CALGARY, Aug. 4 /CNW/ - Canyon Services Group Inc. today announced its second quarter 2009 results. The following should be read in conjunction with the Management's Discussion and Analysis, the consolidated financial statements and notes of Canyon Services Group Inc. which are available on SEDAR at www.sedar.com.

OVERVIEW OF THE SECOND QUARTER 2009

The second quarter is traditionally the weakest quarter for the Canadian oilfield services sector as the spring thaw makes the ground unstable for purposes of moving heavy equipment and as a result, municipalities and transportation departments enforce road bans, thereby significantly reducing drilling and well servicing activity levels. Nevertheless, the seasonal break-up in the second quarter was even more pronounced than normal due to the current economic environment, with downward natural gas price pressures resulting in ongoing, lower, industry-wide equipment utilization levels.

In the case of natural gas pricing, AECO-C spot prices decreased by 29% in Q2 2009 compared to Q2 2008, and by 66% for the first six months of 2009 compared to the 2008 comparable period, causing exploration and production companies to significantly curtail 2009 capital expenditure budgets. As a result, in Q2 2009, the key indicators for utilization of stimulation equipment, well licensing activity and drilling rig utilization, significantly trailed the prior year's levels. Well licenses issued in Q2 2009 and for the first half of 2009 were 58% and 50% lower respectively than the 2008 comparable periods. Drilling rig utilization in Q2 2009 was only 11% versus the 20% achieved in Q2 2008 while the first half of 2009 was about 23% versus 38% in the 2008 comparable period, representing the weakest utilization since the early 1990's.

Canyon's continued expansion into deeper segments of the market with the successful completion of large, horizontal, multi-stage fracs in the Montney, has resulted in higher hydraulic fracturing revenues and significantly increased average revenues per job in 2009. For the first half of 2009 revenues increased by 24%, with jobs completed decreasing by 5%. In Q2 2009, total revenues remained relatively flat compared to Q2 2008, with jobs completed decreasing by 27% over the two quarters.

The operating and financial highlights for the three and six months ended June 30, 2009 may be summarized as follows:

Operating and Financial Highlights
-   In Q2 2009, Canyon's revenues totaled $4.0 million compared to
    $4.2 million in Q2 2008. However, in the six months ended June 30,
    2009, total revenues increased by 24% to $28.1 million from
    $22.6 million in the 2008 comparable period.
-   In Q2 2009, Canyon completed 97 jobs compared to 132 jobs completed
    in Q2 2008, a decrease of 27%, while for the first six months of 2009
    total jobs completed decreased by 5% to 599 from 632 in the 2008
    comparable period.
-   Average revenue per job increased in Q2 2009 by 27% to $41,228 from
    $32,521 in Q2 2008, while for the first six months of 2009, average
    revenue per job increased by 30% to $46,947 from $36,111 in the 2008
    comparable period.
-   In Q2 2009, Canyon expanded its customer base with the completion of
    a multi-well pilot project for a major, international exploration and
    production company, employing the patented Grand Canyon technology
    process. The results are presently being evaluated by the customer.
-   As a result of significant, company-wide cost reductions implemented
    in late March 2009, fixed costs and SG&A before stock based
    compensation expense were reduced by 28% in Q2 2009 compared to
    Q1 2009.
-   Spring break-up and weak demand across the industry for well
    stimulation services in the quarter resulted in a loss before income
    taxes of $5.9 million in Q2 2009 compared to a loss before income
    taxes of $6.7 million in Q2 2008.
-   In May 2009, Canyon renewed its bank credit agreement with no change
    to the available credit facilities. The interest rate spread over
    prime on all facilities payable has been increased by 75 basis points
    pursuant to the renewal terms.
-   As at June 30, 2009, the Company's available credit facilities total
    $17.8 million.
QUARTERLY COMPARATIVE STATEMENTS OF OPERATIONS
                                                   June 30,      June 30,
Quarter Ended                                         2009          2008
-------------------------------------------------------------------------
                                                (unaudited)   (unaudited)
Revenues                                        $4,011,369    $4,191,145
Expenses
  Operating                                      5,392,159     5,972,049
  Selling, general and administrative            1,621,881     1,862,471
  Stock based compensation                         422,380       219,254
  Interest on long-term debt                       170,915       379,892
  Other interest                                     8,829        62,287
  Depreciation and amortization                  2,290,549     2,355,458
                                              ---------------------------
Loss before income taxes                        (5,895,344)   (6,660,266)
                                              ---------------------------
  Income taxes-future (reduction)                 (506,343)      (96,415)
                                              ---------------------------
                                                  (506,343)      (96,415)
                                              ---------------------------
Net loss and comprehensive loss                $(5,389,001)  $(6,563,851)
                                              ---------------------------
                                              ---------------------------
EBITDA before stock based compensation(1)      $(3,002,671)  $(3,643,375)
                                              ---------------------------
                                              ---------------------------
Loss per share:
  Basic                                             $(0.24)       $(0.30)
  Diluted                                           $(0.24)       $(0.29)
                                              ---------------------------
                                              ---------------------------
Note (1): See Non-GAAP Measures.

Revenues

In Q2 2009, average revenue per job increased by 27% to $41,228 from $32,521 in Q2 2008 as Canyon completed larger, multi-stage fracs in northeast British Columbia. Total revenues recorded in Q2 2009 remained relatively flat at $4.0 million compared to $4.2 million in Q2 2008 as the number of jobs decreased to 97 in Q2 2009 from 132 in Q2 2008. The decrease in job count is the result of significantly reduced activity across the oilfield services sector.

Operating Expenses

Operating expenses decreased by 10% to $5.4 million in Q2 2009 from $6.0 million in Q2 2008, as a result of the reduced job count and reductions in the fixed component of operating costs implemented in late March 2009.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased to $1.6 million in Q2 2009 from $1.9 million in Q2 2008 mainly due to cost cutting measures introduced in late March 2009.

Stock-Based Compensation Expense

In Q2 2009, the Company recorded stock-based compensation expense of $0.4 million compared to $0.2 million in the 2008 comparable quarter.