Strad Energy Services Announces Second Quarter Results

CALGARY, ALBERTA--(Marketwired - Aug. 7, 2013) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

The news release contains "forward-looking information and statements" within the meaning of applicable securities laws. For full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Cautionary Statement Regarding Forward-Looking Information and Statements" later in this news release.

Strad Energy Services Ltd., ("Strad" or the "Company") (TSX:SDY), a North American-focused, energy services company, today announced its financial results for the six months ended June 30, 2013. All amounts are stated in Canadian dollars unless otherwise noted.

SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:

Second quarter EBITDA⁽¹⁾ from continuing operations of $8.8 million decreased 19% compared to $10.9 million for the same period in 2012;
Second quarter revenue from continuing operations of $49.6 million, a 9% decrease compared to $54.3 million for the same period in 2012;
Strad's U.S. Operations maintained an EBITDA⁽¹⁾ margin of 31% during the second quarter compared to 32% for the first quarter of 2013 and 26% for the second quarter of 2012;
Capital additions totaled $5.3 million during the second quarter. Reported capital expenditures, net of $6.4 million rental asset disposals, were $(1.1) million during the second quarter and $1.6 million in the first half of 2013;
Total funded debt ⁽²⁾ to trailing EBITDA ratio of 1.4 to 1 at the end of the second quarter of 2013; and
Second quarter earnings per share from continuing operations of $nil, compared to $0.08 for the same period in 2012. Adjusted for additional depreciation expense of $1.5 million recognized during the second quarter to fully amortize assets that are no longer in use, earnings per share would otherwise be $0.03 for the second quarter of 2013.

Notes:

⁽¹⁾	Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation".

⁽²⁾	Funded debt includes bank indebtedness plus current and long-term portion of debt plus current and long-term obligations under finance lease less cash. EBITDA is based on trailing twelve months. See "Non-IFRS Measures Reconciliation".

"Our second quarter results demonstrated relatively stable levels of EBITDA in comparison to Q1 of this year despite an extended breakup in Canada and sequential declines in North American drilling activity," said Andy Pernal, President and CEO of Strad. "While the North American E&P sector has remained stagnant for some time, we remain cautiously optimistic over the near term and have recently seen increased request for proposal activity for larger scoped projects. With that being said, we remain very much aware of the continued uncertainty facing our industry and plan to continue with our approach to prudent allocation of capital and resources across our North American markets. Our business has been designed around flexibility and the ability to quickly scale our operational base."

"During the second quarter we solidified the success experienced with the restructuring of our U.S. cost base by delivering another quarter of healthy U.S. EBITDA margins," said Greg Duerr, Chief Financial Officer of Strad. "We believe that we currently have a sustainable operation firmly in place on both sides of the border that allows us the potential to ramp up activity without adding undue cost to our business. Financially, Strad remains well positioned to progress through the second half of 2013 and into another winter drilling season."

SECOND QUARTER FINANCIAL HIGHLIGHTS

	Three months ended June 30,						Six months ended June 30,
	2013		2012		% Chg.		2013		2012		% Chg.

Revenue from continuing operations	49,576		54,304		(9	)	94,299		110,605		(15	)
EBITDA from continuing operations ⁽¹⁾	8,769		10,885		(19	)	19,428		26,866		(28	)
EBITDA as a % of revenue	18	%	20	%			21	%	24	%
Per share ($), basic	0.24		0.30		(20	)	0.53		0.73		(27	)
Per share ($), diluted	0.23		0.29		(21	)	0.52		0.71		(27	)
Net income (loss) from continuing operations ⁽²⁾	13		2,772		(100	)	1,076		7,895		(86	)
Per share ($), basic	-		0.08		(100	)	0.03		0.22		(86	)
Per share ($), diluted	-		0.07		(100	)	0.03		0.21		(86	)
Funds from continuing operations ⁽³⁾	8,788		11,134		(21	)	19,541		25,772		(24	)
Per share ($), basic	0.24		0.30		(20	)	0.53		0.70		(24	)
Per share ($), diluted	0.24		0.29		(17	)	0.52		0.68		(24	)

Capital expenditures from continuing operations ⁽⁴⁾	5,254		23,914		(78	)	10,636		48,527		(78	)
Dispositions of rental assets ⁽⁵⁾	(6,361	)	(613	)	938		(9,078	)	(1,866	)	386
Net capital expenditures	(1,107	)	23,301		(105	)	1,558		46,661		(97	)

Total assets	217,904		242,038		(10	)	217,904		242,038		(10	)
Return on average total assets ⁽⁶⁾	15	%	20	%			17	%	25	%
Long-term debt ⁽⁷⁾	49,400		52,500		(6	)	49,400		52,500		(6	)
Total long-term liabilities	50,358		70,453		(29	)	50,358		70,453		(29	)
Common shares - end of period	37,251		37,251				37,251		37,251
Weighted avg common shares
Basic	36,533		36,714				36,533		36,714
Diluted	37,327		37,768				37,334		37,679


Notes:

⁽¹⁾	Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation".
⁽²⁾	Net income from continuing operations excludes income attributable to the non-controlling interests.
⁽³⁾	Funds from continuing operations is cash flow from operating activities before changes in working capital. Funds from operations is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation".
⁽⁴⁾	Includes assets acquired under finance lease and purchases of intangible assets. Capital expenditures are net of rental asset disposals.
⁽⁵⁾	Dispositions reported at net book value.
⁽⁶⁾	Return on average total assets is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation".
⁽⁷⁾	Excluding current portion.

FINANCIAL POSITION AND RATIOS

	As at June 30,
($000's except ratios)	2013	2012

Working capital ⁽¹⁾	19,505	23,531
Funded debt ⁽²⁾	55,802	64,788
Total assets	217,904	242,038

Funded debt to EBITDA⁽²⁾	1.4	1.0


Notes:

⁽¹⁾	Working capital is calculated as current assets less current liabilities. See "Non-IFRS Measures Reconciliation".
⁽²⁾	Funded debt includes bank indebtedness plus current and long-term portion of debt plus current and long-term obligations under finance lease less cash. EBITDA is based on trailing twelve months. See "Non-IFRS Measures Reconciliation".

SECOND QUARTER RESULTS

Strad reported a decrease in revenue and EBITDA of 9% and 19%, respectively, during the three months ended June 30, 2013, compared to the same period in 2012. On a year-over-year basis, Strad continued to experience lower activity levels in the Marcellus and the Bakken regions due to low natural gas prices, decreased customer activity and increased competition and pricing pressure. In the WCSB region, Strad experienced lower year-over-year activity levels resulting from weather related delays in the post breakup seasonal recovery. These declines were partially offset by profit generated from Product Sales related to matting.

Strad's Canadian Operations reported lower revenue and EBITDA during the three months ended June 30, 2013, compared to the same period in 2012. Decreased revenue and EBITDA were a result of reduced drilling activity in the WCSB which impacted asset utilization and pricing when compared to the second quarter of 2012. During the second quarter, an extended breakup season and unusually wet weather in June resulted in a 14% year-over-year decline in drilling activity.

On a year-over-year basis, second quarter revenue and EBITDA results from Strad's U.S. Operations continued to be impacted by lower utilization levels in the Marcellus resource play in Pennsylvania. Overall rig counts in the Marcellus during the second quarter declined 28% from second quarter 2012 levels, resulting in relatively lower utilization rates and pricing for Strad's equipment and matting fleet. Pricing in the Marcellus region has been relatively consistent since the third quarter of 2012. Strad's U.S. Operations were also impacted by less favorable weather for the matting business as well as increased matting rental competition in North Dakota, which resulted in modest pricing pressure and utilization declines. Despite an 8% decline in revenue during the second quarter compared to the first quarter, Strad's U.S. Operations maintained EBITDA margins at 31% compared to 32% during the first quarter of 2013.

During the second quarter, capital expenditures, net of $5.5 million and $0.8 million in rental asset disposals, were $(1.9) million in Canada and $0.7 million in the U.S. Capital expenditures are reported net of the net book value of rental assets sold in the period. During the second quarter of 2013, Strad's Canadian Operations sold $3.7 million of net book value ofSteelLock mats to an existing rental customer. Proceeds from the sale of these mats will be used to fund a portion of Strad's 2013 capital program. For the six months ended June 30, 2013, Strad has spent $10.6 million on a gross basis, or $1.6 million, net of $9.0 million in rental asset disposals, of its budgeted $15.0 million capital program. Strad continues to invest in equipment which is in high demand in both Canada and the U.S.

RESULTS OF OPERATIONS

Canadian Operations

	Three months ended June 30,						Six months ended June 30,
($000's)	2013		2012		% chg.		2013		2012		% chg.

Revenue	14,331		15,625		(8	)	32,073		37,451		(14	)
EBITDA ⁽¹⁾	2,667		4,153		(36	)	7,459		11,526		(35	)
EBITDA %	19	%	27	%			23	%	31	%

Capital expenditures from cont. operations ⁽²⁾	3,656		7,847		(53	)	6,419		19,407		(67	)
Dispositions of rental assets ⁽³⁾	(5,539	)	(327	)	1,594		(8,105	)	(1,525	)	431
Net capital expenditures	(1,883	)	7,520		(125	)	(1,686	)	17,882		(109	)

Gross capital assets	101,983		99,812		2		101,983		99,812		2
Total assets	102,833		107,421		(4	)	102,833		102,833		(4	)


Notes:

⁽¹⁾	Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". EBITDA excludes Restructuring Expenses.
⁽²⁾	Includes assets acquired under finance lease and purchases of intangible assets. Capital expenditures are net of rental asset sales.
⁽³⁾	Dispositions represented at net book value.

Revenue generated for the three months ended June 30, 2013, decreased 8% to $14.3 million versus $15.6 million for the same period in 2012. Second quarter 2013 revenue was impacted by a longer spring breakup and unusually wet weather conditions in June compared to the second quarter of 2012. Under normal conditions, wet weather typically results in higher matting utilization; however, unusually wet weather in June resulted in delayed matting deployments, as road bans limited drill site access. As a result, drilling activity averaged 14% below 2012 levels during the second quarter of 2013 resulting in decreased surface equipment, matting and drill pipe rental revenue compared to the second quarter of 2012.

Second quarter revenue was also impacted by a decline in Strad's Canadian Operations matting rental fleet due to sales of used SteelLock mats to existing customers. Proceeds generated on the sale of SteelLock mats will be allocated to other assets with a higher rental return profile during the second half of 2013.

Revenue generated for the six months ended June 30, 2013, decreased 14% to $32.1 million compared to $37.5 million for the same period in 2012. Lower drilling activity levels are the main driver of year-over-year revenue declines.

EBITDA for the three months ended June 30, 2013, of $2.7 million, decreased 36%, compared to $4.2 million for the same period in 2012. EBITDA as a percentage of revenue for the three months ended June 30, 2013, was 19% compared to 27% for the same period in 2012. This decrease was primarily due to lower rental revenue.

EBITDA for the six months ended June 30, 2013, decreased 35% to $7.5 million compared to $11.5 million for the same period in 2012. Decreased EBITDA was a result of lower rental revenue during the first six months of 2013 compared to the same period in 2012. EBITDA as a percentage of revenue for the six months ended June 30, 2013, was 23% compared to 31% for the same period in 2012.

U.S. Operations

	Three months ended June 30,						Six months ended June 30,
($000's)	2013		2012		% chg.		2013		2012		% chg.

Revenue	12,783		19,939		(36	)	26,762		40,851		(34	)
EBITDA ⁽¹⁾	3,916		5,157		(24	)	8,421		12,605		(33	)
EBITDA %	31	%	26	%			31	%	31	%

Capital expenditures from cont. operations ⁽²⁾	1,498		15,545		(90	)	3,798		28,425		(87	)
Dispositions of rental assets ⁽³⁾	(821	)	(286	)	187		(973	)	(341	)	185
Net capital expenditures	677		15,259		(96	)	2,825		28,084		(90	)

Gross capital assets	105,269		105,674		-		105,269		105,674		-
Total assets	110,233		123,554		(11	)	110,233		123,554		(11	)


Notes:

⁽¹⁾	Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". EBITDA excludes Restructuring Expenses.
⁽²⁾	Includes assets acquired under finance lease and purchases of intangible assets. Capital expenditures are net of rental asset sales.
⁽³⁾	Dispositions represented at net book value.

Revenue for the three months ended June 30, 2013, decreased 36% to $12.8 million from $19.9 million for the same period in 2012. Year-over-year revenue declines continue to be the result of lower drilling activity in the U.S., specifically in the Marcellus and Bakken resource plays, where rig counts declined 28% and 13%, respectively, from second quarter 2012 levels. Decreased rig counts have resulted in increased competition in both resource plays, which caused lower surface equipment and matting utilization as well as pricing pressure relative to 2012. The Bakken continued to be the most active resource play for Strad's U.S. Operations, generating 70% of total U.S. revenue.

Revenue for the six months ended June 30, 2013, decreased 34% to $26.8 million from $40.9 million for the same period in 2012. The decrease in revenue year-over-year was due to the same activity related factors impacting the second quarter results in comparative periods.

EBITDA for the three months ended June 30, 2013, decreased 24% to $3.9 million compared to $5.2 million for the same period in 2012. The decrease in EBITDA was due to the previously mentioned reduction in overall asset utilization rates and pricing pressure in the Marcellus and Bakken resource plays, offset by a shift in product mix during the quarter. EBITDA as a percentage of revenue for the three months ended June 30, 2013, was 31% compared to 26% for the same period in 2012. EBITDA as a percentage of revenue has remained consistent with the first quarter of 2013 due to the ongoing success of management's restructuring plan, which re-aligned the U.S. Operations cost structure with current market conditions.

EBITDA for the six months ended June 30, 2013, decreased 33% to $8.4 million compared to $12.6 million for the same period in 2012. The decrease is consistent with utilization and revenue declines discussed previously. EBITDA as a percentage of revenue for the six months ended June 30, 2013, remained consistent at 31% in comparison to the same period in 2012.

Product Sales

	Three months ended June 30,						Six months ended June 30,
($000's)	2013		2012		% chg.		2013		2012		% chg.

Revenue	22,462		18,740		20		35,464		32,303		10
EBITDA ⁽¹⁾	3,010		2,517		20		5,362		4,556		18
EBITDA %	13	%	13	%			15	%	14	%
Capital expenditures ⁽²⁾	-		475		(100	)	203		647		(69	)
Total assets	1,099		6,162		(82	)	1,099		6,162		(82	)


Notes:

⁽¹⁾	Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". EBITDA excludes Restructuring Expenses.
⁽²⁾	Includes assets acquired under finance lease and purchases of intangible assets.

Product Sales are comprised of in-house manufactured products sold to external customers, third party equipment sales to existing customers, and sales of equipment from Strad's existing fleet to customers. Product Sales revenue tends to fluctuate quarter-over-quarter depending on customer demand and manufacturing capacity dedicated to external sales.

Revenue for the three months ended June 30, 2013, increased 20% to $22.5 million from $18.7 million for the same period in 2012, resulting primarily from higher matting and drill pipe sales. During the second quarter, Product Sales consisted of $5.5 million of in-house manufactured products and $17.0 million of third party equipment and rental fleet sales to existing customers compared to $9.2 million and $9.5 million, respectively, during the same period in 2012. Increased matting sales in the second quarter of 2013 were due to the sale of a portion of Strad's Canadian Operations SteelLock matting fleet to an existing customer. Proceeds generated from the sale will be allocated to other higher rental return assets in Canada and the U.S.

Revenue for the six months ended June 30, 2013, increased 10% to $35.5 million from $32.3 million for the same period in 2012. Increased matting sales during the second quarter were the primary driver of year-over-year revenue increases. Matting sales during the first six months of 2013 consisted of both third party mat sales and sales of Strad's Canadian Operations rental fleet to existing customers.

EBITDA for the three months ended June 30, 2013, of $3.0 million increased by 20% compared to $2.5 million for the same period in 2012. The increase in EBITDA was due to higher Product Sales during the second quarter of 2013. EBITDA as a percentage of revenue for the three months ended June 30, 2013, remained consistent with the same period in 2012 at 13%. EBITDA as a percentage of revenue tends to vary from quarter-over-quarter depending on the mix of sales, as realized margins on third party equipment sales and sales of equipment from Strad's existing fleet fluctuate more compared to sales of in-house manufactured products.

EBITDA for the six months ended June 30, 2013, of $5.4 million, increased by 18% compared with $4.6 million for the same period in 2012. EBITDA as a percentage of revenue for the six months ended June 30, 2013, increased to 15% from 14% during the same period in 2012.

OUTLOOK

Overall industry conditions during the second quarter deteriorated on a year-over-year basis due to the continued reduction in North American drilling activity. Lower drilling activity was largely a result of depressed natural gas pricing across North America, wet weather in Canada, as well as oil transportation bottlenecks in the WCSB, which has impacted cash flow and access to capital for many participants in the Canadian Exploration & Production ("E&P") sector.

In the WCSB, active drilling rigs in the second quarter of 2013 averaged 152 compared with 177 for the same period in 2012, a 14% decline. In the U.S., drilling rig activity levels varied by region, with the total active U.S. rig count declining by 11% on a year-over-year basis. The majority of Strad's U.S. fleet operates in the Bakken and Marcellus resource plays, which were also subject to reduced drilling activity. The active rig count in the Bakken averaged 188 rigs in the second quarter of 2013, down 13% from 217 in the prior year period. In the gas-weighted Marcellus play, the active rig count averaged 79 during the second quarter of 2013, down 28% from 110 in the prior year period. On a sequential basis, rig counts in the Bakken and Marcellus declined 3% and 13%, respectively.

In Canada, industry activity was impacted by a prolonged spring breakup that coincided with abnormally wet weather conditions. Wet weather not only reduced overall Canadian drilling activity, but also adversely impacted Strad's matting business, with many customers determining that conditions were too wet even for matting based operations. Despite this, Strad's matting utilization levels increased this quarter, as the Company was able to sell a lower return component of its matting fleet, thereby reducing its amount of idle inventory. The Company plans to subsequently redeploy this revenue into higher rental return assets during the remainder of 2013. Looking ahead, Management anticipates generally positive Canadian industry conditions for the duration of the year and is engaged in the process of bidding on an increased number of projects with broader scopes than it has in preceding quarters.

In Strad's U.S. business, the Company was successful in maintaining 30% EBITDA margins during the second quarter, despite increased pricing pressure in the Bakken. These margins remain in line with those set last quarter following the successful restructuring of Strad's U.S. cost base. Management expects U.S. margins to normalize at or near these levels by year-end, although current activity and planned investment in field sales staff may modestly impact margins in the third quarter. With overall U.S. industry activity remaining relatively unchanged on a quarter-over-quarter basis, Strad remains confident in the current size and scope of its U.S. fleet. Should industry conditions increase to more robust levels, the Company remains poised to grow without adding significant cost to its U.S. operations.

During the second quarter capital expenditures, net of $6.4 million in rental asset disposals, totaled $(1.1) million. The majority of the $5.3 million in new capital purchases was deployed in Canada. This represented a year-over-year decline of 77%, which is the result of significant investment made to Strad's fleet during 2012. As well, capital spending during the first half of 2013 has been focused on specific opportunities to ensure Strad has the flexibility to execute on larger scope projects. Strad intends to continue its practice of applying cash from operations towards a combination of capital expenditures and debt reduction on a quarter-by-quarter basis. Management believes that this disciplined approach to cash flow allocation will continue to enable Strad to selectively target key areas for growth, maintain its current dividend, and reduce its overall debt levels during 2013.

While Strad maintains a positive outlook for the balance of 2013, management remains aware of the persistent uncertainty that continues to characterize the North American E&P sector. Given this reality, Strad remains focused on maintaining a balanced approach to forward planning, where near-term caution does not compromise long-term growth prospects. Management continues to believe in the resiliency of Strad's flexible business model as well as the long-term potential inherent in its targeted North American markets.

LIQUIDITY AND CAPITAL RESOURCES

($000's)		June 30, 2013	March 31, 2013

	Current assets	50,466	50,532
	Current liabilities	30,961	31,389
Working capital ⁽¹⁾		19,505	19,143

Banking facilities
	Operating facility	2,847	3,166
	Syndicated revolving facility	49,400	55,500
Total facility borrowings		52,247	58,666

Total available facilities		110,000	110,000
Unused borrowing capacity		57,753	51,334

⁽¹⁾

Working capital is calculated as current assets less current liabilities. See "Non-IFRS Measures Reconciliation".

At June 30, 2013, working capital was $19.5 million compared to $19.1 million at March 31, 2013. The change in working capital is consistent with the modest increase in revenue from the first quarter to the second quarter of 2013. Funds from operations for the three months ended June 30, 2013, decreased to $8.8 million compared to $10.8 million for the three months ended March 31, 2013. Capital expenditures from continuing operations totaled $5.3 million and $5.4 million for the three months ended June 30, 2013 and March 31, 2013, respectively and were offset by $6.4 million and $2.7 million of rental asset sales during the same periods. Management used funds from operations and proceeds from Product Sales to repay a portion of Strad's total facility borrowing during the second quarter of 2013. Management monitors funds from operations and the timing of capital additions to ensure adequate capital resources are available to fund Strad's capital program.

The Company's syndicated banking facility consists of an operating facility with a maximum principal amount of $15.0 million CAD and $10.0 million USD, and an $85.0 million revolving facility, both of which are subject to certain limitations on accounts receivable, inventory and net book value of fixed assets and are secured by a general security agreement over the Company's assets. The syndicated banking facility bears interest at bank prime plus a variable rate, which is dependent on the Company's funded debt to EBITDA ratio. On July 18, 2013, the Company amended its syndicated credit facility, extending the maturity date from July 25, 2015 to July 25, 2016.

Based on the Company's funded debt to EBITDA ratio of 1.4 to 1 at the end of the second quarter of 2013, the interest rate on the syndicated banking facility is bank prime plus 1.25% on prime rate advances and at the prevailing rate plus a stamping fee of 2.25% on bankers' acceptances. For the three months ended June 30, 2013, the overall effective rates on the operating facility and revolving facility were 4.11% and 3.44%, respectively. As of June 30, 2013, $2.8 million was drawn on the operating facility and $49.4 million was drawn on the revolving facility. Payments on the revolving facility are interest only.

As at June 30, 2013, the Company was in compliance with all of the syndicated banking facility covenants.

NON-IFRS MEASURES RECONCILIATION

Certain supplementary measures in this MD&A do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-IFRS measures. These measures are described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent IFRS measure. However, they should not be used as an alternative to IFRS, because they may not be consistent with calculations of other companies. These measures are further explained below.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS. Management believes that in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company's principal business activities prior to consideration of how those activities are financed or how the results are taxed. EBITDA is calculated as net income from continuing operations plus interest, finance fees, taxes, depreciation and amortization, non-controlling interest, loss on disposal of property, plant and equipment, loss on foreign exchange, loss on assets held for sale, restructuring charges, impairment loss, less gain on foreign exchange and gain on disposal of property, plant and equipment. Segmented EBITDA is based upon the same calculation for defined business segments, which are comprised of Canadian Operations, U.S. Operations, Product Sales and Corporate.

Funds from operations are cash flow from operating activities excluding changes in working capital and share-based payments. It is a supplemental measure to gauge performance of the Company before non-cash items. Working capital is calculated as current assets minus current liabilities. Working capital, cash forecasting and banking facilities are used by Management to ensure funds are available to finance growth opportunities.

Annualized return on average total assets for the six months ended June 30, 2013, is calculated as annualized year-to-date EBITDA divided by the average of total assets over the fourth quarter of 2012 and first quarter of 2013, including a three month lag. The three month lag represents the time between the purchase of capital assets and when they are deployed in the field and earning revenue.

Funded debt is calculated as bank indebtedness plus current and long-term portion of debt plus current and long-term portion of finance lease obligations, less cash.

Reconciliation of EBITDA and Funds from Operations

($000's)

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012

Net income from continuing operations	13		2,772		1,076		7,895
Add:
Depreciation and amortization	8,824		7,003		16,450		13,256
Loss/(gain) on disposal of PP&E	76		(11	)	662		24
Loss on disposal of assets held for sale	17		-		175		-
Non-controlling interest	-		(187	)	-		333
Share-based payments	95		113		283		362
Deferred income tax (recovery)/expense	(1,099	)	748		(753	)	2,704
Financing fees	71		58		143		116
Interest expense	791		638		1,505		1,082
Funds from operations	8,788		11,134		19,541		25,772

Add:
(Gain)/loss on foreign exchange	(18	)	(32	)	(139	)	369
Current income tax expense/(recovery)	94		(104	)	309		1,087
Subtotal	8,864		10,998		19,711		27,228

Deduct:
Share-based payments	95		113		283		362
EBITDA	8,769		10,885		19,428		26,866

Reconciliation of quarterly non-IFRS measures

($000's)

	Three months ended (unaudited)

	June 30, 2013		March 31, 2013		December 31, 2012		September 31, 2012

Net income/(loss) from cont. operations	13		1,063		(3,490	)	2,937
Add:
Depreciation and amortization	8,824		7,626		7,667		7,362
Loss on disposal of PP&E	76		586		226		22
Loss on disposal of assets held for sale	17		158		-		-
(Gain)/loss on foreign exchange	(18	)	(121	)	(195	)	510
Non-controlling Interest	-		-		-		22
Current income tax expense/(recovery)	94		216		(13	)	788
Deferred income tax (recovery)/expense	(1,099	)	345		(3,804	)	(528	)
Interest Expense	791		714		739		854
Restructuring expense	-		-		4,129		-
Impairment loss	-		-		2,350		-
Finance fees	71		72		66		63
EBITDA	8,769		10,659		7,675		12,030

Communications operating loss	-		-		679		610
EBITDA (Adjusted)	8,769		10,659		8,354		12,640

	Three months ended (unaudited)

	June 30, 2012		March 31, 2012	December 31, 2011		September 31, 2011

Net income from cont. operations	2,772		5,123	7,661		7,325
Add:
Depreciation and amortization	7,003		6,253	5,713		5,214
(Gain)/loss on disposal of PP&E	(11	)	35	(96	)	52
(Gain)/loss on foreign exchange	(32	)	401	52		(915	)
Non-controlling Interest	(187	)	520	543		497
Current income tax (recovery)/expense	(104	)	1,191	1,177		2,074
Deferred income tax expense	748		1,956	1,499		2,749
Interest Expense	638		444	620		457
Finance fees	58		58	-		31
EBITDA	10,885		15,981	17,169		17,484

Communications operating loss	556		167	213		179
EBITDA (Adjusted)	11,441		16,148	17,382		17,663

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements and information contained in this MD&A constitute forward-looking statements. More particularly, this MD&A contains forward-looking statements concerning future capital expenditures of the Company, debt, dividends, demand for the Company's products and services, drilling activity in North America, pricing of the Company's products and services, introduction of new products and services, manufacturing capacity to meet anticipated demand for the Company's products, and expected exploration and production industry activity. These statements relate to future events or to the Company's future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

The use of any of the words "expect", "plan", "continue", "estimate", "anticipate", "potential", "targeting", "intend", "could", "might", "should", "believe", "may", "predict", or "will" and similar expressions are intended to identify forward-looking information or statements. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this MD&A. The forward-looking information and statements included in this MD&A are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements. These factors include, but are not limited to, such things as the impact of general industry conditions, fluctuation of commodity prices, industry competition, availability of qualified personnel and management, stock market volatility and timely and cost effective access to sufficient capital from internal and external sources. The risks outlined above should not be construed as exhaustive. Although management of the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Accordingly, readers should not place undue reliance upon any of the forward-looking information set out in this MD&A. All of the forward-looking statements of the Company contained in this MD&A are expressly qualified, in their entirety, by this cautionary statement. The various risks to which the Company is exposed are described in this MD&A under the heading "Risk Factors" above and in additional detail in the Company's Annual Information Form ("AIF"). Except as required by law, the Company disclaims any intention or obligation to update or revise any forward-looking information or statements, whether the result of new information, future events or otherwise.

This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

SECOND QUARTER EARNINGS CONFERENCE CALL

Strad Energy Services Ltd. has scheduled a conference call to begin promptly at 8:00 a.m. MT (10:00 am. ET) on Thursday, August 8, 2013.

The conference call dial in number is 1-800-925-3017.

The conference call will also be accessible via webcast at www.stradenergy.com.

A replay of the call will be available approximately one hour after the conference call ends until Thursday, August 15th, 2013, at 11:59pm ET. To access the replay, call 1-800-558-5253, followed by pass code 21669222.

Strad Energy Services Ltd.

Interim Consolidated Statement of Financial Position

(Unaudited)

(in thousands of Canadian dollars)	As at June 30, 2013		As at December 31, 2012
	$		$
Assets
Current assets
Trade receivables	36,994		33,418
Inventories (note 3)	8,938		12,022
Prepaids and deposits	1,908		2,379
Current portion of notes receivable (note 4)	682		665
Income taxes receivable	1,944		1,526
	50,466		50,010

Assets held for sale (note 5)	2,749		4,728

Non-current assets
Property, plant and equipment (note 6)	144,496		157,042
Intangible assets (note 7)	2,399		2,721
Notes receivable (note 4)	384		729
Goodwill	17,277		17,277
Deferred income tax assets	133		198
Total assets	217,904		232,705

Liabilities
Current liabilities
Bank indebtedness (note 8)	2,847		2,488
Accounts payable and accrued liabilities	20,389		24,244
Deferred revenue	372		160
Current portion of obligations under finance lease (note 9)	2,598		2,735
Note payable (note 10)	1,051		1,492
Dividend payable (note 13)	2,049		2,050
Restructuring provision (note 11)	1,655		3,813
	30,961		36,982
Non-current liabilities
Long-term debt (note 12)	49,400		55,500
Obligations under finance lease (note 9)	958		2,285
Deferred income tax liabilities	8,760		9,279
Total liabilities	90,079		104,046

Equity
Share capital (note 13)	117,579		117,462
Contributed surplus (note 13)	11,317		11,016
Accumulated other comprehensive income (loss)	317		(1,451	)
Retained earnings (deficit)	(1,388	)	1,632
Total equity	127,825		128,659
Total liabilities and equity	217,904		232,705

Strad Energy Services Ltd.

Interim Consolidated Statement of Income

For the three and six months ended June 30, 2013 and 2012

(Unaudited)

(in thousands of Canadian dollars, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Continuing operations
Revenue		49,576			54,304			94,299			110,605
Expenses
Operating expenses		33,889			34,959			60,120			66,859
Depreciation		8,543			6,637			15,730			12,525
Amortization of intangible assets		281			366			720			731
Selling, general administration		6,823			8,347			14,468			16,518
Share-based payments		95			113			283			362
Loss (gain) on disposal of property, plant and equipment		76			(11	)		662			24
Foreign exchange (gain) loss		(18	)		(32	)		(139	)		369
Finance fees		71			58			143			116
Interest expense		791			638			1,505			1,082
Loss on assets held for sale		17			-			175			-
(Loss) income before income tax from continuing operations		(992	)		3,229			632			12,019
Income tax (recovery) expense (note 15)		(1,005	)		644			(444	)		3,791
Net income from continuing operations for the period		13			2,585			1,076			8,228

Income from discontinued operations, net of tax (note 16)		-			744			-			437

Net income for the period		13			3,329			1,076			8,665

Net income attributable to:
Owners of the parent		13			3,516			1,076			8,332
Non-controlling interests (note 14)		-			(187	)		-			333
		13			3,329			1,076			8,665
Earnings per share from continuing operations attributable to the equity owners of the Company:
Basic	$	0.00		$	0.08		$	0.03		$	0.22
Diluted	$	0.00		$	0.07		$	0.03		$	0.21

Earnings per share from discontinued operations attributable to the equity owners of the Company:
Basic	$	0.00		$	0.02		$	0.00		$	0.01
Diluted	$	0.00		$	0.02		$	0.00		$	0.01

Earnings per share from total operations attributable to the equity owners of the Company:
Basic	$	0.00		$	0.10		$	0.03		$	0.23
Diluted	$	0.00		$	0.09		$	0.03		$	0.22

Strad Energy Services Ltd.

Interim Consolidated Statement of Comprehensive Income

For the six months ended June 30, 2013 and 2012

(Unaudited)

(in thousands of Canadian dollars)

		Three Months Ended			Six Months Ended
		June 30,			June 30,
		2013	2012		2013	2012
		$	$		$	$

	Net income for the period	13	3,329		1,076	8,665

Other comprehensive income (loss)Items that may be reclassified subsequently to net income
Cumulative translation adjustment		1,160	931		1,768	(169	)
	Total other comprehensive income (loss)	1,160	931		1,768	(169	)
	Comprehensive income for the period	1,173	4,260		2,844	8,496

	Comprehensive income attributable to:
	Owners of the parent	1,173	4,337		2,844	8,163
	Non-controlling interests	-	(77	)	-	333
		1,173	4,260		2,844	8,496

Strad Energy Services Ltd.

Interim Consolidated Statement of Cash Flow

For the six months ended June 30, 2013 and 2012

(Unaudited)


(in thousands of Canadian dollars)
		2013		2012
Cash flow provided by (used in)		$		$

Operating activities
Net income for the period		1,076		8,665
Adjustments for:
	Depreciation and amortization	16,450		13,256
	Deferred income tax	(753	)	2,704
	Share-based payments	283		166
	Interest expense and finance fees	1,648		1,198
	Loss on disposal of property, plant and equipment	662		24
	Loss/impairment on sale of investment in subsidiary	-		441
Loss on assets held for sale (note 5)		175		-
Changes in items of non-cash working capital (note 17)		(5,835	)	(1,147	)
Net cash generated from operating activities		13,706		25,307

Investing activities
Purchase of property, plant and equipment		(988	)	(45,071	)
Proceeds from sale of property, plant and equipment		1,550		848
Purchase of intangible assets		(396	)	(623	)
Proceeds on sale of subsidiaries (note 16)		-		7,129
Purchase of assets held for sale		(125	)	(1,439	)
Proceeds from sale of assets held for sale		1,876		-
Purchase of non-controlling interest (note 14)		-		(4,627	)
Cash settlement on stock option exercises		(36	)	-
Changes in items of non-cash working capital (note 17)		(518	)	(5,752	)
Net cash generated (used) in investing activities		1,363		(49,535	)

Financing activities
Proceeds on issuance of long-term debt		2,000		29,000
Repayment of long-term debt		(8,100	)	-
Repayment of finance lease obligations (net)		(1,464	)	(1,877	)
Issue of share capital		-		24
Repayment of shareholder loan		115		271
Interest expense and finance fees		(1,648	)	(1,198	)
Payment of dividends		(4,096	)	-
Net cash (used) generated from financing activities		(13,193	)	26,220
Effect of exchange rate changes on cash and cash equivalents		(2,235	)	(1,676	)
(Decrease) increase in cash and cash equivalents		(359	)	316

Cash and cash equivalents (including bank indebtedness) - beginning of year		(2,488	)	(5,570	)
Cash and cash equivalents (including bank indebtedness) - end of period		(2,847	)	(5,254	)

Cash and cash equivalents - included in liabilities of disposal group (note 16)		-		(205	)
Cash and cash equivalents (including bank indebtedness) - end of period		(2,847	)	(5,459	)

Cash paid for income tax		731		5,621

ABOUT STRAD ENERGY SERVICES LTD.

Strad is a North American energy services company that focuses on providing well-site infrastructure solutions to the oil and natural gas industry. Strad focuses on providing complete customer solutions in well-site-related oilfield equipment for producers active in unconventional resource plays.

Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the Toronto Stock Exchange under the trading symbol "SDY".

Contact Information:

Strad Energy Services Ltd.
Andy Pernal
President and Chief Executive Officer
(403) 775-9202
(403) 232-6901 (FAX)
apernal@stradenergy.com

Strad Energy Services Ltd.
Greg Duerr
Chief Financial Officer
(403) 705-4333
(403) 232-6901 (FAX)
gduerr@stradenergy.com
www.stradenergy.com