Cordy Oilfield Services Inc.
TSX VENTURE : CKK

Cordy Oilfield Services Inc.

March 28, 2007 19:49 ET

Cordy Announces 2006 Year End Results

CALGARY, ALBERTA--(CCNMatthews - March 28, 2007) - Cordy Oilfield Services Inc. ("Cordy" and or the "Company") (TSX VENTURE:CKK) announces its consolidated operating and financial results for the year ending December 31, 2006. Consolidated revenues for the year ended December 31, 2006 were $87.0 million, up $86.8 million from $0.2 million in 2005. Net income was $2.4 million, up $3.1 million from a $0.7 million loss in 2005. Basic and diluted earnings per share was $0.03 per share compared with a $0.03 loss per share in 2005.



2006 FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
Three months ended Year ended
Selected Annual Information December 31, 2006 December 31, 2006
----------------------------------------------------------------------------
($ millions, except per share
amounts) 2006 2005 Change 2006 2005 Change
----------------------------------------------------------------------------
Revenue 29.4 0.0 29.4 87.0 0.2 86.8
Operating income (loss) (1.3) (0.3) (1.0) 2.8 (0.9) 3.7
Net income (loss) (1.5) (0.1) (1.4) 2.4 (0.7) 3.1
EBITDA (1) 3.3 (0.3) 3.6 14.2 (0.8) 15.0

Earnings per share
Basic and diluted (0.02) (0.01) (0.01) 0.03 (0.03) 0.06
----------------------------------------------------------------------------
Cash and Cash Equivalents 37.3 19.1 18.2
----------------------------------------------------------------------------
Total Assets 161.4 20.3 141.1
----------------------------------------------------------------------------
Total Long-term liabilities 22.6 14.7 7.9
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(1) Refer to the "Non GAAP Measures" section for further details


David Mullen, Chief Executive Officer and Chairman of the Board of Cordy Oilfield Services Inc., stated that Cordy has established a significant operational base in 2006 which provides momentum for future growth. "Cordy plans to utilize its diversified set of business segments to mitigate the risks associated with being overly reliant on oil and gas based activities. Cordy is positioned well due to a strong cash position. Management plans to continue its strategy of growth through acquisition and organic growth within its existing subsidiaries."

CORPORATE PROFILE

Cordy presently consists of ten wholly owned operating subsidiaries, Calgary Septic Company Ltd. ("CSC"), Mesken Contracting Limited. ('Mesken"), NWP Construction Ltd. ("NWP"), Coverall Pipeline Construction Ltd. ("Coverall"), Nohels Group Inc. ("Nohels"), Top-Notch Oilfield Services Inc. ("Top-Notch"), Sphere Drilling Fluids Ltd. ("Sphere"), 522532 Alberta Ltd. ("Hartwell"), Battle River Oilfield Construction Ltd. ("Battle River") and Lamont Drilling Bit Services Ltd. ("Lamont"), each operating as a separate business accountable for its own profitability and performance. The operating businesses provide specialized services that include; small diameter pipeline and facilities construction, oilfield site preparation and reclamation, highway and subdivision construction, environmental services and drilling solutions. The Company provides management and financial expertise, capital resources and strategic planning to enable its subsidiaries to expand and increase profits.

The Company operates in four reportable segments:

Heavy Construction

The Heavy Construction segment of Cordy's business is conducted through Nohels, Battle River and Mesken. This segment accounts for approximately 43% of the total revenue generated by the Corporation.

Services provided by the Heavy Construction segment include: building and repairing infrastructure including sewer and water reservoirs, highways and municipal roads; construction, maintenance and reclamation of oilfield leases and lease roads; mine dredging operations; crane operation; heavy haulage; mobile gravel crushing and washing services; gravel supply and delivery; production and supply of concrete; right of way clearing; bridge and culvert installation; and camp services.

The majority of the services are provided in Alberta and Southeastern British Columbia to residential and resort developments, mining operations, municipalities and oil and gas production companies operating in those areas.

Pipeline and Facilities Construction

The Pipeline and Facilities Construction segment of Cordy's business is conducted through Top Notch, Coverall and NWP. This segment accounts for approximately 29% of the total revenue generated by the Corporation.

Services provided by this segment include: low pressure gas tie-ins; insulated pipeline installation; cement lined pipeline installation; fibreglass pipeline installation; water injection lines; construction and installation of compressors, line heaters, separator buildings and header systems; pipeline maintenance and repairs; tying-in wellheads; decommissioning old well sites; and transport of facility components to production sites. In providing its pipeline construction and oilfield maintenance services, the focus is on small to medium diameter pipeline construction, primarily on steel gathering system pipe under 12" in diameter.

The majority of the services are provided in Northwestern and Central Alberta to large and midsized oil and gas production companies operating in these areas and to heavy oil facilities development in the Fort McMurray area.

Manufacturing and Supply

The Manufacturing and Supply segment is conducted through Sphere and Lamont and is generally involved in providing overall drilling solutions to the mining, construction, geotechnical, seismic, water well and oil and gas industries. The Manufacturing and Supply segment accounts for approximately 18% of the total revenue generated by the Corporation.

Services and products provided by the Manufacturing and Supply segment include: manufacturing and supplying of stock and customized drill bits, down hole hammer bits, tri-cones, construction drilling products, mining drilling products and seismic drilling products; manufacturing and supplying of stock and customized mining tools. The segment provides customized drilling solutions through in house design and manufacturing capabilities whereby overall assistance is provided with respect to job design, product design, start-up, training and job completion. The segment also sells, rents, leases and services bottom hole assemblies and their components and rents large diameter hammers and accessories for wide diameter casing systems such as pilings and elevator shafts.

The Manufacturing and Supply segment provides its products and services to seismic, construction, environmental, manufacturing, mining and oil and gas production industries. The products and services are mainly provided in Western Canada, however this segment also has international customers.

Environmental Services

The Environmental Services segment is generally involved in providing environmental clean up, hazardous goods transport and containment services primarily to the oil and gas industry in Alberta but also to industrial, residential and commercial customers. The Environmental Services segment accounts for approximately 10% of the total revenue generated by the Corporation.

Services provided by the Environmental Services segment include: general water truck and vacuum truck services to the oilfield and industrial industries, confined space entries; dangerous goods transportation and general transportation services; high pressure and steam cleaning services; septic and holding tank cleaning; hydro-excavation; spill response for liquids and solids; and 24 hour emergency response coverage.

The services are mainly provided in Central and Southern Alberta. The Environmental Services segment is conducted through CSC and Hartwell and is generally involved in providing environmental clean up, hazardous goods transport and containment services primarily to the oil and gas industry in Alberta but also to industrial, residential and commercial customers.

SEASONALITY OF OPERATIONS

A significant portion of the Company's operations relate to the oilfield services and construction segment in Western Canada. The Company's earnings follow seasonal activity patterns of Western Canada's oil and gas exploration industry for which activity peaks in the winter months and declines during the spring thaw, and the construction industry for which activity peaks during the warmer months in southern Alberta and southeastern British Columbia. Due to the spring thaw, frost comes out of the ground, which makes roads incapable of supporting heavy equipment resulting in making drilling for oil and gas more difficult. As a result, demand for oilfield services generally is the highest in the first quarter and the lowest in the second quarter. This seasonality is balanced by heavy construction's busiest quarters typically being the second and third quarters.

SIGNFICANT DEVELOPMENTS

Business acquisitions

The Company completed ten acquisitions during the year ended December 31, 2006: Calgary Septic Company Ltd., Mesken Contracting Limited, NWP Construction Ltd. and Coverall Pipeline Construction Ltd. on January 31, 2006, Nohels Group Inc. and Top-Notch Oilfield Services Inc. on April 1, 2006, Sphere Drilling Fluids Ltd. on May 31, 2006, 522532 Alberta Ltd., Battle River Oilfield Construction Ltd. and Lamont Drilling Bit Services Ltd. on August 1, 2006.

The acquisitions have been accounted for using the purchase method whereby the purchase price is allocated to the net assets acquired based on their fair values.

Quarter ended March 31, 2006

The following companies were acquired during the quarter ended March 31, 2006. The shares issued were recorded at a price of $0.45, the price of the Company's most recent share issuance. Included in cash consideration and goodwill of each acquisition are acquisition costs of $100,000.

Calgary Septic Company. Ltd.

The Company acquired all of the issued and outstanding shares of CSC for $4,000,000 in cash and 5,400,000 common shares.

Mesken Contracting Ltd.

The Company acquired all of the issued and outstanding shares of Mesken for $4,500,000 in cash and 3,000,000 common shares.

NWP Construction Ltd.

The Company acquired, directly or indirectly, all of the issued and outstanding shares of NWP for $4,500,000 in cash and 2,000,000 common shares.

Coverall Pipeline Construction Ltd.

The Company acquired all of the issued and outstanding shares of Coverall for $2,200,000 in cash and 400,000 common shares.

Quarter ended June 30, 2006

The following companies were acquired during the quarter ended June 30, 2006:

Nohels Group Inc.

On April 1, 2006, the Company acquired indirectly, all the issued and outstanding shares of Nohels for total consideration of $6,751,146 payable $4,160,000 cash and 5,600,000 common shares at a deemed price of $.45 per common share and costs of $71,146.

Top-Notch Oilfield Services Inc.

On April 1, 2006, the Company acquired directly and indirectly all the issued and outstanding shares of Top-Notch for total consideration of $8,633,978 payable $4,150,000 in cash and 1,383,333 common shares at a deemed price of $3.19 per common share and expenses of $71,146.

Sphere Drilling Fluids Ltd.

On May 31, 2006, the Company acquired directly and indirectly all the issued and outstanding shares of Sphere for total consideration of $8,450,095 payable $3,858,016. in cash and 1,046,512 common shares at a deemed price of $4.32 per share and expenses of $71,147.

Quarter ended September 30, 2006

The following companies were acquired effective August 1, 2006:

522532 Alberta Ltd.

The Company acquired all the issued and outstanding common shares of Hartwell for total consideration of $7,025,401 payable $4,218,650 in cash, 982,119 common shares at a deemed value of $2.83 per share and acquisition costs of $27,354.

In addition, the Company is required to issue an additional 216,980 common shares effective February 1, 2007 as the market price of the Company's common shares did not achieve a predetermined target.

Battle River Oilfield Construction Ltd.

The Company acquired all the issued and outstanding common shares of Battle River for total consideration of $18,677,368 payable $11,028,029 in cash, by 2,690,478 common shares at a deemed value of $2.83 per share and acquisition costs of $35,286.

In addition, the Company is required to issue an additional 594,408 common shares effective February 1, 2007 as the market price of the Company's common shares did not achieve a predetermined target.

Lamont Drilling Bit Services Ltd.

The Company acquired all the issued and outstanding common shares of Lamont for total consideration of $3,268,352 payable $2,000,000 in cash, 442,922 common shares at a deemed value of $2.83 per share and acquisition costs of $14,883.

Financings

During the year ended December 31, 2006 the Company completed the following significant financings:

On March 23, 2006, the Company completed a $4 million private placement of 10% unsecured debentures ("Debentures"). Each $1 million of principal amount of debentures was accompanied with 100,000 warrants ("Warrants"), resulting in 400,000 warrants being issued under the private placement. Each warrant entitles the holder to acquire one common share of the Company at the exercise price of $3.52 per share for a period of 18 months after closing of the private placement.

On April 19, 2006 the Company issued, on a bought deal basis, by way of private placement, 13,372,200 common shares at a price of $4.30 per common shares for net proceeds of $54,625,427. The net proceeds from this offering were used to partially finance the acquisition of Sphere, Battle River, Lamont and Hartwell and for general corporate purposes including funding future acquisitions and the possible retirement of a portion of previously incurred debt.

Throughout the year a total of 6,409,940 warrants were exercised for proceeds of $5,821,848.



CONSOLIDATED FINANCIAL RESULTS
----------------------------------------------------------------------------

2006 FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
Three months ended Year ended
Selected Annual Information December 31, 2006 December 31, 2006
----------------------------------------------------------------------------
($ millions, except per share
amounts) 2006 2005 Change 2006 2005 Change
----------------------------------------------------------------------------
Revenue 29.4 0.0 29.4 87.0 0.2 86.8
Operating income (loss) (1.3) (0.3) (1.0) 2.8 (0.9) 3.7
Net income (loss) (1.5) (0.1) (1.4) 2.4 (0.7) 3.1
EBITDA (1) 3.3 (0.3) 3.6 14.2 (0.8) 15.0

Earnings per share
Basic and diluted (0.02) (0.01) (0.01) 0.03 (0.03) 0.06
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Total Assets 161.4 20.3 141.1
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Total Long-term liabilities 22.6 14.7 7.9
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(1) Refer to the "Non GAAP Measures" section for further details


YEAR ENDED DECEMBER 31, 2006

REVENUE

Consolidated revenues for the year ended December 31, 2006 were $87.0 million, up $86.8 million from $0.2 million in 2005. The results of operations are included in the consolidated financial statements from the date of each acquisition. The relevance of the year to year comparisons are minimal given that the company operated as a technology company and had minimal operations during the year ended December 31, 2005. The increase is directly attributed to revenue generated from the ten acquisitions and due to the minimal operations in the prior year.



SEGMENT REVENUE
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($ millions) 2006 2005 $ Change
----------------------------------------------------------------------------
Heavy Construction 37.0 - 37.0
Pipeline & Facilities 25.4 - 25.4
Manufacturing & Supply 16.1 - 16.1
Environmental Services 8.5 - 8.5
Other - 0.2 (0.2)
----------------------------------------------------------------------------
Total 87.0 0.2 86.8
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The Company operates in four reportable operating segments:

Heavy Construction generated $37.0 million of revenue which represented 43% of total revenue. Results included eleven months of operations for Mesken, nine months of operations for Nohels and five months of operations for Battle River.

Pipeline and Facilities Construction generated $25.4 million of revenue which represented 29% of total revenue. Results included eleven months of operations for NWP and Coverall and nine months of operations for Top-Notch.

Manufacturing and Supply generated $16.1 million of revenue which represented 18% of total revenue. Results included seven months of operations for Sphere and five months for Lamont.

Environmental Services segment generated $8.5 million of revenue which represented 10% of total revenue. Results included eleven months of operations for CSC and five months for Hartwell.

DIRECT OPERATING EXPENSES

Direct operating expenses were $63.2 million, up $63.1 million from $0.1 million in 2005. The increase is directly attributed to revenue generated from the ten acquisitions and due to the minimal operations in the prior year.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $8.8 million, up $8.0 million from $0.8 million in 2005. The increase is directly attributed to additional administrative costs from the ten acquisitions and due to the minimal operations in the prior year.

EBITDA

Consolidated EBITDA for the year ended December 31, 2006 was $14.2 million, up $15.0 million from a $0.8 million loss in 2005. The increase is directly attributed to revenue generated from the ten acquisitions and due to the minimal operations in the prior year. EBITDA represented 16% of revenue.

OPERATING INCOME

Operating income was $2.8 million, up $3.7 million from a $0.9 million loss in 2005, primarily as a result of the increase in revenue from the acquisitions and the overall change in business operations.

AMORTIZATION OF PROPERTY AND EQUIPMENT

Amortization of property and equipment was $5.4 million, up $5.4 million from Nil in 2005. The increase is primarily the result of the assets acquired in the ten acquisitions and additional capital acquisitions to support ongoing operations.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles was $1.4 million, up $1.4 million from Nil in 2005. The increase is attributed to the purchase of $23.7 million of intangible assets acquired in the ten acquisitions completed in the current year.

STOCK BASED COMPENSATION

Stock based compensation was $2.2 million, up $2.1 million from $0.1 million in 2005. The increase is primarily attributed to the 5.5 million options issued to employees in conjunction with the ten acquisitions completed in the current year.

OTHER INCOME

Other income was $1.3 million, up $1.3 million from Nil in 2005. Other income is comprised primarily of interest. The increase is primarily the result of the increased interest on excess cash on hand.

INCOME TAXES

Income tax expense is comprised of current and future income taxes:

Current income taxes were $2.5 million, up $2.6 million from a $0.1 million recovery in 2005. The increase is attributed to taxes payable on the operations of the business during the year.

Future income taxes in the amount of $0.7 million were recovered, up $0.6 million from a $0.1 recovery in 2005. The recovery in 2006 was primarily due to Canadian Federal and Provincial income tax rate reductions which reduced future income tax liabilities.

NET INCOME

Net income was $2.4 million, up $3.1 million from a $0.7 million loss in 2005 primarily as a result of the increase in net income from the operations of the ten acquisitions. Net income was also negatively affected by 2.2 million of stock based compensation expense and 1.4 million from the amortization of intangibles. Net income before those expenses was $6.0 million.



SUMMARY OF QUARTERLY RESULTS
----------------------------------------------------------------------------
($ millions, except per
share amounts) Q4 - 2006 Q3 - 2006 Q2 - 2006 Q1 2006 Total
----------------------------------------------------------------------------
Revenue 29.4 31.2 17.3 9.1 87.0
Net Income (loss) (1.5) 2.3 1.0 .6 2.4
Earnings (loss) per Share
- Basic (.02) .03 .01 .01 .03
Earnings (loss) per Share
- diluted (.02) .03 .01 .01 .03
----------------------------------------------------------------------------
($ millions, except per
share amounts) Q4 - 2005 Q3 - 2005 Q2 - 2005 Q1 2005 Total
----------------------------------------------------------------------------
Revenue - - - .2 .2
Net Income (loss) (0.2) (0.1) (0.3) (0.1) (0.7)
Earnings (loss) per Share
- Basic (.01) (.00) (.01) (.01) (.03)
Earnings (loss) per Share
- diluted (.01) (.00) (.01) (.01) (.03)
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THREE MONTHS ENDED DECEMBER 31, 2006

REVENUE

Revenues for the three months ended December 31, 2006 were $29.4 million, up $29.4 million from $0.0 million in 2005. The increase is directly attributed to revenue generated from the ten acquisitions and due to the minimal operations in the prior year



SEGMENT REVENUE
----------------------------------------------------------------------------
($ millions) 2006 2005 $ Change
----------------------------------------------------------------------------
Heavy Construction 11.6 - 11.6
Pipeline & Facilities 7.9 - 7.9
Manufacturing & Supply 7.0 - 7.0
Environmental Services 2.9 - 2.9
----------------------------------------------------------------------------
Total 29.4 - 29.4
----------------------------------------------------------------------------


The Company operates in four reportable business segments:

Heavy Construction generated $11.6 million of revenue which represented 39% of total revenue. These revenues were generated from ongoing operations of the Heavy Construction entities, Mesken, Nohels and Battle River.

Pipeline and Facilities Construction generated $7.9 million of revenue which represented 27% of total revenue.

These revenues were generated from ongoing operations of the Pipeline and Facilities Construction entities, NWP, Coverall and Top-Notch.

Manufacturing and Supply generated $7.0 million of revenue which represented 24% of total revenue. These revenues were generated from ongoing operations of the Manufacturing and Supply entities, Sphere and Lamont.

Environmental Services generated $2.9 million of revenue which represented 10% of total revenue. These revenues were generated from ongoing operations of the Environmental Services entities, CSC and Hartwell.

DIRECT OPERATING EXPENSES

Direct operating expenses were $21.9 million, up $22 million from a $0.1 million recovery in 2005. The increase is directly attributed to revenue generated from the increase in operations in the current year as a result of the ten acquisitions completed during the year.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $3.3 million, up $2.9 million from $0.4 million in 2005. The increase is directly attributed to increased administration required to operate the ten businesses.

EBITDA

EBITDA was $3.3 million, up $3.6 million from a $0.3 million loss in 2005. The increase is directly attributed to revenue generated from the ten acquisitions and due to the minimal operations in the prior year. EBITDA represented 11% of revenue.

OPERATING INCOME (LOSS)

Operating loss was $1.3 million, up $0.9 million from a $0.4 million loss in 2005. The increased loss was primarily the result of poor weather conditions across the region which included two weeks of extremely wet weather and one severe cold week where equipment and personnel could not operate. Additionally major projects scheduled to begin in the fourth quarter did not start up until 2007.

AMORTIZATION OF PROPERTY AND EQUIPMENT

Amortization of property and equipment was $2.0 million, up $2.0 million from Nil in 2005. The increase is primarily the result of the assets acquired in the ten acquisitions and additional capital acquisitions to support ongoing operations.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles was $1.0 million, up $1.0 million from Nil in 2005. The increase is attributed to the purchase of $23.7 million of intangible assets acquired in the ten acquisitions completed in the current year.

STOCK BASED COMPENSATION

Stock based compensation was $1.5 million, up $1.5 million from Nil in 2005. The increase is primarily attributed to the 5.5 million options issued to employees in conjunction with the ten acquisitions completed in the current year.

OTHER INCOME

Other income was $0.5 million, up $0.5 million from Nil in 2005. Other income is comprised primarily of interest. The increase is primarily the result of the increased interest on excess cash on hand.

INCOME TAXES

Income tax expense is comprised of current and future income taxes:

Current income taxes were $0.8 million, up $0.9 million from a $0.1 million recovery in 2005. The increase is attributed to taxes payable on the operations of the business during the year.

Future income taxes in the amount of $0.1 million were recovered. This was the same as in 2005.

NET INCOME (LOSS)

Net loss was $1.5 million, up $1.4 million from a $0.1 million loss in 2005. The increased loss was primarily the result of: poor weather conditions across the region which included two weeks of extremely wet weather and one severe cold week where equipment and personnel could not operate; major projects scheduled to begin in the fourth quarter did not start up until 2007; stock based compensation expense of $1.5 million and $1.0 million of amortization of intangibles. Net income before these expenses was $1.0 million.

CAPITAL RESOURCES AND LIQUIDITY

The consolidated cash resources of the Company at December 31, 2006 were $37.3 million compared to consolidated cash of $19.1 million at December 31, 2005, an increase of $18.2 million. This increase resulted primarily from the proceeds of a $57.5 million private placement completed in April 2006 resulting in net proceeds of $54.6 million. A portion of the funds from the placement were used to fund acquisitions during the year. The remainder is held in short term interest bearing investments.

OPERATING ACTIVITIES

The Company generated $46,000 of cash from operating activities for the year ended December 31, 2006, however working capital items such as Accounts receivable increased $24.3 million with Accounts payable increasing by only $12.4 million. It is expected that this working capital will result in significant cash flow by April 2007.

FINANCING ACTIVITIES

Net cash provided by financing activities for the year ended December 31, 2006 was $68.5 million. The activities were primarily the result of $60.3 million from the net proceeds of $54.6 million from the private placement completed in April 2006 and $5.7 million from the exercise of warrants. Net proceeds from long term debt provided $7.9 million of net cash.

INVESTING ACTIVITIES

Net cash used in investing activities for the year ended December 31, 2006 was $50.4 million. The activities were primarily the result of $9.3 million paid for the purchase of property and equipment and $40.4 million of net cash paid for acquisitions.

The Company had $34.7 million of consolidated long-term debt and capital leases (including current portion) at December 31, 2006. This is comprised primarily of $19 million of debentures of which $12.8 million mature in 2007 and $6.2 million mature in 2008 and equipment loans with maturity dates extending to July 2011 of which $5.1 million is due in 2007. The consolidated net working capital at December 31, 2006 was $31.0 million.

At December 31, 2006, the Company had operating lines of credit totaling $9.9 million, of which $1.5 million was drawn and term loans payable on demand of $4.4 million. Interest is based on the bank prime rate plus a fee ranging from 0% to 1.00 % per annum, secured by a general security agreement covering all unencumbered assets and require maintenance of certain financial ratios and other covenants.



SHARE CAPITAL
Issued: December 31, 2006
Common shares Number Amount
----------------------------------------------------------------------------
Balance, beginning of year 38,585,519 $ 8,850,375
Issued for cash 13,372,200 57,500,460
Preferred Series II Conversion - -
Broker Warrants Exercised 112,440 50,598
Subscriber Warrants Exercised 6,297,500 5,771,250
Transfer from warrants on exercise - 245,308
Options exercised 121,600 127,427
Transfer from contributed surplus on exercise of
options - 102,048
Issued on business acquisitions 22,945,364 27,960,683
Share issue costs - (3,129,891)
Future income tax impact of share issue costs - 964,462
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, end of year 81,434,623 $ 98,442,720
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at December 31, 2006 the Company has placed orders for construction equipment of approximately $1.4 million. These orders are in the normal course of business and it is anticipated that all of the equipment will be leased or financed on a basis that will not require significant capital resources.

The Company anticipates that its current cash resources will be sufficient to meet all anticipated obligations throughout the balance of 2007.

OFF BALANCE SHEET ARRANGEMENTS

As at December 31, 2006 the company had no off balance sheet arrangements.

RELATED PARTY TRANSACTIONS

In conjunction with the purchase of Mesken, the previous owner of Mesken, a continuing officer of Mesken, is owed $1,100,000 which bears interest at 6.5% per annum and is repayable on or before January 31, 2008. Interest of $65,542 has been accrued to December 31, 2006.

The $4 million, 10% debentures maturing March 22, 2008, were issued during the year to directors of the Company or companies controlled by directors of the Company and interest of $311,233 was paid to these debenture holders.

The Company paid $509,190 in management fees, $356,430 in land and building and equipment rentals to officers of a subsidiary or their related companies. The Company also paid $57,627 for lodging to a company controlled by an officer and director. These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

NON-GAAP MEASURES

EBITDA

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is not a recognized measure under Canadian GAAP. Management believes, in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated form the Company's principal business activities prior to consideration of how these activities are financed or how the results are taxed. Readers should be cautioned however that EBITDA should not be construed as an alternative to net income in accordance with Canadian GAAP as an indicator of the Company's performance. The Company's method of calculating EBITDA may differ from other companies and, accordingly, EBITDA may not be comparable to measures used by other companies.



The following is a reconciliation of EBITDA to Net Income:

Three months ended Year ended
December 31, 2006 December 31, 2006
----------------------------------------------------------------------------
($ millions) 2006 2005 2006 2005
----------------------------------------------------------------------------
EBITDA 3.3 (0.3) 14.2 (0.8)
Less:
Amortization 3.0 - 7.0 -
Interest 1.0 - 3.1 0.1
----------------------------------------------------------------------------
(0.7) (0.3) 4.1 (0.9)

Provision for income taxes (recovery)
Current 0.9 (0.1) 2.4 (0.1)
Future (0.1) (0.1) (0.7) (0.1)
----------------------------------------------------------------------------
Net Income (loss) (1.5) (0.1) 2.4 (0.7)
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DISCLOSURE AND INTERNAL CONTROLS

DISCLOSURE CONTROLS

As of December 31, 2006, the Chief Executive Officers ("CEO") and the Chief Financial Officer ("CFO") together with the Company's management have evaluated the design and effectiveness of the Company's disclosure controls and procedures. They concluded that the Company's disclosure controls and procedures were adequate and effective in ensuring that material information relating to the Company and its consolidated subsidiaries were accurately and properly disclosed.

Because of their inherent limitations, disclosure controls and procedures and internal controls over financial reporting may not prevent or detect misstatements, errors or fraud. Control systems, no matter how well conceived or operated, can provide only reasonable, not absolute assurance that the objectives of the control systems are met.

INTERNAL CONTROL OVER FINANCIAL REPORTING

The CEO and CFO are responsible for designing internal control procedures over financial reporting, causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. The Company has designed internal controls over financial reporting and have conducted an evaluation of those controls.

The Company, due to its corporate structure, decentralized operations and strategy of growth through acquisition, does have weaknesses in its internal control over financial reporting. These weaknesses include the following.

- In certain business units there is a weakness in regards to segregation of duties. This weakness is addressed by management and senior executive overview. In addition, the Company will, where practicable, make the necessary changes to improve the segregation of duties.

- The complex structure of the Company and its decentralized operations raises a risk of misstatements due to the handling of complex and non-routine accounting and tax related transactions. Management and board reviews are utilized to mitigate these risks but there is no guarantee that a material misstatement would be prevented. The Company will attempt to remediate this weakness by developing in-house expertise, recruiting the necessary personnel with the expertise or by utilizing outside consultants with the appropriate expertise when the need arises.

- The Company's inability to design or effect a change to a design of an internal control over financial reporting for a company it acquires until after the acquisition has been completed. This is an inherent weakness that exists due to the Company's strategy of growth through acquisition. Management is aware of this issue and will ensure that, to the extent appropriate and possible, a review of the design of the internal control over financing reporting for companies it intends to acquire occurs during its due diligence process or within a reasonable period of time after acquisition.

We have not made any changes in the Company's systems of internal control over financial reporting that would materially affect, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

RISK AND UNCERTAINTIES

GENERAL

Certain activities of the Company are affected by factors that are beyond its control of influence. The oilfield services and construction businesses are directly affected by changes in the general economy, including fluctuations in the level of exploration, development and production activity carried on by its customers, which is affected by numerous factors such as world energy prices and government policies.

The oilfield services industry is extremely sensitive to the levels of capital expenditures made by oil and gas exploration and production companies. These companies base their capital expenditures on several factors, including but not limited to hydrocarbon prices, production levels and access to capital. Oil and gas exploration and production companies examine long term fundamentals before determining their capital budgets. In recent years, commodity prices, and the corresponding level of production and exploration activity have been volatile. Any prolonged, substantial reduction in commodity prices will likely affect the activity levels of the exploration and production companies and reduce the demand for the Company's services. These conditions could have a material adverse effect on the Company's results of operations and financial condition. The Company's operations are significantly affected by the price of fuel, labor, equipment and other costs. Significant increases in these and other related costs could adversely affect profitability. The Company cannot predict the impact of future economic conditions and there is no assurance that the Company's operations will continue to be profitable.

CREDIT RISK

A substantial portion of the Company's accounts receivable are with customers in the energy industry, whose revenues may be impacted by fluctuations in commodity prices. Although collection of these receivables could be influenced by economic factors, management considers the risk of significant loss is mitigated by the number, reputation and diversified nature of the companies with which the Company does business.

ENVIRONMENTAL LIABILITY RISK

Certain subsidiaries of the Company routinely deal with potentially hazardous materials. The Company has programs to address compliance with current environmental standards and has policies and procedures to deal with the handling of potentially hazardous materials. There can be no assurance that the Company's procedures will prevent environmental damage occurring from spills of materials handled by the Company or that such damage has not already occurred. Canadian laws generally impose potential liability to the present or former owner or occupants of properties on which contamination has occurred. Although the Company is not aware of any contamination which, if remediation or clean up were required would have a material adverse effect on the Company, there can be no assurance that the Company will not be required, at some future date, to incur significant costs to comply with environmental laws, or that its operations, business, assets or cash flow will not be materially adversely affected by current or future environmental laws.

OTHER RISKS

The Company is also subject to each of, and the cumulative effect of all of, the following factors:

- Identification of suitable targets for future growth and expansion;

- Successful completion of acquisition targets;

- Management of future growth and expansion;

- Ability to attract new investors and to raise additional debt or equity financing for acquisitions;

- Dependence on key personnel, investors and customers

Management will continue to use their best efforts to address all of these uncertainties in the evaluation of acquisition opportunities.

OUTLOOK

In spite of the negativity that surrounds the oil and gas markets going into 2007 Cordy remains positive about its own operations. Cordy has diversified its operations both geographically and by vertical operating segments. Cordy intends to continue its pursuit of new business opportunities in both the infrastructure and mining sectors to mitigate the risk associated with being overly reliant on the oil and gas based activities. Cordy will utilize its diversified set of business units to maximize earnings.

In each of Cordy's operational locations, Cordy is a long standing service provider with locations in Alberta and Eastern British Columbia. Cordy is able to provide goods and services to the oil and gas, infrastructure and mining sectors.

Cordy intends to continue its strategy of growth through acquisition and organic growth within its existing subsidiaries. Cordy management believes that Cordy is positioned well to expand due to a strong cash position and the capital being generated by its subsidiaries. Management believes there will be growing opportunities within the context of softening valuations of potential target companies and a likely decreased purchaser base due to recently announced income trust tax changes.

Cordy management will continue to construct efficiencies in relation to its ten business units while proceeding with expansions and new acquisitions. The future of the Alberta oil and gas industry is strong regardless of the softening of market conditions from time to time. Cordy management remains confident in the growth of their businesses in Alberta. Cordy also continues to spread its focus to the infrastructure build out which continues to take place in Alberta and Southeastern British Columbia. With a large portion of Cordy's business derived from this build-out, Cordy remains optimistic about the outlook for 2007.

Additional information on Cordy is available on our website www.cordy.ca or on SEDAR at www.sedar.com.

The TSX Venture Exchange does not accept responsibility for the accuracy or adequacy of this release.

Contact Information

  • Cordy Oilfield Services Inc.
    David Mullen
    Chairman and CEO
    (403) 266-2067
    (403) 266-2087 (FAX)
    Email: dmullen@cordy.ca
    or
    Cordy Oilfield Services Inc.
    David Orr
    Vice President - Corporate Development
    (403)266-2067
    (403) 266-2087 (FAX)
    Email: dorr@cordy.ca
    Website: www.cordy.ca