Release Details

HIGHLIGHTS – CONTINUING OPERATIONS

CEO'S MESSAGE

Calfrac's Chief Executive Officer, Pat Powell commented: "Since I joined the Company, I have had the opportunity to meet with a number of our employees, both in the field and the divisional offices, and I am very impressed with their drive and commitment towards delivering on our revised brand promise of "Do It Safely, Do It Right, Do It Profitably". This quarter, Calfrac was able to demonstrate solid progress on its financial performance while continuing to deliver top tier service to our clients."

During the quarter, Calfrac:

     nearly doubled adjusted EBITDA to $39.3 million or 12 percent of revenue on a sequential basis on revenue growth of eight percent from the first quarter;
 

     grew its operating scale to nine fracturing fleets in the United States to compliment the Company's four active fleets in Canada; and

     re-constituted its Board of Directors’ committees, including appointing the Audit Committee comprised of Charles Pellerin, Anuroop Duggal and Chetan Mehta. Charles Pellerin, who is the Principal Partner and President of one of the largest independent accounting firms in Quebec, will act as chairman of the Audit Committee.

SECOND QUARTER OVERVIEW

In the second quarter of 2022, the Company:

     generated revenue of $318.5 million, an increase of 83 percent from the second quarter in 2021, resulting primarily from improved activity in all of the Company's operating divisions and improved pricing in North America;

     reported adjusted EBITDA of $39.3 million versus negative $1.1 million in the comparable period in 2021, mainly as a result of improved performance in North America;

     repaid and cancelled its $25.0 million secured bridge loan from G2S2 Capital Inc., of which the Company had drawn $15.0 million prior to repayment;

     reduced its Funded Debt and Total Debt leverage to levels that will terminate the covenant relief period under its revolving credit facility agreement upon filing its second quarter compliance certificate, which is anticipated to occur before the end of July 2022;

     filed a short-form base shelf prospectus that allows Calfrac to issue up to $500.0 million of equity or debt securities over a 25-month period commencing May 19, 2022;

     reported a net loss of $6.8 million or $0.18 per share diluted compared to a net loss of $35.5 million or $0.95 per share diluted in the second quarter in 2021;

     reported period-end working capital of $144.5 million; and

     incurred capital expenditures of $15.2 million, focused on maintenance and sustaining activities to primarily support the Company's United States fracturing operations.

In the six months ended June 30, 2022, the Company:

     generated revenue of $613.0 million, an increase of 58 percent from the first six months in 2021, resulting from higher activity in all operating divisions, most notably in the United States;

     reported adjusted EBITDA of $60.1 million versus $9.7 million in the comparable period in 2021, mainly as a result of higher utilization of equipment in all operating divisions;

     reported a net loss of $24.8 million or $0.65 per share diluted, compared to a net loss of $58.5 million or $1.56 per share diluted in the first six months in 2021; and

     incurred capital expenditures of $27.4 million focused on maintenance and sustaining activities to primarily support the Company's United States fracturing operations.

CONSOLIDATED HIGHLIGHTS - CONTINUING OPERATIONS

Second-quarter revenue in 2022 of $318.5 million represented an increase of 8 percent from the first quarter of 2022, primarily due to improved pricing in North America and significantly higher fracturing activity in the United States, offset partially by lower activity in Canada due to the onset of spring break-up. Revenue per fracturing job was 35 percent higher than the first quarter of 2022 due to pricing increases in North America combined with job mix in Argentina and Canada.

In Canada, revenue decreased by 34 percent from the first quarter of 2022 to $71.1 million in the second quarter of 2022 due to the normal seasonal slowdown in activity stemming from spring break-up conditions. Operating income as a percentage of revenue was 5 percent compared to 13 percent in the first quarter of 2022, and included a $3.0 million litigation accrual related to product purchase commitments made in a prior year.

In the United States, revenue in the second quarter of 2022 was $193.8 million, a 46 percent increase from the first quarter of 2022 due to improved utilization and a larger average number of fleets operating during the quarter. The second quarter included some weather-related disruptions in North Dakota and Wyoming in April resulting in 24 lost operating days. However, the Company achieved strong utilization for its eight operating fleets during the quarter outside of these disruptions and added a ninth fleet in May. Comparatively, the first quarter in 2022 started with four fleets operating and exited with eight operating fleets. The Company continued to implement pricing increases during the second quarter in order to improve its profitability for all of its operating fleets. Operating income was $35.8 million in the second quarter compared to $7.9 million in the first quarter of 2022.

In Argentina, revenue decreased by 2 percent from the first quarter in 2022 to $53.6 million in the second quarter of 2022. The Company experienced a slight decrease in sequential activity particularly for the Company's fracturing and coiled tubing operations. Operating income decreased from $5.5 million in the first quarter of 2022 to $1.6 million in the second quarter of 2022 due to inflationary salary increases that are paid in pesos that were not immediately offset by the devaluation in the official peso exchange rate.

Adjusted EBITDA from continuing operations of $39.3 million for the second quarter of 2022 increased from $20.8 million in the first quarter of 2022 primarily due to improved crew utilization and pricing in the United States.

BUSINESS UPDATE AND OUTLOOK
During the second quarter of 2022, the Company continued to grow its North American fracturing operating scale as it exited the period with nine fracturing fleets operating in the United States and four large fleets in Canada. Throughout the past few months, Calfrac was able to achieve pricing gains with its clients that have compensated for significant increases in its operating expenses and are now beginning to contribute to an overall improvement in the Company's consolidated financial performance. The Company expects strong utilization of its North American and Argentinean fleets for the remainder of 2022 and 2023 and remains focused on the provision of top tier pressure pumping services, while generating enhanced returns for its shareholders in a market that is more supportive of a profitable services sector on a full cycle basis.

CANADA
The Company's operations in Canada began the second quarter at a slower rate due to spring break-up but exceeded expectations with a strong exit and Calfrac anticipates full utilization in the third quarter for its four large fracturing fleets. Calfrac's Canadian Division expects robust demand for its services throughout the remainder of 2022 and into 2023 as customers have already begun to inquire about equipment availability in the new year. While Calfrac has the ability to increase its operating scale in Canada, the Company is committed to its current fleet capacity for the foreseeable future and will only consider additional fleet reactivations if they are supported by a committed customer agreement.

UNITED STATES
The Company's United States division overcame weather disruptions early in the second quarter in its largest operating district to exit the quarter with fleet profitability not seen since the same period in 2017. Calfrac expects to benefit from consistent utilization for its nine sold out fracturing fleets for the remainder of the year and anticipates that the pressure pumping market will remain tight through 2023 as demand exceeds supply. While the Company has the option to reactivate additional idle equipment, Calfrac remains focused on improving cash flows and returns for its existing fleets rather than market share.

ARGENTINA
Calfrac has a significant presence in Argentina's pressure pumping market. The Company recently signed a multi-year contract with a major client operating in the Vaca Muerta shale play and expects utilization as well as profitability to improve significantly from the first six months of the year. With the strength in commodity prices, Calfrac anticipates that this market will remain tight and support further growth opportunities in the Neuquén region and southern Argentina over the next several years.

RUSSIA
The Company has made progress related to the sale of its Russian subsidiary and is seeking to close this transaction as soon as possible in compliance with applicable laws and sanctions.

CORPORATE
Calfrac's priority is to leverage its geographical scale and superior execution focus in both North America and Argentina to drive profitable growth, margin expansion and strong free cash flow generation, which will be dedicated to strengthening the Company's balance sheet. Calfrac believes that the services industry is entering a multi-year up cycle and the Company is well-positioned to advance its strategy and maximize shareholder returns.

FINANCIAL OVERVIEW – CONTINUING OPERATIONS – THREE MONTHS ENDED JUNE 30, 2022 VERSUS 2021

CANADA

REVENUE
Revenue from Calfrac's Canadian operations during the second quarter of 2022 was $71.1 million compared to $50.8 million in the same period of 2021 primarily due to higher pricing. The number of fracturing jobs increased by 31 percent from the comparable period in 2021 due to changes in job mix as the Company completed a larger number of smaller jobs during the second quarter in 2022. As expected, activity in April was slow due to spring break-up conditions but increased significantly as the quarter progressed. Revenue per fracturing job was one percent higher than the comparable quarter as pricing increases more than offset the impact of job mix during the quarter. The number of coiled tubing jobs increased by 17 percent versus the second quarter in 2021. The 74 percent increase in the coiled tubing revenue per job as compared to the same quarter in 2021 was due to a combination of higher pricing and the type of work completed during the quarter.

OPERATING INCOME
Operating income in Canada during the second quarter of 2022 was $3.9 million compared to $4.3 million in the same period of 2021. The Canadian division's operating income as a percentage of revenue was five percent compared to eight percent in the second quarter of 2021. The Company recorded a $3.0 million expense accrual during the quarter to reflect the potential outcome of ongoing litigation associated with product purchase commitments made in a prior year. In addition, the Company did not receive any benefit from the Canadian Emergency Wage Subsidy ("CEWS") in the second quarter of 2022 while the comparable quarter included a benefit of $2.5 million. The Company introduced price increases during the first quarter that were in effect for the entire second quarter in 2022. SG&A expenses increased as the comparable quarter included a recovery of a litigation settlement while the second quarter in 2022 included the reinstatement of salary and benefit rollbacks and the elimination of the CEWS benefit in 2022.

UNITED STATES

REVENUE
Revenue from Calfrac's United States operations increased significantly to $193.8 million during the second quarter of 2022 from $86.7 million in the comparable quarter of 2021. The 124 percent increase in revenue can be attributed to a combination of a 69 percent increase in revenue per job period-over-period combined with a 32 percent increase in the number of completed fracturing jobs. The higher revenue per job was due to improved pricing for its services as the Company passed through higher input costs to its customers while also achieving net pricing gains, combined with the impact of job mix. The overall increase in job count was mainly due to the Company operating eight of its nine marketed fleets for the entire quarter while the ninth fleet began work during May. Activity in the Rockies region and North Dakota increased relative to the comparable quarter in 2021, although activity in North Dakota during April was impacted by snow storms that resulted in the loss of 24 operating days. Activity in Pennsylvania was relatively consistent with the comparable quarter in 2021.

OPERATING INCOME (LOSS)
The Company's operations in the United States generated operating income of $35.8 million during the second quarter of 2022 compared to an operating loss of $2.6 million in the same period in 2021. This significant increase in operating income was largely driven by improved fracturing crew utilization and strong net pricing gains, which supported significant margin expansion relative to the comparable quarter in 2021. SG&A expenses increased by five percent primarily due to the reinstatement of previously reduced salaries and benefits near the end of 2021.

ARGENTINA

REVENUE
Calfrac's Argentinean operations generated revenue of $53.6 million during the second quarter of 2022 compared to $36.3 million in the comparable quarter in 2021 as activity in the Neuquén region improved across all service lines but was offset partially by lower activity in southern Argentina. Overall fracturing activity increased by 4 percent compared to the second quarter in 2021 as the Company did not experience similar disruptions in the current quarter as it did during 2021. Average fracturing revenue per job increased by 23 percent primarily due to higher pricing generated by inflation. The number of coiled tubing jobs increased by 72 percent due to higher customer activity in Neuquén and southern Argentina while revenue per job also improved by 26 percent primarily due to job mix. Activity in the Company's cementing operations increased by 16 percent and revenue per job increased by 59 percent due to changes in job mix as a greater number of pre-fracturing projects, which are typically larger job sizes, were completed in the second quarter of 2022.

OPERATING INCOME
The Company's operations in Argentina generated operating income of $1.6 million during the second quarter of 2022 compared to operating income of $4.9 million in the comparable quarter of 2021. Utilization of the Company's equipment improved across all service lines versus the same period in 2021. However, the Company's operating margins as a percentage of revenue decreased from 13.6 percent to 3.0 percent due to inflationary salary increases that are paid in pesos but were not offset by the devaluation in the official peso exchange rate. The Company also incurred $0.3 million of severance costs during the second quarter in 2022.

CORPORATE

OPERATING LOSS
Corporate expenses for the second quarter of 2022 were $4.7 million compared to $5.9 million in the second quarter of 2021. The lower SG&A expense was due to a $1.3 million reduction in legal fees incurred during the second quarter in 2022 offset partially by higher stock-based compensation expense.

DEPRECIATION
For the three months ended June 30, 2022, depreciation expense of $30.4 million was relatively consistent with the corresponding quarter in 2021. The slight decrease in second-quarter depreciation expense was primarily due to the mix and timing of capital expenditures related to major components.

FOREIGN EXCHANGE GAINS AND LOSSES
The Company recorded a foreign exchange gain from continuing operations of $3.4 million during the second quarter of 2022 versus a loss of $2.8 million in the comparative three-month period of 2021. Foreign exchange gains and losses arise primarily from the translation of net monetary assets or liabilities that were held in U.S. dollars in Canada and net monetary assets or liabilities that were held in pesos in Argentina. The foreign exchange gain during the second quarter was mainly due to the revaluation of net monetary assets that were held in U.S. dollars as the Canadian dollar weakened relative to the U.S. dollar, offset partially by net monetary assets that were held in pesos in Argentina as the peso devalued against the U.S. dollar during this period.

INTEREST
The Company's net interest expense of $10.9 million for the second quarter of 2022 was $1.6 million higher than the comparable period in 2021. The increase in interest expense was primarily due to higher borrowings and interest rates under the Company's revolving credit facilities combined with interest on outstanding draws made under the secured bridge loan from G2S2 Capital Inc. during the second quarter in 2022.

INCOME TAXES
The Company recorded an income tax expense of $1.7 million during the second quarter of 2022 compared to a tax recovery of $7.9 million in the comparable period of 2021. The Company had a current tax expense of $0.9 million and a deferred tax expense of $0.8 million both of which were related to its United States operations. All other divisions are in a net deferred tax asset position and the deferred tax assets continue to not be recognized for accounting purposes.

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
During the first quarter, management committed to a plan to sell its Russian division, resulting in the associated assets and liabilities being classified as held for sale and presented as discontinued operations. In conjunction with the ongoing sale process and in light of the additional Canadian sanctions and restrictions that were issued in relation to the Russian oil and gas industry during the second quarter, the Company has recorded an impairment of $42.8 million to write down the Russian division's current and long-term assets to their expected recoverable amount. Results from operations held for sale have not been included in the preceding tables.

Revenue from Calfrac's discontinued Russian operations decreased by 2 percent during the second quarter of 2022 to $33.0 million from $33.5 million in the corresponding period of 2021. Fracturing revenue was consistent with the comparable quarter while coiled tubing revenue  decreased slightly due to lower activity.

The Company's Russian division had an operating income of $4.9 million during the second quarter of 2022 compared to operating income of $5.3 million in the comparable quarter in 2021. The slightly lower operating performance was primarily due to higher overhead costs as the rouble appreciated during the second quarter in 2022 compared to the same period in 2021.

FINANCIAL OVERVIEW – CONTINUING OPERATIONS – SIX MONTHS ENDED JUNE 30, 2022 VERSUS 2021

CANADA

REVENUE
Revenue from Calfrac's Canadian operations during the first six months in 2022 was $178.7 million, an increase from $136.3 million in the comparable period in 2021, primarily due to improved pricing and increased activity. Revenue per fracturing job was 15 percent higher than the comparable period in 2021 as price increases were implemented during the period to recover significant inflation in operating costs. The number of fracturing jobs increased by 10 percent as the Company's four fracturing fleets were highly utilized in the first quarter prior to the onset of spring break-up conditions and improved significantly in the month of June. The number of coiled tubing jobs increased by 8 percent from the comparable period in 2021 due to higher activity while revenue per job increased by 46 percent due to improved pricing and changes in job mix.

OPERATING INCOME
The Company's Canadian division generated operating income of $17.4 million compared to $19.5 million in the comparable period in 2021. The Company recorded a $3.0 million expense accrual during the quarter to reflect the potential outcome of ongoing litigation associated with product purchase commitments made in a prior year. In addition, the Company did not receive any CEWS benefits in the first six months of 2022 while the comparable period included a benefit of $3.9 million. Excluding these items, operating income improved relative to the comparable period in 2021 primarily due to improved pricing. The Company introduced price increases during the first quarter that were in effect for the entire second quarter. SG&A expenses increased as the comparable six month period included a recovery of a litigation settlement while the first six months in 2022 included the reinstatement of salary and benefit rollbacks and the elimination of the CEWS benefit in 2022.

UNITED STATES

REVENUE
Revenue from Calfrac's United States operations increased to $326.1 million in the first six months in 2022 from $179.6 million in the same period in 2021 primarily due to higher pricing and a 7 percent increase in the number of completed fracturing jobs. A total of four active fleets were operating in the United States at the beginning of the year but increased to eight fleets exiting the first quarter with a ninth fracturing crew commencing operations in May. The higher fracturing revenue per job was reflective of improved pricing as the Company passed on higher input costs to its clients and was able to attain net pricing increases during the second quarter.

OPERATING INCOME (LOSS)
The Company's United States division generated operating income of $43.7 million in the first half of 2022 compared to an operating loss of $5.6 million in the same period of 2021 primarily due to a larger number of operating fleets, a higher number of operating days per fleet and improved pricing, offset partially by a slow start to the year and adverse weather in April 2022. SG&A expenses increased by 5 percent primarily due to the reinstatement of previously reduced salaries and benefits during the fourth quarter in 2021. 

ARGENTINA

REVENUE
Calfrac's Argentinean operations generated revenue of $108.2 million during the first six months of 2022 compared to $71.8 million in the comparable period in 2021. Activity in the first half of 2022 improved from the comparable period in 2021 across all service lines with the vast majority of the improvement occurring in the Neuquén region. Activity in the Vaca Muerta shale play continued to increase while activity in southern Argentina remained relatively consistent with the comparable period in 2021. Overall fracturing activity increased by 18 percent compared to the first six months in 2021 along with 13 percent higher revenue per job. Revenue from the Company's coiled tubing and cementing service lines continued to improve relative to the comparable period in 2021. The number of coiled tubing jobs increased by 69 percent as activity increased in Neuquén and southern Argentina while revenue per job improved by 23 percent primarily due to job mix. Activity in the Company's cementing operations increased by 23 percent and revenue per job increased by 60 percent due to changes in job mix as a greater number of pre-fracturing projects, which are typically larger job sizes, were completed in the first half of 2022.

OPERATING INCOME
The Company's operations in Argentina generated operating income of $7.1 million during the first six months of 2022 compared to operating income of $8.8 million in the comparable period of 2021. Utilization of the Company's equipment improved across all service lines compared to the same period in 2021. However, the Company's operating margins as a percentage of revenue decreased from 12 percent to 7 percent due to inflationary salary increases that are paid in pesos that were not offset by the devaluation in the official peso exchange rate. The Company also incurred $0.6 million of severance costs during the first half of 2022.

CORPORATE

OPERATING LOSS
Corporate expenses during the first six months of 2022 were $10.6 million versus $10.5 million in the comparable period in 2021 due to higher stock-based compensation expenses combined with no benefit from Canadian COVID-19 government subsidy programs which were $0.8 million in the same period of 2021. These items were mainly offset by lower professional fees in 2022.

DEPRECIATION
Depreciation expense decreased by $2.6 million from $62.9 million in the first six months in 2021 to $60.3 million in the first half of 2022 primarily due to the mix and timing of major component capital expenditures.

FOREIGN EXCHANGE LOSSES
The Company recorded a foreign exchange loss of $0.4 million in the first six months in 2022 versus a loss of $5.4 million in the comparable period in 2021. Foreign exchange gains and losses arise primarily from the translation of net monetary assets or liabilities that were held in U.S. dollars in Canada, net monetary assets or liabilities that were held in pesos in Argentina. The Company's foreign exchange loss in the first six months in 2022 was largely attributable to net monetary assets that were held in pesos in Argentina as the peso devalued against the U.S. dollar during this period, offset partially by the revaluation of net monetary assets that were held in U.S. dollars as the Canadian dollar weakened relative to the U.S. dollar.

INTEREST
The Company's interest expense of $20.7 million in the first six months in 2022 was $2.3 million higher than the comparable period in 2021. The increase in interest expense was primarily due to higher borrowings and interest rates under the Company's revolving credit facilities combined with interest related to draws made under the secured bridge loan that was entered into with G2S2 Capital Inc. during the first quarter of 2022 and repaid in the second quarter.

INCOME TAXES
The Company recorded an income tax recovery of $3.9 million in the first six months in 2022 compared to a $16.3 million tax recovery in the comparable period in 2021. The Company had current tax expense of $0.9 million in the United States while the deferred tax recovery of $4.9 million was recorded due to the liability position in the United States. All other divisions are in a net deferred tax asset position which are not recognized for accounting purposes.

DISCONTINUED OPERATIONS
Revenue from Calfrac's discontinued Russian operations decreased by 10 percent during the first six months of 2022 to $55.1 million from $61.2 million in the corresponding six-month period of 2021. Fracturing revenue decreased due to changes in job mix while coiled tubing revenue decreased slightly due to lower activity.

The Company's Russian division had an operating income of $4.3 million during the first six months of 2022 versus operating income of $6.8 million in the comparable period in 2021. The lower operating performance was primarily due to lower fracturing equipment utilization as operations were impacted by the start of the conflict in Ukraine. In addition, the Company halted plans to reactivate an additional fracturing and coiled tubing fleet in the first quarter. Coiled tubing activity was comprised of lower margin work during the first six months in 2022, which had a negative impact on overall margins as a percentage of revenue. The Company incurred $0.2 million of severance costs during the first six months in 2022. 

LIQUIDITY AND CAPITAL RESOURCES – CONSOLIDATED

OPERATING ACTIVITIES
The Company's cash provided by operating activities for the three months ended June 30, 2022 was $9.2 million versus $18.8 million during the same period in 2021. The decrease in cash provided by operations was primarily due to improved operating results in all divisions, offset by $28.9 million used to fund the Company's working capital requirements during the second quarter as compared to working capital providing $15.8 million of cash during the same period in 2021. At June 30, 2022, Calfrac's working capital was $144.5 million, compared to $121.9 million at December 31, 2021.

FINANCING ACTIVITIES
Net cash used in financing activities for the three months ended June 30, 2022 was $18.1 million compared to net cash provided of $1.7 million in the second quarter in 2021. During the quarter, the Company repaid $15.0 million of bridge loan financing, paid lease principal payments of $2.2 million, and received proceeds of $0.6 million from the exercise of a portion of the Company's outstanding warrants and stock options.

During the second quarter of 2022, the Company repaid and cancelled the $25.0 million secured bridge loan from G2S2 Capital Inc., of which the Company had drawn $15.0 million prior to its repayment. The loan was executed during the first quarter of 2022 to fund the Company's short-term working capital requirements during a period of improved activity in North America.

At June 30, 2022, the Company had used $0.9 million of its credit facilities for letters of credit and had $200.0 million of borrowings under its credit facilities, leaving $49.1 million in available liquidity. As described above, the Company's credit facilities are subject to a monthly borrowing base, which at June 30, 2022 was above the maximum availability of $250.0 million under its credit facilities. At June 30, 2022, the Company was required to have minimum available liquidity of $15.0 million.

The Company's credit facilities contain certain financial covenants. As per the amended credit facility agreement, the Company's Funded Debt to Adjusted EBITDA covenant is 3.00x for the quarter ended June 30, 2022 and each quarter end thereafter. As shown in the table below, the Company was in compliance with its financial covenants associated with its credit facilities as at June 30, 2022. Upon filing its second quarter compliance certificate, the Company will no longer be subject to the covenant relief terms within its revolving credit facility agreement, as described in further detail in the Company's first quarter MD&A.

INVESTING ACTIVITIES
Calfrac's consolidated net cash used in investing activities was $9.9 million for the three months ended June 30, 2022 versus $13.5 million in the comparable period in 2021. Cash outflows relating to capital expenditures were $11.0 million for the quarter ended June 30, 2022 compared to $14.6 million in the second quarter in 2021. Calfrac's Board of Directors have approved a 2022 capital budget of approximately $97.0 million, which is comprised primarily of maintenance capital, and is subject to fluctuations based on operating activity.

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 the three months ended June 30, 2022 was a gain of $27.4 million versus a loss of $0.3 million in the second quarter in 2021. The significant  gain was primarily related to the nearly 70 percent appreciation in the Russian rouble since the end of the first quarter and the impact this movement had on cash, working capital and monetary liabilities held by the Company’s foreign subsidiary during the period.

With its working capital position, available credit facilities, access to capital markets and anticipated funds provided by operations, the Company expects to have adequate resources to fund its financial obligations and planned capital expenditures for 2022 and beyond.

At June 30, 2022, the Company had a cash position of $17.4 million, which excludes cash held in Russia.

NON-GAAP MEASURES
Certain supplementary measures presented in this MD&A do not have any standardized meaning under IFRS and, because IFRS have been incorporated as Canadian generally accepted accounting principles (GAAP), these supplementary measures are also non-GAAP measures. These measures have been described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and ability to generate funds to finance its operations. These measures may not be comparable to similar measures presented by other entities, and are explained below.

Operating income (loss) is defined as net income (loss) before depreciation, foreign exchange gains or losses, gains or losses on disposal of property, plant and equipment, gains or losses on exchange or settlement of debt, impairment of property, plant and equipment, impairment of other assets, interest, 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 taxed. Operating income for the period was calculated as follows:

Adjusted EBITDA is defined in the Company's credit facilities for covenant purposes as net income or loss for the period adjusted for interest, income taxes, depreciation and amortization, unrealized foreign exchange losses (gains), non-cash stock-based compensation, and gains and losses that are extraordinary or non-recurring. Adjusted EBITDA is presented because it is used in the calculation of the Company's bank covenants. Adjusted EBITDA for the period was calculated as follows:

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY