Collicutt Energy Services Ltd.
TSX : COH

Collicutt Energy Services Ltd.

August 13, 2007 16:30 ET

Collicutt Energy Services Ltd. Announces Its Second Quarter Report of 2007

RED DEER, ALBERTA--(Marketwire - Aug. 13, 2007) - Collicutt Energy Services Ltd. (TSX:COH):

MESSAGE TO SHAREHOLDERS

Basic and diluted earnings per share for the quarter ended June 30, 2007 was a loss of 10 cents per share compared to basic earnings of 17 cents per share and diluted earnings of 16 cents per share for the same period of 2006.

Revenues decreased by $14.3 million to $23.2 million for the period from $37.5 million in the second quarter of 2006. Gross profits decreased by $3.7 million over the same period of 2006. The net loss for the three months ended June 30, 2007 was $1.0 million, versus net earnings of $1.8 million from the previous year's second quarter.

The Fabrication Division recorded significantly lower revenues of $4.7 million in the second quarter of 2007. The second quarter of 2007 appears to be the low ebb in softening revenues within the Fabrication Division. The backlog of customer orders for the third and fourth quarters of 2007 currently includes $26.4 million in compression and power generation orders. The increasing activity levels in the second half of 2007 are coming from increased domestic orders as well as growth generated from the international arena. With it being anticipated that the Western Canada natural gas markets will recover in 2008, we are optimistic that improved revenues will be attainable as we go forward.

Despite the second quarter having its share of challenges, Service revenues were buoyed by an encouraging amount of activity late in the period due to extensive overhauls and plant turnarounds. Our Service Division was further enhanced by the acquisition of the California USA assets and assumption of certain liabilities of KOHLER Power Systems, a company renowned for its total solutions approach for residential, commercial and industrial standby/emergency power, distributed power, recreational power, rental, and power for special events. This acquisition gives us the opportunity to have 3 satellite branches located in Los Angeles, Stockton and Sacramento, California from which to address the ever growing global stand-alone power generation demand. Kohler has long been a company that matches the world's demand for new and different kinds of power, holding a commitment to produce innovative products and to provide world-class engineering, responsive after-sale support and unmatched value.

As we move into the second half of 2007 and into 2008, a continued primary focus for the Service Division will be strategic growth throughout the Western Canadian Sedimentary Basin and the refinement of our systems and processes in preparation for the return to heightened activity levels, both locally and internationally.

A major focus for our Company has been and continues to be an educational investment in our employees. Collicutt Energy Services is pleased to announce its strategic alliance and partnership with Red Deer College. Both the College and our Company are dedicated to meeting the demand for a highly skilled workforce in the rapidly developing Central Alberta region. Together we recognize the advantages in partnering to promote superior education for the betterment of our community and its sustainable future. On June 20, 2007, a Memorandum of Understanding was signed whereby we committed to a long-term relationship to develop and support a Natural Gas Compression and Power Energy Generation Technician program. Red Deer College has also agreed to provide support to our human resources and training departments through additional technical and soft-skills training as required.

Additionally, Collicutt Energy Services Ltd. will be supplying a compressor package to the Northern Alberta Institute of Technology (NAIT) this fall in sponsorship of their Millwright and Heavy Equipment Technician programs. This Waukesha F-18 natural gas engine with an Ariel JGJ-4 compressor frame will allow for increased visual and hands-on learning for the new apprentices entering into the aforementioned trades and in particular, those employed in the natural gas compression industry. Collicutt Energy Services will continue to actively support the sixteen different trades we employ through ventures such as this one with NAIT, in addition to the scholarships and 100% paid tuition and salary continuation we provide our employees while in attendance at school. These are win-win scenarios for Red Deer College, NAIT and Collicutt Energy Services and set the stage for future partnerships for other corporations throughout a variety of industries.

Although the Company did experience lower revenue levels during the second quarter due to a continued downturn in the Western Canada natural gas sector, it is the ability of our Company to not only reap the benefits of industry upswings but to have the stamina to withstand the cyclical ebbs and make the critical and crucial decisions as a result of the down turns. We responded to the softened activity levels in the second quarter by instituting effective cost saving measures while maintaining the required talent pool of employees to meet our long-term customer demands.

Steven M. Collicutt, President and Chief Executive Officer

August 13, 2007

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 periods ended June 30, 2007 and its outlook based on current available information and expectations as at August 13, 2007. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and the MD&A in the Company's Annual Report for the year ended December 31, 2006. The following discussion includes forward-looking statements that involve certain risks and uncertainties and require management to make certain assumptions which if not held will produce different results than these statements have indicated. Additional information regarding the risks and uncertainties significant to the Company are provided in the Annual Information Form (AIF). Additional information is also available on the Company's website (www.collicutt.com) and all previous public filings, including the AIF, are available through SEDAR (www.sedar.com).

The terms "Company", "we", "our" and "us", when used in this report, refer to Collicutt Energy Services Ltd. and its subsidiaries except where indicated.

EXECUTIVE OVERVIEW

Collicutt Energy Services Ltd. 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 has recently begun expansion into California and Nevada in the USA through its wholly-owned subsidiary - Collicutt Energy Services Inc. In addition, the Company does complete a number of projects globally, particularly within the Fabrication Division.



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EARNING HIGHLIGHTS
($000s - Unaudited - Prepared by Management)

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2007 2006
--------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1
--------------------------------------------------
Revenue
Service 18,499 11,947 12,683 16,465 15,517 16,981
Fabrication 4,734 24,693 31,588 28,824 21,934 24,804
--------------------------------------------------
23,233 36,640 44,271 45,289 37,451 41,785

Gross profit 3,601 5,256 8,026 8,617 7,263 7,053
Gross profit percentage 15.50% 14.34% 18.13% 19.03% 19.39% 16.88%

EBITDA(1) (169) 968 4,037 4,383 3,685 3,619

Net (loss) earnings (972) (202) 1,983 2,033 1,763 1,597

Capital expenditures and
business acquisitions 5,314 2,332 4,004 515 3,489 593

(1) EBITDA is calculated from the consolidated statement of earnings as
revenue less cost of sales, operating and general and administrative
expenses and other income and is used to assist management and
investors in assessing the Company's ability to generate cash from
operations. EBITDA is a non-GAAP earning measure that does not have any
standardized meaning prescribed by GAAP and may not be comparable to
similar measures provided by other companies.

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Revenue performance on a consolidated basis fell below those posted in any of the quarters in 2006 and represented a 37.0% year over year decrease from those seen in the second quarter of 2006, despite the Service Division realizing gross revenues greater than those realized in any quarter in 2006. The backlog of customer orders within the Fabrication Division for the third and fourth quarters of 2007 currently includes $26.4 million in compression and power generation orders.

Gross Profit of $3.6 million for the second quarter of 2007 saw a year over year decrease of $3.7 million from $7.3 million in the second quarter of 2006. A larger contribution to total revenue from the Service Division in the second quarter of 2007, with corresponding higher gross profit as a percentage of revenue in comparison to the Fabrication Division resulted in higher consolidated gross profit as a percentage of revenue in the second quarter from the first quarter of 2007.

EBITDA decreased $3.9 million in second quarter of 2007 to ($0.2) million compared to $3.7 million in 2006.

Capital expenditures were $3.8 million in the second quarter of 2007 largely as a result of the $2.8 million acquisition of California USA assets of KOHLER Power Systems and the continued expansion of the leasing fleet within the Fabrication Division.

The Normal Course Issuer Bid (NCIB) was authorized by the Board of Directors in May 2005 and was the result of the strong belief that the market price of the Company's shares was not reflective of their true underlying value. Under the NCIB renewed by the Board of Directors from June 20, 2006 to June 19, 2007 the Company purchased 474,900 common shares for cancellation at an average price of $6.42, representing total consideration of $3.1 million. The NCIB was renewed on June 22, 2007 and will expire on June 21, 2008. Under this renewed NCIB, the Company may purchase from time to time, as it considers advisable, up to 495,000 of the issued and outstanding common shares of the Company on the open market through the facilities of the Toronto Stock Exchange. From June 22, 2007 to August 13, 2007, no shares were purchased pursuant to the issuer bid. Copies of the "Notice of Intention to Make a Normal Course Issuer Bid" of the Company dated June 12, 2007 to which the Bid is made, may be obtained by shareholders without charge by contacting the Company.



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COMMON SHARE INFORMATION
($000s except per share data - Unaudited - Prepared by Management)

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2007 2006
--------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1
--------------------------------------------------
Per share
- basic (loss) earnings (0.10) (0.02) 0.18 0.20 0.17 0.15
- diluted (loss) earnings (0.10) (0.02) 0.18 0.19 0.16 0.15
- book value 5.59 5.68 5.72 5.51 5.33 5.20

Shares Outstanding
- average basic 9,985 10,026 10,107 10,263 10,540 10,736
- average diluted 9,985 10,026 10,351 10,677 10,794 10,922
- end of period 9,850 9,912 10,066 10,099 10,402 10,570

- end of period share
options 765 785 805 770 775 557

Market Capitalization 57,329 59,965 64,925 68,812 68,130 60,770

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Basic and diluted (loss) earnings per share for the second quarter was (10) cents per share versus 17 and 16 cents per share respectively in the second quarter of 2006. As at June 30, 2007 the book value of the Company was $5.59 per share or $55.1 million versus the book value of $5.33 per share or $55.4 million at June 30, 2006.



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BALANCE SHEET SUMMARY
($000s except per share data - Unaudited - Prepared by Management)

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2007 2006
--------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1
--------------------------------------------------

Total assets 113,994 101,069 107,257 115,587 119,539 104,851

Total debt 58,928 44,663 49,643 59,929 64,119 49,915

Shareholders' equity 55,066 56,405 57,614 55,658 55,420 54,936

Debt to equity 1.07 0.79 0.86 1.08 1.16 0.91

Total interest bearing
debt 39,480 31,989 26,869 28,538 31,738 20,106

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Total interest bearing debt increased $7.5 million in the second quarter of 2007 to $39.5 million from $32.0 million in the first quarter of 2007. The increase in interest bearing debt was the result of $5.3 million in capital expenditures and business acquisitions, $0.5 million in share transactions and an increase in working capital of $1.7 million. The primary components of the $1.7 million increase in working capital (excluding the working capital acquired from KOHLER Power Systems) consisted of a $4.8 million increase in inventory and work-in-progress, a $2.5 million increase in accounts receivable and a $0.8 million decrease in taxes payable partially offset by a $5.1 million increase in deferred revenue and a $1.3 million increase in accounts payable and accrued liabilities. Increases in inventory levels have resulted from long lead times from suppliers of engines and compressors in the Fabrication Division in combination with the reduction in activity experienced in the second quarter.

Total debt increased $14.2 million to $58.9 million in the second quarter of 2007 from $44.7 million in the first quarter. The significant components of the increase were a $7.5 million increase in interest-bearing debt, $5.3 million in capital expenditures and business acquisitions and a $0.5 million purchases under the NCIB.



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CONSOLIDATED
($000's - Unaudited- Prepared by Management)

----------------------------------------------------------------------------
Three months ended Six months ended
-----------------------------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-----------------------------------------
Revenue 23,233 37,451 59,873 79,236

Gross profit 3,601 7,263 8,857 14,316

Gross profit % 15.50% 19.39% 14.79% 18.07%

General and administrative 3,810 3,702 8,119 7,158

Interest 543 387 962 699

Net (loss) earnings (972) 1,763 (1,174) 3,360

EBITDA (1) (169) 3,685 799 7,304

Capital expenditures and
business acquisitions 5,314 3,489 7,646 4,082

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(1) EBITDA is calculated from the consolidated statement of earnings as
revenue less cost of sales, operating and general and administrative
expenses and other income and is used to assist management and investors
in assessing the Company's ability to generate cash from operations.
EBITDA is a non-GAAP earning measure that does not have any standardized
meaning prescribed by GAAP and may not be comparable to similar measures
provided by other companies.


Consolidated revenues decreased 37.0% or $14.3 million from the second quarter of 2006. The majority of the year over year decrease was a result of lower revenues in the Fabrication Division. The Service Division saw a year over year increase of 19.0% principally due to the addition of revenue from the California operations acquired from KOHLER Power Systems. Looking forward in 2007, activity has already begun to increase for the latter part of the year, particularly within the Fabrication Division.

Consolidated gross profit decreased $3.7 million from the second quarter of 2006. Year over year, gross profit as a percentage of revenue was down 3.89% of revenue to 15.50% versus 19.39% in the second quarter of 2006. Gross profit as a percentage of revenue was up from the first quarter of 2007 by 1.16%.

Consolidated general and administrative expenses increased $0.1 million to $3.8 million from $3.7 million in the second quarter of 2006 as a result of higher utility costs and the addition of expenses from the California operations acquired from KOHLER Power Systems.

Interest expense increased by $0.1 million year over year. The increase is consistent with the increase in the bank indebtedness.

Consolidated net (loss) earnings decreased $2.8 million in the second quarter of 2007 to a loss of $1.0 million from net earnings of $1.8 million in the second quarter of 2006.

Capital expenditures and business acquisitions of $5.3 million for the second quarter of 2007 were $1.8 million higher than in the second quarter of 2006 and include the acquisition of two additional California locations acquired from KOHLER Power Systems for $2.8 million.

Related party transactions - there were no significant related party transactions in 2007 or during the 2006 fiscal year.



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SERVICE DIVISION
($000's - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three months ended Six months ended
-----------------------------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-----------------------------------------

Revenue 18,499 15,517 30,446 32,498

Earnings(loss) before interest and
income tax ("EBIT") 1,637 2,340 1,183 3,835

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Service Division revenues are generated from a network of 12 branches located across Western Canada and 3 branches located in California. Revenues increased by $6.6 million from the first quarter of 2007 to $18.5 million. Year over year revenues within the Service Division saw a $3.0 million increase from $15.5 million in the second quarter of 2006. The California operations contributed $4.6 million in revenue in the second quarter of 2007.

The division continues to focus on increasing market share while at the same time managing the balance sheet of the division through improved receivable collection and inventory management. This focus will continue throughout 2007.

EBIT decreased by $0.7 million in the second quarter of 2007 to $1.6 million from earnings of $2.3 million in the second quarter of 2006.

Gross profit as a percentage of revenue was 7.61% lower than the second quarter of 2006 due to the inclusion of the California operations acquired from KOHLER Power Systems. Year to date gross profit as a percentage of revenue was 7.22% lower than in 2006.



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FABRICATION DIVISION
($000's - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three months ended Six months ended
-----------------------------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-----------------------------------------

Revenue 4,734 21,934 29,427 46,738

(Loss) earnings before interest
and income tax ("EBIT") (1,155) 1,512 355 3,419

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Fabrication Division revenues for the second quarter of 2007 saw a decrease of $17.2 million to $4.7 from $21.9 in the second quarter of 2006. The revenue performance is expected to improve in the latter half of the year.

EBIT decreased by $2.7 million to a loss of $1.2 million from $1.5 million for the second quarter of 2006.

Gross profit as a percentage of revenue was 7.6% lower than the second quarter of 2006 due to the substantially lower activity level this year. Year to date gross profit as a percentage of revenue was 1.84% lower than in 2006.



LIQUIDITY AND CAPITAL RESOURCES

----------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
($000's - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three months ended Six months ended
-----------------------------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-----------------------------------------
Cash flow from operations 39 2,203 758 4,834

(Increase) reduction in non-cash
working capital (1,687) (9,065) (4,213) (7,738)

(Repurchase) issuance of share
capital (529) (1,278) (1,509) (2,473)

Cash invested in business
acquisitions (2,762) (1,650) (2,762) (1,650)

Cash (invested in) received from
acquisition and disposal of
property, plant and equipment (2,552) (1,839) (4,884) (2,432)
-----------------------------------------
(Increase) reduction in interest
bearing debt (7,491) (11,629) (12,610) (9,459)

Repayment of long-term debt (295) 41 (529) (328)

-----------------------------------------
(Increase) reduction in operating
loan (7,786) (11,588) (13,139) (9,787)

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Cash flow generated from operations, before changes in non-cash working
capital, decreased by $2.2 million in the second quarter of 2007.

Total interest bearing debt increased $7.8 million to $39.5 million in the
second quarter of 2007 versus $31.7 in the second quarter of 2006.

WORKING CAPITAL

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WORKING CAPITAL
($000's - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
As at
-----------------------
June 30, December 31,
2007 2006
-----------------------
Working capital 21,559 29,122

-----------------------
Operating loan 30,245 17,105

Current portion of long-term debt 1,295 1,251

Long-term debt 7,940 8,513

-----------------------
Total interest bearing debt 39,480 26,869

-----------------------

Total interest bearing debt to equity .71 .47

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The Company has an operating loan of $40.0 million (December 31 2006: $32.0 million) available to finance current operations. As at June 30, 2007, $30.2 million had been drawn (December 31, 2006: $17.1 million; June 30, 2006 $21.5 million). Management believes that this level of financing, combined with cash flow generated from operations, is sufficient to fund operational activities for the foreseeable future.

ACCOUNTING POLICIES

Foreign Currency Translation

The Company's wholly-owned US subsidiary, Collicutt Energy Services Inc., is considered a self-sustaining foreign operation and the current rate method is used to translate their financial statements into Canadian dollars. The resulting translation adjustments are reported as part of accumulated other comprehensive income and recognized in income only when a reduction of the net investment in the foreign operation has been realized.

Financial Instruments and Hedges

On January 1, 2007, the Company adopted Section 3855 of the Canadian Institute of Chartered Accountants (CICA) Handbook, "Financial Instruments - Recognition and Measurement" and Section 3865 "Hedges". Under these standards financial assets available for sale and assets and liabilities held for trading have to be measured at fair value. All derivative instruments, including embedded derivatives, are recorded in the consolidated balance sheet at fair value unless they qualify for the normal sales and purchases exemption. Changes in the fair value of derivatives that are not exempt are recorded in earnings unless hedge accounting is used, in which case changes in fair value are recorded in other comprehensive earnings.

Comprehensive Earnings

On January 1, 2007, the Company adopted Section 1530 of the CICA Handbook, "Comprehensive Income". It describes reporting and disclosure recommendations with respect to comprehensive earnings (loss) and its components. Comprehensive earnings (loss) are the change in shareholders' equity which results from transactions and events from sources other than the Company's shareholders. These transactions and events include changes in the cumulative translation adjustment relating to self-sustaining foreign operations and unrealized gains and losses resulting from changes in the fair value of certain financial instruments.

Recent Accounting Pronouncements Issued and Not Yet Adopted

In December 2006, the CICA issued three accounting standards: Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures, and Section 3863, Financial Instruments - Presentation, as well as Section 3031, Inventories, in June 2007. These new standards will be effective for the Company on January 1, 2008.

Section 1535: Capital Disclosures

This new standard establishes new disclosure requirements concerning capital, such as: qualitative information about the Company's objectives, policies and processes for managing capital; quantitative data about what it regards as capital; whether it has complied with any externally imposed capital requirements and, if not, the consequences of such non-compliance. The Company is presently evaluating the impact of this new standard.

Section 3862: Financial Instruments - Disclosures and Section 3863: Financial Instruments - Presentation

These new standards replace Section 3861, Financial Instruments - Disclosure and Presentation, revising and enhancing disclosure requirements, and carrying forward unchanged the presentation requirements. The Company is presently evaluating the impact of these new standards.

Section 3031: Inventories

This standard introduces changes to the measurement and disclosure of inventory. The measurement changes include the elimination of the last in-first out method, the requirement to measure inventories at the lower of cost and net realizable value, the allocation of overhead based on normal capacity, the use of the specific cost method for inventories that are not ordinarily interchangeable or goods and services produced for specific purposes, the requirement for an entity to use a consistent cost formula for inventory of a similar nature and use, and the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories. The Company is presently evaluating the future impact of this new standard.



National Instrument 51-102
Continuous Disclosure Obligations

Notice

Pursuant to Part 4.3 (3) of National Instrument 51-102, these unaudited
consolidated financial statements of Collicutt Energy Services Ltd. for the
three and six month periods ended June 30, 2007 have not been reviewed by
the Company's auditors.


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CONSOLIDATED BALANCE SHEET
($000's - Unaudited - Prepared by Management)

As at
----------------------------------------------------------------------------
June 30, December 31,
2007 2006
-----------------------
ASSETS

Current
Accounts receivable (Note 4) 22,612 31,462
Inventory and work-in-progress 46,875 37,145
Prepaid expenses and deposits 550 516
Future income taxes 250 434
Income taxes recoverable 1,426 -
-----------------------
71,713 69,557
Property, plant and equipment 41,281 37,700
Intangible assets (Note 8) 1,000 -
-----------------------
113,994 107,257

-----------------------
-----------------------

LIABILITIES

Current
Operating loan (Note 5) 30,245 17,105
Accounts payable and accrued liabilities 11,299 11,766
Income taxes payable - 2,073
Deferred revenue 7,315 8,240
Current portion of long-term debt (Note 4) 1,295 1,251
-----------------------
50,154 40,435
Long-term debt (Note 4) 7,940 8,513
Future income taxes 835 695
-----------------------
58,928 49,643
-----------------------

SHAREHOLDERS' EQUITY

Share capital (Note 6) 36,397 37,300
Accumulated other comprehensive earnings (Note 2) 1 -
Retained earnings 18,668 20,314
-----------------------
55,066 57,614
-----------------------
113,994 107,257

-----------------------
-----------------------

"signed" "signed"
Steven M. Collicutt Peter. A. Lacey
Director Director

Approved by the Board of Directors



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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
($000's - Unaudited - Prepared by Management)

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Accumulated
Other Total
Share Contributed Comprehensive Retained Shareholder
Capital Surplus Earnings (loss) Earnings Equity
$ $ $ $ $
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----------------------------------------------------------------------------
Balances at
December 31,
2006 37,300 - - 20,314 57,614

Adoption of new
accounting
standard
(Note 2) - - (149) - (149)
Common shares
purchased (768) (123) - (407) (1,298)
Share purchase
loans (135) - - (65) (200)
Stock-based
compensation - 123 - - 123
Cumulative
translation
adjustment - - 3 - 3
Other comprehensive
income:
Fair value of
interest rate swap - - 147 - 147
Net (loss) earnings
for the period - - - (1,174) (1,174)

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Balances at June
30, 2007 36,397 - 1 18,668 55,066
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CONSOLIDATED STATEMENT OF (LOSS) EARNINGS
($000s except share and per share data - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three Months Ended Six months ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
----------------------------------------------
Sales 23,233 37,451 59,873 79,236
Cost of goods sold 19,632 30,188 51,016 64,920
----------------------------------------------
Gross profit 3,601 7,263 8,857 14,316
Other income 40 124 61 146
----------------------------------------------
3,641 7,387 8,918 14,462
----------------------------------------------
Expenses
General and administration 3,810 3,702 8,119 7,158
Interest 543 387 962 699
Amortization 673 685 1,512 1,565
----------------------------------------------
5,026 4,774 10,593 9,422
----------------------------------------------
(Loss) earnings before income
taxes (1,385) 2,613 (1,675) 5,040
----------------------------------------------

Income tax (recovery) expense
Current (713) 737 (838) 1,623
Future 300 113 337 57
----------------------------------------------
(413) 850 (501) 1,680
----------------------------------------------

Net (loss) earnings (972) 1,763 (1,174) 3,360
----------------------------------------------
----------------------------------------------

(Loss) earnings per share
(Note 3)
- basic (0.10) 0.17 (0.12) 0.32
- diluted (0.10) 0.16 (0.12) 0.31

Weighted average number of
common shares
- basic 9,984,696 10,539,911 10,325,632 10,664,278
- diluted 9,984,696 10,794,526 10,325,632 11,021,454

----------------------------------------------
----------------------------------------------



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CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) EARNINGS
($000's - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
----------------------------------------------
Net (loss) earnings (972) 1,763 (1,174) 3,360

Other comprehensive earnings:
Unrealized gains (losses) on
translation of self-
sustaining foreign operations 2 - 3 -
Gains (losses) on derivatives
designated as cash flow hedges 126 - 147 -
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Other comprehensive (loss)
earnings 128 - 150 -
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(Comprehensive) earnings (844) 1,763 (1,024) 3,360
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CONSOLIDATED STATEMENT OF CASH FLOWS
($000s except share and per share data - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three Months Ended Six months ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
----------------------------------------------
Cash flows related to the
following activities
Operating
Net (loss) earnings for the
period (972) 1,763 (1,174) 3,360
Adjustments for:
Amortization 673 685 1,512 1,565
(Gain) loss on sale of assets (3) - 16 14
Stock based compensation
expense 22 - 122 16
Future income tax expense 300 113 337 57
Provision for warranty costs 19 (358) (55) (178)
----------------------------------------------
39 2,203 758 4,834
Net change in non-cash working
capital (1,687) (9,065) (4,213) (7,738)
----------------------------------------------
(1,648) (6,862) (3,455) (2,904)
----------------------------------------------

Financing
Repurchase of share capital (529) (1,278) (1,509) (2,473)
Advance (repayment) on
operating loan 7,786 11,588 13,139 9,787
Advances of long-term debt - 9,500 - 9,500
Repayment of long-term debt (295) (9,459) (529) (9,828)
----------------------------------------------
6,962 10,351 11,101 6,986
----------------------------------------------

Investing
Business acquisitions (Note 8) (2,762) (1,650) (2,762) (1,650)
Purchase of property, plant
and equipment (2,570) (1,839) (4,902) (2,432)
Proceeds on disposition of
property, plant and equipment 18 - 18 -
----------------------------------------------
(5,314) (3,489) (7,646) (4,082)
----------------------------------------------

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 485 370 942 678
Interest received - 16 32
----------------------------------------------
----------------------------------------------

Income taxes paid 270 482 2,656 2,208
Income taxes refunded - - -
----------------------------------------------
----------------------------------------------



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SEGMENTED INFORMATION
($000s except share and per share data - Unaudited - Prepared by Management)

----------------------------------------------------------------------------
Three Months Ended Six months ended

June 30, June 30, June 30, June 30,
2007 2006 2007 2006
----------------------------------------------
----------------------------------------------
Revenue
Service 18,499 15,517 30,446 32,498
Fabrication 4,734 21,934 29,427 46,738
----------------------------------------------
23,233 37,451 59,873 79,236
----------------------------------------------

Amortization
Service 376 305 721 822
Fabrication 222 311 647 607
Corporate 75 69 144 136
----------------------------------------------
673 685 1,512 1,565
----------------------------------------------

Earnings (loss) before
interest and income taxes
Service 1,637 2,340 1,183 3,835
Fabrication (1,155) 1,512 355 3,419
Corporate (1,324) (852) (2,251) (1,515)
----------------------------------------------
(842) 3,000 (713) 5,739
----------------------------------------------

Capital expenditures and
business acquisitions
Service 2,987 3,335 3,157 3,672
Fabrication 2,205 70 4,180 264
Corporate 122 84 309 146
----------------------------------------------
5,314 3,489 7,646 4,082
----------------------------------------------

As at
June 30, December 31,
2007 2006
----------------------------------------------
----------------------------------------------

Assets
Service 50,015 42,860
Fabrication 40,090 41,873
Corporate 23,889 22,524
----------------------------------------------

113,994 107,257

----------------------------------------------
----------------------------------------------


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, 2006 as they do not contain all of the disclosures required for annual financial statements. The interim consolidated financial statements have not been reviewed by the Company's auditors. These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The preparation of the unaudited interim consolidated financial statements is based on accounting principles and methods of application consistent with those used in the preparation of the most recent annual financial statements, except as described in Note 2. In the opinion of the Company, these unaudited interim financial statements contain all necessary adjustments to present a fair statement of the results of the interim periods presented.

Foreign Currency Translation

The Company's foreign subsidiary is considered a self-sustaining foreign operation and the current rate method is used to translate their financial statements into Canadian dollars. The resulting translation adjustments are reported as part of accumulated other comprehensive income and recognized in income only when a reduction of the net investment in the foreign operation has been realized.

NOTE 2: CHANGE IN ACCOUNTING POLICIES

Financial Instruments and Hedges

On January 1, 2007, the Company adopted Section 3855 of the Canadian Institute of Chartered Accountants (CICA) Handbook, "Financial Instruments - Recognition and Measurement" and Section 3865 "Hedges". Under these standards, financial assets available for sale and assets and liabilities held for trading have to be measured at fair value. All derivative instruments, including embedded derivatives, are recorded in the consolidated balance sheet at fair value unless they qualify for the normal sales and purchases exemption. Changes in the fair value of derivatives that are not exempt are recorded in earnings unless hedge accounting is used, in which case changes in fair value are recorded in other comprehensive earnings (loss).

In relation to CICA Handbook 3855 the Company has made the following classifications:

(a) Accounts receivable are classified as loans and receivables and are initially measured at fair value and subsequent periodical revaluations are recorded at amortized cost.

(b) Bank overdraft, accounts payable and accrued liabilities, and long-term debt are classified as other liabilities and are initially measured at fair value and subsequent periodical revaluations are recorded at amortized cost.

(c) Derivative instruments are recorded in the balance sheet at fair value, including the Company's forward exchange contracts and the interest rate swap (Note 4).

The Company has elected to use hedge accounting for the interest rate swap and as long as the hedge remains effective, gains and losses relating to the swap will be recorded in other comprehensive earnings (loss).

As at January 1, 2007, the impact on the consolidated balance sheet of measuring hedging derivatives at the fair value was a decrease in future tax liabilities of $72, and increase in long-term debt liability of $221 and a decrease in accumulated other comprehensive income (loss) earnings of $(149). Prior periods were not required to be restated. There were no other impacts on opening balances relating to the adoption of these standards.

Comprehensive Earnings

On January 1, 2007, the Company adopted Section 1530 of the CICA Handbook, "Comprehensive Income". It describes reporting and disclosure recommendations with respect to comprehensive earnings (loss) and its components. Comprehensive earnings (loss) are the change in shareholders' equity which results from transactions and events from sources other than the Company's shareholders. These transactions and events include changes in the cumulative translation adjustment relating to self-sustaining foreign operations and unrealized gains and losses resulting from changes in the fair value of certain financial instruments.

The adoption of this Section required the presentation of a consolidated statement of comprehensive earnings (loss) as part of the consolidated financial statements. Comparative statements have not been restated to reflect the application of this Section.

Recent Accounting Pronouncements Issued and Not Yet Adopted

In December 2006, the CICA issued three accounting standards: Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures and Section 3863, Financial Instruments - Presentation, as well as Section 3031, Inventories, in June 2007. These new standards will be effective for the Company on January 1, 2008.

Capital Disclosures

This new standard establishes new disclosure requirements concerning capital, such as: qualitative information and the Company's objectives, policies and processes for managing capital; quantitative data about what it regards as capital; whether it has complied with any externally imposed capital requirements and, if not, the consequences of such non-compliance. The Company is presently evaluating the impact of this new standard.

Section 3862: Financial Instruments - Disclosures and Section 3863: Financial Instruments - Presentation

These new standards replace Section 3861, Financial Instruments - Disclosure and Presentation, revising and enhancing disclosure requirements, and carrying forward unchanged the presentation requirements. The Company is presently evaluating the impact of these new standards.

Section 3031: Inventories

This standard introduces changes to the measurement and disclosure of inventory. The measurement changes include the elimination of the last in-first out method, the requirement to measure inventories at the lower of cost and net realizable value, the allocation of overhead based on normal capacity, the use of the specific cost method for inventories that are not ordinarily interchangeable or goods and services produced for specific purposes, the requirement for an entity to use a consistent cost formula for inventory of a similar nature and use, and the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories. The Company is presently evaluating the future impact of this new standard.



NOTE 3: BASIC AND DILUTED (LOSS) EARNINGS PER SHARE

----------------------------------------------------------------------------

($000s except share and per share data - Unaudited - Prepared by Management)

THREE MONTHS ENDED
June 30, 2007 June 30, 2006
---------------------------------------------------------
Net Per Net Per
(loss) Shares share earnings Shares share
Basic (loss)
earnings per
share (972) 9,984,696 (0.10) 1,763 10,539,911 0.17

Dilutive effect
of stock option
conversions - - 254,615 -

Diluted (loss)
earnings per
share (972) 9,984,696 (0.10) 1,763 10,794,526 0.16

Options and
warrants excluded
from diluted
income per common
share as their
effect could be
anti-dilutive 818,132 495,500

----------------------------------------------------------------------------

----------------------------------------------------------------------------

($000s except share and per share data - Unaudited - Prepared by Management)

SIX MONTHS ENDED
June 30, 2007 June 30, 2006
---------------------------------------------------------
Net Per Net Per
(loss) Shares share earnings Shares share
Basic (loss)
earnings per
share (1,174) 10,325,632 (0.12) 3,360 10,664,278 0.32

Dilutive effect
of stock option
conversions - - 357,176 -

Diluted (loss)
earnings per
share (1,174) 10,325,632 (0.12) 3,360 11,021,454 0.31

Options and
warrants
excluded
from diluted
income per
common share as
their effect
could be
anti-dilutive 818,132 495,500

----------------------------------------------------------------------------


NOTE 4: FINANCIAL INSTRUMENTS

To mitigate its exposure to fluctuations in interest rates, in the second quarter of 2006, the Company entered into an interest rate swap arrangement to fix the interest rate on $8,746 of its long-term debt at 6.66%, inclusive of bank stamping fees of 1.75% . The fair value of the interest rate swap contract at June 30, 2007 was negative $2 December 31, 2006: negative $221). This arrangement matures May 31, 2011.

The Company enters into foreign exchange forward contracts as a hedge against certain US dollar denominated sales and purchases and the related accounts receivable and payable. At June 30, 2007 the Company held forward contracts with a notional value of $15,500 (December 31, 2006: $8,700). 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, 2007 is negative $354.

NOTE 5: OPERATING LOAN

The Company has an operating loan facility of $40,000 at June 30, 2007 ($32,000 at December 31, 2006), which is funded through direct prime based borrowing and bankers acceptances. The operating loan facility incurs interest on a sliding scale based on cash flow to annual debt service varying from prime to prime plus 0.5% or at the banker's acceptance rate plus acceptance-stamping fee. The operating loan facility is payable on demand and is secured by a general security agreement over all assets and demand mortgage on properties.

As at June 30, 2007, $30,245 (December 31, 2006: $17,105) of this loan facility has been advanced. Bank overdrafts were offset by cash deposits.



NOTE 6: SHARE CAPITAL
Authorized
Unlimited number of voting common shares
Unlimited number of First Preferred shares, issuable in series, without
nominal or par value.
Unlimited number of Second Preferred shares, issuable in series, without
nominal or par value.

----------------------------------------------------------------------------
As Issued at (Unaudited - Prepared by Management)

June 30, 2007 December 31, 2006
----------------------------------------------
Common Amount Common Amount
Issued shares (000)'s shares (000)'s
----------------------------------------------

Balance, beginning of year 10,132,844 37,645 10,783,415 40,001
Stock options exercised - - 11,000 30
Common shares issued - - 21,429 150
Common shares purchased (206,900) (768) (683,000) (2,536)
Common shares cancelled (22,900) (235) - -
----------------------------------------------
----------------------------------------------
9,903,044 36,642 10,132,844 (2,536)

Share purchase loans
outstanding (52,632) (245) (67,000) (345)
----------------------------------------------
Balance, end of period 9,850,412 36,397 10,065,844 37,300
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Company, under a normal course issuer bid ("NCIB"), had the ability to purchase from time to time, as it considered advisable, up to 520,000 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, 2006 and expired on June 19, 2007. During the six month period ended June 30, 2007, the Company purchased and later cancelled 206,900 common shares at an average price of $6.27, for a total cost of $1,298, including commissions, pursuant to the issuer bid.

The NCIB was renewed effective June 22, 2007 and will expire on June 21, 2008. Under this renewed NCIB, the Company may purchase from time to time, as it considers advisable, up to 495,000 of the issued and outstanding common shares of the Company on the open market through the facilities of the Toronto Stock Exchange. During the period ending June 30, 2007, no shares were purchased pursuant to the issuer bid.

Offset within share capital are employee share purchase loans receivable of $245 (2006: $345). During the six month period ended June 30 2007, 22,900 shares were cancelled representing loans receivable of $150 and 8,532 shares were granted representing loans receivable of $50. These loans, issued by the Company to assist key employees acquiring shares in the Company, are non-interest bearing and secured by the share certificates issued. Repayment of the loan balance is required five years from date of issuance. The employee share purchase loans receivable are reflected in these financial statements as a reduction against share capital. The market value of the shares held as security against these loans was $306 at June 30, 2007 (December 31, 2006: $432).

NOTE 7: CONTINGENCIES

The Company is involved in various litigation matters arising in the ordinary course of business, for which no provision has been made in the financial statements. Management is of the opinion that any resulting net settlement would not materially affect the financial position, results of operations, or liquidity of the Company.

NOTE 8: ACQUISITIONS

On May 4, 2007, the Company acquired Kohler Power Systems - California Standby, Residential and Mobile distributorship branches in Stockton, California and Los Angeles, California for cash consideration of $2,762.

The estimated fair value of the net assets, including intangible assets, acquired at the date of acquisition was $2,762 and included $1,853 in Inventory, $225 in Property, Plant and Equipment, $94 in other current assets, $411 in deferred revenue and $1,000 in Intangible Assets.

The fair value adjustments relating to the acquisition, including the valuation of intangible assets, are provisional and will be finalized during 2007.



CORPORATE INFORMATION

----------------------------------------------------------------------------

Board of Directors Officers

Steven M. Collicutt (2) (3) Steven M. Collicutt
President and Chief Executive Officer President and Chief Executive Officer
Collicutt Energy Services Ltd.
Andrew S. Cruickshank, CA, CPA
Edward Kernaghan (2) Chief Financial Officer
President
Principia Research Inc. D. Scott Collicutt
Vice-President, Sales & Marketing
Frank Tirpak (1) (2)
President and Chief Executive Officer Glen Roberts
Lonkar Services Ltd. Senior Vice-President, Sales &
Marketing
Gary W. Harris (1) (3)
President and Chief Executive Officer Ted Melissen
Westward Parts Services Ltd. Vice-President, Fabrication

Peter A. Lacey (1) (3) Investor Relations Information
President and Chief Executive Officer
Cervus LP Requests for information should be
directed to:
(1) Member of Audit Committee
(2) Member of Compensation Committee Steven M. Collicutt
(3) Member of Corporate Governance President and Chief Executive Officer
Committee
Andrew S. Cruickshank, CA, CPA
Corporate Secretary Chief Financial Officer

Gerard N. Feehan QC
Duhamel, Manning, Feehan, Warrender, TSX Trading Symbol: COH
Glass

Auditors Corporate Office

PricewaterhouseCoopers LLP
Chartered Accountants Collicutt Energy Services Ltd.
Edmonton, Alberta 7550 Edgar Industrial Drive
Red Deer, Alberta T4P 3R2
Banker
Telephone: (403) 358-3200
HSBC Bank Canada Facsimile (403) 358-3210
Calgary, Alberta
Website: www.collicutt.com
Solicitors
Registrar and Transfer Agent
Duhamel, Manning, Feehan, Warrender,
Glass Computershare Trust Company of Canada
Red Deer, Alberta Calgary, Alberta and Toronto, Ontario

Tingle Merritt LLP
Calgary, Alberta

Davis and Company LLP
Calgary, Alberta

Contact Information

  • Collicutt Energy Services Ltd.
    Steven M. Collicutt
    President and Chief Executive Officer
    (403) 358-3200
    or
    Collicutt Energy Services Ltd.
    Andrew S. Cruickshank, CA, CPA
    Chief Financial Officer
    (403) 358-3200
    (403) 358-3210 (FAX)
    Website: www.collicutt.com