Trican Well Service Ltd.
TSX : TCW

Trican Well Service Ltd.

February 28, 2011 21:16 ET

Trican - 2010 Fourth Quarter and Year End Results

CALGARY, ALBERTA--(Marketwire - Feb. 28, 2011) - Trican Well Service Ltd. (TSX:TCW)



Financial Review
($ millions, except per share amounts, unaudited)
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Three months ended Years ended
December 31, December 31,
2010 2009 2008 2010 2009 2008
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Revenue $ 434.3 $ 219.9 $ 322.8 $1,478.3 $ 811.5 $ 1,016.1
Operating income (1) 109.0 24.9 73.2 330.4 70.2 181.8
Net income/(loss) 56.3 14.7 (96.3) 151.6 (8.5) (71.4)
Net income/(loss)
per share
(basic) 0.39 0.12 (0.77) 1.10 (0.07) (0.57)
(diluted) 0.39 0.12 (0.77) 1.09 (0.07) (0.57)
Adjusted net
income/(loss)(1) 59.1 7.4 38.7 163.3 (8.1) 72.3
Adjusted
net income/(loss) per
share(1)
(basic) 0.41 0.06 0.32 1.18 (0.07) 0.58
(diluted) 0.41 0.06 0.31 1.18 (0.07) 0.58

Funds provided
by operations (1) 113.7 27.5 78.9 331.7 38.8 166.2
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(1) Trican makes reference to operating income, adjusted net income/(loss)
and funds provided by operations. These are measures that are not
recognized under Canadian Generally Accepted Accounting Principles
(GAAP). Management believes that, in addition to net income/(loss),
operating income, adjusted net income/(loss) and funds provided by
operations are useful supplemental measures. Operating income provides
investors with an indication of earnings before depreciation, taxes and
interest. Adjusted net income/(loss) provides investors with information
on net income excluding one-time non-cash charges and the non-cash
effect of stock-based compensation expense. Funds provided by operations
provide investors with an indication of cash available for capital
commitments, debt repayments and other expenditures. Investors should be
cautioned that operating income, adjusted net income/(loss), and funds
provided by operations should not be construed as an alternative to net
income/(loss) determined in accordance with GAAP as an indicator of
Trican's performance. Trican's method of calculating operating income,
adjusted net income/(loss) and funds provided by operations
may differ from that of other companies and accordingly may not be
comparable to measures used by other companies.


FOURTH QUARTER HIGHLIGHTS

Consolidated revenue for the fourth quarter of 2010 increased by 98% compared to the same period in 2009 and net income increased to $56.3 million from $14.7 million. Fourth quarter adjusted net income increased to $59.1 million from $7.4 compared to the same period in 2009, and diluted adjusted net income per share was $0.41 compared to $0.06 in the fourth quarter of 2009.

Revenue in Canada increased by 110% compared to the fourth quarter of 2009 and 13% compared to the third quarter of 2010. Canadian operating results continued to benefit from the strength of horizontal drilling with a 79% increase in the number of horizontal wells drilled compared to the fourth quarter of 2009. In addition, oil and liquids-rich gas activity continued to grow during the fourth quarter as our customers focused on developing these reservoirs. Price increases of 20% compared to the fourth quarter of 2009 and 5% compared to the third quarter of 2010 contributed to improved operating margins both sequentially and year-over-year for our Canadian operations.

Revenue in the U.S. increased by 193% year-over-year and 8% on a sequential basis. Our U.S. operations continued to gain from the growth in horizontal drilling as approximately 56% of overall U.S. drilling activity during the fourth quarter was performed on horizontal wells. We also expanded our U.S. operations with the opening of a new base operating out of the Marcellus play. Fourth quarter operating margins in the U.S. were down slightly compared to the third quarter of 2010 as our ability to increase pricing was limited due to the fixed term nature of certain contracts. Costs associated with start-up activities in the Marcellus and cost increases for key inputs also reduced fourth quarter margins in the U.S. We were able to increase pricing on some key contracts late in 2010 and, as a result, we expect 2011 U.S. margins to improve relative to 2010.

Activity levels for our Russian operations were consistent with expectations as revenue increased 5% compared to the fourth quarter of 2009. Sequential revenue declined by 17% due to the decreased activity caused by typical seasonal slowdowns and the completion of the 2010 work contracts. Operating margins for our Russian operations were negatively impacted by significant cost inflation, particularly related to fracturing proppant, chemicals and equipment components.

Capital Budget Update

We have increased our 2011 capital budget by $120 million to $493 million. The increase consists of an additional $70 million for our U.S. operations and includes initiating coiled tubing services in the U.S., expanding our acidizing service line, and infrastructure costs for the establishment of new bases to support our Eagle Ford and other geographic expansion. The Canadian capital budget has increased by $32 million and includes expansion of our nitrogen service line as well as infrastructure costs relating to the expansion of existing bases in Canada. The Russian capital budget has increased by $9 million and includes maintenance and replacement capital initiatives. The remainder of the capital budget increase will be spent in our Corporate Division.

Financing Update

Subsequent to year-end, the Company replaced its existing Revolving Credit Facility with a new syndicated CAD $250 million three year extendible Revolving Credit Facility (the "New Facility"). The New Facility is unsecured and bears interest at Canadian prime rate, U.S. prime rate, Banker's Acceptance rate or at LIBOR plus 125 to 375 basis points, dependent on certain financial ratios of the Company.



COMPARATIVE QUARTERLY INCOME STATEMENTS

($ thousands, unaudited)
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Quarter-
Over-
Three months ended % of % of Quarter %
December 31, 2010 Revenue 2009 Revenue Change Change
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Revenue 434,254 100% 219,862 100.0% 214,392 97.5%
Expenses
Materials and
operating 303,059 69.8% 182,697 83.1% 120,362 65.9%
General and
administrative 22,203 5.1% 12,252 5.6% 9,951 81.2%
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Operating income(1) 108,992 25.1% 24,913 11.3% 84,079 337.5%
Other asset impairment - 0.0% (10,766) -4.9% 10,766 -100%
Interest expense 2,356 0.5% 2,436 1.1% (80) -3.3%
Depreciation and
amortization 29,619 6.8% 24,772 11.3% 4,848 19.6%
Foreign exchange loss 1,270 0.3% 311 0.1% 952 306.1%
Other income (1,276) -0.3% (3,054) -1.4% 1,784 -58.4%
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Income before income
taxes and non
controlling interest 77,023 17.7% 11,214 5.0% 65,809 586.8%
Provision for income
taxes 20,697 4.8% (3,446) -1.6% 24,142 700.6%
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Income before
non-controlling
interest 56,326 13.0% 14,660 6.7% 41,667 284.2%
Non-controlling
interest - 0.0% (41) -0.0% 41 -100%
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Net income 56,326 13.0% 14,701 6.7% 41,626 283.2%
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(1) see first page of this report


CANADIAN OPERATIONS
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Three months
ended,
($ thousands, Dec. 31, % of Dec. 31, % of Sept. 30, % of
unaudited) 2010 Revenue 2009 Revenue 2010 Revenue
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Revenue 267,831 127,256 237,605
Expenses
Materials and
operating 160,135 59.8% 95,730 75.2% 144,971 61.0%
General and
administrative 7,443 2.8% 4,057 3.2% 6,688 2.8%
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Total
expenses 167,578 62.6% 99,787 78.4% 151,659 63.8%
Operating
income(1) 100,253 37.4% 27,469 21.6% 85,946 36.2%

Number of jobs 6,674 4,730 5,521

Revenue per job 39,738 26,421 42,575
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Sales Mix
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Three months ended, Dec. 31, Dec. 31, Sept. 30,
($ thousands, unaudited) 2010 2009 2010
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% of Total Revenue
Fracturing 65% 57% 71%
Cementing 17% 22% 15%
Coiled Tubing 6% 6% 5%
Nitrogen 5% 5% 4%
Acidizing 4% 4% 3%
Other 3% 6% 2%
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Total 100% 100% 100%
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Operations Review

Canadian industry activity was robust during the fourth quarter and was led by the continued strength of horizontal drilling and oil and liquids-rich gas directed activity. The number of wells drilled was up 52% compared to the fourth quarter of 2009, led by a 79% increase in the number of horizontal wells drilled. Our Canadian operations were able to capitalize on these strong market conditions and achieved record quarterly revenue and operating income during the fourth quarter of 2010.

Strong oil prices and favorable economics of liquids-rich gas plays led to continued momentum for oil and liquids-rich gas directed activity during the fourth quarter of 2010. This development continues to positively impact Trican as fourth quarter fracturing and fracturing related revenue from oil and liquids-rich gas plays continued to grow. Fourth quarter operating activity in the Horn River and Montney formations was also strong as producers continued to develop their reserves in these regions.

Strong demand for our services provided us with opportunities to increase pricing and improve operating margins. Our average fourth quarter prices increased by 20% compared to the same period in 2009 and by 5% compared to the third quarter of 2010. Although increases to certain key inputs costs, such as proppant and chemicals, partially offset price improvements, we were able to increase operating income percentage by 1,580 basis points compared to the fourth quarter of 2009 and 120 basis points compared to the third quarter of 2010.

Current Quarter versus Q4 2009

Well count increases, led by horizontal drilling, and robust oil and liquids-rich gas directed activity was primarily responsible for the 110% increase in 2010 fourth quarter Canadian revenue compared to the same period in 2009. Job count grew by 41% with increases across all major service lines, including a 78% increase in fracturing job count. Revenue per job was up by 50% and continues to benefit from the growing demand for fracturing services on horizontal wells. Price increases and a larger proportion of fracturing revenue relative to total revenue also contributed to higher revenue per job. Fracturing revenue per job is significantly higher than revenue per job for our other service lines.

Materials and operating expenses decreased as a percentage of revenue to 59.8% compared to 75.2% for the same period in 2009, largely due to pricing increases and greater operating leverage on our fixed cost structure. General and administrative expenses increased by $3.4 million due to an increase in costs associated with our restricted share unit program, profit sharing and staff costs.

Current Quarter versus Q3 2010

Revenue increased sequentially by 13% and was supported by higher activity levels as the rig count increased by 14%. Job count increased by 21% while revenue per job decreased by 7% due to changing customer mix and a decline in fracturing revenue as a percentage of total revenue.

Materials and operating expenses decreased as a percentage of revenue to 59.8% compared to 61.0% for the third quarter of 2010 as pricing increases more than offset increases to input costs such as proppant and chemicals. General and administrative expenses increased by $0.8 million due to an increase in restricted share unit costs.



UNITED STATES OPERATIONS

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Three months
ended,
($ thousands, Dec. 31, % of Dec. 31, % of Sept. 30, % of
unaudited) 2010 Revenue 2009 Revenue 2010 Revenue
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Revenue 107,588 36,701 99,217
Expenses
Materials and
operating 83,888 78.0% 36,711 100.0% 75,543 76.1%
General and
administrative 1,958 2.5% 931 2.5% 2,168 2.2%
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Total expenses 85,846 79.8% 37,642 102.6% 77,711 78.3%
Operating
income(1) 21,742 20.2% (941) -2.6% 21,506 21.7%
Number of jobs 822 467 807
Revenue per job 131,538 78,965 123,373
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Operations Review

The U.S. operating environment remained strong during the fourth quarter as the average number of active drilling rigs in our areas of operation remained consistent with the third quarter. The demand for pressure pumping services benefitted from the continued strength of horizontal drilling in the U.S. as horizontal wells represented approximately 56% of drilling activity during the fourth quarter. In addition, strong U.S. industry activity was supported by the growth of oil and liquids-rich gas directed activity.

We expanded our geographic reach midway through the fourth quarter with the opening of a base in Pennsylvania, operating in the Marcellus play. We completed 27 jobs in this region during the quarter and expect it to be a significant source of growth for our U.S. operations throughout 2011.

Fourth quarter operating margins declined by 150 basis points compared to third quarter of 2010. The fixed term nature of certain contracts did not allow for meaningful price increases during the quarter as pricing increased by only 3% compared to the third quarter. In addition, one time start-up costs relating to the new base in Pennsylvania and overall cost inflation for key inputs had a negative impact on operating margins. We were able to increase pricing on some key contracts late in 2010 and, as a result, we expect 2011 U.S. margins to improve relative to 2010.

Current Quarter versus Q4 2009

Fourth quarter revenue in the U.S. increased by 193% compared to the fourth quarter of 2009 due to an increase in job count and revenue per job. The 76% increase in job count reflects the increased industry activity, as the rig count in the existing areas that we operate increased by 32% in the fourth quarter compared to the same period in 2009. In addition, our new operating bases in Shawnee and Pennsylvania provided added capacity during the quarter. Revenue per job increased by 67% compared to the fourth quarter of 2009, reflecting a price increase of 49% and larger job sizes.

Materials and operating expenses decreased from 100% to 78% of revenue as a result of the pricing increases achieved during the year and higher operating leverage on our fixed cost structure. General and administrative costs increased by $1.0 million due largely to costs associated with our restricted share unit plan.

Current Quarter versus Q3 2010

Revenue increased by 8% on a sequential basis mainly due to a 7% increase in revenue per job. Pricing increases of 3%, combined with larger job sizes contributed to the increase in revenue per job and were partially offset by a 3% weakening of the U.S. dollar. Fourth quarter job count was relatively unchanged compared to the third quarter, which was consistent with the nominal change in the rig count.

Materials and operating expenses as a percentage of revenue increased to 78% from 76% as pricing increases were offset by higher costs for key inputs. Fourth quarter general and administrative expenses remained relatively consistent with the third quarter.



RUSSIAN OPERATIONS

----------------------------------------------------------------------------
Three months
ended,
($ thousands, Dec. 31, % of Dec. 31, % of Sept. 30, % of
unaudited) 2010 Revenue 2009 Revenue 2010 Revenue
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Revenue 58,835 55,905 70,932
Expenses
Materials and
operating 53,873 91.6% 48,550 86.8% 57,920 81.7%
General and
administrative 4,010 6.8% 2,009 3.6% 1,595 2.2%
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Total expenses 57,883 98.4% 50,559 90.4% 59,515 83.9%
Operating
income(1) 952 1.6% 5,346 9.6% 11,417 16.1%
Number of jobs 1,052 1,001 1,247
Revenue per job 53,923 54,140 56,001
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(1) see first page of this report.

Sales Mix
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Three months ended, Dec. 31, Dec. 31, Sept. 30,
($ thousands, unaudited) 2010 2009 2010
----------------------------------------------------------------------------
% of Total Revenue
Fracturing 78% 80% 78%
Coiled Tubing 12% 13% 12%
Cementing 5% 4% 5%
Nitrogen 5% 3% 5%
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Total 100% 100% 100%
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Operations Review

Fourth quarter revenue and activity levels declined on a sequential basis for our Russian operations. Decreased activity levels were caused by the completion of our customers 2010 work programs, along with the colder temperatures normally experienced near the end of the year. The year-over-year increase in activity resulted in a 5% increase in revenue, consistent with management's expectations for the region.

Operating margins declined due to significant cost inflation, particularly related to fracturing proppant, chemicals and equipment components. The strength in the North American pressure pumping market has resulted in the export of fracturing proppant from Russia to North America causing an under supply in the Russian market and significant pricing pressure. Due to the fixed price nature of our contracts, we are unable to pass along the cost increases to our customers.

The ruble remained relatively stable during the fourth quarter with average rates decreasing by 3% compared to the third quarter of 2010. There was a 10% weakening of the ruble compared to the fourth quarter of 2009.

Current Quarter versus Q4 2009

Revenue in Russia for the quarter increased by $2.9 million or 5% relative to the fourth quarter of 2009. A year-over-year increase in activity levels was partially offset by the devaluation of the ruble.

Materials and operating expenses increased from 87% to 92% of revenue as significant cost inflation was partially offset by an increase in pricing relative to the fourth quarter of 2009. General and administrative expenses increased by $2.0 million mainly as a result of costs associated with the restricted share unit plan along with higher employee costs.

Current Quarter versus Q3 2010

Revenue declined by 17% compared to the third quarter of 2010 due to decreased activity caused by seasonal slowdowns and the completion of the 2010 work contracts. Revenue per job decreased by 4% largely as a result of the 3% weakening of the ruble.

The continued economic pressures associated with supply inputs caused an increase in variable costs that could not be passed on to customers, resulting in a significant increase in materials and operating costs as a percentage of revenue. General and administrative expenses increased by $2.4 million due to bad debt recoveries recorded that reduced third quarter general and administrative expenses and increased costs associated with the restricted share unit plan.



CORPORATE DIVISION
----------------------------------------------------------------------------
Three months ended,
($ thousands, Dec. 31, % of Dec. 31, % of Sept. 30, % of
unaudited) 2010 Revenue 2009 Revenue 2010 Revenue
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Expenses
Materials and
operating 5,163 1.2% 2,635 1.2% 3,935 1.0%
General and
administrative 8,792 2.0% 4,326 2.0% 7,646 1.9%
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Total expenses 13,955 3.2% 6,961 3.2% 11,581 2.8%
Operating loss(1) (13,955) (6,961) (11,581)
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(1) see first page of this report.


Corporate division expenses consist of salaries, stock-based compensation and office costs related to corporate employees, as well as public company costs.

Current Quarter versus Q4 2009

Corporate Division expenses were up $7 million from the same quarter last year largely because of increases in profit sharing expense, stock based compensation expense and employee costs. Stock based compensation expense includes expenses associated with stock options, restricted share units (RSUs), performance share units (PSUs) and director share units (DSUs). RSU, PSU and DSU expenses are revalued based on the Company's share price, which rose by 43% on a year-over-year basis.

Current Quarter versus Q3 2010

Corporate Division expenses were up $2.4 million on a sequential basis, reflecting increased professional fees and employee costs incurred during the quarter.

OTHER EXPENSES AND INCOME

Interest expense remained relatively stable compared to the fourth quarter of 2009 as a reduction in interest expense due to lower average debt balances was partially offset by standby fees on unused debt capacity. Depreciation and amortization increased by $4.8 million compared to the fourth quarter of 2009 as our large capital expenditure program in 2010 led to increased equipment balances.

Foreign exchange losses were $1.3 million in the quarter compared to a loss of $0.3 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 was $1.3 million in the fourth quarter of 2010 and consisted largely of interest income earned on the loan receivable from an unrelated third party.

INCOME TAXES

Income tax expense increased to $20.7 million in the quarter from a recovery of $3.4 million for the comparable period of 2009. The significant increase in income tax expense recorded during the quarter was primarily a result of higher pre-tax income relative to the fourth quarter of 2009.

2010 HIGHLIGHTS

2010 was a year of expansion for Trican, particularly in North America, and resulted in record revenue, operating income and net income for the Company worldwide. As the oil and gas industry began to emerge from the 2009 global economic recession, activity levels and demand for our services in Canada and the U.S. increased substantially. Horizontal drilling activity continued to increase in 2010 and resulted in high demand for North American pressure pumping services due to an increase in the number of fractures per well. In addition, the size of the fracturing treatments is generally larger than treatments for vertical wells, which leads to higher revenue per job. Our North American operations benefitted from these trends, which was evident in the strong 2010 operating results for our Canadian and U.S. regions.

Consolidated revenue for 2010 increased by 82% to $1.5 billion compared to 2009, and adjusted net income increased to $163.3 million from a loss of $8.1 million. Adjusted diluted net income per share increased to $1.18 from a loss of $0.07 and funds from operations increased to $331.7 million from $38.8 million compared to 2009.

Canadian operating results in 2010, when compared to 2009, benefitted from increased overall industry activity and, in particular, an increase in horizontal drilling and oil and liquids-rich gas directed activity. Higher activity levels led to increased demand for our services and provided opportunities for price increases. As a result, operating margins and profitability improved substantially from 2009.

U.S. operations gained from higher industry activity levels throughout 2010 as the rig count was up in all of our areas of operation. The growth of horizontal drilling led to steady demand for our services and provided opportunities for pricing increases throughout the year. 2010 was also a year of expansion for our U.S. operations as we added new bases in Oklahoma and Pennsylvania.

Activity levels in Russia were consistent with our expectations as revenue increased by 9% and job count increased by 19% compared to 2009. However, overall cost inflation was experienced throughout the year and contributed to a decline in operating margins relative to 2009.



COMPARATIVE ANNUAL INCOME STATEMENTS
($ thousands, unaudited)
----------------------------------------------------------------------------
Year-
Over-
Years ended % of % of Year %
December 31, 2010 Revenue 2009 Revenue Change Change
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Revenue 1,478,293 100% 811,488 100% 666,805 82%
Expenses
Materials and
operating 1,078,377 72.9% 695,413 85.7% 382,964 55%
General and
administrative 69,502 4.7% 45,865 5.7% 23,637 52%
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Operating
income(1) 330,414 22.4% 70,210 8.7% 260,204 371%
Other asset
impairment
reversal - (10,766) 1.3% 10,766 -100%
Interest
expense 9,159 6.2% 10,389 1.3% (1,230) -12%
Depreciation
and
amortization 110,795 7.5% 96,805 11.9% 13,990 14%
Foreign
exchange losses 4,074 0.1% 5,882 0.7% (1,808) -31%
Other income (3,878) 0.0% (2,244) 0.3% (1,634) 73%
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Income/(loss)
before income
taxes and non
controlling
interest 210,264 13.9% (29,856) -3.7% 240,120 -804%
Provision for
income taxes 58,667 4.0% (21,147) -2.6% 79,814 377%
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Income/(loss)
before
non-controlling
interest 151,597 10.0% (8,709) 1.1% 160,306 1,841%
Non-controlling
interest (20) 0.0% (196) 0.0% 176 -90%
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Net Income/(loss) 151,617 10.0% (8,513) 1.1% 160,130 1,881%
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(1) see first page of this report


CANADIAN OPERATIONS
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Year-Over-
Year ended December 31, % of % of Year
($ thousands, unaudited) 2010 Revenue 2009 Revenue Change
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Revenue 858,201 415,630 106%
Expenses
Materials and operating 553,413 64.5% 336,008 80.8% 65%
General and
administrative 25,060 2.9% 18,057 4.3% 39%
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Total expenses 578,473 67.4% 354,065 85.2% 63%
Operating income(1) 279,728 32.6% 61,565 14.8% 354%

Number of jobs 21,931 16,262 35%
Revenue per job 38,733 25,153 54%
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Revenue from Canadian operations increased 106% from the previous year to $858.2 million. Average revenue per job increased by 54% because of larger fracturing jobs performed on horizontal wells and an 8% average price increase. Job count increased by 35% due to increased industry activity.

Materials and operating expenses decreased as a percentage of revenue to 64.5% from 80.8%. The decrease is a result of higher pricing throughout the year combined with increased operational leverage on our fixed cost structure. General and administrative costs increased $7.0 million from the prior year as a result of an increase in restricted share unit costs incurred in 2010, higher profit sharing expenses and increased employee costs.



UNITED STATES OPERATIONS
----------------------------------------------------------------------------
Year-Over-
Year ended December 31, % of % of Year
($ thousands, unaudited) 2010 Revenue 2009 Revenue Change
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Revenue 361,055 157,366 129%
Expenses
Materials and operating 284,573 78.8% 156,547 99.5% 82%
General and
administrative 6,725 1.9% 5,893 3.7% 14%
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Total expenses 291,298 80.7% 162,440 103.2% 79%
Operating income(1) 69,757 19.3% (5,074) -3.2% 1,475%

Number of jobs 3,130 1,825 72%
Revenue per job 115,740 86,416 34%
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An increase in job count combined with a rise in revenue per job resulted in revenue growth of 129% compared to the prior year. Revenue per job increased 34% due mainly to a 24% increase in pricing and larger job sizes, offset partially by a 10% decrease in the value of the U.S. dollar relative to the Canadian dollar. The increase in job count can be attributed to expansion of our operations into two new bases during 2010 and robust activity levels, with the rig count in our existing areas of operations increasing by 27%.

Materials and operating costs as a percentage of revenue decreased from 99.5% to 78.8% largely because of pricing increases and improved operational leverage on our fixed cost structure. General and administrative expense increased $0.8 million due to increased employee costs associated with the restricted share unit plan introduced in 2010.



RUSSIAN OPERATIONS
----------------------------------------------------------------------------
Year-Over-
Year ended December 31, % of % of Year
($ thousands, unaudited) 2010 Revenue 2009 Revenue Change
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Revenue 259,037 238,492 9%
Expenses
Materials and operating 224,896 86.8% 191,533 80.3% 17%
General and
administrative 10,433 4.0% 9,264 3.9% 13%
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Total expenses 235,329 90.8% 200,797 84.2% 17%
Operating income(1) 23,708 9.2% 37,695 15.8% -37%

Number of jobs 4,510 3,781 19%
Revenue per job 56,206 61,090 -8%
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Year-over-year revenue and activity levels were up with a 19% increase in the number of jobs. Revenue per job decreased largely because of the 6% decline in the ruble relative to the Canadian dollar.

Materials and operating expenses increased as a percentage of revenue, resulting in lower operating margins. Cost inflation for key inputs caused deterioration in margins during the year that could not be mitigated through price increases due to the fixed term nature of our Russian contracts. General and administrative expenses increased by $1.2 million mainly as a result of costs associated with the restricted share unit plan along with higher employee costs.



CORPORATE DIVISION
----------------------------------------------------------------------------
Year ended December 31, Year-Over-
($ thousands, % of % of Year
unaudited) 2010 Revenue 2009 Revenue Change
----------------------------------------------------------------------------
Expenses
Materials and operating 15,494 1.0% 8,656 1.1% 79%
General and
administrative 27,285 1.8% 15,320 1.9% 79%
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Total expenses 42,779 2.9% 23,976 3.0% 78%
Operating loss(1) (42,779) (23,976) 78%
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Corporate division expenses increased $18.8 million compared to last year due to an increase in stock based compensation expenses, employee expenses and an increase in profit sharing expenses.

OTHER EXPENSES AND INCOME

Interest expense decreased by $1.2 million relative to 2009 as a result of lower average debt balances and lower interest rates on our debt facilities. Depreciation and amortization increased to $110.8 million for the year compared to $96.8 million for the same period in 2009 due to higher equipment balances in all of our regions.

Foreign exchange losses were $4.1 million for 2010. The weakening of the U.S. dollar and Russian ruble relative to the Canadian dollar during 2010 resulted in a foreign exchange loss on our U.S. dollar and Russian ruble net monetary assets. Other income in 2010 was $3.9 million and consisted largely of interest income on a loan from an unrelated third party.

INCOME TAXES

Trican recorded an income tax expense of $58.7 million in the year compared to a recovery of $21.1 million for the comparable period of 2009. The Company's effective tax rate for 2010 was an expense of 27.9% versus a recovery of 70.8% for 2009. The increase in income tax expense is directly related to higher earnings in the current year relative to 2009.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Funds provided by operations in 2010 increased by $292.9 million to $331.7 million compared to the previous year. The increase was largely income related as Operating Income increased by $260.2 million.

At December 31, 2010 the Company had working capital of $361.3 million compared to $166.1 million from the previous year. There were significant increases in all current asset and accounts payable balances due to the increase in activity experienced during 2010.

Investing Activities

Capital expenditures for the year totaled $279 million compared with $46 million for the same period in 2009. This investment was largely directed towards equipment and operating facilities in North America and included a $46 million asset acquisition from a U.S. based private company.

At the end of 2010, the Company had a number of ongoing capital projects and estimates that $97.5 million of additional investment will be required to complete them.

We have increased our 2011 capital budget by $120 million to $493 million. The increase consists of an additional $70 million for our U.S. operations and includes expansion of our coiled tubing and acidizing service lines as well as infrastructure costs for our new base in the Eagle Ford region. The Canadian capital budget has increased by $32 million and includes expansion of our nitrogen service line as well as infrastructure costs relating to the expansion of existing bases in Canada. The Russian capital budget has increased by $9 million and includes maintenance and replacement capital initiatives. The remainder of the capital budget increase will be spent in our Corporate Division.

Financing Activities

Subsequent to year-end, the Company replaced the Facility with a new syndicated CAD $250 million three year extendible Revolving Credit Facility (the "New Facility"). The New Facility is unsecured and bears interest at prime rate, U.S. base rate, Banker's Acceptance rate or at LIBOR plus 125 to 375 basis points, dependent on certain financial ratios of the Company. The New Facility requires the Company to comply with certain financial and non-financial covenants that are typical for this type of arrangement.

During 2010, our debt balances have decreased by $103 million due primarily to payments made on our long-term revolving and bank loan facilities.

At December 31, 2010 we have $269.9 million of available debt under our existing facilities.

As at February 28, 2011, Trican had 144,768,569 common shares and 6,550,579 employee stock options outstanding.

OUTLOOK

Canada

Canada's strong 2010 operational and financial results were driven by the increasing demand for fracturing services performed on horizontal wells, and the increasing development of oil and liquids-rich gas reservoirs. We expect these trends to continue in 2011 and anticipate strong pressure pumping demand during the year supported by a strong oil price.

Although we are not anticipating a meaningful increase in the price of natural gas during 2011, we expect any potential reductions in the dry gas well count to be largely offset by increases in oil and liquids-rich gas activity. As such, we expect revenue from oil and liquids-rich gas plays to increase as a percentage of total revenue throughout 2011, and maintain the trend that was seen throughout 2010.

Strong activity levels throughout 2010 led to capacity constraints and resulted in the announcement of significant equipment additions during 2010 with a portion of the equipment being deployed during the second half of 2010 and the remainder expected to be deployed during 2011. We expect this additional capacity to be absorbed by the market with robust demand continuing for pressure pumping services and high utilization levels across most producing basins. Approximately 70% of our 2011 year end equipment capacity is committed in 2011 which is indicative of the continued strong demand for our services.

Favourable market conditions led to significant pricing improvements throughout 2010. We expect these improvements to continue into early 2011. However, we believe the rate of pricing improvement will moderate during the year as additional equipment capacity is deployed in the Canadian market. As a result, we are anticipating a modest pricing improvement and the rate of margin improvement to moderate during the 2011 first quarter relative to the 2010 fourth quarter.

United States

A substantial improvement in the U.S. operating environment was evident during 2010, and we expect further improvements to occur in 2011. The renewal in activity levels and optimism within the industry are demonstrated by producers opting to enter into long-term contracts with pressure pumping companies. We currently have two crews in the Haynesville, one in the Barnett, half of a crew in Oklahoma, two in the Marcellus and one in the Eagle Ford under long term contracts. As a result of these contracts, we expect that approximately 55% of our 2011 year end capacity of 548,000 HP for our U.S. operations will be committed to long term work arrangements. We will continue to pursue additional contracts targeting 70% of our equipment under contract by year end. We believe that this supports our view of continued strong activity levels during 2011 for our U.S. operations.

We expect weak natural gas prices coupled with a reduction in land-retention drilling to result in lower activity levels in dry gas producing regions such as the Haynesville Shale, especially during the second half of 2011.
We have entered into a three-year contract in the Haynesville with a major U.S. producer, which we expect will assist in insulating us from the overall activity declines in this region. An exception to the trend of declining dry gas production is the Marcellus Shale. We expect activity levels in this region to remain strong, as it is a low cost reservoir and close to the large eastern U.S. natural gas consuming market. Trican has entered into two long-term two year minimum commitment contracts in this region each with a term running until 2012.

In addition, we expect any well count declines from dry gas to be offset by growth in the oil and liquids-rich gas regions such as the Eagle Ford, Permian and Bakken. The percentage of oil wells drilled in the U.S. relative to gas wells continues to climb, and now represents almost 50% of total wells drilled, which is the highest percentage since 1995. We expect this trend to continue during 2011, and a key objective will be to capitalize on this growth by expanding into areas focused on oil and liquids-rich gas plays. All five crews being built in our 2011 capital budget will be designated for oil or liquids-rich gas areas.

The improved operating environment provided us with opportunities to increase pricing throughout 2010. Many of our contracts have 6 month pricing reviews in them which occur in late December and June. Late in 2010, we obtained pricing increases on these contracts and, as a result, we expect our U.S. operating margins to improve during the 2011 first quarter relative to 2010 fourth quarter.

Russia

Based on the results of the 2011 Russian contract tendering process, we expect activity levels to increase by approximately 7% relative to 2010, and revenue-per-job to increase by 6%. We also expect 2011 fracturing pricing, expressed in Russian rubles, to increase by approximately 8%. We are forecasting a larger increase in coiled tubing and nitrogen activity relative to the increase anticipated in the fracturing service line, which is expected to slightly reduce overall revenue-per-job. Coiled tubing and nitrogen average revenue-per-job are typically much lower than the fracturing service line; however, operating margins are typically higher than the fracturing service line.

While 2010 activity levels met expectations for our Russian operations, significant cost inflation was experienced throughout and year and led to lower than anticipated operating margins. We expect this cost inflation to continue in 2011, in particular for proppant, chemicals and other product costs. The price increases achieved during the 2011 tendering season are expected to offset the cost inflation being experienced in the Russian market; however, we do not anticipate 2011 operating margins to increase relative to 2010. As a result, the Russian management team's planned focus for 2011 will be on optimizing the cost structure of Trican Russia, and maintaining our superior level of customer service in the Russian market.

Algeria

Recent political and legislative issues in Algeria continue to create a difficult operating environment as our customers have delayed work programs. We expect tender delays to result in sluggish activity levels in first half 2011 and impact the utilization of our equipment. However, we expect market conditions to gradually improve later in 2011 as these administrative issues are resolved.

We believe in the long-term potential of the Algerian market and are positioning ourselves for profitable growth in this region as appropriate opportunities materialize. Therefore, our focus in 2011 for our Algerian operations will be to solidify our reputation, enhance our service quality, and improve profitability.

NON-GAAP DISCLOSURE

Adjusted net income does not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. The following is a reconciliation of adjusted net income, as used in this MD&A, to net income, being the most directly comparable measure calculated in accordance with GAAP. The reconciling items have been presented net of tax.



----------------------------------------------------------------------------
Three months ended Year ended
----------------------------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2010 2009 2010 2009
----------------------------------------------------------------------------
Adjusted net income/(loss) 59,133 7,362 163,277 (8,104)
Deduct/(Add):
Other asset (impairment
reversal)/impairment - (9,465) - (9,465)
Non-cash stock-based compensation
expense 2,806 2,126 11,660 9,874
----------------------------------------------------------------------------
Net income/(loss) (GAAP financial
measure) 56,327 14,701 151,617 (8,513)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Other non-GAAP measures include operating income and funds provided by operations. A calculation of operating income is shown in the consolidated statements of operations and funds provided by operations are shown in the consolidated cash flow statements.

FORWARD-LOOKING STATEMENTS

This document contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements are identified by the use of terms and phrases such as "anticipate," "achieve", "achievable," "believe," "estimate," "expect," "intend", "plan", "planned", and other similar terms and phrases. These statements speak only as of the date of this document and we do not undertake to publicly update these forward-looking statements except in accordance with applicable securities laws. These forward-looking statements include, among others:



-- expectation increasing demand for fracturing services performed on
horizontal wells, and the increasing development of oil and
liquids-rich reservoirs these trends to continue in 2011
-- not anticipating a meaningful increase in the price of natural gas
during the first half of 2011
-- expectations any potential reductions in the dry gas well count to be
largely offset by increases in oil and liquids-rich gas activity
-- expectations revenue from oil and liquids-rich gas plays to increase
as a percentage of total revenue throughout 2011, and maintain the
trend that was seen throughout 2010.
-- expectations this additional capacity to be absorbed by the market with
robust demand continuing for pressure pumping services and high
utilization levels across most producing basins.
-- expectations favourable market conditions led to significant pricing
improvements throughout 2010 to continue into early 2011.
-- expectation further improvement in the U.S. operating environment to
occur in 2011
-- expectation weak natural gas prices coupled with a reduction in land
retention drilling to result in lower activity levels in dry gas
producing regions such as the Haynesville Shale, especially during the
second half of 2011.
-- expectation of oil wells drilled in the U.S. relative to gas wells
continue to climb to continue during 2011
-- expectation U.S. operating margins to improve during the 2011 first
quarter relative to 2010 fourth quarter.
-- expectation Russian activity levels to increase relative to 2010,
-- expectation cost inflation in Russia to continue in 2011,
-- expectation tender delays to result in sluggish activity levels in
early 2011 in Algeria due recent political and legislative issues
-- expectation market conditions to gradually improve later in 2011 as
these administrative issues are resolved in Algeria
-- expected timing for completion of the assessment and design phase of
our project plan for transition to IFRS;
-- expectations with respect to changes to be made during the
implementation phase of our project plan for transition to IFRS;
-- expectations with respect to continued monitoring of changes in
accounting standards relating to our IFRS changeover plan and
participation with our peers in any related industry initiatives;
-- expectations that the Company has sufficient funding to meet future
borrowing requirements
-- estimates of additional investment required to complete ongoing capital
projects;
-- expectations that there will be opportunities to expand our operations
in other regions
-- expectation of deployment of additional equipment acquisitions to be
deployed in 2011;
-- expectations that approximately 55% of our 2011 year end
capacity of 548,000 HP for our U.S. Operations will be committed to long
term work arrangements;
-- expectation that the percentage of oil wells drilled in the U.S.
relative to gas well will continue to climb in 2011;
-- intention to designate the five crews that we will be building in our
2011 capital budget for oil or liquids-rich gas areas;
-- expectation that activity levels in Russia to increase by approximately
7% relative to 2010, and revenue-per-job to increase by 6%;
-- expectation that price increases achieved during the 2011 tendering
season will offset the cost inflation.


Forward-looking statements are based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: industry activity; the general stability of the economic and political environment; effect of market conditions on demand for the Company's products and services; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate its business in a safe, efficient and effective manner; the performance and characteristics of various business segments; the effect of current plans; the timing and costs of capital expenditures; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services.

Forward-looking statements are subject to 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; the successful exploitation and integration of technology; customer acceptance of technology; success in obtaining issued patents; the potential development of competing technologies by market competitors; and availability of products, qualified personnel, manufacturing capacity and raw materials. In addition, actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth under the section entitled "Business Risks" in this document.



CONSOLIDATED BALANCE SHEETS

December 31, December 31,
(Stated in thousands of dollars) 2010 2009
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and short-term deposits $ 81,058 $ 26,089
Accounts receivable 364,986 181,483
Income taxes recoverable 6,024 -
Inventory (note 5) 106,719 91,249
Prepaid expenses 9,257 8,568
----------------------------------------------------------------------------
568,044 307,389
Property and equipment (note 6) 697,601 534,696
Intangible assets (note 7) 20,816 28,082
Future income tax assets (note 15) 108,688 104,838
Other assets (note 8) 13,115 17,918
Goodwill (note 9) 42,458 36,916
----------------------------------------------------------------------------
$ 1,450,722 $ 1,029,839
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank loans (note 10) $ - $ 27,997
Accounts payable and accrued liabilities 198,012 97,847
Deferred consideration - 1,882
Dividend payable 7,232 6,282
Current income taxes payable - 6,505
Current portion of capital lease
obligations 1,544 804
----------------------------------------------------------------------------
206,788 141,317


Long-term debt (note 11) 99,460 174,660
Capital lease obligations 2,603 1,619
Future income tax liabilities (note 15) 133,206 64,754
Non-controlling interest (note 4) - 296
Shareholders' equity
Share capital (note 12) 486,594 246,854
Contributed surplus 37,864 28,458
Retained earnings 578,448 441,234
Accumulated other comprehensive loss (94,241) (69,353)
----------------------------------------------------------------------------
1,008,665 647,193
----------------------------------------------------------------------------
Subsequent events, contractual
obligations, and
contingencies (notes 11, 18 and 20) $ 1,450,722 $ 1,029,839
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Three
Months Months Year Year
Ended Ended Ended Ended
Dec. Dec. Dec. Dec.
(Stated in thousands, 31, 31, 31, 31,
except per share amounts) 2010 2009 2010 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue $434,254 $219,862 $1,478,293 $811,488
Expenses
Materials and operating 303,059 182,698 1,078,377 695,413
General and
administrative 22,203 12,251 69,502 45,865
----------------------------------------------------------------------------
Operating income 108,992 24,913 330,414 70,210
Other asset impairment
reversal (note 8) - (10,766) - (10,766)
Interest expense on
long-term
debt and bank loans 2,356 2,436 9,159 10,389
Depreciation and
amortization 29,620 24,772 110,795 96,805
Foreign exchange loss 1,263 311 4,074 5,882
Other income (1,270) (3,054) (3,878) (2,244)
----------------------------------------------------------------------------
Income/(loss) before
income
taxes and non-controlling
interest 77,023 11,214 210,264 (29,856)
Current income tax
(recovery)
/ expense (note 15) (4,401) (2,723) (63) 23,132
Future income tax expense
/ (recovery) (note 15) 25,097 (723) 58,730 (44,279)
----------------------------------------------------------------------------
Income/(loss) before
non-controlling interest 56,327 14,660 151,597 (8,709)
Non-controlling interest - (41) (20) (196)
----------------------------------------------------------------------------
Net income/(loss) $ 56,327 $ 14,701 $ 151,617 $ (8,513)
----------------------------------------------------------------------------
Income/(loss) per share
----------------------------------------------------------------------------
Basic $ 0.39 $ 0.12 $ 1.10 $ (0.07)
Diluted $ 0.39 $ 0.12 $ 1.09 $ (0.07)
----------------------------------------------------------------------------
Dividend per share $ - $ - $ 0.10 $ 0.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average shares
outstanding - basic 143,788 125,639 137,400 125,616
Weighted average shares
outstanding - diluted 145,215 126,145 138,571 125,616
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME/(LOSS)
(Stated in thousands of
dollars) 2010 2009 2010 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net income / (loss) $ 56,327 $ 14,701 $ 151,617 $ (8,513)
Other comprehensive loss
Unrealized losses on
translating financial
statements of self
sustaining foreign
operations (18,410) (9,845) (24,888) (60,677)
----------------------------------------------------------------------------
Other comprehensive
income/(loss) $ 37,917 $ 4,856 $ 126,729 $(69,190)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND ACCUMULATED
OTHER COMPREHENSIVE LOSS

(Stated in thousands of
dollars) 2010 2009 2010 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Retained earnings,
beginning
of year $529,353 $432,816 $ 441,234 $462,312
Dividend (7,232) (6,283) (14,403) (12,565)
Net income / (loss) 56,327 14,701 151,617 (8,513)
----------------------------------------------------------------------------
Retained earnings, end of
year $578,448 $441,234 $ 578,448 $441,234
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other
comprehensive loss,
beginning
of year $(75,831) $(59,508)$ (69,353) $ (8,676)
Unrealized losses on
translating financial
statements of self
sustaining foreign
operations (18,410) (9,845) (24,888) (60,677)
----------------------------------------------------------------------------
Accumulated other
comprehensive loss, end
of year $(94,241) $(69,353)$ (94,241) $(69,353)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENTS

Three Three
Months Months Year Year
Ended Ended Ended Ended
Dec. Dec. Dec. Dec.
(Stated in thousands of 31, 31, 31, 31,
dollars) 2010 2009 2010 2009
----------------------------------------------------------------------------
Cash Provided By/ (Used In):
Operations
Net income / (loss) $ 56,327 $ (14,701) $ 151,617 $ (8,513)
Charges to income not involving
cash:
Depreciation and amortization 29,619 24,772 110,795 96,805
Future income tax expense /
(recovery) 25,097 (723) 58,730 (44,279)
Non-controlling interest - (41) (20) (196)
Stock-based compensation 2,806 2,126 11,660 9,874
(Gain)/ loss on disposal of
property and equipment (129) 624 (167) 930
Gain on revaluation of deferred
consideration - 9 (22) (95)
Unrealized foreign exchange
(gain)/ loss (2) (661) (880) 3,587
Recovery on other assets - (13,317) - (19,294)
----------------------------------------------------------------------------
Funds provided by operations 113,718 27,490 331,713 38,819
Net change in non-cash working
capital from operations (30,218) (4,053) (139,257) 60,516
----------------------------------------------------------------------------
83,500 (23,437) 192,456 99,335

Investing
Purchase of property and
equipment (80,650) (14,200) (278,802) (45,867)
Proceeds from the sale of
property and equipment 260 556 531 2,656
Payments received on loan to an
unrelated third party 3,963 2,551 7,934 8,528
Business acquisitions - - (5,818) (1,670)
Net change in non-cash working
capital from investing
activities 21,549 1,175 18,705 (1,490)
----------------------------------------------------------------------------
(54,878) (9,918) (257,450) (37,843)

Financing
Net proceeds from issuance of
share capital 9,727 - 230,167 497
Repayment of bank loans (0) (62) (28,093) (28,342)
Repayment of long-term debt (20,397) (10,000) (68,799) (50,000)
Dividend paid 0 - (13,453) (12,560)
----------------------------------------------------------------------------
(10,670) (10,062) 119,822 (90,405)

Effect of exchange rate changes
on cash 659 (1,019) 141 (1,279)
----------------------------------------------------------------------------

Increase/(decrease) in cash and
short-term deposits 18,611 2,438 54,969 (30,192)
Cash and short-term deposits,
beginning of period 62,447 23,651 26,089 56,281
----------------------------------------------------------------------------
Cash and short-term deposits,
end of period $ 81,058 $ 26,089 $ 81,058 $26,089
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplemental information
Income taxes paid - 1,606 6,442 29,637
Interest paid 2,356 2,505 9,161 18,018
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

Selected Notes to Consolidated Financial Statements
----------------------------------------------------------------------------

For the years ended December 31, 2010 and 2009

NOTE 6 - PROPERTY AND EQUIPMENT

(stated in thousands) 2010 2009
----------------------------------------------------------------------------
Property and Equipment:
Land $ 21,396 $ 16,929
Buildings and improvements 60,604 54,062
Equipment 958,844 744,937
Furniture and fixtures 30,956 26,620
----------------------------------------------------------------------------
$ 1,071,800 $ 842,548
Accumulated Depreciation:
Buildings and improvements 15,620 12,025
Equipment 339,027 279,836
Furniture and fixtures 19,552 15,991
----------------------------------------------------------------------------
374,199 307,852
----------------------------------------------------------------------------
$ 697,601 $ 534,696
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Included within equipment are assets held under capital lease with a gross value of $6.0 million (2009 - $3.0 million) and accumulated depreciation of $1.1 million (2009 - $0.2 million). Interest expense of $0.2 million (2009 - $0.1 million) relating to these capital leases has been charged to the Consolidated Statement of Operations in the year.



NOTE 11 - LONG-TERM DEBT

(Stated in thousands) 2010 2009
----------------------------------------------------------------------------
Notes payable $ 99,460 $ 104,660
Equipment and acquisition loan - 70,000
----------------------------------------------------------------------------
$ 99,460 $ 174,660
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes Payable

On June 21, 2007, the Company entered into an agreement with institutional
investors in the U.S. 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.


The Notes require the Company to comply with certain financial and non-financial covenants that are typical for this type of arrangement. At December 31, 2010, the Company was in compliance with these covenants.

During 2010, the Company entered into a syndicated CAD $250 million three year extendible Revolving Credit Facility (the "Facility"). The Facility is unsecured and bears interest at prime rate, U.S. base rate, Banker's Acceptance rate or at LIBOR plus 150 to 400 basis points, dependent on certain financial ratios of the Company. The Facility requires the Company to comply with certain financial and non-financial covenants that are typical for this type of arrangement. At December 31, 2010, there was no amount owing on the Facility and the Company was in compliance with the covenants. The Facility replaced all existing bank loan and long-term debt facilities, with the exception of the U.S.$20 million bank loan held by the Company's Russian subsidiary and the notes payable.

Subsequent to year-end, the Company replaced the Facility with a new syndicated CAD $250 million three year extendible Revolving Credit Facility (the "New Facility"). The New Facility is unsecured and bears interest at prime rate, U.S. base rate, Banker's Acceptance rate or at LIBOR plus 125 to 375 basis points, dependent on certain financial ratios of the Company. The New Facility requires the Company to comply with certain financial and non-financial covenants that are typical for this type of arrangement.

NOTE 12 - 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, 2008 125,562,767 $ 246,357
Exercise of stock options 25,050 61
Reclassification from contributed surplus on
exercise of options - 84
Issuance out of treasury for CBM deferred
consideration 50,852 352
----------------------------------------------------------------------------
Balance, December 31, 2009 125,638,669 $ 246,854
Exercise of stock options 1,248,566 9,958
Fair value adjustment of stock options
previously exercised - 4,054
Reclassification from contributed surplus on
exercise of options - 2,254
Issuance out of treasury for CBM deferred
consideration 50,848 693
Issuance of shares (net of issuance costs and
future income taxes) 17,698,500 222,781
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, December 31, 2010 144,636,583 $ 486,954
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 13 - PER SHARE AMOUNTS

(Stated in thousands, except share and per
share amounts)
Basic Income/(Loss) Per Share 2010 2009
----------------------------------------------------------------------------
Net income/(loss) available to common
shareholders $ 151,617 $ (8,513)
Weighted average number of common shares 137,400,019 125,615,955
Basic income/(loss) per share $1.10 $ (0.07)
----------------------------------------------------------------------------

Diluted Income/(Loss) Per Share 2010 2009
----------------------------------------------------------------------------
Net income/(loss) available to common
shareholders $ 151,617 $ (8,513)
Weighted average number of common shares 137,400,019 125,615,955
Diluted effect of stock options 1,171,371 -
----------------------------------------------------------------------------
Diluted weighted average number of common
shares 138,571,390 125,615,955
Diluted income/(loss) per share $ 1.09 $ (0.07)
----------------------------------------------------------------------------

NOTE 15 - INCOME TAXES

(Stated in thousands) 2010 2009
----------------------------------------------------------------------------
Current income tax expense (recovery) $ (63) $ 23,132
Future income tax expense (recovery) 58,730 (44,279)
----------------------------------------------------------------------------
$ 58,667 $ (21,147)
----------------------------------------------------------------------------

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

2010 2009
----------------------------------------------------------------------------
Canada $ 196,732 $ 6,316
Foreign 13,532 (36,172)
----------------------------------------------------------------------------
$ 210,264 $ 29,856)
----------------------------------------------------------------------------

The net income tax provision differs from that expected by applying the
combined Canadian federal and provincial income tax rate of 28.21% (2009 -
29.23%) to income (loss) before income taxes for the following reasons:

2010 2009
----------------------------------------------------------------------------
Expected combined federal and provincial income tax $ 59,315 $ (8,720)
Statutory and other rate differences (2,700) (10,958)
Non-deductible expenses 5,700 2,446
Translation of foreign subsidiaries 314 (1,115)
Changes to future income tax rates (4,448) (3,090)
Capital and other foreign tax 195 50
Other 291 240
----------------------------------------------------------------------------
$ 58,667 $ (21,147)
----------------------------------------------------------------------------

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

2010 2009
----------------------------------------------------------------------------
Future income tax assets:
----------------------------------------------------------------------------
Goodwill $ 43,337 $ 48,305
Non-capital loss carry forwards 50,089 44,001
Deferred interest expense 9,399 7,580
Other 5,863 4,952
----------------------------------------------------------------------------
$ 108,688 $ 104,838
----------------------------------------------------------------------------
Future income tax liabilities:
----------------------------------------------------------------------------
Property, equipment and other assets $ 63,099 $ 51,354
Deferred income 66,558 10,860
Other 3,549 2,540
----------------------------------------------------------------------------
$ 133,206 $ 64,754
----------------------------------------------------------------------------


Included in the above tax pools are $128.4 million (2009- $110.1 million) related to non-capital losses available for carry forward to reduce taxable income in future years. These losses expire between 2026 and 2030.

NOTE 19 - SEGMENTED INFORMATION

The Company operates in three main geographic regions: Canada, Russia (which includes Kazakhstan and Algeria), and the U.S. Each geographic region has a General Manager that is responsible for the operation and strategy of their region's business. Personnel working within the particular geographic region report to the General Manager; the General Manager reports to the corporate executive.

The Company provides a comprehensive array of specialized products, equipment, services and technology to customers through three operating divisions:



-- Canadian Operations provides cementing, fracturing, coiled tubing,
nitrogen, geological, and acidizing services which are performed on new
and existing oil and gas wells, and industrial services.
-- Russian Operations provides cementing, fracturing, deep coiled tubing,
nitrogen and acidizing services which are performed on new and existing
oil and gas wells.
-- United States Operations provides fracturing, cementing, nitrogen and
acidizing services which are performed on new and existing oil and gas
wells.

Corporate Division expenses consist of salary expenses, stock-based
compensation and office costs related to corporate employees, as well as
public company costs.

United
(Stated in Canadian States Russian
thousands) Operations Operations Operations Corporate Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended
December 31,
2010
----------------------------------------------------------------------------
Revenue $ 858,201 $ 361,055 $ 259,037 $ - $ 1,478,293
Operating
income/(loss) 279,728 69,757 23,708 (42,779) 330,414
Interest
expense - - - 9,159 9,159
Depreciation
and
amortization 45,551 38,210 26,840 194 110,795
Assets 620,469 468,387 259,738 102,128 1,450,722
Goodwill 22,690 - 19,768 - 42,458
Property and
equipment 364,903 237,364 92,387 2,947 697,601
Capital
expenditures 135,103 125,741 16,234 1,724 278,802
Goodwill
expenditures - - 5,542 - 5,542
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Year ended
December 31,
2009
----------------------------------------------------------------------------
Revenue $ 415,630 $ 157,366 $ 238,492 $ - $ 811,488
Operating
income/(loss) 61,565 (5,074) 37,695 (23,976) 70,210
Interest
expense - - - 10,389 10,389
Depreciation
and
amortization 37,292 35,559 23,917 37 96,805
Assets 441,950 297,463 224,995 65,431 1,029,839
Goodwill 22,690 - 14,226 - 36,916
Property and
equipment 279,992 148,542 105,027 1,135 534,696
Capital
expenditures 14,356 8,245 22,163 1,103 45,867
Goodwill
expenditures 254 - 1,106 - 1,360
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The Corporate division incurred an operating loss of $42.8 million (2009 - $24.0 million) of which 93% (2009 - 96%) was incurred in Canada as this is where corporate head office is located.

Revenue from two external customers for the year ended December 31, 2010 amount individually to greater than 10% of the Company's total revenue. One of the customer's revenue is exclusively in the U.S. and totals $237.9 million (2009- $113.7 million). The other customer's revenue is mixed between Canada and the U.S. and totals $160.7 million (2009- $80.7 million).

NOTE 20 - CONTINGENCIES

From time to time, Trican is subject to costs and other effects of legal and administrative proceedings, settlements, investigations, claims and actions. Trican may in the future be involved in disputes with other parties which could result in litigation or other actions, proceedings or related matters. The results of litigation or any other proceedings or related matters cannot be predicted with certainty. Amounts involved in such matters are not reasonably determinable due to uncertainty as to the final outcome. Trican's assessment of the likely outcome of these matters is based on its judgment of a number of factors including experience with similar matters, past history, precedents, relevant financial and other evidence and facts specific to the matter. Notwithstanding the uncertainty as to the final outcome, based upon the information currently available to it, Trican does not currently believe these matters in aggregate will have a material adverse effect on its consolidated financial position or results of operations.

The tax regulations and legislation in the various jurisdictions that the Company operates in are continually changing. As a result, there are usually some tax matters under review. Management believes that it has adequately met and provided for taxes based on the Company's interpretation of the relevant tax legislation and regulations.

The Company will host a conference call on Tuesday, March 1, 2011 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's results for the Fourth Quarter and Year End 2010.

To listen to the webcast of the conference call, please enter: http://www.gowebcasting.com/2197 in your web browser or visit the Investor Information section of our website at www.trican.ca.

To participate in the Q&A session, please call the conference call operator at 1-877-240-9772 (North America) or 416-340-8530 (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 2010 Conference Call".

A replay of the conference call will be available until March 8, 2011 by dialing 1-800-408-3053 (North America) or 905-694-9451 (outside North America). Playback passcode: 4780047.

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

Contact Information

  • Trican Well Service Ltd.
    Dale Dusterhoft
    Chief Executive Officer
    (403) 266-0202
    (403) 237-7716 (FAX)
    ddusterhoft@trican.ca
    or
    Trican Well Service Ltd.
    Michael Baldwin
    Vice President, Finance and Chief Financial Officer
    (403) 266-0202
    (403) 237-7716 (FAX)
    mbaldwin@trican.ca
    or
    Trican Well Service Ltd.
    2900, 645 - 7th Avenue S.W.
    Calgary, Alberta T2P 4G8
    www.trican.ca