Calfrac Announces Fourth Quarter Results

 CALGARY, Feb. 26, 2014 /CNW/ - Calfrac Well Services Ltd. ("Calfrac" or "the  Company") (TSX-CFW) announces its financial and operating results for the  three months and year ended December 31, 2013.        HIGHLIGHTS                                                                                     Three Months Ended       Years Ended December                                   December 31,                        31,                            2013    2012 Change      2013      2012 Change     (C$000s, except per     share and unit     data)                   ($)     ($)    (%)       ($)       ($)    (%)     (unaudited)                                                               Financial                                                                 Revenue             463,054 367,487     26 1,563,814 1,595,216    (2)     Operating income(1)  57,416  43,218     33   188,076   257,013   (27)     EBITDA(2)            57,667  46,866     23   185,933   264,471   (30)            Per share -            basic           1.25    1.05     19      4.07      5.97   (32)            Per share -            diluted         1.24    1.04     19      4.04      5.90   (32)     Net income     attributable to                                                                  the            shareholders            of Calfrac                                                                before            foreign            exchange                                                                  losses            (gains)(3)    10,194   8,073     26    27,578    89,931   (69)            Per share -            basic           0.22    0.18     22      0.60      2.03   (70)            Per share -            diluted         0.22    0.18     22      0.60      2.01   (70)     Net income     attributable to                                                                  the            shareholders            of Calfrac    11,764  11,243      5    27,914    97,146   (71)            Per share -            basic           0.25    0.25      -      0.61      2.19   (72)            Per share -            diluted         0.25    0.25      -      0.61      2.17   (72)     Working capital     (end of period)                              319,934   322,857    (1)     Total equity (end     of period)                                   795,207   780,759      2     Weighted average     common                                                                           shares            outstanding            (000s)                                                                    Basic         46,174  44,694      3    45,728    44,335      3            Diluted       46,497  45,073      3    46,045    44,808      3                                                                               Operating (end of     period)                                                                   Pumping horsepower     (000s)                                         1,194       977     22     Coiled tubing units     (#)                                               38        29     31     Cementing units (#)                               31        26     19     (1)  Operating income is defined as net income (loss) before          depreciation, interest, foreign exchange gains or losses, gains or          losses on disposal of property, plant and equipment, expenses and          gain related to business combinations and income taxes. Management          believes that operating income is a useful supplemental measure as          it provides an indication of the financial results generated by          Calfrac's business segments prior to consideration of how these          segments are financed or how they are taxed. Operating income is a          measure that does not have any standardized meaning under          International Financial Reporting Standards (IFRS) and,          accordingly, may not be comparable to similar measures used by          other companies.     (2)  EBITDA is defined as net income (loss) before interest, income          taxes, depreciation and amortization. EBITDA is presented because          it is frequently used by securities analysts and others for          evaluating companies and their ability to service debt. EBITDA is          a measure that does not have any standardized meaning prescribed          under IFRS and, accordingly, may not be comparable to similar          measures used by other companies.     (3)  Net income attributable to the shareholders of Calfrac before          foreign exchange gains or losses is defined as net income (loss)          attributable to the shareholders of Calfrac before foreign          exchange gains or losses on an after-tax basis. Management          believes that net income attributable to the shareholders of          Calfrac before foreign exchange gains or losses is a useful          supplemental measure as it provides an indication of the financial          results generated by Calfrac without the impact of foreign          exchange fluctuations, which are not fully controllable by the          Company. Net income attributable to the shareholders of Calfrac          before foreign exchange gains or losses is a measure that does not          have any standardized meaning prescribed under IFRS and,          accordingly, may not be comparable to similar measures used by          other companies.  CEO's MESSAGE  I am pleased to present Calfrac's operating and financial highlights for 2013  and to discuss our prospects for 2014. During the fourth quarter, our Company:          --  completed the acquisition of the operating assets of Mission             Well Services, LLC ("Mission"), a privately-held hydraulic             fracturing and coiled tubing services provider focused in the             Eagle Ford shale play of Texas;         --  experienced strong equipment utilization in the unconventional             natural gas resource plays of the United States;         --  began executing on its pressure pumping services contract with             YPF S.A., the largest operator in Argentina; and         --  announced a 2014 capital program of $120.0 million, which             focuses on maintenance and support capital, further investment             in logistics equipment and international growth.  Financial Highlights  ------------------------------  For the three months ended December 31, 2013, the Company recorded:         --  revenue of $463.0 million, an increase of 26 percent from the             fourth quarter of 2012 driven primarily by the commencement of             fracturing operations in the Eagle Ford shale play combined             with increased activity in the Niobrara and Marcellus shale             plays in the United States, higher fracturing activity in             Russia due to an expanded customer base and increased demand             for horizontal multi-stage fracturing operations, and the             significant increase in fracturing activity in Argentina;         --  operating income of $57.4 million versus $43.2 million in the             same quarter of 2012, mainly due to higher equipment             utilization in the United States offset partially by the             effects of the competitive pricing environment in Canada; and         --  net income attributable to shareholders of Calfrac of $11.8             million or $0.25 per share diluted, including a $1.5 million             foreign exchange gain, compared to net income of $11.2 million             or $0.25 per share diluted in the fourth quarter of 2012, which             included a foreign exchange gain of $3.8 million.  For the year ended December 31, 2013, the Company:         --  generated revenue of $1.6 billion, a 2 percent decrease from             2012 driven primarily by competitive pricing pressure in             western Canada and the United States and lower fracturing             activity in Mexico, offset partially by higher multi-stage             fracturing activity in Western Siberia, and the commencement of             fracturing operations in Argentina and the Eagle Ford shale             play in Texas during the second and fourth quarters of 2013,             respectively;         --  reported operating income of $188.1 million versus $257.0             million in 2012, a decrease of 27 percent, mainly as a result             of competitive pricing and a decline in activity in Canada and             lower equipment utilization in Mexico; and         --  reported net income attributable to shareholders of Calfrac of             $27.9 million or $0.61 per share diluted, including a foreign             exchange loss of $1.2 million, compared to net income of $97.1             million or $2.17 per share diluted, which included a $8.3             million foreign exchange gain, in 2012.  Operational Highlights   ------------------------------  Canada  Calfrac's financial and operating results in Canada for the fourth quarter met  expectations as activity significantly increased as the quarter progressed  with the onset of winter. Activity was particularly strong in the Montney play  as several customers were focused on completing their 2013 programs during the  quarter. However, bitterly cold temperatures throughout much of December did  result in higher than expected fuel and subcontractor costs and impacted the  Company's ability to cost effectively complete its scheduled programs.  Financial performance in the fourth quarter was also weakened by further  pricing competition on callout work during the early part of the quarter.  Pricing stabilized as the quarter progressed and Calfrac expects this stable  pricing environment to continue throughout the first quarter of 2014, as  demand for its services remains at very high levels.  United States  In the United States, Calfrac's financial performance in the fourth quarter  was consistent with expectations as equipment utilization remained high in the  Marcellus and Fayetteville natural gas plays combined with improved  utilization in the Bakken and Niobrara oil plays. The revenue base was further  bolstered by the acquisition of the assets and business of Mission at the  beginning of the fourth quarter as Calfrac made its entry into the Eagle Ford  shale play in Texas. While utilization remained high, pricing continued to be  a challenge in the fourth quarter as the oversupply of fracturing capacity  remained prevalent in the latter part of the year. Financial results for the  fourth quarter were also affected by holiday disruptions and inclement weather  prevalent in several regions during the latter part of the quarter. The  integration of Mission proceeded as planned although operating margins were  impacted by the exposure to the weak callout market and the incurrence of  certain costs related to integrating Mission into the Calfrac platform.  Calfrac's United States operations remained focused on proactively managing  the Company's cost structure. The Company's supply chain and logistic  capabilities made further progress during the quarter to enhance operating  efficiencies in the midst of challenging market conditions.  Russia  Equipment utilization for Calfrac's Russian operations continued to be  positively impacted by the increase in horizontal multi-stage fracturing  activity in Western Siberia. While this technology is still in the early  stages of development, the Company remains optimistic that it will gain  further acceptance and be a driver of future growth in operating and financial  performance in Russia. While equipment utilization remained high in the fourth  quarter, Calfrac's financial results were lower on a quarter-over-quarter  basis due to the higher cost structure resulting from the onset of winter  operating conditions. Late in the third quarter, a new district was opened in  the Usinsk region and the Russian fleet was increased to six fracturing  spreads. The Company successfully completed its first stimulation treatment in  this region during the fourth quarter.  Latin America  Calfrac's Latin American operating results during the quarter improved  substantially from the third quarter mainly due to an increase in fracturing  activity in Argentina offset partially by a significant reduction in drilling  and completion activity in the northern region of Mexico due to budget  reductions implemented by the Company's main customer. The reduction in  Mexican activity is not expected to change significantly in 2014, but Calfrac  is optimistic that activity will improve in the future when the use of  horizontal drilling with multi-stage completions becomes more prominent. In  the meantime, the Company continues to rationalize its cost structure to be  more closely aligned with its short term revenue outlook. Additional measures  will be undertaken if the outlook does not improve as the year progresses.  In Argentina, the aforementioned increase in fracturing activity was related  to the YPF S.A. tight gas contract that was announced in October 2013. This  significant increase in activity was effectively managed by Calfrac's local  team and has laid the groundwork for future growth opportunities. Based on the  Company's assessment of the quality of the resource base in Argentina, it is  expected that the greater adoption of horizontal well technology will provide  further opportunities in this country.  Challenging market conditions in Colombia persisted in the fourth quarter of  2013, resulting in lower than expected equipment utilization and financial  performance. Permitting and infrastructure issues remain barriers to greater  oilfield activity. The Company expects these issues to be resolved, but  continues to closely manage its operating costs while focusing on expanding  its customer base. Calfrac currently operates four cementing units in Colombia  and does not intend to deploy additional equipment until market conditions  improve.  Outlook and Business Prospects  ------------------------------  Natural gas prices in North America have improved during the first two months  of 2014, with colder-than-normal weather providing improved fundamentals for a  recovery in natural gas prices. Crude oil prices also remain at levels that  provide solid economics to oil producers. Calfrac expects that this will  encourage higher oilfield activity in 2014 in the unconventional resource  plays of Canada and the United States. In addition, current trends in service  intensity in the form of larger pad designs, longer horizontal legs and  greater stimulation intensity should provide the basis for higher completions  activity. The benefits of higher activity will however continue to be tempered  by the competitive pricing environment in North America. Internationally,  Calfrac's operations are experiencing continuing momentum in the application  of multi-stage completion technology within horizontal wellbores, and the  Company expects this increase to drive higher equipment utilization in those  markets over the near and long term.  Fracturing and coiled tubing activity in western Canada is anticipated to  remain strong in the Montney, Deep Basin, Cardium and Duvernay plays for the  foreseeable future. Pricing recently stabilized and Calfrac expects it to  remain firm throughout the first quarter. From a cost standpoint, the  weakening of the Canadian dollar is negatively impacting certain input costs  which are denominated in U.S. dollars and may continue into the first quarter.  The development of liquids-rich gas plays, such as the Duvernay and various  plays in the Deep Basin, likely represents the most meaningful short-term  driver for increased activity, with the movement towards liquefied natural gas  (LNG) export capability being the primary driver of higher demand for the  Company's services over the longer-term.  Calfrac expects LNG export-related activity to increase with the influx of  capital from foreign entities and large multi-national companies. The  Company's leadership position in the development of the Montney, Duvernay and  Horn River resource plays is expected to position it to participate  significantly in the development of the natural gas reserves required to  support these LNG initiatives. Calfrac believes that two or three LNG projects  will move forward, but the timing for these projects remains unclear. Several  of the Company's long-standing customers are at the forefront of this  development, which is expected to be a catalyst for a significant increase in  the demand for the Company's services over the longer term. Calfrac has seen  the benefit of initial LNG activity in 2013, particularly in the Montney, and  expects that this source of activity will grow materially in 2014. This should  gain greater momentum in 2015 and beyond as further visibility unfolds  regarding the scope and timing of the LNG projects.  Calfrac expects that oil-focused activity will remain stable for the rest of  the year, with the introduction of higher-rate treatments in certain plays,  such as the Cardium, driving higher equipment utilization. Viking activity is  expected to increase in 2014 over 2013. Calfrac also expects to achieve  further operational efficiencies in the Canadian market through the expanded  use of 24-hour operations and multi-well pad development.  The organizational improvements initiated in the United States in late 2012  and 2013 resulted in improved financial performance during 2013 and provide  the basis for achieving reasonable financial returns amidst challenging market  conditions. Calfrac remains focused on prudently managing the Company's cost  structure in the United States, creating further efficiencies through supply  chain and logistical initiatives and expanding customer relationships in order  to maximize profitability. In the short term, uncertainty remains due to the  United States' over-supplied pressure pumping market. Calfrac's equipment  utilization is expected to be quite strong given the Company's active customer  base, contract coverage and positioning in some of the most economic plays  such as the Marcellus, Niobrara and Eagle Ford. While the Company does not  expect market conditions to change significantly in the first half of 2014, it  remains cautiously optimistic that activity will increase in the last six  months of 2014. This may lead to improved pricing dynamics, as further  unconventional development occurs in oil-producing basins and completion  activity in unconventional natural gas plays increases due to higher natural  gas prices resulting from colder winter weather.  Calfrac's view is supported by its strong positioning in the U.S. market. The  Company services three of the most active unconventional resource plays in the  United States: the Bakken oil shale play in North Dakota, the Marcellus shale  natural gas play in Pennsylvania and West Virginia and most recently, the  Company's entry into the Eagle Ford shale play in Texas. Calfrac believes that  the Marcellus will remain very active due to its low cost structure and  proximity to consuming markets. In addition, Calfrac believes that activity in  the Utica shale will see meaningful growth in 2014 as well results continue to  improve. Calfrac's customer base, market presence and infrastructure have  provided the opportunity to participate in this development. Activity in the  Fayetteville shale play is anticipated to remain stable in 2014 due to the  Company's strong customer relationships and operational performance in this  region. Calfrac's long-standing presence in the Rocky Mountain region provides  additional growth prospects in the Niobrara shale oil play, as many producers  have begun using longer-reach horizontal wells and greater stimulation  intensity with encouraging results. The Company has experienced a significant  increase in activity in the Niobrara play and expects further growth in 2014.  Calfrac's Russian results in 2013 met its expectations and based on the  results of the 2014 contract tender process, it expects improvement in both  utilization and pricing in 2014. However, activity in the early portion of  2014 has been negatively impacted by harsh weather conditions. This outlook is  primarily based on the expanded use of new technologies in Western Siberia,  such as horizontal drilling and multi-stage completions. The pace of adoption  of this new methodology has exceeded the Company's expectations. Approximately  35 percent of Calfrac's fracturing work was focused on horizontal wells in  2013. Consequently, Calfrac expects that this trend will continue to drive  demand for its services over the short and long term as Russia's producing  sector gains confidence in this approach.  In Mexico, the Company expects the use of multi-stage fracturing of horizontal  wellbores to become more prominent over the longer term as capital budgets  recover. Based on customer feedback, the majority of future onshore activity  will be focused on horizontal wells, which should spur demand for Calfrac's  services. However, as discussed above, short term visibility remains poor.  Calfrac remains focused on prudently managing its Mexican cost structure to  align with expected near-term activity. The Company continues to monitor this  environment closely and will proactively manage this segment as more  information becomes available. While the short-term outlook remains quite  challenging, Calfrac is encouraged by the recent legislative and  constitutional changes enacted in Mexico to open this market to foreign  investment. The Company believes that implementation is likely to take some  time as further clarity is required surrounding the rules governing foreign  energy investment. This is likely to have a more material impact on oilfield  service activity after 2014.  With Calfrac's successful entry into the Argentinean fracturing market in  2013, the Company believes that it is well-positioned to take advantage of  additional opportunities related to the development of the country's  unconventional resource plays. Calfrac expects that horizontal drilling  combined with multi-stage fracturing will be key inputs to unlocking  Argentina's tight sands and shale resources. With limited industry capacity  in-country to service these emerging unconventional plays, the Company's  strategy is to lever its long-standing reputation for service quality and  technical expertise, which is expected to provide the foundation for long-term  growth in Argentina. Calfrac's recently executed contract with YPF S.A.  provides a strong foundation to grow its hydraulic fracturing, coiled tubing  and cementing services in Argentina.  Overall, the Company believes that positive momentum in the pressure pumping  business appears to be building in 2014. Calfrac remains focused on it core  principles of service quality and technology and expects that further growth  opportunities will develop as the year unfolds. The Company believes that it  is well-positioned to take advantage of these opportunities.  On a personal note, Doug Ramsay recently retired from his role of Chief  Executive Officer at Calfrac. As I assume the CEO role, I would like to  acknowledge and thank Doug for the incredible leadership that he has provided  to the Company over the last fifteen years since founding Calfrac and guiding  it into one of the leading pressure pumping companies in the world. I look  forward to continuing to work with Doug in his new role as Vice-Chairman.  Tim Swinton recently retired from his position as a director of Calfrac. Mr.  Swinton has served as a director of Calfrac since its amalgamation with  Denison Energy Inc. in March of 2004. The board and management of Calfrac  would like to sincerely thank Tim for his many outstanding contributions to  the growth and stewardship of Calfrac over the past decade, and wish him the  very best in his retirement.  On behalf of the Board of Directors,  Fernando Aguilar President & Chief Executive Officer February 26, 2014  2013 Overview  ------------------------------  For the three months ended December 31, 2013, the Company recorded:         --  revenue of $463.0 million, an increase of 26 percent from the             fourth quarter of 2012 driven primarily by the commencement of             fracturing operations in the Eagle Ford shale play combined             with increased activity in the Niobrara and Marcellus shale             plays, higher fracturing activity in Russia due to an expanded             customer base and increased demand for horizontal multi-stage             fracturing operations, and the commencement of fracturing             operations in Argentina during the second quarter of 2013;         --  operating income of $57.4 million versus $43.2 million in the             same quarter of 2012, mainly due to higher equipment             utilization in the United States offset partially by the             effects of the competitive pricing environment in Canada; and         --  net income attributable to shareholders of Calfrac of $11.8             million or $0.25 per share diluted, including a $1.5 million             foreign exchange gain, compared to net income of $11.2 million             or $0.25 per share diluted in the fourth quarter of 2012, which             included a foreign exchange gain of $3.8 million.  In 2013, the Company:         --  generated revenue of $1.6 billion, a 2 percent decrease from             2012 resulting primarily from competitive pricing pressure in             western Canada and the United States, lower coiled tubing             activity in the unconventional plays in Canada, smaller             fracturing job sizes in the United States, and lower fracturing             activity in Mexico, offset partially by higher multi-stage             fracturing activity in Western Siberia, and the commencement of             fracturing operations in Argentina and the Eagle Ford shale             play in Texas during the second and fourth quarters of 2013,             respectively;         --  reported operating income of $188.1 million versus $257.0             million in 2012, a decrease of 27 percent, mainly as a result             of competitive pricing and a decline in activity in Canada and             lower equipment utilization in Mexico;         --  reported net income attributable to shareholders of Calfrac of             $27.9 million or $0.61 per share diluted, including a foreign             exchange loss of $1.2 million, compared to net income of $97.1             million or $2.17 per share diluted, which included a $8.3             million foreign exchange gain, in 2012;         --  incurred capital expenditures of $170.5 million primarily to             bolster the Company's fracturing operations in Canada, the             United States and Argentina;         --  completed the acquisition of the operating assets of Mission, a             privately-held hydraulic fracturing and coiled tubing services             provider focused on the Eagle Ford shale play of Texas;         --  entered the Argentinean fracturing market and announced the             signing of a long-term pressure pumping services contract with             YPF S.A., the largest operator in Argentina;         --  reported period-end working capital of $319.9 million versus             $322.9 million at December 31, 2012; and         --  announced a capital budget for 2014 of $120.0 million, which             focuses on maintenance and support capital, further investment             in logistics equipment and international growth. Approximately             $33.0 million is allocated to supporting Calfrac's growing             international operations, including an investment in coiled             tubing and fracturing equipment in Russia and Argentina. In             addition, approximately $20.0 million remaining from Calfrac's             2013 capital program is expected to be expended in 2014.  Financial Overview - Three Months Ended December 31, 2013 Versus 2012  ------------------------------     Canada                                                            Three Months Ended December 31,                2013    2012 Change     (C$000s, except operational information)        ($)     ($)    (%)     (unaudited)                                                            Revenue                                     197,112 201,573    (2)     Expenses                                                                      Operating                            157,775 147,518      7            Selling, general and administrative    4,334   5,033   (14)            (SG&A)                                                 162,109 152,551      6     Operating income(1)                          35,003  49,022   (29)     Operating income (%)                          17.8%   24.3%   (27)     Fracturing revenue per job ($)              188,660 192,600    (2)     Number of fracturing jobs                       995   1,001    (1)     Pumping horsepower, end of period (000s)        389     375      4     Coiled tubing revenue per job ($)            26,617  22,689     17     Number of coiled tubing jobs                    353     387    (9)     Coiled tubing units, end of period (#)           21      21      -     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.             Revenue  Revenue from Calfrac's Canadian operations during the fourth quarter of 2013  was $197.1 million versus $201.6 million in the same period of 2012. The  decrease in revenue was primarily due to increased pricing pressure, partially  offset by the completion of larger jobs during the quarter.  Operating Income  Operating income in Canada decreased by 29 percent to $35.0 million during the  fourth quarter of 2013 from $49.0 million in the same period of 2012. The  decrease was primarily due to the competitive pricing environment experienced  during the quarter. Additionally, extreme cold weather during the latter part  of the quarter increased fuel and subcontractor costs. Selling, general and  administrative expenses during the fourth quarter were $0.7 million less than  in the comparable three-month period for 2012 primarily due to a lower annual  bonus provision.     United States                                                       Three Months Ended December 31,                  2013    2012 Change     (C$000s, except operational and exchange rate     ($)     ($)    (%)     information)     (unaudited)                                                              Revenue                                       189,239 109,975     72     Expenses                                                                   Operating                                   154,001  99,048     55       SG&A                                          5,642   5,439      4                                                   159,643 104,487     53     Operating income(1)                            29,596   5,488    439     Operating income (%)                            15.6%    5.0%    212     Fracturing revenue per job ($)                 53,815  52,347      3     Number of fracturing jobs                       3,348   1,943     72     Pumping horsepower, end of period (000s)          662     492     35     Cementing revenue per job ($)                  37,285  30,678     22     Number of cementing jobs                          213     180     18     Cementing units, end of period (#)                 18      12     50     US$/C$ average exchange rate(2)                1.0498  0.9913      6     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.     (2)  Source: Bank of Canada.             Revenue  Revenue from Calfrac's United States operations increased during the fourth  quarter of 2013 to $189.2 million from $110.0 million in the comparable  quarter of 2012. The increase was due primarily to the commencement of  fracturing operations in the Eagle Ford shale play following the acquisition  of the Mission assets early in the fourth quarter of 2013. In addition, higher  activity in the Niobrara and Marcellus shale plays contributed to the revenue  increase. The increase in revenue was partially offset by lower pricing in the  United States resulting from high levels of competition.  Operating Income  Operating income in the United States was $29.6 million for the fourth quarter  of 2013, an increase of $24.1 million from the comparative period in 2012. The  increase was primarily due to higher utilization in the unconventional natural  gas plays where Calfrac is active, as well as in the Niobrara shale oil play,  and the commencement of operations in the Eagle Ford play.     Russia                                                                  Three Months Ended December 31,                  2013   2012 Change     (C$000s, except operational and exchange rate     information)                                      ($)    ($)    (%)     (unaudited)                                                             Revenue                                        41,404 24,197     71     Expenses                                                                  Operating                                    36,946 22,707     63       SG&A                                          1,794  1,744      3                                                    38,740 24,451     58     Operating income (loss)(1)                      2,664  (254)      -     Operating income (loss) (%)                      6.4%  -1.0%      -     Fracturing revenue per job ($)                118,015 84,063     40     Number of fracturing jobs                         284    199     43     Pumping horsepower, end of period (000s)           62     45     38     Coiled tubing revenue per job ($)              60,671 54,117     12     Number of coiled tubing jobs                      130    138    (6)     Coiled tubing units, end of period (#)              7      7      -     Rouble/C$ average exchange rate(2)             0.0322 0.0319      1     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.     (2)  Source: Bank of Canada.             Revenue  During the fourth quarter of 2013, the Company's revenue from Russian  operations increased by 71 percent to $41.4 million from $24.2 million in the  corresponding three-month period of 2012. The increase in revenue was mainly  due to higher fracturing activity as a result of the Company expanding its  customer base combined with increased demand for horizontal multi-stage  fracturing operations in Western Siberia and larger fracturing job sizes. The  Company began supplying proppant to two significant customers in 2013, which  contributed to the revenue growth over the comparable quarter of 2012. The  increase in revenue was partially offset by lower coiled tubing activity  resulting from the increased use of multi-stage fracturing completions.  Operating Income (Loss)  Operating income in Russia was $2.7 million during the fourth quarter of 2013  compared to an operating loss of $0.3 million in the corresponding period of  2012. The turnaround in operating income was primarily a result of operational  efficiencies resulting from higher fracturing equipment utilization and a  higher overall revenue base. The increase in operating income was somewhat  tempered by higher fuel and maintenance costs with the onset of winter  operating conditions.     Latin America                                                            Three Months Ended December 31,                   2013   2012 Change     (C$000s, except operational and exchange rate     information)                                       ($)    ($)    (%)     (unaudited)                                                              Revenue                                         35,299 31,742     11     Expenses                                                                   Operating                                     28,943 26,489      9       SG&A                                           2,520  2,152     17                                                     31,463 28,641     10     Operating income(1)                              3,836  3,101     24     Operating income (%)                             10.9%   9.8%     11     Pumping horsepower, end of period (000s)            81     65     25     Cementing units, end of period (#)                  13     13      -     Coiled tubing units, end of period (#)               3      1    200     Mexican peso/C$ average exchange rate(2)        0.0806 0.0766      5     Argentinean peso/C$ average exchange rate(2)    0.1732 0.2066   (16)     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.     (2)  Source: Bank of Canada.             Revenue  Calfrac's Latin America operations generated total revenue of $35.3 million  during the fourth quarter of 2013 versus $31.7 million in the comparable  three-month period in 2012. The increase in revenue was due to the significant  increase in unconventional fracturing activity in Argentina during 2013 as a  result of the pressure pumping services contract that was signed with YPF S.A.  at the beginning of the fourth quarter of 2013 combined with higher cementing  and coiled tubing activity in that country. This increase in revenue was  offset by lower fracturing activity in Mexico resulting from budget  constraints by Calfrac's major customer in that country. The Colombian market  continued to present challenging conditions, due to permitting and  infrastructure issues, resulting in lower-than-expected equipment utilization.  Operating Income  Operating income in Latin America for the three months ended December 31, 2013  was $3.8 million versus $3.1 million in the comparative quarter in 2012. The  increase in operating income was due to the commencement of fracturing  operations in Argentina combined with higher cementing and coiled tubing  equipment utilization in that country. This increase was offset by a decrease  in operating income in Mexico and Colombia resulting from significantly lower  equipment utilization.     Corporate                                                             Three Months Ended December 31,              2013     2012 Change     (C$000s, except operational information)      ($)      ($)    (%)     (unaudited)                                                           Expenses                                                                Operating                                 2,328    2,464    (6)       SG&A                                     11,355   11,675    (3)                                                13,683   14,139    (3)     Operating loss(1)                        (13,683) (14,139)    (3)                                                                           % of Revenue                                 3.0%     3.8%   (21)     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.             Operating Loss  The 3 percent decrease in corporate expenses from the fourth quarter of 2012  was mainly due to lower annual bonus expenses. The decrease was offset  partially by higher corporate personnel costs to support the Company's larger  scale of operations.  Depreciation  For the three months ended December 31, 2013, depreciation expense increased  by 33 percent to $31.4 million from $23.6 million in the corresponding quarter  of 2012. The increase was mainly a result of the acquisition of assets from  Mission at the beginning of the fourth quarter of 2013 combined with asset  additions required to support the commencement of fracturing operations in  Argentina.  Foreign Exchange Losses or Gains  The Company recorded a foreign exchange gain of $1.5 million during the fourth  quarter of 2013 versus a foreign exchange gain of $3.8 million in the  comparative three-month period of 2012. Foreign exchange gains and losses  arise primarily from the translation of net monetary assets or liabilities  that were held in United States dollars in Canada, Russia and Latin America.  The Company's fourth quarter 2013 foreign exchange gain was largely  attributable to the translation of United States dollar-denominated assets  held in Canada offset by a loss on United States dollar-denominated debt held  in Argentina. The value of the United States dollar at December 31, 2013 had  strengthened against the Canadian dollar and the Argentinean peso from the  beginning of the quarter, resulting in a consolidated net foreign exchange  gain.  Interest  The Company's net interest expense of $13.4 million for the fourth quarter of  2013 was $4.5 million higher than in the comparable period of 2012. The  increase was related to the issuance of an additional US$150.0 million of  Calfrac's 7.50 percent senior notes to finance the acquisition of assets from  Mission combined with draws on its revolving credit facility during the fourth  quarter. Additional short-term borrowing in Latin America to fund the  operational expansion in Argentina also contributed to the increase in  interest expense during the quarter.  Income Tax Expenses  The Company recorded income tax expense of $1.1 million during the fourth  quarter of 2013 compared to $3.3 million in the comparable period of 2012. The  effective income tax rate for the three months ended December 31, 2013 was 8  percent compared to 23 percent in the same quarter of 2012. The decrease in  total income tax expense was primarily due to lower profitability in Canada  and Mexico offset partially by higher taxable income in the United States. The  lower effective tax rate was due to the mix of earnings between various tax  jurisdictions combined with a lower-than-expected effective tax rate in the  United States. The lower effective tax rate in the United States was partially  due to the reclassification of $1.8 million of deferred tax expense related to  the Mission acquisition to offset the gain on business combination as required  under IFRS and as described in note 11.     Summary of     Quarterly     Results                                                                     Quarters Ended       Mar.       June       Sept.       Dec.                           31,        30,         30,        31,       Total     (C$000s,     except per     share and     operating     data)                 ($)        ($)         ($)        ($)         ($)     (unaudited)                                                                 2013                                                                        Financial                                                                   Revenue           423,397    288,701     388,662    463,054   1,563,814     Operating     income(1)          62,670     16,307      51,683     57,416     188,076     EBITDA(1)          65,169     16,235      46,862     57,667     185,933       Per share -       basic              1.44       0.36        1.02       1.25        4.07       Per share -       diluted            1.43       0.35        1.01       1.24        4.04     Net income     (loss)     attributable     to the     shareholders     of Calfrac         24,645   (14,584)       6,089     11,764      27,914       Per share -       basic              0.55     (0.32)        0.13       0.25        0.61       Per share -       diluted            0.54     (0.32)        0.13       0.25        0.61     Capital     expenditures       43,989     46,618      34,683     45,227     170,517     Working     capital (end     of period)        332,241    319,982     292,854    319,934     319,934     Total equity     (end of     period)           802,581    784,247     786,933    795,207     795,207                                                                                 Operating (end     of period)                                                                  Pumping     horsepower     (000s)              1,013      1,025       1,025      1,194                 Coiled tubing     units (#)              29         29          31         38                 Cementing     units (#)              28         30          30         31                 (1)  Refer to "Non-GAAP Measures" on page 20 for further information.                                                                                     Quarters                 Mar.       June       Sept.       Dec.     Ended                     31,        30,         30,        31,       Total     (C$000s,               except per     share and     operating     data)                     ($)        ($)         ($)        ($)         ($)     (unaudited)                                                                     2012                                                                            Financial                                                                       Revenue               474,107    335,780     417,842    367,487   1,595,216     Operating              income(1)             113,381     29,810      70,604     43,218     257,013     EBITDA(1)             127,995     18,736      70,874     46,866     264,471       Per share              - basic                2.92       0.42        1.59       1.05        5.97       Per share              - diluted              2.87       0.42        1.58       1.04        5.90     Net income             attributable     to the     shareholders     of Calfrac             70,841   (11,855)      26,917     11,243      97,146       Per share              - basic                1.62     (0.27)        0.60       0.25        2.19       Per share              - diluted              1.59     (0.27)        0.60       0.25        2.17     Capital                expenditures           84,075     75,286      63,962     55,694     279,017     Working                capital (end     of period)            431,053    357,128     353,182    322,857     322,857     Total equity           (end of     period)               779,426    747,591     783,091    780,759     780,759                                                                                     Operating              (end of     period)                                                                         Pumping                horsepower     (000s)                    782        830         845        977                 Coiled                 tubing units     (#)                        29         29          29         29                 Cementing              units (#)                  23         23          25         26                 (1) Refer to "Non-GAAP Measures" on page 20 for further information.     Financial Overview - Year Ended December 31, 2013 Versus 2012  ------------------------------     Canada                                                              Years Ended December 31,                         2013    2012 Change     (C$000s, except operational information)          ($)     ($)    (%)     (unaudited)                                                              Revenue                                       677,114 732,880    (8)     Expenses                                                                    Operating                                  538,730 526,400      2        Selling, general and administrative (SG&A)  16,685  17,925    (7)                                                   555,415 544,325      2     Operating income(1)                           121,699 188,555   (35)     Operating income (%)                            18.0%   25.7%   (30)     Fracturing revenue per job ($)                198,667 197,062      1     Number of fracturing jobs                       3,239   3,441    (6)     Pumping horsepower, end of period (000s)          389     375      4     Coiled tubing revenue per job ($)              25,674  30,661   (16)     Number of coiled tubing jobs                    1,310   1,787   (27)     Coiled tubing units, end of period (#)             21      21      -     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.             Revenue  Revenue from Calfrac's Canadian operations was $677.1 million in 2013 versus  $732.9 million in 2012. The decrease in revenue was primarily due to lower  pricing experienced in Canada during 2013 due to competitive pressures, the  effects of which were largely offset by an increase in average job size and  associated revenue. The increase in average job size reflects the continued  shift in activity into the unconventional oil and liquids-rich regions of  western Canada. In addition, flood conditions experienced during the second  and third quarters of 2013 resulted in lower fracturing and coiled tubing  activity in central and southern Alberta. Lower coiled tubing activity in the  Horn River area of northeast British Columbia in 2013 also contributed to the  reduction in job sizes and overall revenue.  Operating Income  Operating income in Canada decreased by 35 percent to $121.7 million in 2013  from $188.6 million in 2012. The decline was primarily caused by a more  competitive pricing environment combined with higher logistical costs  associated with the completion of larger fracturing jobs. Selling, general and  administrative expenses during 2013 were $1.2 million less than in 2012  primarily due to a lower provision for annual bonuses.     United States                                                            Years Ended December 31,                         2013    2012 Change     (C$000s, except operational and exchange rate             ($)     information)                                      ($)            (%)     (unaudited)                                                              Revenue                                       616,174 638,483    (3)     Expenses                                                                   Operating                                   492,699 512,482    (4)       SG&A                                         19,350  20,872    (7)                                                   512,049 533,354    (4)     Operating income(1)                           104,125 105,129    (1)     Operating income (%)                            16.9%   16.5%      2     Fracturing revenue per job ($)                 57,019  69,620   (18)     Number of fracturing jobs                      10,256   8,766     17     Pumping horsepower, end of period (000s)          662     492     35     Cementing revenue per job ($)                  35,432  30,912     15     Number of cementing jobs                          854     661     29     Cementing units, end of period (#)                 18      12     50     US$/C$ average exchange rate(2)                1.0299  0.9996      3     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.     (2)  Source: Bank of Canada.             Revenue  Revenue from Calfrac's United States operations decreased by 3 percent to  $616.2 million in 2013 from $638.5 million in 2012, primarily due to  competitive pricing pressure and lower activity in the Bakken play of North  Dakota. This was somewhat offset by higher fracturing activity in the  Marcellus shale formation in Pennsylvania and West Virginia and the  commencement of fracturing operations in the Eagle Ford shale play during the  fourth quarter. Cementing revenue increased by $9.8 million to $30.3 million  in 2013 primarily due to increased activity in the Fayetteville shale in  Arkansas.  Operating Income  Operating income in the United States was $104.1 million for 2013, a decrease  of 1 percent from 2012 and up slightly to 16.9 as a percentage of revenue.  Higher equipment utilization in the Marcellus shale play and the Fayetteville  shale basin combined with the start-up of operations in the Eagle Ford shale  play in Texas were offset by competitive pricing pressure and lower  utilization in North Dakota.     Russia                                                                   Years Ended December 31,                         2013    2012 Change     (C$000s, except operational and exchange rate     information)                                      ($)     ($)    (%)     (unaudited)                                                              Revenue                                       158,782 112,765     41     Expenses                                                                   Operating                                   138,910 100,098     39       SG&A                                          6,514   6,101      7                                                   145,424 106,199     37     Operating income(1)                            13,358   6,566    103     Operating income (%)                             8.4%    5.8%     45     Fracturing revenue per job ($)                108,599  92,791     17     Number of fracturing jobs                       1,184     826     43     Pumping horsepower, end of period (000s)           62      45     38     Coiled tubing revenue per job ($)              58,304  57,884      1     Number of coiled tubing jobs                      518     624   (17)     Coiled tubing units, end of period (#)              7       7      -     Rouble/C$ average exchange rate(2)             0.0323  0.0322      -     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.     (2)  Source: Bank of Canada.             Revenue  The Company's revenue from Russian operations increased by 41 percent to  $158.8 million in 2013 from $112.8 million in 2012. The increase in revenue  was mainly due to the Company supplying proppant to two significant customers  in Western Siberia during 2013. In addition, higher multi-stage fracturing  activity in 2013 and an expanded customer base combined with larger  conventional fracturing job sizes contributed to the overall increase in  revenue. During 2013, approximately 34 percent of Calfrac's total Russian  fracturing activity was related to multi-stage well completions compared to  less than 5 percent in 2012. Coiled tubing activity declined as a result of  the increased use of multi-stage fracturing operations, which reduced the  requirements for coiled tubing services.  Operating Income  Operating income in Russia was $13.4 million in 2013 compared to $6.6 million  in 2012. The increase in operating income was primarily due to operational  efficiencies associated with multi-stage fracturing operations forming a  larger proportion of total activity in 2013 and a higher revenue base.     Latin America                                                            Years Ended December 31,                         2013    2012 Change     (C$000s, except operational and exchange rate     information)                                      ($)     ($)    (%)     (unaudited)                                                              Revenue                                       111,744 111,088      1     Expenses                                                                   Operating                                   100,507  95,494      5       SG&A                                          7,714   6,755     14                                                   108,221 102,249      6     Operating income(1)                             3,523   8,839   (60)     Operating income (%)                             3.2%    8.0%   (60)     Pumping horsepower, end of period (000s)           81      65     25     Cementing units, end of period (#)                 13      13      -     Coiled tubing units, end of period (#)              3       1    200     Mexican peso/C$ average exchange rate(2)       0.0807  0.0760      6     Argentinean peso/C$ average exchange rate(2)   0.1889  0.2201   (14)     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.     (2)  Source: Bank of Canada.             Revenue  Calfrac's Latin American operations generated total revenue of $111.7 million  during 2013 compared to $111.1 million in 2012. Revenue in Argentina increased  significantly due to the start-up of conventional fracturing operations  beginning in the second quarter of 2013 followed by the commencement of  unconventional fracturing operations for YPF S.A. in Argentina's tight sands  in October 2013. Higher cementing and coiled tubing activity in Argentina also  contributed to higher overall revenue. The revenue improvement achieved in  Argentina was almost entirely offset by significantly lower fracturing  activity in Mexico resulting from customer budget reductions.  Operating Income  During 2013, Calfrac's Latin America division generated operating income of  $3.5 million versus $8.8 million in 2012. The decrease in operating income was  primarily due to lower equipment utilization in Mexico and Colombia combined  with higher SG&A expenses as a result of the larger overall scale of the  Company's Latin American operations with the commencement of fracturing  operations in Argentina.     Corporate                                             Years Ended December 31,     2013     2012 Change     (C$000s)                      ($)      ($)    (%)     (unaudited)                                           Expenses                                                Operating                 8,706    9,973   (13)       SG&A                     45,923   42,103      9                                54,629   52,076      5     Operating loss(1)        (54,629) (52,076)      5                                                           % of Revenue                 3.5%     3.3%      6     (1)  Refer to "Non-GAAP Measures" on page 20 for further information.             Operating Loss  The 5 percent increase in corporate expenses in 2013 over 2012 was mainly due  to a $4.2 million increase in stock-based compensation expenses resulting from  additional restricted share units granted to employees and a higher stock  price in 2013. Higher corporate personnel costs to support the Company's  larger scale of operations also contributed to the increase in corporate  expenses. The increase was offset partially by lower annual bonus expenses.  Depreciation  Depreciation expense increased by 22 percent to $110.0 million for 2013 from  $90.4 million in 2012. The increase was mainly a result of the acquisition of  assets from Mission at the beginning of the fourth quarter of 2013 combined  with a larger fleet of equipment deployed in North America and Argentina  throughout 2013 pursuant to Calfrac's 2013 capital plan.  Foreign Exchange Losses or Gains  The Company recorded a foreign exchange loss of $1.2 million during 2013  versus an $8.3 million gain in 2012. Foreign exchange gains and losses arise  primarily from the translation of net monetary assets or liabilities that were  held in United States dollars in Canada, Russia and Latin America. The  majority of the Company's foreign exchange loss recorded in 2013 was  attributable to U.S. dollar-denominated debt in Russia and Argentina as the  U.S. dollar appreciated against the Russian rouble and Argentinean peso during  the period. The loss was partially offset by the impact of the net U.S.  dollar-denominated asset position in Canada as the U.S. dollar appreciated  against the Canadian dollar during this period.  Interest  The Company's interest expense increased by $5.6 million to $42.0 million in  2013 primarily due to the issuance of an additional US$150.0 million of  Calfrac's 7.50 percent senior notes at the beginning of the fourth quarter of  2013 to finance the acquisition of assets from Mission. Additional short-term  borrowing in Latin America, which was used to fund Calfrac's Argentinean  expansion, combined with a draw on the Company's revolving credit facility  during the fourth quarter also contributed to the increase in interest expense  during the year.  Income Tax Expenses  The Company recorded income tax expense of $7.2 million during 2013 compared  to $41.4 million in 2012. The effective income tax rate for 2013 was 21  percent compared to 30 percent in 2012. The decrease in total income tax  expense was primarily due to lower profitability in Canada and Mexico. The  lower effective tax rate was due to the mix of earnings between various tax  jurisdictions combined with a lower-than-expected effective tax rate in the  United States. The lower effective tax rate in the United States was partially  due to the reclassification of $1.8 million of deferred tax expense related to  the Mission acquisition to offset the gain on business combination as required  under IFRS and as described below and in note 11.  Business Combination  On October 1, 2013, the Company acquired all of the operating assets of  Mission. The purchase was recognized as a business combination and accounted  for as such using the acquisition method of accounting under IFRS 3 Business  Combinations. The gain of $4.5 million, before taxes, was recognized in the  Statement of Operations on the acquisition date and represents the excess of  the fair value of identifiable assets over the consideration paid. The Company  has reassessed the fair value of the identifiable assets purchased and the  fair value of the consideration transferred in determining the gain, as  required under IFRS. The composition of the business combination expenses  reported in the Statement of Operations is as follows:                                                                 Year Ended December 31,                                  2013     (C$000s) (unaudited)                                      ($)     Gain on business combination                          (4,522)     Deferred taxes relating to business combination         1,775                                                           (2,747)     Acquisition costs                                       5,221     Business combination                                    2,474                                                              Liquidity and Capital Resources  ------------------------------                                                                     Years Ended December 31,                             2013      2012     (C$000s) (unaudited)                                  ($)       ($)     Cash provided by (used in):                                                    Operating activities                       132,011   196,251            Financing activities                       191,515  (28,762)            Investing activities                     (331,720) (259,184)            Effect of exchange rate changes on           7,908     1,121            cash and cash equivalents     Decrease in cash and cash equivalents               (286)  (90,574)                                                                  Operating Activities  The Company's cash provided by operating activities for the year ended  December 31, 2013 was $132.0 million versus $196.3 million in 2012. The  decrease was primarily due to a decline in operating margins in Canada. At  December 31, 2013, Calfrac's working capital was approximately $319.9 million,  in line with its working capital at December 31, 2012 of $322.9 million. The  Company had accounts receivable of US$40.8 million at December 31, 2013 with a  customer operating in Mexico that has been outstanding for greater than 120  days, for which no provision has been made. The payment delay is consistent  with the experience of many other oilfield service companies in this market.  Collection is expected in its entirety; however, the timing is uncertain.  Financing Activities  Net cash provided by financing activities was $191.5 million in 2013 compared  to cash used in financing activities of $28.8 million in 2012. During 2013,  the Company increased its senior notes by $150.2 million (net of debt issuance  costs and debt discount) to finance the purchase of assets from Mission,  received bank loan proceeds of $27.6 million in Argentina, received a net  $22.8 million through draws and repayments on its credit facility, issued  $15.8 million of common shares, paid cash dividends of $23.7 million and  repaid $1.2 million of finance lease obligations and long-term debt.  On August 8, 2013, the Company extended the term of its credit facilities by  one year to September 27, 2017. The maturity may be extended by one or more  years at the Company's request and lenders' acceptance. The Company also may  prepay principal without penalty. The facilities consist of an operating  facility of $20.0 million and a syndicated facility of $280.0 million. The  interest rates are based on the parameters of certain bank covenants. For  prime-based loans and U.S. base-rate loans, the rate ranges from prime or U.S.  base rate plus 0.50 percent to prime plus 1.25 percent. For LIBOR-based loans  and bankers' acceptance-based loans, the margin thereon ranges from 1.50  percent to 2.25 percent above the respective base rates. As at December 31,  2013, the Company had used $24.4 million of its credit facilities for letters  of credit and had $24.5 million outstanding under its credit facility, leaving  $251.1 million in available credit.  On October 8, 2013, the Company closed a private offering of US$150.0 million  aggregate principal of its 7.50 percent senior notes yielding net proceeds of  $150.2 million (US$145.4 million) after applicable discount and debt issuance  costs. Fixed interest on the notes is payable semi-annually on June 1 and  December 1 of each year. The notes will mature on December 1, 2020. The net  proceeds from this offering were used to finance the Mission asset acquisition.  Calfrac pays quarterly dividends to shareholders at the discretion of the  Board of Directors, which qualify as "eligible dividends" as defined by the  Canada Revenue Agency. In February 2012, the Company increased its semi-annual  cash dividend from $0.10 to $0.50 per share, beginning with the dividend paid  on July 16, 2012, thereby increasing the annualized dividend to $1.00 per  share beginning in 2012. In December 2012, the Company announced that it would  pay dividends quarterly instead of semi-annually commencing with a $0.25  dividend that was declared in the first quarter of 2013.  Investing Activities  Calfrac's net cash used for investing activities was $331.7 million for the  year ended December 31, 2013 versus $259.2 million for 2012. Cash outflows  relating to capital expenditures were $170.5 million during 2013 compared to  $279.0 million in 2012. Capital expenditures were primarily to support the  Company's Canadian, United States, Russian and Argentinean fracturing  operations.  On October 1, 2013, the Company completed the acquisition of the operating  assets of Mission, a privately-held hydraulic fracturing and coiled tubing  services provider based in San Antonio, Texas and operating in the Eagle Ford  shale play of Texas. The acquisition provides the Company with modern  fracturing and coiled tubing equipment and an entry into the Texas market.  Under the terms of the purchase agreement, the total purchase price was  approximately $150.5 million, excluding transaction costs, which included  certain working capital associated with the ongoing operations of the  business. The purchase price accounting for this transaction resulted in a  business combination expense of $2.5 million recorded in 2013, the composition  of which is described above and in note 11.  Calfrac's 2014 capital budget is projected to be approximately $120.0 million,  of which $33.0 million is being directed towards growing its international  operations, including an investment in coiled tubing and fracturing equipment  in Russia and Argentina. In addition, approximately $20.0 million remaining  from Calfrac's 2013 capital program is expected to be expended in 2014. As  such, projected capital spending in 2014 is expected to be $160.0 million.  Effect of Exchange Rate Changes on Cash and Cash Equivalents  The effect of changes in foreign exchange rates on the Company's cash and cash  equivalents during 2013 was a gain of $7.9 million versus a gain of $1.1  million during 2012. These gains relate to cash and cash equivalents held by  the Company in a foreign currency.  With its strong working capital position, available credit facilities and  anticipated funds provided by operations, the Company expects to have adequate  resources to fund its financial obligations and planned capital expenditures  for 2014 and beyond.  At December 31, 2013, the Company had cash and cash equivalents of $42.2  million.  Outstanding Share Data  The Company is authorized to issue an unlimited number of common shares.  Employees have been granted options to purchase common shares under the  Company's shareholder-approved stock option plan. The number of shares  reserved for issuance under the stock option plan is equal to 10 percent of  the Company's issued and outstanding common shares. As at February 21, 2014,  there were 46,560,836 common shares issued and outstanding, and 2,945,725  options to purchase common shares.  The Company has a Dividend Reinvestment Plan that allows shareholders to  direct cash dividends paid on all or a portion of their common shares to be  reinvested in additional common shares that will be issued at 95 percent of  the volume-weighted average price of the common shares traded on the Toronto  Stock Exchange (TSX) during the last five trading days preceding the relevant  dividend payment date.  Normal Course Issuer Bid  The Company filed a Notice of Intention (the "Renewal Notice") to renew its  Normal Course Issuer Bid (the "Renewed NCIB") with the TSX on November 1,  2012. Under the Renewed NCIB, the Company could acquire up to 3,318,738 common  shares, which was 10 percent of the public float outstanding as at October 31,  2012, during the period November 12, 2012 through November 11, 2013. The  maximum number of common shares that could be acquired by the Company during a  trading day was 44,254, with the exception that the Company was allowed to  make one block purchase of common shares per calendar week that exceeded such  limit. All purchases of common shares were to be made through the TSX,  alternative trading systems or such other exchanges or marketplaces through  which the common shares trade from time to time at the market price of the  shares at the time of acquisition. Any shares acquired under the Renewed NCIB  were to be cancelled. There were no shares purchased under the Renewed NCIB  for the year ended December 31, 2013. The NCIB was not renewed for 2014. A  copy of the Renewal Notice may be obtained by any shareholder, without charge,  by contacting the Company's Corporate Secretary at 411 - 8th Avenue S.W.,  Calgary, Alberta, T2P 1E3, or by telephone at 403-266-6000.  Advisories  ------------------------------  Forward-Looking Statements  In order to provide Calfrac shareholders and potential investors with  information regarding the Company and its subsidiaries, including management's  assessment of Calfrac's plans and future operations, certain statements  contained in this press release, including statements that contain words such  as "seek", "anticipates", "plan", "continue", "estimate", "expect", "may",  "will", "project", "predict", "potential", "targeting", "intend", "could",  "might", "should", "believe", "forecast" or similar words suggesting future  outcomes, are forward-looking statements.  In particular, forward-looking statements in this press release include, but  are not limited to, statements with respect to expected operating strategies,  capital expenditure programs, future financial resources, anticipated  equipment utilization levels, future oil and natural gas well activity in each  of the Company's operating jurisdictions, results of acquisitions, the impact  of environmental regulations on the Company's business, future costs or  potential liabilities, projections of market prices and costs, supply and  demand for oilfield services, expectations regarding the Company's ability to  maintain its competitive position, anticipated benefits of the Company's  competitive position, expectations regarding the Company's ability to raise  capital, treatment under government regulatory regimes, commodity prices,  anticipated outcomes of specific events, trends in, and the growth prospects  of, the global oil and natural gas industry, the Company's growth prospects  including, without limitation, its international growth strategy and prospects  and the impact of changes in accounting policies and standards on the Company  and its financial statements. These statements are derived from certain  assumptions and analyses made by the Company based on its experience and  perception of historical trends, current conditions, expected future  developments and other factors that it believes are appropriate in the  circumstances, including, but not limited to, the general stability of the  economic and political environment in which the Company operates, the  Company's expectations for its current and prospective customers' capital  budgets and geographical areas of focus, the Company's existing contracts and  the status of current negotiations with key customers and suppliers, the focus  of the Company's customers on oil and liquids-rich plays in the current  natural gas pricing environment in North America, the effect unconventional  gas projects have had on supply and demand fundamentals for natural gas and  the likelihood that the current tax and regulatory regime will remain  substantially unchanged.  Forward-looking statements are subject to a number of known and unknown risks  and uncertainties that could cause actual results to differ materially from  the Company's expectations. Such risk factors include: general economic  conditions in Canada, the United States, Russia, Mexico, Argentina and  Colombia; the demand for fracturing and other stimulation services during  drilling and completion of oil and natural gas wells; volatility in market  prices for oil and natural gas and the effect of this volatility on the demand  for oilfield services generally; regional competition; liabilities and risks,  including environmental liabilities and risks, inherent in oil and natural gas  operations; changes in legislation and the regulatory environment; sourcing,  pricing and availability of raw materials, component parts, equipment,  suppliers, facilities and skilled personnel; the ability to integrate  technological advances and match advances of competition; the availability of  capital on satisfactory terms; intellectual property risks; uncertainties in  weather and temperature affecting the duration of the service periods and the  activities that can be completed; dependence on, and concentration of, major  customers; the creditworthiness and performance by the Company's  counterparties and customers; liabilities and risks associated with prior  operations; the effect of accounting pronouncements issued periodically;  failure to realize anticipated benefits of acquisitions and dispositions; and  currency exchange rate risk. Further information about these and other risks  and uncertainties may be found in the Company's most recently filed Annual  Information Form.  Consequently, all of the forward-looking statements made in this press release  are qualified by these cautionary statements and there can be no assurance  that actual results or developments anticipated by the Company will be  realized, or that they will have the expected consequences or effects on the  Company or its business or operations. These statements speak only as of the  respective date of this press release or the document incorporated by  reference herein. The Company assumes no obligation to update publicly any  such forward-looking statements, whether as a result of new information,  future events or otherwise, except as required pursuant to applicable  securities laws.  Business Risks  The business of Calfrac is subject to certain risks and uncertainties. Prior  to making any investment decision regarding Calfrac, investors should  carefully consider, among other things, the risk factors set forth in the  Company's most recently filed Annual Information Form, which are specifically  incorporated by reference herein.  The Annual Information Form is available through the Internet on the Canadian  System for Electronic Document Analysis and Retrieval (SEDAR), which can be  accessed at www.sedar.com. Copies of the Annual Information Form may also be  obtained on request without charge from Calfrac at 411 - 8(th) Avenue S.W.,  Calgary, Alberta, Canada, T2P 1E3, or at www.calfrac.com, or by facsimile at  403-266-7381.  Non-GAAP Measures  Certain supplementary measures in this press release do not have any  standardized meaning as prescribed under IFRS and are therefore considered  non-GAAP measures. These measures include operating income and EBITDA. These  measures may not be comparable to similar measures presented by other  entities. These measures have been described and presented in this press  release in order to provide shareholders and potential investors with  additional information regarding the Company's financial results, liquidity  and its ability to generate funds to finance its operations. Management's use  of these measures has been disclosed further in this press release as these  measures are discussed and presented.  Additional Information  Further information regarding Calfrac Well Services Ltd., including the most  recently filed Annual Information Form, can be accessed on the Company's  website at www.calfrac.com or under the Company's public filings found at  www.sedar.com.  Fourth Quarter Conference Call  Calfrac will be conducting a conference call for interested analysts, brokers,  investors and news media representatives to review its 2013 fourth quarter  results at 10:00 a.m. (Mountain Time) on Wednesday, February 26, 2014. The  conference call dial-in number is 1-888-231-8191 or 647-427-7450. The  seven-day replay numbers are 1-855-859-2056 or 416-849-0833 (once connected,  enter 96180761). A webcast of the conference call may be accessed via the  Company's website at www.calfrac.com.     CONSOLIDATED BALANCE SHEETS                                        As at December 31,                                      2013      2012     (C$000s) (unaudited)                                     ($)       ($)     ASSETS                                                                     Current assets                                                               Cash and cash equivalents                           42,195    42,481       Accounts receivable                                395,845   320,143       Income taxes recoverable                             1,146       292       Inventories                                        134,140   118,713       Prepaid expenses and deposits                       17,189    10,697                                                          590,515   492,326     Non-current assets                                                           Property, plant and equipment                    1,245,009 1,005,101       Goodwill                                            10,523    10,523       Deferred income tax assets                          23,884    16,871     Total assets                                       1,869,931 1,524,821                                                                        LIABILITIES AND EQUITY                                                     Current liabilities                                                          Accounts payable and accrued liabilities           245,899   168,250       Bank loan (note 3)                                  24,298         -       Current portion of long-term debt (note 4)             384       479       Current portion of finance lease obligations             -       740                                                          270,581   169,469     Non-current liabilities                                                      Long-term debt (note 4)                            651,553   441,018       Other long-term liabilities                            198       435       Deferred income tax liabilities                    152,392   133,140     Total liabilities                                  1,074,724   744,062     Equity attributable to the shareholders of Calfrac                         Capital stock (note 5)                               332,287   300,451     Contributed surplus (note 7)                          27,658    27,546     Loan receivable for purchase of common shares        (2,500)   (2,500)     (note 14)     Retained earnings                                    440,179   458,543     Accumulated other comprehensive loss                   (839)   (2,403)                                                          796,785   781,637     Non-controlling interest                             (1,578)     (878)     Total equity                                         795,207   780,759     Total liabilities and equity                       1,869,931 1,524,821     See accompanying notes to the consolidated financial statements.        CONSOLIDATED STATEMENTS                                           OF OPERATIONS                               Three Months Ended Dec. Years Ended Dec. 31,                               31,                                  2013            2012      2013       2012     (C$000s, except per share     ($)             ($)       ($)        ($)     data) (unaudited)     Revenue                   463,054         367,487 1,563,814  1,595,216     Cost of sales (note 15)   411,404         321,860 1,389,558  1,334,828     Gross profit               51,650          45,627   174,256    260,388     Expenses                                                                          Selling, general    25,644          26,043    96,186     93,756            and administrative            Foreign exchange   (1,517)         (3,818)     1,183    (8,260)            (gains) losses            Business             2,474               -     2,474          -            combination (note            11)            (Gain) loss on     (1,208)             170   (1,514)        802            disposal of            property, plant            and  equipment            Interest            13,433           8,933    41,985     36,354                                38,826          31,328   140,314    122,652     Income before income tax   12,824          14,299    33,942    137,736     Income tax expense                                                                Current                814           (344)     3,853      4,733            Deferred               259           3,662     3,356     36,642                                 1,073           3,318     7,209     41,375     Net income for the period  11,751          10,981    26,733     96,361                                                                                Net income (loss)                                                          attributable to:            Shareholders of     11,764          11,243    27,914     97,146            Calfrac            Non-controlling       (13)           (262)   (1,181)      (785)            interest                                11,751          10,981    26,733     96,361                                                                                Earnings per share(note                                                    5)            Basic                 0.25            0.25      0.61       2.19            Diluted               0.25            0.25      0.61       2.17     See accompanying notes to the consolidated financial statements.        CONSOLIDATED STATEMENTS OF                                     COMPREHENSIVE INCOME                                   Three Months Ended Years Ended Dec. 31,                                   Dec. 31,                                     2013        2012    2013         2012     (C$000s) (unaudited)             ($)         ($)     ($)          ($)     Net income for the period     11,751      10,981  26,733       96,361     Other comprehensive income                                                (loss)     Items that may be                                                         subsequently reclassified to     profit or loss:            Change in foreign       2,337         460   1,602      (3,856)            currency            translation adjustment     Comprehensive income for the  14,088      11,441  28,335       92,505     period                                                                    Comprehensive income (loss)                                               attributable to:            Shareholders of        14,056      11,707  29,478       93,409            Calfrac            Non-controlling            32       (266) (1,143)        (904)            interest                                   14,088      11,441  28,335       92,505     See accompanying notes to the consolidated financial statements.        CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                                                                                                                                                               Equity Attributable to the Shareholders of Calfrac                                                                           Loan                                             Receivable                                                    for                                               Purchase   Accumulated                                                     of         Other                          Non-                           Share Contributed     Common Comprehensive Retained          Controlling    Total                         Capital     Surplus     Shares Income (Loss) Earnings    Total    Interest   Equity     (C$000s)                ($)         ($)        ($)           ($)      ($)      ($)         ($)      ($)     (unaudited)     Balance - January   300,451      27,546    (2,500)       (2,403)  458,543  781,637       (878)  780,759     1, 2013     Net income for the        -           -          -             -   27,914   27,914     (1,181)   26,733     year     Other comprehensive                                                                                         income:            Cumulative         -           -          -         1,564        -    1,564          38    1,602            translation            adjustment     Comprehensive             -           -          -         1,564   27,914   29,478     (1,143)   28,335     income for the year     Stock options:                                                                                                     Stock-based        -       5,454          -             -        -    5,454           -    5,454            compensation            recognized            Proceeds      21,132     (5,342)          -             -        -   15,790           -   15,790            from            issuance of            shares     Dividend                                                                                                    Reinvestment Plan     shares            issued (note  10,704           -          -             -        -   10,704           -   10,704            21)     Dividends                 -           -          -             - (45,953) (45,953)           - (45,953)     Non-controlling           -           -          -             -        -        -         118      118     interest     contribution     Dilution of               -           -          -             -    (325)    (325)         325        -     non-controlling     interest     Balance - December  332,287      27,658    (2,500)         (839)  440,179  796,785     (1,578)  795,207     31, 2013                                                                                                                 Balance - January   271,817      24,170    (2,500)         1,334  405,954  700,775       (206)  700,569     1, 2012     Net income for the        -           -          -             -   97,146   97,146       (785)   96,361     year     Other comprehensive                                                                                         income:            Cumulative         -           -          -       (3,737)        -  (3,737)       (119)  (3,856)            translation            adjustment     Comprehensive             -           -          -       (3,737)   97,146   93,409       (904)   92,505     income for the year     Stock options:                                                                                                     Stock-based        -       6,990          -             -        -    6,990           -    6,990            compensation            recognized            Proceeds      14,836     (3,614)          -             -        -   11,222           -   11,222            from            issuance of            shares     Dividend                                                                                                    Reinvestment Plan     shares            issued (note  13,798           -          -             -        -   13,798           -   13,798            21)     Dividends                 -           -          -             - (44,557) (44,557)           - (44,557)     Non-controlling           -           -          -             -        -        -         232      232     interest     contribution     Balance - December  300,451      27,546    (2,500)       (2,403)  458,543  781,637       (878)  780,759     31, 2012     See accompanying notes to the consolidated financial statements.        CONSOLIDATED     STATEMENTS OF CASH           FLOWS                            Three Months Ended Dec. 31, Years Ended Dec. 31,                                 2013              2012      2013       2012     (C$000s) (unaudited)         ($)               ($)       ($)        ($)     CASH FLOWS PROVIDED BY                                                      (USED IN)     OPERATING ACTIVITIES                                                          Net income for the      11,751            10,981    26,733     96,361       period       Adjusted for the                                                            following:         Depreciation          31,410            23,634   110,006     90,381         Stock-based            1,075             1,926     5,454      6,990         compensation (note         8)         Unrealized foreign     (320)           (2,462)     1,350   (10,895)         exchange (gains)         losses         Gain on business     (2,747)                 -   (2,747)          -         combination, net         of tax (note 11)         (Gain) loss on       (1,208)               170   (1,514)        802         disposal of         property, plant         and equipment         Interest              13,433             8,933    41,985     36,354         Deferred income          259             3,662     3,356     36,642         taxes       Interest paid         (20,386)          (16,883)  (39,770)   (34,596)       Changes in items of   (46,609)          (10,739)  (12,842)   (25,788)       working capital       (note 10)     Cash flows provided by  (13,342)            19,222   132,011    196,251     operating activities     FINANCING ACTIVITIES                                                          Bank loan proceeds      11,173                 -    27,596      2,734       Issuance of            339,866             (511)   365,581      (440)       long-term debt, net       of debt issuance       costs       Bank loan repayments         -           (4,948)         -    (4,948)       Long-term debt       (166,714)             (125) (193,037)      (461)       repayments       Finance lease                -             (135)     (740)    (1,734)       obligation       repayments       Net proceeds on            403               693    15,790     11,222       issuance of common       shares       Dividends paid, net    (7,249)          (16,431)  (23,675)   (35,135)       of DRIP (note 21)     Cash flows provided by   177,479          (21,457)   191,515   (28,762)     (used in)     financing activities     INVESTING ACTIVITIES                                                          Purchase of           (41,330)          (55,338) (183,124)  (261,321)       property, plant and       equipment (note 10)       Proceeds on disposal       713               392     1,799      1,905       of property, plant       and equipment       Business combination (150,513)                 - (150,513)          -       (note 11)       Other                        -                39       118        232     Cash flows used in     (191,130)          (54,907) (331,720)  (259,184)     investing activities     Effect of exchange         5,440             3,168     7,908      1,121     rate changes on cash     and cash equivalents     Increase (decrease) in  (21,553)          (53,974)     (286)   (90,574)     cash and cash     equivalents     Cash and cash             63,748            96,455    42,481    133,055     equivalents, beginning     of period     Cash and cash             42,195            42,481    42,195     42,481     equivalents, end of     period     See accompanying notes to the consolidated financial statements.  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  ------------------------------  As at and for the years ended December 31, 2013 and 2012 (Amounts in text and tables are in thousands of Canadian dollars, except share  data and certain other exceptions as indicated) (unaudited)  1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION  Calfrac Well Services Ltd. was formed through the amalgamation of Calfrac Well  Services Ltd. (predecessor company originally incorporated on June 28, 1999)  and Denison Energy Inc. ("Denison") on March 24, 2004 under the Business  Corporations Act (Alberta). The registered office is at 411 - 8(th) Avenue  S.W., Calgary, Alberta, Canada, T2P 1E3. The Company provides specialized  oilfield services, including hydraulic fracturing, coiled tubing, cementing  and other well completion services to the oil and natural gas industries in  Canada, the United States, Russia, Mexico, Argentina and Colombia.  These consolidated financial statements were prepared in accordance with  International Financial Reporting Standards as issued by the International  Accounting Standards Board (IASB) and interpretations by the International  Financial Reporting Interpretations Committee (IFRIC).  The Company has consistently applied the same accounting policies throughout  all periods presented, as if these policies had always been in effect.  These financial statements were approved by the Board of Directors for  issuance on February 25, 2014.  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  These interim consolidated financial statements follow the same accounting  policies and methods of application as the most recent annual financial  statements.  For purposes of calculating income taxes during interim periods, the Company  utilizes estimated annualized income tax rates. Current income tax expense is  only recognized when taxable income is such that current income taxes become  payable.  The adoption of accounting standards and amendments, effective January 1,  2013, is disclosed in the March 31, 2013 interim consolidated financial  statements.  3. BANK LOAN  The Company's Argentinean subsidiary has two operating lines of credit, and a  total of ARS148,975 ($24,298) was drawn at December 31, 2013 (December 31,  2012 - $nil). The interest rate ranges from 35.0 percent to 38.0 percent and  both lines of credit are secured by letters of credit issued by the Company.  4. LONG-TERM DEBT     As at December 31,                                         2013    2012     (C$000s)                                                    ($)     ($)     US$600,000 senior unsecured notes (December 31, 2012                        -            US$450,000) due December 1, 2020, bearing                                   interest at            7.5% payable semi-annually                       638,160 447,705     Less: unamortized debt issuance costs and debt         (11,161) (6,895)     discount                                                             626,999 440,810     $280,000 extendible revolving term loan facility,                           secured            by Canadian and U.S. assets of the Company        24,463       -     Less: unamortized debt issuance costs                   (1,291) (1,444)                                                              23,172 (1,444)     US$1,661 mortgage maturing May 2018 bearing interest                               at U.S. prime less 1%, repayable at US$33 per                               month            principal and interest, secured by certain         1,766   2,003            real property     Argentina term loan maturing December 31, 2013                              bearing            interest at 18.25%, repayable at ARS61 per                                  month            principal and interest, secured by a Company           -     128            guarantee                                                             651,937 441,497     Less: current portion of long-term debt                   (384)   (479)                                                             651,553 441,018                                                               The fair value of the senior unsecured notes, as measured based on the closing  quoted market price at December 31, 2013, was $652,921 (December 31, 2012 -  $443,228). The carrying values of the mortgage obligations, term loans and  revolving term loan facilities approximate their fair values as the interest  rates are not significantly different from current interest rates for similar  loans.  On October 8, 2013, the Company closed a private offering of US$150,000 of its  7.5 percent senior notes yielding net proceeds of $150,208 (US$145,396) after  applicable debt discount and debt issuance costs. The notes bear the same  terms and conditions as the pre-existing senior notes.  The interest rate on the $280,000 revolving term loan facility is based on the  parameters of certain bank covenants. For prime-based loans, the rate ranges  from prime plus 0.50 percent to prime plus 1.25 percent. For LIBOR-based loans  and Bankers' Acceptance-based loans the margin thereon ranges from 1.50  percent to 2.25 percent above the respective base rates for such loans. The  facility is repayable on or before its maturity of September 27, 2017,  assuming it is not extended. The maturity may be extended by one or more years  at the Company's request and lenders' acceptance. The Company may also prepay  principal without penalty. Debt issuance costs related to this facility are  amortized over its term.  Interest on long-term debt (including the amortization of debt issuance costs  and debt discount) for the year ended December 31, 2013 was $40,629 (year  ended December 31, 2012 - $36,085).  The Company also has an extendible operating loan facility, which includes  overdraft protection in the amount of $20,000. The interest rate is based on  the parameters of certain bank covenants in the same fashion as the revolving  term facility. Drawdowns under this facility are repayable on September 27,  2017, assuming the facility is not extended. The term and commencement of  principal repayments may be extended by one year on each anniversary at the  Company's request and lenders' acceptance. The operating facility is secured  by the Company's Canadian and U.S. assets.  At December 31, 2013, the Company had utilized $24,410 of its loan facility  for letters of credit and had $24,463 outstanding under its credit facility,  leaving $251,127 in available credit.  5. CAPITAL STOCK  Authorized capital stock consists of an unlimited number of common shares.     Years Ended December 31,                     2013                2012     Continuity of Common Shares       Shares   Amount     Shares   Amount                                          (#) (C$000s)        (#) (C$000s)     Balance, beginning of year    45,020,641  300,451 43,709,073  271,817     Issued upon exercise of stock    896,837   21,132    686,488   14,836     options     Dividend Reinvestment Plan       381,096   10,704    625,080   13,798     shares issued (note 21)     Balance, end of year          46,298,574  332,287 45,020,641  300,451                                                                     The weighted average number of common shares outstanding for the year ended  December 31, 2013 was 45,727,828 basic and 46,045,471 diluted (year ended  December 31, 2012 - 44,334,810 basic and 44,808,099 diluted). The difference  between basic and diluted shares is attributable to the dilutive effect of  stock options issued by the Company as disclosed in note 8.  6. NORMAL COURSE ISSUER BID  The Company received regulatory approval to purchase its own common shares in  accordance with a Normal Course Issuer Bid (NCIB) for the one-year period  November 7, 2011 through November 6, 2012 and for the one-year period November  12, 2012 through November 11, 2013. There were no shares purchased under the  NCIB for the years ended December 31, 2013 or 2012. The NCIB was not renewed  for 2014.  7. CONTRIBUTED SURPLUS                                                     Continuity of Contributed Surplus     Years Ended December 31,             2013    2012     (C$000s)                              ($)     ($)     Balance, beginning of year         27,546  24,170       Stock options expensed            5,454   6,990       Stock options exercised         (5,342) (3,614)     Balance, end of year               27,658  27,546                                                  8. STOCK-BASED COMPENSATION  (a) Stock Options     Continuity of Stock Options                2013               2012                                                 Average            Average                                                Exercise           Exercise                                        Options    Price   Options    Price                                            (#)     (C$)       (#)     (C$)     Balance, January 1               2,920,412    25.67 3,198,475    23.31            Granted during the year     707,700    24.64   704,200    27.71            Exercised for common      (896,837)    17.61 (686,488)    16.35            shares            Forfeited                 (228,025)    28.94 (295,775)    26.60            Expired                     (1,875)    13.06         -        -     Balance, December 31             2,501,375    27.98 2,920,412    25.67                                                                      Stock options vest equally over four years and expire five years from the date  of grant. When stock options are exercised, the proceeds, together with the  amount of compensation expense previously recorded in contributed surplus, are  added to capital stock.  (b) Stock Units     Continuity of                        2013                            2012     Stock Units                      Deferred Performance Restricted Deferred Performance Restricted                         Stock       Stock      Stock    Stock       Stock      Stock                         Units       Units      Units    Units       Units      Units                           (#)         (#)        (#)      (#)         (#)        (#)     Balance, January   35,000      45,000    247,230   35,000      40,000          -     1            Granted     35,000      45,000    399,125   35,000      45,000    270,135            during            the year            Exercised (35,000)    (45,000)   (82,410) (35,000)    (40,000)          -            Forfeited        -           -   (50,150)        -           -   (22,905)     Balance,           35,000      45,000    513,795   35,000      45,000    247,230     December 31                                                                              The Company grants deferred stock units to its outside directors. These units  vest in November of the year of grant and are settled either in cash (equal to  the market value of the underlying shares at the time of exercise) or in  Company shares purchased on the open market. The fair value of the deferred  stock units is recognized equally over the vesting period, based on the  current market price of the Company's shares. During the year ended December  31, 2013, $1,064 of compensation expense was recognized for deferred stock  units (year ended December 31, 2012 - $885). This amount is included in  selling, general and administrative expenses. At December 31, 2013, the  liability pertaining to deferred stock units was $1,085 (December 31, 2012 -  $877).  The Company grants performance stock units to its senior officers who do not  participate in the stock option plan. The amount of the grants earned is  linked to corporate performance and the grants vest on the approval of the  Board of Directors at the meeting held to approve the consolidated financial  statements for the year in respect of which performance is being evaluated. As  with the deferred stock units, performance stock units are settled either in  cash or Company shares purchased on the open market. During the year ended  December 31, 2013, $1,467 of compensation expense was recognized for  performance stock units (year ended December 31, 2012 - $1,296). This amount  is included in selling, general and administrative expenses. At December 31,  2013, the liability pertaining to performance stock units was $1,395 (December  31, 2012 - $1,227).  The Company grants restricted share units to its employees. These units vest  equally over three years and are settled either in cash (equal to the market  value of the underlying shares at the time of exercise) or in Company shares  purchased on the open market. The fair value of the restricted share units is  recognized over the vesting period, based on the current market price of the  Company's shares. During the year ended December 31, 2013, $9,031 of  compensation expense was recognized for restricted share units (year ended  December 31, 2012 - $3,693). This amount is included in selling, general and  administrative expense. At December 31, 2013, the liability pertaining to  restricted share units was $10,696 (December 31, 2012 - $3,693).  Changes in the Company's obligations under the deferred and performance stock  unit plans and restricted share unit plan, which arise from fluctuations in  the market value of the Company's shares underlying these compensation  programs, are recorded as the share value changes.  9. FINANCIAL INSTRUMENTS  The Company's financial instruments included in the consolidated balance  sheets are comprised of cash and cash equivalents, accounts receivable,  accounts payable and accrued liabilities, bank loan and long-term debt.  The fair values of financial instruments included in the consolidated balance  sheets, except long-term debt, approximate their carrying amounts due to the  short-term maturity of those instruments. The fair value of the senior  unsecured notes based on the closing market price at December 31, 2013 was  $652,921 before deduction of unamortized debt issuance costs (December 31,  2012 - $443,228). The carrying value of the senior unsecured notes at December  31, 2013 was $638,160 before deduction of unamortized debt issuance costs and  debt discount (December 31, 2012 - $447,705). The fair values of the remaining  long-term debt obligations approximate their carrying values, as described in  note 4.  10. SUPPLEMENTAL CASH FLOW INFORMATION  Changes in non-cash operating assets and liabilities are as follows:                              Three Months Ended Dec 31, Years Ended Dec 31,                                  2013              2012     2013       2012     (C$000s)                                                                    Accounts receivable      (97,816)          (15,895) (75,702)    (6,245)     Income taxes recoverable    1,393             (345)    (854)      1,048     Inventory                (12,852)             4,887  (8,748)   (24,369)     Prepaid expenses and        4,487             2,447  (5,230)      (548)     deposits     Accounts payable and       58,234           (1,782)   77,929      4,666     accrued liabilities     Other long-term              (55)              (51)    (237)      (340)     liabilities                              (46,609)          (10,739) (12,842)   (25,788)                                                                     Purchase of property, plant and equipment (excluding the business acquisition  disclosed in note 11) is comprised of:                            Three Months Ended Dec. 31, Years Ended Dec. 31,                                2013               2012      2013       2012     (C$000s)                    ($)                ($)                          Property, plant and    (45,227)           (55,694) (170,517)  (279,017)     equipment additions     Change in liabilities                                                       related to purchase of            property, plant    3,897                356  (12,607)     17,696            and equipment                            (41,330)           (55,338) (183,124)  (261,321)                                                                     11. BUSINESS COMBINATION  On October 1, 2013, the Company acquired all of the operating assets of  Mission Well Services, LLC ("Mission"), a privately-held hydraulic fracturing  and coiled tubing services provider based in San Antonio, Texas and operating  in the Eagle Ford shale play. The total purchase price was cash consideration  of $150,513. The purchase was recognized as a business combination and  accounted for as such using the acquisition method of accounting under IFRS 3  Business Combinations.  The acquisition provides the Company with modern fracturing and coiled tubing  equipment as well as an entry into the Texas pressure pumping market. The  recognized amounts of identifiable assets acquired and liabilities assumed are  as follows:     (C$000s)                                         ($)     Prepaid expenses and deposits                  1,261     Inventory                                      6,680     Property, plant and equipment                147,094     Deferred income tax liability                (1,775)     Total identifiable net assets                153,260     Gain on business combination, net of tax     (2,747)     Total consideration                          150,513                                                     The composition of the business combination expenses reported in the Statement  of Operations is as follows:     (C$000s)                                                ($)     Gain on business combination                        (4,522)     Deferred taxes relating to business combination       1,775                                                         (2,747)     Acquisition costs                                     5,221     Business combination                                  2,474                                                            The gain of $4,522, before taxes, was recognized in the Statement of  Operations on the acquisition date and represents the excess of the fair value  of identifiable assets over the consideration paid.  The Company has reassessed the fair value of the identifiable assets purchased  and the fair value of the consideration transferred in determining the gain,  as required under IFRS.  During the period October 1, 2013 to December 31, 2013, the acquisition  contributed immaterial operating income to the Company. The effect on revenue  and operating income, had the acquisition occurred on January 1, 2013, is not  determinable.  12. CAPITAL STRUCTURE  The Company's capital structure is comprised of shareholders' equity and  long-term debt. The Company's objectives in managing capital are (i) to  maintain flexibility so as to preserve its access to capital markets and its  ability to meet its financial obligations, and (ii) to finance growth,  including potential acquisitions.  The Company manages its capital structure and makes adjustments in light of  changing market conditions and new opportunities, while remaining cognizant of  the cyclical nature of the oilfield services sector. To maintain or adjust its  capital structure, the Company may revise its capital spending, adjust  dividends paid to shareholders, issue new shares or new debt or repay existing  debt.  The Company monitors its capital structure and financing requirements using,  amongst other parameters, the ratio of long-term debt to cash flow. Cash flow  for this purpose is calculated on a 12-month trailing basis and is defined as  follows:     Years Ended December 31,                            2013     2012     (C$000s)                                             ($)      ($)     Net income for the year                           26,733   96,361     Adjusted for the following:                                             Depreciation                                   110,006   90,381       Amortization of debt issuance costs and debt     1,464    1,234       discount       Stock-based compensation                         5,454    6,990       Unrealized foreign exchange losses (gains)       1,350 (10,895)       Gain on business combination, net of tax       (2,747)        -       (Gain) loss on disposal of property, plant and (1,514)      802       equipment       Deferred income taxes                            3,356   36,642     Cash flow                                        144,102  221,515                                                                 The ratio of long-term debt to cash flow does not have a standardized meaning  under IFRS and may not be comparable to similar measures used by other  companies.  At December 31, 2013, the long-term debt to cash flow ratio was 4.52:1  (December 31, 2012 - 1.99:1) calculated on a 12-month trailing basis as  follows:     As at December 31,                                        2013    2012     (C$000s, except ratio)                                     ($)     ($)     Long-term debt (net of unamortized debt issuance costs               and       debt discount) (note 4)                              651,937 441,497     Cash flow                                              144,102 221,515     Long-term debt to cash flow ratio                       4.52:1  1.99:1                                                                       The ratio is higher at the current year-end than the prior year-end due to  additional debt taken on to acquire the Mission assets. The ratio reflects the  full amount of debt (at December 31, 2013) whereas cash flow only represents  three months of activities related to the Mission assets.  The Company is subject to certain financial covenants relating to working  capital, leverage and the generation of cash flow in respect of its operating  and revolving credit facilities. These covenants are monitored on a monthly  basis. The Company is in compliance with all such covenants.  The Company's capital management objectives, evaluation measures and targets  remained unchanged over the periods presented.  13. PURCHASE OBLIGATIONS  The Company has obligations for the purchase of products, services and  property, plant and equipment over the next five years that total  approximately $114,814.  14. RELATED-PARTY TRANSACTIONS  In November 2010, the Company lent a senior officer $2,500 to purchase common  shares of the Company on the Toronto Stock Exchange. The loan is on a  non-recourse basis and is secured by the common shares acquired with the loan  proceeds. It is for a term of five years and bears interest at 3.375 percent  per annum, payable annually. The market value of the shares that secure the  loan was approximately $2,623 as at December 31, 2013 (December 31, 2012 -  $2,119). In accordance with applicable accounting standards regarding share  purchase loans receivable, this loan is classified as a reduction of  shareholders' equity due to its non-recourse nature. In addition, the shares  purchased with the loan proceeds are considered to be, in substance, stock  options.  The Company leases certain premises from an entity controlled by a director of  the Company. The rent charged for these premises during 2013 was $552 (year  ended December 31, 2012 - $356), as measured at the exchange amount.  During 2012, an entity controlled by a director of the Company provided  ongoing real estate advisory services to the Company; the aggregate fees  charged for such services were $29. This arrangement was discontinued in 2013.  15. PRESENTATION OF EXPENSES  The Company presents its expenses on the consolidated Statements of Operations  using the function of expense method whereby expenses are classified according  to their function within the Company. This method was selected as it is more  closely aligned with the Company's business structure. The Company's functions  under IFRS are as follows:         --  operations; and         --  selling, general and administrative.  Cost of sales includes direct operating costs (including product costs, direct  labour and overhead costs) and depreciation on assets relating to operations.  Additional information on the nature of expenses is as follows:     Years Ended December 31,                                 2013    2012     (C$000s)                                                  ($)     ($)     Product costs                                         477,384 490,222     Depreciation                                          110,006  90,381     Amortization of debt issuance costs and debt discount   1,464   1,234     Employee benefits expense (note 16)                   379,117 356,844                                                                                                                                  16. EMPLOYEE BENEFITS EXPENSE  Employee benefits include all forms of consideration given by the Company in  exchange for services rendered by employees.     Years Ended December 31,                              2013    2012     (C$000s)                                               ($)     ($)     Salaries and short-term employee benefits          356,519 337,919     Post-employment benefits (group retirement savings   3,595   3,587     plan)     Share-based payments                                17,016  12,866     Termination benefits                                 1,987   2,472                                                        379,117 356,844                                                                   17. COMPENSATION OF KEY MANAGEMENT  Key management is defined as the Company's Board of Directors, Chief Executive  Officer, Chief Financial Officer, and Chief Operating Officer. Compensation  awarded to key management comprised:     Years Ended December 31,                                  2013  2012     (C$000s)                                                   ($)   ($)     Salaries, fees and short-term benefits                   2,151 2,756     Post-employment benefits (group retirement savings plan)    39    34     Share-based payments                                     2,732 2,392                                                              4,922 5,182                                                                       In the event of termination, key management (excluding the Board of Directors)  are entitled to one to two years of annual compensation. In the event of  termination resulting from change of control, key management (excluding the  Board of Directors) are entitled to two years of annual compensation.  18. CONTINGENCIES  Greek Litigation  As a result of the acquisition and amalgamation with Denison in 2004, the  Company assumed certain legal obligations relating to Denison's Greek  operations.  In 1998, North Aegean Petroleum Company E.P.E. ("NAPC"), a Greek subsidiary of  a consortium in which Denison participated (and which is now a majority-owned  subsidiary of the Company), terminated employees in Greece as a result of the  cessation of its oil and natural gas operations in that country. Several  groups of former employees filed claims against NAPC and the consortium  alleging that their termination was invalid and that their severance pay was  improperly determined.  In 1999, the largest group of plaintiffs received a ruling from the Athens  Court of First Instance that their termination was invalid and that salaries  in arrears amounting to approximately $10,033 (6,846 euros) plus interest were  due to the former employees. This decision was appealed to the Athens Court of  Appeal, which allowed the appeal in 2001 and annulled the above-mentioned  decision of the Athens Court of First Instance. The said group of former  employees filed an appeal with the Supreme Court of Greece, which was heard on  May 29, 2007. The Supreme Court of Greece allowed the appeal and sent the  matter back to the Athens Court of Appeal for the consideration of the quantum  of awardable salaries in arrears. On June 3, 2008, the Athens Court of Appeal  rejected NAPC's appeal and reinstated the award of the Athens Court of First  Instance, which decision was further appealed to the Supreme Court of Greece.  The matter was heard on April 20, 2010 and a decision rejecting such appeal  was rendered in June 2010. NAPC and the Company are assessing available rights  of appeal to any other levels of court in any jurisdiction where such an  appeal is warranted. NAPC is also the subject of a claim for approximately  $4,194 (2,862 euros) from the Greek Social Security Agency for social security  obligations associated with the salaries in arrears that are the subject  matter of the above-mentioned decision and interest of approximately $3,226  (2,201 euros) payable on such amounts as at December 31, 2013.  Several other smaller groups of former employees have filed similar claims in  various courts in Greece. One of these cases was heard by the Athens Court of  First Instance on January 18, 2007. By judgment rendered November 23, 2007,  the plaintiff's allegations were partially accepted, and the plaintiff was  awarded compensation for additional work of approximately $51 (35 euros), plus  interest. The appeal of this decision was heard on June 2, 2009, at which time  an additional claim by the plaintiff was also heard. A decision in respect of  the hearing has been rendered which accepted NAPC's appeal of the initial  claim and partially accepted the additional claim of the plaintiff, resulting  in an award of approximately $16 (11 euros), plus interest.  Another one of the lawsuits seeking salaries in arrears of $188 (128 euros)  plus interest was heard by the Supreme Court of Greece on November 6, 2007, at  which date the appeal of the plaintiffs was denied for technical reasons due  to improper service. A rehearing of this appeal was heard on September 21,  2010 and the decision rendered declared once again the appeal inadmissible due  to technical reasons. The remaining action, which is seeking salaries in  arrears of approximately $643 (439 euros) plus interest, was scheduled to be  heard before the Athens Court of First Instance on October 1, 2009, but has  been postponed a total of four times, including the most recent postponement  on February 22, 2013. No new date has been set yet for the postponed hearing.  The maximum aggregate interest payable under the claims noted above amounted  to $17,988 (12,274 euros) as at December 31, 2013.  Management is of the view that it is improbable there will be a material  financial impact to the Company as a result of these claims. Consequently, no  provision has been recorded in these consolidated financial statements.  U.S. Litigation  A class and collective action complaint was filed against the Company in  September 2012 in the United States District Court for the Western District of  Pennsylvania. The complaint alleges failure to pay U.S. employees the correct  amount of overtime pay required by the Fair Labor Standards Act (FLSA) and  under the Pennsylvania Minimum Wage Act. In May 2013, the plaintiffs amended  their complaint to add a Colorado wage-hour claim. In June 2013, the parties  filed a joint stipulation for conditional certification of the FLSA collective  action with certain current and former employees as the defined class. The  notice to opt-in to the class was mailed to 1,204 current and former employees  in September 2013. The opt-in period expired on November 15, 2013 and 359  individuals opted in. A discovery plan was approved by the court that extends  through June 23, 2014.  The Company has filed answers to each complaint in a timely manner and  believes it has defenses to each claim. At this time no motion for final class  certification as to the FLSA claim or motion for certification of the  Pennsylvania or Colorado state law claims has been filed. Thus no FLSA,  Pennsylvania or Colorado class has been certified. Plaintiffs have not alleged  an amount of damages and at this time it is not possible to predict the amount  of any potential recovery. Given the stage of the proceedings and the  existence of available defenses, no provision has been recorded in the  Company's financial statements regarding these claims, since the direction and  financial consequences of the claims in the amended complaint cannot be  determined at this time. The Company does not have insurance coverage for  these claims.  19. SEGMENTED INFORMATION  The Company's activities are conducted in four geographical segments: Canada,  the United States, Russia and Latin America. All activities are related to  hydraulic fracturing, coiled tubing, cementing and other well completion  services for the oil and natural gas industry.  The business segments presented reflect the Company's management structure and  the way its management reviews business performance. The Company evaluates the  performance of its operating segments primarily based on operating income, as  defined below.                              United           Latin                                             Canada  States  Russia America Corporate Consolidated     (C$000s)            ($)     ($)     ($)     ($)       ($)          ($)     Three Months Ended     December 31, 2013                                                          Revenue         197,112 189,239  41,404  35,299         -      463,054     Operating                                                       57,416     income (loss)     (1)              35,003  29,596   2,664   3,836  (13,583)     Segmented                                                    1,869,931     assets          706,405 828,527 149,946 185,053         -     Capital                                                         45,227     expenditures     13,602  22,683   4,918   4,024         -     Goodwill          7,236   2,308     979       -         -       10,523     Three Months Ended     December 31, 2012                                                          Revenue         201,573 109,975  24,197  31,742         -      367,487     Operating                                                       43,218     income (loss)     (1)              49,022   5,488   (254)   3,101  (14,139)     Segmented                                                    1,524,821     assets          707,663 568,665 126,564 121,929         -     Capital                                                         55,694     expenditures     22,216  26,351   2,454   4,673         -     Goodwill          7,236   2,308     979       -         -       10,523     Year Ended December 31,     2013                                                                       Revenue         677,114 616,174 158,782 111,744         -    1,563,814     Operating                                                      188,076     income (loss)     (1)             121,699 104,125  13,358   3,523  (54,629)     Segmented                                                    1,869,931     assets          706,405 828,527 149,946 185,053         -     Capital                                                        170,517     expenditures     75,875  62,297  13,368  18,977         -     Goodwill          7,236   2,308     979       -         -       10,523     Year Ended December 31,     2012                                                                       Revenue         732,880 638,483 112,765 111,088         -    1,595,216     Operating                                                      257,013     income (loss)     (1)             188,555 105,129   6,566   8,839  (52,076)     Segmented                                                    1,524,821     assets          707,663 568,665 126,564 121,929         -     Capital                                                        279,017     expenditures    124,902 138,328   6,173   9,614         -     Goodwill          7,236   2,308     979       -         -       10,523                                                                     (1)      Operating income (loss) is defined as net income (loss) before              depreciation, interest, foreign exchange gains or losses,              expenses and gain related to business combinations, gains or              losses on disposal of property, plant and equipment, and              income taxes.                                                                                                                                                                  Three Months Ended Dec 31, Years Ended Dec 31,                                 2013               2012    2013        2012     (C$000s)                                                                    Net income (loss)         11,751             10,981  26,733      96,361     Add back (deduct):                                                              Depreciation          31,410             23,634 110,006      90,381         Interest              13,433              8,933  41,985      36,354         Foreign exchange     (1,517)            (3,818)   1,183     (8,260)         (gains) losses         Business combination   2,474                  -   2,474           -         (note 11)         (Gain) loss on       (1,208)                170 (1,514)         802         disposal of         property, plant         andequipment         Income taxes           1,073              3,318   7,209      41,375     Operating income          57,416             43,218 188,076     257,013                                                                    Operating income does not have a standardized meaning under IFRS and may not  be comparable to similar measures used by other companies.  The following table sets forth consolidated revenue by service line:                   Three Months Ended Dec 31, Years Ended Dec 31,                      2013               2012      2013      2012     (C$000s)                                                         Fracturing    422,306            331,590 1,422,872 1,436,279     Coiled tubing  22,477             19,661    73,053   100,239     Cementing      15,399             10,181    53,520    34,750     Other           2,872              6,055    14,369    23,948                   463,054            367,487 1,563,814 1,595,216                                                           The Company's customer base consists of approximately 180 oil and natural gas  exploration and production companies, ranging from large multinational  publicly traded companies to small private companies. Notwithstanding the  Company's broad customer base, Calfrac had five significant customers that  collectively accounted for approximately 46 percent of the Company's revenue  for the year ended December 31, 2013 (year ended December 31, 2012 - five  significant customers for approximately 39 percent) and, of such customers,  one customer accounted for approximately 12 percent of the Company's revenue  for the year ended December 31, 2013 (year ended December 31, 2012 - 13  percent).  20. SEASONALITY OF OPERATIONS  The Company's Canadian business is seasonal. The lowest activity is typically  experienced during the second quarter of the year when road weight  restrictions are in place and access to wellsites in Canada is reduced.  21. DIVIDEND REINVESTMENT PLAN  The Company's Dividend Reinvestment Plan (DRIP) allows shareholders to direct  cash dividends paid on all or a portion of their common shares to be  reinvested in additional common shares that are issued at 95 percent of the  volume-weighted average price of the common shares traded on the Toronto Stock  Exchange during the last five trading days preceding the relevant dividend  payment date.  A dividend of $0.25 per common share, totalling $11,575, was declared on  December 5, 2013, to be paid on January 15, 2014. This amount has been accrued  in the financial statements.  A dividend of $0.25 per common share was declared on September 17, 2013 and  paid on October 15, 2013. Of the total dividend of $11,531, $4,282 was  reinvested under the DRIP into 144,478 common shares of the Company.  A dividend of $0.25 per common share was declared on June 14, 2013 and paid on  July 15, 2013. Of the total dividend of $11,472, $3,313 was reinvested under  the DRIP into 111,594 common shares of the Company.  A dividend of $0.25 per common share was declared on February 26, 2013 and  paid on April 15, 2013. Of the total dividend of $11,375, $3,108 was  reinvested under the DRIP into 125,024 common shares of the Company.    SOURCE  Calfrac Well Services Ltd.  Fernando Aguilar President & Chief Executive Officer Telephone: 403-266-6000  Fax: 403-266-7381  Michael (Mick) J. McNulty Chief Financial Officer Telephone: 403-266-6000  Fax: 403-266-7381  Tom J. Medvedic Senior Vice President, Corporate  Development Telephone: 403-266-6000 Fax: 403-266-7381  Ian Gillies  Manager, Investor Relations Telephone: 403-266-6000 Fax: 403-266-7381  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/February2014/26/c7358.html  CO: Calfrac Well Services Ltd. ST: Alberta NI: OIL ERN