Trican Well Service Ltd.
TSX : TCW

Trican Well Service Ltd.

February 27, 2008 20:33 ET

Trican- 2007 Fourth Quarter and Year End Results

CALGARY, ALBERTA--(Marketwire - Feb. 27, 2008) - Trican Well Service Ltd. (TSX:TCW):



Financial Review ($ millions, except per share amounts)

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Three months ended Years ended
December 31, December 31,
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2007 2006 2007 2006
(unaudited) (unaudited)
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Revenue $ 195.8 $ 208.3 $ 836.4 $ 847.5
Operating income (1) 34.2 61.3 195.1 284.2
Net income before stock-based
compensation (1) 21.4 37.9 124.5 183.6
Net income before stock-based
compensation per share (basic) $ 0.18 $ 0.33 $ 1.03 $ 1.60
(diluted) $ 0.17 $ 0.32 $ 1.01 $ 1.55
Net income 18.2 35.3 111.8 172.6
Net income per share (basic) $ 0.15 $ 0.31 $ 0.93 $ 1.50
(diluted) $ 0.15 $ 0.30 $ 0.91 $ 1.44
Funds provided by operations (1) 41.8 63.5 131.8 226.5
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Note: (1) Trican makes reference to operating income, net income before
stock-based compensation expense and funds from operations. These
are measures that are not recognized under Canadian Generally
Accepted Accounting Principles (GAAP). Management believes that,
in addition to net income, operating income, net income before
stock-based compensation expense, net income before stock-based
compensation expense per share and funds from operations are
useful supplemental measures. Operating income provides investors
with an indication of earnings before depreciation, taxes and
interest. Net income before stock-based compensation expense
provides investors with information on net income excluding the
non-cash affect of stock-based compensation expense. Funds
provided by operations provides investors with an indication of
cash available for capital commitments, debt repayments and
other expenditures. Investors should be cautioned that operating
income, net income before stock-based compensation expense, and
funds from operations should not be construed as an alternative
to net income, net income per share or net cash provided by
operations determined in accordance with GAAP as an indicator of
Trican's performance. Trican's method of calculating operating
income, net income before stock-based compensation expense and
funds from operations may differ from that of other companies
and accordingly may not be comparable to measures used by other
companies.


Fourth Quarter Results

Results for the quarter ended December 31, 2007 reflect increased equipment capacity and strong demand for services in Russia, expansion into the United States, offset by a sharp reduction in demand for our services in Canada.

Demand for our services in Russia continues to be strong. Additional equipment capacity was added to support a broadening customer base and expanded service offering. Fourth quarter Russian results reflect the onset of winter conditions, the completion of some of our customers' 2007 work programs, and higher headcount and infrastructure costs required to support the 2008 business plan. Demand for services in our areas of operations within the United States remains strong, however a shortage of high quality fracturing proppant, as first reported in our third quarter results, forced the cancellation of jobs and increased the cost of sand purchased. Although demand remains strong, an influx of pressure pumping equipment into the Barnett Shale area has led to an increasingly competitive pricing environment as pressure pumping companies compete to maximize fleet utilization. Activity in Canada continues to be hampered by bearish North American natural gas prices, a strong Canadian dollar, excess equipment capacity, and unfavorable royalty changes introduced by the Government of Alberta on certain oil and gas production.

Trican's consolidated revenue decreased marginally compared to the same period in 2006 as the contribution from our Russian operations and expansion into the United States pressure pumping market did not fully offset the marked decline in sales from our Canadian operations. Net income for the period of $18.2 million decreased from $35.3 million recorded in the fourth quarter of 2006. Similarly, the Company recorded net income per share, excluding the impact of stock-based compensation, of $0.18 ($0.17 diluted) versus $0.33 ($0.32 diluted) for the comparable period in 2006. Funds from operations of $41.8 million for the quarter decreased from $63.5 million for the comparable period in 2006 primarily as a result of lower earnings.

Operations Review

Canadian Operations

Industry activity in Canada was relatively consistent with third quarter levels but continues to lag year-over-year comparisons. Most of the drilling activity in western Canada targets natural gas prospects and has been impacted by the weakness in the commodity price. Industry activity, as measured by the number of active drilling rigs, decreased by almost 28% to an average of 342 rigs in the fourth quarter of 2007 from 471 rigs for the same period in 2006 according to the Canadian Association of Oilwell Drilling Contractors ("CAODC"). Activity in Canada was hampered by bearish North American natural gas prices, a strong Canadian dollar, excess equipment capacity, and unfavorable royalty changes introduced by the Government of Alberta on certain oil and gas production.

Russian Operations

Demand for services in Russia continues to be positive. Strong oil prices support strong activity levels and continued growth in demand for services from our customers. Russia is recognized as a key pressure pumping market and Trican and some of its competitors are adding equipment capacity to meet the growing market demands. We expect that with this growth in pressure pumping capacity, Russia will continue to be a competitive market in which our customers will continue to emphasize performance, price and service quality.

Trican expanded and enhanced its existing fracturing and cementing service capabilities and broadened its service offering by adding deep coiled tubing and nitrogen services late in the year. During the year, two new fracturing crews were added along with upgraded support equipment to improve operational efficiencies. A fracturing crew was transferred from Canada late in the year to further support strong demand for the Company's services bringing the total number of crews operating to 11 by year's end. The Company also added three twin cement units that were transferred from Canada doubling our cementing capacity in Russia. Cementing activity has benefited Russian operations in recent years as producers gain an appreciation for new cement technology and efficient job execution.

Activity was down in November due to delays in the preparation of wells by the rig companies as they transitioned to cold weather operations and customers requesting additional budget allocations for 2007.

United States Operations

Our United States operations opened a third base during the fourth quarter of 2007 in Searcy, Arkansas. This base services the Fayetteville Shale reservoir and is serviced by the sixth fracturing crew brought into service in the quarter. The remaining equipment build is expected to be operational during the first quarter of 2008. Once the U.S. 2007 capital build program is complete, Trican will operate 186,000 hhp and up to ten fracturing crews in its U.S. operations.

A shortage of high quality fracturing proppant continued to impact operations in the fourth quarter forcing the cancelation of jobs and increased the cost of sand purchased. Management continues to work to secure stable supplies of sand.

North African Operations

Trican commenced operations in Algeria in October 2007 under a contract to provide coiled tubing, nitrogen and acidizing services. Subject to contract awards, the Company will expand its service offerings from its operating base in Hassi Messaoud. This project represents Trican's first operation in Africa and the Company is excited about the potential for our services in this new market.



Comparative Quarterly Income Statements ($ thousands, unaudited)


Quarter-
Over-
Three months ended % of % of Quarter %
December 31, 2007 Revenue 2006 Revenue Change Change
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Revenue 195,794 100.0% 208,329 100.0% (12,535) -6%
Expenses
Materials and
operating 151,595 77.4% 137,870 66.2% 13,725 10%
General and
administrative 10,036 5.1% 9,147 4.4% 889 10%
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Operating income(i) 34,163 17.4% 61,312 29.4% (27,149) -44%
Interest expense 2,764 1.4% 71 0.0% 2,693 3793%
Depreciation and
amortization 17,801 9.1% 9,848 4.7% 7,953 81%
Foreign exchange gain (1,352) -0.7% (853) -0.4% (499) 58%
Other (income) /
expense 55 0.0% (1,079) -0.5% 1,134 -105%
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Income before income
taxes and
non-controlling
interest 14,895 7.6% 53,325 25.6% (38,430) -72%
Provision for income
taxes (3,287) -1.7% 17,758 8.5% (21,045) -119%
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Income before
non-controlling
interest 18,182 9.3% 35,567 17.1% (17,385) -49%
Non-controlling
interest 28 0.0% 240 0.1% (212) -88%
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Net Income 18,154 9.3% 35,327 17.0% (17,173) -49%
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(i) See first page of this report.


The Company operates three divisions: Well Service, Production Services and Corporate. The Well Service Division provides deep coiled tubing; nitrogen; fracturing, including coalbed methane fracturing; cementing services; and geological services. The Production Services Division provides acidizing, intermediate depth coiled tubing, and industrial services.



Well Service Division - Overview ($ thousands, unaudited)

Three months ended, Dec. 31, % of Dec. 31, % of Sept. 30, % of
2007 Revenue 2006 Revenue 2007 Revenue
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Revenue 184,416 196,938 216,861
Expenses
Materials and
operating 142,712 77.4% 128,646 65.3% 147,779 68.1%
General and
administrative 1,215 0.7% 525 0.3% 855 0.4%
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Total expenses 143,927 78.0% 129,171 65.6% 148,634 68.5%
Operating income(i) 40,489 22.0% 67,767 34.4% 68,227 31.5%

Number of jobs 5,834 6,290 6,069
Revenue per job 31,942 31,562 36,035
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(i) See first page of this report.


Current Quarter versus Q4 2006

Revenue for the quarter ended December 31, 2007 for the Well Service Division decreased 6% to $184.4 million. Growth in Russia and expansion into the United States did not fully offset the decline in Canada. Well Service Division revenue made up 94% of revenue in the quarter, down slightly from 95% in the prior year.

Changing geographic sales mix reflects our significant investment in foreign operations and our continued focus on diversification outside of our traditional Canadian market. Our Russian operations accounted for 34% of the revenue for this division in the quarter, an increase from 29% last year, reflecting the increased scope of operations and strong demand for services. Correspondingly, Canadian revenue fell to 54% of total revenue from 71% last year as a result of a sharp decline in activity compared with last year. Our United States operations accounted for the remaining 12%.

Fracturing services revenue, including coalbed methane fracturing, increased to 69% of total Well Service revenue compared to 67% for the previous year. This increase is the result of our expansion into the United States as well as continued growth of our fracturing operations in Russia. Cementing services contributed 19% of the total sales of the Well Service Division, compared to 22% in 2006. Coiled tubing accounted for 7% and nitrogen contributed 4% of total Well Service revenue versus 6% and 5% respectively in 2006. Geological services revenue made up the remaining 1% in the current year.

Current Quarter versus Q3 2007

Revenue from the Well Service Division was down from the third quarter in Canada, Russia and the United States.



Well Service - Canadian Operations ($ thousands, unaudited)

Three months ended, Dec. 31, % of Dec. 31, % of Sept. 30, % of
2007 Revenue 2006 Revenue 2007 Revenue
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Revenue 99,550 139,035 107,914
Expenses
Materials and
operating 72,846 73.2% 86,453 62.2% 74,208 68.8%
General and
administrative 357 0.4% 375 0.3% 369 0.3%
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Total expenses 73,203 73.5% 86,828 62.5% 74,577 69.1%
Operating income(i) 26,347 26.5% 52,207 37.5% 33,337 30.9%

Number of jobs 5,139 5,883 5,230
Revenue per job 19,654 23,896 20,763
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(i) See first page of this report.


Current Quarter versus Q4 2006

Revenue in the Well Service Division from our Canadian operations decreased 28% to $99.6 million from the previous year due to an increasingly competitive pricing environment and a reduction in drilling activity. According to the CAODC, the average number of active drilling rigs in the quarter decreased almost 28% to 342 from 471 for the same period in 2006.

The Company had a 13% reduction in job count from fourth quarter of 2006. Revenue per job in Canada was down 18% to $19,654 from the previous year. Discounts were up significantly compared to the fourth quarter of 2006 with the majority of the increases occurring in the last four months of 2007.

Materials and operating expenses for the quarter increased to 73.2% compared to 62.2% for the same period in 2006 as a result of lower activity levels, an increase in lower margin project activity and increased pricing pressure brought on by lower levels of activity. General and administrative costs remained relatively unchanged on a year-over-year basis.

Current Quarter versus Q3 2007

Revenue decreased 8% from the third quarter to $99.6 million. Activity was down due to normal seasonal slow downs and the completion of coalbed methane programs midway through the quarter. The reduction in revenue per job from the previous quarter was due to a sharp increase in sales discounts commencing toward the end of the third quarter. The reduction in revenue from the third quarter of 2007 led to lost operational leverage on our fixed cost structure which reduced operating margins.



Well Service - Russian Operations ($ thousands, unaudited)

Three months ended, Dec. 31, % of Dec. 31, % of Sept. 30, % of
2007 Revenue 2006 Revenue 2007 Revenue
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Revenue 63,085 57,903 70,655
Expenses
Materials and
operating 52,902 83.9% 42,193 72.9% 53,099 75.2%
General and
administrative 746 1.2% 150 0.3% 251 0.4%
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Total expenses 53,648 85.0% 42,343 73.1% 53,350 75.5%
Operating income(i) 9,437 15.0% 15,560 26.9% 17,305 24.5%

Number of jobs 492 407 560
Revenue per job 129,205 142,368 128,238
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(i) See first page of this report.


Current Quarter versus Q4 2006

Revenue for the quarter from Russian operations increased to $63.1 million. Revenue improved as a result of increased fracturing and cementing equipment as well as the addition of coiled tubing and nitrogen services compared to the previous year. This additional equipment capacity was added to support higher levels of demand for services, a broadening customer base and expanded operational reach. Revenue per job decreased 9% mainly as a result of a changing service line mix. Fracturing, which has the highest revenue per job, represented 90% of total Russian revenues for the quarter with cementing accounting for 4% and coiled tubing accounting for 6%, compared to 97%, 3% and nil respectively for the same period last year.

Materials and operating expenses for the quarter increased as a percentage of revenue to 83.9%, compared to 72.9% for the same period in 2006. The increase was due to increased staffing levels associated with the addition of our eleventh fracturing crew, coiled tubing equipment and additional cementing capacity. This additional equipment capacity will focus on 2008 customer work programs. The majority of work in Russia is performed under contracts which generally coincide with the calendar year. General and administrative expenses increased due to increased professional fees and business taxes.

Current Quarter versus Q3 2007

Revenue for the quarter decreased compared with our record third quarter due to a slow down primarily in our Nefteyugansk operations. Activity was down in November due to delays in the preparation of wells by the rig companies as they transitioned to cold weather operations. Work programs were also impacted by delays arising from customers requesting additional budget allocations for 2007 work programs.

Materials and operating expense remained consistent in dollar terms. Variable costs reduced consistently with revenue but were offset by increased staffing costs associated with increased equipment capacity focused on 2008 customer work programs. General and administrative costs increased in the quarter due to increased professional fees and business taxes.



Well Service - United States Operations ($ thousands, unaudited)

Three months ended, Dec. 31, % of Sept. 30, % of
2007 Revenue 2007 Revenue
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Revenue 21,781 38,292
Expenses
Materials and operating 16,964 77.9% 20,472 53.5%
General and administrative 112 0.5% 235 0.6%
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Total expenses 17,076 78.4% 20,707 54.1%
Operating income(i) 4,705 21.6% 17,585 45.9%

Number of jobs 203 279
Revenue per job 107,293 137,248
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(i) See first page of this report.


Current Quarter versus Q3 2007

Revenue from the Company's United States operations fell sharply compared to the previous quarter. Job count for the quarter was significantly impacted by a shortage of high quality fracturing proppant. This shortage forced the cancellation of jobs and increased the cost of sand purchased.

Revenue per job fell 22% from the previous quarter, of which 6% can be attributed to a weakening United States dollar. The remaining reduction can be attributed to a changing customer mix and an increasingly competitive pricing environment due to the influx of pressure pumping equipment into our areas of operations.

Materials and operating expenses increased to 77.9% from 53.5% in the previous quarter. Our fixed cost structure was sufficient to support double the amount of work performed in the quarter, however sand shortages resulted in reduced activity. Pricing pressure and the increased cost of sand also contracted margins in the quarter. General and administrative costs remained relatively unchanged compared to the previous quarter.



Production Services Division ($ thousands, unaudited)

Three months ended, Dec. 31, % of Dec. 31, % of Sept. 30, % of
2007 Revenue 2006 Revenue 2007 Revenue
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Revenue 11,378 11,391 11,808
Expenses
Materials and
operating 8,394 73.8% 8,862 77.8% 8,297 70.3%
General and
administrative 42 0.4% 52 0.5% 49 0.4%
-------- -------- ---------
Total expenses 8,436 74.1% 8,914 78.3% 8,346 70.7%
Operating income(i) 2,942 25.9% 2,477 21.7% 3,462 29.3%

Number of jobs 856 798 943
Revenue per job 9,624 10,598 9,120
Number of hours 1,689 2,159 1,567
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(i) See first page of this report.


The Production Services Division includes intermediate depth coiled tubing services, acidizing services and industrial services.

Current Quarter versus Q4 2006

Revenue was consistent with the same quarter last year at $11.4 million. An increase in acidizing and industrial services activity was offset by a reduction in shallow coiled tubing activity. Revenue per job was down 9% as a result of a greater proportion of acidizing work and an increasingly competitive pricing environment for industrial services work.

Materials and operating expenses decreased as a percentage of revenue to 73.8% compared to 77.8% for the same period of 2006. Reduced activity levels in shallow coiled tubing led to a reduction in staffing levels, and third party charges for industrial services decreased due to changes in the type of industrial services work performed. General and administrative expenses remained relatively unchanged on a quarter-over-quarter basis.

Current Quarter versus Q3 2007

Revenue was down slightly from the third quarter due to seasonal slow down of facilities cleaning which impacted our industrial services offering. Scheduled maintenance of facilities occurs in the second and third quarters when weather is more accommodating.

Materials and operating expense compared to the sequential quarter was relatively consistent in dollar terms.



Corporate Division ($ thousands, unaudited)

Three months ended, Dec. 31, % of Dec. 31, % of Sept. 30, % of
2007 Revenue 2006 Revenue 2007 Revenue
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Expenses
Materials and
operating 489 0.2% 363 0.2% 474 0.2%
General and
administrative 8,779 4.5% 8,569 4.1% 8,091 3.5%
--------- --------- ---------
Total expenses 9,268 4.7% 8,932 4.3% 8,565 3.7%
Operating loss(i) (9,268) (8,932) (8,565) -3.7%
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(i) See first page of this report.


Current Quarter versus Q4 2006

Corporate Division expenses consist mainly of general and administrative expenses. Overall, corporate expenses increased 4% to $9.3 million from $8.9 million on a quarter-over-quarter basis. Higher stock-based compensation and staffing costs accounted for $1.4 million of the increase, and public company costs and professional fees accounted for $0.7 million of the increase. Partially offsetting the increases were a reduction in the mark-to-market valuation of deferred share units and the impact of a reduction in the provision for doubtful accounts.

Current Quarter versus Q3 2007

On a sequential basis, corporate expenses have increased $0.7 million of which $0.5 million relates to a recovery of bad debt expense which occurred in the third quarter but did not repeat in the fourth quarter. The remainder of the increase relates to increased professional fees.

Other Expenses and Income

Interest expense increased to $2.8 million for the quarter from $0.1 million for the comparable prior period. This was a result of debt issued to finance acquisitions and capital expenditures undertaken by the Company in the year.

Depreciation and amortization increased to $17.8 million for the quarter compared to $9.8 million for the same period in 2006 as a result of the acquisition of Liberty, as well as the continued investment in equipment and operations facilities, most of which occurred in Russia and the United States.

Foreign exchange gains increased slightly to $1.4 million in the quarter from $0.9 million for the comparable prior period as a result of U.S. dollar and Russian ruble currency fluctuations relative to the Canadian dollar.

Other income decreased from $1.1 million in the fourth quarter of 2006 to a $0.1 million expense for the same period in the current year as lower cash balances in the year resulted in lower interest income.

Income Taxes

Trican had an income tax recovery of $3.3 million in the quarter versus an expense of $17.8 million for the comparable period of 2006. The reduction can be attributed to lower earnings, a $6.8 million future tax rate reduction resulting from the Federal government's announcement of reductions to future corporate income tax rates which were substantively enacted in the fourth quarter, as well as a higher proportion of income from our Russian operations which have lower corporate tax rates.

2007 ANNUAL RESULTS

Trican's financial and operational performance for 2007 reflects record revenue in Russia, expansion into the United States pressure pumping market via our acquisition of Liberty, and a marked decline in demand for our services in Canada.

The Company recorded revenue of $836.4 million in the year, only 1% lower than last year's record $847.5 million. Net income was $111.8 million decreasing from the Company's record net income of $172.6 million achieved the previous year. Similarly, diluted earnings per share fell to $0.91 from $1.44 in 2006. Funds from operations of $131.8 million for the year decreased from $226.5 million one year earlier.

Revenue from our Russian operations benefited from expanded operational reach, expanded service offerings, and additional operating capacity in existing service offerings, combined with strong demand for services. Margin percentages were negatively impacted in Russia by staffing of equipment added in the latter part of the year to support 2008 expansion plans. As noted in previous quarters, volume discounts to a key customer have also contracted margins.

The Company expanded into the United States via our acquisition of Liberty, a Texas-based fracturing company. Liberty's area of operations, the Barnett Shale and the Fayetteville shale, have seen a significant increase in rig counts over the last year. With the influx of drilling rigs into these areas, demand for our services has been strong. Results from our United States operations reflected this strong demand until the end of the third quarter when operations were impacted by a shortage of high quality fracturing proppant. This shortage forced the cancellation of jobs and increased the cost of sand purchased which resulted in lost operational leverage on our fixed cost structure and margin contraction. Management continues to work to secure stable supplies of sand.

After leveling off in 2006, the average number of active drilling rigs in Canada fell by 33% in 2007 to 339 versus 502 in 2006(1), with natural gas directed drilling impacted most severely. This marked reduction in activity in Canada led to excess equipment capacity in the Western Canadian Sedimentary Basin which resulted in an increasingly competitive pricing environment compared to the previous year. The Company has taken steps to reduce the impact of the decrease in activity including equipment transfers to other operations and reduction of the Company's fixed cost structure.

(1) CAODC



Comparative Annual Income Statements ($ thousands)


Year-
Over-
Years ended % of % of Year %
December 31, 2007 Revenue 2006 Revenue Change Change
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Revenue 836,373 100.0% 847,472 100.0% (11,099) -1%
Expenses
Materials and
operating 602,919 72.1% 531,875 62.8% 71,044 13%
General and
administrative 38,363 4.6% 31,405 3.7% 6,958 22%
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Operating income (i) 195,091 23.3% 284,192 33.5% (89,101) -31%
Interest expense 8,596 1.0% 736 0.1% 7,860 1068%
Depreciation and
amortization 62,707 7.5% 34,798 4.1% 27,909 80%
Foreign exchange
gain (20,512) -2.5% (2,027) -0.2% (18,485) 912%
Other income (1,356) -0.2% (2,321) -0.3% 965 -42%
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Income before income
taxes and
non-controlling
interest 145,656 17.4% 253,006 29.9% (107,350) -42%
Provision for
income taxes 31,183 3.7% 79,633 9.4% (48,450) -61%
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Income before
non-controlling
interest 114,473 13.7% 173,373 20.5% (58,900) -34%
Non-controlling
interest 2,656 0.3% 810 0.1% 1,846 228%
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Net income 111,817 13.4% 172,563 20.4% (60,746) -35%
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(i) See first page of this report.


Well Service Division -- Overview ($ thousands)

Year-
Over-
Years ended December 31, % of % of Year
2007 Revenue 2006 Revenue Change
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Revenue 792,109 797,517 -1%
Expenses
Materials and operating 567,016 71.6% 495,558 62.1% 14%
General and administrative 3,474 0.4% 1,493 0.2% 133%
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Total expenses 570,490 72.0% 497,051 62.3% 15%
Operating income (i) 221,619 28.0% 300,466 37.7% -26%

Number of jobs 22,521 26,178 -14%
Revenue per job 35,481 30,679 16%
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(i) See first page of this report.


Revenue for the year ended December 31, 2007 for the Well Service Division was down slightly to $792.1 million from $797.5 million. Well Service Division revenue made up 95% of total revenue in the year, up from 94% last year.

Geographically, our Russian operations accounted for 32% of the revenue for this division during the year, an increase from 24% last year, reflecting the increased scope of operations and strong demand for services. Correspondingly, Canadian revenue fell to 54% of total revenue from 76% last year as a result of a sharp decline in activity in the year. Our expansion into the United States accounted for the remaining 13% of revenue.

Fracturing services revenue, which includes coalbed methane fracturing, increased to 72% of total Well Service revenue compared to 63% for the prior year. This marked increase is the result of our expansion into the United States as well as continued growth of our Russian operations. We successfully expanded our service offering in Russia from an almost exclusive focus on fracturing to one that now includes expanded cementing operations and the introduction of coiled tubing and nitrogen services. Cementing services contributed 18% of the total sales of the Well Service Division, compared to 26% in 2006. Coiled tubing accounted for 6% and nitrogen contributed 3% of total Well Service revenue versus 6% and 5% respectively in 2006. Geological services revenue made up the remaining 1% in the year.



Well Service -- Canadian Operations ($ thousands)

Year-
Over-
Years ended December 31, % of % of Year
2007 Revenue 2006 Revenue Change
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Revenue 429,847 605,725 -29%
Expenses
Materials and operating 308,582 71.8% 355,903 58.8% -13%
General and administrative 1,474 0.3% 1,243 0.2% 19%
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Total expenses 310,056 72.1% 357,146 59.0% -13%
Operating income (i) 119,791 27.9% 248,579 41.0% -52%

Number of jobs 19,681 24,626 -20%
Revenue per job 22,087 24,822 -11%
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(i) See first page of this report.


Revenue from the Well Service Division's Canadian operations decreased 29% to $429.8 million from a record $605.7 million the previous year. The significant reduction in wells drilled has resulted in excess equipment capacity in the Western Canadian Sedimentary Basin which has led to an increasingly competitive pricing environment.

The Company had a 20% reduction in job count from a record year in 2006. According to the CAODC, active drilling rigs were down 33% over the same period. Revenue per job in Canada was down 11% to $22,087 from the annual record achieved in 2006. Discounts increased significantly year-over-year with the majority of the increases occurring in the last four months of the year.

Materials and operating expenses for the year increased to 71.8% compared to 58.8% for the same period in 2006 as a result of lower utilization levels reducing operational leverage, an increase in lower margin project activity and pricing pressure brought on by lower levels of activity. General and administrative costs remained relatively unchanged on a year-over-year basis.



Well Service -- Russian Operations ($ thousands)

Year-
Over-
Years ended December 31, % of % of Year
2007 Revenue 2006 Revenue Change
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Revenue 256,628 191,792 34%
Expenses
Materials and operating 199,150 77.6% 139,655 72.8% 43%
General and administrative 1,483 0.6% 250 0.1% 493%
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Total expenses 200,633 78.2% 139,905 72.9% 43%
Operating income (i) 55,995 21.8% 51,887 27.1% 8%

Number of jobs 2,046 1,552 32%
Revenue per job 126,467 123,611 2%
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(i) See first page of this report.


Revenue from our Russian operations increased 34% year-over-year to a record $256.6 million as a result of expanded operational reach, expanded service offerings, and additional operating capacity in existing service offerings, combined with strong demand for services.

Russian job count of 2,046 surpassed last year's record 1,552 by 32%. During the year, additional fracturing and cementing capacity were added. The Company also introduced coiled tubing and nitrogen services to broaden its existing service offerings. Revenue per job also set a new record increasing slightly to $126,467. This increase is the result of a trend towards larger fracturing job sizes and improved pricing on cement jobs.

Materials and operating expenses for the year increased as a percentage of revenue to 77.6% from 72.8% in the previous year. The increase was primarily due to an increase in the fourth quarter as staffing levels increased in preparation of our eleventh fracturing crew, coiled tubing and nitrogen equipment and additional cementing capacity. This additional equipment capacity will focus on 2008 customer work programs. General and administrative expenses have increased as a result of increased staffing costs and professional fees.



Well Service -- United States Operations ($ thousands)

Year ended December 31, % of
2007 Revenue
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Revenue 105,634
Expenses
Materials and operating 59,284 56.1%
General and administrative 517 0.5%
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Total expenses 59,801 56.6%
Operating income (i) 45,833 43.4%

Number of jobs 794
Revenue per job 133,040
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(i) See first page of this report.


Revenue from our United States operations for the period since the March 8 acquisition of Liberty totaled $105.6 million. A total of 794 jobs were completed with average revenue per job of $133,040.



Production Services Division ($ thousands)

Year-
Over-
Years ended December 31, % of % of Year
2007 Revenue 2006 Revenue Change
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Revenue 44,264 49,955 -11%
Expenses
Materials and operating 33,488 75.7% 34,563 69.2% -3%
General and administrative 206 0.5% 385 0.8% -46%
--------- --------
Total expenses 33,694 76.1% 34,948 70.0% -4%
Operating income (i) 10,570 23.9% 15,007 30.0% -30%

Number of jobs 3,087 3,112 -1%
Revenue per job 9,846 10,960 -10%
Number of hours 9,369 11,947 -22%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(i) See first page of this report.


Revenue from the Production Services Division decreased by 11% on a year-over-year basis as a result of a reduction in shallow coiled tubing activity and an increase in pricing pressure, most notably on industrial services work as competitors attempt to increase market share.

Revenue per job was down 10% due to pricing pressure on industrial services work, offset partially by an increase in the proportion of industrial services work as this service line has historically higher revenue per job than acidizing.

Job count remained relatively unchanged as an increase in industrial services job count was offset by fewer acidizing jobs, however demand for shallow coiled tubing decreased from the previous year.

Materials and operating expenses increased as a percentage of revenue to 75.7% compared to 69.2% of revenue for 2006, as a result of margin contraction resulting from industry-wide pricing pressure offset partially by a reduction in third party charges. General and administrative expenses remained relatively unchanged on a year-over-year basis.



Corporate Division ($ thousands)

Year-
Over-
Years ended December 31, % of % of Year
2007 Revenue 2006 Revenue Change
----------------------------------------------------------------------------
Expenses
Materials and operating 2,415 0.3% 1,621 0.2% 49%
General and administrative 34,683 4.1% 29,660 3.5% 17%
--------- --------
Total expenses 37,098 4.4% 31,281 3.7% 19%
Operating loss (i) (37,098) (31,281) 19%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(i) See first page of this report.


Overall, corporate expenses increased 19% to $37.1 million from $31.3 million on a year-over-year basis. Stock-based compensation and staffing costs increased $3.7 million while public company costs and professional fees increased $2.0 million.

Other Expenses and Income

Interest expense increased to $8.6 million for the year from $0.7 million for the comparable prior period as a result of debt issued to finance acquisitions and capital expenditures undertaken by the Company in the year.

Depreciation and amortization increased to $62.7 million for the year relative to $34.8 million for the same period in 2006 as a result of the acquisition of Liberty, as well as the continued investment in equipment and operations facilities, most of which occurred in Russia and the United States.

Foreign exchange gains increased to $20.5 million in the year from $2.0 million for the comparable prior period. The majority of this increase can be attribute to a $9.3 million realized gain on the U.S. dollar denominated Bridge Credit Facility and a $7.5 million unrealized gain on the $U.S. 100 million Notes Payable. The Canadian dollar has appreciated over 15% relative to the United States dollar since we obtained the Bridge Credit Facility utilized for the acquisition of Liberty.

Other income decreased from $2.3 million in the prior year to $1.4 million in the current year due to reduced interest income resulting from lower average cash balances in the year.

Income Taxes

Trican's income tax expense decreased to $31.2 million in the year from $79.6 million for the comparable period of 2006 primarily as a result of lower earnings. The Company's effective tax rate for 2007 was 21.4% versus 31.5% for 2006. The significant reduction in the Company's effective tax rate can be attributed to future tax rate reductions resulting from decreases to future corporate income tax rates, an increase in income taxed in lower rate jurisdictions and an increase in non-taxable exchange gains arising from the translation of foreign subsidiaries.

Liquidity and Capital Resources

Operating Activities

Funds provided by operations in the year decreased to $131.8 million from a record the previous year of $226.5 million. This reduction can be attributed to a reduction in consolidated earnings, a future income tax recovery and an increase in foreign exchange gains.

At December 31, 2007 the Company had working capital of $181.7 million versus $239.2 million at the end of 2006. The majority of the decrease can be attributed to the reduction in cash resulting from the significant amount of investing activities in the year.

The Company, through the conduct of its operations, had undertaken certain contractual obligations as noted in the table below:



(stated in thousands of dollars) Payments due by period
----------------------------------------------------------------------------
2008 2009 2010 2011 2012
----------------------------------------------------------------------------
Operating leases 5,340 3,743 2,743 2,472 2,315
----------------------------------------------------------------------------


Investing Activities

During the first quarter of 2007, the Company completed three acquisitions.

The Company acquired a 93.2% interest in Liberty with Liberty's management retaining the remaining 6.8% interest. The Company will acquire the remaining interest over time at a price based upon an agreed methodology. The acquisition of Liberty has been recorded using the purchase method with results of operations of Liberty included in the Well Service segment of the consolidated financial statements as of March 9, 2007. The cost of the purchase was $313.5 million net of cash acquired and was paid for in cash of $226.7 million; common shares issued out of treasury for $83.0 million and acquisition costs of $3.9 million. Net assets of $117.9 million and goodwill and intangible assets of $195.6 million were acquired.

In addition, the Company acquired all of the shares of CBM Solutions Ltd. (CBM Solutions) and increased its ownership interest in R-Can Services Limited (R-Can) by 1.2% to 98.2%. Headquartered in Calgary, Alberta, CBM Solutions specializes in the provision of geological and engineering services for unconventional gas wells, including gas content analysis, reservoir characterization and consulting services for coalbed methane and shale gas wells. R-Can holds the investment in the Company's Russian operations. The cost of these purchases totaled $31.9 million and was paid in cash of $25.5 million and deferred consideration of $6.4 million. These acquisitions were recorded using the purchase method with results of operations of CBM Solutions included in the Well Service segment of the consolidated financial statements as of the close date. The cost of these purchases was allocated as follows: $35.4 million for goodwill and intangible assets, $0.2 million for equipment, a $4.3 million reduction for future tax liabilities, and a $0.6 million reduction in minority interest.

Capital expenditures for the year totaled $160.2 million. This compares with $130.1 million for the same period in 2006. The majority of this investment was directed to well service equipment and facilities in Russia and the United States.

At the end of 2007, the Company had a number of ongoing capital projects and estimates that $58.0 million of additional investment will be required to complete them. In addition to these amounts, the Company recently announced its capital budget for 2008 as follows:



(Stated in millions of dollars)
----------------------------------------------------------------------------
Canadian Operations $ 14.6
Russian Operations 35.3
United States Operations 56.6
Algerian Operations 1.5
Corporate 1.7
----------------------------------------------------------------------------
$ 109.7
----------------------------------------------------------------------------


Trican continues to review opportunities for growth in North America, Russia and the former CIS, Latin and South America, and other parts of the world. These capital budgets may be increased if viable business opportunities are identified by the Company.

Financing Activities

During the first quarter, the Company established a $30.0 million (or $U.S. equivalent) demand Operating Credit Facility, replacing the previous $15.0 million Operating Credit Line. In addition, the Company replaced its $25.0 million revolving equipment and acquisition line with a three year extendible revolving Acquisition and Capital Expenditure Credit Facility Agreement, under which the bank will make available to the Company an amount up to $70.0 million (or $U.S. equivalent). The Acquisition and Capital Expenditure Facility is reviewed annually by the lender, should it not be extended, repayment will be made at the end of the term. Both facilities are unsecured and bear interest at the bank's rate for Canadian prime rate, U.S. base rate, Bankers' Acceptance rates or at LIBOR plus 0 to 125 basis points, dependent on certain financial ratios of the Company. The facilities are subject to financial and non-financial covenants that are typical for this type of arrangement.

During the third quarter, the Company's Acquisition and Capital Expenditure Credit Facility was syndicated to a group of two Canadian chartered banks and expanded from $70 million to $120 million. Terms of this facility were unchanged.

With this change, the Company had a $30 million operating line and a $120 million extendible revolving equipment and acquisition line. At December 31, 2007, $15.6 million was drawn on the operating line and $90.0 million was drawn on the equipment line.

The Company also established a $U.S. 90.0 million non-revolving Bridge Credit Facility to finance a portion of the acquisition of Liberty. The Bridge Facility accrued interest at a rate of U.S. prime plus 0 to 25 basis points or LIBOR plus 75 basis points to 125 basis points, depending on certain financial ratios of the Company.

During the second quarter, the Company entered into an agreement with institutional investors in the United States providing for the issuance, by way of private placement, of $U.S. 100.0 million of Senior Unsecured Notes (the "Notes") in two tranches:

- $U.S. 25.0 Million Series A Senior Unsecured Notes maturing June 22, 2012, bearing interest at a fixed rate of 6.02% payable semi-annually on June 22 and December 22.

- $U.S. 75.0 Million Series B Senior Unsecured Notes maturing June 22, 2014, bearing interest at a fixed rate of 6.10% payable semi-annually on June 22 and December 22.

Proceeds of the Notes issued were used to fully repay the $U.S. 90.0 million Bridge Credit Facility, with the remainder utilized for general corporate purposes. The Notes require the Company to maintain certain financial and non-financial covenants typical for this type of arrangement.

As at February 27, 2008, the Company had 123,061,932 common shares and 9,171,247 employee stock options outstanding.

Subsequent Event

On February 15, 2008, the Company expanded the $120 million (or U.S. dollar equivalent) three year extendible revolving acquisition and capital expenditure Term Credit Facility to $220 million (or U.S. dollar equivalent) until November 17, 2008, at which time the facility will be reduced to $120 million. Other than the facility amount, terms of this facility are unchanged.

Business Risks

A complete discussion of business risks faced by the company may be found under the "Management's Discussion and Analysis" in Trican's 2006 and, when available, 2007 Annual Report.

Outlook

Russia

Demand for our services in Russia looks positive with continued growth expected in 2008. In 2007, we expanded our geographic reach and established operations in the Volga Urals basin through our base in Perm. 2008 will see us continue to expand our areas of operations as we commence operations in the Eastern Siberian Basin with the start up of the Vankor project. We will also expand our existing operations reach in the Western Siberian Basin by establishing a new operations base in Gubkinsky, in the Purpay region. This new base will be north of our existing operations in Nizhnevartovsk and provide support for the Vankor project and will also provide the Company with access to northern gas fields which are expected to become a growing pressure pumping market in the future.

We expect that Russia will continue to be a price competitive, well serviced market, however with our expanded operations reach and growth of existing and new services introduced in 2007, our Russian operations will continue to provide a strong growth platform for Trican.

Canada

Demand for our services fell significantly in 2007 relative to 2006 as our customers struggled with lower North American natural gas prices, a strong Canadian dollar and unfavorable royalty changes introduced by the Government of Alberta. Most industry watchers expect that activity levels in 2008 will fall below 2007 levels as our customers continue to struggle with reduced economic returns from these reservoirs. However there are some early indications that natural gas withdrawals during the winter heating season and reduced LNG imports may reduce North American gas inventory levels which could support improved near term natural gas prices. Should this occur, activity levels late in the year could improve over current expectations.

United States

At present, Trican's American operations continue to struggle to secure sufficient volumes of fracturing sand to support ongoing operations. Traditional fracturing sand suppliers have been unable to keep pace with the overall growth in activity and the increase in the size of fracturing jobs that has lead to higher volumes of sand being required. As a result, since late in the third quarter of 2007, the Company has been unable to secure sufficient volumes of sand to support ongoing operations. We having been working with existing and alternate sand suppliers to secure stable supplies but as yet have not been able to secure sufficient volumes to meet demand for our services on a consistent basis. We are working to alleviate this supply shortage, however, until we are able to so our fracturing operations will continue to underperform relative to our operating capacity and demand for service.

During 2008 we will expand our operations in this market by introducing cementing services and expand our geographic reach by opening additional operations bases.

Demand for services is still strong, however an increase in fracturing capacity in recent years has created additional competition which has lead to some pricing pressure. Industry watchers have indicated that with the continued development of unconventional gas reserves, and the related increased demand for fracturing services, this additional capacity should be taken up and prices are expected to stabilize during 2008.



Summary of Quarterly Results ($ millions, except per share amounts;
unaudited)

2007 2006
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
----------------------------------------------------------------------------
Revenue 195.8 228.7 139.4 272.5 208.3 244.1 137.4 257.6
Net income 18.2 37.6 0.9 55.1 35.3 54.6 17.4 65.2
Earnings per share
Basic 0.15 0.31 0.01 0.47 0.31 0.47 0.15 0.57
Diluted 0.15 0.30 0.01 0.46 0.30 0.46 0.15 0.54
----------------------------------------------------------------------------


Forward-looking Statements

This document contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements include, among others, the Company's prospects, expected revenues, expenses, profits, expected developments and strategies for its operations, and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.

These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "achieve", "achievable," "believe," "estimate," "expect," "intend", "plan", "planned", and other similar terms and phrases. Forward-looking statements are based on current expectations, estimates, projections and assumptions that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; and availability of products, qualified personnel, manufacturing capacity and raw materials. If any of these uncertainties materialize, or if assumptions are incorrect, actual results may vary materially from those expected.



CONSOLIDATED BALANCE SHEETS

(Stated in thousands of dollars)
As at December 31, 2007 2006
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and short-term deposits $23,370 $94,710
Accounts receivable 138,226 156,306
Income taxes recoverable 5,651 -
Inventory 93,209 80,029
Prepaid expenses 15,576 11,807
----------------------------------------------------------------------------
276,032 342,852
Property and equipment (note 6) 555,104 384,659
Intangible assets (notes 5 and 7) 40,659 1,321
Future income tax assets (note 14) 1,070 2,396
Other assets (note 8) 8,782 -
Goodwill (note 5) 167,417 13,983
----------------------------------------------------------------------------
$1,049,064 $745,211
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank loans (note 9) $15,584 $-
Accounts payable and accrued liabilities 70,529 58,142
Deferred consideration (note 5) 2,146 -
Dividend payable 6,123 5,760
Current income taxes payable - 36,312
Current portion of long-term debt (note 10) - 3,397
----------------------------------------------------------------------------
94,382 103,611


Long-term debt (note 10) 188,810 -
Future income tax liabilities (note 14) 67,531 100,413
Deferred consideration (note 5) 4,292 -
Non-controlling interest (note 5) 10,380 1,419
Shareholders' equity
Share capital (notes 5 and 11) 196,165 84,661
Contributed surplus 20,675 15,638
Retained earnings 546,211 446,606
Accumulated other comprehensive income (note 2) (79,382) (7,137)
----------------------------------------------------------------------------
683,669 539,768
----------------------------------------------------------------------------
Contractual obligations, contingencies and
subsequent events (notes 16, 18 and 19)
$1,049,064 $745,211
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


CONSOLIDATED STATEMENTS OF OPERATIONS

(Stated in thousands, except per share amounts)
Years ended December 31, 2007 2006
----------------------------------------------------------------------------
Revenue $836,373 $847,472
Expenses
Materials and operating 602,919 531,875
General and administrative 38,363 31,405
----------------------------------------------------------------------------
Operating income 195,091 284,192
Interest expense on long-term debt and bank loans 8,596 736
Depreciation and amortization 62,707 34,798
Foreign exchange gain (20,512) (2,027)
Other income (1,356) (2,321)
----------------------------------------------------------------------------
Income before income taxes and non-controlling
interest 145,656 253,006
Provision for current income taxes (note 14) 66,985 70,816
Provision for future income taxes (note 14) (35,802) 8,817
----------------------------------------------------------------------------
Income before non-controlling interest 114,473 173,373
Non-controlling interest (note 5) 2,656 810
----------------------------------------------------------------------------
Net income $111,817 $172,563
----------------------------------------------------------------------------
Earnings per share (note 12)
Basic $0.93 $1.50
Diluted $0.91 $1.44
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dividend per share $0.10 $0.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average shares outstanding - basic
(note 12) 120,724 114,846
Weighted average shares outstanding - diluted
(note 12) 123,493 119,572
----------------------------------------------------------------------------
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

(Stated in thousands of dollars) (note 2)
Years ended December 31, 2007 2006
----------------------------------------------------------------------------
Net Income $111,817 $172,563
Other comprehensive income
Unrealized gains/(losses) on translating
financial statements of
self-sustaining foreign operations (72,245) 1,384
----------------------------------------------------------------------------
Other comprehensive income $39,572 $173,947
----------------------------------------------------------------------------
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
AND ACCUMULATED OTHER COMPREHENSIVE INCOME

(Stated in thousands of dollars)
Years ended December 31, 2007 2006
----------------------------------------------------------------------------
Retained earnings, beginning of year $446,606 $285,547
Dividend (12,212) (11,504)
Net income 111,817 172,563
----------------------------------------------------------------------------
Retained earnings, end of year $546,211 $446,606
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive income, beginning
of year $(7,137) $(8,521)
Unrealized gains/(losses) on translating financial
statements of self-sustaining foreign operations (72,245) 1,384
----------------------------------------------------------------------------
Accumulated other comprehensive income, end of
year $(79,382) $(7,137)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


CONSOLIDATED CASH FLOW STATEMENTS

(Stated in thousands of dollars)
Years ended December 31, 2007 2006
----------------------------------------------------------------------------
Cash Provided By (Used In):
Operations
Net income $111,817 $172,563
Charges to income not involving cash:
Depreciation and amortization 62,707 34,798
Future income tax provision (35,802) 8,817
Non-controlling interest 2,656 810
Stock-based compensation 12,730 11,028
Loss / (Gain) on disposal of property and equipment (19) 442
Gain on sale of investment - (135)
Realized foreign exchange gain from financing
activities (9,270) -
Unrealized foreign exchange gain (13,064) (1,803)
----------------------------------------------------------------------------
Funds provided by operations 131,755 226,520
Net change in non-cash working capital from
operations (927) (22,963)
----------------------------------------------------------------------------
Net cash provided by operating activities 130,828 203,557


Investing
Purchase of property and equipment (160,178) (130,130)
Proceeds from the sale of property and equipment 238 1,294
Purchase of other assets - (7)
Loan receivable (8,782) -
Business acquisitions, net of cash acquired (256,079) (2,536)
Net change in non-cash working capital from the
purchase of property and equipment (2,172) (1,204)
----------------------------------------------------------------------------
(426,973) (132,583)


Financing
Net proceeds from issuance of share capital 20,837 5,214
Net issuance/(repayment) of long-term debt 217,797 (10,757)
Partnership distribution (427) -
Dividend paid (11,849) (5,744)
----------------------------------------------------------------------------
226,358 (11,287)


Effect of exchange rate changes on cash (1,553) -
----------------------------------------------------------------------------

Increase / (decrease) in cash and short-term
deposits (71,340) 59,687
Cash and short-term deposits, beginning of year 94,710 35,023
----------------------------------------------------------------------------
Cash and short-term deposits, end of year $23,370 $94,710
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplemental information
Income taxes paid 108,659 43,666
Interest paid 8,079 736
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


Notes to Consolidated Financial Statements

For the years ended December 31, 2007 and 2006

NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of business

Trican Well Service Ltd. (the "Company") is an oilfield services company incorporated under the laws of the province of Alberta. The Company provides a comprehensive array of specialized products, equipment, services and technology for use in the drilling, completion, stimulation and reworking of oil and gas wells in western Canada, Russia, Kazakhstan, the United States, and Algeria.

Basis of presentation

The financial statements are prepared in accordance with Canadian Generally Accepted Accounting Principles. Management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from these estimates.

NOTE 2 - CHANGES IN ACCOUNTING POLICIES

The Company adopted Canadian Institute of Chartered Accountants (CICA) Handbook Section 1530, Comprehensive Income; and Section 3855, Financial Instruments - Recognition and Measurement on January 1, 2007.

As a result of adopting CICA Section 1530, Comprehensive Income, a new line is included in the Consolidated Statement of Operations under net income called "other comprehensive income" and consists of the gains and losses from the translation of the Company's self-sustaining foreign operations. Accumulated other comprehensive income is presented as a separate component of the shareholders' equity section in the Consolidated Balance Sheet. Previously, these gains and losses were deferred in foreign currency translation adjustment within shareholders' equity.

As a result of adopting CICA Section 3855, Financial Instruments - Recognition and Measurement, financial assets classified as loans and receivables and financial liabilities classified as other liabilities have to be measured initially at fair value. The methods used by the Company in determining the fair value of financial instruments are unchanged as a result of implementing this new accounting standard.

There is no material impact on the Consolidated Financial Statements from adoption of these new standards

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:

Consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries, all of which, except two, are wholly owned. All inter-company balances and transactions have been eliminated on consolidation.

Cash and short-term deposits

The Company's short-term investments with original maturities of three months or less are considered to be cash equivalents and are recorded at cost, which approximates fair market value.

Inventory

Inventory is carried at the lower of cost, determined under the first-in, first-out method, and net realizable value.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Major betterments are capitalized. Repairs and maintenance expenditures which do not extend the useful life of the property and equipment are expensed.



Depreciation is calculated using the straight-line method over the estimated
useful life of the asset as follows:

----------------------------------------------------------------------------
Buildings and improvements 20 years
Equipment 3 to 10 years
Furniture and fixtures 2 to 10 years
----------------------------------------------------------------------------


Management bases the estimate of the useful life and salvage value of property and equipment on expected utilization, technological change and effectiveness of maintenance programs. Although management believes the estimated useful lives of the Company's property and equipment are reasonable, it is possible that changes in estimates could occur which may affect the expected useful lives and salvage values of the property and equipment.

Impairment of Long-Lived Assets

Long-lived assets, which include property and equipment and intangible assets are tested for impairment annually, or more frequently as circumstances require. An impairment loss is recognized when the carrying amount of the assets exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. Estimates of undiscounted future net cash flows are calculated using estimated future job count, sales prices, operating expenditures and other costs. These estimates are subject to risk and uncertainties, and it is possible that changes in estimates could occur which may effect the expected recoverability of the Company's assets.

To test for and measure impairment, assets are grouped at the lowest level for which identifiable cash flows are largely independent. The three lowest asset groupings for which identifiable cash flows are largely independent are Well Service, Production Services and industrial services which is a component or reporting unit within Production Services.

Goodwill

Goodwill represents the excess of purchase price for business acquisitions over the fair value of the acquired net assets. Goodwill is allocated as of the date of the business combination to the Company's reporting units that are expected to benefit from the synergies of the business combination. Goodwill is not amortized, but is tested for impairment at least annually.

The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit is compared with its fair value. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and performance of the second step of the impairment test is unnecessary. The second step compares the implied fair value of the reporting unit's goodwill with its carrying amount to measure the amount of the impairment loss, if any.

Intangible Assets

Non-compete agreements relate to the Company's acquisitions and are recorded at estimated cost and amortized on a straight line basis over 8 years.

Customer relationships relate to the Company's acquisitions and are recorded at estimated cost and amortized on a straight line basis over 5 years.

The "CBM Process" relates to an acquisition by the Company and is recorded at estimated cost and amortized on a straight line basis over 10 years.

Revenue recognition

The Company's revenue comprises services and other revenue and is generally sold based on fixed or determinable priced purchase orders or contracts with the customer. Service and other revenue is recognized when the services are provided and collectability is reasonably assured. Customer contract terms do not include provisions for significant post-service delivery obligations.

Income taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, the Company records future income taxes for the effect of any difference between the accounting and income tax basis of an asset or liability, using the substantively enacted tax rates. The computation of the provision for income taxes involves tax interpretations, regulations and legislation that are continually changing. There are tax matters that have not yet been confirmed by taxation authorities; however, management believes the provision for income taxes is reasonable.

Foreign currency translation

For foreign entities whose functional currency is the Canadian dollar, the Company translates monetary assets and liabilities at year-end exchange rates, and non-monetary items are translated at historical rates. Income and expense accounts are translated at the average rates in effect during the year. Gains or losses from changes in exchange rates are recognized in consolidated income in the year of occurrence.

For foreign entities whose functional currency is not the Canadian dollar, the Company translates assets and liabilities at year-end rates and income and expense accounts at average exchange rates. Adjustments resulting from these translations are reflected in the consolidated statements of other comprehensive income as unrealized gains or losses on translating financial statements of self-sustaining foreign operations.

Transactions of Canadian entities in foreign currencies are translated at rates in effect at the time of the transaction. Foreign currency monetary assets and liabilities are translated at current rates. Gains or losses from changes in exchange rates are recognized in consolidated income in the year of occurrence. Advances made to subsidiaries for which settlement is not planned or anticipated in the foreseeable future will be considered part of the net investment. Accordingly, gains and losses from these advances are reported in the consolidated statements of other comprehensive income as unrealized gains or losses on translating financial statements of self-sustaining foreign operations.

Stock-based compensation plans

The Company has a stock option plan which is described in note 13. The Company accounts for stock options using the Black-Scholes option pricing model, whereby the fair value of stock options are determined on their grant date and recorded as compensation expense over the period that the stock options vest, with a corresponding increase to contributed surplus. When stock options are exercised, the proceeds together with the amount recorded in contributed surplus are recorded in share capital.

The Company has a deferred share unit plan which is described in note 13. The Company accrues a liability equal to the closing price of the Company's common shares for each unit issued under the plan.

Earnings per share

Basic earnings per share is calculated using the weighted average number of common shares outstanding during the period. Under the treasury stock method, diluted earnings per share is calculated based on the weighted average number of shares issued and outstanding during the year, adjusted by the total of the additional common shares that would have been issued assuming exercise of all stock options with exercise prices at or below the average market price for the year, offset by the reduction in common shares that would be purchased with the exercise proceeds.

Comparative figures

Comparative figures have been restated to conform to current year's presentation.

NOTE 4 - ACCOUNTING STANDARDS PENDING ADOPTION

The CICA has issued new guidance on Section 3031, Inventories. The Company will apply this guidance on the standard effective January 1, 2008, which is summarized below.

Section 3031, Inventories - This section provides new guidance on the recognition, measurement, and disclosure of inventories which include: the elimination of the LIFO method of accounting for inventory; the requirement to measure inventories at the lower of cost and net realizable value; the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories; and the inclusion of spare parts inventory not consumed as part of the regular maintenance program as property and equipment. In addition, disclosure requirements have been enhanced. Inventory policies, carrying amounts, amounts recognized as an expense, write-downs and the reversals of write-downs are now required to be disclosed. At December 31, 2007, the Company had $93.2 million of inventory of which $36.3 million is spare parts inventory. The revised guidance will require the Company to determine the proportion of the spare parts inventories that are not consumed as part of regular maintenance and include as property and equipment effective January 1, 2008.

The CICA has revised standards on the presentation and disclosure of financial instruments; Section 3862 and 3863, Financial Instruments - Disclosure and Presentation. Theses new standards provide enhanced disclosure relating to financial instruments, and the Company will apply this guidance on the standard effective January 1, 2008.

NOTE 5 - ACQUISITIONS

During the first quarter ended March 31, 2007, the Company completed the following acquisitions:

A. The Company acquired 93.2% of Liberty Pressure Pumping LP's (Liberty) assets, a provider of pressure pumping services in Texas. Headquartered in Denton Texas, Liberty provides stimulation services used in the development and completion of oil and gas wells. Liberty management will retain a 6.8% interest and the Company will acquire the remaining interest over three years at a price based upon an agreed methodology. The acquisition of Liberty was recorded using the purchase method with results of operations of Liberty included in the consolidated financial statements as of March 9, 2007. The Company has finalized the purchase price equation for this acquisition.



The purchase price equation is as follows:

Cost of Acquisition (Stated in thousands):
Cash $ 233,908
Common shares issued out of treasury 82,973(a)
Transaction costs 3,854
----------------------------------------------------------------------------
$ 320,735
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Allocated (Stated in thousands):
Goodwill $ 161,024(b)
Property and equipment 100,488
Other intangibles 34,604
Accounts receivable 30,186
Cash 7,186
Prepaid expenses, inventory and other 4,809
Accounts payable and accrued liabilities (8,435)
Non-controlling interest (9,127)
----------------------------------------------------------------------------
$ 320,735
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(a) 4,008,864 shares at a price of $20.70 per share which was based on the
weighted average share price for the two days preceding and two days
following the announcement date of February 2, 2007.

(b) Goodwill has been attributed to the Well Service reporting segment and
is considered to be deductible for tax purposes.


B. The Company acquired all of the shares of CBM Solutions Ltd. (CBM Solutions) and increased its ownership interest in R-Can Services Limited (R-Can) by 1.2% to 98.2%.

- Headquartered in Calgary Alberta, CBM Solutions specializes in the provision of geological and engineering services for unconventional gas wells, including gas content analysis, reservoir characterization and consulting services for coalbed methane and shale gas wells. The acquisition of CBM Solutions was recorded using the purchase method with results of operations of CBM Solutions included in the consolidated financial statements from the effective date of acquisition. In addition to the amounts disclosed below, contingent consideration may be paid for each calendar year ended 2007, 2008, 2009, 2010, and 2011 based upon financial results for that year. The Company has not yet finalized the purchase price equation for this acquisition.

- Pursuant to an agreement entered into in June 2004 with the remaining shareholder of R-Can, the Company increased its ownership percentage to 98.2% through the purchase of 1,208 common shares.



The purchase price equation of the aforementioned transactions is as
follows:

Cost of Acquisition (Stated in thousands):
Cash and transaction costs $ 25,503
Deferred consideration 6,438(a)
----------------------------------------------------------------------------
$ 31,941
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Allocated (Stated in thousands):
Goodwill $ 19,998(b)
Other intangibles 15,400
Equipment 242
Future income tax liability (4,273)
Non-controlling interest 574
----------------------------------------------------------------------------
$ 31,941
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(a) Deferred consideration consists of $3.5 million in cash and 152,772
common shares of the Company equal to $2.9 million and will be paid
equally on the first, second and third anniversary of the closing date.
(b) Goodwill has been attributed to the Well Service reporting segment and
is not considered deductible for tax purposes.


NOTE 6 - PROPERTY AND EQUIPMENT
(Stated in thousands) 2007 2006
----------------------------------------------------------------------------
Property and Equipment:
Land $ 15,593 $ 13,336
Buildings and improvements 48,109 35,478
Equipment 639,937 436,514
Furniture and fixtures 20,684 18,977
----------------------------------------------------------------------------

724,323 504,305
Accumulated Depreciation:
Buildings and improvements 6,098 4,602
Equipment 152,677 107,202
Furniture and fixtures 10,444 7,842
----------------------------------------------------------------------------
169,219 119,646
----------------------------------------------------------------------------
$ 555,104 $ 384,659
----------------------------------------------------------------------------
----------------------------------------------------------------------------


NOTE 7 - INTANGIBLE ASSETS
(Stated in thousands) 2007 2006
----------------------------------------------------------------------------
Non-compete agreements (accumulated
amortization $2,235) $ 20,616 $ -
Customer relationships (accumulated
amortization $2,025) 11,074 -
CBM Process (accumulated amortization
$637) 7,862 -
License (accumulated amortization 2007 -
$1,247, 2006 - $1,033) 1,107 1,321
----------------------------------------------------------------------------
$ 40,659 $ 1,321
----------------------------------------------------------------------------
----------------------------------------------------------------------------


NOTE 8 - OTHER ASSETS

Included in other assets is an $8.8 million secured, interest bearing first mortgage real estate loan to an unrelated third party.

NOTE 9 - BANK LOANS

The Company has a $30 million (or US dollar equivalent) demand Operating Credit Facility with a Canadian chartered bank. This facility is unsecured and bears interest at the bank's prime rate, U.S. base rate, Bankers' Acceptance rate or at LIBOR plus 0 to 125 basis points, dependent on certain financial ratios of the Company. This facility is subject to financial and non-financial covenants that are typical for this type of arrangement. At December 31, 2007, $15.6 million was drawn on the Operating Credit Facility (2006 - nil).



NOTE 10 - LONG-TERM DEBT
(Stated in thousands) 2007 2006
----------------------------------------------------------------------------
Notes payable $ 98,810 $ -
Equipment and acquisition loan 90,000 -
Other - 3,397
----------------------------------------------------------------------------
$ 188,810 $ 3,397
Less: current portion - 3,397
----------------------------------------------------------------------------
$ 188,810 $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Notes Payable

On June 21, 2007, the Company entered into an agreement with institutional investors in the United States providing for the issuance, by way of private placement of U.S. $100 million of Senior Unsecured Notes (the "Notes") in two tranches:

- U.S. $25 Million Series A Senior Notes maturing June 22, 2012, bearing interest at a fixed rate of 6.02% payable semi-annually on June 22 and December 22; and

- U.S. $75 Million Series B Senior Notes maturing June 22, 2014, bearing interest at a fixed rate of 6.10% payable semi-annually on June 22 and December 22.

Proceeds from the Notes were used to fully repay the U.S. $90 million Bridge Credit Facility entered into on March 6, 2007 to finance the acquisition of Liberty, with the remainder utilized for general corporate purposes. The Notes require the Company to maintain certain financial and non-financial covenants that are typical for this type of arrangement.

Equipment and Acquisition Loan

On March 9, 2007, the Company entered into a $70 million (or US dollar equivalent) three year extendible revolving acquisition and capital expenditure Term Credit Facility with a Canadian chartered bank. This facility is reviewed annually by the lender, should it not be extended, repayment will be made at the end of the term. This facility is unsecured and bears interest at the bank's prime rate, United States base rate, Bankers' Acceptance rate or at LIBOR plus 0 to 125 basis points, dependent on certain financial ratios of the Company. This facility is subject to financial and non-financial covenants that are typical for this type of arrangement.

On September 13, 2007, this facility was syndicated with two Canadian chartered banks and expanded from $70 million to $120 million (or US dollar equivalent). Terms of this facility are unchanged. At December 31, 2007, $90.0 million was drawn on the Term Credit Facility (2006 - nil). See note 19 for revisions to this facility subsequent to year end.



NOTE 11 - SHARE CAPITAL

Authorized:

The Company is authorized to issue an unlimited number of common shares and
preferred shares, issuable in series.

Issued and Outstanding - Common Shares:
----------------------------------------------------------------------------
Number of
(stated in thousands, except share amounts) Shares Amount
----------------------------------------------------------------------------
Balance, December 31, 2005 113,908,132 $ 77,806
Exercise of stock options 1,289,542 5,214
Compensation expense relating to options
exercised 1,641
----------------------------------------------------------------------------
Balance, December 31, 2006 115,197,674 84,661
Exercise of stock options 3,243,844 20,938
Compensation expense relating to options
exercised 7,694
Issuance on the acquisition of Liberty, net of
share issuance costs 4,008,864 82,872
----------------------------------------------------------------------------
Balance, December 31, 2007 122,450,382 $ 196,165
----------------------------------------------------------------------------
----------------------------------------------------------------------------


NOTE 12 - EARNINGS PER SHARE
(Stated in thousands, except share and per share amounts)

Basic Earnings Per Share 2007 2006
----------------------------------------------------------------------------
Net income available to common shareholders $111,817 $172,563
Weighted average number of common shares 120,724,035 114,845,714
Basic earnings per share $0.93 $1.50
----------------------------------------------------------------------------

Diluted Earnings Per Share 2007 2006
----------------------------------------------------------------------------
Net income available to common shareholders $111,817 $172,563
Diluted weighted average number of common shares
Weighted average number of common shares 120,724,035 114,845,714
Diluted effect of stock options 2,769,440 4,725,885
----------------------------------------------------------------------------
123,493,475 119,571,599
Diluted earnings per share $0.91 $1.44
----------------------------------------------------------------------------


Excluded from the calculation of diluted earnings per share were weighted average options outstanding of 2,844,183 (2006 - 693,795) as the options' exercise price was greater than the average market price of the common shares for the year.

NOTE 13 - STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans which are described below.

Incentive stock option plan:

Options may be granted at the discretion of the Board of Directors and all officers and employees of the Company are eligible for participation in the Plan. Since July 2004, non-management directors have not participated in this plan. The option price equals the weighted average closing price of the Company's shares on the Toronto Stock Exchange for the five trading days preceding the date of grant. Options granted prior to 2004 vest equally over a period of four years commencing on the first anniversary of the date of grant, and expire on the fifth or tenth anniversary of the date of grant.

In 2004, the Board changed its policy for stock option grants under the stock option plan so that one-third of new options issued under the stock option plan vest on each of the first and second anniversary dates, and the remaining third vest ten months subsequent to the second anniversary date. These options expire on the third anniversary from the date of grant. The compensation expense that has been recognized in net income for the year ended is $12.7 million (2006 - $11.0 million). The weighted average grant date fair value of options granted during 2007 has been estimated at $5.23 (2006 - $5.77) using the Black-Scholes option pricing model. The Company has applied the following assumptions in determining the fair value of options on the date of grant:



2007 2006
----------------------------------------------------------------------------
Vesting period (years) 2.8 2.8
Expiration period (years) 3.0 3.0
Expected life (years) 2.4 2.5
Volatility 36% 33%
Risk-free interest rate 4.4% 4.0%
Expected dividend $0.10 $0.08
----------------------------------------------------------------------------


The Company has reserved 12,245,038 common shares as at December 31, 2007 (December 31, 2006 - 11,519,767) for issuance under a stock option plan for officers and employees. The maximum number of options permitted to be outstanding at any point in time is limited to 10% of the Common Shares then outstanding. As of December 31, 2007, 9,863,531 options (December 31, 2006- 10,963,944) were outstanding at prices ranging from $0.62 - $30.01 per share with expiry dates ranging from 2008 to 2012.



The following table provides a summary of the status of the Company's stock
option plan and changes during the years ending December 31:

2007 2006
----------------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
----------------------------------------------------------------------------
Outstanding at the beginning
of year 10,963,944 $12.50 9,075,332 $7.27
Granted 2,386,033 20.34 3,350,710 23.67
Exercised (3,243,844) 6.45 (1,289,542) 4.07
Forfeited (242,602) 19.61 (172,556) 17.28
----------------------------------------------------------------------------
Outstanding at the end of year 9,863,531 16.21 10,963,944 12.50
----------------------------------------------------------------------------
Exercisable at end of year 4,579,361 $10.92 4,635,767 $5.73
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table summarizes information about stock options outstanding
at December 31, 2007:
Options Outstanding Options Exercisable
----------------------------------------------------------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Excercise Number Exercisable
Prices Outstanding Life Price Exercisable Price
----------------------------------------------------------------------------
$0.62 to $ 0.62 48,000 1 $0.62 48,000 $0.62
$1.13 to $ 2.12 49,000 3 1.51 49,000 1.51
$2.04 to $ 3.04 933,288 4 2.35 933,288 2.35
$2.63 to $ 3.68 1,231,560 5 3.13 1,231,560 3.13
$10.69 to $25.50 2,158,993 1 14.91 1,295,019 15.01
$17.58 to $30.01 3,064,257 2 23.88 1,022,494 23.88
$18.60 to $25.67 2,378,433 3 20.34 - -
----------------------------------------------------------------------------
$0.62 to $30.01 9,863,531 2.6 $16.21 4,579,361 $10.92
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Deferred share unit plan:

In 2004, the Company implemented a deferred share unit ("DSU") plan for outside directors. Under the terms of the plan, DSU's awarded will vest immediately and will be settled with cash in the amount equal to the closing price of the Company's common shares on the date the director specifies upon tendering their resignation from the Board, which in any event must be after the date on which the notice of redemption is filed with the Company and within the period from the Director's termination date to December 15 of the first calendar year commencing after the Director's termination date. The Company has recorded a $0.2 million expense (2006 - $0.5 million recovery) in the year relating to DSU's and there are 132,900 DSU's outstanding at year end (2006 -124,000).

In 2007, the Company agreed to provide an annual election for directors to purchase a like number of Common Shares in the market, in lieu of a DSU grant, within 5 business days of the effective date of the resolution of the Board approving the annual DSU grant. The Company would reimburse directors who make such election, less withholdings. Any such shares purchased shall be held until the earlier of the director's retirement from the Board and the fifth anniversary of the date of purchase.



NOTE 14 - INCOME TAXES (Stated in thousands)

2007 2006
----------------------------------------------------------------------------
Current tax provision $ 66,985 $ 70,816
Future tax provision (35,802) 8,817
----------------------------------------------------------------------------
$ 31,183 $ 79,633
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The geographic income before income taxes and non-controlling interest for
the years ended December 31, are as follows:

2007 2006
----------------------------------------------------------------------------
Canada $ 61,252 $ 210,250
Foreign 84,404 42,756
----------------------------------------------------------------------------
$ 145,656 $ 253,006
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The net income tax provision differs from that expected by applying the
combined federal and provincial income tax rate of 32.45% (2006 - 32.86%) to
income before income taxes for the following reasons:

2007 2006
----------------------------------------------------------------------------
Expected combined federal and provincial income
tax $ 47,265 $ 83,138
Non-deductible expenses 6,233 5,188
Future income tax rate reduction (8,854) (4,937)
Translation of foreign subsidiaries (5,322) (43)
Statutory and other rate differences (8,624) (4,555)
Capital and other foreign tax 765 114
Other (280) 728
----------------------------------------------------------------------------
$ 31,183 $ 79,633
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The components of the future income tax asset and liability as at December
31 are as follows:

2007 2006
----------------------------------------------------------------------------
Future income tax assets:
----------------------------------------------------------------------------
Non-capital loss carry forwards $ - $ 1,337
Deferred share units 662 776
Share issue costs 42 30
Other 366 253
----------------------------------------------------------------------------

1,070 2,396
Future income tax liabilities:
----------------------------------------------------------------------------
Property, equipment and other assets (35,246) (29,367)
Partnership income (26,404) (71,046)
Intangible assets (3,770) -
Goodwill (2,111) -
----------------------------------------------------------------------------
(67,531) (100,413)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ (66,461) $(98,017)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


NOTE 15 - FINANCIAL INSTRUMENTS

a) Fair values of financial assets and liabilities

The fair values of cash and short term deposits, accounts receivable, accounts payable and accrued liabilities included in the consolidated balance sheets, approximate their carrying amount due to the short-term maturity of these instruments. Long-term debt, including current portion, has a fair value of approximately $187.7 million as at December 31, 2007 (December 31, 2006 - $3.4 million).

b) Credit risk

Accounts receivable includes balances from a large number of customers. The Company assesses the credit worthiness of its customers on an ongoing basis as well as monitoring the amount and age of balances outstanding. Accordingly, the Company views the credit risks on these amounts as normal for the industry. As at December 31, 2007 the Company's allowance for doubtful accounts was $1.6 million (December 31, 2006 - $2.2 million).

c) Interest rate risk

The Company manages its exposure to interest rate risks through a combination of fixed and floating rate borrowing facilities that are available if required. As at December 31, 2007, the Notes Payable were the Company's only fixed rate debt.

d) Foreign currency risk

The Company is exposed to foreign currency fluctuations in relation to its investment in Russian and United States operations and certain equipment and product purchases from U.S. vendors related to its Canadian operations. The Company is also exposed to foreign currency fluctuations with respect to the Notes Payable which are denominated in U.S dollars.

NOTE 16 - CONTRACTUAL OBLIGATIONS

The Company has commitments for operating lease agreements, primarily for vehicles and office space, in the aggregate amount of $16.6 million. Payments over the next five years are as follows:



(Stated in thousands) Payments due by period
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2008 2009 2010 2011 2012
----------------------------------------------------------------------------
Operating leases 5,340 3,743 2,743 2,472 2,315
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at December 31, 2007, the Company has commitments totaling approximately $32.8 million relating to the construction of fixed assets in 2008.

NOTE 17 - SEGMENTED INFORMATION
The Company provides a comprehensive array of specialized products, equipment, services and technology to customers through two operating divisions:

- Well Service provides cementing, fracturing, deep coiled tubing, nitrogen and geological services which are performed on new and producing oil and gas wells;

- Production Services provides acidizing, intermediate depth coiled tubing and industrial services which are predominantly used in the stimulation and reworking of existing oil and gas wells.



Well Production
(Stated in thousands) Service Services Corporate Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended December 31,
2007
----------------------------------------------------------------------------
Revenue $ 792,109 $ 44,264 $ - $836,373
Operating income (loss) 221,619 10,570 (37,098) 195,091
Interest expense - - 8,596 8,596
Depreciation and
amortization 58,290 2,865 1,552 62,707
Assets 830,022 48,612 170,430 1,049,064
Goodwill 161,365 6,052 - 167,417
Capital expenditures 157,404 1,876 898 160,178
Goodwill expenditures 181,022 - - 181,022
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended December 31,
2006
----------------------------------------------------------------------------
Revenue $ 797,517 $ 49,955 $ - $847,472
Operating income (loss) 300,466 15,007 (31,281) 284,192
Interest expense - - 736 736
Depreciation and
amortization 31,042 2,574 1,182 34,798
Assets 586,718 52,476 106,017 745,211
Goodwill 7,931 6,052 - 13,983
Capital expenditures 124,122 3,129 2,879 130,130
Goodwill expenditures 2,228 - - 2,228
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Company's operations are carried on in three geographic locations:
Canada, Russia and the United States. Results from operations in Kazakhstan
and Algeria are included within our Russian operations.

United
(Stated in thousands) Canada Russia States Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended December 31,
2007
----------------------------------------------------------------------------
Revenue $ 474,111 $256,628 $ 105,634 $ 836,373
Operating income 103,207 50,820 41,064 195,091
Property and equipment 313,262 117,627 124,215 555,104
Goodwill 22,135 10,132 135,150 167,417
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended December 31,
2006
----------------------------------------------------------------------------
Revenue $ 655,680 $191,792 $ - $ 847,472
Operating income 236,627 47,565 - 284,192
Property and equipment 333,203 51,456 - 384,659
Goodwill 7,014 6,969 - 13,983
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Revenue from each of two external customers for the year ended December 31, 2007 amounts to greater than 10 percent of the Company's total revenue. The first customer's revenue is exclusively Well Service totaling $164.6 million (2006 - $102.2 million). The second customer's revenue includes Well Service and Production Services totaling $85.5 million; revenue from this external customer was less than 10% of the Company's total revenue for the prior year.

NOTE 18 - CONTINGENCIES

The Company, through the performance of its services, is sometimes named as a defendant in litigation. The nature of these claims is usually related to personal injury or completed operations. The Company maintains a level of insurance coverage deemed appropriate by management and for matters for which insurance coverage can be maintained. Management of the Company believes there are no outstanding claims having a potentially material adverse effect on the Company.

NOTE 19 - SUBSEQUENT EVENT

On February 15, 2008, the Company expanded the $120 million (or U.S. dollar equivalent) three year extendible revolving acquisition and capital expenditure Term Credit Facility to $220 million (or U.S. dollar equivalent) until November 17, 2008, at which time the facility will be reduced to $120 million. Terms of this facility are unchanged.

Headquartered in Calgary, Alberta, Trican has operations in Canada, Russia, the US and North Africa. Trican provides a comprehensive array of specialized products, equipment and services that are used during the exploration and development of oil and gas reserves.

A conference call has been schedule on Thursday February 28, 2008 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's results for the 2007 Fourth Quarter and Year End.

To access the conference call, contact the conference call operator at 1-877-677-0837 (North America) or 416-695-6616 (outside North America) 15 minutes prior to the call's start time and ask for the "Trican Well Service Ltd. - Fourth Quarter and Year End 2007 Conference Call".

A replay of the conference call will be available until March 6, 2008 by dialing 1-800-408-3053 (North America) or 416-695-5800 (outside North America). Playback passcode: 3250827.

The conference call will be archived on Trican's website at www.trican.ca.

Contact Information

  • Trican Well Service Ltd.
    Murray Cobbe
    President and CEO
    (403) 266-0202
    (403) 237-7716 (FAX)
    Email: mcobbe@trican.ca
    or
    Trican Well Service Ltd.
    Michael Kelly
    Vice President, Finance & Administration and CFO
    (403) 266-0202
    (403) 237-7716 (FAX)
    Email: mkelly@trican.ca
    or
    Trican Well Service Ltd.
    2900, 645 - 7th Avenue S.W.
    Calgary, Alberta T2P 4G8
    Website: www.trican.ca