from January 25, 2005 through February 28, 2005 and is effectively a pro-rated amount of $0.12 per Trust unit per month. Management targets an annualized payout ratio of 65 - 70%. Management believes that such a target payout ratio represents an important measure of the Trust's ability to fund its ongoing distributions.

Cash flow from operations was $9,120,000 for the 157-day period ended June 30, 2005, and $2,532,000 for the quarter ended June 30, 2005. Cash flow from operations was within management's expectations.



(in thousands of dollars, except per unit 157-day Period Ended
amounts or otherwise noted) June 30, 2005
------------------------------------------------------------------------
Total Per unit(1)
------------------------------------------------------------------------
Cash flow from operations $ 9,120 $ 0.89
------------------------------------------------------------------------
------------------------------------------------------------------------
Distributions
- paid $ 5,085
- payable 1,415
------------------------------------------------------------------------
$ 6,500 $ 0.63
------------------------------------------------------------------------
------------------------------------------------------------------------
Distributions as a percentage of cash flow
from operations 71% 71%
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Per unit amounts for cash flow from operations is based on
10,298,445 units, which is the weighted average of outstanding
Trust units and Subordinated units for the 157-day period.


Investing Activities

On June 1, 2005, Builders acquired substantially all of the operating assets of Tryton, including its name, distribution rights, management and staff for total consideration of $16,258,000. Tryton sells, rents, installs and services downhole tools and accessories for the oil and gas industry in western Canada.

Asset additions for the 157-day period to June 30, 2005 were $8,751,000. This equipment includes $5 million for rig relocation and oilfield hauling tractors and trailers, most of which were received near the end of the second quarter and will be placed in service early in the third quarter of 2005. Approximately $2 million was for the purchase and construction of one coil tubing unit and one nitrogen pumping unit, both of which are expected to be in service late in the third quarter. The balance was approximately $1 million related to construction of two service rigs which are expected to be in service early in the fourth quarter and $1 million for other oilfield equipment.

Proceeds on disposal of oilfield equipment, primarily tubular goods and transportation tractors, during the 157-day period totaled $1,329,000.

In the second half of 2005, Builders expects to spend additional funds on further organic fleet expansion. Most of this equipment is expected to be in service at the end of 2005 with full utilization in 2006. Anticipated additional oilfield equipment will include two nitrogen pumping units, one coil tubing unit, one service rig, two slickline units, one e-line unit and several tractors, pickers and trailers for further expansion of our oilfield transportation businesses. Much of this additional capital will be deployed in expansion of our business in Grande Prairie. Builders anticipates that net capital spending for 2005 will be in the range of $15 to $20 million.

Long-term debt

At June 30, 2005, the Trust had aggregate debt of $16,821,000 comprised of $2,430,000 of current portion of long-term debt and $14,391,000 of long-term debt.

Included in long-term debt is $9.2 million of drawdowns of the credit facility.

The other $7.6 million of debt relates to specific debt assumed, and not repaid, on January 25, 2005, in conjunction with the business acquisitions at that date.

All covenants of the credit facility were satisfied at June 30, 2005. All banking requirements were up to date and the Trust does not anticipate any covenant issues restricting its future operating, investing or financing activities.

Liquidity

On June 2, 2005 the Trust closed a bought deal private placement of 1,200,000 Trust units at a price of $12.50 per Trust unit for total gross proceeds of $15,000,000. These funds were used to fund ongoing operations, including capital expenditures, and the Endeavor acquisition, which closed on July 21, 2005.

In early May, the Trust obtained a $45 million credit facility with two major Canadian chartered financial institutions. The facility is split into an operating component of $15 million and an acquisition component representing $30 million.

In addition, Builders' management believes that the Trust has the ability to raise additional resources, if required, through the public or private issue of additional Trust units. Current resources are expected to be sufficient to meet existing working capital and operating needs for at least the next year.

Outlook

Builders anticipates high levels of activity and high demand for its services for the balance of 2005. Activity in the oil and gas exploration and production sector is the main driver of activity in the oilfield services industry. Oil and gas prices are expected to remain relatively strong for at least the next two years and ongoing declines in conventional oil and gas reserves in North America are expected to continue. As a result, oil and gas drilling and service activity in the Western Canadian Sedimentary Basin is expected to remain strong.

On July 21, 2005 the Trust completed the acquisition of Endeavor E-Line Services Inc. for consideration of $13.1 million in cash and 988,947 Trust units. The Trust utilized its existing cash resources combined with its credit facility to fund the cash component. For the remainder of 2005, Builders expects that Endeavor will contribute revenue of approximately $11 million and EBITDA of $3 million.

The oilfield services sector remains highly fragmented, and industry consolidation is expected to continue. This is expected to provide further acquisition opportunities for Builders.

Management expects to generate sufficient cash to maintain the current level of distributions of $0.12 per unit per month, for the remainder of 2005.

Non-GAAP measures

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). In the discussion of our performance for the quarter and 157-day period to date, in addition to the primary measures of earnings and earnings per unit, management believes that certain measures not recognized under GAAP assist the reader in understanding the Trust's results. These measures include:

- EBITDA - Earnings before interest, taxes, depreciation, amortization and non-cash charges (EBITDA);

- Gross margin, which refers to revenues less operating expenses;

- Cash flow or cash flow from operations which refers to cash flow from operations before changes in non-cash working capital; and

- Payout ratio, which refers to distributions as a percentage of cash flow from operations.

These measures should not be used as an alternative to GAAP, because they may not be consistent with calculations of other companies or trusts.

Forward-Looking Statements

Certain statements contained in this MD&A constitute forward-looking statements. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and similar expressions, as they relate to Builders, are intended to identify forward-looking statements. Such statements reflect Builders' current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, without limitation, those described in this MD&A under the heading "Outlook". Many factors could cause Builders' actual results, performance or achievements to vary from those anticipated in this MD&A. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this MD&A as intended, planned, anticipated, believed, estimated or expected. Builders does not assume any obligation to update these forward-looking statements if conditions or opinions should change.

Additional Information

Additional information regarding Builders can be found in the Annual Information Form dated March 30, 2005, and the initial prospectus of the Trust dated January 13, 2005. These documents can be found on SEDAR at www.sedar.com.



BUILDERS ENERGY SERVICES TRUST
Consolidated Balance Sheet
(unaudited)

------------------------------------------------------------------------
As at
(Thousands of dollars) June 30, 2005
------------------------------------------------------------------------
Assets (note 5)

Current assets
Cash and cash equivalents $ 8,489
Accounts receivable 14,016
Inventory 4,506
Prepaid expenses and deposits 1,079
------------------------------------------------------------------------
28,090

Oilfield equipment 77,824
Intangible assets 10,723
Goodwill 48,679
Other assets 316
------------------------------------------------------------------------
$ 165,632
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Unitholders' Equity

Current liabilities
Accounts payable and accrued liabilities $ 12,012
Distributions payable 1,415
Current portion of long-term debt (note 5) 2,430
------------------------------------------------------------------------
15,857

Long-term debt (note 5) 14,391
Future income tax liability 16,492
Non-controlling interest (note 7) 10,183
------------------------------------------------------------------------
56,923
------------------------------------------------------------------------

Unitholders' equity
Trust units (note 6) 110,279
Contributed surplus 598
Accumulated earnings 4,332
Accumulated distributions (6,500)
------------------------------------------------------------------------
108,709
------------------------------------------------------------------------
$ 165,632
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


BUILDERS ENERGY SERVICES TRUST
Consolidated Statement of Operations and Accumulated Earnings
From inception of operations of the Trust on January 25, 2005 to
June 30, 2005
(unaudited)

------------------------------------------------------------------------
Three months
(Thousands of dollars, ended June January 25 -
except per unit amounts) 30, 2005 June 30, 2005
------------------------------------------------------------------------
(Re-stated -
see note 3)
Revenue $ 17,303 $ 37,524
Operating expenses 12,942 23,726
------------------------------------------------------------------------
4,361 13,798
------------------------------------------------------------------------

Expenses
General and administrative 2,474 4,351
Unit-based compensation 351 598
Interest on long-term debt 206 369
Depreciation and amortization 2,287 3,885
Other income (81) (64)
------------------------------------------------------------------------
5,237 9,139
------------------------------------------------------------------------
Earnings (loss) before income taxes (876) 4,659

Income tax recovery
Current (809) -
Future (158) (99)
------------------------------------------------------------------------
(967) (99)
------------------------------------------------------------------------

Net earnings before non-controlling interest 91 4,758

Non-controlling interest (note 7) 8 426
------------------------------------------------------------------------

Net earnings 83 4,332

Accumulated earnings, beginning of period 4,249 -

------------------------------------------------------------------------
Accumulated earnings, end of period $ 4,332 $ 4,332
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings per unit (note 8):
Basic $ 0.01 $ 0.42
Diluted $ 0.01 $ 0.39
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


BUILDERS ENERGY SERVICES TRUST
Consolidated Statement of Cash Flows
From inception of operations of the Trust on January 25, 2005 to
June 30, 2005
(unaudited)

(Thousands of dollars, Three months ended January 25 -
except per unit amounts) June 30, 2005 June 30, 2005
------------------------------------------------------------------------
(Re-stated -
see note 3)
Operating
Net earnings $ 83 $ 4,332
Items not affecting cash:
Depreciation and amortization 2,287 3,885
Gain on disposal of oilfield equipment (39) (22)
Future income tax recovery (158) (99)
Non-controlling interest 8 426
Unit-based compensation 351 598
------------------------------------------------------------------------
Cash flow from operations 2,532 9,120

Net change in non-cash working capital items 3,153 2,220
------------------------------------------------------------------------
Cash flow from operations, including changes
in non-cash working capital items 5,685 11,340
------------------------------------------------------------------------

Financing
Issue of Trust units (net) 13,986 60,977
Issue of Subordinated units - 2,500
Distributions paid (3,589) (5,085)
Drawdown of long-term debt 10,856 10,856
Repayment of long-term debt (5,149) (7,607)
Repayment of long-term debt related
to acquisitions - (12,250)
Deferred costs (112) (316)
------------------------------------------------------------------------
15,992 49,075
------------------------------------------------------------------------

Investing
Purchase of oilfield equipment (6,868) (8,751)
Business acquisitions, including
net cash (bank indebtedness)
assumed (note 4) (12,339) (44,504)
Proceeds on disposal of oilfield equipment 1,177 1,329
------------------------------------------------------------------------
(18,030) (51,926)

------------------------------------------------------------------------
Increase in cash 3,647 8,489

Cash, beginning of period 4,842 -
------------------------------------------------------------------------
Cash, end of period $ 8,489 $ 8,489
------------------------------------------------------------------------
------------------------------------------------------------------------
Supplementary cash flow information
Interest paid $ 70 $ 233
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


BUILDERS ENERGY SERVICES TRUST
Notes to Interim Consolidated Financial Statements
As at and for the Period Ended June 30, 2005
(unaudited)
(All amounts in thousands of dollars unless otherwise stated, except for
per unit amounts)


1) Nature of the Organization

Builders Energy Services Trust (the "Trust" or "Builders") is an open-end unincorporated investment trust governed by the laws of the Province of Alberta and created pursuant to a Declaration of Trust dated November 29, 2004. The Trust commenced operations on January 25, 2005. The principal undertaking of the Trust is to engage in the oilfield services business indirectly, through its wholly-owned subsidiaries.

On January 25, 2005, the Trust completed its Initial Public Offering ("IPO") whereby 5,100,000 Trust units were issued at $10 per Trust unit for net proceeds of $47.0 million.

The beneficiaries of the Trust are the holders of Trust units. The Trust intends to make monthly distributions to Unitholders of record on the last business day of each calendar month.

2) Summary of Significant Accounting Policies

The Trust's accounting policies are in accordance with accounting principles generally accepted in Canada and are consistent with those outlined in the 2005 First Quarter Report, except as described in note 3. These interim consolidated financial statements do not include all disclosures provided in annual financial statements and should be read in conjunction with the Trust's consolidated interim financial statements for the 66-day period ended March 31, 2005. In management's opinion, these interim consolidated financial statements include all adjustments to present fairly such information.

3) Change in Accounting Policy

On January 19, 2005, the Canadian Institute of Chartered Accountants ("CICA") issued Emerging Issues Committee abstract 151 "Exchangeable Securities Issued by Subsidiaries of Income Trusts" ("EIC-151"). EIC-151 describes conditions which must be met as of June 30, 2005 in order to include exchangeable securities issued by subsidiaries of income trusts as part of Unitholders' equity. If these conditions are not met, the exchangeable securities must be presented as non-controlling interest or as debt on the consolidated balance sheet. EIC-151 must be applied retroactively, with restatement of prior periods. Management has determined that the exchangeable shares issued by the Trust do not meet the conditions contained in EIC-151 necessary for inclusion of the exchangeable shares as part of Unitholders' equity. Accordingly, the exchangeable shares have been retroactively presented as non-controlling interest and the consolidated financial statements for March 31, 2005 have been restated to reflect this change.



The effect of the restatement is as follows:

As
Originally
Reported Re-stated Change
------------------------------------------------------------------------
------------------------------------------------------------------------
Balance Sheet as at March 31, 2005
------------------------------------------------------------------------
Non-controlling interest $ - $ 10,175 $ 10,175
Unitholders' Equity
Units 88,193 88,193 -
Exchangeable shares 9,757 - (9,757)
Total assets 147,231 147,231 -
Total liabilities 47,059 57,234 10,175
------------------------------------------------------------------------
Income statement for the 66-day
period ended March 31, 2005
------------------------------------------------------------------------
Non-controlling interest - 418 418
Net earnings 4,667 4,249 (418)
Accumulated earnings 4,667 4,249 (418)
Basic earnings per unit $ 0.43 $ 0.43 $ -
Diluted earnings per unit $ 0.40 $ 0.40 $ -

4) Business Acquisitions

During the year, Builders completed a number of acquisitions with net
assets acquired and consideration as follows:

------------------------------------------------------------------------
The Acquired
Net Assets Acquired Companies (i) Tryton (ii) Total
------------------------------------------------------------------------

Acquired cash (bank indebtedness) $ (2,016) $ - $ (2,016)
Non-cash working capital 7,952 1,891 9,843
Oilfield equipment 72,619 1,109 73,728
Intangible assets 9,382 1,845 11,227
Goodwill 37,266 11,413 48,679
Long-term debt (25,824) - (25,824)
Future income taxes (16,591) - (16,591)
------------------------------------------------------------------------
$ 82,788 $ 16,258 $ 99,046
------------------------------------------------------------------------
------------------------------------------------------------------------

Consideration
------------------------------------------------------------------------
Cash $ 34,328 $ 8,158 $ 42,486
Trust units 38,353 8,100 46,453
Exchangeable shares 10,107 - 10,107
------------------------------------------------------------------------
$ 82,788 $ 16,258 $ 99,046
------------------------------------------------------------------------
------------------------------------------------------------------------

i) On January 25, 2005, Builders completed the acquisition of all the
issued and outstanding shares of nine separate oilfield service
companies ("the Acquired Companies") for an aggregate purchase price
of $82.8 million. The combined purchase price was funded by payment
of $34.3 million in cash, the issuance by the Trust of an aggregate
of 3,835,226 Trust units at a price of $10.00 per trust unit and the
issuance by Builders Energy Services Ltd., a subsidiary of the
Trust, of an aggregate of 1,010,691 Exchangeable shares, at $10.00
per share.

The acquisitions have been accounted for by the purchase method
with the results of operations of the Acquired Companies being
included in the consolidated financial statements from the date of
acquisition.

ii) On June 1, 2005 Builders completed the acquisition of the net
assets of Tryton Tool Services Ltd., ("Tryton") which specializes
in the sale, rental, installation and servicing of downhole tools
and accessories. This transaction has been accounted for as a
business combination using the purchase method with the results of
operations for the net assets acquired included in the financial
statements from the date of acquisition. A summary of the net
assets acquired and the allocation of the purchase price is as
follows:

Net assets acquired Amount
-----------------------------------------------------
Non-cash working capital $ 1,891
Oilfield equipment 1,109
Intangible assets 1,845
Goodwill 11,413
-----------------------------------------------------
$ 16,258
-----------------------------------------------------
-----------------------------------------------------

Consideration
-----------------------------------------------------
Cash $ 8,158
Trust units (623,077 units) 8,100
-----------------------------------------------------
$ 16,258
-----------------------------------------------------
-----------------------------------------------------


5) Long-Term Debt

Long-term debt consists of senior term debt, financing contracts and obligations under capital leases. The financing contracts and obligations under capital leases are repayable in monthly installments and are secured by specific equipment.

The senior term debt is a $45 million credit facility agreement that was executed with two major Canadian chartered banks and announced on May 3, 2005. This credit facility consists of an extendible revolving operating credit facility of $15 million, which includes a $5 million seasonality bulge for peak activity periods, and an extendible revolving acquisition facility of up to $30 million to finance corporate and asset acquisitions. The term of the facilities require no principal payments during the term and bear interest at varying rates that fluctuate with the prime rate. The facilities are renewable annually, subject to mutual consent, and the Trust maintaining compliance with certain financial covenants. To the extent that the facilities are not renewed, debt repayments would occur over a three-year period. As at June 30, 2005, $9.2 million was drawn on this facility.



6) Unitholders' Equity

Units issued and outstanding:

Thousands
Trust units of Units Amount
------------------------------------------------------------------------
Trust units issued pursuant to Initial Public
Offering 5,100 $ 51,000
Trust unit issue costs - (4,009)
Trust units issued as consideration for the
Acquired Companies 3,835 38,352
Trust units issued on acquisition of Tryton 623 8,100
Trust units issued on conversion of
Exchangeable shares 35 350
Trust units issued pursuant to Private Placement 1,200 15,000
Private Placement issue costs - (1,014)
------------------------------------------------------------------------
10,793 $ 107,779
------------------------------------------------------------------------
------------------------------------------------------------------------

Subordinated units
------------------------------------------------------------------------
Subordinated units issued for cash on
January 25, 2005 1,000 $ 2,500
------------------------------------------------------------------------
------------------------------------------------------------------------

Total Trust units and Subordinated units
at June 30, 2005 11,793 $ 110,279
------------------------------------------------------------------------
------------------------------------------------------------------------


7) Non-controlling interest

Thousands of
Shares Amount
------------------------------------------------------------------------
Exchangeable shares issued, January 25,
2005, as consideration for the Acquired
Companies 1,011 $ 10,107
Redeemed upon conversion to Trust units (35) (350)
Allocation of earnings to non-controlling
interest - 426
------------------------------------------------------------------------
Balance, end of period 976 $ 10,183
------------------------------------------------------------------------
------------------------------------------------------------------------
Exchange ratio, end of period 1.0475
-----------------------------------------------------------
-----------------------------------------------------------


The Exchangeable shares are convertible at the option of the holder into units of the Trust at any time. The number of Trust units issuable upon conversion is based upon the exchange ratio in effect at the conversion date. The exchange ratio, which was initially at one to one, is cumulatively adjusted each time a distribution is made to Unitholders.

The Exchangeable shares are not eligible to receive cash distributions from the Trust, and in the event the holders do not convert them, they will automatically convert to Trust units on January 31, 2008.



8) Earnings per unit

The following table summarizes the computation of earnings per unit:

Three
months January 25 -
ended June June 30,
30, 2005 2005
------------------------------------------------------------------------
Numerator:
Earnings for basic earnings per unit $ 83 $ 4,332
Add non-controlling interest 8 426
------------------------------------------------------------------------
Numerator for diluted earnings per unit $ 91 $ 4,758
------------------------------------------------------------------------
------------------------------------------------------------------------

Denominator:
Weighted average units for basic earnings per
unit 10,565 10,298
Exchangeable shares converted to units at the
average exchange ratio during the period 1,001 991
Options converted to units 822 804
------------------------------------------------------------------------
Denominator for diluted earnings per share 12,388 12,093
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic earnings per unit $ 0.01 $ 0.42
------------------------------------------------------------------------
------------------------------------------------------------------------
Diluted earnings per unit $ 0.01 $ 0.39
------------------------------------------------------------------------
------------------------------------------------------------------------


9) Segmentation

Builders views its operations as a single business segment due to the integration of the operations, common customer base, geographic concentration in the Western Canadian Sedimentary Basin, and the single focus on the oilfield service sector.

10) Seasonality of Operations

The Trust's operations are carried out in western Canada. The industry's ability to move heavy equipment in exploration and production areas is dependent on weather conditions. With the onset of spring, melting snow together with frost coming out of the ground render many secondary roadways incapable of supporting heavy equipment until sufficient time has passed for them to dry out. In addition, the exploration areas in northern Canada are typically only accessible during winter months, when the surface is frozen enough to support the heavy equipment. As a result, the activity levels of the Trust are directly impacted by this seasonality, whereby activity is traditionally higher in the first and fourth quarters of the year and lower in the second and third quarters.

11) Related Party Transactions

During the normal course of operations, on commercial terms established and agreed to by the related parties, the Trust rents land, buildings and certain light oilfield equipment from the previous owners of certain of the businesses acquired on January 25, 2005.

12) Subsequent Event

On July 21, 2005, Builders completed the acquisition of Endeavor E-Line Services Inc. (Endeavor) for total consideration of $13.1 million in cash and 988,947 Trust units. The Trust utilized its existing cash, combined with its credit facility to fund the cash portion of the purchase price. Endeavor performs e-line services including logging and perforating for the oil and gas industry in western Canada.

Based in Calgary, Builders Energy Services Trust is an open-end unincorporated investment trust governed by the laws of the Province of Alberta and was established to acquire and operate entities that engage in oilfield services. The principal undertaking of the Trust, through its indirect wholly-owned subsidiaries, is to provide a variety of services to oil and gas exploration and production companies in western Canada. Builders' Trust Units are listed on the Toronto Stock Exchange and trade under the symbol "BET.UN".

Certain measures are not recognized under Canadian generally accepted accounting principles (GAAP) and are provided where Management believes they assist the reader in understanding the Trust's results. These measures include: earnings before interest, taxes, depreciation, amortization and non-cash charges (EBITDA); gross margin, which refers to revenues less operating expenses; cash flow or cash flow from operations, which refers to cash flow from operations before changes in non-cash working capital; and payout ratio, which refers to distributions as a percentage of cash flow from operations. These measures should not be used as an alternative to GAAP, because they may not be consistent with calculations of other companies or Trusts.

When used in this news release, the words "expect", "anticipate", "estimate" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those contemplated in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the date that the statements are made, and the Trust undertakes no obligation to update forward-looking statements if conditions or opinions should change.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Builders Energy Services Trust
    Garnet K. Amundson
    President and Chief Executive Officer
    (403) 693-3426
    Email: IR-BEST@BuildersEnergy.com
    or
    Builders Energy Services Trust
    John W. Nearing
    Vice President, Finance and Chief Financial Officer
    (403) 693-3426
    Email: IR-BEST@BuildersEnergy.com