Q1 - tricanwellservice.com · Q1. 2 TRICAN WELL SERVICE Q1 2005 Russia Despite very cold weather in...

1TRICAN WELL SERVICE Q1 2005

Financial Review

Three months ended March 31,

($ millions, except per share amounts, unaudited) 2005 2004

Revenue $ 164.5 $ 118.5

Operating income * 62.2 41.0

Net income 36.7 23.6

Net income per share (basic) $ 1.96 $ 1.32

(diluted) $ 1.88 $ 1.25

Funds provided by operations* 29.8 20.6

Trican Well Service Ltd. is pleased to announce its fi nancial and operating results for the three months ended March 31, 2005 with comparison to the same period last year. Despite an early start to spring breakup, which hampered activity in March for Canadian operations, results for the quarter established new records for revenue, revenue per job, number of jobs completed, profi tability and earnings per share. The results for the quarter refl ect continued strong demand for services resulting from the strength in oil and natural gas prices, as well as continued record results from our Russian operations.

Revenue increased 39% in the quarter to $164.5 million compared to the same period in 2004. Net income of $36.7 million increased 55% over the $23.6 million recorded in the fi rst quarter of 2004. Similarly, the Company recorded earnings per share of $1.96 ($1.88 diluted) versus earnings per share of $1.32 ($1.25 diluted) for the comparable period in 2004, a 50% increase on a diluted basis. Funds from operations of $29.8 million for the quarter increased $9.1 million or 44% over the same period last year.

Operations Review

CanadaActivity levels in the Western Canadian Sedimentary Basin (“WCSB”) were on course to set a new record for wells drilled in a quarter but were cut short in March when warm weather brought an early end to the winter drilling season. Approximately 6,168 wells were drilled in the fi rst quarter versus 6,305 wells in the same quarter of 2004. As has been seen in recent years, natural gas directed drilling again made up the majority of the activity in the quarter as high commodity prices supported strong exploration and development initiatives. Despite the slight decrease in well count, strong demand for the Company’s equipment drove record utilization rates, particularly for fracturing services.

Fracturing and cementing equipment that was in the fi nal stages of completion in December 2004 was put into service in the fi rst quarter of 2005 to meet the high demand for services. Our eleventh and twelfth conventional fracturing crews were operational early in January and three twin cementers were brought into service over the course of the quarter, bringing the total number of units to forty-fi ve. These units are used to perform services in the deeper, more technically challenging areas of the WCSB and are state-of-the-art in both design and capability.

Recently, the Board of Directors approved an increase in the capital expansion program that will result in additional $30.5 million in spending for Canada, and bring the total Canadian operations budget to $98.9 million. Funds will be used to augment Trican’s deep fracturing capacity by adding two new deep fracturing crews that will provide additional pumping capacity to better utilize our existing equipment on deeper wells, and to add two more conventional nitrogen pumping units to complement the additional fracturing capacity.

INTERIM REPORT THREE MONTHS

ENDED MARCH 31ST, 2005

Q1

2 TRICAN WELL SERVICE Q1 2005

RussiaDespite very cold weather in January that slowed activity, our Russian operations achieved record results for the quarter 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 fi rst quarter of 2004 which doubled the size of the fracturing fl eet. An additional twin cementer was added in the third quarter of 2004 which brought the total number of units operating to three.

The Company opened its new operations base in Kyzylorda, Kazakhstan and operations commenced in April on a large fracturing contract secured from a western customer operating in the area. The Board of Directors recently approved a $3.0 million increase in the capital budget for Russian operations bringing the total budget to $19.0 million. These additional funds will be used to provide support equipment and pumping capacity for our fracturing operations.

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (MD&A) should be read in conjunction with the unaudited interim consolidated fi nancial statements of Trican as at, and for the three months ended March 31, 2005 and 2004, and should also be read in conjunction with the audited consolidated fi nancial statements and MD&A contained in Trican’s annual report for the year ended December 31, 2004. The interim consolidated fi nancial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). This MD&A is dated May 4, 2005. Additional information including the Company’s Annual Information Form is available on SEDAR at www.sedar.com.

QUARTERLY COMPARATIVE INCOME STATEMENTS ($ thousands, unaudited)

Quarter-over- % of % of Quarter %Three months ended March 31, 2005 Revenue 2004 Revenue Change Change

Revenue 164,481 100.0% 118,473 100.0% 46,008 39%

Expenses

Materials and operating 96,813 58.9% 74,312 62.7% 22,501 30%

General and administrative 5,465 3.3% 3,114 2.6% 2,351 75%

Operating income* 62,203 37.8% 41,047 34.6% 21,156 52%

Interest expense 482 0.3% 652 0.6% (170) (26)%

Depreciation and amortization 5,400 3.3% 4,042 3.4% 1,358 34%

Foreign exchange loss 227 0.1% 109 0.1% 118 108%

Other expense / (income) 88 0.1% (190) (0.2)% 278 146%

Income before income taxes and

non-controlling interest 56,006 34.1% 36,434 30.8% 19,572 54%

Provision for income taxes 19,186 11.7% 12,059 10.2% 7,127 59%

Income before non-controlling interest 36,820 22.4% 24,375 20.6% 12,445 51%

Non-controlling interest 71 0.0% 741 0.6% (670) (90)%

Net income 36,749 22.3% 23,634 19.9% 13,115 55%

The Company is managed in three divisions – Well Service, Production Services and Corporate. The Well Service Division provides deep coiled tubing; nitrogen; fracturing, which includes coalbed methane fracturing; and cementing services in Canada and Russia. The Production Services Division provides acidizing, intermediate depth coiled tubing, PolyboreTM, jet pumping and industrial services in Canada.

FINANCIAL REVIEW

WELL SERVICE DIVISION Quarter- Over-OVERVIEW % of % of QuarterThree months ended March 31, ($ thousands, unaudited) 2005 Revenue 2004 Revenue Change

Revenue 152,097 107,496 41%

Expenses

Materials and operating 88,502 58.2% 66,321 61.7% 33%

General and administrative 558 0.4% 545 0.5% 2%

Total expenses 89,060 58.6% 66,866 62.2%

Operating income* 63,037 41.4% 40,630 37.8% 55%

Number of jobs 6,303 5,784 9%

Revenue per job 24,348 18,934 29%

The Well Service Division’s record fi nancial performance for the year refl ects continued strong demand for services and the impact of expanded equipment capacity in both Canada and Russia. Revenue for the three months ended March 31, 2005 for the Well Service Division increased by 41% to $152 million, a new division record, compared to the same period in 2004. Within this division, Canadian operations accounted for 89% of revenue for the quarter while Russian operations contributed 11%. Last year Canadian operations made up 91% of divisional revenue and Russian operations contributed 9%. All service lines contributed to the increase in revenue; however, the largest gains were in fracturing, cementing and deep coiled tubing service lines. Average revenue per job of $24,348 was 29% higher than the previous record set in the fi rst quarter of 2004 while job count increased by 9% to 6,303.

Quarter- Over-WELL SERVICE - CANADIAN OPERATIONS % of % of QuarterThree months ended March 31, ($ thousands, unaudited) 2005 Revenue 2004 Revenue Change

Revenue 136,080 98,181 39%

Expenses



Total expenses 76,390 56.1% 60,050 61.2%


Number of jobs 6,006 5,545 8%

Revenue per job 22,861 18,070 27%

Canadian operations established a new record for quarterly revenue, increasing 39% over the same period in 2004 due to higher activity levels, expanded equipment capacity and higher revenue per job. Over the last year, the Company has added three additional fracturing crews, two new state-of-the-art CBM crews, four deep coil units and six cementing units. This additional equipment and continued strong demand for services drove an 8% increase in jobs performed and produced the second highest quarterly job total in the Company’s history. An early arrival of spring severely hampered activity in March particularly impacting the fracturing and cementing service lines as the early onset of spring breakup restricted our ability to move our equipment. CBM related revenues were up 329% relative to the fi rst quarter of 2004 and would have been higher; however, warm weather in March particularly impacted activity in central Alberta where the majority of CBM work is being performed. Revenue per job increased 27% to a record $22,861 as most of the service lines established new records for revenue per job. Revenue per job benefi ted 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 August 2004.



Materials and operating expense for the quarter decreased as a percentage of revenue to 56% compared to 61% 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.

Quarter- Over-WELL SERVICE – RUSSIAN OPERATIONS % of % of QuarterThree months ended March 31, ($ thousands, unaudited) 2005 Revenue 2004 Revenue Change

Revenue 16,017 9,315 72%

Expenses


General and administrative 351 2.2% 400 4.3% (12)%

Total expenses 12,669 79.1% 6,814 73.2%


Number of jobs 297 239 24%

Revenue per job 54,407 38,975 40%

Revenue for the quarter from Russian operations (which comprises fracturing and cementing services) increased by 72% 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 higher revenue per job. Two additional fracturing crews were added since the fi rst quarter of 2004 doubling the size of the fracturing fl eet. An additional twin cementer was added in the third quarter of 2004 which brings the total to three units. The additional equipment capacity coupled with continued strong demand for services established a new record for total fracturing jobs. Additional jobs could have been completed; however, very cold weather in early January impacted well preparations and produced delays for our equipment. Revenue per job of $54,407 was the highest on record due to larger fracturing and primary cementing jobs.

Materials and operating expense increased as a percentage of revenue to 76.9% from the 68.9% recorded in the prior year’s quarter. The increase was due primarily to higher proppant costs, a direct result of larger overall job sizes, higher fuel, repair and maintenance 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. This investment will enable us to better serve our customers and provide a platform for our future growth. General and administrative costs remained relatively unchanged and decreased as a percentage of revenue relative to the fi rst quarter of 2004.

Quarter- PRODUCTION SERVICES DIVISION Over- % of % of QuarterThree months ended March 31, ($ thousands, unaudited) 2005 Revenue 2004 Revenue Change

Revenue 12,384 10,977 13%

Expenses



Total expenses 7,997 64.6% 7,577 69.0%


Number of jobs 560 747 (25)%

Revenue per job 9,921 9,297 7%

Number of hours 6,983 7,286 (4)%


The Production Services Division includes intermediate depth coiled tubing services, acidizing services, PolyboreTM, jet pumping and industrial services. During the quarter, revenue from the Production Services Division increased 13% over the same period of 2004 primarily due to an increase in intermediate depth coiled tubing sales and higher chemical sales. Although the number of jobs completed decreased 25% as a result of an early spring breakup, the average revenue per job increased 7% to $9,921 relative to the same period in 2004 and was the second highest on record for a quarter. The number of hours for the intermediate depth coiled tubing service line decreased by 4% versus the fi rst quarter of 2004; however, this decline was more than offset by an increase in the average revenue per hour. Both revenue per job and revenue per hour benefi ted from the August 2004 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 as a percentage of sales decreased to 64.2% from 68.9% in 2004 due to increased operational leverage on our fi xed cost structure. General and administrative expenses remained relatively unchanged on a quarter-over-quarter basis. Quarter- CORPORATE DIVISION Over- % of Total % of Total QuarterThree months ended March 31, ($ thousands, unaudited) 2005 Revenue 2004 Revenue Change

Expenses

Materials and operating 355 0.2% 432 0.4% (18)%

General and administrative 4,866 3.0% 2,551 2.2% 91%

Total expenses 5,221 3.2% 2,983 2.5%

Operating loss* (5,221) (2,983) 75%

Corporate Division expenses consist mainly of general and administrative expenses. Overall expenses increased both as a percentage of revenue and in total. Materials and operating expense remained consistent with the comparable prior period. General and administrative expense increased by $2.3 million due to higher stock-based compensation costs, deferred share unit costs (“DSU”), staffi ng and incentive bonus accruals. Stock-based compensation costs accounted for $1.5 million of the increase, staffi ng and bonus accruals combined for $0.6 million and DSU costs accounted for $0.2 million of the increase.

Other Expenses and IncomeInterest expense decreased $0.2 million quarter-over-quarter to $0.5 million primarily as a result of repayment of small loans associated with the Company’s Russian operations. Depreciation increased by $1.4 million for the quarter relative to the same period in 2004 due to continued expansion of the Company’s equipment capacity and operations facilities. Foreign exchange losses remained relatively unchanged compared to the corresponding prior quarter. Other income, which consists mainly of interest income, decreased by $0.3 million as a result of lower cash balances on hand relative to the same period in 2004. Liquidity and Investing ActivitiesFunds from operations for the three months ended March 31, 2005 amounted to $29.8 million. This represents an increase of 44% from the fi rst quarter 2004 amount of $20.6 million. At March 31, 2005, the Company had working capital of $80.0 million, an 8% increase over the December 31, 2004 level of $74.3 million. Record sales led to higher accounts receivable offset by a large increase in current taxes payable due to previously deferred future taxes from the Trican Partnership now becoming current income taxes payable. Included in current portion of long-term debt are loans arising from our Russian subsidiary totalling $2.8 million. These loans are repayable over the next two years; however, as they are demand loans, they have been included in current portion of long-term debt. The Company has an operating line of credit to fi nance working capital requirements. At March 31, 2005, all of this line was available for use.


Capital expenditures for the quarter totalled $22.0 million compared with $13.7 million for the same period in 2004. The majority of this investment was directed to fracturing and nitrogen equipment.

In June 2004, the Company purchased 19,472 shares of R-Can Services Limited (“R-Can”) for $3.0 million, representing 40% of the issued and outstanding shares. In accordance with the terms of the purchase agreement, contingent consideration was paid based on R-Can’s actual 2004 results and was recorded as an additional cost of the purchase. During the quarter an additional U.S.$176.74 per share or U.S.$3.4 million (approximately CAD$ 4.2 million) of additional consideration was paid.

Capital ResourcesTrican had long-term debt (excluding current portion) of $12.5 million at the end of the fi rst 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 suffi cient capital resources to fund its on-going operations and future expansion.

Cash RequirementsTrican has historically fi nanced 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 $117.9 million and estimates that $110.5 million of funding will be required for projects related to its 2005 and 2004 capital programs. All capital expenditures will be fi nanced by funds from operations and/or credit facilities.

Trican continues to review opportunities for growth in Canada, Russia and other parts of the world. The capital budget may be increased if viable business opportunities are identifi ed by the Company.

Financing ActivitiesThe Company’s $25.0 million extendible revolving equipment and acquisition line was extended in April 2005 for an additional year. This 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. At March 31, 2005, no amounts were drawn on the facility.

The Board of Directors has approved a stock split of the Company’s common shares on a three-for-one basis. The trading price for Trican’s common shares has increased substantially in the last year and the Board of Directors believes that the stock split will encourage greater market liquidity and wider distribution among retail investors. Trican’s shareholders will be asked to approve the stock split at the annual and special meeting of shareholders scheduled for May 12, 2005. In addition to shareholder approval, the stock split is subject to the receipt of all required regulatory approvals. As at May 4, 2005, the Company had 18,829,176 common shares and 1,261,085 employee stock options outstanding. For further information please review our management information circular which can be found at www.sedar.com.

Business RisksA complete discussion on business risks faced by the Company may be found in Trican’s 2004 annual report.

OutlookStrong commodity prices continue to support high demand for services in both Canada and Russia. In Canada many industry watchers are predicting high levels of activity to continue through out 2005 and could even surpass levels experienced in 2004. Management remains encouraged about the potential for the Company’s Russian operations; however, we are aware of the unique opportunities and challenges presented by this market.


With the signifi cant investment undertaken in equipment and facilities in recent years, and the $117.9 million in capital expenditures planned for 2005, Trican is committed to meeting the demands of its customers and becoming the preeminent pressure pumping Company in our areas of operations. With strong demand for services anticipated and our additional equipment capacity, Trican is well positioned to continue to deliver strong fi nancial and operational performance.

Summary of Quarterly Results

2005 2004 2003

($ millions, except per share amounts; unaudited) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

Revenue 164.5 126.7 95.4 67.7 118.5 85.3 82.9 40.0

Net income (loss) from continuing operations 36.7 24.8 14.5 2.4 23.6 14.1 11.7 (1.6)

Earnings (loss) per share from continuing operations

Basic 1.96 1.34 0.79 0.13 1.32 0.79 0.66 (0.09)

Diluted 1.88 1.28 0.75 0.13 1.25 0.75 0.63 (0.09)

Net income (loss) 36.7 24.8 8.2 2.4 23.6 14.1 11.7 (1.6)

Earnings (loss) per share

Basic 1.96 1.34 0.44 0.13 1.32 0.79 0.66 (0.09)

Diluted 1.88 1.28 0.43 0.13 1.25 0.75 0.63 (0.09)

FORWARD-LOOKING STATEMENTSThis document contains forward-looking statements as required under OSC Form 51-102F1 concerning, among other things, the Company’s prospects, expected revenues, expenses, profi ts, developments and strategies for its operations, all of which are subject to certain risks, uncertainties and assumptions. These forward-looking statements are identifi ed 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 fl uctuating 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. 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). Russian operations are conducted through bases in Tyumen region of western Siberia in the towns of Raduzhny and Nyagan. 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.

* 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

March 31, December 31,

2005 2004

(Stated in thousands of dollars) (unaudited)

ASSETS

Current assets

Cash and short-term deposits $ 8,669 $ 14,355

Accounts receivable 128,579 93,656

Inventory 27,532 22,133

Prepaid expenses 3,721 5,835

168,501 135,979

Property and equipment 214,943 198,617

Future income tax assets 2,079 2,171

Other assets 2,932 2,980

Goodwill (note 1) 11,949 8,657

$ 400,404 $ 348,404

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued liabilities $ 50,996 $ 42,003

Current income taxes payable 29,148 11,391

Current portion of long-term debt 8,364 8,236

88,508 61,630

Long-term debt (note 5) 12,468 13,893

Future income tax liabilities 36,211 49,734

Non-controlling interest 641 569

Shareholders’ equity

Share capital (note 3) 73,376 70,185

Contributed surplus 2,610 2,076

Foreign currency translation adjustment (3,976) (3,500)

Retained earnings 190,566 153,817

262,576 222,578

$ 400,404 $ 348,404

See accompanying notes to the consolidated fi nancial statements.


CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

Three Months Three Months

Ended March 31, Ended March 31,

(Stated in thousands of dollars, except per share amounts; unaudited) 2005 2004

Revenue $ 164,481 $ 118,473

Expenses

Materials and operating 96,813 74,312

General and administrative 5,465 3,114

Operating income 62,203 41,047

Interest expense 482 652

Depreciation and amortization 5,400 4,042

Foreign exchange loss 227 109

Other expense (income) 88 (190)

Income before income taxes and non-controlling interest 56,006 36,434

Provision for income taxes (note 4) 19,186 12,059

Income before non-controlling interest 36,820 24,375


Net income 36,749 23,634

Retained earnings, beginning of period 153,817 94,775

Retained earnings, end of period $ 190,566 $ 118,409

Earnings per share

Basic $ 1.96 $ 1.32

Diluted $ 1.88 $ 1.25



CONSOLIDATED CASH FLOW STATEMENTS

Three Months Three Months

Ended March 31, Ended March 31,

(Stated in thousands of dollars; unaudited) 2005 2004

Cash Provided By (Used In):

Operations

Net income $ 36,749 $ 23,634

Charges to income not involving cash:

Depreciation and amortization 5,400 4,042

Future income tax expense (13,367) (7,951)


Stock-based compensation 753 163

Loss on disposal of property and equipment 127 -

Unrealized foreign exchange loss 29 -

Funds provided by operations 29,762 20,629

Net change in non-cash working capital from operations (9,100) 3,701

20,662 24,330

Investing

Purchase of property and equipment (21,971) (13,661)

Proceeds from the sale of property and equipment 147 -

Purchase of other assets (5) (431)

Business acquisitions (4,185) -

Net change in non-cash working capital from the

purchase of property and equipment (1,993) 519

(28,007) (13,573)

Financing

Net proceeds from issuance of share capital 2,972 2,457

Repayment of long-term debt (1,313) (1,346)

1,659 1,111

Increase (decrease) in cash and short-term deposits (5,686) 11,868

Cash and short-term deposits, beginning of period 14,355 23,699

Cash and short-term deposits, end of period $ 8,669 $ 35,567

Supplemental Information

Income taxes paid 14,725 1,069

Interest paid 482 652



Notes to the Interim Consolidated Financial StatementsThree Months Ended March 31, 2005 (Unaudited)

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

The Company’s businesses are seasonal in nature with the highest activity in the winter months (fi rst and fourth fi scal quarters) and the lowest activity during spring break-up (second fi scal 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 quarter based on R-Can achieving specifi ed 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, PolyboreTM, jet pumping 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 March 31, 2005

Revenue $ 152,097 $ 12,384 $ – $ 164,481

Operating income (loss) 63,037 4,387 (5,221) 62,203

Interest expense 80 – 402 482

Depreciation and amortization 4,667 576 157 5,400

Assets 353,926 39,595 6,883 400,404

Goodwill 5,897 6,052 – 11,949

Capital expenditures 20,560 715 696 21,971

Goodwill expenditures 3,292 – – 3,292Three months ended March 31, 2004 Revenue $ 107,496 $ 10,977 $ – $ 118,473Operating income (loss) 40,630 3,400 (2,983) 41,047Interest expense (income) 249 – 403 652Depreciation and amortization 3,365 505 172 4,042Assets 221,965 42,876 39,242 304,083Goodwill 2,605 6,052 – 8,657Capital expenditures 12,997 285 379 13,661Goodwill expenditures – – – –


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

(Stated in thousands) Canada Russia Other Total

Three months ended March 31, 2005

Revenue $ 148,464 $ 16,017 $ – $ 164,481

Operating income (loss) 58,897 3,331 (25) 62,203

Property and equipment 194,863 19,944 136 214,943

Goodwill 7,086 4,863 – 11,949Three months ended March 31, 2004 Revenue $ 109,158 $ 9,315 $ – $ 118,473Operating income (loss) 38,597 2,450 – 41,047Property and equipment 140,947 6,049 229 147,225Goodwill 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) March 31, 2005 December 31, 2004

Issued and outstanding:

Common shares 18,819 18,550

Securities convertible into common shares:

Employee stock options 1,274 1,522

20,093 20,072

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 fi nancial 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 as well as its respective earnings per share (“EPS”), for the three months ended March 31, 2005 would have been as follows:

Three months ended March 31, 2005 2004

(Stated in thousands, except per share amounts) As reported Pro forma As reported Pro forma

Net income $ 36,749 $ 36,583 $ 23,634 $ 23,468

Basic EPS 1.96 1.95 1.32 1.31

Diluted EPS 1.88 1.87 1.25 1.24

These pro forma earnings refl ect compensation cost amortized over the option’s vesting period.


NOTE 4 – INCOME TAXES

(Stated in thousands) 2005 2004

Three months ended March 31,

Current tax provision $ 32,553 $ 20,010

Future tax provision (13,367) (7,951)

Provision for income taxes $ 19,186 $ 12,059

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 March 31, 2005, no amounts were drawn on the extendible revolving equipment and acquisition facility.

NOTE 6 – COMPARATIVE FIGURES

Comparative fi gures have been restated to conform to current period’s presentation.


BOARD OF DIRECTORSKenneth M. Bagan (1) (2)

President and Chief Executive Offi cer Wellco Energy Services Trust Gary R. Bugeaud (2)

Partner, Burnet, Duckworth & Palmer LLP

Murray L. CobbePresident and Chief Executive Offi cer

Donald R. LuftSenior Vice President, Operations andChief Operating Offi cer

Douglas F. Robinson (1) (2)

President and Chief Executive Offi cerEnerchem International Inc.

Victor J. Stobbe (1)

Chief Financial Offi cerWave Energy Ltd.

OFFICERSMurray L. CobbePresident and Chief Executive Offi cer

Donald R. LuftSenior Vice President, Operations andChief Operating Offi cer

Michael G. Kelly, C.A.Vice President, Finance, Chief Financial Offi cerand Corporate Secretary

Dale M. DusterhoftVice President, Technical Services

David L. CharltonVice President, Marketing

Michael A. Baldwin, C.A.Treasurer

John D. Ursulak, C.A.Corporate Controller

CORPORATE OFFICETrican Well Service Ltd.2900, 645 - 7th Avenue S.W.Calgary, Alberta T2P 4G8Telephone: (403) 266-0202Facsimile: (403) 237-7716Website: www.trican.ca

AUDITORSKPMG LLP, Chartered AccountantsCalgary, Alberta

SOLICITORSBurnet, Duckworth & Palmer LLPCalgary, Alberta

BANKERSRoyal Bank of CanadaCalgary, Alberta

REGISTRAR AND TRANSFER AGENTComputershare Trust Company of CanadaCalgary, Alberta

STOCK EXCHANGE LISTINGThe Toronto Stock ExchangeTrading Symbol: TCW

INVESTOR RELATIONS INFORMATIONRequests for information should be directed to:

Murray L. CobbePresident and Chief Executive Offi cer

Michael G. Kelly, C.A.Vice President, Finance, Chief Financial Offi cer and Corporate Secretary

(1) Member of the Audit Committee(2) Member of the Compensation and Corporate Governance Committee

Corporate Information

Q1 - tricanwellservice.com · Q1. 2 TRICAN WELL SERVICE Q1 2005 Russia Despite very cold weather in...

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