Trican Well Service Ltd.
TSX : TCW

Trican Well Service Ltd.

October 26, 2005 17:31 ET

Trican-Third Quarter 2005 Record Results

CALGARY, ALBERTA--(CCNMatthews - Oct. 26, 2005) - Trican Well Service Ltd. (TSX:TCW):



Financial Review
------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended Nine months ended
($ millions, except per Sept. 30, Sept. 30,
share amounts, unaudited) 2005 2004 2005 2004
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Revenue $174.3 $95.4 $433.4 $281.6
Operating income (1) 62.7 25.9 142.2 77.3
Net income from continuing operations 36.6 14.5 81.3 40.6
Net income per share from continuing
operations (basic) $ 0.64 $0.26 $1.44 $0.74
(diluted) $ 0.62 $0.25 $1.38 $0.71
Net income 36.6 8.2 81.3 34.3
Net income per share (basic) $ 0.64 $0.15 $1.44 $0.63
(diluted) $ 0.62 $0.14 $1.38 $0.60
Funds provided by continuing
operations(1) 66.0 27.0 113.3 56.4
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Trican Well Service Ltd. is pleased to announce its financial and operating results for the three and nine months ended September 30, 2005 with comparisons to the same periods last year. The Company's activity levels during the quarter were hampered by periods of wet weather experienced in southern Alberta, however; strong demand for services in Trican's northern Alberta and British Columbia areas combined with continued favourable results from its International operations helped establish new record highs for both total revenue and number of jobs completed in a quarter.

Revenue increased 83% for the three months and 54% for the nine months ended September 30, 2005 compared to the same periods in 2004 as a result of increased equipment capacity and a continued strong demand for services brought about by the strength of oil and natural gas prices. Also supporting the significant revenue growth in Canada is the Company's strategic focus on servicing the deeper, more technically challenging areas of the Western Canadian Sedimentary Basin ("WCSB") which drove the second highest revenue per job for a quarter. Net income for the quarter increased 345% to $36.6 million compared to the $8.2 million recorded in the same period in 2004. Similarly, earnings per share increased 327% to $0.64 ($0.62 diluted) from $0.15 ($0.14 diluted) for the comparable period in 2004. However the results from the third quarter in 2004 reflect the write down of the Company's investment in the Polybore™ technology. Without the impact of this write down, net income from continuing operations for the quarter would have increased 151% to $36.6 million from the $14.5 million recorded in the third quarter of 2004. Earnings per share from continuing operations for the quarter of $0.64 ($0.62 diluted) would have increased 146% over last years comparable measure of $0.26 ($0.25 diluted). This was the second highest per share earnings ever achieved by Trican, almost equalling the record $0.65 established in the first quarter of this year. Funds from operations were $66.0 million for the quarter, an increase of $39.0 million or 145% over the same period last year.

For the nine months ended September 30, 2005, net income from continuing operations totalled $81.3 million, an increase of 100% over the same period in 2004. Earnings per share from continuing operations on a year-to-date basis increased 95% to $1.44 ($1.38 diluted) versus $0.74 ($0.71 diluted) in the comparable prior period. Funds from continuing operations increased $57.0 million to $113.3 million for the nine months compared to the same period in 2004.

Operations Review

Canada

Drilling activity levels in the WCSB were affected by wet weather experienced in southern Alberta during August; however, they increased almost 16% over the same quarter last year. Approximately 7,274 wells were drilled in the third quarter versus 6,291 wells for the comparable prior period. As in recent years, natural gas directed drilling continued to comprise a majority of the activity as high commodity prices support strong exploration and development initiatives.

Trican continues to invest in expanding its operational capacity in Canada to meet growing customer demand and expected strong activity levels. During the quarter five additional cement units and one conventional and two coalbed methane fracturing crews as well as two deep coiled tubing units were added to the Company's operations fleet. As in the past, equipment type and specifications focused on servicing the deeper, more technically challenging areas of the WCSB as well as the rapidly growing CBM fracturing market.

This investment has increased Trican's operational capacity substantially. Compared to the third quarter of last year, the Company currently operates 11 more cementing units, three more fracturing crews, three additional deep coil units and three more coalbed methane (CBM) fracturing crews. This expanded equipment capacity helped drive a new record for the number of jobs completed by the Company during a quarter.

As noted in the interim report for the period ended June 30, 2005, the Board of Directors approved an increase in the capital expansion program of $32.6 million, which will bring the total Canadian operations capital budget for 2005 to $101.0 million. Although the Company has experienced some delays with the delivery of the equipment, by year end it expects to add two additional fracturing crews, two additional deep coil units and two nitrogen units. Trican expects all of the additional equipment to be operational in time for the winter drilling season.

International

International operations, which include operations in Russia and Kazakhstan, achieved significant growth during the quarter ended September 30, 2005 relative to the same period in 2004. Additional equipment capacity combined with continued strong demand for services drove these results. Two additional fracturing crews have been added since the third quarter of 2004 bringing the total operating to five crews.

As reported in the second quarter, operations from the Company's Kazakhstan base were significantly curtailed due primarily to ongoing uncertainty regarding a key customer. As a result, during the quarter, Trican redeployed the equipment from its Kazakhstan operation to Russia to meet strong demand from existing customers as well as new customer contracts that had been awarded. Management still believes that there is a good potential for services in Kazakhstan and efforts continue to negotiate suitable arrangements to support the return of the equipment to this market.

During the quarter the Board of Directors approved a $7 million increase in the capital budget for Trican's Russian operations bringing the total budget for 2005 to $27 million. This additional investment will upgrade the pumping capacity and expand logistical support for the Company's fracturing operations. This investment was necessitated because of a trend of increasing job sizes. Further, the Company has recently signed a short-term contract and entered into discussions regarding a longer term arrangement with a new strategic customer for fracturing services in a new area of operations. This expanded capacity and logistical support will be an integral part of Trican's ability to meet the needs of its growing customer base. The Company recently added one additional fracturing crew, expanding fracturing capacity to six crews in anticipation of a busy fourth quarter.

Management's Discussion and Analysis

This Management's Discussion and Analysis (MD&A) should be read in conjunction with the unaudited interim consolidated financial statements of Trican as at, and for the three and nine months ended September 30, 2005 and 2004, and should also be read in conjunction with the audited consolidated financial statements and MD&A contained in Trican's annual report for the year ended December 31, 2004. The interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). This MD&A is dated October 26, 2005. Additional information including the Company's Annual Information Form is available on SEDAR at www.sedar.com.




QUARTERLY COMPARATIVE INCOME STATEMENTS
Quarter-
Three months ended over-
Sept. 30, % of % of Quarter %
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change Change
------------------------------------------------------------------------

Revenue 174,261 100.0 % 95,440 100.0 % 78,821 83 %
Expenses
Materials and
operating 105,227 60.4 % 65,736 68.9 % 39,491 60 %
General and
administrative 6,307 3.6 % 3,773 4.0 % 2,534 67 %
------------------------------------------------------------------------
Operating income(1) 62,727 36.0 % 25,931 27.2 % 36,796 142 %
Interest expense 350 0.2 % 588 0.6 % (238) (40)%
Depreciation and
amortization 6,294 3.6 % 4,357 4.6 % 1,937 44 %
Foreign exchange gain (41) - % (25) - % (16) (64)%
Other income (142) (0.1)% (167) (0.2)% 25 15 %
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Income from continuing
operations before
income taxes and
non-controlling
interest 56,266 32.3 % 21,178 22.2 % 35,088 166 %
Provision for income
taxes 19,615 11.3 % 6,512 6.8 % 13,103 201 %
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Income from continuing
operations before
non-controlling
interest 36,651 21.0 % 14,666 15.4 % 21,985 150 %
Non-controlling interest 86 - % 122 0.1 % (36) (30)%
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Net income from
continuing operations 36,565 21.0 % 14,544 15.2 % 22,021 151 %
Net loss from
discontinued
operations - - % 6,329 6.6 % (6,329)(100)%
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Net Income 36,565 21.0 % 8,215 8.6 % 28,350 345 %
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The Company is managed in three divisions - Well Service, Production Services and Corporate. The Well Service Division provides deep coiled tubing; nitrogen; fracturing, including coalbed methane fracturing; and cementing services in Canada, Russia and Kazakhstan. The Production Services Division provides acidizing, intermediate depth coiled tubing, and industrial services primarily in Canada.



FINANCIAL REVIEW

WELL SERVICE DIVISION
OVERVIEW Quarter-
Over-
Three months ended Sept. 30, % of % of Quarter
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 166,079 88,869 87 %
Expenses
Materials and operating 98,130 59.1 % 60,345 67.9 % 63 %
General and administrative 693 0.4 % 615 0.7 % 13 %
--------- --------
Total expenses 98,823 59.5 % 60,960 68.6 %
Operating income(1) 67,256 40.5 % 27,909 31.4 % 141 %
Number of jobs 7,324 4,947 48 %
Revenue per job 22,830 18,142 26 %
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The Well Service Division's record financial performance for the quarter reflects continued strong demand for services and the impact of expanded equipment capacity, both in Canada and internationally. Revenue for the three months ended September 30, 2005 established a new Company record of $166 million, an increase of 87% compared to the same period in 2004. Within this division, Canadian operations accounted for 86% of revenue for the quarter while International operations contributed 14%. Last year, Canadian operations made up 84% of divisional revenue and International operations contributed 16%. All service lines contributed to the increase in revenue; however, the largest gains were achieved by the fracturing, cementing and deep coiled tubing service lines. Average revenue per job of $22,830 was the second highest on record and was 26% higher than the comparable prior quarter. The number of jobs completed increased 48% to 7,324 establishing a Company record for total number of jobs completed in a quarter.



WELL SERVICE - CANADIAN OPERATIONS Quarter-
Over-
Three months ended Sept. 30, % of % of Quarter
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 143,591 75,037 91 %
Expenses
Materials and operating 80,629 56.2 % 51,574 68.7 % 56 %
General and administrative 227 0.2 % 205 0.3 % 11 %
--------- --------
Total expenses 80,856 56.3 % 51,779 69.0 %
Operating income(1) 62,735 43.7 % 23,258 31.0 % 170 %
Number of jobs 6,943 4,637 50 %
Revenue per job 20,823 16,107 29 %
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Canadian operations revenue for the quarter increased 91% over the same period in 2004 due to expanded equipment capacity and higher revenue per job. During the past year, the Company has added three additional fracturing crews, three new state-of-the-art CBM crews, three deep coil units and eleven cementing units. This additional equipment and continued strong demand for services drove a 50% increase in jobs performed, and produced the highest job count in the Company's history. CBM-related revenues were up 274% relative to the third quarter of 2004 and could have been higher; however, precipitation in southern Alberta negatively impacted CBM activity for part of August. Revenue per job was the second highest in the Company's history increasing 29% to $20,823 and benefited from more work being performed in the deeper, more technically challenging areas of the WCSB, the addition of CBM-related work and a price book increase in July 2005.

Materials and operating expense for the quarter decreased as a percentage of revenue to 56% compared to 69% for the same period in 2004. Growth in the higher margin services and a continued focus on deeper more technical work contributed to this improvement. General and administrative expenses remained relatively unchanged on a quarter-over-quarter basis.



WELL SERVICE - INTERNATIONAL OPERATIONS Quarter-
Over-
Three months ended Sept. 30, % of % of Quarter
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 22,488 13,832 63 %
Expenses
Materials and operating 17,501 77.8 % 8,771 63.4 % 100 %
General and administrative 466 2.1 % 410 3.0 % 14 %
--------- --------
Total expenses 17,967 79.9 % 9,181 66.4 %
Operating income(1) 4,521 20.1 % 4,651 33.6 % (3)%
Number of jobs 381 310 23 %
Revenue per job 59,403 45,443 31 %
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Revenue for the quarter from International operations (which comprises fracturing and cementing services) increased 63% compared to the same period in 2004 and established a new record for quarterly revenue as a result of strong demand for services, expanded equipment capacity and a new record for revenue per job. Two additional fracturing crews were added since the third quarter of 2004 bringing the total operating to five crews. The additional equipment capacity coupled with continued strong demand for services established new records for total fracturing jobs completed as well as total jobs completed. Revenue per job increased 31% over the comparable prior quarter to $59,403 establishing another record due to larger fracturing job sizes.

Materials and operating expense increased as a percentage of revenue to 78% from the 63% recorded in the third quarter of 2004. The increase was due primarily to higher repairs and maintenance costs and higher fuel costs as well as an increase in salaries and infrastructure costs. Additional salaries and infrastructure costs were incurred for the new base in Nyagan as well as the existing base in Raduzhny in order to support the additional equipment added. Recent contract renewals have allowed for some of these cost increases to be passed on to customers through price increases. General and administrative costs remained relatively unchanged and decreased as a percentage of revenue relative to the third quarter of 2004.



PRODUCTION SERVICES DIVISION Quarter-
Over-
Three months ended Sept. 30, % of % of Quarter
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 8,182 6,571 25 %
Expenses
Materials and operating 6,682 81.7 % 5,009 76.2 % 33 %
General and administrative 41 0.5 % 29 0.4 % 41 %
------- -------
Total expenses 6,723 82.2 % 5,038 76.7 %
Operating income(1) 1,459 17.8 % 1,533 23.3 % (5)%
Number of jobs 582 539 8 %
Revenue per job 8,488 9,607 (12)%
Number of hours 2,228 2,225 - %
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The Production Services Division includes intermediate depth coiled tubing services, acidizing services and industrial services. During the quarter, revenue from the Production Services Division increased 25% over the same period of 2004 primarily as a result of a significant increase in chemical sales. The number of jobs completed increased 8% to 582; however, revenue per job decreased 12% as a result of job sizes being on average lower than the comparable prior period. The number of hours for the intermediate depth coiled tubing service line was consistent quarter-over-quarter; however, average revenue per hour increased.

Materials and operating expenses as a percentage of sales increased to 82% from 76% in 2004 due to a higher volume of chemical sales, which have relatively lower margins. General and administrative expenses remained relatively unchanged on a quarter-over-quarter basis.



CORPORATE DIVISION Quarter-
% of % of Over-
Three months ended Sept. 30, Total Total Quarter
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
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Expenses
Materials and operating 415 0.2 % 382 0.4 % 9 %
General and administrative 5,573 3.2 % 3,129 3.3 % 78 %
------- -------
Total expenses 5,988 3.4 % 3,511 3.7 %
Operating loss(1) (5,988) (3,511) 71 %
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Corporate Division expenses consist mainly of general and administrative expenses. Overall, expenses increased $2.5 million quarter-over-quarter; however, as a percentage of revenue, they decreased to 3.4% from 3.7%. Materials and operating expense remained consistent with the comparable prior period. General and administrative expense increased $2.4 million due to higher stock-based compensation costs, staffing and incentive bonus accruals. Stock-based compensation costs and staffing and bonus accruals each accounted for $1.1 million of the increase. The remaining $0.2 million increase was split evenly between higher deferred share unit costs and an increase in the allowance for doubtful accounts.

Other Expenses and Income

Interest expense decreased $0.2 million quarter-over-quarter to $0.4 million primarily as a result of repayment of Russian bank and investor loans. Depreciation and amortization expense increased $1.9 million for the quarter relative to the same period in 2004 due to continued expansion of the Company's equipment capacity and operations facilities.



YEAR-TO-DATE COMPARATIVE INCOME STATEMENTS
------------------------------------------------------------------------
Year-
Nine months ended Over-
Sept. 30, % of % of Year %
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change Change
------------------------------------------------------------------------
Revenue 433,396 100.0 % 281,594 100.0 % 151,802 54 %
Expenses
Materials and
operating 274,674 63.4 % 194,280 69.0 % 80,394 41 %
General and
administrative 16,545 3.8 % 10,046 3.6 % 6,499 65 %
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Operating income(1) 142,177 32.8 % 77,268 27.4 % 64,909 84 %
Interest expense 1,268 0.3 % 1,801 0.6 % (533) (30)%
Depreciation and
amortization 17,560 4.1 % 12,478 4.4 % 5,082 41 %
Foreign exchange
(gain) / loss (1,258) (0.3)% 515 0.2 % (1,773)(344)%
Other income (351) (0.1)% (545) (0.2)% 194 36 %
------------------------------------------------------------------------
Income from continuing
operations before
income taxes and
non-controlling
interest 124,958 28.8 % 63,019 22.4 % 61,939 98 %
Provision for
income taxes 43,440 10.0 % 20,907 7.4 % 22,533 108 %
------------------------------------------------------------------------
Income from
continuing operations
before
non-controlling
interest 81,518 18.8 % 42,112 15.0 % 39,406 94 %
Non-controlling interest 251 0.1 % 1,519 0.5 % (1,268) (83)%
------------------------------------------------------------------------
Net income from
continuing operations 81,267 18.8 % 40,593 14.4 % 40,674 100 %
Net loss from
discontinued operations - 0.0 % 6,329 2.2 % (6,329)(100)%
------------------------------------------------------------------------
Net income 81,267 18.8 % 34,264 12.2 % 47,003 137 %
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WELL SERVICE DIVISION

OVERVIEW Year-
Over-
Nine months ended Sept. 30, % of % of Quarter
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------

Revenue 404,904 257,239 57 %
Expenses
Materials and operating 251,898 62.2 % 174,903 68.0 % 44 %
General and administrative 2,085 0.5 % 1,808 0.7 % 15 %
-------- --------
Total expenses 253,983 62.7 % 176,711 68.7 %
Operating income(1) 150,921 37.3 % 80,528 31.3 % 87 %
Number of jobs 17,858 14,626 22 %
Revenue per job 22,837 17,826 28 %
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The Well Service Division's record financial performance for the year reflects a continued strong demand for services and the impact of expanded equipment capacity in both Canada and Russia. Revenue for the nine months ended September 30, 2005 for the Well Service Division increased 57% to $405 million compared to the same period in 2004. Within this division, Canadian operations accounted for 86% of revenue for both the current and prior year while International operations contributed 14% in both periods. Average revenue per job increased 28% to $22,837 while the number of jobs completed increased 22% to 17,858.



WELL SERVICE - CANADIAN OPERATIONS Year-
Over-
Nine months ended Sept. 30, % of % of Year
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 346,194 221,742 56 %
Expenses
Materials and operating 206,866 59.8 % 152,180 68.6 % 36 %
General and
administrative 643 0.2 % 485 0.2 % 33 %
-------- --------
Total expenses 207,509 59.9 % 152,665 68.8 %
Operating income(1) 138,685 40.1 % 69,077 31.2 % 101 %
Number of jobs 16,828 13,807 22 %
Revenue per job 20,720 16,288 27 %
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Canadian operations revenue for the nine months ended September 30, 2005 increased 56% over the same period in 2004 due to expanded equipment capacity and higher revenue per job. This increase more than surpassed growth in industry activity as there has only been a 5% increase in number of wells drilled in the WCSB for the first nine months of 2005 versus the same period last year. Additional equipment and continued strong demand for services drove a 22% increase in the number of jobs performed. CBM-related revenues were up 275% on a year-over-year basis. Revenue per job increased 27% to $20,720 and benefited from more work being performed in the deeper, more technically challenging areas of the WCSB, the addition of CBM related work and a price book increase in July 2005.

Materials and operating expense on a year-to-date basis decreased as a percentage of revenue to 60% compared to 69% for the same period in 2004. Growth in the higher margin services and a continued focus on deeper more technical work contributed to this improvement. General and administrative expenses remained relatively unchanged on a year-over-year basis.



WELL SERVICE - INTERNATIONAL OPERATIONS Year-
Over-
Nine months ended Sept. 30, % of % of Year
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 58,709 35,497 65 %
Expenses
Materials and operating 45,032 76.7 % 22,723 64.0 % 98 %
General and
administrative 1,442 2.5 % 1,323 3.7 % 9 %
-------- --------
Total expenses 46,474 79.2 % 24,046 67.7 %
Operating income(1) 12,235 20.8 % 11,451 32.3 % 7 %
Number of jobs 1,030 819 26 %
Revenue per job 57,420 43,759 31 %
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------------------------------------------------------------------------


Revenue for the nine months ended September 30, 2005, from International operations increased 65% compared to the same period in 2004. Additional equipment capacity coupled with continued strong demand for services helped drive record results. The total number of jobs completed increased 26% to 1,030 compared with the comparable prior period. Revenue per job increased 31% to $57,420 as a result of larger and higher margin fracturing jobs completed as well as larger primary cementing jobs.

Materials and operating expense for the year increased as a percentage of revenue to 77% from the 64% recorded in the comparable prior year. The increase was due primarily to higher proppant costs, a direct result of larger overall job sizes, higher fuel, repairs and maintenance costs, as well as increases in salaries and infrastructure costs. General and administrative costs remained relatively unchanged on a year-to-date basis and decreased as a percentage of revenue relative to the same period last year.



PRODUCTION SERVICES DIVISION Year-
Over-
Nine months ended Sept. 30, % of % of Year
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Revenue 28,492 24,355 17 %
Expenses
Materials and operating 21,515 75.5 % 18,165 74.6 % 18 %
General and administrative 123 0.4 % 107 0.4 % 15 %
--------- --------
Total expenses 21,638 75.9 % 18,272 75.0 %
Operating income(1) 6,854 24.1 % 6,083 25.0 % 13 %
Number of jobs 1,606 1,900 (15)%
Revenue per job 10,053 9,112 10 %
Number of hours 10,896 12,873 (15)%
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Revenue from the Production Services Division increased 17% on a year-over-year basis as a result of an increase in industrial services work as well as strong activity levels in the WCSB. The number of jobs completed for the first nine months of the year decreased 15% as a result of an early spring break-up during the first quarter and significant precipitation in southern Alberta during the latter part of the second quarter. Average revenue per job increased 10% to $10,053 relative to the same period in 2004 benefiting from an increased volume of industrial service which carries a higher average revenue per job. The number of hours for the intermediate depth coiled tubing service line decreased 15% on a year-over-year basis due to wet weather; however, this decline was more than offset by an increase in the average revenue per hour. Both revenue per job and revenue per hour benefited from the July 2005 price book increase and an increase in the amount of work being performed in the deeper more technically challenging areas of the WCSB.

Materials and operating expenses on a year-to-date basis as a percentage of sales increased to 76% from 75% due primarily to increased chemical sales that have lower margin. General and administrative expenses remained relatively unchanged on a year-over-year basis.




CORPORATE DIVISION Year-
% of % of Over-
Nine months ended Sept. 30, Total Total Year
($ thousands, unaudited) 2005 Revenue 2004 Revenue Change
------------------------------------------------------------------------
Expenses
Materials and operating 1,261 0.3 % 1,212 0.4 % 4 %
General and administrative 14,337 3.3 % 8,131 2.9 % 76 %
--------- --------
Total expenses 15,598 3.6 % 9,343 3.3 %
Operating loss(1) (15,598) (9,343) 67 %
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------------------------------------------------------------------------


Corporate Division expenses on a year-to-date basis increased both as a percentage of revenue and in total. Material and operating expense remained consistent with the comparable prior period. General and administrative expense increased $6.2 million due to higher stock-based compensation costs, an increase in staffing and incentive bonus accruals, higher deferred share unit costs ("DSU") and an increase in the bad debt provision and other administrative costs. Stock-based compensation costs accounted for $2.8 million of the increase while staffing and bonus accruals combined for $2.0 million. DSU costs increased $0.9 million year-over-year as a second issuance was granted to the external members of the board of directors in 2005. The remaining increase was a result of higher general administrative costs of $0.3 million and a $0.1 million increase in the allowance for doubtful accounts.

Other Expenses and Income

Interest expense year to date decreased $0.5 million to $1.3 million compared to the same period in 2004 primarily as a result of a repayment of outstanding debt. Depreciation and amortization expense on a year-over-year basis increased $5.1 million due to continued expansion of the Company's equipment capacity and operations facilities. Foreign exchange gains increased $1.8 million compared to the prior year as a result of fluctuations in the U.S. dollar against the Canadian dollar.

Liquidity and Investing Activities

Funds from continuing operations for the three months ended September 30, 2005 amounted to $66.0 million. This represents an increase of more than 145% from the 2004 third quarter amount of $27.0 million.

At September 30, 2005 the Company had working capital of $96.6 million, a 30% increase over the December 31, 2004 amount of $74.3 million. Record revenues led to higher accounts receivable balances and increased activity necessitated higher inventory levels in the Company's international operations relative to December 31, 2004. Offsetting these increases were accounts payable balances that increased in conjunction with higher activity levels. Included in current portion of long-term debt were loans arising from Trican's Russian subsidiary totalling $2.8 million; these loans were repaid in July 2005. The Company has a $15.0 million operating line of credit to finance ongoing working capital requirements all of which was available for use at September 30.

Capital expenditures for the quarter totalled $29.5 million compared with $24.7 million for the same period in 2004. The majority of this investment was directed to fracturing equipment.

Capital Resources

Trican had long-term debt (excluding current portion) of $9.5 million at the end of the third quarter compared with $13.9 million at the end of 2004. This debt is in the form of lease facilities involving certain pieces of the Company's operating equipment. The Company believes that its strong balance sheet and unutilized borrowing capacity combined with funds from operations will provide sufficient capital resources to fund its on-going operations and future expansion.

Cash Requirements

Trican has historically financed its capital expenditures with funds from operations, equity issues and debt. In response to the strong demand for services and the expectation of continued strength in the near term, the Company has undertaken a number of projects to increase its equipment capacity in all of its major service lines. The Company has expanded its 2005 capital budget to $128 million and estimates that $51 million of funding will be required to complete the ongoing capital program. All capital expenditures will be financed by funds from operations and/or credit facilities.

Trican is in the process of reviewing its 2006 capital budget and is investigating opportunities for growth in Canada, Russia and other parts of the world.

Financing Activities

The Company's $25.0 million extendible revolving equipment and acquisition line was extended by its lender for an additional year. Should this facility not be extended, outstanding amounts will be transferred to a four-year term facility repayable in equal quarterly installments. At September 30, 2005, no amounts were drawn on the facility.

As at October 26, 2005, the Company had 56,876,018 common shares and 4,597,114 employee stock options outstanding. For further information please review Trican's management information circular which can be found at www.sedar.com.

Business Risks

A complete discussion on business risks faced by the Company may be found in Trican's 2004 annual report.

Outlook

Strong commodity prices continue to drive demand for services in both Canada and internationally and are expected to continue into 2006. In Canada many industry watchers are predicting high levels of activity to continue for the balance of 2005 and could even surpass levels experienced in 2004. Management remains encouraged about the potential for the Company's International operations; however, Trican is aware of the unique opportunities and challenges presented by this market.

With the significant investment undertaken in equipment and facilities in recent years, Trican is committed to meeting the demands of its customers and becoming the preeminent pressure pumping Company in its areas of operations. With strong demand for services anticipated and additional equipment capacity, Trican is well positioned to continue to deliver solid financial and operational performance.



Summary of Quarterly Results
------------------------------------------------------------------------
($ millions,
except per
share amounts; 2005 2004 2003
unaudited) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
------------------------------------------------------------------------
Revenue 174.3 94.7 164.5 126.7 95.4 67.7 118.5 85.3
Net income from
continuing
operations 36.6 8.0 36.7 24.8 14.5 2.4 23.6 14.1
Earnings per share
from continuing
operations
Basic 0.64 0.14 0.65 0.45 0.26 0.04 0.44 0.26
Diluted 0.62 0.14 0.63 0.43 0.25 0.04 0.42 0.25

Net income 36.6 8.0 36.7 24.8 8.2 2.4 23.6 14.1
Earnings per share
Basic 0.64 0.14 0.65 0.45 0.15 0.04 0.44 0.26
Diluted 0.62 0.14 0.63 0.43 0.14 0.04 0.42 0.25
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FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements as required under OSC Form 51-102F1 concerning, among other things, the Company's prospects, expected revenues, expenses, profits, developments and strategies for its operations, all of which are subject to certain risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "achievable," "believe," "expect," "estimate," and other similar terms and phrases. These statements are based on certain assumptions and analysis made by the Company in light of its experience and its perception of known trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to many external variables such as fluctuating prices for crude oil and natural gas, changes in drilling activity and general global economic, political, business and weather conditions. If any of these uncertainties materialize, or if assumptions are incorrect, actual results may vary materially from those expected.

Headquartered in Calgary, Alberta, Trican's principal operations are in Canada; however, the Company also has operations in Russia and Kazakhstan. The Canadian operations are conducted through bases in British Columbia, Alberta and Saskatchewan, and provide services to customers across the entire Western Canadian Sedimentary Basin (WCSB). International operations are conducted through bases in Tyumen region of western Siberia in the towns of Raduzhny and Nyagan in Russia and in Kyzylorda, Kazakhstan. Trican provides a comprehensive array of specialized products, equipment and services that are used by exploration and production companies during the exploration and development of oil and gas reserves.


(1) Operating income and funds from operations are not recognized measures under Canadian generally accepted accounting principles (GAAP). Management believes that, in addition to net income, operating income and funds from operations are useful supplemental measures. Operating income provides investors with an indication of earnings before depreciation, taxes and interest. Funds from operations provides investors with an indication of cash available for capital commitments, debt repayments and other expenditures. Investors should be cautioned that operating income and funds from operations should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of Trican's performance. Trican's method of calculating operating income and funds from operations may differ from that of other companies and accordingly may not be comparable to measures used by other companies.



CONSOLIDATED BALANCE SHEETS

Sept. 30, December 31,
2005 2004
(Stated in thousands of dollars) (unaudited)
------------------------------------------------------------------------
ASSETS
Current assets
Cash and short-term deposits $ 12,577 $ 14,355
Accounts receivable 125,599 93,656
Inventory 31,629 22,133
Prepaid expenses 7,130 5,835
------------------------------------------------------------------------
176,935 135,979
Property and equipment 267,023 198,617
Future income tax assets 2,352 2,171
Other assets 2,826 2,980
Goodwill (note 1) 11,754 8,657
------------------------------------------------------------------------
$460,890 $348,404
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 58,368 $ 42,003
Current income taxes payable 16,236 11,391
Current portion of long-term debt (note 5) 5,761 8,236
------------------------------------------------------------------------
80,365 61,630

Long-term debt (note 5) 9,528 13,893
Future income tax liabilities 62,595 49,734
Non-controlling interest 805 569
Shareholders' equity
Share capital (note 3) 76,631 70,185
Contributed surplus 4,618 2,076
Foreign currency translation adjustment (8,736) (3,500)
Retained earnings 235,084 153,817
------------------------------------------------------------------------
307,597 222,578
------------------------------------------------------------------------
$460,890 $348,404
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


CONSOLIDATED STATEMENTS
OF OPERATIONS AND RETAINED EARNINGS


(Stated in
thousands Three Three Nine Nine
of dollars, Months Months Months Months
except per Ended Ended Ended Ended
share amounts; Sept. 30, Sept. 30, Sept. 30, Sept. 30,
unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
------------------------------------------------------------------------

Revenue $174,261 $ 95,440 $433,396 $281,594
Expenses
Materials and operating 105,227 65,736 274,674 194,280
General and administrative 6,307 3,773 16,545 10,046
------------------------------------------------------------------------
Operating income 62,727 25,931 142,177 77,268
Interest expense 350 588 1,268 1,801
Depreciation and
amortization 6,294 4,357 17,560 12,478
Foreign exchange
(gain)/loss (41) (25) (1,258) 515
Other income (142) (167) (351) (545)
------------------------------------------------------------------------
Income from continuing
operations before
income taxes and
non-controlling
interest 56,266 21,178 124,958 63,019
Provision for income
taxes (note 4) 19,615 6,512 43,440 20,907
------------------------------------------------------------------------
Income from continuing
operations before
non-controlling
interest 36,651 14,666 81,518 42,112
Non-controlling interest 86 122 251 1,519
------------------------------------------------------------------------
Net income from
continuing operations 36,565 14,544 81,267 40,593
Net loss from discontinued
operations - 6,329 - 6,329
------------------------------------------------------------------------
Net income 36,565 8,215 81,267 34,264
Retained earnings,
beginning of period 198,519 120,824 153,817 94,775
------------------------------------------------------------------------
Retained earnings,
end of period $235,084 $129,039 $235,084 $129,039
------------------------------------------------------------------------
------------------------------------------------------------------------
Earnings per share from
continuing operations
Basic $ 0.64 $ 0.26 $ 1.44 $ 0.74
Diluted $ 0.62 $ 0.25 $ 1.38 $ 0.71
------------------------------------------------------------------------
Earnings per share
Basic $ 0.64 $ 0.15 $ 1.44 $ 0.63
Diluted $ 0.62 $ 0.14 $ 1.38 $ 0.60
------------------------------------------------------------------------
Weighted average shares
outstanding - basic
(thousands) 56,707 55,482 56,490 54,712
Weighted average shares
outstanding - diluted
(thousands) 59,277 57,825 58,834 57,343
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


CONSOLIDATED CASH FLOW STATEMENTS


Three Three Nine Nine
(Stated in Months Months Months Months
thousands Ended Ended Ended Ended
of dollars; Sept. 30, Sept. 30, Sept. 30, Sept. 30,
unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash Provided By (Used In):
Operations
Net income $36,565 $14,544 $81,267 $40,593
Charges to income
not involving cash:
Depreciation and
amortization 6,294 4,357 17,560 12,478
Future income tax expense 21,156 7,437 12,692 550
Non-controlling interest 86 122 251 1,519
Stock-based compensation 1,659 530 3,307 1,283
(Gain)/ loss on disposal
of property and equipment 61 - (41) -
Unrealized foreign
exchange (gain)/ loss 149 (27) (1,720) (61)
Writedown of other assets - -
------------------------------------------------------------------------
Funds provided by
continuing operations 65,970 26,963 113,316 56,362
Net change in non-cash
working capital from
continuing operations (37,421) (18,931) (24,477) (3,136)
------------------------------------------------------------------------
Net cash provided by
continuing operations 28,549 8,032 88,839 53,226

Investing
Purchase of property
and equipment (29,489) (24,711) (87,573) (56,581)
Proceeds from the sale
of property
and equipment 214 - 852 -
Purchase of other assets - - (6) -
Business acquisitions,
net of cash acquired - - (4,185) (2,643)
Net change in non-cash
working capital from
the Purchase of property
and equipment (836) (1,135) 1,508 5,295
------------------------------------------------------------------------
Funds used for investing
in continuing operations (30,111) (25,846) (89,404) (53,929)
------------------------------------------------------------------------
Net cash used for
investing in discontinued
operations - (406) - (1,363)
------------------------------------------------------------------------
(30,111) (26,252) (89,404) (55,292)

Financing
Net proceeds from
issuance of share capital 1,717 644 5,681 4,986
Repayment of
long-term debt (4,227) (1,549) (6,894) (3,953)
------------------------------------------------------------------------
(2,510) (905) (1,213) 1,033

Decrease in cash and
short-term deposits (4,072) (19,125) (1,778) (1,033)
Cash and short-term
deposits, beginning
of period 16,649 41,791 14,355 23,699
------------------------------------------------------------------------
Cash and short-term
deposits, end of period $12,577 $22,666 $12,577 $22,666
------------------------------------------------------------------------
------------------------------------------------------------------------
Supplemental information
Income taxes paid 4,627 1,506 24,970 5,930
Interest paid 350 588 1,268 1,801
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2005 (Unaudited)

The Company's interim financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual financial statements. The Company's interim financial statements should be read in conjunction with the most recent annual financial statements. The Company's interim financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements, except where any change has been noted in the interim financial statements.

The Company's businesses are seasonal in nature with the highest activity in the winter months (first and fourth fiscal quarters) and the lowest activity during spring break-up (second fiscal quarter) due to road weight restrictions and reduced accessibility to remote areas.

NOTE 1 - ACQUISITIONS

In June 2004, the Company purchased 19,472 shares of R-Can from existing shareholders for $3.0 million, representing 40.2% of the issued and outstanding shares. In accordance with the terms of the purchase agreement, contingent consideration of $4.2 million was paid in the first quarter of 2005 based on R-Can achieving specified earnings levels in 2004 and was recorded as an additional cost of the purchase allocated to goodwill net of an accrual for contingent consideration.

NOTE 2 - SEGMENTED INFORMATION

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

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

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



Well Production
(Stated in thousands) Service Services Corporate Total
------------------------------------------------------------------------
Three months ended
Sept. 30, 2005
------------------------------------------------------------------------
Revenue $166,079 $ 8,182 $ - $174,261
Operating income (loss) 67,256 1,459 (5,988) 62,727
Interest expense 5 - 345 350
Depreciation and
amortization 5,561 586 147 6,294
Assets 401,706 39,792 19,392 460,890
Goodwill 5,702 6,052 - 11,754
Capital expenditures 28,011 520 958 29,489
------------------------------------------------------------------------
Three months ended
Sept. 30, 2004
------------------------------------------------------------------------
Revenue $ 88,869 $ 6,571 $ - $ 95,440
Operating income (loss) 27,909 1,533 (3,511) 25,931
Interest expense (income) 202 - 386 588
Depreciation and
amortization 3,605 565 187 4,357
Assets 249,645 34,353 28,111 312,109
Goodwill 2,605 6,052 - 8,657
Capital expenditures 24,186 475 50 24,711
------------------------------------------------------------------------
------------------------------------------------------------------------


Well Production
(Stated in thousands) Service Services Corporate Total
------------------------------------------------------------------------
Nine months ended
September 30, 2005
------------------------------------------------------------------------
Revenue $404,904 $ 28,492 $ - $433,396
Operating income (loss) 150,921 6,854 (15,598) 142,177
Interest expense 155 - 1,113 1,268
Depreciation and
amortization 15,352 1,758 450 17,560
Assets 401,706 39,792 19,392 460,890
Goodwill 5,702 6,052 - 11,754
Capital expenditures 82,027 3,025 2,521 87,573
Goodwill expenditures 4,185 - - 4,185
------------------------------------------------------------------------
Nine months ended
Sept. 30, 2004
------------------------------------------------------------------------
Revenue $257,239 $ 24,355 $ - $281,594
Operating income (loss) 80,528 6,083 (9,343) 77,268
Interest expense (income) 660 - 1,141 1,801
Depreciation and
amortization 10,372 1,572 534 12,478
Assets 249,645 34,353 28,111 312,109
Goodwill 2,605 6,052 - 8,657
Capital expenditures 55,140 838 603 56,581
------------------------------------------------------------------------


The Company's operations are carried on in the following geographic
locations:

(Stated in thousands) Canada International Other Total
------------------------------------------------------------------------
Three months ended
Sept. 30, 2005
------------------------------------------------------------------------
Revenue $151,773 $ 22,488 $ - $174,261
Operating income (loss) 58,329 4,518 (120) 62,727
Property and equipment 244,678 22,345 - 267,023
Goodwill 7,086 4,668 - 11,754
------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended
Sept. 30, 2004
------------------------------------------------------------------------
Revenue $ 81,608 $ 13,832 $ - $ 95,440
Operating income (loss) 21,343 4,593 (5) 25,931
Property and equipment 171,155 10,461 200 181,816
Goodwill 7,086 1,571 - 8,657
------------------------------------------------------------------------
------------------------------------------------------------------------

(Stated in thousands) Canada International Other Total
------------------------------------------------------------------------
------------------------------------------------------------------------
Nine months ended
September 30, 2005
------------------------------------------------------------------------
Revenue $374,687 $ 58,709 - $433,396
Operating income (loss) 130,113 12,212 (148) 142,177
Property and equipment 244,678 22,345 - 267,023
Goodwill 7,086 4,668 - 11,754
------------------------------------------------------------------------
------------------------------------------------------------------------
Nine months ended
Sept. 30, 2004
------------------------------------------------------------------------
Revenue $246,097 $ 35,497 $ - $281,594
Operating income (loss) 65,997 11,277 (6) 77,268
Property and equipment 171,155 10,461 200 181,816
Goodwill 7,086 1,571 - 8,657
------------------------------------------------------------------------

NOTE 3 - SHARE CAPITAL

The issued and outstanding common shares of the Company along with
securities convertible into common shares are as follows:

(Stated in thousands) Sept. 30, 2005 December 31, 2004
------------------------------------------------------------------------
Issued and outstanding:
Common shares 56,839 55,651
Securities convertible into common shares:
Employee stock options 4,598 4,565
------------------------------------------------------------------------
61,437 60,216
------------------------------------------------------------------------


The Company's shareholders approved a subdivision of its issued and outstanding common shares on a three-for-one basis at the Company's Annual and Special Meeting held on May 12, 2005. The completion of the share split occurred on May 26, 2005 upon approval of securities regulators. All common share and per common share amounts have been restated to retroactively reflect the share split.

Stock-based compensation:

In 2003, the Company chose to adopt the amended standards for stock-based compensation. The amended standards require that all transactions whereby goods and services are received in exchange for stock-based compensation result in expenses recognized in the Company's financial statements. The transitional provisions permitted prospective application for awards not previously accounted for using the fair market value method. Had compensation expense been determined based on the fair value of stock-based compensation granted since inception of the original accounting standard in 2002, the Company's net income from continuing operations and net income, as well as their respective earnings per share ("EPS"), for the three and nine months ended September 30, 2005 and 2004 would have been as follows:



Three months ended Sept. 30, 2005 2004
(Stated in thousands, As Pro As Pro
except per share amounts) reported forma reported forma
------------------------------------------------------------------------
Net income from continuing operations 36,565 36,398 14,544 14,378
Basic EPS from continuing operations 0.64 0.64 0.26 0.26
Diluted EPS from continuing operations 0.62 0.61 0.25 0.25
------------------------------------------------------------------------

Three months ended Sept. 30, 2005 2004
(Stated in thousands, As Pro As Pro
except per share amounts) reported forma reported forma
------------------------------------------------------------------------
Net income 36,565 36,398 8,215 8,049
Basic EPS 0.64 0.64 0.15 0.15
Diluted EPS 0.62 0.61 0.14 0.14
------------------------------------------------------------------------

Nine months ended Sept. 30, 2005 2004
(Stated in thousands, As Pro As Pro
except per share amounts) reported forma reported forma
------------------------------------------------------------------------
Net income from continuing operations 81,267 80,768 40,593 40,096
Basic EPS from continuing operations 1.44 1.43 0.74 0.73
Diluted EPS from continuing operations 1.38 1.37 0.71 0.70
------------------------------------------------------------------------

Nine months ended Sept. 30, 2005 2004
(Stated in thousands, As Pro As Pro
except per share amounts) reported forma reported forma
------------------------------------------------------------------------
Net income 81,267 80,768 34,264 33,767
Basic EPS 1.44 1.43 0.63 0.62
Diluted EPS 1.38 1.37 0.60 0.59
------------------------------------------------------------------------

These pro forma earnings reflect compensation cost amortized over the
option's vesting period.

NOTE 4 - INCOME TAXES

Three months Nine months
(Stated in thousands) ended Sept. 30, ended Sept. 30,
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Current tax provision $(1,541) $ (925) $30,748 $20,357
Future tax provision 21,156 7,437 12,692 550
------------------------------------------------------------------------
Provision for income taxes $19,615 $6,512 $43,440 $20,907
------------------------------------------------------------------------
------------------------------------------------------------------------


NOTE 5 - LONG TERM DEBT

In April 2005, the Company extended its $25.0 million extendible revolving equipment and acquisition line to April 30, 2006. Advances are available under the extendible revolving equipment and acquisition line either at the bank's prime rate plus 0.75% or Bankers' Acceptance plus 1.5% or in combination. The facility is extendible annually at the option of the lenders. Should this facility not be extended, outstanding amounts will be transferred to a four-year term facility repayable in equal quarterly installments. This facility is subject to covenants that are typical for this type of arrangement. This facility, together with the operating line, is secured by a general security agreement. At September 30, 2005, no amounts were drawn on the extendible revolving equipment and acquisition facility.

Included in current portion of long-term debt at December 31, 2004, were equipment demand loans totaling $2.8 million (US$2.3 million) and bear interest at an average rate of 10.5% per annum. These loans were repaid in July 2005.

NOTE 6 - COMPARATIVE FIGURES

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

A conference call has been scheduled on Thursday, October 27, 2005 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's results for the Third Quarter 2005.

To access the conference call, contact the conference call operator at 1-877-667-7774 (North America) or 416-695-5259 (outside North America) approximately 10 minutes prior to the call's start time and ask for the "Trican Well Service Ltd. - Third Quarter 2005 Results Conference Call".

A replay of the conference call will be available until November 3, 2005 by dialing 1-866-518-1010 (North America) or 416-695-5275 (outside North America).

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

Requests for shareholder information should be directed to the below contacts.

Contact Information

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