Trican Well Service Ltd.

TSX : TCW


Trican Well Service Ltd.

November 06, 2012 19:50 ET

Trican Reports Third Quarter Results for 2012

CALGARY, ALBERTA--(Marketwire - Nov. 6, 2012) - Trican Well Service Ltd. (TSX:TCW)

Financial Review
Three months ended Nine months ended

($ millions, except per share amounts; unaudited)
Sept 30,
2012
Sept 30,
2011
June 30,
2012
Sept 30,
2012
Sept 30,
2011
Revenue $ 593.2 $ 659.1 $ 418.0 $ 1,727.5 $ 1,615.4
Operating income/(loss) * 71.4 193.6 (28.3 ) 204.9 417.2
Profit/(loss) 22.6 111.3 (50.9 ) 61.2 223.8
Earnings/(loss) per share (basic ) $ 0.16 $ 0.76 $ (0.35 ) $ 0.42 $ 1.54
(diluted ) $ 0.16 $ 0.75 $ (0.35 ) $ 0.42 $ 1.52
Adjusted profit/(loss) * 24.7 114.4 (48.6 ) 68.4 233.1
Adjusted profit/(loss) per share* (basic ) $ 0.17 $ 0.78 $ (0.33 ) $ 0.47 $ 1.60
(diluted ) $ 0.17 $ 0.77 $ (0.33 ) $ 0.47 $ 1.58
Funds provided by/(used in) operations* 49.3 174.3 (49.1 ) 136.7 376.9

Notes:

* Trican makes reference to operating income/(loss), adjusted profit/(loss) and funds provided by/(used in) operations. These are measures that are not recognized under International Financial Reporting Standards (IFRS). Management believes that, in addition to profit, operating income/(loss), adjusted profit/(loss) and funds provided by/(used in) operations are useful supplemental measures. Operating income/(loss) provides investors with an indication of earnings/(loss) before depreciation, foreign exchange gains and losses, other income, taxes and interest. Adjusted profit/(loss) provides investors with information on profit/(loss) excluding one-time non-cash charges and the non-cash effect of stock-based compensation expense. Funds provided by/(used in) operations provide investors with an indication of cash available for capital commitments, debt repayments and other expenditures. Investors should be cautioned that operating income/(loss), adjusted profit/(loss), and funds provided by/(used in) operations should not be construed as an alternative to profit/(loss) and cash flow from operations determined in accordance with IFRS as an indicator of Trican's performance. Trican's method of calculating operating income/(loss), adjusted profit/(loss) and funds provided by/(used in) operations may differ from that of other companies and accordingly may not be comparable to measures used by other companies.

THIRD QUARTER HIGHLIGHTS

Consolidated revenue for the third quarter of 2012 was $593.2 million, a decrease of 10% compared to the third quarter of 2011. Consolidated profit was $22.6 million and diluted profit per share was $0.16 compared to $111.3 million and $0.75 per share for the same period in 2011. Funds provided by operations were $49.3 million compared to $174.3 million in the third quarter of 2011.

Third quarter revenue was $321.9 million for our Canadian operations, which was 13% lower than the third quarter of 2011. Canadian operating margins remained strong at 31% and benefitted from a large Horn River project that was completed early in the quarter. Despite the strong margins, Canadian results were negatively impacted by a decline in drilling and completions activity as the number of active drilling rigs decreased by 28% and well completions were down 31% on a year-over-year basis. Canadian pricing decreased by 6% compared to the third quarter of 2011 due to the drop in demand combined with a continued increase in equipment supply.

U.S. operations third quarter revenue was $198.9 million down 4% compared to the second quarter of 2012. U.S. operating margins decreased to a loss of 11.7% as a percentage of revenue compared to a loss of 10.7% in the second quarter of 2012. U.S. results were significantly impacted by low utilization in July when pricing was being renegotiated with many of our U.S. customers. Our U.S. results improved in August and September due to the pricing increases obtained and progress made on cost cutting initiatives. U.S. pricing increased by 3% in the third quarter of 2012 compared to the second quarter of 2012. Financial results for our U.S. operations improved as the third quarter progressed due to declining guar prices and the commencement of operations in the Bakken where activity levels and demand for our equipment was strong.

International revenue was $72.4 million during the third quarter of 2012, which was a 10% year-over-year decrease and a 2% sequential increase. Our operations in Russia comprise the majority of our international results and revenue and operating income in this region improved sequentially due to increased activity levels from our customers. However, our Russian customers' work programs remain behind schedule and overall revenue is expected to come in below our initial expectations for this region. Russian results were also negatively impacted by a weaker Russian ruble as the average ruble to Canadian dollar exchange rate for the third quarter of 2012 decreased by 8% compared to the third quarter of 2011.

Trican is pleased to announce its entry into Colombia through a joint business arrangement with Independence Drilling S.A. ("Independence"). Independence is a privately held company headquartered in Bogota, Colombia and has extensive experience in the provision of drilling services in the region. We intend to initially provide cementing services in the Colombian market growing over time to become a full service pressure pumping company in the region. We expect to commence operations in Colombia during the first half of 2013.

Capital Budget and Financing Update

Given the weak operating conditions in the U.S. and reduced activity levels in Canada, we have decreased our capital budget by an additional $90 million. The reductions include support equipment and infrastructure initiatives for our North American operations. After these reductions, remaining capital expenditures for all existing capital programs are expected to be approximately $150 to $200 million. We expect to incur approximately $70 to $90 million of these expenditures during the fourth quarter of 2012, with the remainder carried forward into 2013. We have now reduced our original capital budget by over $300 million and we will continue to look at additional reducations on the remaining amount.

Subsequent to September 30, 2012, and subject to final approval by the investor, Trican intends to issue $50 million in senior unsecured notes on a private placement basis. The notes have a seven-year final maturity, five-year average term and a coupon of 4.05%. The notes are unsecured and rank equally with Trican's bank facilities and other outstanding senior notes. Trican intends to use the net proceeds to fund a portion of its 2012 capital program and for general corporate purposes.

Subsequent to September 30, 2012, Trican's syndicate of banks has unanimously agreed to extend the Company's four year revolving credit facility for an additional year. In addition, Trican has received approval to add a new bank to its syndicate and intends to increase its extendible revolving credit facility from $450 million to $500 million.

COMPARATIVE QUARTERLY INCOME STATEMENTS


($ thousands; unaudited)
Three months ended September 30,



2012





% of
Revenue






2011





% of
Revenue



Quarter-
Over-
Quarter
Change





%
Change



Revenue 593,204 100.0 % 659,104 100.0 % (65,900 ) (10.0 %)
Expenses
Materials and operating 493,877 83.3 % 441,054 66.9 % 52,823 12.0 %
General and administrative 27,972 4.7 % 24,430 3.7 % 3,542 14.5 %
Operating income/(loss)* 71,355 12.0 % 193,620 29.4 % (122,265 ) (63.1 %)
Finance costs 7,696 1.3 % 6,057 0.9 % 1,639 27.0 %
Depreciation and amortization 37,270 6.3 % 31,474 4.8 % 5,796 18.4 %
Foreign exchange (gain)/loss 1,651 0.3 % (72 ) -0.0 % 1,723 (2,393.1 %)
Other (income)/loss 806 0.1 % (1,537 ) -0.2 % 2,343 (152.4 %)
Profit/(loss) before income taxes 23,932 4.0 % 157,698 23.9 % (133,766 ) (84.8 %)
Income tax expense/(recovery) 1,284 0.2 % 46,434 7.0 % (45,150 ) (97.2 %)
Profit/(loss) before non-controlling interest 22,648 3.8 % 111,264 16.9 % (88,616 ) (79.6 %)
Non-controlling interest (94 ) 0.0 % - 0.0 % (94 ) 0.0 %
Profit/(loss) 22,742 3.8 % 111,264 16.9 % (88,522 ) (79.6 %)
* see first page of this report
CANADIAN OPERATIONS
($ thousands, except revenue per job, unaudited)
Three months ended,
Sept, 30,
2012
% of
Revenue
Sept 30,
2011
% of
Revenue
June 30,
2012
% of
Revenue
Revenue 321,948 371,481 140,178
Expenses
Materials and operating 215,022 66.8 % 216,746 58.3 % 136,127 97.1 %
General and administrative 7,095 2.2 % 7,813 2.1 % 5,222 3.7 %
Total expenses 222,117 69.0 % 224,559 60.4 % 141,349 100.8 %
Operating income/(loss)* 99,831 31.0 % 146,922 39.6 % (1,171 ) (0.8 %)
Number of jobs 6,368 6,960 3,334
Revenue per job 50,140 52,766 41,959
* see first page of this report
Sales Mix
Three months ended,
(unaudited)
Sept 30,
2012
Sept 30,
2011
June 30,
2012
% of Total Revenue
Fracturing 68 % 67 % 57 %
Cementing 17 % 17 % 18 %
Nitrogen 6 % 8 % 8 %
Coiled Tubing 4 % 4 % 6 %
Acidizing 3 % 2 % 5 %
Other 2 % 2 % 6 %
Total 100 % 100 % 100 %

Operations Review

Canadian oil and gas activity levels were significantly lower during the third quarter of 2012 compared to the third quarter of 2011. The average number of active drilling rigs during the quarter was 28% lower and the number of wells completed was 31% lower on a year-over-year basis. Despite the reduced activity levels, utilization of our equipment was strong in the early part of the quarter due to the completion of a large Horn River project and a backlog of completions work coming out of the second quarter. However, utilization decreased near the end of the quarter as drilling and completions activity slowed.

Third quarter Canadian pricing decreased by 6% compared to the third quarter of 2011 as continued increases in Canadian pressure pumping equipment supply and reduced demand placed downward pressure on pricing. Trican did not deploy any additional fracturing equipment in Canada during the third quarter of 2012.

Q3 2012 versus Q3 2011

Canadian revenue decreased by 13% compared to the third quarter of 2011 due to a decrease in job count and revenue per job. The job count decreased by 9% due to the decline in year-over-year drilling and completions activity; however, lower activity was partially offset by the large Horn River project that was completed during the third quarter of 2012. Revenue per job decreased by 5% due largely to the 6% price decrease, which was offset slightly by the larger jobs performed in Horn River during the quarter.

Third quarter materials and operating expenses increased to 66.8% of revenue compared to 58.3% in the third quarter of 2011. The 6% year-over-year reduction in our pricing combined with an increase in product costs such as sand, acid and guar has contributed to the lower margins. In addition, lower revenue resulted in reduced operating leverage on our fixed cost structure. General and administrative expenses decreased by $0.7 million compared to the third quarter of 2011 due largely to lower share based and profit sharing expenses.

Q3 2012 versus Q2 2012

Canadian revenue increased by 130% sequentially due to the expected rise in industry activity as spring break-up conditions subsided early in the third quarter. The 79% sequential increase in Canadian rig count and the completion of a large Horn River project contributed to the 91% increase in job count. Revenue per job increased by 19% due largely to the higher proportion of fracturing revenue relative to total revenue, offset partially by a 4% sequential decrease in price.

Materials and operating expenses decreased as a percentage of revenue to 66.8% compared to 97.1% in the second quarter of 2012, due largely to increased operating leverage on our fixed cost structure. General and administrative expenses increased by $1.9 million due mainly to higher share based and profit sharing expenses.

UNITED STATES OPERATIONS
($ thousands, except revenue per job, unaudited)
Three months ended,
Sept 30,
2012
% of
Revenue
Sept 30,
2011
% of
Revenue
June 30,
2012
% of
Revenue
Revenue 198,881 207,288 206,777
Expenses*
Materials and operating 216,283 108.8 % 150,279 72.5 % 224,084 108.4 %
General and administrative 5,768 2.9 % 2,474 1.2 % 4,825 2.3 %
Total expenses 222,051 111.7 % 152,753 73.7 % 228,909 110.7 %
Operating income/(loss)** (23,170 ) (11.7 %) 54,535 26.3 % (22,132 ) (10.7 %)
Number of jobs 1,861 1,445 1,915
Revenue per job 106,962 144,361 108,394
* Certain prior period expenses have been reclassified from materials and operating to general and administrative to conform to the current period classification
** see first page of this report
Sales Mix
Three months ended,
(unaudited)
Sept 30,
2012
Sept 30,
2011
June 30,
2012
% of Total Revenue
Fracturing 91 % 98 % 92 %
Cementing 6 % 1 % 5 %
Coiled Tubing 3 % 1 % 3 %
Total 100 % 100 % 100 %

Operations Review

Overall pricing for our U.S. operations increased by 3% sequentially as pricing increases were negotiated for many of our fracturing crews under contract. As pricing was being renegotiated in July, U.S. equipment utilization was substantially lower, which had a significant negative impact on U.S. operating margins in July. Utilization levels recovered in August, and we saw a meaningful improvement in the financial performance of our U.S. operations during August and September.

Overall U.S. activity levels were down slightly as the rig count decreased sequentially by 4% in the areas where we operate. The U.S. rig count continued to decline in dry gas regions and was relatively stable in the oil and liquids-rich gas regions. Our Bakken fracturing crew began operations in August and utilization was strong throughout the remainder of the quarter for this crew. Increased activity in the Bakken was more than offset by lower utilization early in the third quarter for our crews under contract when pricing was being renegotiated.

Our U.S. operations currently have 670,000 of fracturing horsepower; however, in addition to the two newly completed crews from our 2012 capital program that have not been manned, we have idled two operating crews during the third quarter of 2012.

Our realized guar price decreased sequentially by approximately 15% in the U.S. during the third quarter of 2012. Guar spot prices decreased substantially more than 15% during the third quarter; however, our third quarter guar usage was primarily driven from higher priced guar purchased during the second quarter and early in the third quarter. Guar usage levels were also down sequentially during the third quarter due to the decrease in activity.

Our U.S. operations continued to focus on many cost cutting measures and we began to see the benefit of these measures during the third quarter of 2012. We continue to focus on optimizing our cost structure and reducing costs wherever practical and expect to see additional benefit from these measures in the fourth quarter of 2012 and into 2013.

We continue to see strong growth for our cementing service line in the U.S., which operates in the Eagle Ford, Permian and Haynesville plays. Cementing revenue represented 6% of total U.S. revenue, and increased by 28% sequentially and 330% year-over-year. We intend to expect the growth of our cementing business in the U.S., as well as our coiled tubing service line, to continue as we move towards becoming a full service pressure pumping company in the U.S.

Q3 2012 versus Q3 2011

2012 third quarter revenue decreased by approximately 4% compared to the third quarter of 2011 for our U.S. operations. The job count increased by 29% while revenue per job decreased by 26%. The job count increase is primarily a result of fracturing, cementing and coiled tubing equipment additions, offset partially by low utilization early in the quarter during price renegotiations. Revenue per job decreased approximately 26% primarily due to pricing pressure in the U.S. market combined with the increase in work performed in the cementing and coiled tubing service lines and an increase in jobs performed in the Permian basin. Revenue per job for the cementing and coiled tubing service lines is typically lower than the fracturing service line and fracturing jobs performed in the Permian Basin are typically smaller relative to other regions resulting in lower revenue per job.

Materials and operating expenses increased to 108.8% from 72.5% as a percentage of revenue. Operating margins were negatively impacted by the decrease in pricing, a significant increase in guar costs, and low utilization in July. Increases in repairs and maintenance and accommodation expenses also contributed to the increase in materials and operating expenses.

General and administrative costs increased by $3.3 million due largely to an increase wage, travel, and office expenses.

Q3 2012 versus Q2 2012

Third quarter revenue in 2012 decreased 4% relative to the second quarter of 2012 for our U.S. operations. The job count decreased by 3% largely as a result of low utilization in the early part of the third quarter while pricing was being renegotiated. These decreases were partially offset by a job count increase in the cementing service line and the start-up of our Bakken fracturing crew. Revenue per job decreased by 1% primarily as a result of an increase in work from the cementing service line and increased work performed in the Permian basin. These factors were partially offset by a 3% increase in pricing.

Materials and operating expenses remained relatively consistent at 108.8% of revenue compared to 108.4% in the second quarter of 2012. Operating margins benefitted from a 3% increase in pricing, a 15% decrease in the realized price of guar, and cost cutting measures, which led to reductions in freight and unit costs. These factors were offset by low utilization in July during price renegotiations.

General and administrative expenses increased by approximately $0.9 million due to increases in insurance and office expenses.

INTERNATIONAL OPERATIONS
($ thousands, except revenue per job, unaudited)
Three months ended,
Sept 30,
2012
% of
Revenue
Sept 30,
2011
% of
Revenue
June 30,
2012
% of
Revenue
Revenue 72,375 80,335 71,020
Expenses
Materials and operating 59,202 81.8 % 68,481 85.2 % 60,523 85.2 %
General and administrative 3,590 5.0 % 3,770 4.7 % 2,985 4.2 %
Total expenses 62,792 86.8 % 72,251 89.9 % 63,508 89.4 %
Operating income* 9,583 13.2 % 8,084 10.1 % 7,512 10.6 %
Number of jobs 1,057 1,388 1,057
Revenue per job 64,873 54,686 62,506
* see first page of this report
Sales Mix
Three months ended,
(unaudited)
Sept 30,
2012
Sept 30,
2011
June 30,
2012
% of Total Revenue
Fracturing 80 % 76 % 76 %
Coiled Tubing 10 % 11 % 13 %
Cementing 6 % 8 % 8 %
Nitrogen 2 % 5 % 2 %
Other 2 % 0 % 1 %
Total 100 % 100 % 100 %

Operations Review

Our International operations include the financial results for our operations in Russia, Kazakhstan, Algeria, and Australia. Our operations in Russia comprise the majority of our international results, and revenue and operating income in this region improved sequentially due to increased activity levels from our customers. However, our Russian customers' work programs remain behind schedule and overall revenue is expected to be below our initial expectations for this region.

Horizontal drilling and completions activity has increased in Russia during 2012. Approximately 10% of our Russian fracturing revenue was from horizontal wells during the third quarter compared to 3% in the third quarter of 2011. We believe this trend will continue and result in increased pressure pumping demand in Russia.

Customer delays in Kazakhstan led to lower sequential revenue in the region, although we continue to produce solid operating margins in this region. We continue to see improved results for our Algerian operations as year-over-year margins improved substantially. We are also continuing to grow and establish our cementing business in Australia and had an 80% sequential increase in revenue for our cementing and environmental service lines in Australia during the third quarter of 2012.

Q3 2012 versus Q3 2011

International revenue decreased by 10% compared to the third quarter of 2011. Job count decreased by 24% as our customers' work programs in Russia are behind schedule relative to 2011. Activity for our cementing and coiled tubing service lines in Russia was particularly slow and contributed to the majority of the job count decrease. This was partially offset by increased activity in Australia. Revenue per job increased by 19% due largely to Russian pricing increases and the rise in fracturing revenue relative to total revenue as fracturing jobs generally have significantly higher revenue per job than other service lines. These factors were partially offset by an 8% year-over-year decline in the value of the Russian ruble relative to the Canadian dollar.

Materials and operating expenses as a percentage of revenue decreased to 81.8% compared to 85.2% in the third quarter of 2011. Increased fracturing activity as a percentage of total activity contributed to the improved margins as fracturing work is typically performed at higher margins. A reduction in repairs and maintenance also factored into the margin improvement. General and administrative costs were relatively consistent on a year-over-year basis.

Q3 2012 versus Q2 2012

Revenue for our International operations increased by 2% on a sequential basis. The number of jobs completed in the third quarter was consistent with the second quarter of 2012 as increases in Russia and Australia were offset by sequential decreases in Kazakhstan and Algeria. Kazakhstan revenue was lower due to reduced customer activity levels that are expected to be made up in the fourth quarter. Algeria revenue was lower due to overall reduced activity levels in the region due to Ramadan. Revenue per job increased sequentially by 4% due to a higher proportion of fracturing revenue relative to total revenue, which was offset partially by lower revenue per job in Russia caused by a 5% weakening of the ruble relative to the Canadian dollar.

Materials and operating expenses as a percentage of revenue decreased to 81.8% from 85.2% on a sequential basis. Increased fracturing activity as a percentage of total activity contributed to the improved margins as fracturing work is generally performed at higher margins. Improved operational leverage on our fixed cost structure also contributed to the higher third quarter margins. General and administrative expenses increased by $0.6 million due largely to higher share based expenses.

CORPORATE
($ thousands, unaudited)
Three months ended,
Sept 30,
2012
% of
Revenue
Sept 30,
2011
% of
Revenue
June 30,
2012
% of
Revenue
Expenses
Materials and operating 5,907 1.0 % 5,548 0.8 % 4,895 1.2 %
General and administrative 8,981 1.5 % 10,373 1.6 % 7,569 1.8 %
Total expenses 14,888 2.5 % 15,921 2.4 % 12,464 3.0 %
Operating loss* (14,888 ) (15,921 ) (12,464 )
* see first page of this report

Q3 2012 versus Q3 2011

Corporate expenses decreased by $1.0 million from the same quarter last year due primarily to lower profit sharing expenses. These factors were partially offset by increased share unit and salary expenses.

Q3 2012 versus Q2 2012

Corporate expenses increased by $2.4 million on a sequential basis due largely to higher profit sharing and share unit expenses.

OTHER EXPENSES AND INCOME

Finance costs for the third quarter of 2012 increased by $1.6 million on a year-over-year basis mainly due to interest on the existing private placement debt and revolving credit facility. Depreciation and amortization increased by $5.8 million in the third quarter of 2012 compared to the same period last year, due primarily to capital additions relating to our capital expansion program.

The foreign exchange loss of $1.7 million in the quarter versus a gain of $0.1 million in the same quarter last year was due to the net impact of fluctuations in the U.S. dollar and Russian ruble relative to the Canadian dollar. Other loss was $0.8 million in the quarter versus income of $1.5 million for the same period in the prior year. The third quarter other loss was a result of losses on disposal of equipment, which was offset partially by interest income on a loan to an unrelated third party and interest income earned on cash balances.

INCOME TAXES

Trican recorded an income tax expense of $1.3 million in the quarter versus $46.4 million for the comparable period of 2011. The decrease in tax expense is largely attributable to lower taxable income.

COMPARATIVE YEAR-TO-DATE INCOME STATEMENTS


($ thousands; unaudited)
Nine months ended Sept 30,



2012


% of
Revenue



2011


% of
Revenue
Year -
Over-
Year -
Change


%
Change
Revenue 1,727,535 100 % 1,615,433 100.0 % 112,102 6.9 %
Expenses
Materials and operating 1,447,890 83.8 % 1,124,777 69.6 % 323,113 28.7 %
General and administrative 74,700 4.3 % 73,427 4.5 % 1,273 1.7 %
Operating income* 204,945 11.9 % 417,229 25.8 % (212,284 ) (50.9 %)
Finance costs 22,123 1.3 % 13,484 0.8 % 8,639 64.1 %
Depreciation and amortization 111,273 6.4 % 90,133 5.6 % 21,140 23.5 %
Foreign exchange (gain)/loss 3,876 0.2 % (300 ) 0.0 % 4,176 1,392.0 %
Other income (1,277 ) -0.1 % (4,580 ) -0.3 % 3,303 (72.1 %)
Profit before income taxes 68,950 4.0 % 318,492 19.7 % (249,542 ) (78.4 %)
Provision for income taxes 7,781 0.5 % 94,726 5.9 % (86,945 ) (91.8 %)
Profit before non-controlling interest 61,169 3.5 % 223,766 13.9 % (162,597 ) (72.7 %)
Non-controlling interest (246 ) 0.0 % (20 ) 0.0 % (226 ) 11.3 %
Profit 61,415 3.6 % 223,786 13.9 % (162,371 ) (72.6 %)
* see first page of this report
CANADIAN OPERATIONS
($ thousands, except revenue per job, unaudited)
Nine months ended,
Sept 30,
2012
% of
Revenue
Sept 30,
2011
% of
Revenue
Year-
Over-Year
Change
Revenue 895,237 865,663 3 %
Expenses
Materials and operating 617,114 68.9 % 544,144 62.9 % 13 %
General and administrative 20,453 2.3 % 21,588 2.5 % (5 %)
Total expenses 637,567 71.2 % 565,732 65.4 % 13 %
Operating income* 257,670 28.8 % 299,931 34.6 % (14 %)
Number of jobs 16,855 18,151 (7 %)
Revenue per job 52,781 46,772 13 %
* see first page of this report

Revenue for the nine months ending September 30, 2012, for our Canadian operations was 3% higher compared to the same period in 2011. Revenue per job increased by 13% due to larger job sizes combined with a 4% increase in price. Job size benefitted from a higher proportion of fracturing revenue relative to total revenue and an increase in the average cement and fracturing job size due to the increase in horizontal drilling activity. Job count decreased by 7% due largely to a 10% decrease in year to date average Canadian rig count.

As a percentage of revenue, materials and operating expenses increased to 68.9% from 62.9% for the comparable period in 2011. Increased pricing was more than offset by higher product and employee costs. General and administrative costs were down $1.1 million due mainly to lower share based and profit sharing expenses.

UNITED STATES OPERATIONS
($ thousands, except revenue per job, unaudited) Sept 30, % of Sept 30, % of Year-Over-Year
Nine months ended, 2012 Revenue 2011 Revenue Change
Revenue 624,194 523,244 19 %
Expenses
Materials and operating 632,537 101.3 % 370,918 70.9 % 71 %
General and administrative 15,255 2.4 % 8,720 1.7 % 75 %
Total expenses 647,792 103.8 % 379,638 72.6 % 71 %
Operating income* (23,598 ) (3.8 %) 143,606 27.4 % (116 %)
Number of jobs 5,456 3,570 53 %
Revenue per job 114,712 147,005 (22 %)
* see first page of this report

U.S. revenue for the nine months ended September 30, 2012 increased 19% relative to the same period in 2011. Job count increased 53% largely due to the significant fracturing capacity additions and expansion of the cementing and coiled tubing service lines. Revenue per job declined by 22% largely as a result of the decrease in fracturing pricing experienced during the first nine months of 2012 as well as an increase in work performed in the cementing and coiled tubing service lines and smaller jobs typically performed in the Permian basin.

Materials and operating expenses as a percentage of revenue increased to 101.3% from 70.9% relative to the same period in 2011. This increase is largely attributed to the decline in pricing and the significant increase in guar costs. The $6.5 million increase in general and administrative expenses is largely attributable to an increase in travel, office and employee expenses.

INTERNATIONAL OPERATIONS
($ thousands, except revenue per job, unaudited) Sept 30, % of Sept 30, % of Year-Over-Year
Nine months ended, 2012 Revenue 2011 Revenue Change
Revenue 208,104 226,526 (8 %)
Expenses
Materials and operating 181,027 87.0 % 194,134 85.7 % (7 %)
General and administrative 10,270 4.9 % 10,972 4.8 % (6 %)
Total expenses 191,297 91.9 % 205,106 90.5 % (7 %)
Operating income* 16,807 8.1 % 21,420 9.5 % (22 %)
Number of jobs 3,056 3,721 (18 %)
Revenue per job 63,919 58,292 10 %
* see first page of this report

International revenue was down 8% for the nine months ended September 30, 2012, compared to the same period in 2011. The number of jobs completed is down 18% due to a reduction in our Russian customers' 2012 activity levels, in particular for the coiled tubing and cementing service lines. Revenue per job is up 10% as a 5% weakening of the Russian ruble relative to the Canadian dollar was more than offset by pricing increases and a higher proportion of fracturing revenue relative to total revenue.

Materials and operating expenses as a percentage of revenue increased to 87.0% compared to 85.7% in 2011. Pricing increases were more than offset by reduced operating leverage on our fixed cost structure combined with increased product costs. General and administrative expenses decreased by $0.7 million due largely to lower share based expenses.

CORPORATE
($ thousands, unaudited)
Nine months ended,
Sept 30,
2012

% of
Revenue

Sept 30,
2011

% of
Revenue

Year-Over-Year
Change

Expenses
Materials and operating 17,211 1.0 % 15,581 1.0 % 10 %
General and administrative 28,721 1.7 % 32,147 2.0 % (11 %)
Total expenses 45,932 2.7 % 47,728 3.0 % (4 %)
Operating loss* (45,932 ) (47,728 ) (4 %)
* see first page of this report

Corporate expenses decreased $1.8 million from the same period last year due to a lower profit sharing costs and shared based expenses. These decreases were partially offset by increased salary expenses and a $1.0 million charitable donation to the Alberta Children's Hospital.

OTHER EXPENSES AND INCOME

For the nine months ended September 30, 2012, finance costs increased by $8.6 million compared to the same period in 2011 largely due to interest on the existing private placement debt and revolving credit facility. Depreciation and amortization increased by $21.1 million compared to the same period last year, due primarily to capital additions relating to our capital expansion program.

Foreign exchange losses of $3.9 million have been recorded for the nine months ended September 30, 2012 compared to gains of $0.3 million for the same period in 2011. This change is due to the net impact of fluctuations in the U.S. dollar and Russian ruble relative to the Canadian dollar. Year-to-date other income was $1.3 million versus $4.6 million for the same period in the prior year. Other income is mainly comprised of interest income on a loan to an unrelated third party and interest income earned on cash balances, offset partially by losses on disposal of equipment.

INCOME TAXES

Trican recorded income tax expense of $7.8 million for the nine months ended September 30, 2012, versus $94.7 million for the comparable period of 2011. The decrease in tax expense is primarily attributable to lower earnings.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Funds provided by operations was $49.3 million for the third quarter of 2012 compared to $174.3 million for the same period in 2011. The decrease was due largely to lower earnings.

At September 30, 2012, Trican had working capital of $519.7 million compared to $621.2 million at the end of 2011. The decrease is due to lower cash on hand as we continue to execute our 2012 capital budget.

Investing Activities

Given the weak operating conditions in the U.S. and reduced activity levels in Canada, we have decreased our capital budget by an additional $90 million. The reductions include support equipment and infrastructure initiatives for our North American operations. After these reductions, remaining capital expenditures for all existing capital programs are expected to be approximately $200 to $250 million. We expect to incur approximately $70 to $90 million of these expenditures during the fourth quarter of 2012, with the remainder carried forward into 2013.

Capital expenditures for the third quarter of 2012 totaled $81.7 million compared with $158.0 million for the same period in 2011. Capital expenditures for the nine months ended September 30, 2012, were $386.0 million compared to $415.6 million for the same period in 2011.

Financing Activities

As at November 6, 2012, Trican had 146,450,177 common shares and 6,494,453 employee stock options outstanding.

In the second quarter of 2012, Trican entered into an uncommitted shelf agreement that could allow for the issuance of up to U.S.$100 million in senior unsecured notes. Subsequent to the third quarter of 2012, and subject to final approval by the investor, Trican intends to issue $50 million in senior unsecured notes from this shelf agreement. The notes have a seven-year final maturity, five-year average term, and a coupon of 4.05%. The notes are unsecured and rank equally with Trican's bank facilities and other outstanding senior notes. Trican intends to use the net proceeds to fund a portion of its 2012 capital budget and for general corporate purposes.

Subsequent to September 30, 2012, Trican's syndicate of banks has unanimously agreed to extend the Company's four year revolving credit facility for an additional year. In addition, Trican has received approval to add a new bank to its syndicate and intends to increase its extendible revolving credit facility from $450 million to $500 million.

The Company received approval from the Toronto Stock Exchange to purchase its own common shares, for cancellation, in accordance with a Normal Course Issuer Bid ("NCIB") for the one year period of March 2, 2012 to March 2, 2013. During the three months ended September 30, 2012, no common shares were purchased under the NCIB. During the nine months ended September 30, 2012, 755,400 common shares were purchased at a cost of $10.0 million, of which $2.7 million was charged to Share Capital and $7.3 million to retained earnings.

OUTLOOK

Canadian Operations

We expect Canadian 2012 fourth quarter revenue to decrease relative to the third quarter of 2012. Early fourth quarter drilling and completions activity is expected to remain consistent with activity levels seen in the third quarter; however, activity levels are expected to decrease near the end of the quarter as we move into the holiday season and our customers complete their 2012 budgets. We also expect pricing to decrease sequentially in the fourth quarter due to additional pressure pumping supply in Canada combined with the expectation of reduced activity levels near the end of the quarter. We expect these factors to result in a reduction in fourth quarter 2012 operating margins in Canada.

We expect 2013 first quarter activity levels to be strong in Canada based on current commodity prices and an expectation that 2013 producer budgets will be consistent with 2012. We will continue to monitor the capital budgets and cash flows of our customers, keeping in mind that any year-over-year additions or reductions in capital spending by our customers will increase or decrease Canadian rig count.

U.S. Operations

Financial results for our U.S. Operations have gradually improved since July as a result of a reduction in guar expenses, the partial impact of cost cutting initiatives and a modest improvement in equipment utilization and pricing. We believe these trends will be maintained as we expect guar price reductions to continue and expect to make further progress on our cost cutting initiatives. We have experienced some cost relief relating to product, freight, unit, wage and base expenses and expect more meaningful cost reductions in these areas in the fourth quarter of 2012 and into 2013. However, the U.S. pressure pumping market remains oversupplied and very competitive, and we expect any improvements in operating margins will be gradual and dependent on a relatively stable pricing environment.

Despite the recent weakness in the U.S. market, we remain confident in our ability to manage our business through the current downturn. We will continue to focus on cost cutting initiatives and improving our operational efficiency in the U.S., and believe that these efforts are necessary to get our U.S. financial results back to an acceptable level. We still believe in the long-term potential of the U.S. pressure pumping market, and remain confident that with our people, management team, technology and operational excellence, we will emerge from the downturn as a stronger company. International Operations

Year-to-date 2012 results for our International operations have been below expectations due to slower than expected activity levels from our Russian customers and a 5% weakening of the Russian ruble relative to the Canadian dollar. We expect strong activity levels in Russia in the early part of the fourth quarter as our customers work towards meeting 2012 spending and production targets; however, consistent with previous years, we expect activity levels to decrease near the end of the fourth quarter as we move into the holiday season and face challenging weather conditions in western Siberia.

Contracts for 2013 work in Russia are currently being tendered and we expect to have greater visibility on our 2013 outlook in Russia by the end of the year.

Our operations in Algeria are improving and we are establishing our work programs and our customer base in Australia. However, we do not expect operations in these regions to have a meaningful impact on our operating results for the remainder of 2012.

NON-IFRS DISCLOSURE

Adjusted profit, operating income and funds provided by operations do not have any standardized meaning as prescribed by IFRS and, therefore, are considered non-IFRS measures.

Adjusted profit and funds provided by operations have been reconciled to profit and operating income has been reconciled to gross profit, being the most directly comparable measures calculated in accordance with IFRS. The reconciling items have been presented net of tax.

(thousands; unaudited) Three months ended Nine months ended
Sept 30, 2012 Sept 30, 2011 June 30, 2012 Sept 30, 2012 Sept 30, 2011
Adjusted profit/(loss) $ 24,716 $ 114,352 $ (48,612 ) $ 68,403 $ 233,141
Deduct:
Non-cash share-based compensation expense 2,068 3,088 2,248 7,234 9,375
Profit/(loss) (IFRS financial measure) $ 22,648 $ 111,264 $ (50,860 ) $ 61,169 $ 223,766
(thousands; unaudited) Three months ended Nine months ended
Sept 30, 2012 Sept 30, 2011 June 30, 2012 Sept 30, 2012 Sept 30, 2011
Funds provided by/(used in) operations $ 49,682 $ 174,284 $ (49,057 ) $ 136,726 $ 376,895
Charges to income not involving cash
Depreciation and amortization 37,270 31,474 38,171 111,273 90,133
Stock-based compensation 2,068 3,088 2,248 7,234 9,375
Loss/(gain) on disposal of property and equipment 1,736 (1,075 ) 282 2,071 (1,047 )
Unrealized foreign exchange (gain)/loss 1,160 98 3,460 4,813 (884 )
Income tax expense/(recovery) 1,284 46,434 (25,139 ) 7,781 94,726
Income tax paid (16,484 ) (16,999 ) (17,219 ) (57,615 ) (39,174 )
Profit/(loss) (IFRS financial measure) $ 22,648 $ 111,264 $ 50,860 $ 61,169 $ 223,766
(thousands; unaudited) Three months ended Nine months ended
Sept 30, 2012 Sept 30, 2011 June 30, 2012 Sept 30, 2012 Sept 30. 2011
Operating income/(loss) $ 71,355 $ 193,620 $ (28,255 ) $ 204,945 $ 417,229
Add:
Administrative expenses 28,408 25,814 20,582 79,361 77,116
Deduct:
Depreciation expense (37,270 ) (31,474 ) (38,171 ) (111,273 ) (90,133 )
Gross profit /(loss)(IFRS financial measure) $ 62,493 $ 187,960 $ (45,844 ) $ 173,033 $ 404,212
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Stated in thousands; unaudited)
September 30,
2012
December 31,
2011
ASSETS
Current assets
Cash and cash equivalents $ 55,333 $ 125,855
Trade and other receivables 526,390 607,672
Current tax assets 330 1,553
Inventory 215,385 173,515
Prepaid expenses 42,989 31,996
840,427 940,591
Property and equipment 1,433,856 1,178,410
Intangible assets 10,938 14,662
Deferred tax assets 67,571 33,369
Other assets 11,120 6,445
Goodwill 43,611 43,706
$ 2,407,523 $ 2,217,183
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank loans (note 3) $ 11,310 $ -
Trade and other payables 278,729 287,689
Contingent consideration (note 2) 2,827 2,867
Current tax liabilities 27,886 3,363
Current portion of long-term debt (note 3) - 25,425
320,752 319,344
Loans and borrowings (note 3) 602,751 400,256
Deferred tax liabilities 91,853 132,031
Shareholders' equity
Share capital (note 4) 527,860 529,062
Contributed surplus 52,897 45,894
Accumulated other comprehensive income (34,204 ) (22,805 )
Retained earnings 845,407 813,238
Total equity attributable to equity holders of the Company 1,391,960 1,365,389
Non-controlling interest 207 163
$ 2,407,523 $ 2,217,183
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


(Stated in thousands, except per share amounts; unaudited)
Three Months
Ended Sept 30,
2012
Three Months
Ended Sept 30,
2011
Nine Months
Ended Sept 30,
2012
Nine Months
Ended Sept 30,
2011
Revenue $ 593,204 $ 659,104 $ 1,727,535 $ 1,615,433
Cost of sales 530,711 471,144 1,554,502 1,211,221
Gross profit 62,493 187,960 173,033 404,212
Administrative expenses 28,408 25,814 79,361 77,116
Other loss/(income) 1,280 (536 ) 385 (2,256 )
Results from operating activities 32,805 162,682 93,287 329,352
Finance income (474 ) (1,001 ) (1,662 ) (2,324 )
Finance costs 7,696 6,057 22,123 13,484
Foreign exchange loss/(gain) 1,651 (72 ) 3,876 (300 )
Profit before income tax 23,932 157,698 68,950 318,492
Income tax expense (note 6) 1,284 46,434 7,781 94,726
Profit for the period 22,648 111,264 61,169 223,766
Profit attributable to:
Owners of the Company 22,742 111,284 61,415 223,786
Non-controlling interest (94 ) (20 ) (246 ) (20 )
Profit for the period $ 22,648 $ 111,264 $ 61,169 $ 223,766
Other comprehensive income
Unrealized gain/(loss) on hedging instruments 663 (522 ) 1,105 (1,069 )
Foreign currency translation differences (13,908 ) 13,000 (12,504 ) 8,667
Total comprehensive income for the period $ 9,403 $ 123,742 $ 49,770 $ 231,364
Total comprehensive income attributable to:
Owners of the Company 9,497 123,778 50,016 231,400
Non- Controlling interest (94 ) (36 ) (246 ) (36 )
Total comprehensive income for the period $ 9,403 $ 123,742 $ 49,770 $ 231,364
Earnings per share (note 5)
Basic $ 0.16 $ 0.76 $ 0.42 $ 1.54
Diluted $ 0.16 $ 0.75 $ 0.42 $ 1.52
Weighted average shares outstanding - basic 146,432 146,299 146,677 145,482
Weighted average shares outstanding - diluted 146,446 147,866 146,773 147,261
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS


(Stated in thousands; unaudited)
Three Months
Ended Sept 30,
2012
Three Months
Ended Sept 30,
2011
Nine Months
Ended Sept 30,
2012
Nine Months
Ended Sept 30,
2011
Cash Provided By/ (Used In):
Operations
Profit for the period $ 22,648 $ 111,264 $ 61,169 $ 223,766
Charges to income not involving cash:
Depreciation and amortization 37,270 31,474 111,273 90,133
Amortization of debt issuance costs 202 173 605 173
Stock-based compensation 2,068 3,088 7,234 9,375
Loss/(gain)on disposal of property and equipment 1,736 (1,075 ) 2,071 (1,047 )
Net Finance Costs 7,223 5,056 20,461 11,160
Unrealized foreign exchange (gain)/loss 1,160 98 4,813 (884 )
Income tax expense 1,284 46,434 7,781 94,726
73,591 196,512 215,407 427,402
Change in inventories 198 (14,050 ) (46,175 ) (50,830 )
Change in trade and other receivables (107,637 ) (223,218 ) 71,288 (226,349 )
Change in prepayments (3,761 ) (14,592 ) (11,907 ) (20,096 )
Change in trade and other payables 9,856 66,625 3,013 73,467
Cash generated from operating activities (27,753 ) 11,277 231,626 203,594
Interest paid (13,128 ) (2,575 ) (15,905 ) (4,659 )
Income tax paid (16,484 ) (16,999 ) (57,615 ) (39,174 )
(57,365 ) (8,297 ) 158,106 159,761
Investing
Interest received 203 311 913 1,462
Purchase of property and equipment (81,707 ) (157,964 ) (385,862 ) (415,645 )
Proceeds from the sale of property and equipment 798 1,941 1,477 2,428
Payments received on loan to an unrelated third party - 1,714 226 4,425
Business acquisitions - (9,372 ) - (9,372 )
(80,706 ) (163,370 ) (383,246 ) (416,702 )
Financing
Net proceeds from issuance of share capital 181 16,882 1,289 32,123
Repurchase and cancellation of shares under NCIB - - (10,011 ) -
Funds received from bank loans - - 11,310 -
Funds drawn on revolving credit facility 154,261 207,500
Issuance of long-term debt, net of financing fees - - - 295,824
Repayment of long-term debt - - (25,425 ) -
Dividend paid (21,957 ) (7,284 ) (29,302 ) (14,516 )
132,485 9,598 155,361 313,431
Effect of exchange rate changes on cash (350 ) 2,392 (743 ) 1,415
(Decrease)/increase in cash and cash equivalents (5,936 ) (159,677 ) (70,522 ) 57,905
Cash and cash equivalents, beginning of period 61,269 298,640 125,855 81,058
Cash and cash equivalents, end of period $ 55,333 $ 138,963 $ 55,333 $ 138,963
See accompanying notes to the consolidated financial statements.
Selected Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
For the three and nine months ended September 30, 2012 and 2011
NOTE 3 - LOANS AND BORROWINGS
Long term debt
As at
(Stated in thousands)
September 30,
2012
December 31,
2011
Notes payable $ 376,841 $ 412,646
Finance lease obligations 37,505 26,766
Revolving credit facility 205,274 -
Bank loans 11,310 -
Hedge receivable (4,154 ) (4,903 )
Total 626,776 434,509
Current portion of finance lease obligations (1) (12,715 ) (8,828 )
Russian demand revolving credit facility (11,310 ) -
Current portion of long-term debt - (25,425 )
Non-current $ 602,751 $ 400,256
(1) Current portion of finance lease obligations is included in trade and other payables.

On October 18, 2011, Trican entered into a new $450 million four year extendible revolving credit facility (the "New Facility") with a syndicate of banks. On October 18, 2012, Trican extended the New Facility by an additional year. The New Facility, which replaced the previous $250 million three year extendible facility, is unsecured and bears interest at the applicable Canadian prime rate, U.S. prime rate, Banker's Acceptance rate or at LIBOR plus 50 to 325 basis points, dependent on certain financial ratios of the Company. The New Facility requires Trican to comply with certain financial and non-financial covenants that are typical for this type of arrangement. Trican was in compliance with these covenants at September 30, 2012.

Notes payable

The Notes payable require the Company to comply with certain financial and non-financial covenants that are typical for this type of arrangement. At September 30, 2012, the Company was in compliance with these covenants (2011 - in compliance). During the quarter ended June 30, 2012, Trican repaid U.S. $25.0 million in notes payable.

NOTE 4 - SHARE CAPITAL

Share capital

Authorized:

The Company is authorized to issue an unlimited number of common and preferred shares, issuable in series. The shares have no par value.

Issued and Outstanding - Common Shares:
(stated in thousands, except share amounts) Number of Shares Amount
Balance, January 1, 2012 146,916,859 $ 529,062
Exercise of stock options 288,718 1,289
Reclassification from contributed surplus on exercise of options - 231
Shares repurchased and cancelled under NCIB (755,400 ) (2,722 )
Balance, September 30, 2012 146,450,177 $ 527,860

All issued shares are fully paid.

Normal Course Issuer Bid

The Company received approval from the Toronto Stock Exchange to purchase its own common shares, for cancellation, in accordance with a Normal Course Issuer Bid ("NCIB") for the one year period of March 2, 2012 to March 2, 2013. During the nine months ended September 30, 2012, 755,400 common shares were purchased at a cost of $10.0 million, of which $2.7 million was charged to Share Capital and $7.3 million to retained earnings.

NOTE 5 - EARNINGS PER SHARE
(Stated in thousands, except share and per share amounts) For the three months ended September 30, For the nine months ended September 30,
Basic earnings per share 2012 2011 2012 2011
Profit attributable to owners of the company $ 22,742 $ 111,284 $ 61,415 $ 223,786
Weighted average number of common shares 146,431,602 146,299,022 146,676,555 145,482,252
Basic earnings per share $ 0.16 $ 0.76 $ 0.42 $ 1.54
Diluted earnings per share 2012 2011 2012 2011
Profit attributable to owners of the company $ 22,742 $ 111,284 $ 61,415 $ 223,786
Weighted average number of common shares 146,431,602 146,299,022 146,676,555 145,482,252
Diluted effect of stock options 14,444 1,566,739 96,275 1,779,133
Diluted weighted average number of common shares 146,446,046 147,865,761 146,772,830 147,261,385
Diluted earnings per share $ 0.16 $ 0.75 $ 0.42 $ 1.52

At September 30, 2012, 5.8 million (2011 - 5.3 million) options were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

NOTE 6 - INCOME TAXES
(Stated in thousands)
Nine months ended September 30,
2012 2011
Current income tax expense $ 84,177 $ 39,903
Deferred income tax (recovery)/expense (76,396 ) 54,823
$ 7,781 $ 94,726

The net income tax provision differs from that expected by applying the combined federal and provincial income tax rate of 25.17% (2011 - 26.64%) to income before income taxes for the following reasons:

(Stated in thousands)
Nine months ended September 30,
2012

2011
Expected combined federal and provincial income tax $ 17,354 $ 84,847
Statutory and other rate differences (15,678 ) 6,905
Non-deductible expenses 6,658 6,018
Translation of foreign subsidiaries (740 ) 15
Changes to deferred income tax rates - (3,925 )
Capital and other foreign tax 45 608
Other 142 258
$ 7,781 $ 94,726

NOTE 9 - OPERATING SEGMENTS

The Company operates in Canada and the U.S. along with a number of international operations. The international regions include Russia, Algeria, Kazakhstan, Australia and Saudi Arabia. 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.
  • U.S. operations provides cementing, fracturing, coiled tubing, nitrogen, and acidizing services which are performed on new and existing oil and gas wells.
  • International operations provides cementing, fracturing, coiled tubing, and nitrogen services which are performed on new and existing oil and gas wells.

Information regarding the results of each geographic region is included below. Performance is measured based on Revenue and Gross profit as included in the internal management reports which are reviewed by the Company's executive management team. Each region's Gross profit is used to measure performance as management believes that such information is most relevant in evaluating regional results relative to other entities that operate within the industry.


(Stated in thousands)
Canadian
Operations
United States
Operations

International
Operations

Corporate


Total

Three months ended September 30, 2012
Revenue $ 321,948 $ 198,881 $ 72,375 $ - $ 593,204
Gross profit/(loss) 93,758 (31,946 ) 6,554 (5,873 ) 62,493
Finance income - - - (474 ) (474 )
Finance costs - - - 7,696 7,696
Tax expense/(recovery) 17,289 (16,972 ) 976 (9 ) 1,284
Depreciation and amortization 13,880 16,544 6,696 150 37,270
Assets 903,794 1,130,052 322,453 51,224 2,407,523
Goodwill 22,690 - 6,695 14,226 43,611
Property and equipment 529,353 773,920 115,079 15,504 1,433,856
Capital expenditures 6,183 67,487 1,844 6,193 81,707
Three months ended September 30, 2011
Revenue $ 371,481 $ 207,288 $ 80,335 $ - $ 659,104
Gross profit/(loss) 145,635 42,181 6,009 (5,865 ) 187,960
Finance income - - - 1,001 1,001
Finance costs - - - 6,057 6,057
Tax expense 31,505 13,604 2,150 (825 ) 46,434
Depreciation and amortization 10,472 14,937 5,882 183 31,474
Assets 834,635 791,171 246,901 229,931 2,102,638
Goodwill 22,690 - 20,791 - 43,481
Property and equipment 439,123 514,796 90,410 9,720 1,054,049
Capital expenditures 60,920 93,354 3,110 580 157,964
Goodwill expenditures - - 6,565 - 6,565

(Stated in thousands)
Canadian
Operations
United States
Operations
International
Operations

Corporate

Total
Nine months ended September 30, 2012
Revenue $ 895,237 $ 624,194 $ 208,104 $ - $ 1,727,535
Gross profit/(loss) 241,237 (59,015 ) 7,763 (16,952 ) 173,033
Finance income - - - (1,662 ) (1,662 )
Finance costs - - - 22,123 22,123
Tax expense/(recovery) 42,334 (35,106 ) 243 310 7,781
Depreciation and amortization 38,734 52,755 19,525 259 111,273
Capital expenditures 111,776 241,200 26,693 6,193 385,862
Nine months ended September 30, 2011
Revenue $ 865,663 $ 523,244 $ 226,526 $ - $ 1,615,433
Gross profit/(loss) 292,074 113,148 15,059 (16,069 ) 404,212
Finance income - - - 2,324 2,324
Finance costs - - - 13,484 13,484
Tax expense 58,159 34,261 2,355 (49 ) 94,726
Depreciation and amortization 32,716 39,378 17,551 488 90,133
Capital expenditures 128,115 273,704 12,303 1,523 415,645
Goodwill expenditures - - 6,565 - 6,565

The Corporate division does not represent an operating segment and is included for informational purposes only. Corporate division expenses consist of salary expenses, stock-based compensation and office costs related to corporate employees, as well as public company costs.

FORWARD-LOOKING INFORMATION

The MD&A contains certain forward-looking statements and other information based on Trican's current expectations, estimates, projections and assumptions that were made by the Company in light of information available at the time the statement was made. Statements and other information that address expectations or projections about the future, and other statements and information about the Company's strategy for growth, expected and future expenditures, costs, operating and financial results, future financing and capital activities are forward-looking statements. Some 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:

  • Remaining capital expenditures for the 2012 capital program are expected to be approximately $70 to $120 million;
  • Trican intends to use the net proceeds from the issuance of senior unsecured notes to fund a portion of its 2012 capital program and for general corporate purposes;
  • We intend to consider removing additional U.S. fracturing crews from service if warranted by deteriorating market conditions;
  • We expect a more meaningful U.S. operating margin improvement during the fourth quarter of 2012 as a result of the significant decrease in guar prices;
  • We expect to see additional benefit from cost cutting measures in the U.S. in the fourth quarter of 2012 and into 2013;
  • We intend to continue to focus on growing our cementing business in the U.S., as well as our coiled tubing service line, as we move towards becoming a full service pressure pumping company in the U.S.;
  • Our Russian customers' work programs remain behind schedule and overall revenue is expected to come in below our initial expectations for this region;
  • We believe the trend towards more horizontal drilling and completions work in Russia will continue and result in increased pressure pumping demand in the region;
  • Expectation that activity levels will increase in Kazakhstan during the fourth quarter of 2012;
  • We expect our Canadian 2012 fourth quarter revenue to decrease relative to the third quarter of 2012;
  • Early fourth quarter drilling and completions activity in Canada is expected to remain consistent with activity levels seen in the third quarter; however, activity levels are expected to decrease near the end of the quarter as we move into the holiday season and our customers complete their 2012 budgets;
  • We expect Canadian pricing to decrease sequentially in the fourth quarter due to additional pressure pumping supply in Canada combined with the expectation of reduced activity levels near the end of the quarter;
  • We expect a reduction in fourth quarter 2012 operating margins in Canada;
  • We expect 2013 first quarter activity levels to be strong in Canada based on current commodity prices and an expectation that 2013 producer budgets will be consistent with 2012;
  • We have seen the price of guar decline recently and expect this trend to improve our operating margins during the fourth quarter of 2012;
  • We expect any improvements in U.S. operating margins will be gradual and dependent on a relatively stable pricing environment;
  • If the U.S. operating environment deteriorates any further, we intend to examine shutting down additional U.S. fracturing crews until market conditions improve;
  • We anticipate seeing additional benefit in the U.S. from cost cutting measures in the fourth quarter of 2012 with the most meaningful improvements in product, freight, unit, wage and base expenses;
  • Despite the recent weakness in the U.S. market, we remain confident in our ability to manage our business through the current downturn;
  • We expect strong activity levels in Russia in the early part of the fourth quarter as our customers work towards meeting 2012 spending and production targets; however, consistent with previous years, we expect activity levels to decrease near the end of the fourth quarter as we move into the holiday season and face challenging weather conditions in western Siberia;
  • Contracts for 2013 work in Russia are currently being tendered and we expect to have greater visibility on our 2013 outlook in Russia by the end of the year; and
  • We do not expect operations in Australia and Algeria to have a meaningful impact on our operating results for the remainder of 2012.

Forward-looking information and financial outlook is based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect. Trican's actual results may differ materially from those expressed or implied and therefore such forward-looking information and financial outlook 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 information and financial outlook is 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. The foregoing important factors are not exhaustive. In addition, actual results could differ materially from those anticipated in forward-looking information and financial outlook provided herein as a result of the risk factors set forth under the section entitled "Risks Factors" in our Annual Information Form dated March 22, 2012. Readers are also referred to the risk factors and assumptions described in other documents filed by the Company from time to time with securities regulatory authorities.

Additional information regarding Trican including Trican's most recent annual information form is available under Trican's profile on SEDAR (www.sedar.com).

Requests for shareholder information should be directed to Dale Dusterhoft, Michael Baldwin or Gary Summach.

Contact Information

  • Trican Well Service Ltd.
    Dale Dusterhoft
    Chief Executive Officer
    (403) 266 - 0202
    (403) 237 - 7716 (FAX)
    ddusterhoft@trican.ca

    Trican Well Service Ltd.
    Michael Baldwin
    Vice President, Finance & CFO
    (403) 266 - 0202
    (403) 237 - 7716 (FAX)
    mbaldwin@trican.ca

    Trican Well Service Ltd.
    Gary Summach
    Director of Reporting and Investor Relations
    (403) 266 - 0202
    (403) 237 - 7716 (FAX)
    gsummach@trican.ca

    Trican Well Service Ltd.
    2900, 645 - 7th Avenue S.W.
    Calgary, Alberta T2P 4G8
    www.trican.ca