Collicutt Energy Services Ltd.
TSX : COH

Collicutt Energy Services Ltd.

February 27, 2007 18:58 ET

Collicutt Energy Services Ltd Is Pleased to Announce Its Results for the Fourth Quarter Ended December 31, 2006

RED DEER, ALBERTA--(CCNMatthews - Feb. 27, 2007) - Collicutt Energy Services Ltd. (TSX:COH):

MESSAGE TO SHAREHOLDERS

We are pleased to present our fourth quarter report of 2006.

Basic and diluted earnings per share for the quarter ended December 31, 2006 yielded 0.18 cents per share compared to 0.13 cents per share for the same period of 2005. Year over year, basic and diluted earnings per share increased 89%, from $0.37 per share to $0.70 per share and from $0.36 to $0.68 respectively.

Revenues increased by $4.6 million to $44.3 million for the period from $39.7 million in the fourth quarter of 2005. Gross profits improved by $1.1 million over the same period of 2005. Net earnings for the three months ended December 31, 2006 were $2.0 million, an increase of $0.6 million from the previous year's fourth quarter.

As we bring our 20th year in business to a close, we reflect on what a great year it has been. Celebrations with staff were held throughout our Alberta and British Columbia locations as we thanked them for their terrific contributions throughout the year and for their journey with us to make these 20 years such a success.

2006 held its challenges. The industry continued to experience the adverse effects of skilled labour shortages and material shortages. Now more than ever, companies need to be creative in developing and implementing effective solutions to these difficulties. Collicutt Energy Services met these challenges with innovative solutions to ensure optimization of its resources, facilities and people. In doing so, quality enhancements to our processes significantly reduced the impact of these challenges. Major production improvements were made to the Fabrication Division's process flows resulting in our ability to produce more in less time, more efficiently, and ultimately bringing improvements to lead times.

Great strides in our Service Division's branch network strengthened our market share in 2006, such as the opening of a larger facility in Fort Nelson, British Columbia, a new location in Stettler, Alberta, from the purchase of MLR Mechanical Services Ltd. (MLR) and a new location in Rimbey, Alberta from the acquisition of FIELDCO. The benefits of these initiatives continued to be evident in the fourth quarter. We will be introducing a new packaged service early in the new year to bring further enhancements to our service offerings.

With the foundation of a solid team, Collicutt Energy Services' 20th year in business was one of strength, focus, and accomplishment in both our Service and Fabrication Divisions.

On behalf of Lorna, Scott, and myself, a heartfelt thanks to all our employees, our customers and all our stakeholders, for their steadfast contributions to Collicutt Energy Services' historical and successful 20 years, and for 'writing history' with us as we usher in the Company's 21st. year.

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 twelve month periods ended December 31, 2006 and its outlook based on current available information and expectations as at February 27, 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, 2005. 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 Annual Information form (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, assembles, and leases natural gas compression packages, under-balanced drilling service equipment, 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 Division.



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

2006
-----------------------------------------
Q4 Q3 Q2 Q1
-----------------------------------------
Revenue
Service 12,683 16,465 15,517 16,981
Fabrication 31,588 28,824 21,934 24,804
-----------------------------------------
44,271 45,289 37,451 41,785

Gross profit 8,026 8,617 7,263 7,053
Gross profit percentage 18.13% 19.03% 19.39% 16.88%

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

Net earnings 1,983 2,033 1,763 1,597

Capital expenditures and
business acquisitions 4,004 515 3,489 593


2005
-----------------------------------------
Q4 Q3 Q2 Q1
-----------------------------------------
Revenue
Service 12,357 11,287 14,534 10,073
Fabrication 27,359 22,847 21,447 21,086
-----------------------------------------
39,716 34,134 35,981 31,159

Gross profit 6,943 5,769 5,241 3,546
Gross profit percentage 17.48% 16.90% 14.57% 11.38%

EBITDA(1) 3,340 2,923 2,138 2,108

Net earnings 1,436 1,149 669 748

Capital expenditures and
business acquisitions 1,050 388 589 682

(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.


Sales performance in both the Service and the Fabrication Divisions led to the posting of another healthy quarter with both realizing increases over the same period of 2005. Although gross revenues for the quarter broke the historical increase trend, gross revenues realized an increase of $4.6 million over the same period of 2005. The full 2006 year revenue increased by $27.8 million from the 2005 year's performance. Revenues for the quarter are the result of significant process improvements implemented and the Company's continued focused on effectively managing the growing labour shortage, which continues to be a prevalent factor throughout the industry. Looking forward to 2007, lower natural gas prices have had a negative impact on the Fabrication Division's 2007 backlog. The softness in orders may result in lower activity levels in 2007 in the Fabrication Division.

Gross profit of $8.0 million for the fourth quarter of 2006 increased by $1.1 million, from $6.9 million in the fourth quarter of 2005. In the fourth quarter of 2006, inventory reductions and accounts receivable management continued to be a focus of the Company. The Company employees' incentive program, named the Collicutt Sharing Improvements Plan (CSI Plan), rewards increased inventory turns and reduced days revenue in accounts receivable, amongst other measures.

EBITDA realized an increase of $0.7 million or 21.2% in the fourth quarter of 2006 to $4.0 million from $3.3 million in the same period of 2005. Full year 2006 EBITDA increased $5.2 million or 49.6% to $15.7 million from the 2005 EBITDA of $10.5 million.

Net earnings saw an increase of $0.6 million to $2.0 million in the fourth quarter of 2006 versus the fourth quarter of 2005.

Capital Expenditures and Business Acquisitions were $4.0 million in the fourth quarter of 2006. Capital expenditures in the fourth quarter of 2006 included $2.0 million in additions to the rental fleet.

In June 2006, the Normal Course Issuer Bid (NCIB), initially authorized by the Board of Directors in May of 2005, was renewed due to the belief that the market price of the Company's shares fail to reflect their true underlying value. Under the NCIB that ended on June 19, 2006, 541,800 shares were purchased and cancelled. The NCIB was renewed by the Board of Directors effective June 20, 2006 and will expire on June 19, 2007. Under the renewed NCIB, the Company may purchase from time to time as it considers advisable, up to 520,000 of the issued and outstanding common shares of the Company on the open market through the facilities of the Toronto Stock Exchange. From June 20, 2006 to February 27, 2007 353,900 shares were purchased and cancelled under the NCIB. The purchase of shares for cancellation will further increase the proportionate interest of and may be advantageous to all remaining shareholders. Copies of the "Renewal Notice of Intention to Make a Normal Course Issuer Bid" of the Company dated June 14, 2006 pursuant to which the Bid is made, may be obtained by shareholders without charge by contacting the Company.



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

2006
-----------------------------------------
Q4 Q3 Q2 Q1
-----------------------------------------
Per share
- basic earnings 0.18 0.20 0.17 0.15
- diluted earnings 0.18 0.19 0.16 0.15
- book value 5.72 5.51 5.33 5.20

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

- end of period share options 805 770 775 557

Market Capitalization 64,925 65,743 68,130 60,779


2005
-----------------------------------------
Q4 Q3 Q2 Q1
-----------------------------------------
Per share
- basic earnings 0.13 0.11 0.06 0.07
- diluted earnings 0.13 0.11 0.06 0.07
- book value 5.06 4.91 4.80 4.73

Shares Outstanding
- average basic 10,809 10,888 10,913 10,913
- average diluted 10,949 10,943 10,940 10,969
- end of period 10,783 10,861 10,892 10,913

- end of period share options 552 570 557 592

Market Capitalization 53,809 38,012 23,200 26,847


Fourth quarter basic earnings per share increased from 13 cents per share for the three months ended December 31, 2005 to 18 cents per share for the three months ended December 31, 2006. Basic earnings per share for the twelve months ended December 31, 2006 was 70 cents per share. As at December 31, 2006 the book value of the Company was $5.72 per share, or $57.8 million, versus the book value of $5.06 or $54.6 million at December 31, 2005.



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

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

Total assets 107,257 115,587 119,539 104,851

Total debt 49,643 59,929 64,119 49,915

Shareholders' equity 57,614 55,658 55,420 54,936

Debt to equity 0.86 1.08 1.16 0.91

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


2005
-----------------------------------------
Q4 Q3 Q2 Q1
-----------------------------------------

Total assets 102,277 104,322 118,743 103,729

Total debt 47,759 50,994 66,443 52,062

Shareholders' equity 54,518 53,328 52,300 51,667

Debt to equity 0.88 0.96 1.27 1.01

Total interest bearing debt 22,275 25,287 30,383 24,937


Total interest bearing debt decreased by $1.6 million to $26.9 million at December 31, 2006, from $28.5 million at September 30, 2006. The decrease in interest bearing debt in the fourth quarter was due to $3.2 million in cash flow generated from operations before changes in non-cash working capital, $2.3 million from reduced working capital partially offset by capital expenditures totalling $3.9 million.



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

Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
Revenue 44,271 39,716 168,796 140,990

Gross profit 8,026 6,943 30,959 21,499

Gross profit % 18.13% 17.48% 18.34% 15.25%

General and
administrative 4,039 3,699 15,480 12,706

Interest 458 298 1,569 1,321

Net earnings 1,983 1,436 7,376 4,002

EBITDA (1) 4,037 3,340 15,724 10,509

Capital expenditures
and business
acquisitions 4,004 1,050 8,601 2,709

(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 for the fourth quarter of 2006 increased by $4.6 million from the same period of 2005. The Service and Fabrication Divisions realized year over year fourth quarter increases in gross revenues of $0.4 million and $4.2 million respectively. Full year revenues increased in 2006 by 19.7% or $27.8 million versus 2005. Year over year revenues increased in 2006 by $13.4 million and $14.4 million for the Service and Fabrication Divisions respectively over 2005.

Consolidated gross profit increased $1.1 million in the fourth quarter of 2006 to $8.0 million versus $6.9 million in the fourth quarter of 2005. Fourth quarter gross profit as a percentage of revenue was up 0.6% of revenue to 18.1% in 2006 from 17.5% for the same period of 2005. Consolidated gross profit for the full 2006 year increased $9.5 million from $21.5 million in 2005 to $30.9 million in 2006. Full year gross profit expressed as a percentage of revenue increased 3.1% of revenue from 15.3% in 2005 to 18.3% in 2006.

Consolidated general and administrative expenses increased by $0.3 million to $4.0 million in the fourth quarter of 2006 from $3.7 million for the same period of 2005. Twelve month general and administrative expenses increased $2.8 million from $12.7 million in 2005 to $15.5 million in 2006. The full year increases in general and administrative expenses from 2005 to 2006 were principally the result of increased salaries, employee bonuses, continuing education and facility costs.

Interest expense increased $0.2 million from $0.3 million in the fourth quarter of 2005 to $0.5 million in the fourth quarter of 2006. Full year interest expense increased $0.2 million from $1.3 million in 2005 to $1.6 million in 2006. The increases are consistent with the year over year increase in debt levels and interest rates.

Consolidated net earnings increased $0.5 million to $2.0 million in the fourth quarter of 2006 from net earnings of $1.4 million for the fourth quarter of 2005. Full year consolidated net earnings realized an increase of 85.0%, or $3.4 million, from $4.0 million in 2005 to $7.4 million in 2006.

Capital expenditures and business acquisitions of $8.6 million for the twelve months ended December 31, 2006 were $5.9 million higher than 2005. This increase was attributable mainly to the new facilities in Fort Nelson, British Columbia and Rimbey, Alberta and the addition of FIELDCO of Rimbey, Alberta and MLR Mechanical Services Ltd. (MLR) with operations in Red Deer, Stettler and Drumheller, Alberta. Rental fleet additions contributed $2.0 million to the 2006 capital expenditures.

Related party transactions - there were no significant related party transactions during the 2006 or the 2005 fiscal year.



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

Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
Revenue 12,683 12,357 61,646 48,251

Earnings before interest
and income tax ("EBIT") 972 636 7,294 3,644


Service Division revenues are generated from a network of 13 branches located across Western Canada and the Western United States. Revenues increased by $0.3 million to $12.7 million in the fourth quarter of 2006 from $12.4 million for the same period of 2005. Year to date revenues increased $13.4 million from $48.3 million for the twelve months ended December 31, 2005 to $61.6 million in 2006.

The division continues to focus on increasing market share and improving employee retention. The Company completed the construction of the building in Fort Nelson (featured in the picture left) and invested in Rimbey and Stettler, Alberta through the acquisitions of FIELDCO and MLR which brought in equipment and inventory as well as valuable employees in these areas.

EBIT increased by $0.3 million in the fourth quarter of 2006 to $1.0 million from $0.6 million in the fourth quarter of 2005. EBIT for the full 2006 year was $7.3 million, an increase of $3.6 million from $3.6 million in 2005.

Gross profit as a percentage of revenue in the fourth quarter of 2006 was 3.6% higher than the fourth quarter of 2005. Full year 2006 gross profit as a percentage of revenue was 3.4% higher in 2006 versus 2005. Gross profit is higher in 2006 compared to the prior year due to improved use of facilities and other fixed costs and lower inventory obsolescence expense.



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

Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
Revenue 31,588 27,359 107,150 92,739

Earnings before interest
and income tax ("EBIT") 3,140 2,714 8,621 4,889


Fabrication Division revenues for the fourth quarter of 2006 increased $4.2 million to $31.6 million from $27.4 million in the fourth quarter of 2005. Strong demand in customer orders late in 2005 favourably impacted Fabrication revenues in 2006. Process improvements and an experienced manufacturing and sales team also contributed positively to year end results. The Fabrication Division will focus on expanding the lease fleet in 2007. A new leasing manager has been added to the sales team to better develop this line and resources have been allocated to manufacture additional units to expand the fleet.

EBIT increased $0.4 million, from $2.7 million in the fourth quarter of 2005 to $3.1 million in the fourth quarter of 2006. During 2006 EBIT increased $3.7 million to $8.6 million at December 31, 2006 from $4.9 million at December 31, 2005.

A strategic focus on key strengths in high horsepower applications has been reflected in continually improving results. In 2006, the division has continued its commitment to improve the utilization of plant resources, process improvements, lean manufacturing initiatives, and high quality standards.

Gross profit as a percentage of revenue for the fourth quarter of 2006 was 0.3% lower than the fourth quarter of 2005. Gross profit has remained relatively constant in 2006 as a result of gains in efficiency in the manufacturing process and inventory management being offset by increasing labour costs. Gross profit as a percentage of revenue was 2.5% higher in 2006 compared to 2005. Gross profit has improved in 2006 as a result of improved project management and market pricing.



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

Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
Cash flow from
operations 3,198 2,171 10,927 6,162

Reduction (increase) in
non-cash working
capital 2,336 1,793 (2,727) (583)

Repurchase of share
capital 31 (264) (4,303) (439)

Cash invested in
business acquisitions - - (1,650) -

Cash (invested in)
received from
acquisition and
disposal of capital
assets (3,894) (688) (6,841) 3,436
---------------------------------------------------
Reduction (increase) in
interest bearing debt 1,671 3,012 (4,594) 8,576

Repayment of long-term
debt (237) (421) (832) (1,542)

---------------------------------------------------
Reduction (increase) in
operating loan 1,434 2,591 (5,426) 7,034


Cash flow generated from operations, before changes in non-cash working capital, increased by $1.0 million in the fourth quarter of 2006 to $3.2 million, compared to $2.2 million generated in the fourth quarter of 2005. In 2006 cash flow generated from operations increased $4.7 million to $10.9 million from $6.2 million in 2005.

Total interest bearing debt decreased by $1.6 million to $26.9 million at December 31, 2006, from $28.5 million at September 30, 2006 and increased by $4.7 million from $22.3 million at December 31, 2005. The decrease in interest bearing debt in the fourth quarter was due to $3.2 million in cash flow generated from operations before changes in non-cash working capital, $2.3 million from reduced working capital partially offset partially by capital expenditures totalling $3.9 million.



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

As at
December 31, December 31,
2006 2005
-------------------------
Working capital 29,122 22,969

-------------------------
Operating loan 17,105 11,679

Current portion of long-term debt 1,251 1,513

Non-current portion of callable long-term debt - 8,420

Long-term debt 8,513 663

-------------------------
Total interest bearing debt 26,869 22,275

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

Total interest bearing debt to equity .47 .41


The Company has an available operating loan of $32.0 million (December 31, 2005: $38.0 million). As at December 31, 2006, $17.1 million had been drawn (December 31, 2005: $11.7 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.

During the second quarter of 2006, the Company negotiated a new credit facility with the Company's existing lender. The existing term loans were replaced with a non-revolving term loan within a committed borrowing facility. The new non-revolving term loan has a ten-year amortization and has been classified as current and long-term debt. In compliance with CICA Emerging Issues abstract 122, the non-current portion of the term loans under the previous credit facility had a callable feature that reclassified them to current liabilities.

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 twelve month periods ended December 31, 2006 have not been reviewed by the Company's auditors.



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

As at
December 31, December 31,
2006 2005
-------------------------
-------------------------
ASSETS

Current
Accounts receivable (Note 3) 31,462 27,714
Inventory and work-in-progress 37,145 41,088
Prepaid expenses and deposits 516 218
Future income taxes 434 276
-------------------------
69,557 69,296
Property, plant and equipment 37,700 32,981
-------------------------
107,257 102,277
-------------------------
-------------------------

LIABILITIES

Current
Operating loan 17,105 11,679
Accounts payable and accrued liabilities 11,766 10,365
Income taxes payable 2,073 1,509
Deferred revenue 8,240 12,841
Current portion of long-term debt (Note 3) 1,251 1,513
Non-current portion of callable long-term
debt (Note 3) - 8,420
-------------------------
40,435 46,327
Long-term debt (Note 3) 8,513 663
Future income taxes 695 769
-------------------------
49,643 47,759
-------------------------

SHAREHOLDERS' EQUITY
Share capital (Note 4) 37,300 40,001
Contributed surplus - 117
Retained earnings 20,314 14,400
-------------------------
57,614 54,518
-------------------------
107,257 102,277
-------------------------
-------------------------


Steven M. Collicutt Peter A. Lacey
Director Director

Approved by the Board of Directors


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

Three Months Ended Twelve months ended

December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
---------------------------------------------------
Sales 44,271 39,716 168,796 140,990
Cost of goods sold 36,245 32,773 137,837 119,491
---------------------------------------------------
Gross profit 8,026 6,943 30,959 21,499
Other income (Note 5) 50 96 245 1,716
---------------------------------------------------
8,076 7,039 31,204 23,215
---------------------------------------------------
Expenses
General and
administration 4,039 3,699 15,480 12,706
Interest 458 298 1,569 1,321
Amortization 910 801 3,273 3,078
---------------------------------------------------
5,407 4,798 20,322 17,105
---------------------------------------------------

Earnings before income
taxes 2,669 2,241 10,882 6,110
---------------------------------------------------

Income tax expense
(recovery)
Current 531 732 3,738 1,490
Future 155 73 (232) 618
---------------------------------------------------
686 805 3,506 2,108
---------------------------------------------------

Net earnings 1,983 1,436 7,376 4,002
Retained earnings,
beginning of period 18,254 12,964 14,400 10,398
Share repurchase costs 77 - (1,462) -
---------------------------------------------------
Retained earnings, end
of period 20,314 14,400 20,314 14,400
---------------------------------------------------
---------------------------------------------------

Earnings per share
(Note 2)
- basic 0.18 0.13 0.70 0.37
- diluted 0.18 0.13 0.68 0.36

Weighted average number
of common shares
- basic 10,107,538 10,808,572 10,464,969 10,880,163
- diluted 10,350,783 10,949,039 10,618,222 10,990,703

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


CONSOLIDATED STATEMENT OF CASH FLOWS
($000s except share and per share data - Unaudited - Prepared by
Management)

Three Months Ended Twelve months ended

December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
---------------------------------------------------
Cash flows related to
the following
activities

Operating
Net earnings for the
period 1,983 1,436 7,376 4,002
Adjustments for:
Amortization 910 801 3,273 3,078
Gain on sale of
assets 14 (71) 20 (1,607)
Stock based
compensation expense 118 19 218 29
Future income tax
(recovery) expense 155 (6) (232) 618
Provision for
warranty costs 18 (8) 272 42
---------------------------------------------------
3,198 2,171 10,927 6,162
Net change in non-cash
working capital 2,336 1,793 (2,727) (583)
---------------------------------------------------
5,534 3,964 8,200 5,579
---------------------------------------------------

Financing
Repurchase of share
capital 31 (264) (4,303) (439)
(Repayment) advances
of operating loan (1,434) (2,591) 5,426 (7,034)
Advances of long-term
debt - - 9,500
Repayment of long-term
debt (237) (421) (10,332) (1,542)
---------------------------------------------------
(1,640) (3,276) 291 (9,015)
---------------------------------------------------

Investing
Business acquisitions
(Note 8) - - (1,650) -
Purchase of property,
plant and equipment (4,004) (1,050) (6,951) (2,709)
Proceeds on
disposition of
property, plant
and equipment 110 362 110 6,145
---------------------------------------------------
(3,894) (688) (8,491) 3,436
---------------------------------------------------

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 493 299 1,548 1,300
Interest received 11 6 52 38
---------------------------------------------------
---------------------------------------------------

Income taxes paid 482 - 3,173 73
Income taxes refunded - - - 609

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


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

Three Months Ended Twelve months ended

December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------
---------------------------------------------------
Revenue
Service 12,683 12,357 61,646 48,251
Fabrication 31,588 27,359 107,150 92,739
---------------------------------------------------
44,271 39,716 168,796 140,990
---------------------------------------------------

Amortization
Service 427 369 1,651 1,428
Fabrication 400 349 1,327 1,411
Corporate 84 83 295 239
---------------------------------------------------
911 801 3,273 3,078
---------------------------------------------------

Earnings before
interest and
income taxes
Service 972 636 7,294 3,644
Fabrication 3,140 2,714 8,621 4,889
Corporate (985) (811) (3,464) (1,102)
---------------------------------------------------
3,127 2,539 12,451 7,431
---------------------------------------------------

Capital expenditures
and business
acquisitions
Service 1,169 769 5,176 1,440
Fabrication 2,738 233 3,064 678
Corporate 97 48 361 591
---------------------------------------------------
4,004 1,050 8,601 2,709
---------------------------------------------------


As at
December 31, December 31,
2006 2005
---------------------------------------------------
---------------------------------------------------
Assets
Service 42,860 38,447
Fabrication 41,873 40,481
Corporate 22,524 23,349
---------------------------------------------------
107,257 102,277

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


NOTES TO FINANCIAL STATEMENTS

NOTE 1: ACCOUNTING POLICIES

The unaudited interim consolidated financial statements should be read in conjunction with the unaudited consolidated financial statements contained in the Annual Report for the year ended December 31, 2005 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. All financial summaries included are presented on a comparative and consistent basis showing the figures for the corresponding period in the preceding year. 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. 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.



NOTE 2: BASIC AND DILUTED EARNINGS PER SHARE

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

THREE MONTHS ENDED

December 31, 2006 December 31, 2005
-----------------------------------------------------
Net Per Net Per
Earnings Shares share Earnings Shares share

Basic earnings
per share 1,983 10,107,538 0.18 1,436 10,808,572 0.13

Dilutive effect of
stock option
conversions 243,245 140,467

Diluted earnings
per share 1,983 10,350,783 0.18 1,436 10,949,039 0.13

Options and warrants
excluded from diluted
income per common
share as their effect
could be anti-dilutive 617,300 341,500


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

TWELVE MONTHS ENDED

December 31, 2006 December 31, 2005
-----------------------------------------------------
Net Per Net Per
Earnings Shares share Earnings Shares share

Basic earnings
per share 7,376 10,464,969 0.70 4,002 10,880,163 0.37

Dilutive effect of
stock option
conversions 153,253 110,540

Diluted earnings
per share 7,376 10,618,222 0.68 4,002 10,990,703 0.36

Options and warrants
excluded from diluted
income per common
share as their effect
could be anti-dilutive 610,500 341,500


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 $9,064 of its long-term debt at 6.66%, inclusive of bank stamping fees of 1.75%, in the second quarter of 2006. The fair value of the interest rate swap contracts at December 31, 2006 is $221 (December 31, 2005: negative $23). This arrangement matures May 31, 2011.

From time to time, the Company purchases foreign exchange forward contracts as a hedge against certain US dollar denominated sales and purchases and the related accounts receivable and payable. At December 31, 2006 the Company held forward contracts with a book value of $8,700 (2005: $6,420). These derivative financial instruments are accounted for using the fair value method. The foreign exchange translation gains and losses on these instruments are accrued for 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 change in fair value of the foreign exchange contracts in the year ended December 31, 2006 was $404 (2005: $31).

NOTE 4: 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 at (Unaudited - Prepared by Management)

December 31, 2006 December 31, 2005
---------------------------------------------
Amount Amount
Issued Common shares (000)'s Common shares (000)'s
---------------------------------------------
Balance, beginning of year 10,783,415 40,001 10,913,215 40,500
Stock options exercised 11,000 30 12,000 27
Common shares issued 21,429 150 - -
Common shares purchased (683,000) (2,536) (141,800) (526)
Share purchase loans (67,000) (345) - -
---------------------------------------------
Balance, end of period 10,065,844 37,300 10,783,415 40,001


The Company under a normal course issuer bid ("NCIB") had the ability to purchase from time to time, as it considered 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 expired on June 19, 2006. From January 1, 2006 to June 19, 2006 the Company purchased and later cancelled 400,000 common shares at an average price of $6.29, for a total cost of $2,514, including commissions, pursuant to the issuer bid.

The NCIB was renewed effective June 20, 2006 and will expire on June 19, 2007. Under this renewed NCIB, the Company may purchase from time to time, as it considers advisable, up to 520,000 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 December 31, 2006, the Company purchased and later cancelled 268,000 common shares at an average price of $6.54, for a total cost of $1,752, including commissions, pursuant to the issuer bid. Included in common shares purchased is 15,000 common shares at an average price of $5.00 for a total cost of $74, related to share purchase loans cancelled.

Employee share purchase loans receivable of $345 (2005: $0) represent loans that were issued by the Company to assist key employees acquiring shares in the Company. These loans are non-interest bearing and are secured by the share certificates issued. 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 $432 at December 31, 2006.

NOTE 5: ASSETS HELD FOR RESALE

In 2004, $400 for land, as well as the Red Deer Service facility with a value of $3,500, were included in assets held for resale. The Red Deer Service facility was sold in February 2005 for total proceeds of $4,800 resulting in a gain on sale of $1,300, which has also been included in Other Income for the year ended December 31, 2005.

NOTE 6: 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 7: INTEREST IN JOINT VENTURE

The Company proportionately consolidates its 50% (2005: 33.33%) share of assets, liabilities and results of operations of its joint venture in Fort Nelson, British Columbia. The joint venture is a jointly controlled asset that has resulted in a new building. Construction of the building was substantially completed in the second quarter of 2006.



---------------------------------------------------------------------------
Years ended December 31, December 31, 2006 December 31, 2005
---------------------------------------
Balance Sheet
Current assets 91 48
Long-term assets 2,229 739
Current liabilities 105 377
Long-term liabilities and equity 2,215 410

Income Statement
Revenue 114 -
Expenses 79 1
Net income (loss) 35 (1)

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


NOTE 8: ACQUISITIONS

During the second quarter, the Company acquired two businesses totalling $1,800, including $1,650 of cash and common stock valued at $150.

On June 22, 2006, the Company acquired the assets of MLR Mechanical Services Ltd. (MLR) of Red Deer, Alberta. The results of MLR's operations have been included in the consolidated financial statements since that date. MLR repaired and serviced natural gas compression equipment through three branches in Drumheller, Stettler and Red Deer, Alberta.

The aggregate purchase price was $1,300, including $1,150 of cash and common stock valued at $150.

The estimated fair value of the assets acquired at the date of acquisition was $1,300. No liabilities were assumed at the date of acquisition.

On May 15, 2006, the Company acquired the assets of the Rimbey, Alberta gas compression, parts, service and machining branch of FIELDCO of Edmonton, Alberta. The results of the Rimbey branch operations have been included in the consolidated financial statements since that date.

The aggregate purchase price was $500 of cash.

The estimated fair value of the assets acquired at the date of acquisition was $500. No liabilities were assumed at the date of acquisition.



Corporate Information Officers

Board of Directors Steven M. Collicutt
President and Chief Executive Officer
Steven M. Collicutt (2) (3)
President and Chief Executive Andrew S. Cruickshank, CA, CPA
Officer Chief Financial Officer
Collicutt Energy Services Ltd.
D. Scott Collicutt
Edward Kernaghan (2) Vice-President, Sales & Marketing
President
Principia Research Inc. Ted Melissen
Vice-President, Fabrication
Frank Tirpak (1) (2)
President and Chief Executive Solicitors
Officer Duhamel, Manning, Feehan, Warrender,
Lonkar Services Ltd. Glass
Red Deer, Alberta
Gary W. Harris (1) (3)
President and Chief Executive Tingle Merritt LLP
Officer Calgary, Alberta
Westward Parts Services Ltd.
Davis and Company LLP
Peter A. Lacey (1) (3) Calgary, Alberta
President and Chief Executive
Officer Investor Relations Information
Cervus LP
Requests for information should be
(1) Member of Audit Committee directed to:
(2) Member of Compensation
Committee Steven M. Collicutt
(3) Member of Corporate President and Chief Executive Officer
Governance Committee
Andrew S. Cruickshank, CA, CPA
Corporate Secretary Chief Financial Officer

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

Auditors Collicutt Energy Services Ltd.
PricewaterhouseCoopers LLP 7550 Edgar Industrial Drive
Chartered Accountants Red Deer, Alberta T4P 3R2
Edmonton, Alberta
Telephone: (403) 358-3200
Banker Facsimile (403) 358-3210

HSBC Bank Canada Website: www.collicutt.com
Calgary, Alberta

Registrar and Transfer Agent
Computershare Trust Company of
Canada
Calgary, Alberta and Toronto,
Ontario


Contact Information

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