Crossfire Holdings Inc.
TSX VENTURE : CFE

Crossfire Holdings Inc.

April 25, 2007 18:40 ET

Crossfire Energy Services Announced 2006 Operating Results

CALGARY, ALBERTA--(CCNMatthews - April 25, 2007) - Crossfire Holdings Inc. ("Crossfire Energy Services" or the "Company") (TSX VENTURE:CFE) is pleased to announce its consolidated operating and financial results for the year ending December 31, 2006.

Crossfire Energy Services recorded revenues $21.9M for the year ended December 31, 2006, compared with revenue of $0.015M for 2005. The Company generated net earnings of $2.0M, or $0.16 per share for the year ended December 31, 2006 compared with a net loss of $0.6M, or a loss of $0.32 per share for 2005.

"In our inaugural year of operations under the Crossfire banner, we identified, negotiated, financed and integrated four acquisitions that delivered $2.6 million of EBITDA from $21.9 million of revenue," noted Dean Bethune, Crossfire's President and CEO. "While these financial results only reflect six actual months of operations following our initial acquisitions in June of 2006, they represent a very solid foundation on which Crossfire plans to build its growth strategy."



2006 FINANCIAL HIGHLIGHTS
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Year ended
Selected Annual Information December 31
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($ thousands, except per share amounts) 2006 2005
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Revenue
Construction Services 6,897 -
Fabrication 14,987 -
Other 23 15
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21,907 15
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EBITDA(1) 2,613 (588)
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EBITDA(1) per share
Basic $ 0.21 $ (0.32)
Diluted $ 0.13 $ (0.32)

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Net income 2,049 (602)
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Net income per share
Basic $ 0.16 $ (0.32)
Diluted $ 0.12 $ (0.32)

Weighted average shares outstanding (thousands) 12,627 1,861
Fully diluted shares outstanding (thousands) 16,724 1,861

(1) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and stock-based compensation.


Revenue exceeded financial guidance of $19.5M for the year however realized EBITDA(1) of $2.6M during the year did not meet management expectations of $3.1M provided in its financial guidance.

"Construction services realized revenues of $6.9M in 2006 which were below management expectations," noted Dean Bethune, "Project delays in customer spending programs reduced demand for construction services in the fourth quarter of 2006. Construction projects originally scheduled for October and November of 2006 were cancelled and/or pushed out until the first quarter of 2007."

During the fourth quarter of 2006 the Company realized gross margin of $1.9M on revenues of $9.5M compared with gross margin of $3.1M on revenue of $12.4M in the third quarter of 2006. The decline in fourth quarter gross margin, as a percentage of revenues, is a result of slower activity levels in the fourth quarter of 2006.

"In typical periods of slower activity, the Company would reduce its labour force in response to activity slowdowns," says President and CEO Dean Bethune, "Management retained most of its key operational staff during the fourth quarter in anticipation of higher activity levels in the first quarter of 2007."



FOURTH QUARTER ANALYSIS
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Three months ended
Fourth Quarter Operational Analysis September 30 December 31
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($ thousands, except per share amounts) 2006 2006
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(restated)
Revenue
Construction Services 3,515 3,382
Fabrication 8,865 6,121
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12,380 9,503
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Gross Margin 3,104 1,891
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25.1% 19.9%
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EBITDA(1) 2,148 496
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EBITDA(1) per share
Basic $ 0.12 $ 0.02
Diluted $ 0.09 $ 0.03

Weighted average shares outstanding (thousands) 18,521
Fully diluted shares outstanding (thousands) 25,041

(1) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and stock-based compensation.
EBITDA is not a recognized measure under Canadian GAAP. See "Non-GAAP
Measures".


Management has restated its financial results for the third quarter of 2006. The Company generated EBITDA(1) of $2.1M on revenues of $12.3M, compared with reported EBITDA(1) of $1.8M on revenues of $7.7M. The Company has posted restated third quarter financial statements on Sedar (www.sedar.com).

"Restatement of third quarter financial results of 2006 was due to an isolated problem in the financial reporting system of what was formerly known as Dynacorp, which resulted in the understatement of revenues and cost of goods sold," says Scott Hamilton, CFO of Crossfire Energy Services. "This problem was inherited with the acquisition, is isolated to Dynacorp and has since been rectified."

Outlook

Field activities in the fourth quarter softened due in large part to natural gas prices declining with North American storage volumes of natural gas at above average levels. Slower activity levels are expected to continue into the first quarter of 2007. Declines in natural gas commodity prices are expected to depress sales of traditional oilfield equipment in our fabrication services division and is not expected to increase significantly until the fall of 2007.

Many industry analysts anticipate natural gas storage levels will decline or return to traditional levels due to the depletion rate inherent in natural gas wells. In addition declines in Canadian gas production and enhanced producer economics point to a recovery in activity levels in the fourth quarter of 2007.

"We plan to take advantage of the anticipated neutral pricing market to pursue additional acquisition opportunities and to continue the consolidation of our acquired operations to identify revenue and EBITDA growth opportunities," added Mr. Bethune

About Crossfire Energy Services

Crossfire Energy Services is a full-service provider of design, fabrication, construction and installation of oilfield facilities and carries on business under the name Crossfire Energy Services™. The Company's success is achieved through a commitment to building long-term relationships with clients, employees and investors. Crossfire is a publicly traded company on the TSX Venture Exchange, symbol "CFE".

The TSX Venture has in no way passed upon the merits of the contents nor approved or disapproved the contents of this press release. The TSX Venture does not accept responsibility for the adequacy or accuracy of this release.

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