Collicutt Energy Services Ltd.
TSX : COH

Collicutt Energy Services Ltd.

August 15, 2005 15:24 ET

Collicutt Energy Services Ltd. Announces its Second Quarter Earnings

RED DEER, ALBERTA--(CCNMatthews - Aug. 15, 2005) - Collicutt Energy Services Ltd. (COH:TSX) is pleased to announce its results for the second quarter ended June 30, 2005.

Second quarter revenues rose 30% to $36.0 million from $27.7 million in 2004 on the strength of growing demand for both service and manufactured products. Year-to-date revenues amounted to $67.1 million, a 25% increase over 2004 revenues of $53.6 million. Net earnings for the quarter were $0.67 million compared to a loss of $0.48 million in 2004, while six month earnings rose to $1.4 million from a prior year loss of $1 million.

Robust demand for oil and gas services in Western Canada drove activity in both the fabrication and service segments. Service experienced significant year-over-year growth in the quarter and more than replaced the volumes lost following the sale by Hanover of its Canadian lease fleet to a competitor, late last year. Fabrication volumes reflect growing demand for both power and compression packages. Business activity is expected to remain strong through the remainder of 2005 due to existing orders for new compressor packages and high demand for maintenance of gas compressors.



Financial Highlights
The financial highlights for the three and six month periods ended June
30, 2005 are as follows:
(Thousands of dollars except share and per share data - Unaudited)

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
------------------------------------------------------------------------

Revenue 35,981 27,735 67,140 53,622
Net earnings (loss) 669 (479) 1,417 (1,036)
Earnings (loss) per share
- basic 0.06 (0.04) 0.13 (0.09)
- diluted 0.06 (0.04) 0.13 (0.09)
Cash flow per share
- basic 0.16 0.02 0.17 0.03
- diluted 0.16 0.02 0.17 0.03
EBITDA (1) 2,138 598 4,246 1,083

Weighted average number
shares outstanding
- basic 10,912,985 10,913,215 10,913,099 10,911,622
- diluted 10,939,745 10,913,215 10,949,651 10,911,622
Actual shares outstanding
- shares 10,892,015 10,913,215
- options 556,500 643,500

(1) EBITDA is calculated from the consolidated statement of earnings as
revenue less operating and general and administrative expenses and
is used to assist management and investors in assessing the
Company's ability to generate cash from operations. Cash flow, which
is expressed before changes in non-cash working capital, is used by
management to analyse operating performance, leverage and liquidity.
EBITDA and cash flow are non-GAAP earning measures that do not have
any standardized meaning prescribed by GAAP and may not be
comparable to similar measures provided by other companies.


In May 2005, Collicutt Energy Services' Board of Directors authorized a normal course issuer bid (NCIB). The Directors believe that the market price of Collicutt shares do not reflect their underlying value. The purchase of shares for cancellation will increase the proportionate interest of and be advantageous to all remaining shareholders.

On the first of June, a new ERP software system was installed throughout the company's service division. It is expected that the system will enhance customer service, reduce administrative expenses and improve management of parts inventories.

Effective June 21, 2005, Thomas E. Lewis resigned his position as Vice-President, Finance and Chief Financial Officer. The Company is actively seeking a replacement and anticipates having this role filled within the next quarter.

Collicutt Energy Services' remains committed to improving shareholder value by focussing on the following priorities:

1. Delivering consistently high quality products and services to our customers on a timely basis;

2. Enhancing the company's reputation as an "employer of choice" through ongoing training and performance-based compensation;

3. Continuous improvement in business processes.



STEVEN M. COLLICUTT
President and Chief Executive Officer
August 15, 2005


MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

The following constitutes management's opinion concerning the Company's operating and financial results for the three and six month period ended June 30, 2005 and its outlook based on current available information and expectations as at August 15, 2005. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and MD&A in the Company's Annual Report for the year ended December 31, 2004. Additional information is also available on the Company's website (www.collicutt.com) and all previous public filings, including the Annual Information Form (AIF) are available through SEDAR (www.sedar.com).

Collicutt Energy Services has two business segments - Service and Fabrication. The service division maintains, repairs, and refurbishes natural gas compression and power generation equipment. The fabrication division designs and assembles natural gas compression packages, power generation systems and oilfield production equipment. The Company is geographically focused within Western Canada, but does complete a number of projects globally, particularly within the fabrication group.

Q2 2005 activity levels for both fabrication and service have increased considerably over the same period in 2004. Consolidated revenues were $8.3 million higher than in Q2 2004. For the six-month period ending June 30, 2005 the Company had a $13.5 million dollar increase in revenues compared to the same period in 2004. High oil and gas prices are driving increased production from existing wells, which in turn requires more intensive use of both existing compression facilities as well as demand for incremental compression. Secondly, sustained high prices are resulting in record expenditures on exploration and development in Western Canada and the commensurate need for new compression facilities. Both of these industry factors underlie the company's strong revenue growth in the first six months of the year.

The service division increased revenue in Q2 from $11.4 million a year ago to $14.5 million, an increase of 27%. More importantly, the company continues to grow its share of this important market as revenues for the first half exceeded last year's level by over 10%, despite the loss of Hanover's service business late last year.

The fabrication division continues to operate in a highly competitive industry segment characterized by compression production capacity that significantly exceeds product demand, as well as a shortage of skilled labour and long lead times from suppliers. Despite these challenges fabrication continued to increase revenue from Q2 2004 to Q2 2005 by 31.2% and 35.5% year-to-date. Q2 2005 gross margins were 3.5% below 2004 for the quarter and 2.7% below year-to-date due to production difficulties with a power unit and reallocation of engineering wages from general and administrative to indirect expenses.

The company continues to invest in the computer systems that drive our business. Service implemented a new ERP system in the quarter which will enhance customer service, reduce operating costs and improve inventory management. The Fabrication division continued to implement new modules within its existing state-of-the art system, specifically enhancing the company's quoting and estimating processes, which are expected to result in increased manufacturing efficiencies.

In Q2 2005 the remaining vacant land adjacent to our Red Deer facility was sold for proceeds of $0.4 million resulting in a gain which is classified in other income of $0.06 million. The Company no longer holds any assets for resale.

Consolidated revenues for the quarter ended June 30, 2005 increased by $8.3 million to $36.0 million from $27.7 million for the same three-month period in 2004. Year-to-date revenues increased by 25.2% to $67.1 million from $53.6 million for the same six-month period in 2004. The fabrication division accounted for $11.1 million and the service division $2.4 million of this year-to-date increase.

Consolidated gross profit increased to $5.2 million from $4.1 million in Q2 2004. Gross profit as a percentage of sales remained stable between Q2 2005 and Q2 2004. Year-to-date gross profit increased by $0.7 million, however, this is less than expected due to gross margins decreasing by 2.0%. The 2005 results reflect lower margins in power and custom fabrication due to production inefficiencies, staffing shortages, and the reallocation of project-related wages from administrative to indirect expenses. These lower margins were partially offset by a slight increase in service margins year-over-year.

Consolidated general and administrative expenses decreased by $0.3 million to $3.2 million in Q2 2005 from $3.5 million for the same period in 2004. Year-to-date these costs decreased by $1.0 million. The majority of this variance is a result of the Red Deer facility consolidation and the reallocation of project-related costs from administrative to indirect expense. These savings were partially offset by increased expenses for bad debt provision and bonuses due to increased revenues.

Interest expense decreased 22.0% in Q2 2005 to $0.34 million compared to $0.43 million in Q2 2004. Year-to-date interest expense decreased by $0.2 million. The decrease was the result of lower long-term debt levels partially offset by a modest increase in the prime rate, which affected borrowing costs on the company's operating line of credit.

Consolidated net income increased to $0.7 million in Q2 2005 from a loss of $0.5 million for the same period in 2004. Year-to-date net income rose $2.4 million over 2004. However, included in the 2005 income was a one-time gain of $1.3 million on the sale of the Red Deer service facility as well as a gain from the sale of vacant land of $0.06 million. After providing for these gains, 2005 results were $1.0 million above those of 2004.

Capital expenditures of $1.3 million for the six-month period ending June 30, 2005 were $0.8 million higher than those in 2004. These expenditures include $0.3 million for ERP systems, $0.2 million for rental equipment and the remainder being for routine capital additions to the service fleet and fabrication facilities.

Related Party Transactions - in the course of its regular business activities, the Company previously engaged in routine transactions with Hanover Compressor Company, a 24% shareholder of the Company. Hanover divested of its ownership position in Q4 2004 and is no longer a related party.

SERVICE revenues are generated from a network of 11 branches located across Western Canada and increased to $14.5 million in Q2 2005 from $11.4 million in Q2 2004. Year-to-date revenues increased by $2.4 million over the same period in 2004. Increased activity in all areas as well as revised pricing to compensate for increased costs has more than compensated for the loss of revenue from the servicing of Hanover's rental fleet. Net of Hanover revenues, service generated an additional $4.3 million in new business compared to last year, largely as a result of increased revenues from refabrication activities. EBIT increased to $2.0 million in Q2 2005 from $0.7 million in 2004 and increased $0.8 million year-to-date over the same period in 2004 reflecting higher revenues and gross margin percentages. The increased margins for the quarter were partially offset by a slight increase in overhead expenses due to increased activity levels and allocation of corporate human resource and information technology expenses. Gross profit for Q2 2005 was 58.0% higher than Q1 2005 and year-to-date was 15.0% higher than the same period in 2004, reflecting the impact of higher activity and higher gross margin percentages. Overhead costs year-to-date are slightly lower than the same period last year. Gross profits as a percentage of sales increased by 5.2% quarter over quarter and increased by 1.0% year-to-date over the same period in 2004.

FABRICATION revenues for Q2 2005 increased 31.3% to $21.4 million from $16.3 million in Q2 2004. Year-to-date revenues increased $11.1 million from $31.4 million in 2004 to $42.5 million in 2005. All product lines had increased revenues year-to-date 2005 over the same period in 2004. Despite higher revenues for the quarter EBIT remained level with Q2 2004. This was due to lower contribution margins in power and the reallocation of project-related wages from corporate administration to indirect expenses. Year-to-date EBIT increased by $0.6 million from a loss of $0.3 million in 2004 to income of $0.3 million in 2005.

Contribution margin percentages for the quarter declined by 3.6% over the same period in 2004. Year-to-date contribution margin percentages declined by 2.2%. The decline in contribution margins year-to-date was attributable to projects in fabrication services and power. Fabrication revenues increased sufficiently during the first six months to more than offset the lower margins and resulted in improved profitability compared to 2004. The division also benefited from a reduction in overhead and administrative costs related to the consolidation of the Red Deer facilities.

Cash flow from operations, before changes in non-cash working capital, increased by $1.5 million in Q2 2005 to $1.7 million compared to $0.2 million in Q2 2004. Year-to-date cash flow increased by $1.6 million to $1.9 million compared to $0.3 million for the same six-month period in 2004. Cash resources were used to fund $1.3 million of capital assets and $0.7 million in debt reduction, in addition to recurring operational activities. Working capital increased from December 31, 2004 to June 30, 2005 by $2.2 million.

At June 30, 2005, Collicutt had total operating and term loan indebtedness of $30.4 million (December 31, 2004: $30.9 million). In compliance with a CICA Emerging Issues Committee abstract, the non-current portion of long-term debt has been classified as current due to its callable feature. This accounting disclosure is not indicative of the Comp any's intention to repay these amounts within the next year or of the lender's intention to enforce repayment within the next year.

Long-term debt, inclusive of the current portion, decreased by $0.7 million from December 31, 2004. In 2003 the Company entered into a three-year interest rate swap arrangement, which it has deemed to be an effective hedge, to mitigate the interest rate risk associated with its floating rate term debt. This arrangement expires April 30, 2006. The Company has followed hedge accounting for this financial derivative and disclosed the fair value of the interest rate swap in its notes to the financial statements in accordance with the provisions of CICA Accounting Guideline 13. The ratio of debt to shareholders' equity decreased from 61.0% as at December 31, 2004 to 58.0% at the end of Q1 in 2005.

The Company has an operating loan of $38.0 million (2004: $38.0 million) available to finance current operations. As at June 30, 2005, $19.0 million had been drawn (December 31, 2004: $18.7 million). Management is confident that this level of financing, combined with cash flow generated from operations, is sufficient to fund operational activities for the foreseeable future.

The Company purchases foreign exchange forward contracts as a hedge against certain US dollar denominated sales and the related accounts receivable. At June 30, 2005 the Company held forward contracts with a book value of $4,640,280. These derivative financial instruments are accounted for using the fair value method. The foreign exchange translation gains and losses on these instruments are accrued under accounts receivable on the balance sheet and recognized currently in cost of sales as foreign exchange gains/losses. The forward premium or discount on forward exchange contracts is recognized in cost of sales at the time the sale is recognized. The fair value of the foreign exchange contracts at June 30, 2005 is $165,391.

OUTLOOK

Both operating divisions anticipate a strong third quarter as the industry activity levels are anticipated to remain robust.

Service expects continued growth in demand for routine maintenance as well as for re-fabrication services.

Fabrication will focus on increasing margin percentages by improving production and quoting efficiencies. Timely access to major components from suppliers continues to be a challenge, however we are confident that this challenge can be effectively met by identifying new sources of supply and improving relationships with existing suppliers. The current book of business will keep the manufacturing facilities fully occupied through the end of November.

The Company's management is continuing to analyze new market opportunities that have opened up as a result of Hanover's divestiture of its ownership interest in Collicutt, including the introduction of a leasing and rental option for our customers and a geographic expansion of our service activities into the north western United States.

Climate and customer operating cycles can influence seasonal demand for the Company's products and services. Quarterly activity levels within the service division are fairly neutral across the quarters, with a tendency for higher activity in the last three months of the year. Fabrication activity tends to be greater during the first and fourth quarters as equipment is usually delivered during the colder winter months.

ADVISORY

This quarterly report contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions. Should one or more of these risk factors materialize, or should assumptions prove incorrect, actual results may vary significantly from those expected.



CONSOLIDATED BALANCE SHEET
($000s - Unaudited)

As at
June 30, 2005 December 31, 2004
-------------------------------------
ASSETS
Current
Accounts receivable (Note 3) 37,890 28,642
Inventory and work-in-progress 46,283 41,673
Assets held for resale (Note 4) - 3,860
Prepaid expenses and deposits 535 572
Future income taxes 252 510
Income taxes recoverable - 513
-------------------------------------
84,960 75,770
Capital assets 33,783 34,388
-------------------------------------
118,743 110,158
-------------------------------------
-------------------------------------
LIABILITIES
Current
Operating loan 18,988 18,713
Accounts payable and
accrued liabilities 9,661 13,366
Deferred revenue 25,617 14,630
Current portion of
long-term debt (Note 3) 1,543 1,542
Non-current portion of callable
long-term debt (Note 3) 8,991 9,544
-------------------------------------
64,800 57,795
Long-term debt (Note 3) 861 1,052
Future income taxes 782 385
-------------------------------------
66,443 59,232
-------------------------------------
-------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 5) 40,419 40,500
Contributed surplus 66 28
Retained earnings 11,815 10,398
-------------------------------------
52,300 50,926
-------------------------------------
118,743 110,158
-------------------------------------
-------------------------------------

approved by the board of directors

Steven M. Collicut Peter A. Lacey
Director Director


CONSOLIDATED STATEMENT OF EARNINGS (LOSS) AND RETAINED EARNINGS
($000s except share and per share data - Unaudited)

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
------------------------------------------------------------------------
Sales 35,981 27,735 67,140 53,622
Cost of goods sold 30,740 23,673 58,353 45,534
---------------------------------------------
Gross profit 5,241 4,062 8,787 8,088
Other income (Note 4) 77 23 1,593 49
---------------------------------------------
5,318 4,085 10,380 8,137
---------------------------------------------
Expenses
General and administration 3,180 3,487 6,134 7,054
Interest 339 434 684 892
Amortization 757 845 1,471 1,676
---------------------------------------------
4,276 4,766 8,289 9,622
---------------------------------------------

Earnings (loss) before
income taxes 1,042 (681) 2,091 (1,485)
---------------------------------------------

Income tax (recovery)
expense
Current 83 22 98 49
Future 290 (224) 576 (498)
---------------------------------------------
373 (202) 674 (449)
---------------------------------------------

Net earnings (loss)
(Note 2) 669 (479) 1,417 (1,036)

Retained earnings,
beginning of period 11,146 10,000 10,398 10,557
---------------------------------------------
Retained earnings,
end of period 11,815 9,521 11,815 9,521
---------------------------------------------
---------------------------------------------
Earnings (loss) per share
- basic and diluted 0.06 (0.04) 0.13 (0.09)

Weighted Average
Number Of Common Shares
- basic 10,912,985 10,913,215 10,913,099 10,911,622
- diluted 10,939,745 10,913,215 10,949,651 10,911,622
---------------------------------------------
---------------------------------------------




CONSOLIDATED STATEMENT OF CASH FLOWS
($000s - Unaudited)

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
------------------------------------------------------------------------
Cash flows related to
the following activities

Operating
Net earnings (loss) for
the period 669 (479) 1,417 (1,036)
Adjustments for:
Amortization 757 845 1,471 1,676
(Gain) on sale of assets (59) - (1,531) -
Compensation expense 12 6 5 12
Future income tax
(recovery) 287 (224) 655 (498)
Provision for warranty
costs 73 95 (110) 152
---------------------------------------------
1,739 243 1,907 306
Net change in non-cash
working capital (6,637) (5,582) (5,554) (2,962)
---------------------------------------------
(4,898) (5,339) (3,647) (2,656)
---------------------------------------------
---------------------------------------------

Financing
Issuance/repurchase
of share capital (49) - (49) 21
Advance on operating loan 5,819 6,091 275 4,021
Repayment of
long-term debt (373) (450) (743) (892)
---------------------------------------------
5,397 5,641 (517) 3,150
---------------------------------------------

Investing
Purchase of capital assets (589) (314) (1,271) (506)
Proceeds on disposition
of capital assets 90 12 5,435 12
---------------------------------------------
(499) (302) 4,164 (494)
---------------------------------------------

Net decrease in cash
and cash equivalents - - - -
Cash and cash equivalents,
beginning of period - - - -
---------------------------------------------

Cash and cash equivalents,
end of period - - - -
---------------------------------------------
---------------------------------------------



Supplementary cash
flow items
Interest paid 329 433 664 898
Interest received 3 2 27 13
---------------------------------------------
---------------------------------------------

Income taxes paid 7 77 66 160
Income taxes refunded 250 65 554 65
---------------------------------------------
---------------------------------------------



SEGMENTED INFORMATION
($000s - Unaudited)

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
------------------------------------------------------------------------
Revenue
Service 14,534 11,387 24,607 22,248
Fabrication 21,447 16,348 42,533 31,374
---------------------------------------------
35,981 27,735 67,140 53,622
---------------------------------------------

Amortization
Service 356 377 691 742
Fabrication 356 448 704 894
Corporate 45 20 76 40
---------------------------------------------
757 845 1,471 1,676
---------------------------------------------

Earnings (loss) before
interest and income taxes
Service 1,990 672 2,130 1,318
Fabrication (139) (168) 287 (344)
Corporate (470) (751) 358 (1,567)
---------------------------------------------
1,381 (247) 2,775 (593)
---------------------------------------------

Capital expenditures
Service 197 256 512 414
Fabrication 161 58 388 86
Corporate 231 - 371 6
---------------------------------------------
589 314 1,271 506
---------------------------------------------

As at
June 30, 2005 December 31, 2004
---------------------------------------------
ASSETS
Service 39,294 37,169
Fabrication 55,790 44,963
Corporate 23,659 28,026
---------------------------------------------
118,743 110,158
---------------------------------------------
---------------------------------------------


NOTES TO FINANCIAL STATEMENTS

NOTE 1: ACCOUNTING POLICIES

The unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Annual Report for the year ended December 31, 2004. The interim consolidated financial statements do not contain all of the disclosures required for annual financial statements. The interim financial statements follow the same accounting policies and methods of application as the most recent annual financial statements.



NOTE 2: BASIC AND DILUTED EARNINGS PER SHARE
($000s except share data - Unaudited)

THREE MONTHS ENDED

June 30, 2005 June 30, 2004
Net Per Net Per
Earnings Shares share Loss Shares share
------------------------------------------------------

Basic earnings
(loss) per share 669 10,912,985 0.06 (479) 10,913,215 (0.04)


Dilutive effect
of stock option
conversions 26,760

Diluted earnings
(loss) per share 669 10,939,745 0.06 (479) 10,913,215 (0.04)
------------------------------------------------------

Options and
warrants excluded
from diluted
income per common
share as their
effect could
be anti-dilutive 386,500 643,500
------------------------------------------------------
------------------------------------------------------




SIX MONTHS ENDED

June 30, 2005 June 30, 2004
Net Per Net Per
Earnings Shares share Loss Shares share
------------------------------------------------------

Basic loss
per share 1,417 10,913,099 0.13(1,036) 10,911,622 (0.09)

Dilutive effect
of stock option
conversions 36,552

Diluted earnings
(loss) per share 1,417 10,949,651 0.13(1,036) 10,911,622 (0.09)
------------------------------------------------------
------------------------------------------------------

Options and
warrants excluded
from diluted
income per common
share as their
effect could be
anti-dilutive 376,500 643,500
------------------------------------------------------
------------------------------------------------------


NOTE 3: FINANCIAL INSTRUMENTS

To mitigate its exposure to fluctuations in interest rates, the Company entered into an interest rate swap arrangement to fix the interest rate on $10.0 million of its debt at 6.5%, inclusive of bank stamping fees of 2.05%. The fair value of the interest rate swap contracts at June 30, 2005 was negative $105,709. This arrangement matures April 30, 2006.

The Company purchases foreign exchange forward contracts as a hedge against certain US dollar denominated sales and the related accounts receivable. At June 30, 2005 the Company held forward contracts totalling $4,640,280. These derivative financial instruments are accounted for using the fair value method. The foreign exchange translation gains and losses on these instruments are accrued under accounts receivable on the balance sheet and recognized currently in cost of sales as foreign exchange gains/losses. The forward premium or discount on forward exchange contracts is recognized in cost of sales at the time the sale is recognized. The fair value of the foreign exchange contracts at June 30, 2005 is $165,391.

NOTE 4: ASSETS HELD FOR RESALE

The lands held for resale were sold June 2005 for $423,900 resulting in a gain on sale of $58,374, which has been included in Other Income for the three months ended June 30, 2005 ($0.4 million for land as well as the Red Deer service facility $3.5 million: December 31, 2004). The Red Deer service facility was sold in February 2005 for total proceeds of $4.8 million resulting in a gain on sale of $1.3 million which has been included in Other Income for the six months ended June 30, 2005.

NOTE 5: SHARE CAPITAL

The Company made a normal course issuer bid to purchase from time to time, as it considers advisable, up to 545,000 of the issued and outstanding common shares of Collicutt Energy Services Ltd. on the open market through the facilities of the Toronto Stock Exchange. The bid commenced on June 20, 2005 and will terminate on June 19, 2006, or such earlier time as the bid is completed or terminated by the Company. In June 2005, the Company purchased and later cancelled 21,200 common shares at an average price of $2.20, for a total cost of $49,064, including commissions, pursuant to the issuer bid.



As at ($000s - Unaudited) June 30, 2005 December 31, 2004
----------------------------------------------
Issued Common shares Amount Common shares Amount
----------------------------------------------
Balance, beginning of year 10,913,215 40,500 10,903,215 40,479
Stock options exercised - - 10,000 21
Common shares purchased (21,200) (81) - -
----------------------------------------------
Balance, end of year 10,892,015 40,419 10,913,215 40,500
------------------------------------------------------------------------
------------------------------------------------------------------------


NOTE 6: COMMITMENTS AND GUARANTEES

The Company, in the normal course of business, has various commitments and guarantees. Management believes only one guarantee in the amount of $450,000 USD for the possible return of equipment to be of any significance.

NOTE 7: COMPARATIVE AMOUNTS

Certain comparative numbers have been reclassified to confirm to the presentation in the current year.

NOTE 8: CONTINGENCIES

The Company is involved in various litigation matters arising in the ordinary course of business. The Company is currently defending an action that was initiated in 2005 totaling $6 million relating to the alleged non-performance and termination of a contract. The Company intends to vigorously defend this action and does not believe any liability will be incurred. Accordingly, no provision has been made in the financial statements with respect to this matter.

Collicutt Energy Services Ltd. is an oilfield service company operating from its centrally located headquarters in Red Deer, Alberta and 11 strategic branch locations throughout the Western Canadian Sedimentary Basin.

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