Builders Energy Services Trust
TSX : BET.UN

Builders Energy Services Trust

November 09, 2006 19:33 ET

Builders Energy Services Trust Reports Third Quarter Earnings

CALGARY, ALBERTA--(CCNMatthews - Nov. 9, 2006) - Builders Energy Services Trust (TSX:BET.UN) ("Builders", or the "Trust") announced today that funds flow from operations(1) for the first nine months of 2006 was $34.5 million ($2.15 diluted per unit), an 88% increase compared to $18.4 million ($1.61 diluted per unit) for the 249 day period from inception on January 25, 2005 through September 30, 2005. Net earnings for the first nine months of 2006 were $22.4 million ($1.40 diluted per unit), a 141% increase compared to $9.3 million ($0.81 diluted per unit) for the 249 day period ended September 30, 2005. The significant increase in funds flow from operations and net earnings reflects Builders' quality oilfield services and continued growth. Earnings before interest, income taxes, depreciation, amortization and losses or gains on disposal of capital assets ("EBITDA")(1) for the first nine months of 2006 was $36.8 million.

Funds flow from operations(1) for the third quarter of 2006 was $11.9 million ($0.70 diluted per unit), a 29% increase compared to $9.2 million ($0.71 diluted per unit) in the third quarter of 2005. Net earnings for the third quarter of 2006 was $6.6 million ($0.38 diluted per unit), a 32% increase compared to $5.0 million ($0.38 diluted per unit) in the third quarter of 2005. EBITDA(1) for the third quarter of 2006 was $12.8 million.

The third quarter was strong for Builders even though natural gas related activity showed signs of slowing near the end of the quarter. Natural gas prices weakened in the third quarter due to high gas storage levels. Industry response in the Western Canadian Sedimentary Basin ("WCSB") has been a slowdown in drilling activity, particularly in shallow gas and coal bed methane.

"Our businesses continued to perform well in the third quarter," said Garnet Amundson, President and Chief Executive Officer of Builders. "As our oilfield services are diversified geographically throughout the WCSB and with a meaningful focus on production services, Builders had a strong quarter even though the industry is beginning to soften."

On October 31, 2006 the federal government proposed a "Tax Fairness Plan" to tax income trusts 31.5 percent on distributions to unitholders. This proposal suggests that distributions to unitholders will be treated similar to corporate dividends. The tax impact will be nominal to an investor holding units outside any tax-exempt structure but will impact tax exempt entities (pension funds and RRSPs) and foreign investors. The legislation is not expected to affect Builders, from a distributable cash flow perspective, until 2011.

Highlights

- For the nine months ended September 30, 2006 compared to the 249 day period ended September 30, 2005:

-- Increase in funds flow from operations(1) of $16.1 million (to $34.5 million, $2.15 per unit from $18.4 million, $1.61 per unit)

-- Increase in net earnings of $13.1 million (to $22.4 million from $9.3 million)

- Continued growth through acquisitions and capital spending with:

-- The purchase of Prime Oilfield Hauling Ltd. for $18.9 million on August 1, 2006

-- The purchase of Murphy's Oilfield Services Ltd. for $12.4 million on October 3, 2006

-- $33 million of capital expenditures during the first nine months of 2006

- Increased financial flexibility with:

-- Equity financing of $30 million in August 2006

-- An increase in the credit facility from $85 million to $100 million in August 2006

- Payout ratio for the first nine months of 2006 of 57% versus 61% for the 249 day period ending September 30, 2005.



FINANCIAL SUMMARY
Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
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Revenue $ 50,422 $ 37,164 $ 147,766 $ 74,688

Gross margin $ 17,501 $ 14,078 $ 50,279 $ 27,876

Funds flow from operations(1) $ 11,852 $ 9,234 $ 34,484 $ 18,354
Per unit - diluted $ 0.70 $ 0.71 $ 2.15 $ 1.61

Net earnings $ 6,554 $ 4,960 $ 22,402 $ 9,292
Per unit - diluted $ 0.38 $ 0.38 $ 1.40 $ 0.81

Distributions declared $ 7,282 $ 4,734 $ 19,557 $ 11,234
Per unit $ 0.42 $ 0.37 $ 1.22 $ 1.00
As a percentage of funds
flow from operations
("Payout ratio") 61% 51% 57% 61%
Gross margin as a percentage
of revenue 35% 38% 34% 37%
General and administrative
expense as a percentage
of revenue 8% 12% 8% 12%

Capital expenditures $ 10,996 $ 8,282 $ 33,107 $ 17,033
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Trust units:
Outstanding, end of period 18,109 12,814 18,109 12,814
Weighted average, basic 16,774 12,599 15,759 11,113
Weighted average, diluted 17,028 13,003 16,038 11,409
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(1) Funds flow from operations and EBITDA are non-GAAP financial measures.
The attached Management's Discussion and Analysis outlines the
definition and usefulness of these measures.


Based in Calgary, Alberta, Builders Energy Services Trust is an open-end, unincorporated investment trust providing oilfield services in western Canada through skilled staff and specialized equipment. Builders provides services to the oil and gas industry related to the ongoing servicing of producing wells and new drilling activity.

This press release may contain forward-looking statements including expectations of future cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated. These risks include, but are not limited to: risks associated with the oilfield services industry (e.g. demand, pricing and terms for oilfield services; current and expected oil and gas prices; exploration and development costs and delays; reserves discovery rates; pipeline and transportation capacity; weather, health, safety and environmental risks), integration of acquisitions, competition, and uncertainties resulting from potential delays or changes in plans with respect to acquisitions, development projects or capital expenditures. Additional information on these and other factors that could affect the Trust's operations or financial results are included in the Trust's documentation and filings with Canadian securities regulatory authorities. 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 press release. The Trust does not assume any obligation to update these forward-looking statements, except as required by law.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following Management's Discussion and Analysis ("MD&A") of Builders Energy Services Trust ("Builders" or the "Trust") is an update to, and should be read in conjunction with, the June 30 and March 31, 2006 interim reports and annual MD&A included in the 2005 Annual Report to Unitholders, in addition to the attached financial statements as at and for the three and nine months ended September 30, 2006, to which readers are referred. No update is provided where an item is not material or where there has been no material change from the discussion in the aforementioned interim reports or annual MD&A. This MD&A was prepared effective November 9, 2006.

Forward-Looking Statements

This MD&A may contain forward-looking statements including expectations of future cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated. These risks include, but are not limited to: risks associated with the oilfield services industry (e.g. demand, pricing and terms for oilfield services; current and expected oil and gas prices; exploration and development costs and delays; reserves discovery rates; pipeline and transportation capacity; weather, health, safety and environmental risks), integration of acquisitions, competition, and uncertainties resulting from potential delays or changes in plans with respect to acquisitions, development projects or capital expenditures. Additional information on these and other factors that could affect the Trust's operations or financial results are included in the Trust's documentation and filings with Canadian securities regulatory authorities. 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. The Trust does not assume any obligation to update these forward-looking statements, except as required by law.

Non-GAAP Measures

Throughout this MD&A, certain terms that are not specifically defined in Canadian Generally Accepted Accounting Principles ("GAAP") are used to analyze the operations. In addition to the primary measures of net earnings and net earnings per unit in accordance with GAAP, management believes that certain measures not recognized under GAAP assist management and the reader in assessing the performance and understanding the Trust's results. Each of these measures provides the reader with additional insight into the Trust's ability to fund future distributions, principal debt repayments and capital programs. These non-GAAP measures are not recognized measures under GAAP. As a result, the method of calculation may not be comparable with other companies or Trusts. These measures should not be considered alternatives to net earnings and net earnings per unit as calculated in accordance with GAAP.

- Gross margin(1) - This measure is considered a primary indicator of operating performance as calculated by revenue less operating expenses.

- EBITDA(2) (Earnings before interest, income taxes, depreciation, amortization and losses or gains on disposal of capital assets) - This measure is considered an indicator of the Trust's ability to generate funds flow in order to meet distributions, fund required working capital, service debt, pay current income taxes and fund capital programs. During the second quarter of 2006, Builders revised its definition of EBITDA to include a deduction for unit-based compensation. Comparative EBITDA disclosure has been revised to conform to the current period's presentation.

- Funds flow or funds flow from operations(3) - This measure is an indicator of the Trust's ability to generate funds flow in order to make distributions, fund required working capital, principal debt repayments and fund capital programs. Funds flow or funds flow from operations is defined as cash flow from operations before changes in non-cash working capital. Management considers this to be the most appropriate measure in assessing the Trust's funds flow as it provides cash generated in the period excluding the timing of working capital. This reflects the ability of the operations of the Trust to meet the above noted funding requirements. The most significant non-cash working capital component affecting cash flow is accounts receivable.

- Payout ratio(4) - This ratio is defined as distributions declared expressed as a percentage of funds flow from operations. This ratio is an indicator of the Trust's ability to meet its distribution levels from the Trust's ongoing operations.



(1) Gross margin is reconciled from the GAAP measure, revenue, in the table
"Revenue and Gross Margin".

(2) EBITDA is reconciled from the GAAP measure, earnings before income
taxes and non-controlling interest, in the table "EBITDA and Earnings
Before Income Taxes and Non-Controlling Interest".

(3) Funds flow is reconciled from the GAAP measure, cash flow from
operations, in the table "Funds Flow from Operations".

(4) Payout ratio is calculated from the non-GAAP measure, funds flow, and
the GAAP measure, distributions declared, in the table "Payout Ratio".


Additional Information

Additional information regarding Builders, including the March 31 and June 30, 2006 interim reports and financial statements, the 2005 Annual Report and 2005 Annual Information Form, can be found on SEDAR at www.sedar.com.

BUILDERS OVERVIEW

Based in Calgary, Alberta, Builders is an open-end, unincorporated investment trust providing oilfield services in western Canada through skilled staff and specialized equipment. Builders provides services to the oil and gas industry related to the ongoing servicing of producing wells and new drilling activity. Builders' equipment services conventional crude oil and natural gas wells and related activities.

Builders offers its customers services through three operating segments: Oilfield Transport, Service Rigs and Downhole Services & Rentals. The Oilfield Transport segment provides general oilfield transportation and rig relocation services. The Service Rig segment provides production and completion services. The Downhole Services & Rentals segment includes wireline services, coil-tubing, nitrogen, downhole tools services and equipment rentals. A fourth non-operating segment, Corporate, includes general and administrative costs, unit-based compensation and interest.

COMPARATIVE AND CURRENT PERIOD

Builders was formed on January 25, 2005, through an Initial Public Offering ("IPO") which included the concurrent closing of the acquisitions of nine oilfield service companies ("IPO Acquisitions"). The comparative period for the 249-days ended September 30, 2005 includes the operations of the IPO Acquisitions, the net assets of Tryton Tool Services Ltd. ("Tryton") and Endeavor E-line Services Inc. ("Endeavor") commencing on January 25, June 1 and July 21, 2005 respectively. Readers should note that the 249-day comparative period does not represent a complete nine months of operations.

Builders has continued to acquire oilfield service companies that fit strategically and complement its existing service offerings. Acquisitions include the net assets of Puma Well Service Ltd. ("Puma") acquired October 14, 2005; Leachman Enterprises Ltd. ("Leachman") acquired February 1, 2006; Kodiak Well Service Ltd. ("Kodiak") acquired May 8, 2006; and Prime Oilfield Hauling Ltd. ("Prime") acquired August 1, 2006. The operations and financial results of each acquisition have been included in the September 30, 2006 financial statements and MD&A of the Trust from the later of the date of acquisition or January 1, 2006.



DISCUSSION OF FINANCIAL RESULTS

Net Earnings

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
---------------------------------------------------------------------------

Net earnings $ 6,554 $ 4,960 $ 22,402 $ 9,292
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Per unit - basic $ 0.39 $ 0.39 $ 1.42 $ 0.84
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Per unit - diluted $ 0.38 $ 0.38 $ 1.40 $ 0.81
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Net earnings for the nine months ended September 30, 2006 increased by $13.1 million from the 249-days ended September 30, 2005 and $1.6 million from the three months ended September 30, 2005. The increases are driven from the Service Rig and Downhole Services & Rentals segments as a result of acquisitions and new equipment combined with effective operations. Additionally, a future tax recovery related to Alberta and Federal corporate tax rate reductions, was recognized in the second quarter ended June 30, 2006.

Net earnings per unit for the current quarter are consistent with 2005 while the 2006 year-to-date amounts reflect the utilization of services in the first quarter, a full nine months of operations versus the 249-day period in 2005, accretive acquisitions and investment in equipment.



Revenue and Gross Margin

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
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Revenue by segment:
Oilfield Transport $ 16,665 $ 12,114 $ 44,706 $ 26,803
Service Rigs 14,842 7,674 38,337 18,922
Downhole Services & Rentals 18,915 17,376 64,723 28,963
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Revenue 50,422 37,164 147,766 74,688
Operating expenses 32,921 23,086 97,487 46,812
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Gross margin $ 17,501 $ 14,078 $ 50,279 $ 27,876
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Gross margin as a percentage
of revenue 35% 38% 34% 37%
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Gross margin for the current quarter and year-to-date reflects high 2006 service utilization levels in the industry as a result of strong industry fundamentals combined with corporate acquisitions and investment in equipment. The quarterly results in all segments were impacted by a downturn in activity levels in mid-September resulting from wet weather and a reduction in drilling activity. Oil and natural gas drilling in the Western Canadian Sedimentary Basin ("WCSB") was curtailed mainly due to weakening prices for natural gas resulting in a reduction of shallow natural gas drilling. The following factors on a year-to-date and quarterly basis contributed to Builders' segmented revenue and gross margin growth:
- Year-to-date 2006 reflects a full nine months of operations versus 249 days for 2005.

- Oilfield Transport: Revenues increased $4.6 million (38 percent) and $17.9 million (67 percent) for the three and nine months ended September 2006 respectively relative to 2005. Current quarter and year-to-date revenue improvement resulted from the Leachman and Prime acquisitions dated February 1 and August 1, 2006, respectively, and a significant investment in equipment. The current quarter's revenue relative to the prior period reflects lower utilization rates mostly due to drilling-dependent rig relocation services.

- Service Rigs: Revenues increased $7.2 million (93 percent) and $19.4 million (103 percent) in the current quarter and year-to-date relative to 2005. Improved revenues were partially a result of the Kodiak and Puma acquisitions, dated May 8, 2006 and October 14, 2005, respectively, and investment in four new service rigs. Service rig utilization rates were strong during the quarter and year-to-date.

- Downhole Services & Rentals: Revenues remained relatively consistent for the quarter but increased $35.8 million for the nine months ended September 30, 2006 relative to 2005. The year-over-year increase is attributable to the Endeavor and Tryton acquisitions that occurred in mid-2005 combined with the addition of one E-line unit, two coil tubing units, three nitrogen units and additional rental equipment. Overall, geographical diversity of this segment contributed to steady quarterly comparative revenues.



EBITDA and Earnings Before Income Taxes and Non-Controlling Interest

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
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Earnings before income taxes
and non-controlling interest
by segment:

Oilfield Transport $ 1,843 $ 2,901 $ 4,743 $ 5,727
Service Rigs 4,006 2,626 10,949 5,139
Downhole Services & Rentals 4,508 3,982 16,834 6,296
Corporate (3,282) (3,946) (11,095) (6,940)
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Earnings before income taxes
and non-controlling interest 7,075 5,563 21,431 10,222

Add back:

Depreciation and Amortization 4,777 3,048 12,815 6,933
Interest 865 368 1,987 706
Loss on disposal of capital
assets 128 155 553 133
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EBITDA $ 12,845 $ 9,134 $ 36,786 $ 17,994
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Per unit - basic $ 0.77 $ 0.72 $ 2.33 $ 1.62
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Per unit - diluted $ 0.75 $ 0.70 $ 2.29 $ 1.58
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EBITDA as a percentage of
revenue 25% 25% 25% 24%
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Consistent with revenue and gross margin, EBITDA and earnings before income taxes and non-controlling interest strengthened for the third quarter and year-to-date 2006 as compared to 2005 due to the variances noted above.

EBITDA per unit growth during the 2006 periods demonstrates the accretive growth through 2005 and 2006 acquisitions, equipment expenditures and effective operations.



General and administrative

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
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General and administrative
expense $ 4,118 $ 4,432 $ 12,001 $ 8,783
General and administrative
expense as a percentage
of revenue 8% 12% 8% 12%
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The Trust's general and administrative expenses include primarily Calgary personnel and office costs and certain personnel in the field offices associated with administrative functions. The increase in year-to-date costs over the previous period reflects an increase in administrative costs associated with the growth in Builders' operations. The percentage of general and administrative costs has declined relative to revenue as a result of efficiencies relative to operational size.

Depreciation and amortization

Depreciation and amortization has increased as a result of the investment in equipment and acquisitions made throughout 2005 and 2006 combined with a full nine months of operating activity in 2006 compared to 249 days in the comparative period.



Income taxes

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
---------------------------------------------------------------------------
Income tax expenses (recoveries)

Current $ 626 $ - $ 1,754 $ -
Future (357) 201 (3,848) 102
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Total income tax expense
(recovery) $ 269 201 (2,094) 102
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The 2006 current income tax expense resulted from the strong operating results of the Trust. The 2006 year-to-date future tax recovery mainly relates to the Alberta and Federal corporate tax rate reductions, as recognized in the second quarter ended June 30, 2006.

FINANCIAL RESOURCES

Management of the Trust's financial resources is accomplished by balancing distributions to Unitholders, repayment of debt, funding for investment in capital and business acquisitions. Distributions to Unitholders and investment in capital that is required to maintain the operations at current levels is funded through funds flow from operations. Capital that increases the operations of the Trust and business acquisitions are primarily financed through debt and equity. Management uses funds flow from operations and EBITDA as measures to ensure that resources are sufficient to meet anticipated cash distributions, capital to maintain operations and debt repayments. Net working capital is not included as part of these measures as the significant component of working capital is accounts receivable and management assesses the ability of the Trust to meet funding commitments on the ability of the operations to generate cash. A key metric management uses in ensuring that distribution levels are in line with funds flow from operations is the payout ratio.



Funds Flow from Operations

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
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Cash flow from operations $ 4,942 $ 759 $ 31,988 $ 12,099

Add back:

Changes in non-cash operating
working capital 6,910 8,475 2,496 6,255
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Funds flow from operations $ 11,852 $ 9,234 $ 34,484 $ 18,354
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Per unit - basic $ 0.71 $ 0.73 $ 2.19 $ 1.65
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Per unit - diluted $ 0.70 $ 0.71 $ 2.15 $ 1.61
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Funds flow from operations increased in 2006 compared to 2005 for both the year-to-date and the quarter, reflecting strong operational performance supplemented by growth from acquisitions and equipment expenditures.



Payout Ratio

Nine months 249-days
Three months ended ended
(Thousands, except as ended Sept. 30, Sept. 30, Sept. 30,
otherwise noted) 2006 2005 2006 2005
---------------------------------------------------------------------------
Funds flow from operations(1) $ 11,852 $ 9,234 $ 34,484 $ 18,354
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Distributions declared $ 7,282 $ 4,734 $ 19,557 $ 11,234

Per unit - distributions $ 0.42 $ 0.37 $ 1.22 $ 1.00
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Payout ratio on funds flow from
operations 61% 51% 57% 61%
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(1) Funds flow from operations is a non-GAAP measure and is reconciled from
the most relevant GAAP measure, cash flow from operations, per the
"Funds Flow from Operations" table.


Commencing with the May 2006 distribution, Builders increased its monthly cash distribution by eight percent to $0.14 per Trust unit ($1.68 per annum). This distribution increase reflects the strong operational performance of the operating segments and the successful integration of the acquisitions which have been accretive to the overall operations. As at September 30, 2005, Builders' monthly cash distribution was $0.13 per Trust unit ($1.56 per annum).

The current quarter's increased payout ratio reflects two distribution increases each of $0.01 per unit per month announced May 2006 and September 2005, combined with Trust unit issuances for the November 2005 private placement, the August 2006 public offering and consideration for Puma and the 2006 acquisitions.

Distributions declared have increased significantly, reflecting distribution increases and Trust unit issuances. On a per unit basis, year-to-date funds flow has improved at a pace greater than distributions declared per unit leading to a reduction in the payout ratio. Distributions declared during the year-to-date periods were entirely funded through cash flow from operations. Cash flows from operations of $11.6 million in excess of distributions declared have been used to partially finance equipment expenditures. Management's expectations are that the annual payout ratio will be in-line with management's target.



Summary of Quarterly Data

Three Three Three Three
months months months months 341-days
(Thousands, except ended ended ended ended ended
where otherwise Mar. 31, June 30, Sept.30, Dec. 31, Dec. 31,
indicated) 2005(1) 2005 2005 2005 2005
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Revenue $ 20,221 $ 17,303 $ 37,164 $ 50,772 $ 125,460

Net earnings 4,249 83 4,960 7,220 16,512
Per-unit - basic 0.43 0.01 0.39 0.53 1.40
Per-unit - diluted 0.40 0.01 0.38 0.52 1.38
Funds flow from
operations 6,588 2,532 9,234 12,544 30,898
Per-unit - basic 0.66 0.24 0.73 0.93 2.62
Per-unit - diluted 0.57 0.20 0.71 0.90 2.38
Distributions per
unit $ 0.27 $ 0.36 $ 0.37 $ 0.39 $ 1.39
Payout ratio 41% 150% 51% 44% 54%
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(1) Except for the 66-day period ended March 31, 2005.


Three Three Three Nine
months months months months
ended ended ended ended
(Thousands, except where Mar. 31, June 30, Sept. 30, Sept. 30,
otherwise indicated) 2006 2006 2006 2006
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Revenue $ 62,754 $ 34,590 $ 50,422 $ 147,766

Net earnings 11,870 3,978 6,554 22,402
Per-unit - basic 0.79 0.26 0.39 1.42
Per-unit - diluted 0.78 0.25 0.38 1.40
Funds flow from
operations 16,913 5,719 11,852 34,484
Per-unit - basic 1.13 0.37 0.71 2.19
Per-unit - diluted 1.05 0.35 0.70 2.15
Distributions per unit $ 0.39 $ 0.41 $ 0.42 $ 1.22
Payout ratio 35% 112% 61% 57%
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Builders has increased revenue through continued oilfield service acquisitions and equipment expenditures that has translated into higher net earnings, funds flow and distributions per Trust unit.

The quarterly information for the three months ended June 30, 2006 and 2005 was impacted by spring break-up which left many secondary roads temporarily incapable of supporting the weight of heavy equipment and resulted in restrictions in the level of oilfield service activity. As a result of the seasonality of operations, funds flow in the first quarter has been substantially more than the distributions declared, which is expected. This excess funds flow was used to partially finance the distributions in the second quarter, which typically has reduced operations due to spring break-up. As utilization levels increase during the third quarter, funds flow is primarily used to finance increases in non-cash working capital and distributions.

Increases in quarterly results for the first and third quarters of 2006 and the third and fourth quarters of 2005 mainly relate to the effect of acquisitions, equipment expenditures and colder conditions causing sufficient freezing so that oilfield services could access certain well sites.



Acquisitions
(Thousands) Prime Kodiak Leachman Total
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Consideration

Cash $ 10,244 $ 9,365 $ 5,144 $ 24,753
Trust units 8,660 8,250 2,450 19,360
Series B Exchangeable shares - - 1,050 1,050
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$ 18,904 $ 17,615 $ 8,644 $ 45,163
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Issued:
Trust units 536 499 150 1,185
Series B Exchangeable shares - - 64 64
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On August 1, 2006, Builders acquired Prime, an oilfield hauling operation located in Grande Prairie, Alberta; on May 8, 2006, Builders acquired Kodiak, a service rig operation located in Fort St. John, B.C. and on February 1, 2006, Builders acquired Leachman, an oilfield trucking operation located in Provost, Alberta. These acquisitions expanded Builders' geographic presence in key, high activity areas of the oil and gas industry.



Equipment Expenditures

Nine months 249-days
Three months ended ended
ended Sept. 30, Sept. 30, Sept. 30,
(Thousands) 2006 2005 2006 2005
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Equipment expenditures:
Oilfield Transport $ 5,350 $ 4,456 $ 13,742 $ 9,827
Service Rigs 2,845 1,475 7,053 2,398
Downhole Services & Rentals 2,542 2,050 11,641 4,396
Corporate 259 301 671 412
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Total equipment expenditures $ 10,996 $ 8,282 $ 33,107 $ 17,033
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Builders continues to add equipment in areas where it believes it has operational growth opportunities to meet current and anticipated industry activity levels. Of the $33.1 million in equipment expenditures incurred in the first nine months of 2006, substantially all of this equipment has been deployed.

Trust Units and Non-controlling Interest

During the nine months ended September 30, 2006, in addition to the 1,185,733 Trust units and 64,417 Series B Exchangeable shares issued as partial consideration for the acquisitions of Prime, Kodiak and Leachman, Builders had the following Trust unit activity:

- August 2006 public offering of 1,765,000 Trust units for $17.00 per Trust unit raised proceeds of $28.2 million, net of issue costs. The Trust used the proceeds for repayment of indebtedness, to fund the Trust's capital expenditure and acquisition program and for working capital purposes.

- 391,706 Trust units were issued in exchange for 356,703 Series A Exchangeable shares and 66,978 Trust units were issued in exchange for 64,417 Series B Exchangeable shares. The Series B Exchangeable share conversion represented the entire outstanding Series B Exchangeable shares. As such, there are no outstanding Series B Exchangeable shares as at September 30, 2006.

- For the nine months ended September, 2006, Builders issued 75,671 Trust units on exercise of Trust unit options (nil for the 249-days ended September 30, 2005).

As at November 9, 2006, there were 18,452,687 Trust units and 1,425,262 Trust unit options outstanding.

As at September 30, 2006, 588,988 Series A Exchangeable shares were convertible into 689,075 Trust units. As at December 31, 2005, 945,691 Series A Exchangeable shares were convertible into 1,029,574 Trust units.

Credit Facilities

In August, 2006, Builders amended its credit facility to include a fourth major Canadian chartered bank and increased the total available facility to $100.0 million, comprised of an operating line of credit of $20.0 million and a term acquisition loan facility of $80.0 million. The unutilized portions of the operating and acquisition facilities are expected to be sufficient to meet existing operating commitments and capital spending for the next year. As at September 30, 2006, all financial debt covenants were satisfied and all banking requirements were up to date. The Trust does not anticipate any covenant issues restricting its future operating, investing or financing activities.

Subsequent Event

On October 3, 2006, Builders completed the acquisition of all the issued and outstanding shares of Murphy's Oilfield Services Ltd. ("Murphy's") for an aggregate purchase price of $12.4 million. The purchase price consideration was comprised of $5.4 million in cash, the issuance by the Trust of 343,228 Trust units at a price of $15.77 per Trust unit and $1.6 million in assumed debt.

Murphy's provides a variety of oilfield services, with a focus on service rigs and camp rentals, operating out of Slave Lake, Alberta.

OUTLOOK

Builder's is well-positioned as it enters the two most profitable quarters in the annual cycle for the industry, the fourth quarter of 2006 and the first quarter of 2007. The additions in 2006 to the Oilfield Transport segment of Leachman and Prime and the Service Rig segment of Kodiak and Murphy's, have expanded the geographic and operational presence in two key business segments. In addition to these 2006 acquisitions, Builders has invested $33.1 million year-to-date in equipment additions. Further, an additional $12.0 million of capital expenditures are planned for the fourth quarter of 2006. These combined factors should result in significant growth year-over-year.

Activity levels late in the third quarter were impacted by a reduction in gas related drilling activity and wet weather and early fourth quarter indications are that activity levels will not reach the heightened levels seen earlier in the year. However, with the onset of the winter season and colder temperatures, activity levels are expected to increase to more traditional winter season levels, as field locations become accessible.

On October 31, 2006 the federal government proposed a "Tax Fairness Plan" to tax income trusts 31.5 percent on distributions to unitholders. This proposal suggests that distributions to unitholders will be treated similar to corporate dividends. The tax impact will be nominal to an investor holding units outside any tax-exempt structure but will impact tax exempt entities (pension funds and RRSPs) and foreign investors. The legislation is not expected to affect Builders, from a distributable cash flow perspective, until 2011.



BUILDERS ENERGY SERVICES TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited)

As at As at
(Thousands) Sept. 30, 2006 Dec. 31, 2005
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Assets (notes 4 and 5)
Current assets
Cash $ - $ 1,461
Accounts receivable 39,619 38,862
Inventory 5,866 5,730
Prepaid expenses 1,397 764
---------------------------------------------------------------------------
46,882 46,817
Capital assets 148,012 104,403
Intangible assets 17,107 13,798
Goodwill 90,224 66,876
Deferred charges and other 590 475
---------------------------------------------------------------------------
$ 302,815 $ 232,369
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Liabilities
Current liabilities
Bank indebtedness $ 869 $ -
Operating line of credit (note 4) 700 5,700
Accounts payable and accrued liabilities 17,011 18,767
Distributions payable 2,535 1,901
Income taxes payable 451 2,009
Current portion of long-term debt (note 5) 6,227 5,559
---------------------------------------------------------------------------
27,793 33,936
Long-term debt (note 5) 33,816 16,369
Future income tax liability 23,503 19,086

Non-controlling interest (note 6) 7,683 10,807

Unitholders' Equity
Trust units (note 7) 204,557 150,790
Contributed surplus (note 8) 2,837 1,600
Accumulated net earnings 38,914 16,512
Accumulated distributions (36,288) (16,731)
---------------------------------------------------------------------------
210,020 152,171
---------------------------------------------------------------------------
$ 302,815 $ 232,369
---------------------------------------------------------------------------
---------------------------------------------------------------------------

See accompanying notes to unaudited consolidated interim financial
statements



BUILDERS ENERGY SERVICES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED NET EARNINGS
(unaudited)

Nine months 249-days
Three months ended ended
(Thousands, except per ended Sept. 30, Sept. 30, Sept. 30,
unit amount) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue $ 50,422 $ 37,164 $ 147,766 $ 74,688
Operating expenses 32,921 23,086 97,487 46,812
---------------------------------------------------------------------------
17,501 14,078 50,279 27,876
---------------------------------------------------------------------------

Expenses
General and administrative 4,118 4,432 12,001 8,783
Depreciation 4,087 2,520 11,035 5,901
Amortization 690 528 1,780 1,032
Interest on long-term debt 786 377 1,761 746
Unit-based compensation (note 9) 498 468 1,439 1,066
Other 247 190 832 126
---------------------------------------------------------------------------
10,426 8,515 28,848 17,654
---------------------------------------------------------------------------

Earnings before income taxes and
non-controlling interest 7,075 5,563 21,431 10,222

Income tax expenses (recoveries)
Current 626 - 1,754 -
Future (357) 201 (3,848) 102
---------------------------------------------------------------------------
269 201 (2,094) 102
---------------------------------------------------------------------------

Earnings before non-controlling
interest 6,806 5,362 23,525 10,120

Non-controlling interest earnings
(note 6) 252 402 1,123 828
---------------------------------------------------------------------------

Net earnings $ 6,554 $ 4,960 $ 22,402 $ 9,292

Accumulated net earnings,
beginning of period 32,360 4,332 16,512 -
---------------------------------------------------------------------------

Accumulated net earnings,
end of period $ 38,914 $ 9,292 $ 38,914 $ 9,292
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net earnings per unit (note 10)
Basic $ 0.39 $ 0.39 $ 1.42 $ 0.84

Diluted $ 0.38 $ 0.38 $ 1.40 $ 0.81
---------------------------------------------------------------------------
---------------------------------------------------------------------------

See accompanying notes to unaudited consolidated interim financial
statements



BUILDERS ENERGY SERVICES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine months 249-days
Three months ended ended
ended Sept. 30, Sept. 30, Sept. 30,
(Thousands) 2006 2005 2006 2005
---------------------------------------------------------------------------

Operating activities
Net earnings $ 6,554 $ 4,960 $ 22,402 $ 9,292
Items not affecting cash:
Depreciation and amortization 4,777 3,048 12,815 6,933
Future income tax expense
(recovery) (357) 201 (3,848) 102
Unit-based compensation
(note 9) 498 468 1,439 1,066
Non-controlling interest
earnings (note 6) 252 402 1,123 828
Loss on disposal of capital
assets 128 155 553 133
---------------------------------------------------------------------------
11,852 9,234 34,484 18,354
Changes in non-cash operating
working capital (note 11) (6,910) (8,475) (2,496) (6,255)
---------------------------------------------------------------------------
4,942 759 31,988 12,099
---------------------------------------------------------------------------

Financing activities
Issue of Trust units, net of
issue costs (note 7) 28,231 - 28,908 60,977
Issue of Subordinated units - - - 2,500
Distributions paid (6,958) (4,483) (18,923) (9,568)
Increase (repayment) in
operating line of credit (1,495) 1,750 (5,000) 1,750
Increase in long-term debt 11,500 18,172 34,600 29,028
Repayment of long-term debt (17,059) (1,023) (18,698) (20,880)
Deferred charges and other (187) 20 (295) (296)
---------------------------------------------------------------------------
14,032 14,436 20,592 63,511
---------------------------------------------------------------------------

Investing activities
Capital assets (10,996) (8,282) (33,107) (17,033)
Business acquisitions (note 3) (9,359) (15,468) (25,035) (59,972)
Proceeds on disposal of
capital assets 716 326 2,695 1,655
Changes in non-cash investing
working capital (1,052) - 537 -
---------------------------------------------------------------------------
(20,691) (23,424) (54,910) (75,350)
---------------------------------------------------------------------------

Increase (decrease) in cash (1,717) (8,229) (2,330) 260

Cash, beginning of period 848 8,489 1,461 -
---------------------------------------------------------------------------
Cash (bank indebtedness), end
of period $ (869) $ 260 $ (869) $ 260
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Supplementary cash flow
information
Income taxes paid $ 1,258 $ - $ 4,112 $ -
Interest paid $ 882 $ 513 $ 2,058 $ 746
---------------------------------------------------------------------------
---------------------------------------------------------------------------

See accompanying notes to unaudited consolidated interim financial
statements



BUILDERS ENERGY SERVICES TRUST
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the periods ended September 30, 2006 and 2005
(All tabular amounts in thousands 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 oilfield services, indirectly, through three operating segments: Oilfield Transport, Service Rigs and Downhole Services & Rentals.

2. Significant Accounting Policies

The interim consolidated financial statements of the Trust have been prepared by management in accordance with Canadian generally accepted accounting principles and are consistent with those set out in the audited consolidated financial statements for the 341-day period ended December 31, 2005. These interim consolidated financial statements do not include all disclosures provided in the December 31, 2005 financial statements and should be read in conjunction with the Trust's consolidated annual financial statements for the 341-day period ended December 31, 2005 and with the consolidated interim financial statements for the periods ended March 31, 2006 and June 30, 2006. In management's opinion, these interim consolidated financial statements include all adjustments to present fairly such information.

3. Business Acquisitions

During the nine months ended September 30, 2006, Builders completed three acquisitions. These acquisitions have been accounted for by the purchase method with the results of operations of Prime Oilfield Hauling Ltd. ("Prime"), Kodiak Well Service Ltd. ("Kodiak") and Leachman Enterprises Ltd. ("Leachman") being included in the financial statements from the dates of acquisition. The final determination of the cost of the acquisitions and the allocations of net asset fair values is pending.



A summary of the net assets acquired and the allocation of the purchase
prices are as follows:


Prime(i) Kodiak(ii) Leachman(iii) Total
---------------------------------------------------------------------------
Net assets acquired
Non-cash working capital $ 764 $ 1,133 $ 985 $ 2,882
Capital assets 7,309 12,342 5,134 24,785
Intangible assets 2,973 1,550 386 4,909
Goodwill 12,831 6,905 3,329 23,065
Long-term debt (2,213) - - (2,213)
Future income taxes (2,760) (4,315) (1,190) (8,265)
---------------------------------------------------------------------------
$ 18,904 $ 17,615 $ 8,644 $ 45,163
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Consideration
Cash $ 7,097 $ 9,365 $ 5,144 $ 21,606
Payable subsequent to
closing 3,147 - - 3,147
Trust units (note 7) 8,660 8,250 2,450 19,360
Series B Exchangeable
shares (note 6) - - 1,050 1,050
---------------------------------------------------------------------------
$ 18,904 $ 17,615 $ 8,644 $ 45,163
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Issued:
Trust units (note 7) 536 499 150 1,185
Series B Exchangeable
shares (note 6) - - 64 64
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(i) Prime

On August 1, 2006, Builders completed the acquisition of all the issued and outstanding shares of Prime for an aggregate purchase price of $18.9 million. The combined purchase price was funded by a cash payment of $7.1 million, an amount payable subsequent to closing of $3.1 million and the issuance by the Trust of 536,099 Trust units at a price of $16.15 per Trust unit. Prime provides oilfield transport services.

(ii) Kodiak

On May 8, 2006, Builders completed the acquisition of all the issued and outstanding shares of Kodiak for an aggregate purchase price of $17.6 million. The combined purchase price was funded by a cash payment of $9.4 million and the issuance by the Trust of 499,327 Trust units at a price of $16.52 per Trust unit. Kodiak operates service rigs.

(iii) Leachman

On February 1, 2006, Builders completed the acquisition of all the issued and outstanding shares of Leachman for an aggregate purchase price of $8.6 million. The combined purchase price was funded by a cash payment of $5.1 million, the issuance by the Trust of 150,307 Trust units at a price of $16.30 per Trust unit and the issuance by Builders Energy Services Ltd., a subsidiary of the Trust, of 64,417 Series B Exchangeable shares at a price of $16.30 per Series B Exchangeable share. Leachman provides oilfield transport services.

4. Operating Line of Credit

In August, 2006, the Trust amended its credit agreement with its banking syndicate comprised of an operating line of credit and a term acquisition loan facility (note 5). Under this agreement, the operating line of credit is limited to the lesser of $20.0 million or 75 percent of the Trust's accounts receivable, less specific items. No limitations existed on the operating line of credit as at September 30, 2006. The line of credit has no required principal repayments during the term and bears interest at the bank's prime rate. The weighted average interest rate for the three and nine months ended September 30, 2006 was 6.00 and 5.67 percent, respectively (4.33 and 4.29 percent respectively for the three months and 249-day period ending September 30, 2005).

The line of credit expires on May 30, 2007 and can be renewed, at the lender's option, for an additional 364-day period. If not renewed, the operating line of credit is repayable on demand. The operating line of credit is secured by a general security agreement and a general assignment of accounts receivable.



5. Long-term Debt
As at As at
Sept. 30, 2006 Dec. 31, 2005
---------------------------------------------------------------------------
Term acquisition loan $ 35,495 $ 14,895
Term debt 4,211 6,502
Capital leases 337 531
---------------------------------------------------------------------------
40,043 21,928
Less: current portion of long-term debt 6,227 5,559
---------------------------------------------------------------------------
Long-term debt $ 33,816 $ 16,369
---------------------------------------------------------------------------
---------------------------------------------------------------------------


In August 2006, the Trust amended its credit agreement with its banking syndicate comprised of an operating line of credit (note 4) and a term acquisition loan facility. Under this agreement, the term acquisition loan facility is limited to the lesser of $80.0 million or 60 percent of the unencumbered net tangible assets. No limitations existed on the term acquisition loan facility as at September 30, 2006. The facility has no required principal repayments until expiry and bears interest at the bank's prime rate plus 0.75 percent. The weighted average interest rate for the three and nine months ended September 30, 2006 is 6.75 and 6.34 percent, respectively (4.76 and 5.06 percent respectively for the three months and 249-day period ending September 30, 2005).

The facility expires on May 30, 2007 and can be renewed, at the lenders' option, for an additional 364-day period. If not renewed, the loan is repayable in equal monthly installments over a three-year period. As a result, the portion of the term acquisition loan included in the current portion of long-term debt at September 30, 2006 is $3.9 million ($2.9 million at December 31, 2005). The term acquisition loan facility is collateralized by a general security agreement and a general assignment of book debts.



6. Non-controlling Interest
Nine months ended
Sept. 30, 2006
---------------------------------------------------------------------------
Securities Amount
---------------------------------------------------------------------------

Series A Exchangeable shares

Balance, beginning of period 946 $ 10,807
Conversion to Trust units (357) (4,210)
Earnings attributable to
non-controlling interest 1,086
---------------------------------------------------------------------------
Balance, end of period 589 $ 7,683
---------------------------------------------------------------------------
Exchange ratio, end of period 1.16993
Trust units issuable upon conversion, end
of period 689
--------------------------------------------------------
--------------------------------------------------------

Series B Exchangeable shares

Balance, beginning of period - $ -
Consideration for acquisition (note 3) 64 1,050
Conversion to Trust units (64) (1,087)
Earnings attributable to
non-controlling interest 37
---------------------------------------------------------------------------

Balance, end of period - $ -
---------------------------------------------------------------------------

Series A and Series B Exchangeable shares

Balance, beginning of period 946 $ 10,807
Consideration for acquisition (note 3) 64 1,050
Conversion to Trust units (note 7) (421) (5,297)
Earnings attributable to
non-controlling interest 1,123
---------------------------------------------------------------------------
Balance, end of period 589 $ 7,683
---------------------------------------------------------------------------
Exchange ratio, end of period 1.16993
Trust units issuable upon conversion,
end of period 689
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The Exchangeable shares are not eligible to receive distributions from the Trust and have voting attributes equivalent to the number of Trust units issuable upon conversion of the Exchangeable shares from time-to-time. The Series A Exchangeable shares are required to be converted prior to January 31, 2008.



7. Trust Units
Nine months ended
Sept. 30, 2006
---------------------------------------------------------------------------
Units Amount
---------------------------------------------------------------------------
Balance, beginning of period 14,624 $ 150,790
Public Offering for cash 1,765 30,005
Consideration for acquisitions (note 3) 1,185 19,360
Conversion of Exchangeable shares (note 6) 459 5,297
Exercise of Trust unit options for cash (note 9) 76 763
Fair value of exercised Trust unit options (note 8) - 202
Issue costs - (1,860)
---------------------------------------------------------------------------
Balance, end of period 18,109 $ 204,557
---------------------------------------------------------------------------
---------------------------------------------------------------------------


8. Contributed Surplus
Nine months ended
Sept. 30, 2006
---------------------------------------------------------------------------
Balance, beginning of period $ 1,600
Unit option plan unit-based compensation expense,
net of forfeitures (note 9) 1,439
Fair value of exercised Trust unit options (note 7) (202)
---------------------------------------------------------------------------
Balance, end of period $ 2,837
---------------------------------------------------------------------------
---------------------------------------------------------------------------


9. Unit-based Compensation

A summary of changes in the number of Trust unit options, with their
weighted average exercise prices as at September 30, 2006 is presented
below:

Weighted
Average
Trust Unit Exercise Price
Options (Per Unit)
---------------------------------------------------------------------------
Outstanding, December 31, 2005 1,322 $ 11.21
Issued 212 16.62
Exercised (76) 10.04
Forfeitures (58) 12.58
---------------------------------------------------------------------------
Outstanding, end of period 1,400 $ 12.03
---------------------------------------------------------------------------
Exercisable, end of period 327 $ 11.15
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The following table summarizes information about the Trust unit options
outstanding as at September 30, 2006:

Weighted Weighted
Average Average Fair
Range of Trust Unit Remaining Value of Trust Weighted
Exercise Options Contractual Unit Options Average Exercise
Prices Outstanding Life (years) (Per Unit) Price (Per Unit)
---------------------------------------------------------------------------
$10.00 896 3.3 2.67 $ 10.00
$12.37 - $ 18.79 504 4.1 4.47 15.64
---------------------------------------------------------------------------
1,400 3.6 3.32 $ 12.03
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The Trust recorded unit-based compensation expense in respect of Trust unit options of $0.5 million for the three months ended September 30, 2006 ($0.5 million for the three months ended September 30, 2005) and $1.4 million for the year-to-date ended September 30, 2006 ($1.1 million for the 249-days ended September 30, 2005) with a corresponding increase to contributed surplus. The amount of unit-based compensation expense has been reduced for options forfeited during the period prior to vesting.



10. Net Earnings Per Unit

Nine months 249-days
Three months ended ended
ended Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
---------------------------------------------------------------------------

Numerator:
Basic and diluted net earnings $ 6,554 $ 4,960 $ 22,402 $ 9,292

Denominator:
Weighted average units for basic
net earnings 16,774 12,599 15,759 11,113
Options convertible to units 254 404 279 296
---------------------------------------------------------------------------
Weighted average units for diluted
net earnings 17,028 13,003 16,038 11,409
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net earnings per unit:
Basic $ 0.39 $ 0.39 $ 1.42 $ 0.84
Diluted $ 0.38 $ 0.38 $ 1.40 $ 0.81
---------------------------------------------------------------------------
---------------------------------------------------------------------------


11. Changes in Non-cash Working Capital

Components of changes in non-cash operating working capital are as follows:

Nine months 249-days
Three months ended ended
ended Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
---------------------------------------------------------------------------

Trade accounts receivable $ (6,636) $ (10,509) $ 7,369 $ (2,611)
Inventory 267 (109) (131) (109)
Prepaid expenses and deposits 862 23 (492) (541)
Trade accounts payable and accrued
liabilities (1,620) 2,079 (7,736) (1,712)
Income taxes payable 217 41 (1,506) (1,282)
---------------------------------------------------------------------------
$ (6,910) $ (8,475) $ (2,496) $ (6,255)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


12. Seasonality of Operations

The Trust's operations are carried out in western Canada. The oilfield services 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 renders many secondary roadways incapable of supporting heavy equipment until sufficient time has passed for them to dry out. In addition, certain areas in 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.

13. Segmented Information

The Trust has three operating segments: Oilfield Transport, Service Rigs and Downhole Services & Rentals. Wireline Services and Downhole Services & Rentals have been aggregated and disclosed as one operating segment, Downhole Services & Rentals, as these divisions have similar economic characteristics, services, processes, customers, methods of distribution and regulatory environments.

The Oilfield Transport segment provides general oilfield transportation and rig relocation services. The Service Rig segment provides production and completion services. The Downhole Services & Rentals segment provides wireline services, coil-tubing, nitrogen, downhole tools services and equipment rentals. A fourth non-operating segment, Corporate, includes corporate general and administrative costs, unit-based compensation and interest.

During the first half of 2006, the Trust operated principally in one operating segment - oilfield services. However, during the third quarter of 2006, management structured the operations of the Trust into three operating and one non-operating segments. As a result, the Trust has reclassified its segment disclosures to include these new service segments and has provided comparative information where applicable.



Selected financial information by service segment is disclosed as follows:

As at and for the three months ended Sept. 30, 2006
---------------------------------------------------------------------------
Downhole
Oilfield Service Services &
(Thousands) Transport Rigs Rentals Corporate Consolidated
---------------------------------------------------------------------------
Revenue $ 16,665 $ 14,842 $ 18,915 $ - $ 50,422
Earnings before
income taxes and
non-controlling
interest $ 1,843 $ 4,006 $ 4,508 $ (3,282) $ 7,075

Goodwill &
intangible
assets $ 34,012 $ 21,703 $ 51,616 $ - $ 107,331
Total assets $ 97,598 $ 85,697 $ 117,852 $ 1,668 $ 302,815
Capital
expenditures $ 5,350 $ 2,845 $ 2,542 $ 259 $ 10,996
---------------------------------------------------------------------------
---------------------------------------------------------------------------


As at and for the three months ended Sept. 30, 2005
---------------------------------------------------------------------------
Downhole
Oilfield Service Services &
(Thousands) Transport Rigs Rentals Corporate Consolidated
---------------------------------------------------------------------------
Revenue $ 12,114 $ 7,674 $ 17,376 $ - $ 37,164
Earnings before
income taxes and
non-controlling
interest $ 2,901 $ 2,626 $ 3,982 $ (3,946) $ 5,563

Goodwill &
intangible
assets $ 14,947 $ 13,473 $ 51,482 $ - $ 79,902
Total assets $ 52,022 $ 45,988 $ 107,282 $ (1,583) $ 203,709
Capital
expenditures $ 4,456 $ 1,475 $ 2,050 $ 301 $ 8,282
---------------------------------------------------------------------------
---------------------------------------------------------------------------


As at and for the nine months ended Sept. 30, 2006
---------------------------------------------------------------------------
Downhole
Oilfield Service Services &
(Thousands) Transport Rigs Rentals Corporate Consolidated
---------------------------------------------------------------------------
Revenue $ 44,706 $ 38,337 $ 64,723 $ - $ 147,766
Earnings before
income taxes and
non-controlling
interest $ 4,743 $ 10,949 $ 16,834 $ (11,095) $ 21,431

Goodwill &
intangible
assets $ 34,012 $ 21,703 $ 51,616 $ - $ 107,331
Total assets $ 97,598 $ 85,697 $ 117,852 $ 1,668 $ 302,815
Capital
expenditures $ 13,742 $ 7,053 $ 11,641 $ 671 $ 33,107
---------------------------------------------------------------------------
---------------------------------------------------------------------------



As at and for the 249-day period ended Sept. 30, 2005
---------------------------------------------------------------------------
Downhole
Oilfield Service Services &
(Thousands) Transport Rigs Rentals Corporate Consolidated
---------------------------------------------------------------------------
Revenue $ 26,803 $ 18,922 $ 28,963 $ - $ 74,688
Earnings before
income taxes and
non-controlling
interest $ 5,727 $ 5,139 $ 6,296 $ (6,940) $ 10,222

Goodwill &
intangible
assets $ 14,947 $ 13,473 $ 51,482 $ - $ 79,902
Total assets $ 52,022 $ 45,988 $ 107,282 $ (1,583) $ 203,709
Capital
expenditures $ 9,827 $ 2,398 $ 4,396 $ 412 $ 17,033
---------------------------------------------------------------------------
---------------------------------------------------------------------------



14. Comparative Amounts

Certain comparative amounts have been reclassified to conform to the current period's presentation.

15. Subsequent Event

On October 3, 2006, Builders completed the acquisition of all the issued and outstanding shares of Murphy's Oilfield Services Ltd. ("Murphy's") for an aggregate purchase price of $12.4 million. The purchase price consideration was comprised of $5.4 million in cash, the issuance by the Trust of 343,228 Trust units at a price of $15.77 per Trust unit and $1.6 million in assumed debt. Murphy's provides a variety of oilfield services, with a focus on service rigs and camp rentals.


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

Contact Information

  • Builders Energy Services
    Garnet K. Amundson
    President and Chief Executive Officer
    (403) 296-0344
    Email: IR-BEST@BuildersEnergy.com
    or
    Builders Energy Services
    John W. Nearing
    Vice President, Finance and Chief Financial Officer
    (403) 296-0344
    Email: IR-BEST@BuildersEnergy.com
    or
    Builders Energy Services
    Karen Perasalo
    Manager, Finance and Investor Relations
    (403) 296-0344
    Email: IR-BEST@BuildersEnergy.com