Destiny Resource Services Corp.

Destiny Resource Services Corp.

March 17, 2005 19:53 ET

Destiny Resource Services Corp. Announces 2004 Results, Dividend Declaration and Consolidation


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: DESTINY RESOURCE SERVICES CORP.

TSX SYMBOL: DSC
TSX SYMBOL: DSC.RT

MARCH 17, 2005 - 19:53 ET

Destiny Resource Services Corp. Announces 2004
Results, Dividend Declaration and Consolidation

CALGARY, ALBERTA--(CCNMatthews - March 17, 2005) - Destiny Resource
Services Corp. (TSX:DSC) announced today: (1) 2004 year end and fourth
quarter results; (2) the declaration of a dividend of $0.01 per share
payable March 31, 2005 to shareholders of record March 29, 2005; and (3)
the consolidation of its shares on the basis of 20 "old" shares for "1
new" share effective April 1, 2005.

"2004 was a year of significant progress for Destiny. The groundwork
laid in 2004, together with activity so far in 2005, have us further
energized and comforted as to the Company's future." said Bruce Libin,
Executive Chairman and Chief Executive Officer.

Financial Highlights

The following table highlights certain financial information of the
Company's continuing operations for the quarters and years ended
December 31, 2004 and 2003:



Three months ended Year ended
(000's, except per share December 31 December 31
and share amounts) 2004 2003 2004 2003
------------------------------------------------------------------------
------------------------------------------------------------------------

Revenue 7,431 5,837 33,630 28,057
Direct expenses 7,011 5,074 29,545 24,798
------------------------------------------------------------------------
Gross margin 419 763 4,085 3,259

EBITDA (1) 46 240 2,870 2,204

Income (loss) from
continuing operations (421) (1,215) 943 (1,140)
Per share - basic and diluted (0.01) (0.02) 0.02 (0.02)

Income from discontinued
operations 71 238 403 1,074
Per share - basic and diluted 0.00 0.00 0.01 0.02

Net income (loss) for the period (349) (977) 1,347 (126)
Per share - basic and diluted (0.01) (0.02) 0.03 0.00
Capital expenditures(2) 322 649 1,707 1,075

Weighted average shares
outstanding (000's) 53,284 52,711 52,856 52,711

Total assets 11,391 16,910

Shareholders' equity 7,845 (699)

Book value per share outstanding 0.07 (0.01)

(1) EBITDA is provided to assist investors in determining the ability
of Destiny to generate cash from operations and is calculated from
the consolidated statement of operations as gross margin less
general and administrative expenses. This measure does not have
any standardized meaning prescribed by GAAP and may not be
comparable to similar measures presented by other companies.
(2) Capital expenditures shown here relate to the Company's continuing
operations only.


Dividend Declaration

The Board of Directors declared a dividend of $0.01 per share on each of
the 110,951,618 shares outstanding. The dividend will be paid March 31,
2005 to shareholders of record March 29, 2005.

"Paying dividends is a goal we set for Destiny in 2004" said Mr. Libin.
"The equity issue, by way of rights offering, at the end of 2004
permitted us to retire all term debt and put Destiny in a position to
use cash generated for distribution to the shareholders rather than debt
service. This, together with earnings for 2004, let us achieve this
goal. It is the intent of Destiny to pay a dividend each quarter of
2005. The Board of Directors will determine the dividend, if any, each
quarter in light of operating and financial factors. At present, our
outlook for 2005 is positive. We are subject to the risks and
uncertainties attendant with businesses like ours, including commodity
prices and weather and so no assurance can be given of the Company's
ability to sustain the dividend at this or any level."

20 for 1 Consolidation

The shares of Destiny will be consolidated on a 20 "old" shares for 1
"new" share basis effective April 1, 2005. It is anticipated the common
shares will commence trading on the TSX on a consolidated basis two or
three days thereafter.

"In November we sought the approval of the shareholders to effect a
consolidation of the common shares. The Board of Directors determined
the consolidation will be on a 20 to 1 basis." said Mr. Libin. This is a
further step in the transitioning of Destiny."

Letters of transmittal will be mailed to shareholders in the next week.

Annual General Meeting of Shareholders

Destiny will hold its annual general meeting of shareholders on May 10,
2005.

2004 Review and Outlook for 2005

Mr. Libin continued with the balance of the Letter to Shareholders from
the 2003 Annual Report for Destiny:

Accomplishments in 2004 include:

Operational

- We continued to expand the client base for each of our businesses

- We enhanced our reputation as a provider of safe, quality services

- We solidified a commitment from a client for work in the Canadian
Arctic for 2005

- We made the largest non-military purchase of GPS equipment from Leica
and successfully deployed that equipment

- We acquired additional capacity for our Line-Clearing business and
successfully deployed that equipment

- We set the stage for the entry of our Wolf Survey & Mapping business
into the United States

Financial and Structural

- We completed the disposition of non-core businesses begun in 2003

- We placed new term debt as required for the on-going businesses

- We entered into a new commercial banking relationship, providing
smoother access to capital at a low cost

- We paid down the amount owing on the 1999 debentures and restructured
the payment obligations thereon

- We determined to reduce the cash required for debt service and pay
cash dividends to the shareholders

- The Board of Directors established a dividend policy

- Shareholders voted in favour of a rights issue and share consolidation

- We undertook an equity offering by way of a rights issue and on
December 30 successfully closed this financing

- We used the proceeds from the rights issue to retire all term debt of
the Company

- We were introduced to the opportunity to acquire Kodiak Nav Solutions,
which we completed in January 2005

The above accomplishments are significant. Destiny made much progress in
2004. That said, we are only modestly satisfied with the final bottom
line results for the year. Our business segment was active without being
particularly robust and our operations and profitability were affected,
in the three final quarters of the year, by adverse weather conditions.

Outlook for 2005

2005 is starting strong and we believe will be a good year for Destiny.
Items worthy of note are:

- On January 27 we acquired Kodiak Nav Solutions. This business adds
business lines, synergies, technology and further management skills to
Destiny. We are encouraged by all early signs with respect to this $2
million transaction and are delighted to have Steve Matthews, Jim
McLellan and their team as part of Destiny.

- Each of our three businesses pre-Kodiak (Wolf Survey & Mapping,
Destiny Line Clearing and Double R Drilling) have had strong first
quarters (so far) and are seeing signs for a very active year.

- We have expanded our equipment base with the purchase of additional
mulchers for the Line Clearing division and are planning to add to our
capacity in Wolf Survey & Mapping, Double R Drilling and Kodiak Nav
Solutions. Present plans call for significant capital expenditures for
Destiny in 2005, with a large percentage attributable to capacity
expansion.

- We are actively pursuing our initiative to do business (and make
money) in the US. We expect the amount of revenue generated south of the
border to be decent this year and meaningful in the near term.

- To effect expansion in existing businesses and in the US, we have
asked each of Joe Pilieci (Wolf Survey & Mapping) and Murray Leier
(Destiny Line Clearing) to take on greater responsibilities within their
businesses and have asked Warren Plue to accept responsibility for the
establishment and growth of survey and mapping in the US (in addition to
other responsibilities). Jim Holt will continue to lead Double R
Drilling, including its Arctic operations and joint venture and the
focus and expansion of our seismic drilling business.

- We are instituting a profit sharing plan for our Operations Team and
for our Executive Management Team wherein a portion of bottom line
earnings, after a priority return to shareholders, will be available for
high performing individuals. One-half of each award under these plans
will be paid in cash and one-half in shares of Destiny that will be
purchased in the market.

- We are searching for a Chief Financial Officer / Controller to round
out our Executive Management Team.

- Our Board of Directors has approved the payment on March 31, 2005 of a
dividend of $0.01 per share to shareholders of record on March 29, 2005.

- Our Board of Directors has approved the consolidation of Destiny's
outstanding common shares, effective April 1, 2005, on the basis of 20
"old" shares for 1 "new" share".

There are many good things happening at Destiny. None of them are
possible without the effort, commitment and dedication of the men and
women in the field and in our offices. Once again, on behalf of the
Board of Directors and the shareholders, I express our gratitude to
every one of them.

On behalf of the Board of Directors,

Bruce R. Libin, Q.C.

Executive Chairman and Chief Executive Officer

Destiny provides Seismic Front-End Services comprised of seismic survey
and mapping (Wolf Survey & Mapping), seismic line clearing (Destiny
Resources) and shot-hole drilling (Double R Drilling) to energy
explorers and producers and to seismic acquisition companies. Destiny
provides navigation, positioning and asset management technology to
improve the productivity and safety of seismic operations through its
Kodiak Nav Solutions division.




DESTINY RESOURCE SERVICES CORP.
CONSOLIDATED BALANCE SHEETS

As at December 31 2004 2003
$ $
----------------------------
ASSETS (note 4)

Current
Cash and cash equivalents 1,198,004 ---
Accounts receivable (note 4) 4,261,300 5,672,894
Inventory (note 4) 561,888 459,160
Prepaid expenses 325,459 317,084
Current assets of
discontinued operations (note 9) --- 5,313,650
----------------------------
6,346,651 11,762,788
Property and equipment (note 3) 5,044,266 5,147,120
----------------------------
11,390,917 16,909,908
----------------------------
----------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (note 4) --- 3,077,302
Accounts payable and accrued liabilities 3,483,824 3,651,093
Income taxes payable 61,973 68,950
Current portion of long-term debt (note 5) --- 783,942
Current liabilities of discontinued operations --- 194,424
Current portion of debentures (note 6) --- 3,000,000
----------------------------
3,545,797 10,775,711
----------------------------

Debentures (note 6) --- 6,833,884
Commitments and contingencies (note 16)
Shareholders' equity (deficiency)
Share capital (note 7) 7,198,140 8,370,998
Retained earnings (deficit) 646,980 (9,070,685)
----------------------------
7,845,120 (699,687)
----------------------------
11,390,917 16,909,908
----------------------------
----------------------------

See accompanying notes to the consolidated financial statements.



DESTINY RESOURCE SERVICES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)

Year ended December 31 2004 2003
$ $
----------------------------

Revenue 33,629,852 28,057,075

DIRECT EXPENSES 29,544,635 24,797,972
----------------------------
GROSS MARGIN 4,085,217 3,259,103

Other expenses (income):
General and administrative 1,214,811 1,053,970
Amortization of property and
equipment (note 3) 1,249,000 1,282,804
(Gain) on disposal of property
and equipment (100,345) (118,930)
Interest (note 10) 772,717 2,371,719
Other expenses (income) (note 11) (5,914) (190,589)
----------------------------
3,130,269 4,398,974

INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 954,948 (1,139,871)

Income taxes (note 12)
Current 12,000 59,650

Income (loss) from continuing operations 942,948 (1,199,521)

Income from discontinued operations,
net of income taxes (note 9) 403,719 1,073,798
----------------------------
Net income (loss) for the year 1,346,667 (125,723)

Deficit, beginning of year (9,070,685) (8,944,962)
Elimination of deficit against
share capital (note 7) 8,370,998 ---
----------------------------
RETAINED EARNINGS (DEFICIT), END OF YEAR 646,980 (9,070,685)
----------------------------
----------------------------
Per share amounts (note 7(b))
See accompanying notes to the consolidated financial statements.



DESTINY RESOURCE SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31 2004 2003
$ $
----------------------------
CASH FLOWS PROVIDED BY (USED IN)

OPERATING ACTIVITIES:
Net income (loss) from continuing operations 942,948 (1,199,521)
Items not involving cash:
Amortization of property and equipment 1,249,000 1,282,804
Amortization of deferred charges 45,000 782,693
(Gain) on disposal of property and equipment (100,345) (118,930)
----------------------------
Cash flow from operations 2,136,603 747,046
Net change in non-cash working
capital (note 14) 1,287,813 (1,737,482)
----------------------------
3,424,416 (990,436)
----------------------------

FINANCING ACTIVITIES:
Increase (decrease) in bank indebtedness (3,077,302) 2,272,306
Issue of long-term debt 3,550,000 ---
Repayment of long-term debt (4,333,942) (4,651,266)
Repayment of debentures (6,026,000) (166,116)
Increase in deferred charges (45,000) (84,195)
Rights Offering, net of costs (note 8) 3,228,688 ---
----------------------------
(6,703,556) (2,629,271)
----------------------------

INVESTING ACTIVITIES:
Purchase of property and equipment (1,706,544) (1,074,631)
Proceeds on sale of property and equipment 660,743 176,782
Cash flow from discontinued operations
(note 9) 5,522,945 4,517,556
----------------------------
4,477,144 3,619,707
----------------------------

INCREASE IN CASH AND CASH EQUIVALENTS 1,198,004 ---
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR --- ---
----------------------------
Cash and cash equivalents, end of year 1,198,004 ---
----------------------------
----------------------------

See accompanying notes to the consolidated financial statements.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF 2004 RESULTS OF OPERATIONS AND
SELECTED FINANCIAL INFORMATION

The following discussion and analysis of financial results for the year
ended December 31, 2004 is based on information available until March
17, 2005 and should be read in conjunction with the Company's
consolidated financial statements and related notes contained in this
Annual Report.

Certain statements included in this Management's Discussion and Analysis
relating to matters that are not historical facts are forward-looking
statements. Such forward-looking statements involve known (see "Business
Risks") and unknown risks and uncertainties which may cause the actual
results, performances or achievements of the Company to be materially
different from any future results implied by such forward-looking
statements.

Non-GAAP Measurements: The MD&A contains the terms Earnings Before
Interest, Taxes and Depreciation and Amortization ("EBITDA"), "cash flow
from operations" and "operating cash flow" which should not be
considered an alternative to, or more meaningful than "net income" or
"cash flow from operating activities" as determined in accordance with
Canadian GAAP as an indicator of the Company's financial performance.
These terms do not have any standardized meaning as prescribed by GAAP
and therefore, the Company's determination of EBITDA, cash flow from
operations or operating cash flow may not be comparable to that reported
by other companies. The reconciliation between net income and cash flow
from operations or operating cash flows can be found in the consolidated
statements of cash flows in the consolidated financial statements.
EBITDA is calculated from the consolidated statement of operations as
gross margin less general and administrative expenses. The Company
evaluates its performance based on EBITDA and cash flow from operations.
The Company considers cash flow from operations and EBITDA to be key
measures as they demonstrate the Company's ability to generate the cash
necessary to pay dividends and to fund future capital investment.

OVERALL PERFORMANCE

December 31, 2004 marked a milestone for Destiny - the Company exited
the year with no long-term debt and with no bank borrowings outstanding.
The Company entered 2005 with a strong balance sheet, a solid group of
profit and cash flow generating operations (including Kodiak Nav
Solutions acquired in January 2005) and the ability to commence paying
shareholders quarterly dividends.

During 2004, the Company determined to reduce the amount of cash
utilized for debt service and to adopt a dividend policy aimed at
distributing cash generated by the business in excess of requirements
for running the business to the shareholders. As a consequence, an
equity issue by way of a Rights Offering was undertaken. Shareholders
were offered the right to subscribe, for every share they held, for one
additional share for $0.14. The issue was fully subscribed and on
December 30, 2004, Destiny issued 52,711,309 common shares for gross
proceeds of $7.38 million. Proceeds from the Rights Offering together
with proceeds from sales of businesses and the placement early in the
year of new term debt enabled Destiny to retire $17.1 million of term
debt and obligations during the year and end the year with no long-term
debt.

Operating results for 2004 were satisfying in that the Company was able
to exceed its base budget despite the impact during each of the final
three quarters of the year of adverse weather. Total revenues for 2004
rose 20% to $33.6 million vs $28.1 million for 2003. Income from
continuing operations was $0.9 million compared to a loss of $1.1
million the prior year. Net income was $1.3 million ($0.03 per share)
compared to a loss of $0.1 million ($0.00 per share) in 2003.

The positive cash flows from 2004 operations, together with the 2003
reorganization and the 2004 Rights Offering transactions, have
significantly improved the financial position of the Company. The
Company believes it is well positioned and focused to take advantage of
the opportunities available in its marketplace. In addition, the
acquisition of Kodiak Nav Solutions adds to the services the Company
offers within its business segment and provides further technological
advantages to existing operations. The Company expects to commence in
2005 to pay dividends on its Common Shares.

SELECTED FINANCIAL INFORMATION

The following table highlights certain financial information of the
Company's continuing operations for the three months and years ended
December 31, 2004 and 2003:



Three months ended Year ended
(000's, except per share December 31 December 31
and share amounts) 2004 2003 2004 2003
------------------------------------------------------------------------
------------------------------------------------------------------------

Revenue 7,431 5,837 33,630 28,057
Direct expenses 7,011 5,074 29,545 24,798
------------------------------------------------------------------------
Gross margin 419 763 4,085 3,259

EBITDA 46 240 2,870 2,204

Income (loss) from
continuing operations (421) (1,215) 943 (1,140)
Per share - basic and diluted (0.01) (0.02) 0.02 (0.02)

Income from discontinued
operations 71 238 403 1,074
Per share - basic and diluted 0.00 0.00 0.01 0.02

Net income (loss) for the period (349) (977) 1,347 (126)
Per share - basic and diluted (0.01) (0.02) 0.03 0.00

Capital expenditures(1) 322 649 1,707 1,075

Weighted average shares
outstanding (000's) 53,284 52,711 52,856 52,711

Total assets 11,391 16,910

Shareholders' equity 7,845 (699)

Book value per share outstanding 0.07 (0.01)

(1) Capital expenditures shown here relate to the Company's continuing
operations only.


RESULTS OF OPERATIONS

The following analysis of the Company's results of operations refers to
both the years ended December 31, 2004 ("2004") and December 31, 2003
("2003") as well as the three months ended December 31, 2004 (Q4-04")
and December 31, 2003 ("Q4-03").

Please note that the analysis pertains to the Company's continuing
operations of Seismic Front-End Services. Excluded from the analysis is
the activity of the following businesses that have been classified in
the 2003 consolidated financial statements as discontinued operations:



Surface Preparation

Battle River Oilfield Construction
Post-Drilling Construction

McConnell Welding & Construction

Big Foot Metal Systems

Team Pipeline


REVENUE

Revenue for 2004 was $33.6 million, a $5.6 million or 20% increase from
the $28.0 million recorded during 2003. This increase in revenue is
attributable to:


- a $2.8 million increase in the revenue recorded by the Company's line
clearing division in the third quarter of 2004 compared to the third
quarter of 2003. During 2003, line clearing revenue was negatively
impacted as a result of much of the line clearing work being performed
in north eastern British Columbia where the Company's clients often
support line clearing work being contracted to First Nations companies.
During 2004 the Company was successful in being awarded significant
contracts in Alberta.


- A slight increase in overall industry activity.

- Increased heli-portable seismic drilling activity throughout the first
quarter of 2004 combined with favourable project scheduling which
reduced the number of days that drilling equipment was idle.


- Successful marketing efforts have resulted in an increase in market
share in the Company's survey & mapping and seismic drilling divisions.

Revenue for Q4-04 was $7.4 million, a $1.6 million or 27% increase from
the $5.8 million for Q4-03. The increase is attributable to higher
levels of industry activity and less disruption by adverse weather
conditions in 2004 as compared to 2003.

GROSS MARGIN

For 2004 gross margin increased to $4.1 million, a $0.8 million or 25%
increase from the $3.3 million in 2003. The overall increase in the 2004
gross margin is attributed primarily to the following factors:

- A 20% increase in revenue in 2004.


- Improved field efficiency in the Company's survey & mapping division.

- Lower operating costs in the Company's seismic line clearing division
achieved through decreased use of higher cost subcontractors and rented
equipment.


- Improved field efficiency in the Company's shot-hole drilling division
resulting from initiatives implemented by this division's management
whose tenure is now into its second winter season.


- The Company altering its cost structure so that a greater portion of
direct expenses are variable as opposed to fixed which results in a
reduction in overall costs.

For Q4-04, gross margin was $0.4 million, a $0.4 million or 45% decrease
from the $0.8 million for Q4-03. Although revenue increased by 27% for
Q4-04 vs Q4-03, the margin for the period decreased due to the mix of
projects involved. In addition, Q4-04 results were negatively impacted
by the payment of bonuses to administrative, operations and management
personnel which had not been accrued during the year. For 2005, the
Company is introducing profit sharing plans for its operations and
management leadership, the expense for which will be accrued on a
monthly basis.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses, which represent primarily the costs
associated with the corporate head office and the lease of the survey &
mapping division's shop and office, totalled $1.2 million for 2004
compared to $1.1 million for 2003.

For analytical purposes the best comparison is to "total" general and
administrative expenses, which for 2003 was the total of the amounts
allocated between continuing operations and discontinued operations,
which totalled $1.2 million. Using this comparison, the decrease from
2003 to 2004 in total corporate office costs was $0.4 million or 33%
which was achieved through the elimination of certain costs made
possible by the recent downsizing of the Company. The Company expects
that general and administrative expense will be approximately $1.4
million for fiscal 2005, including the impact of the profit sharing
plans being implemented.

G&A expense for Q4-04 was $0.4 million compared to $0.5 million for
Q4-03.

AMORTIZATION OF PROPERTY & EQUIPMENT

Amortization expense was $1.2 million in 2004 compared to $1.3 million
in 2003. The total is not necessarily comparable year over year however,
as it will be a function of the timing of purchases of new property and
equipment, and any related disposals. Amortization expense for Q4-04 was
similarly $0.3 million compared to $0.4 million for Q4-03. With
purchases of new equipment undertaken and planned, the Company expects
that depreciation and amortization expense will be approximately $2.4
million for fiscal 2005.

GAIN (LOSS) ON DISPOSAL OF CAPITAL ASSETS

The Company reported a gain on the sale of capital assets of $0.1
million arose in both 2004 and 2003. These gains represent the normal
course disposal of capital assets.

INTEREST EXPENSE

Total interest expense fell to $0.8 million for 2004, a decrease of $1.6
million or 68% compared to the 2003 total of $2.4 million.

Interest expense on long-term debt and debentures was $0.7 million for
2004, a 45% decrease from the $1.2 million incurred in 2003. This
decrease is due to the reduction in long-term debt and debentures that
was achieved through the reorganization process.

Bank charges, operating loan and other interest expense were $0.1
million for 2004, an 82% decrease from the total of $0.4 million
incurred in 2003. This significant decrease is due to:


- Lower average operating loan balances during 2004 made possible by the
strong cash flow generated in the first and third quarters and by the
$1.2 million supplement to working capital provided by the $3.5 million
term loan issued in February 2004.


- Dramatically reducing the total interest and fees on the Company's
operating loan facility by being able to move from an asset-based lender
to a more conventional facility with a chartered bank.

Interest expense also includes amortization of deferred charges, which
decreased from $0.8 million for 2003 to $0.1 million for 2004. The
Company was able to achieve this 94% reduction through the
reorganization, by either eliminating old debt of the Company, that when
issued had significant associated financing fees (the balance of which
was written off in 2003), or replacing the old debt with debt that has
lower associated financing fees.

Interest expense for Q4-04 was $0.2 million compared to $0.8 million for
Q4-03, a decrease of $0.6 million or 72% which is attributed to the much
lower levels of term debt and short-term borrowings outstanding in the
period.

INCOME TAXES

The Company was not in a taxable position in 2004 or 2003, with minor
"capital" taxes and minor income tax expense related to an inactive
subsidiary company being the only tax expense booked for 2004.

The Company has significant unutilized Canadian non-capital tax loss
carry forwards available as at December 31, 2004, the benefit of which
has not been fully recognized in the consolidated financial statements.



Summary of Quarterly Results
------------------------------------------------------------------------
(000's,
except
per share
and share Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
amounts) 2004 2004 2004 2004 2003 2003 2003 2003
------------------------------------------------------------------------

Revenue from
continuing
operations 7,430 12,200 1,204 12,796 5,819 10,154 1,333 10,734
Revenue from
discontinued
operations --- --- --- --- 1,706 7,686 5,256 11,310
------------------------------------------------------------------------
Total Revenue 7,430 12,200 1,204 12,796 7,525 17,840 6,589 22,040

Income (loss)
from
continuing
operations (421) 1,057 (1,437) 1,744 (1,030) 183 (1,089) 783
Income (loss)
from
discontinued
operations 72 --- 332 --- 52 594 (1,078) 1,459
------------------------------------------------------------------------
Income (loss)
for the period (349) 1,057 (1,105) 1,744 (977) 777 (2,167) 2,242

Basic & diluted
earnings (loss)
per share:
From continuing
operations (0.00) 0.02 (0.03) 0.03 (0.02) 0.00 (0.02) 0.01
From
discontinued
operations 0.00 --- 0.01 --- --- 0.01 (0.02) 0.03
------------------------------------------------------------------------
For the period 0.00 0.02 (0.02) 0.03 (0.02) 0.01 (0.04) 0.04

Basic & diluted
number of
shares
outstanding
(wtd avg 000s) 53,284 52,712 52,712 52,712 52,712 52,712 52,712 52,712
------------------------------------------------------------------------


The Summary of Quarterly Results highlights the fact that the Company's
business is seasonal with Q1 and Q3 traditionally being the two
strongest quarters and Q2 and Q4 traditionally being the weakest
quarters. The underlying causes of the seasonality are the weather and
the Company being restricted from entering certain wildlife areas at
certain times of the year. Revenue activity for the Company's continuing
operations, by fiscal quarter, can be characterized as follows:



Revenue
by quarter (000's) Description of Quarterly Seasonality
------------------------------------------------------------------------

Q4'04 Q4'03
------------------------------------------------------------------------
$7,430 $5,837 The fourth quarter is traditionally the Company's third
busiest quarter as was the case in each of Q4'04 and
Q4'03. The strength of the quarter is normally
dependent upon prevailing weather conditions, which
affect access to project areas, and the timing of
client capital budget spending plans.
------------------------------------------------------------------------
Q3'04 Q3'03
------------------------------------------------------------------------
$12,200 $10,154 The third quarter is traditionally the Company's second
busiest quarter as was the case in each of Q3'04 and
Q3'03. Ground conditions are normally dry and, as in
the first quarter, the Company is permitted access to
all of the areas in which the Company operates. The
relative strength of this quarter is largely dependent
on utilization rates for the Company's six heli-portable
drill crews and the number of days lost due to weather
conditions.
------------------------------------------------------------------------
Q2'04 Q2'03
------------------------------------------------------------------------
$1,204 $1,333 As was the case in Q2'03, the second quarter is
traditionally the Company's slowest quarter due to
spring break-up. As the ground thaws regulators and
landowners prohibit the company from accessing most
work areas until the ground dries out and becomes
passable to heavy equipment and vehicles without
causing damage to the roads and land. Traditionally
the roads reopen towards the end of May The Company is
further restricted from certain areas that protect
various wildlife species during their migration and
calving seasons which usually extend to the middle of
June. While revenue is comparable between Q2'04 and
Q2,03, in Q2'04 the revenue was earned primarily in
April with work not resuming until July, 2004, which is
in contrast to Q2'03 where spring break-up starting
earlier at the end of March, 2003 with work resuming
in June 2003.
------------------------------------------------------------------------
Q1'04 Q1'03
------------------------------------------------------------------------
$12,796 $10,734 As in each of 2004 and 2003, the first quarter is
traditionally the Company's busiest quarter. The ground
and unpaved roads are frozen which permits the Company
to access and conduct work in the areas in which the
Company operates. It should be noted that an early
spring thaw will reduce the amount of revenue that can
be generated in the first quarter.
------------------------------------------------------------------------


LIQUIDITY AND CAPITAL RESOURCES

Destiny's capital requirements consist primarily of working capital
necessary to fund operations, capital expenditures related to the
purchase and manufacture of operating equipment and capital to finance
strategic acquisitions. Sources of funds to satisfy these capital
requirements include cash flow from operations, external lines of
credit, equipment financing, term loans and equity markets.

The Company believes it has adequate cash generating capability, capital
resources and access to capital to meet its working capital, capital
expenditure and dividend requirements for 2005 and beyond.

WORKING CAPITAL

At December 31, 2004, the Company had a working capital of $2.8 million
compared to $1.0 million at December 31, 2003. This $1.8 million
increase in 2004 is due to such factors as:

- closing of the Rights Offering on December 30, 2004, which
supplemented working capital by $1.1 million ($3.4 million cash
received, less $2.3 million repayment of bank term loan)

- an increase in operating cash flow to $2.1 million in 2004, which was
used to repay secured term debts, and acquire additional capital assets.

PROPERTY AND EQUIPMENT

The net book value of property and equipment is $5.0 million at December
31, 2004, a net decrease of $0.1 million compared to $5.1 million at
December 31, 2003. Purchases of new property and equipment were $1.7
million for 2004, offset by amortization expense of $1.2 million and the
book value of assets sold of $0.7 million. Capital additions for the 4th
quarter were $1.7 million for Q4-04 compared to $1.1 million for Q4-03.

Subsequent to year end, in January 2005 the Company acquired the
operating assets of Kodiak Nav Solutions Ltd. ("Kodiak") at a cost of
approximately $2.0 million (of which $1.0 million was paid in the form
of 5,529,000 common shares issued by the Company). Kodiak is a
synergistic acquisition which will enhance the Company's use of leading
edge technologies in the conduct of its projects for the seismic
industry.

LONG-TERM DEBT AND DEBENTURES

The Company had three objectives in restructuring its long-term debt, a
process which commenced in the first half of 2003. The objectives were
to first pay down long-term debt through proceeds realized on the sale
of non-core assets and businesses; second, to refinance $2.0 million of
the Successor Debentures with long-term debt; and third, to consolidate
its remaining long-term debt under one loan. The Company achieved all
three objectives, and in 2004 was able to achieve a repayment of a total
of $14.1 million of secured term-debt ($10.6 million outstanding at the
end of 2003, plus $3.5 million new term debt which was issued in 2004).
The main transactions which occurred in 2004 were:

- the $0.8 million of long-term debt (excluding debentures) that existed
as at December 31, 2003 was repaid in January and February 2004 through
regularly scheduled principal payments and the use of proceeds from the
sale of the assets of Battle River Oilfield Construction.

- in February 2004, the Company issued a new variable rate term loan of
$3.5 million maturing in March 2007, with minimum annual repayments of
approximately $0.9 million. The proceeds of this term loan were used to
repay $2.0 million of the 8% Senior Debenture, to repay $0.3 million of
equipment purchase contracts, and the remaining $1.2 million used to
supplement working capital. Through December 2004, this loan had been
repaid by $1.2 million, leaving a balance of $2.3 million which was then
paid out on the December 30 2004 closing of the Rights Offering.

- principal of $9.8 million owing as at December 31, 2003 on the
Debentures was repaid through 2003, including a final payment of $3.8
million through the Debenture holder's investment in an additional
35,821,350 common shares through its participation in the Rights
Offering.

DEBENTURES

The financial reorganization of the Company, which was orchestrated
throughout 2003, centered on the 1999 Debenture owned by the Company's
majority Shareholder, First Reserve Fund VIII, L.P. ("First Reserve").
In September 2003, the Successor Debentures (which resulted from the
bifurcation of the 1999 Debenture) together with the approximately
56.21% of the Common Shares owned by First Reserve were sold to Destiny
Resource Investment L.P. ("DRILP").

In December 2003, the terms of the Successor Debentures were amended,
with the Company and DRILP agreeing (i) to extend the maturity of each
of the Successor Debentures to July 2, 2008; (ii) for the Company to pay
$2.0 million from the proceeds of the new term debt and $3.0 million
from the proceeds of the sale of the Battle River heavy equipment as
retirement of principal on the Senior Debenture; and (iii) to replace
the formula for interim payments on each of the Successor Debentures
with a requirement for semi-annual payments based on a formula that
incorporates cash flow from operations, proceeds of disposition of
assets, capital expenditures and term debt principal payments.

The amount outstanding on the Successor Debentures decreased from $9.8
million as at December 31, 2003 to $3.8 million as at September 30, 2004
following the $5.0 million repayments of principal referred to above
that took place in February 2004 and following a $1.0 million
semi-annual payment for the six month period ended June 30, 2004 that
took place in August 2004. As a result of the August 2004 payment, the
Senior Debenture was retired. As noted above, the remaining $3.8 million
of principal owing on the Debentures was repaid on December 30, 2004
concurrent with the closing of the Rights Offering.

CONTRACTUAL OBLIGATIONS AS AT DECEMBER 31, 2004

Upon closing of the Right Offering, Destiny repaid all remaining
long-term debt, and thus at the December 31, 2004 year end its' only
future contractual payment obligations are in the form of operating
leases on premises and equipment. The Company has no other "off balance
sheet" contractual obligations.



------------------------------------------------------------------------
Payments Due by Future Year
------------------------------------------------------------------------
Less than 2 - 3 4 - 5 After
Total 1 year years years 5 years
------------------------------------------------------------------------
Operating Leases $ 2,068,000 $ 536,000 $ 679,000 $ 570,000 $ 283,000
------------------------------------------------------------------------


SHAREHOLDERS' EQUITY

The shareholders' deficiency as at December 31, 2003 of $0.7 million has
been eliminated with the Company now reporting shareholders' equity of
$7.8 million, due to 2004 net income of $1.3 million, and $7.3 million
additional share capital raised (less costs of $0.2 million) pursuant to
the Rights Offering.

On May 5, 2004, at the Annual General Meeting, the shareholders passed a
special resolution approving the reduction of the stated capital of the
Company's common shares by $8.4 million, being the entire amount
thereof, and offsetting the amount against the Company's deficit.

On November 16, 2004, at a Special Meeting, the shareholders passed a
special resolution approving the consolidation (reverse split) of the
shares on a basis of up to 20 to 1 as determined by the Board of
Directors. On March 17, 2005, the Board of Directors resolved to effect
the consolidation effective April 1, 2005 on a 20 for 1 basis.

RESTRUCTURE AND DISCONTINUED OPERATIONS

With the Company burdened by high debt levels and with a $10 million
debenture maturing on July 2, 2004, in 2003 Destiny determined it was in
the best interests of shareholders for the Company to reduce debt
through the sale of non-core businesses and to restructure the remaining
debt.

During 2003 the Company initiated a number of major transactions to
achieve this debt reduction objective. These transactions, which saw the
Company dispose of two of its three business segments, pay down debt and
restructure its remaining debt have significantly altered the
composition of the Company as outlined below.

The reorganization process that had been ongoing for three years was
completed in February 2004 with the collection of the proceeds from the
sale of the last divestiture, with the issuance of $3.55 million of new
term debt and the associated use of the majority of the proceeds to
repay other secured term debts.

In 2003 the Company initiated a number of major transactions to achieve
its debt reduction objective. These transactions, the last of which
culminated in the first quarter of 2004, saw the Company dispose of two
of its three business segments, pay down debt and restructure its
remaining debt, and significantly alter the composition of the Company
as outlined below.


- The Company's continuing operations now consists of one business
segment, being Seismic Front-End Services, which is comprised of seismic
survey and mapping, seismic line clearing and shot-hole drilling.


- For financial statement reporting, the 2003 results of operations and
the financial position of Battle River Oilfield Construction, McConnell
Welding and Construction, Big Foot Metal Systems and Team Pipeline have
been presented in the consolidated financial statements as discontinued
operations.



SELECTED FINANCIAL INFORMATION OF MAJOR 2003 DISPOSITION TRANSACTIONS
------------------------------------------------------------------------

------------------------------------------------------------------------
(all amounts in $millions)
2003
Gain Term Long-term Revenue
Proceeds (loss) Loan Debt Debenture (to date of
on Sale on Sale Proceeds Repaid repayment disposition)
------------------------------------------------------------------------
Business
Dispositions
Battle
River
Oilfield
Construction $4.4 $ 0.5 $0.6(1) $3.0(1) $11.6
McConnell
Welding &
Construction $2.0 $(0.2) $0.2 $ 8.3
Big Foot
Metal
Systems $0.4 $ 0.0 $0.0 $ 1.0
Team Pipeline $1.3 $ 0.3 $0.5 $ 5.0

New Financing
Term loan(1) $3.5 $0.3 $2.0
------------------------------------------------------------------------
$8.1 $ 0.6 $3.5 $1.5 $5.0 $25.9
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Please note that these transactions occured subsequent to
December 31, 2003


The effects of these transactions was as follows:

- During the year ended December 31, 2003, the Company reported an
overall gain on the dispositions of $0.6 million.

- Total gross sale and term loan proceeds were approximately $11.6
million. The proceeds were utilized as follows:

- $3.1 million was applied to the reduction of long-term debt,
being term debt and equipment loans.

- $5.0 million was applied against the Senior Debenture. This
reduction in amount outstanding on the Senior Debentures provided
the opportunity for the Company to negotiate an extension on the
maturity date of the Successor Debentures from July 2, 2004 to
July 2, 2008.

- The balance, after deducting costs and other adjustments, was used
for capital expenditures and to supplement working capital.

- On a combined basis the businesses sold had 2003 revenue (to the dates
of disposition) of $25.9 million (2002 - $27.2 million) or 48%
(2002 - 54%) of the Company's total revenue.

- In 2004, the Company recognized additional income from discontinued
operations of $0.4 million, which was primarily from a recovery of
excess insurance premiums paid in 2003, and for a partial recovery of
a customer accounts receivable which had been written off as a bad
debt in 2003.


CRITICAL ACCOUNTING ESTIMATES

In preparing the consolidated financial statements, various accounting
estimates are made in applying the Company's accounting policies. The
estimates require significant judgment on the part of management and are
considered critical in that they are important to the Company's
recording of financial condition and results. Management believes the
critical accounting estimates for the Company are as follows:

Capital Assets

Capital assets are recorded at cost and are amortized over their
estimated useful lives. The Company evaluates the carrying value of
capital assets whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. The Company recognizes an
impairment charge when it is probable that estimated future cash flows
of the underlying assets will be less than the carrying value of the
assets.

Judgment is required in determining the useful life of capital assets
and the appropriate method of amortization. Factors considered in
estimating the useful lives of capital assets include expected future
usage, effects of technological or commercial obsolescence, expected
wear and tear from use or the passage of time and effectiveness of the
Company's maintenance program.

The Company's investment in capital assets results in amortization
expense being a significant operating cost to the Company and any
misjudgement in estimating the useful life of the equipment could result
in a misstatement of financial results.

Allowance for Doubtful Accounts

Accounts receivable is net of an allowance of $0.1 million which has
been recorded ($0.1 million - December 31, 2003) in the consolidated
financial statements, reflecting the amount of the balance for which
collection is considered doubtful. In assessing the ability to collect
accounts receivable, management reviews individual customer receivable
balances to determine accounts on which collection is not certain. For
these accounts, an allowance for doubtful accounts is established. The
amount of the allowance is based upon a review of the customer's credit
information, past payment practices and overall financial strength of
the customer.

Accrued liabilities

Accrued liabilities normally include managements estimates of expected
future costs to be incurred arising out of current year operating
activity, including costs for repairs and maintenance and project
completion.

BUSINESS RISKS

Destiny is subject to the risks and variables inherent in the oilfield
services industry. Demand for the Company's products and services
depends on the exploration, development and production activities of
energy companies. These activities are directly affected by factors such
as oil and gas commodity prices, weather, changes in legislation,
exchange rates, the general state of domestic and world economies,
concerns regarding fuel surpluses or shortages, substitution through
imports or alternative energy sources, changes to taxation or regulatory
regimes and the broad sweep of international political risks such as
war, civil unrest, nationalization and expropriation or confiscation,
which are all beyond the control of the Company and cannot be accurately
predicted. The oil market is influenced by global supply and demand
considerations and by the supply management practices of OPEC. The
natural gas market is primarily influenced by North American supply and
demand and by the price of competing fuels. The risks associated with
external competition are minimized by concentrating Company activities
in areas where it has demonstrated technical and operational advantages
and by employing highly competent professional staff. Environmental
standards and regulations are continually becoming more stringent in
this industry and Destiny is committed to maintaining its high
standards. Destiny also mitigates business risks by establishing
strategic alliances with reputable partners, developing new technologies
and methodologies as well as investigating new business opportunities.

The risks inherent in the oilfield services industry impact the
Company's ability to meet its financial covenants on its revolving, bank
operating loan facility (of which $nil was utilized at December 31,
2004). Accordingly, the Company may become in violation of its covenants
on the bank facility, which might result in repayment being demanded.

OUTLOOK

Following its reorganization and Rights Offering, the Company believes
it has adequate working capital, capitalization and access to capital.
Management believes the Company has a cost structure that has sufficient
variability as to be able to adapt to the volatility of its industry.
The Company has experienced management, at all levels of sales,
operations and administration who are motivated to achieve success in
both the short- and long-term. The Company provides services principally
in connection with the exploration for a commodity, natural gas, that is
escalating in value and is plentiful in the areas in which the Company
operates.

The Company is encouraged by the indications of demand for its services.
The Rights Offering was undertaken as a means of providing equity to
retire term debt, thereby eliminating interest and debt repayment
requirements, and creating free cash for potential distribution to
shareholders by way of dividends.

Destiny will continue to review expansion opportunities, both organic
and by acquisition. These involve, in each case, the requirement for
capital expenditures beyond the normal course for the Company. Destiny
may pursue any or all of these opportunities, and others that may
present themselves. In doing so the Company may incur term debt, issue
equity, retain cash that might otherwise be paid as dividends or any
combination of the foregoing. The positive impact of the Rights
Offering, to the extent it resulted in the elimination of all long-term
debt from the Company's balance sheet, may be limited in time.

This release, or any part of it, may include comments that do not refer
strictly to historical results or actions and may constitute
forward-looking statements. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or of the industry
to be materially different from any results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors include general and industry economic
and business conditions which, among other things, affect the demand for
the services of the Company; competitive factors and industry capacity;
the availability of personnel to manage the Company and manage and
deliver its services; the ability of the Company to finance and
implement its business strategy; changes in, or the failure to comply
with, government law and regulations (especially relating to health,
safety and environment); weather; and other such risks as may be
identified in this release or in other published documents. Accordingly,
there is no certainty that the Company's plans will be achieved.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Destiny Resource Services Corp.
    Bruce R. Libin, Q.C.
    Executive Chairman and Chief Executive Officer
    (403) 237-6437
    (403) 233-8714 (FAX)
    Email: blibin@destiny-resources.com
    or
    Destiny Resource Services Corp
    #300, 444 - 58th Avenue SE
    Calgary, Alberta, Canada T2H 0P4
    (403) 237-6437
    (403) 233-8714 (FAX)
    Email: destiny@destiny-resources.com
    Website: www.destiny-resources.com