Platform for Growth

PLATFORM FOR GROWTH

2012 Annual Report Trican Well Service Ltd.

CORPORATE PROFILE

Trican Well Service Ltd. (“Trican”) is a provider of pressure pumping and completion services in the global marketplace. A technical and operational leader, Trican’s experience in pressure pumping is among the most extensive in the industry. Trican offers services throughout key oil and gas plays in Canada, the United States and Russia, and has growing operations in many other active regions around the world.

Trican became a public company in 1996, and since then has invested more than $2.5 billion in capital expenditures and acquisitions, expanding its equipment, infrastructure and capabilities. As a result of its strategic expansion program, Trican has evolved from a regional supplier of cementing services to one of the world’s largest pressure pumping companies.

Trican employs a disciplined and scientific approach to research and development that delivers innovative products and processes, while addressing a shared commitment to safety, quality and reducing our impact on the environment. Services provided include fracturing, cementing, coiled tubing, acidizing, nitrogen, reservoir management, industrial cleaning and pipeline services, and completion systems and downhole tool services. Trican’s shares trade on The Toronto Stock Exchange under the symbol “TCW”.

NOTICE OF ANNUAL MEETING ANNUAL FINANCIAL STATEMENTS

Trican will be holding its annual general AND MD&A and special meeting at 2 p.m. on May 9, For further information on Trican’s 2012 financial 2013, in the Metropolitan Centre located at results, please refer to Trican’s financial statements 333-4th Ave SW, Calgary, Alberta, Canada. and Management’s Discussion and Analysis (MD&A) for the years ended December 31, 2012 and 2011, available on SEDAR at www.sedar.com or our website at www.trican.ca.

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CONTENT

Financial Summary...... 2

Message from our CEO...... 4

Platform for Growth...... 6

Operations by Geographic Region

Canada...... 9 United States...... 12

International

Russia...... 17 Kazakhstan ...... 19 Algeria ...... 20 Saudi Arabia ...... 20 Australia ...... 21

Colombia...... 21

Saftey ...... 22

Technology...... 25

Sustainability ...... 33

Outlook...... 36

Forward Looking Statements ...... 38

Corporate Information...... 44

2012 Annual Report | 1 Trican Well Service Ltd.

FINANCIAL SUMMARY

350 30 40

300 35 25 30 250 20 25 200 15 20 150 15 10 100 10 5 50 5 07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12

Net Income ($Millions) Return on Assets (%) Return on Equity (%)

2.5 600 2500

500 2.0 2000

400 1.5 1500 300

1.0 1000 200

500 0.5 100

070807 08 1009 1110 11 12 07 08 09 10 11 12 07 08 09 10 11 12

Adjusted EPS ($) Funds from Operations ($Millions) Revenue ($Millions)

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Financial Summary ($ thousands, except per share amounts and operational information)

2012 2011 Change % Change Revenue 2,213,400 2,309,647 (96,247) -4% Net income 53,339 338,636 (285,297) -84% Adjusted net income 63,028 351,014 (287,986) -82% Adjusted earnings per share: (Basic) $0.43 $2.41 $(1.98) -82% (Diluted) $0.43 $2.39 $(1.96) -82% Funds provided by operations 122,750 558, 811 (436,061) -78% Capital expenditures 444,550 578,457 (133,907) -23% Long-term debt (excluding current portion) 694,972 400,256 294,716 74% Shareholders' equity 1,374,812 1,365,389 9,423 1% Average shares outstanding - Basic 146,620 145,805 815 1% Average shares outstanding - Diluted 146,690 147,085 (395) 0% Shares outstanding at year end 146,450 146,917 (467) 0%

Operational Information (unaudited)

Canadian operations Number of jobs completed 22,427 25,393 (2,966) -12% Revenue per job 50,486 49,964 522 1% United States operations Number of jobs completed 7,110 5,065 2,045 40% Revenue per job 112,471 146,457 (33,986) -23% International operations Number of jobs completed 4,007 4,901 (894) -18% Revenue per job 65,027 55,902 9,125 16%

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MESSAGE FROM OUR CEO

On behalf of the employees and Board of Directors of Trican Well Service Ltd., I am pleased to report on our Company’s 2012 financial and operational results. After posting record financial results in 2011, Trican faced some significant challenges in 2012. Depressed natural gas prices, combined with increased pressure pumping equipment supply in North America contributed to a decline in Trican profitability in 2012. In addition, international markets remained competitive and led to disappointing financial results in many of our international regions. Despite these challenges, Trican made progress on some key strategic goals in 2012. We Dale M. Dusterhoft – Chief Executive Officer expanded and developed our presence in international markets including Colombia, Saudi Arabia and Australia; we expanded our U.S. geographic footprint by opening a new base in the Bakken; we enhanced our position as a technological leader through the development of innovative pressure pumping fluids and systems from our Research and Development Centres in Calgary, Houston and Moscow; and we expanded our completion systems service line through the acquisition of a completion and intervention tools company based in Norway in early 2013. We believe these efforts, combined with a continued focus on meeting the needs of our customers, have positioned Trican to capitalize on growth opportunities in new and existing markets throughout 2013 and beyond.

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PLATFORM FOR GROWTH

Trican faced difficult market conditions during 2012 as the the U.S., all contributed in establishing a platform for growth North American pressure pumping market weakened, and in the U.S. Although the U.S. market weakened substantially international markets remained competitive. Notwithstanding in 2012, it remains the world’s largest pressure pumping these difficult market conditions, Trican was able to make market. Trican has established a reputation as a technically significant progress during 2012 in establishing a platform for focused, international, full-service pressure pumping growth in all of our world-wide regions. company and we believe that a strong presence in the U.S. market is necessary to maintain this reputation. Our focus Although the Canadian market weakened somewhat in in the U.S. for the past few years has been on growth, and 2012, Canada remained our strongest and most profitable with U.S. growth expected to subside in 2013, we believe geographic region. Our Canadian operations posted strong Trican has an opportunity to improve our U.S. operations. financial results and we continued to operate as one of The focus for our U.S. operations in 2013 will be to improve the leading pressure pumping providers in Canada. We operational efficiencies, including cost reductions, and successfully maintained a strong Canadian customer base to expand our technological capabilities as a way to by consistently offering innovative technical solutions and differentiate ourselves from the competition. operational excellence. Our well-established customer relationships in Canada allowed us to develop a strong Trican made good progress in expanding and solidifying our market presence in the Duvernay play. We are very international operations in 2012, as we established a sales encouraged by the future prospects and development of presence in Colombia and continued to develop our business this formation and the positive impact it is expected to have and customer relationships in the Middle East and Australia. We on Trican’s Canadian operations. We are also encouraged by are also optimistic about the emergence of horizontal drilling the potential for liquefied natural gas exports from Canada and the multi-stage fracturing market in Russia. Multi-stage that are expected to rejuvenate future activity in Canada’s fracturing activity in Russia increased substantially in 2012, and dry gas plays, such as the Horn River. Overall, we are very we expect this trend to continue in 2013. Trican is one of the pleased with our current position in the Canadian pressure leading pressure pumping companies in Russia and expansion pumping market and will continue to build and strengthen of multi-stage fracturing is expected to have a positive impact this position in the years ahead. on our operations in this region. This trend in Russia is indicative of the exciting international growth opportunities for the Our U.S. operations faced very difficult market conditions pressure pumping industry, as the world moves towards and internal challenges in 2012, which led to financial lower quality reservoirs that require increased services to make results that were well below expectations; however, we them viable. We are encouraged by our various international were pleased with the progress made during the year in opportunities, and continue to believe international markets executing on our strategy to become a geographically will fuel the growth of our industry for years to come. diverse full-service pressure pumping company in the U.S. market. Geographic expansion into the North Dakota During 2012, we maintained our focus on technology Bakken, growth of our cementing and coiled tubing by responding to the needs of our customers and our services, and advancement of our technical capabilities in operational markets with the development of new and

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The outlook for our North American markets changed substantially throughout 2012. We entered the year with We successfully maintained strong utilization and pricing for our North American a strong Canadian customer equipment, as the market was undersupplied and continued to grow. Our initial 2012 capital budget was $678 million base by consistently offering and reflected the strong market dynamics at the time. innovative technical solutions In early 2012, weak natural gas prices and activity levels, and operational excellence. combined with a substantial increase in industry capacity changed North American market dynamics, particularly in the U.S., and we responded by reducing our capital budget by over $300 million throughout the year. Our 2013 capital budget is expected to be only $32.3 million, as we focus on strengthening the balance sheet in 2013. Although the 2013 budget is small, Trican stands by our commitment to provide innovative products. We opened a new Research and service to our customers with a state-of-the-art and well Development Centre in Moscow in March of 2012, and now maintained fleet of equipment. Many of our maintenance have R&D centres in all of our major markets, allowing us spending requirements for 2013 were incurred in 2012 and to enhance our worldwide knowledge, while providing we are confident our fleet will be maintained in top operating customized local solutions to our customers. Trican was also condition throughout the coming year. named one of Canada’s top R&D spenders in 2012*, a list we have made in five of the last six years. Our commitment We believe that with the support of our strong customer to research and development continues to help Trican base, and the efforts and commitment of our employees develop solutions to support customers in producing their world-wide, Trican made excellent progress in 2012 in wells safely and efficiently, and reduce the impact of our establishing a platform for future growth. We will look to operations on the environment. move on from the challenges faced in 2012 and look forward to the many growth opportunities that we believe lay ahead. Trican took a significant step into the global horizontal multi-stage completion market in early 2013 with the * Compiled by Research Infosource (October 30, 2012) – “Canada’s Top 100 Corporate R&D acquisition of Petro Tools Holdings AS, the parent company Spenders 2012” of i-TEC AS (“i-TEC”). i-TEC is based in Norway and has developed a field-proven portfolio of completion systems and intervention tools. This acquisition complements Trican’s existing completion systems and tools business, and is expected to provide positive growth opportunities, as well as enhance our other pressure pumping service lines. Dale M. Dusterhoft - Chief Executive Officer

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OPERATIONS BY GEOGRAPHIC REGION

Trican is headquartered in Calgary, Alberta, Canada, and operates in Canada, the United States, Russia, Kazakhstan, Algeria, Australia and Norway. The Canadian operations provide services to customers across the entire Western Canadian Sedimentary Basin (“WCSB”). Trican’s U.S. operations are run from bases in Texas, Oklahoma, Pennsylvania and North Dakota. In Russia and Kazakhstan, Trican conducts operations through bases in Western and Eastern Siberia, and in Kyzylorda and Aktau, Kazakhstan. Trican also has bases in Hassi Messaoud, Algeria; Roma, Australia; and Stavanger, Norway.

CANADA

Trican’s Canadian operations provide pressure pumping A key factor in the decline in WCSB activity levels during and completions services to exploration and production the second half of 2012 was low natural gas prices, seen companies, as well as industrial cleaning and pipeline throughout most of 2012, that led to a 27% decline in the services to midstream companies. Trican operates in all the gas directed rig count compared to 2011. WCSB activity key Canadian oil and gas plays from 17 bases in Western levels were also negatively impacted by a reduction in our Canada, and offers fracturing, cementing, coiled tubing, customers’ cash flows caused by low gas prices and large acidizing, nitrogen, geological services and reservoir price differentials between West Texas Intermediate (“WTI”) management, industrial cleaning and pipeline, and oil prices and Canadian oil prices. These reduced cash flows completion systems and downhole tool services. contributed not only to a reduction in gas drilling, but also in oil directed drilling. Despite the strength in Brent , a Trican’s Canadian operations experienced strong operating world oil price measure, and WTI pricing throughout 2012, results during the first quarter of 2012, led by the continued the average number of oil drilling rigs decreased by 6% strength in horizontal and oil and liquids-rich gas activity. compared to 2011, and the overall year-over-year Canadian Second quarter results were consistent with expectations rig count decreased by 13%. and were impacted by spring break-up conditions that led to road bans and road weight restrictions. Second half The increase in available Canadian pressure pumping results showed signs of a slowing Canadian market, in equipment also had a negative impact on our Canadian particular in the fourth quarter, due to a decline in industry operations in the second half of 2012. The strong industry activity levels combined with an increase in available activity levels, in particular for oil and liquids-rich gas pressure pumping equipment in the WCSB. Overall, 2012 plays, and continued growth in horizontal drilling and revenue in Canada was $1.14 billion, down 11% from $1.28 completions led to a substantial undersupply of pressure billion in 2011, and 2012 Canadian operating income was pumping equipment throughout most of 2011. In $308 million, down 34% from $465 million in 2011. response to this demand, Trican and many of our Canadian

2012 Annual Report | 9 Trican Well Service Ltd.

HORN RIVER SHALE Fort Nelson High Level BRITISH COLUMBIA ALBERTA MONTNEY SHALE SASKATCHEWAN MANITOBA Fort St. John Red Earth

Grande Prairie TIGHT GAS DUVERNAY SHALE Whitecourt Hinton Drayton Valley Nisku Lloydminster CARDIUM TIGHT OIL Red Deer Provost Drumheller VIKING TIGHT OIL CALGARY Brooks Brandon BAKKEN SHALE Medicine Hat LOWER SHAUNAVON Estevan TIGHT OIL

competitors undertook large 2012 capital budgets focused we did see the growth rate of these trends slow in 2012 on expanding the size of equipment fleets. During 2012, as many plays in the WCSB began to mature. However, Trican’s fracturing fleet increased by 28% and we exited we expect the growth in fracturing stages-per-well to be 2012 with 413,500 horsepower. This increase in available augmented as activity levels in the Duvernay and Horn River equipment, combined with the decrease in demand led to plays increase in the future. declines in pressure pumping pricing. Compared to peak We believe the Horn River play in Northeastern British Columbia Canadian pricing seen in the first quarter of 2012, pricing has the potential to be Canada’s first large-scale, commercial was down 6% in the third quarter and an additional 7% shale gas operation. Trican has completed annual Horn River in the fourth quarter. That being said, peak pricing seen projects over the last several years for various customers in the in the first quarter occurred when the Canadian market region. In the third quarter of 2012, Trican completed a project was significantly undersupplied, and we did not expect for a large producer and achieved exceptional performance these pricing levels to be sustained. We believe the current and efficiency results. We completed 330 fracturing treatments Canadian pricing environment is indicative of a balanced in 52.5 days for an average of 6.3 fracs per day, compared to an Canadian pressure pumping market. aggressive target set by our customer of 5.5 fracs per day and past We continued to see an increase in Canadian horizontal performance by our competitors of 4.4 fracs per day. At current drilling and completions activity in 2012, which had a gas prices, we do not expect Horn River activity to increase in the favourable impact on all of our pressure pumping service near future; however, we believe the Horn River play will be a key lines in Canada. During 2012, 65% of wells drilled in Canada source for future liquefied natural gas (“LNG”) facilities in British were horizontal, compared to 55% in 2011. In addition, Columbia. As progress is made on the approval and construction we continued to see an increase in pressure pumping of these facilities, interest and activity levels in the Horn River are intensity, as the number of fracturing stages completed expected to increase. The expansion of Horn River activity would per well increased year-over-year in 2012 by 40%. This be extremely beneficial to the pressure pumping industry, as increase in horizontal activity and fracturing stages per well pressure pumping costs-per-well are expected to be the highest is a continuation of a trend that started in 2009, although of any play in Canada. Based on Horn River projects completed

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by Trican thus far, we would expect average crew sizes of 40,000- the Canadian market during 2012; however, Trican was able to 50,000 horsepower and stages-per-well of 15-25 in the region, maintain staffing levels by offering challenging and rewarding which is well above Canadian averages. Given Trican’s knowledge career opportunities to our people. Trican was recognized and expertise in the region, customer relationships and existing in Canada for its commitment to its people in 2012 by being infrastructure, we believe we are well positioned to capitalize on named one of Canada’s Top 100 Employers, one of Canada’s Horn River growth as it develops in the future. Top Family Friendly Employers, and one of Alberta’s Top 55 Employers. Trican is proud to be considered one of Alberta’s and The Duvernay play in west central Alberta has generated a Canada’s top employers and will continue to focus on making substantial amount of interest over the past few years. To date, Trican a great place to work. it has been one of the largest land buys in Alberta history, and we expect at least 6,000 drilling locations will be required to develop the basin. The Duvernay play has oil, liquids-rich gas and dry gas windows and, based on the work Trican has performed in the region thus far, we believe pressure pumping costs-per-well will be second in Canada to the Horn River. Duvernay fracturing crew sizes are expected to be 15,000 to 30,000 horsepower and approximately 10-15 fracturing stages are expected to be completed for a Duvernay Although the Canadian market slowed near the end of 2012, well. Duvernay activity levels were limited in 2012, with we believe the outlook for pressure pumping in Canada is approximately 50-60 wells drilled in the region; however, we bright. We believe the Canadian market is close to balanced expect activity levels to increase in 2013. Trican has worked with and expect the industry to show capital discipline with several customers in this region, and similar to the Horn River, minimal equipment additions in Canada during 2013. We we believe we are well positioned to capitalize on increasing believe Trican has strong customer relationships, a broad and Duvernay activity levels beginning in 2013. efficient infrastructure, highly skilled and qualified people, and a reputation for technological and operational excellence As an oil and gas services company, our ability to provide in Canada. We believe these factors, combined with the high quality service and products to our customers is highly future growth potential of Canadian plays such as the dependent on attracting and retaining our people. Availability Duvernay and Horn River, provide Trican with a platform for of people within the oil and gas sector remained a challenge in future growth and success in Canada in 2013 and beyond.

Number of Units at year end (Canada) 2008 2009 2010 2011 2012 B 2013C

Fracturing Crews A 18 18 18 18 21 21 HP 158,000 159,950 258,700 321,250 413,500 413,500 Cement Pumpers 49 52 48 53 56 56 Deep Coiled Tubing Units 16 16 19 20 20 20 Nitrogen Pumpers 25 26 27 33 38 38 Acidizing Units 13 13 15 17 19 19

Notes: A A fracturing crew is made up of several pieces of specialized equipment B Operational or in the final stages of construction C Expected equipment capacity at year end, based on current budget expectations, which are subject to change

2012 Annual Report | 11 Trican Well Service Ltd.

UNITED STATES

Trican’s U.S. operations provide fracturing, cementing, at our base in Odessa, Texas, where we grew from one crew acidizing, nitrogen and coiled tubing services and operates at the end of 2011 to as many as eight crews in the middle from eight U.S. bases in Texas (Longview, Springtown, of 2012, in response to strong demand and activity levels Mathis and Odessa), Oklahoma (Woodward and Shawnee), in the Permian region. This growth resulted in insufficient Pennsylvania (Mill Hall), and North Dakota (Minot). Trican infrastructure to support the crews in the region, which led currently operates within several of the major U.S. oil and to high people related costs, including accommodation gas plays, such as the Barnett, Woodford, Haynesville, and relocation expenses. Base related costs also increased Marcellus, Eagle Ford, Permian, Granite Wash and Bakken. because we did not have the base infrastructure in place to perform our own repairs and maintenance or 2012 was a challenging year for our U.S. operations. store equipment and products. The growth of this base, Although we experienced continued geographic growth, combined with substantial inflationary pressures in Odessa and an 8% increase in revenue relative to 2011, U.S. and the lack of infrastructure, led to an inefficient cost operating income decreased from $188.8 million to a structure, which contributed to the margin degradation loss of $25.1 million. Operating margins were negatively of our U.S. operations in 2012. Trican responded to these impacted by several factors during 2012, including stagnant inefficiencies in the third quarter of 2012 by reducing industry activity levels, redeployment of equipment, excess the number of active fleets in the Permian from eight to equipment supply and significant increases in guar costs. four. We also undertook significant cost cutting measures Overall U.S. oil and gas drilling activity in 2012 was throughout the second half of 2012, which included relatively consistent with levels seen in 2011. In the oil improvements in the efficiency of product transportation, and liquids-rich gas areas where Trican operates, which negotiating reduced product costs from suppliers, and include the Eagle Ford, Permian, Bakken, and Granite reducing people costs. We began to see the impact of Wash plays, the 2012 average annual rig count increased these measures in the fourth quarter of 2012, and we will by 18% compared to 2011, due to the continued strength continue to focus on reducing costs throughout 2013. of oil and liquids-rich gas prices. This increase was offset Similar to the Canadian market, demand for pressure by declines in the dry gas areas where Trican operates, pumping services in the U.S. increased substantially which include the Barnett, Haynesville, and Marcellus during 2010 and 2011. This led to a significant pressure plays. These U.S. activity trends resulted in a substantial pumping equipment shortage and the industry movement of Trican equipment out of dry gas plays responded by increasing fracturing capacity substantially and into oil and liquids-rich plays that began late in from 2010 until the end of 2012. We continued to see 2011 and extended into early 2012. By the end of 2012, substantial growth in our U.S. operations in 2012, as our 70% of Trican’s active equipment was operating in oil available fracturing capacity increased by 30% to 670,000 and liquids-rich gas plays, compared to 40% at the end horsepower. We opened a new base in Minot, North of 2011. The equipment redeployment had a negative Dakota to service the Bakken play, and began operating impact on 2012 operating margins due to the additional one fracturing crew from this base in August of 2012. We costs associated with moving the equipment and people also continued to expand our cementing, coiled tubing, into new regions, as well as the lost equipment utilization acidizing and nitrogen service lines as we executed on during the transition. our strategy to become a full-service pressure pumping In addition to redeployment costs, our U.S. operations company in the U.S. We saw particularly strong growth incurred additional costs related to insufficient infrastructure in cementing and coiled tubing. Trican U.S. saw annual and logistics as we opened new bases in oil and liquids revenue increases of 215% and 370% respectively in regions. High infrastructure costs were particularly evident cementing and coiled tubing during 2012.

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2012 Annual Report | 13 Trican Well Service Ltd.

The U.S. fracturing market remained undersupplied increased by 3% during the third quarter and remained until the first quarter of 2012, at which time available stable during the fourth quarter of 2012, despite the equipment supply began to surpass demand. Although oversupply of equipment throughout the region. the extent of the industry’s capital expansion factored In response to the poor U.S. market dynamics, Trican into the oversupplied market, the decline of natural gas reduced the size of its U.S. fleet by removing two prices and dry gas directed activity also played a key role. crews from active operation during the third quarter Fracturing intensive areas, such as the Haynesville, Barnett of 2012. This included the temporary shut-down of our and Marcellus shales, saw a dramatic drop in rig count base in Searcy, Arkansas, operating in the Fayetteville throughout 2012 due to depressed natural gas prices. As region, where one fracturing crew had previously been the market became oversupplied in the first quarter of 2012, deployed. This base will remain inactive until activity Trican experienced pricing decreases for our U.S. fracturing levels recover in the Fayetteville. In addition, two crews crews. Trican’s U.S. pricing fell by 14% during the first half that were scheduled to be deployed in the U.S. in the of 2012 relative to pricing levels at the end of 2011, which second of half of 2012 have not been activated and had a substantial negative impact on operating margins. currently remain idle and unstaffed. The four idle U.S. Unacceptably low operating margins in the second quarter crews are expected to remain inactive until U.S. market caused Trican to seek price increases in July for several of conditions improve, or a strategic opportunity arises in our contracted crews where pricing had been adjusted North America or internationally. downward. Price negotiations were successful, and pricing

Minot

NORTH DAKOTA

Mill Hall

PENNSYLVANIA MARCELLUS SHALE

Woodward

WOODFORD SHALE FAYETTEVILLE SHALE Searcy Shawnee OKLAHOMA

ARKANSAS Springtown

Odessa BARNETT SHALE Longview PERMIAN BASIN HAYNSEVILLE SHALE

TEXAS Houston LOUISIANA

EAGLE FORD SHALE Mathis

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Trican’s U.S. operating margins were also negatively more than high quality equipment and operational impacted by a substantial rise in guar costs in the first excellence, despite the importance of these factors. half of 2012. Guar is a bean grown primarily in India that Therefore, Trican’s strategy is to provide innovative and is used to thicken fracturing fluids. The price of guar has value added technology to our customers, in order to historically been approximately $2-$3 per pound, but rose effectively differentiate ourselves from the competition. to approximately $12 in the early part of 2012 due to dry Trican has experienced this first hand in Canada and weather in India and increased demand from the North Russia, where we have leading market positions based American pressure pumping industry. At peak pricing, on our innovative and customer-focused technology. guar represented approximately 40% of Trican’s cost of We have made significant efforts over the last several materials in the U.S. and led to an approximate 1,000 years to establish this reputation in the U.S., and we basis point decline in U.S. margins in the first half of 2012. continued to make progress in 2012. From our research In response to this increase, Trican quickly developed a and development facility in Houston, and collaboration synthetic guar substitute. Once our substitute, as well with facilities in Moscow and Calgary, Trican developed as substitutes developed by some of our competitors, several new products for customers in 2012. An in-depth became available to the market, the price of guar began discussion of many of these new technologies has been to decrease. By the fourth quarter of 2012, Trican U.S.’s included in the technology section of the annual report. realized guar price was approximately $6.50 per pound, A focus on technology will continue to be a key part of which was a decrease of approximately 40% compared our strategy in the U.S., as we look to develop additional to peak guar costs realized in the second quarter of 2012. technical solutions for our customers in 2013 and beyond. Trican is confident that guar prices will remain within a During 2012, Trican became established in many key U.S. reasonable range in the future, due to the existence of oil and gas basins, continued to expand all service lines fully developed and field tested substitutes. as part of our strategy to become a full-service pressure Given the volatility of the U.S. pressure pumping pumping company, and made progress in establishing industry over the last several years, the significance of a reputation for technological excellence in the U.S. competitor differentiation has become increasingly Although 2012 was a difficult year for our U.S. operations, important. We believe that to effectively compete in the we believe we took significant steps in establishing a U.S. market, a pressure pumping company must provide platform for future growth and success during 2012.

Number of Units at year end (U.S.) 2008 2009 2010 2011 2012B 2013C

Fracturing Crews A 8 8 10 13 18 18 HP 211,500 211,500 364,500 514,500 670,000 670,000 Cement Pumpers 2 2 5 15 25 25 Nitrogen Pumpers 4 4 7 10 17 17 Acidizing Units 1 2 4 8 14 14 Coiled Tubing Units - - - 6 11 11

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INTERNATIONAL

RUSSIA

Trican Well Service LLC began operating in Russia in 10% with slight improvements in operating margins. 2000 and has grown into one of the country’s leading Our Russian customers started the year behind fracturing companies. Trican’s services in Russia also schedule on their 2012 work programs and were not include cementing, coiled tubing, acidizing, nitrogen able to increase activity levels enough to reach activity and completion tools. Russian operations are based targets. As a result, 2012 revenue for our Russian and predominantly in the Tyumen Region of western Siberia, Kazakhstan operations was down 6% compared to but also extend into the Arctic North of the eastern 2011. In addition to lower than expected activity Siberian region of Vankor. Our Russian operations levels, revenue was negatively impacted by a 4% service these regions from bases in Nefteyugansk, year-over-year decrease in the average annual value of Raduzhny, Nyagan, Gubkinsky, Novy Urengoy, and the the rouble relative to the Canadian dollar. Operating Vankor Oilfield, Russia. Our Russian regional head office margins increased slightly in 2012 relative to 2011, is located in Nizhnevartovsk, Russia. although operating income fell below expectations due to the decrease in revenue. Our Russian operations performed slightly below expectations in 2012. Based on the 2012 contracts Oil prices were stable throughout most of 2012 and awarded, we were expecting revenue to increase by oil-directed activity supported the majority of our

Novy Urengoy Gubkinsky RUSSIA

Nyagan Raduzhny Nizhnevartovsk Nefteyugansk

Krasnoyarsk Moscow

Aktau KAZAKHSTAN Kyzylorda

2012 Annual Report | 17 Trican Well Service Ltd.

Russian pressure pumping business. However, the compared to approximately 3% in 2011. We expect Russian market remained competitive, with several customer interest in horizontal completions and firms attempting to gain market share, limiting multi-stage fracturing to continue to increase in our ability to increase Russian operating margins 2013, and expect it to represent 20% of 2013 Russian through pricing increases. Cost inflation in Russia also fracturing revenue. This is an important development continued to be a factor, as the annual 2012 inflation for the pressure pumping industry in Russia, as the rate was approximately 5%. shift towards more unconventional drilling and completions is expected to increase the demand for Although 2012 financial results were disappointing in horsepower in the region and place a larger emphasis Russia, the emergence of horizontal completions and on technology. With the shift towards more multi-stage fracturing was a positive development in multi-stage completions, Trican was able to 2012. Approximately 12% of our 2012 Russian fracturing successfully market its BPS (Burst Port System)® revenue was from work performed on horizontal wells, completion tool to the Russian market in 2012.

Trican has positioned itself as a technological leader in the Russian market by providing customers with innovative fracturing fluids, completion tools, and equipment.

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Customer acceptance of this technology in Russia was KAZAKHSTAN very positive in 2012, as a substantial increase in well Trican Well Service LLC began operating in Kazakhstan in 2005. production, as well as a reduction in well costs, was Trican provides fracturing services to the Kazakhstan market, noted by our customers using the BPS® system. With with two fracturing crews operating out of bases in Kyzylorda an increase in multi-stage fracturing expected in 2013, and Aktau. The Kazakhstan regional head office is located in we anticipate additional sales of our BPS® system in Kyzylorda, Kazakhstan. The majority of the activity within the Russia during 2013. Trican has positioned itself as a region is directed at oil wells, as Kazakhstan has approximately 8 technological leader in the Russian market by providing billion tonnes of proven recoverable oil reserves. customers with innovative fracturing fluids, completion tools, and equipment. We believe this reputation will Operating results were strong in Kazakhstan during 2012 for serve us well as the Russian market evolves into a more our two fracturing crews; however, the Kazakhstan pressure technology focused region. pumping market remains very competitive with several service companies operating in the region.

Number of Units at year end (Russia and Kazakhstan) 2008 2009 2010 2011 2012B 2013C

Fracturing Crews A 11 11 15 15 15 15 HP 79,150 88,150 101,650 109,050 109,050 109,050 Cement Pumpers 6 6 6 6 8 8 Deep Coiled Tubing Units 5 5 6 6 6 6 Nitrogen Pumpers 9 10 10 11 11 11

2012 Annual Report | 19 Trican Well Service Ltd.

ALGERIA SAUDI ARABIA

Trican began operations in Algeria in 2007, establishing a base In 2010, Trican entered into a joint business agreement in Hassi Messaoud. Trican offers coiled tubing, cementing, and with a partner in Saudi Arabia. During 2011 and 2012, we nitrogen services to Algeria’s largest state-owned oil company, made progress in establishing our technical qualifications Sonatrach, as well as other international operating companies and developing a sales presence in the region. In 2013, that are in partnership with Sonatrach. Trican expects to participate in cement and coiled tubing work tenders. Trican also completed a small amount of Algeria remains a very competitive and challenging market, and industrial services work in Saudi Arabia during 2012, and Trican’s financial and operational results in this region have been will look to expand this service line in 2013. below expectations for the past several years. In 2012, we saw modest improvements in this region as pricing and utilization With OPEC quotas restricting the production of oil, improved substantially for our coiled tubing service line. These we believe the Saudi government is in the process of improvements were partially offset by weak results from our converting domestic energy consumption from oil to cementing service line where pricing remained very competitive. gas to maximize the amount of oil that can be exported. Activity has already begun to increase in the Saudi We believe that supply commitments by Algeria to Europe Arabian tight gas market, and we expect this will result indicate that Algeria must increase its local gas and oil in increased demand for pressure pumping services in production over the next several years. Also, we believe the the region. Algerian government is interested in investing in and growing shale gas production in the future, which would increase the demand for pressure pumping service in Algeria. For these reasons, we continue to believe in the long-term potential of this region and will continue to maintain our presence in Algeria.

Number of Units at year end (Algeria) 2008 2009 2010 2011 2012A 2013B

Deep Coiled Tubing Units 1 2 2 2 2 2 Nitrogen Pumpers 1 2 2 2 2 2 Acidizing Units 1 2 2 2 2 2 Cementing Units - - 3 3 3 3

Notes: A Operational or in the final stages of construction B Expected equipment capacity at year end, based on approved budgets, which are subject to change

20 | 2012 Annual Report Trican Well Service Ltd.

Algiers TUNISIA AUSTRALIA COLOMBIA MOROCCO In July of 2011, Trican entered the Australian market through In November of 2012, Trican announced its entry Hassi Messaoud the acquisition of a privately owned company that provides into Colombia through a joint business agreement ALGERIA cementing and environmental services in Eastern Australia. with Independence Drilling S.A. (“Independence”). With an operating base in Roma, Queensland, Trican Independence is a privately held company operates five cement pumpers, along with associated headquartered in Bogota, Colombia, and has extensive ancillary equipment and fluid logistics equipment. experience in the provision of drilling services in the region. We intend to initially provide cementing services During 2012, Trican made progress in establishing relationships in the Colombian market, growing over time to become and technical qualifications with customers in the region. Oilfield a full-service pressure pumping company in the region. activity in the region was slow during 2012, but activity levels We expect to commence operations in Colombia during are expected to increase as producers look to meet aggressive the first half of 2013. growth targets to meet export requirements. We believe that Australia intends to become the second largest exporter Oil and gas activity has increased substantially in of liquefied natural gas within five years, and is targeting the Colombia over the last several years and we see construction of ten LNG facilities by 2020. We expect the excellent growth opportunities for Trican in this region. majority of this growth will come from the development of coal Several Canadian based producers are currently active seam and shale gas plays. Given Trican’s extensive experience in Colombia, which we believe provides an opportunity in providing pressure pumping services to coal seam and shale to leverage our strong Canadian reputation and gas plays in Canada, we believe we are well-positioned to take customer relationships. advantage of this growth as it develops.

Algiers TUNISIA

MOROCCO Hassi Messaoud

ALGERIA

2012 Annual Report | 21 Trican Well Service Ltd.

SAFETY

Safety is of the utmost importance to Trican, and as such, A key element in Trican’s safety efforts is the management Trican has developed a comprehensive global safety of risks associated with operations, maintenance activities program. The foundation of Trican’s Safety program is based and other specialized tasks. The hazard management on our core value: We won’t put anyone in harm’s way. processes utilized by Trican to identify, assess, and control hazards includes: This program is documented, maintained, assessed, reinforced and practiced. Trican Safety objectives include Hazard Assessments the elimination of all accidents at work and the prevention Hazard Identification and Unsafe Act Reporting of injury to our employees and others present at our worksites; and the provision of a healthy work environment Identification of Opportunities for Improvement for our employees and others present at our worksites. Safe Work Permits Introduced in 2006, after consulting with HSE Inspections Trican employees, Variance and Management of Change Procedures “Target Zero, Ten Reasons I CAN” is HSE Management System Audits an ongoing safety Hazard management processes allow operations management, campaign that supervisory staff and employees at all levels to identify unsafe encourages employees acts and/or conditions, and eliminate or control them before to think and behave in they result in injuries or losses. Some of these processes a manner that fosters are planned and scheduled (e.g. planned inspections, HSE an incident/injury free Management System Audits), while others are performed at the work environment. job planning stage or during the performance of a job.

Introduced in 2006 after consulting with Trican employees, “Target Zero, Ten Reasons I CAN” is an ongoing safety campaign that encourages employees to think and behave in a manner that fosters an incident/injury free work environment.

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2012 Annual Report | 23 Trican Well Service Ltd.

24 | 2012 Annual Report Trican Well Service Ltd.

TECHNOLOGY

As a recognized competitive advantage, technology is a key factor in Trican’s success. Our commitment to research and development is demonstrated every day by our Research and Development Centres located in Calgary, Houston and Moscow. With a comprehensive and integrated approach to innovation, our technical teams share expertise, knowledge and ideas across geographic borders. This enables us to be nimble, responding to our customers quickly to provide effective solutions in any location.

Trican is a recognized industry leader in providing innovative technical solutions to our customers, and has been included in RE$EARCH Infosource’s list of Canada’s Top 100 Corporate R&D Spenders* in 2007, 2008, 2009, 2011 and 2012.

Our Research and Development Centres feature state-of- the-art laboratories focusing on innovation in stimulation, cementing, completion systems and downhole tools, and reservoir management services.

* Compiled by Research Infosource (October 30, 2012) – “Canada’s Top 100 Corporate R&D Spenders 2012”

STIMULATION Guar Substitutes Novum Trican’s operations were significantly impacted by a large Novum is a unique guar-free product, offering a cost increase in the price of guar during the first three quarters of effective alternative to traditional guar systems. This 2012. In response to this increase, Trican’s stimulation group fluid system creates shear stable and viscoelastic quickly and effectively developed guar substitutes that will gels that display excellent proppant suspension. With help mitigate the impact of volatile guar prices in the future. traditional oxidizers, Novum breaks cleanly, without leaving behind a polymer residue, allowing for TriFrac-C™ sustained conductivity equivalent to that of guar TriFrac-C ™ is a cost-effective replacement to conventional guar- based systems. based fluid systems. This cellulose-based gelling agent employs a unique combination of delayed and instant crosslinkers, Both TriFrac-C and Novum have been field tested by engineered to ensure shear stability and achieve high Trican customers and results have been equivalent to or performance results. As an additional advantage, this product have exceeded guar-based systems. can be customized to individual jobs for optimized viscosity.

2012 Annual Report | 25 Trican Well Service Ltd.

MVP Frac™ reaction rates can be slowed resulting in insufficient Trican’s MVP Frac (Maximum Volume Placement)™ process development of crosslinked gel viscosity, which is a two-component slick water frac system comprised of ultimately leads to higher costs or reduced production the following: of the reservoir. Polar Frac™ allows optimal frac fluid performance, despite the cold reservoir temperatures. A non-energized component (FlowRider™) that allows proppant to be suspended in water GNE-1 GNE-1 is an environmentally-friendly non-emulsifier An energized component consisting of a low volume of surfactant that, when added to a water-based fracturing ™ nitrogen gas that works with FlowRider to transport the fluid, will prevent emulsions from forming between the proppant deeper and more effectively into the formation injected water and any oil or condensate that the water Test results have shown that, in comparison with regular may contact, thereby improving the effectiveness of the slick water fractures, MVP Frac™ transports proppant 25% fracturing fluid. As part of Trican’s EcoClean® line, GNE-1 farther into the reservoir, thereby increasing reservoir is designed to pass the stringent Microtox® test, which production. Additional benefits include higher sand volume is a recognized standard for testing water quality. concentrations, resulting in 25% less water usage on Divertsol average, and a reduced need for coiled tubing cleanouts. Trican’s Divertsol was developed to meet the need Polar Frac™ for a simple, easy to use method of effectively placing Trican’s Polar Frac™ was designed for use in regions of solvents without costly mechanical diversion techniques. Russia where downhole temperatures are less than As this solvent blend is slowly squeezed downhole, 20°C (68°F). In these lower temperature zones, chemical bottom hole conditions gradually increase the viscosity

26 | 2012 Annual Report Trican Well Service Ltd.

of the solvent. As the viscosity changes, treated pathways and development centres, work together to design new become blocked, diverting the subsequent waves of and enhanced cement blends aimed at meeting the solvent along new paths. Divertsol can be customized for needs of our customers and continuously improving individual wellbore scenarios, allowing for optimal fluid Trican’s cementing technology. Some of Trican’s most placement, which lowers costs and increases production recent innovations in cementing services include: of the reservoir. TSB-300 (Trican Surfactant Blend) – A cost effective Thermal Acid surfactant blend for spacers, used for optimal mud Trican’s thermal acid technology consists of an acid removal and wettability. and solvent formulation designed to clean scale MTR-150 (Trican Mid-temperature Retarder) – This build-up and organic deposits that may accumulate mid-temperature retarder features a linear retardation in high temperature Steam Assisted Gravity Drainage effect, with a global application in temperatures (“SAGD”) heavy oil wells, without causing significant between 65.5°C (150°F) to 121.1°C (250°F). corrosion damage. Using coiled tubing for placement to ensure increased coverage, Trican’s thermal acid SPC-2 (Trican Self-Pressurizing Cement) – This technology provides customers with a cost-effective self-pressurizing cement uses a proprietary additive and efficient solution to scale build-up. to prevent gas migration.

CEMENTING TAS-200 (Trican Anti-Settling) – An efficient additive featuring high temperature anti-settling properties. Our technical cementing group, combined with our lab and research personnel operating out of our research

2012 Annual Report | 27 COMPLETION SYSTEMS AND DOWNHOLE TOOL SERVICES

Trican offers a wide array of solutions in multi-stage fracturing completions. Our Completion Systems and Downhole Tools Services team builds upon Trican’s extensive cementing, fracturing and stimulation experience to provide the following services:

Cemented and Open Hole Completion Systems for Horizontal Multi-Stage Fracturing

Coiled Tubing Drilling Services

Coiled Tubing Intervention Tools and Services

Conventional Well Construction and Completion Tools

Trican acquired i-TEC, a technology-driven developer of next generation tools, in early 2013. Combined with the innovation emanating from our research and development centres, this acquisition has enabled us to build a comprehensive, field-proven completion systems portfolio. Our skill, expertise and commitment to providing customized solutions allow us to deliver high-quality service that meets the needs of our customers. Our portfolio includes:

BPS® features a casing collar with pre-milled frac ports specifically designed to open at precise pressures, providing operators more control over the diversion of their fracs. BPS® is a patented system that uses Trican’s selective stimulation straddle technology to allow for repeatable, selective isolation of downhole intervals in stimulation treatments. i-Frac is a cost-effective ball drop activated multi- stage frac solution. The unique design of this high performance valve allows the operator to install multiple frac valves per zone for optimal stimulation. i-Valve is a high performance multi-purpose injection, cement, production and stimulation valve. The i-Valve features easily configurable carbide nozzles that can be installed at location prior to running in hole for optimum flow control. Trican Well Service Ltd.

Trican’s research and development team, along with the recent acquisition of i-TEC in early 2013, a technology-driven developer of next generation tools, have enabled us to build a comprehensive, field-proven completion systems portfolio. Our skill, expertise and commitment to providing customized solutions allow us to deliver high-quality service that meets the needs of our customers.

i-Stroke is a high impact percussion hammer tool, i-Con is a compact, data acquisition tool used in used for coiled tubing fishing and shifting operations. coiled tubing and drill pipe operations. Data logs i-Stroke allows ball activated tools to be run below it, is containing tension, compression, torque, temperature, acid resistant, and is configurable in a single up, single pressure, vibrations and acceleration are easily down or a bi-directional mode. downloaded from user-friendly i-TEC software for analysis and trending. i-Shift is a selective hydraulic shifting tool, activated by flow at desired depths to open or close sleeves multiple i-Plug is an electronically resettable barrier plug times during the same run in horizontal wells. This designed for the North Sea and is currently being tool allows shifting of a wide array of sliding sleeves, developed for North American land markets. and can be configured as a down, up or dual acting manipulation tool.

2012 Annual Report | 29 Trican Well Service Ltd.

RESERVOIR MANAGEMENT SERVICES Microseismic Services Trican’s microseismic team uses expertise and technical Reservoir Management Services at Trican includes a wide innovation to provide graphic representations of a fracture. range of services with an integrated approach. Our team Trican expanded its microseismic capabilities in early 2013 by of reservoir engineers, geologists and geophysicists work entering into a joint business agreement with GeoTomo LLC. together to fully integrate core, log, microseismic and This agreement gives Trican access to a GeoTomo software fracture data into detailed reservoir studies. package called MiVu™, which is capable of performing Reservoir Services microseismic model building, survey optimization, data Innovation in reservoir modelling and simulation is an processing, event imaging, quality control, and visualization integral part of our Reservoir Management Services. With with advanced geophysical technologies and high- the use of numerical reservoir simulator, our technical team performance commercial software graphics utilities. provides detailed analysis and understanding of a resource Trican will use the MiVu™ full 3-Dimensional (3D) capabilities play, including history matching, production, forecasting, with 3D visualization tools referencing surface seismic, identifying infill drilling opportunities, fracture spacing borehole data, 3D velocity modelling, 3D tomographic and wellbore spacing studies, and secondary and tertiary inversion, 3D structures and faults, which are integrated with recovery evaluation. Trican’s extensive fracturing and reservoir knowledge and experience to optimize fracture design.

30 | 2012 Annual Report MiVu™ is expected to enable users to locate microseismic events generated by a fracture treatment using up to five different techniques. The joint agreement leverages the MiVu™ advancements in geophysical software and Trican’s notable depth of experience in geological and pressure pumping services to offer customized solutions that are expected to match the uniqueness of a given well. We believe these customized solutions should provide a highly accurate view of a customer’s fracture network which should assist the producer in determining optimal fracture performance with the expectation that production from future wells in the reservoir should improve. The integration of one or several of MiVu’s processing capabilities with fracture models, as well as the analysis of experienced geophysicists, geologists, and fracturing and reservoir experts, should result in customers receiving an unparalleled interpretation of their reservoir and optimize the completion of the reservoir.

Geological Solutions Trican Geological Solutions specializes in unconventional reservoir evaluation. Our team offers a broad range of services, including land evaluation and prospecting, design of drilling and completion programs, and field desorption and laboratory analysis from our permanent facilities in North America, as well as from our self- contained, mobile field laboratories and staging areas around the world.

In 2012, Trican Geological Solutions:

Added to its research portfolio with a study for industry on the potential of the Muskwa formation in the Rainbow Lake area

Expanded the shale analytical program with a Computed Tomography (CT) Scanner to help determine hydrocarbon potential

Expanded instrumentation capacity with a Roller Oven and Capillary Suction Capacity Instrument to help with reservoir evaluation Trican Well Service Ltd.

32 | 2012 Annual Report Trican Well Service Ltd.

SUSTAINABILITY

Minimizing the impact of our operations on the environment is one of Trican’s core values. Employees are encouraged and committed to keeping environmental sustainability top of mind when developing or purchasing new tools, components, processes and products, and in establishing the procedures and practices we employ every day.

Sustainability in our operations is increasingly important to our customers, as well as our employees, our shareholders, and our communities. We comply with local environmental regulations in our operations and emergency preparedness in response to activities and incidents that could result in environmental damage. We also voluntarily participate in the disclosure programs of many jurisdictions, including various North American FracFocus initiatives. Trican makes every attempt to adopt an environmental program that goes beyond regulations, extending into opportunities for improved practices wherever possible.

Trican’s policies and procedures on sustainability are communicated to our employees on a regular basis. In addition to classroom time, employees take part in emergency drills that involve spill prevention, incident mitigation and additional safe practices.

Trican has taken a proactive position in routinely testing our fracture fluid additives for potential toxicity issues, allowing us to investigate and develop alternatives to our blends and product lines. As a result, we have replaced many components with non-toxic options, both in our EcoClean® line and in conventional systems.

2012 Annual Report | 33 Trican Well Service Ltd.

Regular practices that contribute to safeguarding the WATER USAGE environment include: To reduce fresh water usage, the industry trend is to use Recovering and re-using water and chemicals used more produced, non-potable water from underground in industrial cleaning salt water aquifers, and recycle flowback water to allow for its reuse. Because of this, Trican has developed Re-engineering processes and practices to reduce a range of products and processes that work with energy and resource consumption the conditions of these water sources, and ensure Recycling shop materials, scrap metals customers get the best results from whichever method and lubricants they select.

Re-furbishing vehicle tires Water Management Trican has entered into an alliance with Emerald Preventative maintenance and onsite containment Surf Sciences (“ESS”) to meet the water planning practices to keep job sites clean and treatment needs of customers. The alliance Purchasing energy efficient and emission reducing will combine our mutual expertise and experience vehicles and equipment in developing solutions that address industry and public concerns over freshwater usage and fluid PRODUCT DEVELOPMENT waste disposal. ESS is an innovative leader in the development and application of oilfield water EcoClean® management technologies, and we combine these Trican’s expanding line of EcoClean® products grew to technologies with Trican’s extensive experience in oil include EcoClean-XB™, a crosslinked gelled water frac and gas well stimulation to provide customers with fluid designed to mitigate risk of contamination of non- choices that are both operationally and cost effective. saline groundwater during treatments. This non-toxic fluid is bio-degradable and non-bioaccumulating, and Salt Tolerant Friction Reducers all additives pass the recommended Microtox® test. The Trican FR series of friction reducers was designed EcoClean-XB™ performs like a conventional frac fluid, to give optimal friction reduction performance in is environmentally friendly, and can be pumped with brine water containing salt concentrations greater nitrogen to reduce water usage. In the past year, nearly than 100,000 ppm as well as other components. These 2,000 treatments have been pumped using one or more friction reducers facilitate the use of produced waters of the EcoClean® line of products. and flow back waters, alleviating the strain on fresh water sources. FR-9, the latest in the series, has been TriFrac-MLT shown to pass the Microtox® test with a very high TriFrac-MLT is a crosslinked gelled water system that is threshold value. Other benefits realized through the use highly tolerant of salt and other contaminants, which of FR-9 include cost reduction, as FR-9 has been shown allows us to reuse untreated oilfield produced water, to be effective at nearly half the concentration when water that is produced along with oil and/or gas from compared to conventional friction reducers. FR-9 is a wellbore, and flow back water with salinities as high currently being implemented into fracturing treatments as 350,000 mg/L (greater than 25% salt content). The in many of the primary areas of horizontal shale gas system has been tested in untreated produced water stimulation across North America. from the Bakken and Eagle Ford Shales for at least eight different operators, with promising results.

34 | 2012 Annual Report Trican Well Service Ltd.

WATER REDUCTION COMPANY REPORTING

By introducing new and improved technologies, Carbon Disclosure Project Trican is continually seeking ways to execute the same The Carbon Disclosure Project (“CDP”) is run by an treatment while using less water. Some of our recent organization that works with corporations around the technologies include: world to disclose carbon emissions information to the public. Emissions are based on fuel usage, which Kronos is directly related to activity levels. Trican participates Kronos is a high temperature, ultra-low polymer in the CDP program and will use the data to track our crosslinked fluid with rapid break times. The unique emissions and make improvements where possible. properties of this fluid are an initial high viscosity to carry proppant, and a customizable and rapid break FracFocus time to improve the fracture geometry and adequately Many states and provinces in North America have stimulate the reservoir. In a recent application, the dual adopted a reporting structure called FracFocus, which purpose fluid system resulted in 35% less fluid being is a collaboration among jurisdictions, regulators and pumped on average, with 27.5% lower pump rates. industry to provide objective information on hydraulic fracturing to the public, including what laws and MVP Frac™ regulations are in place, and what makes up the frac Trican MVP Frac™ slick water frac system enhances fluids. Trican supports its customers by providing the proppant distribution and well production, while facilitating required information for reporting purposes. reductions in water usage in the 20% - 25% range, due to the improvement in proppant transportation.

2012 Annual Report | 35 Trican Well Service Ltd.

OUTLOOK

CANADIAN OPERATIONS U.S. OPERATIONS

Demand for pressure pumping services in Canada is expected to We expect U.S. pressure pumping demand will continue be stable in 2013 compared to 2012, with recent industry forecasts to be driven by commodity prices and the cash flows and reflecting a 3% increase in the number of wells drilled compared capital budgets of our U.S. customers. Based on the current to 2012. Oil and liquids-rich gas directed activity is expected to commodity price and capital spending environment in the continue to dominate the Canadian oil and gas market given the U.S., we are not expecting a significant change in 2013 pressure continued weakness in natural gas prices. Horizontal drilling activity pumping demand relative to demand levels seen in the is also expected to remain strong, as it has become the preferred second half of 2012. drilling method in the Canadian market. In 2012, 66% of all wells We believe the U.S. pressure pumping market is currently drilled in Canada were horizontal, compared to 55% in 2011 and oversupplied and as a result, we are not anticipating a 42% in 2010. This trend has benefitted the pressure pumping meaningful amount of new horsepower to enter the U.S. industry by leading to more fracturing treatments per well and is market in 2013. There is potential for modest declines in expected to continue in 2013. available U.S. horsepower to occur in 2013 if equipment is The amount of available equipment in Canada has increased redeployed out of North American and into international substantially over the past year, as the industry continued markets, and/or if older U.S. equipment is permanently retired; to respond to an undersupplied pressure pumping market however, we are not expecting a significant drop in U.S. during 2012. Despite the stable Canadian pressure pumping pressure pumping supply in 2013. activity anticipated in 2013, increased supply is expected to Given our expectation of a relatively flat supply and demand result in a year-over-year reduction in pricing. However, most environment during 2013, we believe the U.S. pressure of the price declines occurred in the second half of 2012 and pumping market will remain oversupplied throughout the we do not expect any significant additional pricing decreases upcoming year; however, we do not expect the supply/ in Canada during 2013. Despite the relatively flat demand demand imbalance to grow throughout 2013. That being and the increase in supply, we believe the Canadian market said, the U.S. pressure pumping market can change quickly is currently balanced and will remain so throughout 2013. We and we will continue to monitor commodity prices and the do not expect a meaningful increase in Canadian horsepower spending of our customers, and react appropriately as market supply in 2013 and believe that sustained demand levels conditions change. will keep the market in balance. However, our Canadian operations are significantly dependant on the capital budgets U.S. pricing declined substantially during the first half of 2012 of our customers and changes to commodity prices. We will as the market became oversupplied, but remained relatively continue to closely monitor the Canadian market and react flat in the second half. We expect pricing to remain stable in appropriately should market conditions change. 2013 given the expectations of a steady supply and demand environment in the U.S.; however, we believe pricing could Canadian operating margins in 2013 are expected to be down soften slightly in some of the more active oil and liquids- relative to 2012 due to the year-over-year decline in pricing; rich gas plays if equipment continues to be redeployed into however, Canadian operating margins are expected to remain these areas. In addition, approximately 60% of our active U.S. above our return on capital targets.

36 | 2012 Annual Report Trican Well Service Ltd.

fracturing equipment is currently under contracts expiring in shift in our work scope to higher margin work and multi-stage 2013. We will be working with new and existing customers to activity, including completion tool revenue, and a continued obtain work for these crews as contracts expire. We expect to focus on optimizing the Russian operations’ cost structure. realize moderate pricing declines in 2013 due to the contract 2012 was a successful year for our two fracturing crews expirations, but expect 2013 utilization of our U.S. fracturing in Kazakhstan, and we expect the Kazakhstan pressure fleet to remain consistent with 2012. pumping market to be stable in 2013. Activity levels are Despite the prospect of an oversupplied U.S. pressure pumping expected to be down slightly; however, operating margins market in 2013, we believe Trican’s U.S. operating margins will are expected to remain strong in this region. increase gradually throughout the year. We have undertaken Our Algeria operations improved modestly in 2012, in particular substantial cost cutting initiatives that are expected to improve for our coiled tubing service line. We expect Algerian coiled margins, and we started to see some of the benefits of these tubing activity and pricing to remain stable in 2013, and we will initiatives in the fourth quarter of 2012. In addition, we are look to secure additional contracts for this service line to keep expecting realized guar prices to continue to decline in the first equipment utilization strong. The cementing market in Algeria was quarter of 2013 as we work through our higher priced inventory. very competitive in 2012 and we expect this to continue in 2013. We expect to grow our cementing and coiled tubing service We will look to increase pricing and utilization for our cementing lines in the U.S. during 2013 by increasing utilization of existing equipment in Algeria during 2013. We will also continue to equipment. A substantial amount of new cementing and closely monitor the political instability in this region and react coiled tubing equipment was built in 2012, and with a full appropriately should the instability negatively impact our Algeria year of equipment availability in 2013, we anticipate sales from operations and, more importantly, the safety of our people. these service lines to increase as a percentage of total sales. An Our 2013 strategy in Australia will be to continue to expand our important part of our U.S. strategy is to become a full-service cementing service line and build new customer relationships. pressure pumping company, and we will continue to execute We expect to see moderate growth in Australian cementing on this strategy in 2013. revenue and operating income improvements in 2013. INTERNATIONAL However, Australian oil and gas activity continues to develop slowly, and we do not expect this region to generate a Based on the results of the 2013 contract tendering process meaningful level of profitability in 2013. for our Russian operations, we expect 2013 revenue to increase by approximately 25%, as measured in Russian Through our joint business arrangements in Saudi Arabia roubles, compared to 2012. The estimated revenue increase and Colombia, we are working to establish our presence in is based on a 2% expected rise in overall activity combined these markets and expect to participate in pressure pumping with a 23% expected increase in average revenue-per-job. tenders in 2013. Initially, we will look to add cementing and The expected increase in average revenue-per-job is the coiled tubing services, with an eventual goal of being full- combined result of the trend towards larger fracturing job service pressure pumping companies in these regions. sizes in multi-stage completions, a shift in the sales mix toward more fracturing work relative to coiled tubing and cementing, and a modest increase in pricing. Description of Services A high rate of inflation in the Russian market and strong competition continues to challenge the Russian operation’s For a description of Trican’s services, profitability. However, we are anticipating moderate improvements in operating margins in 2013 as a result of a visit www.trican.ca/services.

2012 Annual Report | 37 Trican Well Service Ltd.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking information and financial outlook based on Trican’s current expectations, estimates, projections and assumptions that were made by the Company in light of information available at the time the statement was made. Forward-looking information and financial outlook that address expectations or projections about the future, and other statements and information about the Company’s strategy for growth, expected and future expenditures, costs, operating and financial results, future financing and capital activities are forward-looking statements. Some forward-looking information and financial outlook are identified by the use of terms and phrases such as “anticipate,” “achieve”, “achievable,” “believe,” “estimate,” “expect,” “intend”, “plan”, “planned”, and other similar terms and phrases. This forward-looking information and financial outlook speak only as of the date of this document and we do not undertake to publicly update this forward-looking information and financial outlook except in accordance with applicable securities laws. This forward-looking information and financial outlook include, among others:

The belief that Trican is positioned to capitalize on The expectation that expansion of multi-stage growth opportunities in new and existing markets as fracturing will have a positive impact on our operations they arise in the future; in Russia;

The belief that Trican was able to make significant The belief that international markets will fuel the growth progress during 2012 in establishing a platform for of the pressure pumping industry for years to come; growth in all of our world-wide regions; The belief that the i-TEC acquisition complements The expectation that the future prospects and Trican’s existing completion systems and tools business, development of the Duvernay play will have a positive and expansion of this service line is expected to provide impact on Trican’s Canadian operations; growth opportunities and enhance our other pressure pumping service lines; The expectation that the potential of liquefied natural gas exports from Canada will rejuvenate future activity The expectation that Trican’s 2013 capital budget will be in Canada’s dry gas plays, such as the Horn River; $32.3 million;

The belief that a strong presence in the U.S. market is The belief that many of our maintenance spending necessary to maintain a reputation as a growth oriented requirements for 2013 were incurred in 2012 and we do international full-service pressure pumping company; not have any concerns about maintaining our fleet in top operating condition throughout 2013; The belief that Trican has an opportunity to improve our U.S. operations in 2013 by improving operational The belief that with the support of our strong customer efficiencies, including cost reductions, and expanding base, and the efforts and commitment of our 5,700 our technological capabilities as a way to differentiate employees world-wide, Trican made excellent progress in ourselves from the competition; 2012 in establishing a platform for future growth;

38 | 2012 Annual Report Trican Well Service Ltd.

The belief that the Canadian pressure pumping market The belief that Trican is well positioned to capitalize on is balanced, and at current levels operating margins, we increasing Duvernay activity levels beginning in 2013; can meet our return on capital hurdle rate; The belief that the outlook for pressure pumping in The expectation that growth in fracturing stages per Canada is bright; well in Canada will be augmented as activity levels in the The belief that the Canadian market is close to balanced Duvernay and Horn River plays increase in the future; and the industry will show capital discipline with The belief that the Horn River play in Northeastern minimal equipment additions in Canada during 2013; British Columbia has the potential to be Canada’s first The belief that Trican has strong customer relationships, large-scale, commercial shale gas operation; a broad and efficient infrastructure, highly skilled and The expectation that at current gas prices, we do not qualified people, and a reputation for technological and expect Horn River activity to increase in the near future; operational excellence in Canada;

The belief that the Horn River play will be a key source The expectation that four idle U.S. crews will remain for future LNG facilities in British Columbia, and as inactive until U.S. market conditions improve or a strategic progress is made on the approval and construction of opportunity arises in North America or internationally; these facilities, interest and activity levels in the Horn The belief that guar prices will remain within a River will increase: reasonable range in the future due to the existence of The expectation that expansion of Horn River activity fully developed and field tested substitutes; would be extremely beneficial to the pressure pumping The belief that to effectively compete in the U.S. market, industry, as pressure pumping costs per well in this region a pressure pumping company must provide more than are expected to be the highest of any play in Canada; high quality equipment and operational excellence, The expectation that average crew sizes in the Horn despite the importance of these factors; River will be 40,000-50,000 horsepower and stages per The belief that Trican took significant steps in well will be 15-25 in the region, which is well above establishing a platform for future growth and success in Canadian averages; the U.S. during 2012; The belief that Trican is well positioned to capitalize on The expectation that Russian customer interest in Horn River growth as it develops in the future; horizontal completions and multi-stage fracturing will The expectation that the Duvernay play will have over continue to increase in 2013 and the expectation that it 6,000 drilling locations; will represent 20% of 2013 Russian fracturing revenue;

The expectation that Duvernay fracturing crew sizes will The expectation that the shift towards more be 15,000-34,000 horsepower with approximately 10-15 unconventional drilling and completions in Russia will fracturing stages per well; increase the demand for horsepower in the region and place a larger emphasis on technology; The expectation that activity levels in the Duvernay will increase in 2013;

2012 Annual Report | 39 Trican Well Service Ltd.

The expectation of additional sales of our BPS® system The expectation that increased activity in the Saudi in Russia during 2013; Arabian tight gas market will result in increased demand for pressure pumping services in the region; The belief that our reputation as a technological leader in the Russian market by providing customers The expectation that the majority of the growth in the with innovative fracturing fluids, completion tools, Australian market will come from the development of and equipment will serve us well as the Russia market coal seam and shale gas plays; evolves into a more technology focused region; The belief that Trican is well-positioned to take The belief that supply commitments by Algeria to advantage of Australian growth as it develops; Europe indicate that Algeria must increase its local gas The expectation that Trican will initially provide and oil production over the next several years; cementing services in the Colombian market growing The belief that an interest in investing in and growing over time to become a full service pressure pumping shale gas production in the future by the Algerian company in the region; government will substantially increase the demand for The expectation that Trican will commence operations pressure pumping service in Algeria; in Colombia during the first half of 2013; The belief in the long-term potential of the Algerian The belief that Colombia provides excellent growth region; opportunities for Trican; The expectation that Trican will participate in cement and coiled tubing work tenders in Saudi Arabia during 2013;

40 | 2012 Annual Report Trican Well Service Ltd.

The belief that the existence of several Canadian- The expectation that the integration of one or several based producers in Colombia provides Trican with an of MiVu’s processing capabilities with fracture models, opportunity to take advantage of its strong Canadian as well as the analysis of experienced geophysicists, reputation and customers relationships; geologists, and fracturing and reservoir experts, should result in customers receiving an unparalleled The expectation that MiVu™ will enable users to locate interpretation of their reservoir and should optimize the Microseismic events generated by a fracture treatment completion of the reservoir; using up to five different techniques; The expectation that demand for pressure pumping The belief that the joint arrangement leverages the services in Canada will be stable throughout 2013; MiVu™ advancements in geophysical software and Trican’s notable depth of experience in geological The expectation that oil and liquids-rich gas directed and pressure pumping services to offer customized activity will continue to dominate the Canadian oil and solutions that are expected to match the uniqueness of gas market; a given well; The expectation that horizontal drilling activity will The belief that these customized solutions should remain strong in Canada; provide a highly accurate view of a customer’s The expectation that increased equipment supply in fracture network which should assist the producer in Canada will result in a year-over-year reduction in pricing; determining optimal fracture performance with the expectation that production from future wells in the reservoir should improve;

2012 Annual Report | 41 Trican Well Service Ltd.

The belief that most of the 2012 price declines in The expectation that the supply/demand imbalance in Canada occurred in the second half of 2012 and we do the U.S. will not grow throughout 2013; not expect any significant additional pricing decreases The expectation that U.S. pricing will remain stable in in Canada during 2013; 2013 given the expectations of a steady supply and The belief that the Canadian market is currently demand environment in the U.S.; balanced and will remain so throughout 2013; The belief that U.S. pricing could soften slightly in The expectation that a meaningful increase in Canadian some of the more active oil and liquids-rich gas plays if horsepower supply will not occur in 2013 and that equipment continues to be redeployed into these areas; sustained demand levels will keep the market in balance; The expectation that Trican U.S. will realize moderate The expectation that 2013 Canadian operating margins pricing declines in 2013 due to contract expirations; will be down relative to 2012 due the year-over-year The expectation that the utilization of Trican U.S.’s decline in pricing; fracturing fleet will remain consistent with 2012; The expectation that Canadian operating margins will The belief that Trican’s U.S. operating margins will remain above our return on capital targets during 2013; increase gradually throughout the year; The expectation that U.S. pressure pumping demand The expectation that cost cutting initiatives will improve will continue to be driven by commodity prices and the U.S. operating margins in 2013; cash flows and capital budgets of our U.S. customers; The expectation that realized guar prices will continue The expectation that based on the current commodity price to decline in the first half of 2013 as we work through and capital spending environment in the U.S., no significant our higher priced inventory; change in 2013 pressure pumping demand will occur relative to demand levels seen in the second half of 2012. The expectation that we will grow our cementing and coiled tubing service lines in the U.S. during 2013 by The expectation that a meaningful amount of new increasing utilization of existing equipment; horsepower will not enter the U.S. market in 2013; The expectation that sales from our U.S. cementing and The potential for modest declines in available U.S. coiled tubing service lines will increase as a percentage horsepower to occur in 2013 if equipment is redeployed of total sales; out of North American and into international markets and if older U.S. equipment is permanently retired; The expectation that 2013 Russia revenue will increase by approximately 25%, as measured in Russian roubles, The expectation that a significant drop in U.S. pressure compared to 2012; pumping supply in 2013 will not occur; The expectation that the estimated revenue increase is The belief that the U.S. pressure pumping market will based on a 2% rise in overall activity combined with a remain oversupplied throughout the upcoming year; 23% increase in average revenue-per-job;

42 | 2012 Annual Report Trican Well Service Ltd.

The expectation that the increase in average revenue- addition to other factors and assumptions which may per-job is the combined result of the trend towards be identified in this document, assumptions have been larger fracturing job sizes in multi-stage completions, made regarding, among other things: industry activity; a shift in the sales mix toward more fracturing work the general stability of the economic and political relative to coiled tubing and cementing and a modest environment; effect of market conditions on demand for increase in pricing; the Company’s products and services; the ability to obtain qualified staff, equipment and services in a timely and cost The expectation of moderate improvements in Russian efficient manner; the ability to operate its business in a operating margins in 2013; safe, efficient and effective manner; the performance and The expectation that the Kazakhstan pressure pumping characteristics of various business segments; the effect of market will be stable in 2013; current plans; the timing and costs of capital expenditures; future oil and natural gas prices; currency, exchange and The expectation that activity levels in Kazakhstan will be interest rates; the regulatory framework regarding royalties, down slightly; however, operating margins are expected taxes and environmental matters in the jurisdictions to remain strong in this region; in which the Company operates; and the ability of the Company to successfully market its products and services. The expectation that Algerian coiled tubing activity and pricing will remain stable in 2013; Forward-looking information and financial outlook is subject to a number of risks and uncertainties, which could cause The expectation that the cementing market in Algeria actual results to differ materially from those anticipated. will be very competitive in 2013; These risks and uncertainties include: fluctuating prices for The expectation of moderate growth in Australian crude oil and natural gas; changes in drilling activity; general cementing revenue and operating income global economic, political and business conditions; weather improvements in 2013; conditions; regulatory changes; the successful exploitation and integration of technology; customer acceptance The expectation that Australia will not generate a of technology; success in obtaining issued patents; the meaningful level of profitability in 2013. potential development of competing technologies by The expectation that Trican will participate in pressure market competitors; and availability of products, qualified pumping tenders in 2013 in Saudi Arabia and Colombia. personnel, manufacturing capacity and raw materials. The foregoing important factors are not exhaustive. In addition, actual results could differ materially from those anticipated in forward-looking information and financial outlook Forward-looking information and financial outlook are provided herein as a result of the risk factors set forth under based on current expectations, estimates, projections the section entitled “Risks Factors” in our Annual Information and assumptions, which we believe are reasonable but Form dated March 21, 2013. Readers are also referred to the which may prove to be incorrect. Trican’s actual results risk factors and assumptions described in other documents may differ materially from those expressed or implied filed by the Company from time to time with securities and therefore such forward-looking information and regulatory authorities. financial outlook should not be unduly relied upon. In

2012 Annual Report | 43 Trican Well Service Ltd.

CORPORATE INFORMATION

BOARD OF DIRECTORS OFFICERS Murray L. Cobbe Dale M. Dusterhoft Chairman Chief Executive Officer

G. Allen Brooks (1) (3) (5) Donald R. Luft President President and Chief Operating Officer G. Allen Brooks, LLC Michael A. Baldwin, C.A. Kenneth M. Bagan (1) (4) Vice President, Finance and Chief Financial Officer Independent Businessman Bonita M. Croft Kevin L. Nugent (1) (3) Vice President, Legal, General Counsel and President Corporate Secretary Livingstone Energy Management Corporation Rob J. Cox Douglas F. Robinson (2) (4) Vice President, Canadian Geographic Region Independent Businessman

Alexander J. Pourbaix (2) (3) President, Energy and Oil Pipelines TransCanada Corporation

Dean E. Taylor (2) (4) Independent Businessman

Dale M. Dusterhoft Chief Executive Officer

Donald R. Luft (4) President and Chief Operating Officer

______

(1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Corporate Governance Committee (4) Member of the Health, Safety and Environment Committee (5) Lead Director

44 | 2012 Annual Report Trican Well Service Ltd.

AUDITORS CORPORATE OFFICE KPMG LLP, Chartered Accountants Trican Well Service Ltd. Calgary, Alberta 2900, 645 – 7th Avenue S.W. Calgary, Alberta T2P 4G8 BANKERS Telephone: (403) 266-0202 HSBC Bank Canada Facsimile: (403) 237-7716 Calgary, AB Website: www.trican.ca REGISTRAR AND TRANSFER AGENT

Computershare Trust Company of Canada Calgary, Alberta STOCK EXCHANGE LISTING

The Toronto Stock Exchange Trading Symbol: TCW INVESTOR RELATIONS INFORMATION

Requests for information should be directed to:

Dale M. Dusterhoft Chief Executive Officer

Michael A. Baldwin, C.A. Vice President, Finance and Chief Financial Officer

Gary E. Summach, C.A. Director of Reporting and Investor Relations

2012 Annual Report | 45 Trican Well Service Ltd.

MANAGEMENT’S DISCUSSION AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2011 and 2012 Trican Well Service Ltd.

MANAGEMENT’S DISCUSSION AND OVERVIEW

ANALYSIS Headquartered in Calgary, Alberta, Canada, Trican has The following discussion and analysis of the financial operations in Canada, the U.S., Russia, Kazakhstan, Algeria, condition and results of operations of the Company has been Australia and Norway. Trican provides a comprehensive prepared taking into consideration information available to array of specialized products, equipment and services that February 26, 2013 and should be read in conjunction with the are used during the exploration and development of oil and consolidated financial statements and accompanying notes. gas reserves.

Financial Review ($ millions, except per share amounts; unaudited) Three months ended Twelve months ended Dec. 31, Dec. 31, Sept. 30, Dec. 31, Dec. 31, 2012 2011 2012 2012 2011 Revenue $485.9 $694.2 $593.2 $2,213 $2,309.6 Operating income * 35.1 197.3 71.4 240.1 614.5 Net income (loss) (7.7) 114.9 22.6 53.3 338.6 Net income (loss) per share (basic) ($0.05) $0.78 $0.16 $0.37 $2.32 (diluted) ($0.05) $0.78 $0.16 $0.37 $2.30 Adjusted net income (loss) * (5.4) 117.9 24.7 63.0 351.0 Adjusted net income (loss) per share* (basic) ($0.04) $0.80 $0.17 $0.43 $2.41 (diluted) ($0.04) $0.80 $0.17 $0.43 $2.39 Funds provided by (used in) operations* (14.0) 181.9 49.3 122.8 588.8

Notes: * Trican makes reference to operating income, adjusted net income (loss) and funds provided by (used in) operations. These are measures that are not recognized under International Financial Reporting Standards (IFRS). Management believes that, in addition to net income (loss), operating income, adjusted net income (loss) and funds provided by (used in) operations are useful supplemental measures. Operating income provides investors with an indication of earnings before depreciation, foreign exchange, taxes and interest. Adjusted net income (loss) provides investors with information on net income (loss) excluding one-time non-cash charges and the non-cash effect of stock-based compensation expense. Funds provided by (used in) operations provide investors with an indication of cash available for capital commitments, debt repayments and other expenditures. Investors should be cautioned that operating income, adjusted net income (loss), and funds provided by (used in) operations should not be construed as an alternative to net income (loss) and cash flow from operations determined in accordance with IFRS as an indicator of Trican’s performance. Trican’s method of calculating operating income, adjusted net income (loss) and funds provided by (used in) operations may differ from that of other companies and accordingly may not be comparable to measures used by other companies.

FOURTH QUARTER HIGHLIGHTS operating income decreased by 69% compared to the fourth quarter of 2011. Sequentially, Canadian revenue decreased by 24% Consolidated revenue for the fourth quarter of 2012 was and operating income decreased by 49%. The decreases were $485.9 million, a decrease of 30% compared to the fourth indicative of lower year-over-year activity levels in Canada due quarter of 2011. Consolidated net loss was $7.7 million to reduced customer spending as 2012 capital programs came compared to net income of $114.9 million, and diluted to a close. Pricing decreased by 13% compared to the fourth loss per share was $0.05 compared to diluted income per quarter of 2011 and by 7% sequentially, which also had a negative share of $0.78 for the same period in 2011. Funds used in impact on Canadian revenue and operating margins. We believe operations were $14.0 million compared to funds provided that fourth quarter pricing levels reflect a balanced Canadian by operations of $181.9 million in the fourth quarter of 2011. pressure pumping market and expect the market to remain balanced throughout 2013. In addition, we expect activity levels Our Canadian operations generated quarterly revenue of $244.2 to rebound in the first quarter of 2013 as we enter the 2013 winter million and operating income of $51.0 million during the fourth drilling season in Canada. quarter of 2012. Canadian revenue decreased by 41% and

2 | 2012 Annual Report Trican Well Service Ltd.

Fourth quarter U.S. revenue was $173.6 million and the Technology Update operating loss was $2.1 million. U.S. operating margins Trican has taken a significant step into the global horizontal improved sequentially by 1,050 basis points as we began multi-stage completion market with the acquisition of to see the benefits of reduced guar costs and cost cutting Petro Tools Holding AS, the holding company for i-TEC initiatives. Trican pricing remained relatively stable on and its subsidiaries (collectively i-TEC), which closed in a sequential basis for both contracted and spot market January of 2013. i-TEC is a privately-owned company based crews. Despite the improved margins and stable pricing, in Norway that has developed a field-proven portfolio of U.S. activity levels weakened during the fourth quarter of completion systems and intervention tools. This acquisition 2012. U.S. rig count decreased in our areas of operations complements Trican’s existing completion systems and by 13% compared to the fourth quarter of 2011 and by 5% tools business, and is expected to provide positive growth compared to the third quarter of 2012. The drop in U.S. opportunities, as well as enhance our other pressure demand was largely due to reduced activity over the U.S. pumping service lines. Thanksgiving and Christmas holiday periods. Trican is pleased to announce a joint business agreement Revenue from our International operations was $68.0 million with Geotomo LLC to offer customers an integrated service in the fourth quarter of 2012, up 11% year-over-year but that will combine hydraulic fracturing engineering with down 6% sequentially. Russia comprises the majority of our microseismic software capabilities. The joint business International results and Russian activity levels were up year- agreement will leverage Geotomo’s advanced geophysical over-year as several customers increased their work scope software capabilities and Trican’s depth of experience to meet 2012 capital spending budgets. Russian fracturing in geological and pressure pumping services to offer activity was particularly strong due to an increase in work customized solutions to our customers. This service will help performed on horizontal wells. Approximately 12% of our our customers optimize fracture performance and improve 2012 fourth quarter Russian fracturing revenue was from work the production of the well. performed on horizontal wells, compared to approximately 3% in the fourth quarter of 2011. Russian activity levels The acquisition of i-TEC and joint business agreement with were down sequentially due to cold temperatures typically Geotomo reflects Trican’s continued commitment to provide experienced near the end of the fourth quarter. innovative technological solutions to our customers.

Comparative Quarterly Income Statements ($thousands, unaudited)

Quarter- Over- % of % of Quarter % Three months ended December 31, 2012 Revenue 2011 Revenue Change Change Revenue 485,865 100% 694,214 100.0% (208,349) (30%) Expenses Materials and operating 422,999 87.1% 473,693 68.2% (50,694) (10.7%) General and administrative 27,743 5.7% 23,226 3.3% 4,517 19.5% Operating income* 35,123 7.2% 197,295 28.4% (162,172) (82.2%) Finance costs 8,373 1.7% 6,557 0.9% 1,816 27.7% Depreciation and amortization 41,564 8.6% 36,443 5.2% 5,121 14.1% Foreign exchange gain (3,467) (0.7%) (3,975) (0.6%) 508 (12.8%) Other income (560) (0.1%) (1,405) (0.2%) 845 (60.1%) Income (loss) before income taxes (10,787) (2.2%) 159,675 23.0% (170,462) (106.8%) Income tax expense (recovery) (2,957) (0.6%) 44,805 6.5% (47,762) (106.6 %) Net Income (loss) (7,830) (1.6%) 114, 870 16.5% (122,700) (106.8%)

* see first page of this report

2012 Annual Report | 3 Trican Well Service Ltd.

CANADIAN OPERATIONS

($ thousands, except revenue per job, unaudited) Three months ended, Dec. 31, % of Dec. 31, % of Sept. 30, % of 2012 Revenue 2011 Revenue 2012 Revenue Revenue 244,237 417,021 321,948 Expenses Materials and operating 187,313 76.7% 246,363 59.1% 215,022 66.8% General and administrative 5,897 2.4% 5,898 1.4% 7,095 2.2% Total expenses 193,212 79.1% 252,261 60.5% 222,117 69.0% Operating income* 51,025 20.9% 164,760 39.5% 99,831 31.0% Number of jobs 5,572 7,108 6,368 Revenue per job 43,545 58,296 50,140

* see first page of this report.

Sales Mix Three months ended, (unaudited) Dec. 31, 2012 Dec. 31, 2011 Sept. 30, 2012 % of Total Revenue Fracturing 61% 68% 68% Cementing 21% 16% 17% Nitrogen 6% 8% 6% Coiled Tubing 5% 4% 4% Acidizing 3% 2% 3% Other 4% 2% 2% Total 100% 100% 100%

Operations Review supply combined with reduced activity levels led to the pricing Canadian pressure pumping activity was down during decrease; however, peak pricing seen in the fourth quarter of the fourth quarter of 2012 and led to year-over-year and 2011 occurred when the Canadian market was significantly sequential decreases in Canadian revenue and operating undersupplied and we did not expect these pricing levels to be income. In the fourth quarter of 2012, the number of active sustained. We believe that fourth quarter pricing levels reflect a drilling rigs in Canada decreased by 22% and the number balanced Canadian pressure pumping market. of Canadian wells drilled was down 19% compared to the fourth quarter of 2011. Sequentially, Canadian rig count Current Quarter versus Q4 2011 increased by 10% but the number of wells drilled was down Fourth quarter revenue decreased by 41% or $173 million by 4%. Despite the sequential increase in Canadian rig count, compared to the fourth quarter of 2011. Revenue per job fracturing activity was down substantially near the end of decreased by 25% due to a 13% decrease in price combined the quarter during the holiday season, when Canadian rig with a lower proportion of fracturing revenue relative to total count fell to approximately 200 rigs. In addition, many Trican revenue. The job count decreased by 22% and was consistent customers reduced their fracturing activity levels during the with the 22% decrease in Canadian rig count. Available Canadian fourth quarter as 2012 capital budgets came to a close. equipment increased by approximately 30% year-over-year but was more than offset by the decline in Canadian activity, in Canadian pricing decreased by 7% compared to the third particular for the fracturing service line. Fracturing activity was quarter of 2012 and by 13% compared to peak pricing levels down approximately 40% due to a slowdown over the holiday seen in the fourth quarter of 2011. Additional pressure pumping season and as customers completed 2012 capital budgets.

4 | 2012 Annual Report Trican Well Service Ltd.

As a percentage of revenue, materials and operating activity levels by our Canadian customers led to exceptional expenses increased to 76.7% from 59.1% due to decreased activity levels for Trican in the third quarter of 2012. The pricing and reduced operational leverage on our fixed strong activity levels in the third quarter combined with cost structure. General and administrative expenses were reduced fourth quarter activity levels over the holiday season relatively flat on a year-over-year basis. contributed to the sequential decrease in Canadian job count.

Current Quarter versus Q3 2012 Materials and operating expenses increased as a percentage Canadian revenue decreased by 24% sequentially in the of revenue to 76.7% compared to 66.8% in the third quarter fourth quarter of 2012. Revenue per job decreased by 13% of 2012 due largely to decreased pricing and reduced due to a 7% pricing decline combined with less fracturing operational leverage on our fixed cost structure. General and revenue as a percentage of total revenue. The job count also administrative expenses decreased by $1.2 million due mainly decreased by 13% relative to the third quarter of 2012. The to a decrease in profit sharing and bad debt expenses. completion of a large Horn River project and relatively strong

UNITED STATES OPERATIONS

($ thousands, except revenue per job, unaudited) Dec. 31, % of Dec. 31, % of Sept. 30, % of Three months ended, 2012 Revenue 2011 Revenue 2012 Revenue Revenue 173,589 215,672 198,881 Expenses Materials and operating 171,140 98.6% 164,632 76.3% 216,283 108.7% General and administrative 4,553 2.6% 3,819 1.8% 5,768 2.9% Total expenses 175,693 101.2% 168,451 78.1% 222,051 111.7% Operating income (loss)* (2,104) (1.2%) 47,221 21.9% (23,170) (11.7%) Number of jobs 1,654 1,495 1,861 Revenue per job 105,077 145,151 106,962

* see first page of this report

Three months ended, (unaudited) Dec. 31, 2012 Dec. 31, 2011 Sept. 30, 2012 % of Total Revenue Fracturing 90% 97% 91% Cementing 7% 2% 6% Coiled Tubing 3% 1% 3% Total 100% 100% 100%

Operations Review Overall U.S. activity levels weakened during the fourth quarter improvements in overall market conditions were noted. Despite of 2012. U.S. rig count decreased in our areas of operation the oversupplied market, Trican pricing remained relatively stable by 13% compared to the fourth quarter of 2011 and by 5% on a sequential basis for both contracted and spot market crews. compared to the third quarter of 2012. The drop in U.S. demand We made good progress on cost cutting initiatives during was largely due to reduced activity over the U.S. Thanksgiving the fourth quarter of 2012 with meaningful decreases and Christmas holiday periods. As a result of the reduced in product, logistics, and discretionary costs, which activity levels, the U.S. pressure pumping market continued to contributed to an improvement in sequential operating be oversupplied during the fourth quarter and no significant

2012 Annual Report | 5 Trican Well Service Ltd.

margins. In addition, guar costs continued to decline as As a percentage of revenue, materials and operating realized guar prices decreased by approximately 28% expenses increased to 98.6% from 76.3% because of sequentially and led to an approximate 500 basis point decreased pricing and reduced operational leverage on our improvement in operating margins. fixed cost structure. Despite the recent reductions in guar prices, realized guar costs remained approximately 110% Due to the weak U.S. operating environment, four U.S. higher compared to the fourth quarter of 2011. The year- fracturing crews remained idle during the fourth quarter over-year increase in guar costs contributed to the lower including two new crews that have not been manned and margins. General and administrative costs increased by $0.7 two crews that were previously active. The four idle U.S. million due largely to higher insurance and travel costs. crews are expected to remain inactive until U.S. market conditions improve, or a strategic opportunity arises in Current Quarter versus Q3 2012 North America or Internationally. Revenue for the fourth quarter decreased by 13% relative to the third quarter of 2012. The job count decreased by 11% due Current Quarter versus Q4 2011 to reduced oilfield activity as rig count decreased sequentially Year-over-year U.S. revenue decreased by 20% as an increase in by 5% in our areas of operations. Fracturing activity was the job count was more than offset by a decrease in revenue down by approximately 18% as very few fracturing jobs were per job. Job count increased by 11% and benefitted from performed over the Thanksgiving and Christmas holiday an increase in cementing and coiled tubing activity. Fourth period. In addition, fracturing activity in the fourth quarter was quarter cementing job count increased by 166% and coiled particularly slow for our Bakken crew as job count decreased tubing job count increased by 157% compared to the same by 50% sequentially. We are still building our presence in the period in 2011. These increases were offset partially by a 6% Bakken and activity levels are expected to be erratic until we decline in fracturing jobs, which compares to the 13% decrease establish consistent customer relationships in the region. This in U.S. rig count. Fourth quarter revenue per job decreased by decrease was partially offset by increased cement and coiled 28% compared to the fourth quarter of 2011. A year-over-year tubing jobs as we continued to grow these service lines. pricing decline of 13%, a decrease in fracturing revenue as a percentage of total revenue, and a decrease in fracturing job Materials and operating expenses decreased to 98.6% from size led to the revenue per job decrease. Fracturing job size 108.7% as a percentage of sales. Decreased guar costs and declined due to increased work performed in oil plays, such as progress made on cost cutting initiatives led to the improved the Permian, where job size is generally lower. margins. General and administrative costs decreased by $1.2 million due largely to lower employee costs.

INTERNATIONAL OPERATIONS

($ thousands, except revenue per job, unaudited) Dec. 31, % of Dec. 31, % of Sept. 30, % of Three months ended, 2012 Revenue 2011 Revenue 2012 Revenue Revenue 68,039 61,521 72,375 Expenses Materials and operating 57,941 85.2% 56,290 91.5% 59,202 81.8% General and administrative 4,216 6.2% 3,964 6.4% 3,590 5.0% Total expenses 62,157 91.4% 60,254 97.9% 62,792 86.8% Operating income* 5,882 8.6% 1,267 2.1% 9,583 13.2% Number of jobs 951 1,180 1,057 Revenue per job 68,586 48,178 64,873

* see first page of this report

6 | 2012 Annual Report Trican Well Service Ltd.

Sales Mix Three months ended, ( unaudited) Dec. 31, 2012 Dec. 31, 2011 Sept. 30, 2012 % of Total Revenue Fracturing 82% 74% 80% Coiled Tubing 9% 13% 10% Cementing 6% 8% 6% Nitrogen 1% 5% 2% Other 2% - 2% Total 100% 100% 100%

approximately 25% of our costs in Russia are denominated in Operations Review Canadian dollars and other foreign currencies. Our International operations include the financial results for operations in Russia, Kazakhstan, Algeria, Australia, Saudi Fourth quarter operating results were strong in Kazakhstan Arabia and Colombia. for our two fracturing crews operating in the region. We continue to see improved results for our Algerian operations Our Russian operations comprise the majority of our as year-over-year margins improved substantially. We are International results. Revenue and activity levels in this also continuing to grow and establish our cementing region were up year-over-year as several customers business in Australia and had solid revenue growth for our increased their work scope to meet 2012 capital spending cementing service line during the fourth quarter of 2012. budgets. Fracturing activity was particularly strong as job Despite the improvements in Algeria and Australia, financial count increased slightly and fracturing job size increased results during the fourth quarter were below expectations substantially year-over-year due to an increase in work in these regions. performed on horizontal wells. The increase in fracturing activity was partially offset by reduced cementing and coiled Current Quarter versus Q4 2011 tubing activity. Despite the improved fourth quarter results, International revenue increased by 11% compared to the some Russian customers did not meet spending targets fourth quarter of 2011. Revenue per job increased by 42% for 2012, which contributed to 2012 results that were below as increased horizontal work in Russia led to increased expectations. Russian activity levels were down sequentially fracturing and coiled tubing job sizes. Increased pricing due to cold temperatures typically experienced near the end and more fracturing revenue as a percentage of total of the fourth quarter. revenue also contributed to the higher revenue per job. Job count decreased by 19% due largely to declines in Russian The emergence of horizontal completions and multi-stage cementing and coiled tubing activity, offset slightly by an fracturing continues to be a positive development in Russia. increase in fracturing jobs. Approximately 12% of our 2012 fourth quarter Russian fracturing revenue was from work performed on horizontal wells, Fourth quarter materials and operating expenses as a compared to approximately 3% in the fourth quarter of 2011. This percentage of revenue decreased to 85.2% from 91.5% is an important development for the pressure pumping industry compared to the fourth quarter of 2011. The decrease was due in Russia, as the shift towards more unconventional drilling and to improved operating leverage on our fixed cost structure and completions is expected to increase the demand for horsepower increased pricing. General and administrative costs increased in the region and place a larger emphasis on technology. by $0.3 million due largely to higher employee costs.

Relative to the Canadian dollar, the Russian ruble strengthened Current Quarter versus Q3 2012 by 2% compared to the third quarter of 2012 and weakened Revenue for our International operations decreased by $4.3 by 3% compared to the fourth quarter of 2011. Changes in million on a sequential basis. Job count decreased by 10% the ruble exchange rate impacted our Russian results as due to colder weather in Russia near the end of the fourth

2012 Annual Report | 7 Trican Well Service Ltd.

quarter that reduced industry activity levels. Revenue per Materials and operating expenses increased to 85.2% from job increased by 6% due largely to an increase in fracturing 81.8% due to reduced operating leverage on our fixed cost revenue as a percentage of total revenue and larger structure. General and administrative expenses increased by fracturing job sizes in Russia due to customer mix. $0.6 million due primarily to higher employee costs.

CORPORATE

($ thousands, except revenue per job, unaudited) Dec. 31, % of Dec. 31, % of Sept. 30, % of Three months ended, 2012 Revenue 2011 Revenue 2012 Revenue Expenses Materials and operating 6,603 1.4% 6,408 0.9% 5,907 1.0% General and administrative 13,077 2.7% 9,545 1.4% 8,891 1.5% Total expenses 19,680 4.1% 15,953 2.3% 14,888 2.5% Operating loss* (19,680) (15,953) (14,888)

* see first page of this report

Current Quarter versus Q4 2011 INCOME TAXES Corporate expenses increased $3.7 million from the same quarter last year due primarily to transaction costs associated Trican recorded an income tax recovery of $3.0 million in the with the acquisition of i-TEC, a large charitable donation and quarter compared to an income tax expense of $44.8 million increased salaries and benefits expenses. These increases for the fourth quarter of 2011. The change was largely due to a were partially offset by lower employee profit sharing costs. decrease in income before tax. The effective tax rate was 27.4% in the fourth quarter of 2012, which was comparable to an effective Current Quarter versus Q3 2012 tax rate of 28.0% recognized in the fourth quarter of 2011. Corporate expenses increased $4.8 million compared to the third quarter of 2012 due largely to transaction costs OTHER COMPREHENSIVE INCOME associated with the acquisition of i-TEC, a large charitable donation and higher training and travel costs for employees. Other comprehensive income for the three months ended December 31, 2012, includes a loss of $0.2 million on the cash OTHER EXPENSES AND INCOME flow hedges compared to a gain of $0.3 million in the same period of the prior year. Trican has designated all cross currency Finance costs in the fourth quarter of 2012 increased by $1.8 swap agreements as cash flow hedges. Foreign currency million on a year-over-year basis due to increased debt balances. translation differences resulted in a gain of $3.5 million for the Depreciation and amortization increased by $5.1 million compared quarter as a result of the Canadian dollar spot price movements to the same period last year, largely due to capital additions relating compared to the Russian ruble and U.S. dollar. to our capital expansion program in North America. 2012 Highlights The foreign exchange gain of $3.5 million in the quarter Consolidated revenue for 2012 decreased by 4% to $2.2 billion versus a gain of $4.0 million in the same quarter last year compared to 2011, and net income decreased to $53.3 million was due to the net impact of fluctuations in the U.S. dollar versus $338.6 million in 2011. Adjusted diluted net income per and Russian ruble relative to the Canadian dollar. Other share decreased to $0.43 from $2.39 and funds provided by income was $0.6 million in the quarter versus $1.4 million for operations decreased to $122.8 million from $588.8 million. the same period in the prior year. Other income is largely comprised of interest income on a loan to an unrelated third Trican’s Canadian operations experienced strong operating party and interest income earned on cash balances. results during the first quarter of 2012, led by the continued strength in horizontal and oil and liquids-rich gas activity.

8 | 2012 Annual Report Trican Well Service Ltd.

Second quarter results were consistent with expectations and Russia comprises the majority of our International were impacted by spring break-up conditions that led to road operations, and 2012 results in Russia were below bans and road weight restrictions. Canadian margins declined expectations. Based on the 2012 contracts awarded, we in the second half of the year, in particular in the fourth were expecting revenue to increase by 10% with slight quarter, due to a decrease in industry activity levels combined improvements in operating margins. Our Russian customers with an increase in available pressure pumping equipment started the year behind schedule on their 2012 work in the Western Canadian Sedimentary Basin. Overall, 2012 programs and were not able to increase activity levels revenue in Canada was $1.14 billion; down 11% from $1.28 enough to reach activity targets. As a result, 2012 revenue billion in 2011, and 2012 Canadian operating income was $309 for our Russian operations was down 6% compared to 2011. million, down 34% from $465 million in 2011. In addition to lower than expected activity levels, revenue was negatively impacted by a 4% year-over-year decrease A decrease in natural gas prices and increased oil price in the average annual value of the ruble relative to the differentials led to a 13% decline in 2012 Canadian rig Canadian dollar. Operating margins increased slightly in count compared to 2011. In addition, due to the significant 2012 relative 2011, although operating income fell below undersupply of equipment entering 2012, the Canadian expectations due to the decrease in revenue. pressure pumping industry substantially increased equipment supply in 2012. These two factors led to a 13% year-over- Although 2012 financial results were disappointing in Russia year decrease in Canadian pricing, which contributed to the and Kazakhstan, the emergence of horizontal completions year-over-year declines in Canadian revenue and operating and multi-stage fracturing was a positive development income. Despite these declines, we believe the Canadian in 2012. Approximately 12% of our 2012 Russian fracturing pressure pumping market was balanced as we exited 2012. revenue was from work performed on horizontal wells, compared to approximately 3% in 2011. 2012 was a challenging year for our U.S. operations. Although we experienced continued geographic growth, In November of 2012, Trican announced its entry into and an 8% increase in revenue relative to 2011, U.S. Colombia through a joint business agreement with operating income decreased from $190.8 million, to a Independence Drilling S.A. (Independence). Independence loss of $25.7 million. Operating margins were negatively is a privately held company headquartered in Bogota, impacted by several factors during 2012, including stagnant Colombia and has extensive experience in the provision of industry activity levels, redeployment of equipment, drilling services in the region. We intend to initially provide excess equipment supply leading to price reductions and cementing services in the Colombian market, growing over significant increases in guar costs. time to become a full service pressure pumping company in the region. We expect to commence operations in In response to the poor U.S. market dynamics, Trican Colombia during the first half of 2013. reduced the size of its U.S. fleet by removing two crews from active operation during the third quarter of 2012. In Trican took a significant step into the global horizontal addition, two crews that were scheduled to be deployed multi-stage completion market in 2012 with the acquisition in the U.S. in the second of half of 2012 have not been of i-TEC Well Solutions. i-TEC was a privately owned activated and currently remain idle and unstaffed. We also company based in Norway that has developed a field- undertook significant cost cutting measures throughout the proven portfolio of completion systems and intervention second half of 2012, which included improvements in the tools. This acquisition complements Trican’s existing efficiency of product transportation, negotiating reduced completion systems and tools business, and is expected to product costs from suppliers, and reducing people costs. provide positive growth opportunities, as well as enhance We began to see the impact of these measures in the fourth our other pressure pumping service lines. quarter of 2012 and we will continue to focus on reducing costs throughout 2013.

2012 Annual Report | 9 Trican Well Service Ltd.

COMPARATIVE ANNUAL INCOME STATEMENTS

($ thousands; unaudited) % of % of Year-Over- % Year ended December 31, 2012 Revenue 2011 Revenue Year Change Change Revenue 2,213,400 100% 2,309,647 100.0% (96,247) (4.2%) Expenses Materials and operating 1,870,889 84.5% 1,598,470 69.2% 272,419 17.0% General and administrative 102,443 4.6% 96,653 4.2% 5,790 6.0% Operating income* 240,068 10.8% 614,524 26.6% (374,456) (60.9%) Finance costs 30,497 1.4% 20,041 0.9% 10,456 52.2% Depreciation and amortization 152,837 6.9% 126,576 5.5% 26,261 20.7% Foreign exchange (gain)/loss 408 0.0% (4,275) (0.2%) 4,683 (109.5%) Other income (1,837) (0.1%) (5,985) (0.3%) 4,148 (69.3%) Income before income taxes 58,163 2.6% 478,167 20.7% (420,004) (87.8%) Income tax expense 4,824 0.2% 139,531 6.0% (134,707) (96.5%) Net income 53,339 2.4% 338,636 14.7% (285,297) (84.2%)

* see first page of this report

CANADIAN OPERATIONS

Year ended December 31, % of % of Year-Over- ($ thousands, except revenue per job, unaudited) 2012 Revenue 2011 Revenue Year Change Revenue 1,139,474 1,282,684 (11%) Expenses Materials and operating 804,429 70.6% 790,508 61.6% 2% General and administrative 26,352 2.3% 27,486 2.1% (4%) Total expenses 830,781 72.9% 817,994 63.8% 2% Operating income* 308,693 27.1% 464,690 36.2% (34%) Number of jobs 22,427 25,393 (12%) Revenue per job 50,486 49,964 1%

* see first page of this report

2012 Canadian revenue decreased by 11% compared compared to 2011. As a percentage of revenue, materials to 2011. Revenue per job increased by only 1% as 2012 and operating expenses increased to 70.6% compared annual pricing, job size, and sales mix were largely to 61.6% due to reduced operating leverage on our fixed consistent with 2011. The job count decreased by 12% cost structure, pricing declines and higher employee as increases in available equipment were more than costs. General and administrative expenses decreased by offset by reductions in Canadian activity levels. On an $1.1 million due to declines in employee profit sharing annual basis, 2012 Canadian rig count was down 13% and share based expenses.

10 | 2012 Annual Report Trican Well Service Ltd.

UNITED STATES OPERATIONS

Year ended December 31, % of % of Year-Over- ($ thousands, except revenue per job, unaudited) 2012 Revenue 2011 Revenue Year Change Revenue 797,783 738,916 8% Expenses Materials and operating 803,677 100.7% 535,550 72.5% 50% General and administrative 19,808 2.5% 12,539 1.7% 58% Total expenses 823,485 103.2% 548,089 74.2% 50% Operating income (loss)* (25,702) (3.2%) 190,827 25.8% (113%) Number of jobs 7,110 5,065 40% Revenue per job 112,471 146,457 (23%)

* see first page of this report

2012 U.S. revenue increased by 8% compared to 2011. Job on oil wells. As a percentage of revenue, 2012 materials count increased by 40% as increased equipment availability and operating expenses increase to 100.7% compared led to substantial increases for our fracturing, cementing to 72.5% in 2011. A reduction in pricing, increased guar and coiled tubing service lines. Revenue per job decreased costs, and increased logistics, infrastructure and employee by 23% due to a 14% decrease in pricing, a reduction in expenses contributed to the reduced margins. General and fracturing revenue relative to total revenue, and lower administrative costs increased by $7.3 million due to higher fracturing job sizes due to increased work performed travel, insurance, and employee costs.

INTERNATIONAL OPERATIONS

Year ended December 31, % of % of Year-Over- ($ thousands, except revenue per job, unaudited) 2012 Revenue 2011 Revenue Year Change Revenue 276,143 288,047 (4%) Expenses Materials and operating 238,967 86.5% 250,424 86.9% (5%) General and administrative 14,486 5.2% 14,936 5.2% (3%) Total expenses 253,453 91.8% 265,360 92.1% (4%) Operating income* 22,690 8.2% 22,687 7.9% 0% Number of jobs 4,007 4,901 (18%) Revenue per job 65,027 55,902 16%

* see first page of this report

Annual revenue for our International operations was down sizes. In addition, increased fracturing revenue as a percentage 4% compared to the same period in 2011. The job count of total revenue contributed to the higher revenue per job. decreased by 18% due largely to lower activity in Russia. Materials and operating expenses as a percentage of revenue Many of our Russian customers did not complete their decreased slightly to 86.5% from 86.9% compared to the same 2012 work programs, which led to lower than expected period in 2011. Improved pricing was offset by cost inflation. activity levels in Russia. Revenue per job increased by 16% as General and administrative expenses decreased slightly by increased horizontal work in Russia led to larger fracturing job $0.5 million largely due to lower share based expenses.

2012 Annual Report | 11 Trican Well Service Ltd.

CORPORATE

Year ended December 31, % of % of Year-Over- ($ thousands, except revenue per job, unaudited) 2012 Revenue 2011 Revenue Year Change Expenses Materials and operating 23,814 1.1% 21,988 1.0% 8% General and administrative 41,799 1.9% 41,692 1.8% 0% Total expenses 65,613 3.0% 63,680 2.8% 3% Operating loss* (65,613) (63,680) 3%

* see first page of this report

Corporate expenses increased $1.9 million compared to last loss of $2.2 million was recognized on the translation of the year due primarily to an increase in salaries and benefits for financial statements of our foreign subsidiaries whose functional corporate employees and transactions costs relating to the currency is not Canadian dollars, which is consistent with 2011. i-TEC acquisition. These increases were partially offset by a decrease in share based expenses and profit sharing costs. LIQUIDITY AND CAPITAL RESOURCES OTHER EXPENSES AND INCOME Operating Activities Funds used in operations was $14.0 million in the fourth 2012 finance costs increased by $10.5 million relative to 2011 quarter of 2012 compared to funds provided by operations due to increased debt levels. Depreciation and amortization of $181.9 million in the fourth quarter of 2011 largely as a increased by $26.3 million as a result of the North American result of decreased operating income. focused capital asset additions. Trican’s ending 2012 working capital decreased to $547.4 Foreign exchange losses of $0.4 million have been recognized million compared to $621.2 million at the end of 2011. The in 2012 compared to gains of $4.3 million in 2011. The 2012 decrease is predominantly due to year-over-year decreased loss is due to the net impact of fluctuations in the U.S. dollar activity levels in North America, causing trade receivables, and Russian ruble relative to the Canadian dollar. Other income inventory, and prepaid expenses to decline, partially offset decreased by $4.1 million from the same period in 2011 due by decreased accounts payable. largely to proceeds from an insurance claim recognized in 2011. Investing Activities INCOME TAXES Capital expenditures in 2013 are expected to be approximately $130 to $150 million based on our current 2013 budget and The income tax expense for the year ended December 31, remaining capital expenditures on previously approved budgets. 2012 was $4.8 million compared to $139.5 million in 2011. Capital expenditures for the fourth quarter of 2012 totaled $58.7 The decrease in the tax provision is largely attributable to million compared with $162.8 million for the same period in 2011. significantly lower earnings. The effective tax rate in 2012 Total capital expenditures for 2012 were $444.6 million compared was 8.3% compared to an effective tax rate of 29.1% in 2011. to $578.5 million in 2011. The expenditures were largely directed The decrease is due primarily to tax losses in the U.S., which at North American expansion initiatives in 2012 and 2011. The are partially offsetting taxable income in Canada. year over year decreases are due to a reduction in our 2012 budget compared to the 2011 budget. OTHER COMPREHENSIVE INCOME Financing Activities Other comprehensive income includes an unrealized gain of $0.9 As at February 26, 2013, Trican had 148,831,558 common million on the cash flow hedges; while there was an unrealized shares and 7,030,786 employee stock options outstanding. loss of $1.4 million in 2011. In addition, a year-to-date unrealized

12 | 2012 Annual Report Trican Well Service Ltd.

In the second quarter of 2012, Trican entered into an liquids-rich gas directed activity is expected to continue uncommitted shelf agreement that could allow for the to dominate the Canadian oil and gas market given the issuance of up to U.S. $100 million in senior unsecured continued weakness in natural gas prices. Horizontal drilling notes. During the fourth quarter of 2012, Trican issued $50 activity is also expected to remain strong, as it has become million in senior unsecured notes from this shelf agreement. the leading drilling method in the Canadian market. The notes have a seven-year final maturity, five-year average The amount of available equipment in Canada has increased term, and a coupon of 4.05%. The notes are unsecured substantially over the past year, as the industry continued and rank equally with Trican’s bank facilities and other to respond to an undersupplied pressure pumping market outstanding senior notes. during 2012. Despite the steady Canadian pressure pumping During the fourth quarter of 2012, Trican’s syndicate of activity anticipated in 2013, increased supply is expected to banks unanimously agreed to extend the Company’s result in a year-over-year reduction in pricing. However, most four-year revolving credit facility for an additional year. In of the price declines occurred in the second half of 2012 and addition, Trican received approval to add a new bank to we do not expect any significant additional pricing decreases its syndicate and increased its extendible revolving credit in Canada during 2013. Despite the relatively flat demand and facility from $450 million to $500 million. increased supply, we believe the Canadian market is currently balanced and will remain so throughout 2013. We do not Trican received approval from the Toronto Stock Exchange expect a meaningful increase in Canadian horsepower supply to purchase its own common shares, for cancellation, in in 2013 and believe that sustained demand levels will keep accordance with a Normal Course Issuer Bid (“NCIB”) for the the market in balance. However, our Canadian operations one year period of March 2, 2012, to March 2, 2013. During the are significantly dependant on the capital budgets of our three months ended December 31, 2012, no common shares customers and changes to commodity prices. were purchased under the NCIB. During the twelve months ended December 31, 2012, 755,400 common shares were We will continue to closely monitor the Canadian market purchased at a cost of $10.0 million, of which $2.7 million was and react appropriately should market conditions change. charged to Share Capital and $7.3 million to retained earnings. We expect 2013 first quarter activity levels to increase relative Trican intends to renew the NCIB in the first quarter of 2013. to the fourth of 2012 as we enter the busy Canadian drilling season; however, we do not expect first quarter activity Trican Well Service Ltd. announced an increase to its semi- levels to be as strong as the first quarter of 2012. As a result, annual dividend from $0.05 to $0.15 per share in the first we expect first quarter operating margins will be higher quarter of 2012, thereby increasing the annual dividend sequentially due to increased activity but lower year-over-year to $0.30 per share. The increase reflected our expectation due to the declines in pricing and activity levels. that Trican can sustain strong earnings in the future and maximize shareholder value while remaining committed U.S. Operations to investing in the growth of our existing operations and We expect U.S. pressure pumping demand will continue future growth opportunities. Total dividend payments to be driven by commodity prices and the cash flows and during 2012 were $29.3 million and we expect 2013 dividend capital budgets of our U.S. customers. Based on the current payments to be approximately $44.0 million. commodity price and capital spending environment in the U.S., we are not expecting a significant change in 2013 OUTLOOK pressure pumping demand relative to demand levels seen Canadian Operations in the second half of 2012. Demand for pressure pumping services in Canada is We believe the U.S. pressure pumping market is currently expected to be stable in 2013 compared to 2012, with oversupplied and as a result, we are not anticipating a recent industry forecasts reflecting a 3% increase in meaningful amount of new horsepower to enter the U.S. the number of wells drilled compared to 2012. Oil and market in 2013. There is potential for modest declines in

2012 Annual Report | 13 Trican Well Service Ltd.

available U.S. horsepower to occur in 2013 if equipment is sales. An important part of our U.S. strategy is to become a redeployed out of North America and into International full service pressure pumping company, and we will continue markets, and if older U.S. equipment is permanently retired; to execute on this strategy in 2013. however, we are not expecting a significant drop in U.S. International pressure pumping supply in 2013. Based on the results of the 2013 contract tendering process Given our expectation of a relatively flat supply and demand for our Russian operations, we expect 2013 revenue to environment during 2013, we believe the U.S. pressure pumping increase by approximately 25%, as measured in Russian ro\ market will remain oversupplied throughout the upcoming rubles, compared to 2012. The estimated revenue increase year; however, we do not expect the supply/demand imbalance is based on a 2% expected rise in overall activity combined to grow throughout 2013. That being said, the U.S. pressure with a 23% expected increase in average revenue per job. pumping market can change quickly and we will continue to The expected increase in average revenue per job is the monitor commodity prices and the spending of our customers combined result of the trend towards larger fracturing job and react appropriately as market conditions change. sizes in multi-stage completions, a shift in the sales mix toward more fracturing work relative to coiled tubing and U.S. pricing declined substantially during the first half of 2012 cementing, and a modest increase in pricing. as the market became oversupplied, but remained relatively flat in the second half of the year. We expect pricing to remain A high rate of inflation in the Russian market and strong stable in 2013 given the expectations of a steady supply and competition continues to challenge the Russian operation’s demand environment in the U.S.; however, we believe pricing profitability. However, we are anticipating moderate could soften slightly in some of the more active oil and liquids- improvements in operating margins in 2013 as a result of a rich gas plays if equipment continues to be redeployed into shift in our work scope to higher margin work and multi-stage these areas. In addition, approximately 60% of our active U.S. activity, including completion tool revenue, and a continued fracturing equipment is currently under contracts that will be focus on optimizing the Russian operations’ cost structure. expiring in 2013. We will be working with new and existing 2012 was a successful year for our two fracturing crews customers to obtain work for these crews as contracts expire. in Kazakhstan, and we expect the Kazakhstan pressure We expect to realize moderate pricing declines in 2013 due to pumping market to be stable in 2013. Activity levels are the contract expirations but expect 2013 utilization of our U.S. expected to be down slightly; however, operating margins fracturing fleet to remain consistent with 2012. are expected to remain strong in this region. Despite the prospect of an oversupplied U.S. pressure Our Algeria operations improved modestly in 2012, in pumping market in 2013, we believe Trican’s U.S. operating particular for our coiled tubing service line. We expect margins will increase gradually throughout the year. We Algerian coiled tubing activity and pricing to remain stable have undertaken substantial cost cutting initiatives that are in 2013 and we will look to secure additional contracts for expected to improve margins and we have already started this service line to keep equipment utilization strong. The to see some of the benefits of these initiatives in the fourth cementing market in Algeria was very competitive in 2012 quarter of 2012. In addition, we are expecting realized guar and we expect this to continue in 2013. We will look to prices to continue to decline in the first quarter of 2013 as we increase pricing and utilization for our cementing equipment work through our higher priced inventory. in Algeria in 2013. We will also continue to closely monitor We expect to grow our cementing and coiled tubing service the political instability in this region and react appropriately lines in the U.S. during 2013 by increasing utilization on should the instability negatively impact our Algeria existing equipment. A substantial amount of new cementing operations and, more importantly, the safety of our people. and coiled tubing equipment was built in 2012, and with a Our 2013 strategy in Australia will be to continue to expand full year of equipment availability in 2013, we anticipate sales our cementing service line and build new customer from these service lines to increase as a percentage of total relationships. We expect to see moderate growth in

14 | 2012 Annual Report Trican Well Service Ltd.

Australian cementing revenue and operating income financial assets and liabilities with a single model that has only improvements in 2013. However, Australia oil and gas activity two classification categories: amortized cost and fair value. The continues to develop slowly and we do not expect this adoption of this standard is currently not expected to have a region to generate a meaningful level of profitability in 2013. material impact on Trican’s Consolidated Financial Statements.

Through our joint business arrangements in Saudi Arabia In May 2011, the IASB (International Accounting Standards and Colombia, we are working to establish our presence in Board) issued four new standards, and revised two existing these markets and expect to participate in pressure pumping standards. All of the new standards are effective for annual tenders in 2013. Initially, we will look to add cementing and periods beginning on or after January 1, 2013. coiled tubing services, with an eventual goal of being a full IFRS 10, Consolidated Financial Statements, introduces new service pressure pumping companies in these regions. principle-based definition of control, applicable to all investees 2013 Capital Budget to determine the scope of consolidation. The standard provides Trican’s 2013 capital budget is expected to be $32.3 million. the framework for consolidated financial statements and their This capital budget is directed at maintaining Trican’s global preparation based on the principle of control. equipment fleet and infrastructure. Given the current IFRS 11, Joint Arrangements, replaces IAS 31 Interests in operating environment in all of our key regions, minimal Joint Ventures. IFRS 11 divides joint arrangements into expansion capital initiatives have been included in the two types, each having its own accounting model. A ‘joint 2013 capital budget. Although the 2013 budget is modest, operation’ continues to be accounted for using proportional Trican stands by our commitment to provide service to our consolidation, where as a “joint venture” must be accounted customers with a state-of-the-art and well maintained fleet of for using equity accounting. equipment. Many of our maintenance spending requirements for 2013 were incurred in 2012 and we are confident our fleet IFRS 12, Disclosure of Interests in Other Entities, is a new will be maintained in top operating condition throughout the standard which combines all of the disclosure requirements coming year. Trican will continue to closely monitor its capital for subsidiaries, associates and joint arrangements in order program and make any necessary modifications as greater to provide information related to the risks associated with visibility is obtained throughout 2013. an entities interest in other entities, and the effects of those interests on the entity’s financial positions, financial NEW ACCOUNTING STANDARDS AND performance and cash flows. INTERPRETATIONS NOT YET ADOPTED IFRS 13, Fair Value Measurement, is a new standard meant A number of new standards and amendments to standards to clarify the definition of fair value, provide guidance on and interpretations are not yet effective for the year ended measuring fair value and improve disclosure requirements December 31, 2012 and have not been applied in preparing the related to fair value measurement. consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial The Company intends to adopt the amendments in its statements of the Company, except for IFRS 13, Fair Value financial statements for the annual period beginning in the Measurements, which becomes mandatory for the Company’s year applicable. The extent of the impact of adoption of the 2013 consolidated financial statements. The extent of the amendments has not yet been determined. impact of the adoption of IFRS 13, has not been determined. CRITICAL ACCOUNTING ESTIMATES As of January 1, 2015, Trican will be required to adopt IFRS 9, The Company prepares its consolidated financial statements in Financial Instruments, which is the result of the first phase accordance with International Financial Reporting Standards. In of the IASB’s project to replace IAS 39, Financial Instruments: doing so, management is required to make various estimates Recognition and Measurement. The new standard replaces the and judgments in determining the reported amounts of current multiple classification and measurement models for assets and liabilities, revenues and expenses, as well as the

2012 Annual Report | 15 Trican Well Service Ltd.

disclosure of commitments and contingencies. Management As at December 31, 2012, we performed impairment tests bases its estimates and judgments on its own experience and over our financial assets and determined that the carrying various assumptions believed to be reasonable under the value of these assets is fairly stated. circumstances. Anticipating future events cannot be done with Impairment of non financial assets certainty; therefore, these estimates may change as new events The recoverable amount of an asset or cash generating unit occur, more experience is acquired or the Company’s operating is the greater of its value in use and its fair value less costs to environment changes. The accounting estimates believed to sell. In assessing value in use, the estimated future cash flows require the most difficult, subjective or complex judgments are discounted to their present value using a pre-tax discount and which are material to the Company’s financial reporting rate that reflects current market assessments of the time results are as follows: value of money and the risks specific to the asset. For the Allowance for Doubtful Trade Receivables purpose of impairment testing, assets that cannot be tested Trican evaluates its trade receivables through a continuous process individually are grouped together into the smallest group of of assessing its portfolio on an individual customer and overall assets that generates cash inflows from continuing use that basis. This process consists of a thorough review of historical are largely independent of the cash inflows of other assets or collection experience, current aging status of the customer other groups of assets (cash generating unit or CGU). accounts, financial condition of the Company’s customers, and As at December 31, 2012, we performed impairment tests other factors. Based on its review of these factors, it establishes over our non-financial assets and determined that the or adjusts allowances for specific customers as well as general carrying value of these assets is fairly stated. provisions if industry conditions warrant. This process involves a high degree of judgment and estimation and frequently involves Goodwill Impairment significant dollar amounts. Accordingly, the Company’s results of Goodwill arises upon the acquisition of subsidiaries. The operations can be affected by adjustments to the allowance due Company measures goodwill as the fair value of the to actual write-offs that differ from estimated amounts. consideration transferred including the recognized amount Impairment of financial assets of any non-controlling interest in the acquisition, less the net recognized amount (generally fair value) of the identifiable The Company evaluates impairment for financial assets assets acquired and liabilities assumed, all measured as of measured at amortized cost at both a specific asset and the acquisition date. collective level. All individually significant assets are assessed for specific impairment annually. Assets that are not individually Goodwill is allocated as of the date of the business combination significant are collectively assessed for impairment by grouping to the Company’s cash generating units that are expected to together assets with similar risk profiles. benefit from the synergies of the business combination. Goodwill is not amortized, but is tested for impairment at least annually. An Impairment is assessed using historical trends of default, impairment loss in respect of goodwill is not reversed. timing of recoveries and the amount of loss incurred, adjusted for management’s judgment in relation to how the As at December 31, 2012, we performed impairment tests current economic and credit environment will impact losses over our goodwill balances and determined that the being greater or less than historical trends. carrying value of these assets is fairly stated.

An impairment loss is determined as the difference Depreciation and Amortization of Property and between an assets’ carrying amount and the present value Equipment of future cash flows. Losses are recognized in profit or loss Depreciation methods, useful lives and residual values and reflected in a provision account against loans and are reviewed each financial year end and adjusted if receivables. When an event occurring after the impairment appropriate. There have been no significant changes to was recognized causes the amount of impairment to the estimated useful lives of the Company’s property and decrease, the recovery is reversed through profit and loss. equipment during the past two years.

16 | 2012 Annual Report Trican Well Service Ltd.

Income Taxes Financial instruments Deferred income tax assets and liabilities are measured The fair values of cash and cash equivalents, trade and based on income tax rates and tax laws that are enacted other receivables, and trade and other payables included or substantively enacted by the end of the reporting in the consolidated statement of financial position, period and that are expected to apply in the years in which approximates their carrying amount due to the short-term temporary differences are expected to be realized or settled. maturity of these instruments. The fair value of contingent Deferred income tax assets are reviewed at each reporting consideration is recalculated at each reporting period. period and are reduced to the extent that it is no longer The bank loans, including the equipment and acquisition probable that the related tax benefit will be realized. loan facility, approximate their carrying amount due to the variable interest rates applied to these loans and credit Tax interpretations, regulations and legislation in the various spreads on the facilities approximate market rates. The jurisdictions in which the Company and its subsidiaries operate fair value of capital lease obligations was determined by are subject to change. As such, income taxes are subject to calculating the future cash flows, including interest, using measurement uncertainty and the interpretations can impact market rates. The fair value of the loan to an unrelated third net earnings through the income tax expense arising from party calculated using a discounted cash flow approach. changes in deferred income tax assets or liabilities. The Company calculates the fair value of the cash flow Inventory hedges using market forward rates reflecting the remaining Inventory is measured at the lower of cost and net realizable term of the hedges at each reporting period. value. The cost of inventory is determined using the weighted Revenue recognition average cost method. Inventory balances include all costs of purchase, costs of conversion and other costs incurred in Service and other revenue is recognized when the services bringing the inventory to their existing location and condition. are provided and collectability is reasonably assured. Customer contract terms do not include provisions for Net realizable value is the estimated selling prices in significant post-service delivery obligations. the ordinary course of business, less estimated costs of completion and selling expenses. RISK FACTORS

Share-based payment transactions Our business is subject to a number of risks and The Company has a share option plan and accounts for share uncertainties, some of which are summarized below. We options by expensing the fair value of share options measured encourage you to review and carefully consider the risks using a Black Scholes option pricing model. In determining the described below, as well as those described elsewhere fair value there are a number of assumptions related to risk-free in this report and in other publicly disclosed reports and interest rate, average expected option life, estimated forfeitures, materials. If any such risks were to materialize, our business, estimated volatility of the Company’s shares and anticipated financial condition, results of operations, cash flows or dividends. The fair value of the options is determined on their prospects could be materially adversely affected. In turn, grant date and is recognized as administrative expense over this could have a material adverse effect on the trading the period that the share options vest, with a corresponding price of our securities. Additional risks and uncertainties not increase to contributed surplus. currently known to us or that we currently deem immaterial may also adversely affect our business and operations. The fair value of the Director Share Units is recognized based on the market value of the Company’s shares underlying the Demand for Trican’s services is dependent upon the compensation program. The fair value of the Performance level of expenditures in the oil and gas industry, which Share Units is recognized based on the market value of the can be volatile. Company’s shares underlying the compensation program and the probability of the units vesting over the vesting period. The demand, pricing and terms for Trican’s services depend significantly upon the level of expenditures made by oil and

2012 Annual Report | 17 Trican Well Service Ltd.

gas companies on exploration, development and production Trican’s Canadian Operations are susceptible to activities. Expenditures by oil and gas companies are typically weather volatility. directly related to the demand for and price of oil and gas. The well service industry is characterized by considerable Generally, when commodity prices and demand are, or are seasonality in Canada, and to a lesser extent in Russia and predicted to be, relatively high, demand for Trican’s services is the U.S. During the second quarter when the frost leaves the high. The converse is also true. ground, many secondary roads are temporarily rendered The prices for oil and natural gas are subject to a variety of incapable of supporting the weight of heavy equipment factors including: the demand for energy; the ability of the resulting in severe restrictions in the level of well servicing Organization of Petroleum Exporting Countries (“OPEC”) to set activity. The duration of this period, commonly referred to and maintain production levels for oil; oil and gas production as the “spring break-up”, has a direct impact on the level of by non-OPEC countries; political and economic uncertainty our activities, particularly in Canada. During other periods of and socio-political unrest; cost of exporting, producing and the year, rainfall can also render some of the secondary and delivering oil and gas; technological advances affecting energy oilfield service roads impassable for the Company’s equipment. consumption; and weather conditions. Any prolonged or Additionally, if an unseasonably warm winter prevents sufficient substantial reduction in oil and natural gas prices would likely freezing, Trican may not be able to access well sites. decrease the level of activity and expenditures in oil and gas These factors can all reduce activity levels below normal or exploration, development and production activities and, in anticipated levels. Activity levels in the U.S. and Russia are turn, decrease the demand for Trican’s services. typically not impacted to the same extent by seasonality. In addition to current and future oil and gas prices, the level of The oilfield services industry is highly competitive. expenditures made by oil and gas companies are influenced by numerous factors over which the Company has no control, We compete with multi-national, national and regional including but not limited to: weak general economic conditions; competitors in each of our current service lines in each of the cost of exploring for, producing and delivering oil and our geographic regions. Certain of our competitors may gas; the expected rates of current production; the discovery have financial, technical, manufacturing and marketing rates of new oil and gas reserves; cost and availability of drilling advantages in certain regions and may be in a stronger equipment; availability of pipeline and other oil and gas competitive position than Trican as a result. transportation capacity; North American natural gas storage levels; political, regulatory and economic conditions; taxation Competitive actions taken by our competitors such as price and royalty changes; government regulation; environmental changes, new product and technology introductions and regulation; ability of oil and gas companies to obtain credit, improvements in availability and delivery could affect our equity capital or debt financing; and movement of the Canadian market share or competitive position. To be competitive, we dollar and Russian ruble relative to the U.S. dollar. A material must demonstrate value for our customers by developing decline in expenditures by oil and gas companies, caused by a new technologies and providing reliable products and decrease in oil and gas prices or otherwise, could have a material services. The intense competition within our industry adverse effect on Trican’s business, financial condition, results could lead to a reduction in revenue or prevent us from of operations and cash flows. We may also be disadvantaged successfully pursuing additional business opportunities. competitively and financially by a significant movement of In addition, certain foreign jurisdictions and government- exploration and production operation to areas of the world in owned petroleum companies have adopted policies or which we are not currently active. regulations which may give local nationals in these countries Additionally, during times of weak industry conditions, the risk of a competitive advantage and which may impede our ability payment delays and failure to pay increases due to a reduction to expand into or to sustain a market share in such countries. in customers’ cash flow and challenges relating to their ability to access debt and equity markets among other factors.

18 | 2012 Annual Report Trican Well Service Ltd.

Trican would be adversely affected should access to a suppliers. During past periods of high industry activity, a credit facility or additional financing be unavailable to shortage of skilled labour to build equipment, coupled with Trican or its customers. high demand has placed a strain on some fabricators. If a similar strain occurs in the future, it could potentially increase Trican’s growth strategy is subject to the availability of the order time on new equipment and increase uncertainty additional financing for future costs of operations or surrounding final delivery dates. Significant delays in the expansion that may not be available, or may not be available arrival of new equipment from expected dates may constrain on favourable terms. Trican’s activities may also be financed future growth and may have a material adverse effect on the partially or wholly with debt, which may increase its debt levels financial performance of the Company. above industry standards. The level of Trican’s indebtedness from time to time could impair its ability to obtain additional Trican is subject to various risks from its foreign financing on a timely basis to take advantage of business operations. opportunities that may arise. If the Company’s cash flow from Some of Trican’s current operations and related assets are operations is not sufficient to fund its capital expenditure located in Russia, Kazakhstan, Algeria, Australia and Norway. requirements, there can be no assurance that additional Further, Trican’s growth plans may contemplate establishing debt or equity financing will be available to meet these operations in additional foreign countries where the requirements or, if available, on favourable terms. political and economic systems may be less stable than Furthermore, many of our customers access the credit those in North America. Operations in these countries may markets to finance their oil and natural gas drilling activity. If be subject to a variety of risks including, but not limited to: the availability of credit to our customers is reduced, they may social unrest or civil war, currency fluctuations, devaluations reduce their drilling and production expenditures, thereby and exchange controls; inflation; uncertain political and decreasing demand for our products and services. Any such economic conditions resulting in unfavourable government reduction in spending by our customers could adversely actions such as unfavourable legislation or regulation, trade impact our operating results and financial condition. restrictions, nationalization, expropriation, unfavourable tax enforcement or adverse tax policies; the denial of contract The loss of key customers could cause Trican’s revenue rights; trade restrictions or embargoes imposed by other to decline substantially. countries; restrictions on the repatriation of income or For the year ending December 31, 2012, Trican had capital; and acts of terrorism, extortion, or armed conflict. If one significant customer. This customer represented any of the risks described above materialize, it could reduce approximately 15% of our consolidated revenue and all of Trican’s earnings and cash available for operations. the revenue from this customer was generated in the United Further, government-owned oil companies located in States. There can be no assurance that Trican’s relationship some countries have adopted policies or are subject to with this customer will continue, and a significant reduction governmental policies giving preference to the purchase of or total loss of the business from this customer, if not offset goods and services from companies that are majority-owned by sales to new or existing customers, would have a material by local nationals. As a result, we may rely on joint ventures, adverse effect on the Company’s business, financial condition, license arrangements and other business combinations with results of operations and cash flows. local nationals in these countries. Activities in these countries Failure to receive timely delivery of new equipment may require protracted negotiation with host governments, and parts from suppliers could adversely affect Trican’s national oil companies and third parties. growth plans. Our operations outside of Canada could also expose us The Company’s ability to expand its operations and provide to trade and economic sanctions or other restrictions reliable service is dependent upon timely delivery of new imposed by the Canadian or other governments or equipment and replacement parts from fabricators and organizations. Federal agencies and authorities may seek to

2012 Annual Report | 19 Trican Well Service Ltd.

impose a broad range of criminal or civil penalties against Business acquisitions entail numerous risks and may corporations or individuals for violations of securities laws, disrupt Trican’s business or distract management foreign corrupt practices laws or other federal statutes. If any attention. of the above described risks materialize, it could materially As part of Trican’s business strategy, it will continue impact Trican’s operating results and financial condition. to consider and evaluate acquisitions of, or significant Further, Trican is subject to various laws and regulations in investments in, complementary businesses and assets. Any the various jurisdictions in which it operates that govern acquisition that Trican completes could have unforeseen the operation and taxation of its business. The imposition, and potentially material adverse effects on the Company’s application and interpretation of such laws and regulations financial position and operating results. can prove to be uncertain. Acquisitions involve numerous risks, including: An oversupply of oilfield service equipment could lead unanticipated costs and liabilities; to a decline in the demand for Trican’s services. difficulty of integrating the operations and assets of the Because of the long-life nature of oilfield service equipment and acquired business; the lag between when a decision to build additional equipment is made and when the equipment is placed into service, the the ability to properly access and maintain an effective inventory of oilfield service equipment in the industry does internal control environment over an acquired company; not always correlate with the level of demand. Periods of high demand often result in increased capital expenditures on potential loss of key employees and customers of the equipment and those capital expenditures may add capacity acquired company; and that exceeds actual demand. This excess capacity could cause an increase in expenses and working capital requirements. Trican’s competitors to lower their prices and could lead to a decrease in prices in the oilfield services industry generally. Trican may incur substantial indebtedness to finance Consequentially, Trican could fail to secure enough work in which acquisitions and also may issue equity securities in to employ its equipment. This could have a material adverse connection with any such acquisitions. Trican will be effect on Trican’s operating results and cash flows. required to meet certain financial covenants in order to borrow money under its credit agreements to fund Fluctuations in foreign currency exchange rates could acquisitions. Debt service requirements could represent a adversely affect the Company. significant burden on the Company’s results of operations Trican’s consolidated financial statements are presented and financial condition and the issuance of additional equity in Canadian dollars. The reported results of our foreign could be dilutive to shareholders. Acquisitions could also subsidiary operations are affected by the movement in divert the attention of management and other employees exchange rates primarily between the Canadian and United from Trican’s day-to-day operations and the development States dollar and Russian ruble. Trican’s Canadian Operations of new business opportunities. In addition, Trican may include exchange rate exposure as purchases of some not be able to continue to identify attractive acquisition equipment and materials are from United States suppliers. opportunities or successfully acquire identified targets. When acquiring Trican U.S., we took on United States Failure to adequately protect its intellectual property dollar denominated debt which acts as a partial hedge could adversely impact Trican’s business. against this investment. In addition, Trican entered into cross-currency swap agreements to hedge a portion of the Trican’s success depends in part on our proprietary private placement notes. Other than the swap agreements technology. We rely on a combination of patent, copyright, and natural hedges that arise from day-to-day operations, trademark and trade secret laws, confidentiality provisions the Company does not maintain an active hedge program and licensing arrangements to establish and protect our for foreign exchange exposure. proprietary rights. Trican’s business may be adversely

20 | 2012 Annual Report Trican Well Service Ltd.

affected if it fails to obtain patents, its patents are damages. Trican continuously monitors its activities unenforceable, the claims allowed under its patents are not for quality control and safety and maintains insurance sufficient to protect its technology or its trade secrets are coverage it believes to be adequate and customary in the not adequately protected. Trican’s competitors may be able industry. Additionally, Trican seeks to obtain indemnification to develop similar technology independently that is similar from its customers by contract for certain of the above or superior to our technology, or may duplicate or reverse risks. However, such insurance and indemnities may not engineer our technology or design around the patents be adequate to cover Trican’s liabilities and may not be owned or licensed by Trican. available in the future at rates Trican considers reasonable and commercially justifiable. If the Company were to incur Furthermore, if any of its competitors obtain patents over substantial liability and such damages were not covered valuable intellectual property, Trican may be unable to offer by insurance or were in excess of policy limits, or if the certain services in certain jurisdictions, may be forced to use Company were to incur such liability at a time when it is less effective or costlier alternative technology, or required not able to obtain liability insurance, its business, financial to enter into costly licensing agreements. condition, results of operations and cash flow could be Trican’s business is affected by governmental materially adversely affected. regulations and policies. Compliance with various environmental laws, rules, Trican’s operations, and those of its customers, are subject legislation and guidelines could impose greater to a variety of federal, provincial, state and local laws, costs on Trican’s business or lead to a decline in the regulations and guidelines, including laws and regulations demand for services. related to health and safety, the conduct of operations, the Participants in the well services industry are subject to manufacture, management, transportation and disposal various environmental laws and regulations. These laws and of certain materials used in its operations. Trican believes regulations primarily govern the manufacture, processing, it is in compliance with such laws and regulations and importation, transportation, handling and disposal of certain has invested financial and managerial resources to ensure materials used in Trican’s operations and may require extensive such compliance. Such expenditures historically have not remediation or impose civil or criminal liability for violations. been material to Trican. However, because such laws and Trican’s customers are subject to similar laws and regulations. regulations are subject to change it is impossible for Trican Industry participants are also subject to limits on emissions into to predict the cost or impact of such laws and regulations the air and discharges into surface and sub-surface waters. on its future operations, nor their impact on its customers’ activities and thereby on the demand for its services. Recent regulatory initiatives have been undertaken in various jurisdictions to address assertions that hydraulic fracturing Trican’s operations are subject to inherent hazards processes use chemicals that could affect drinking water which may not be covered by insurance. supplies. Legislation has been enacted in some jurisdictions Trican’s operations are subject to hazards inherent in the and is being proposed in others that require the energy oil and gas service industry, such as equipment defects, industry to publicly disclose the chemicals it mixes with water damage, loss, malfunctions and failures, and natural and sand it pumps underground in the fracturing process. disasters which may result in fires, vehicle accidents, These actual and proposed legislative changes could lead explosions and uncontrollable flows of natural gas or well to delays and increased operating costs. The adoption of fluids that can cause personal injury, loss of life, suspension any future federal or state laws or implementing regulations of operations, damage to formations, damage to facilities, in Canada and/or the United States, or in other jurisdictions business interruptions, and damage to or destruction of in which the Company carries on business, which impose property and equipment. These hazards could expose reporting obligations on, or otherwise limit the hydraulic Trican to liability for personal injury, wrongful death, fracturing process could reduce demand for pressure pumping product liability, property damage and other environmental services or make it more difficult for the Company to provide

2012 Annual Report | 21 Trican Well Service Ltd.

fracturing services for natural gas and oil wells and could affect Failure to maintain Trican’s safety standards and record the Company’s ability to utilize proprietary technological could lead to a decline in the demand for services. developments to compete effectively in the pressure pumping Standards for the prevention of incidents in the oil and industry. This could have a material adverse impact on the gas industry are governed by service company safety Company’s financial position and operating results. policies and procedures, accepted industry safety practices, Stringent regulation of fracturing services could have customer specific safety requirements and health and a material adverse impact on the Company’s financial safety legislation. In order to ensure compliance, Trican has position and operating results. developed and implemented safety and training programs which it believes meet or exceed the applicable standards. Trican is subject to increasingly stringent environmental laws A key factor considered by customers in retaining oilfield and regulations, some of which may provide for strict liability service providers is safety. Deterioration of Trican’s safety for damages to natural resources or threats to public health or performance could result in a decline in the demand for safety. While Trican maintains liability insurance, the insurance Trican’s services and could have a material adverse effect on is subject to coverage limits and may exclude coverage for its revenues, cash flows and profitability. damage resulting from environmental contamination. There can be no assurance that insurance will continue to be available Trican may be subject to litigation, contingent to Trican on commercially reasonable terms, that the possible liabilities and potential unknown liabilities. types of environmental liability will be covered by insurance or From time to time, Trican is subject to costs and other effects that the dollar amount of such liabilities will not exceed Trican’s of legal and administrative proceedings, settlements, reviews, policy limits. Even a partially insured claim, if successful and of claims and actions. Trican may in the future be involved in sufficient magnitude, could have a material adverse effect on disputes with other parties which could result in litigation or Trican’s business, results of operations and prospects. other actions, proceedings or related matters including in Future regulatory developments could have the effect of relation to its historical option granting practices. reducing industry activity. Trican cannot predict the nature of Furthermore, there may be unknown liabilities assumed the restrictions that may be imposed. Increase in production in by Trican in relation to prior acquisitions or dispositions as the oil and gas industry from unconventional sources has raised well as environmental or tax issues. The discovery of any concerns over hydraulic fracturing and seismic-related services, material liabilities could have an adverse effect on Trican’s which may result in increased regulation. The adoption of financial condition and results. future federal, state, local or foreign laws or implementing regulations imposing reporting obligations on, or limiting or The results of litigation or any other proceedings or related banning, the hydraulic fracturing process could make it more matters cannot be precisely predicted due to uncertainty difficult to complete natural gas or oil wells and could have a as to the final outcome. Trican’s assessment of the likely material adverse effect on Trican’s liquidity, consolidated results outcome of these matters is based on its judgement of of operations, and consolidated financial condition. Trican a number of factors including past history, precedents, may be required to increase operating expenses or capital relevant financial and other evidence and facts specific to expenditures in order to comply with any new restrictions or the matter as known at the time of the assessment. regulations. Such expenditures could be material. Trican may be subject to litigation if another party We are also aware that some countries, provinces, states, claims that we have infringed upon its intellectual counties and municipalities have enacted or are considering property rights. moratoria on hydraulic fracturing. Additionally, Trican’s business could be affected by a moratorium on related operations, such The tools, techniques, methodologies, programs and as sand mining. It is not possible to estimate how these various components Trican uses to provide services may infringe upon restrictions could affect Trican’s operations. the intellectual property rights of others. Infringement claims

22 | 2012 Annual Report Trican Well Service Ltd.

generally result in significant legal and other costs and may Further, the acquiring company may have preferred supplier distract management from running our core business. Royalty relationships with oilfield service providers other than Trican. payments under licenses from third parties, if available, would New technology could place Trican at a disadvantage also increase Trican’s costs. If a license was not available, Trican versus competitors. might not be able to continue providing a particular service or product, which could adversely affect Trican’s financial condition, The ability of the Company to meet customer demands results of operations and cash flows. Additionally, developing in respect of performance and cost will depend upon non-infringing technologies would increase Trican’s costs. continuous improvements in operating equipment. There can be no assurance that the Company will be successful Trican may be adversely impacted by a shortage of in its efforts in this regard or that it will have the resources qualified personnel. available to meet this continuing demand. Failure by Trican to Trican requires highly skilled personnel to operate and do so could have a material adverse effect on the Company’s provide technical services and support for its business. business, financial condition, results of operation and cash Competition for the personnel required for its businesses flows. No assurances can be given that competitors will not intensifies as activity increases. Trican’s ability to manage the achieve technological advantages over the Company. costs associated with recruiting, training and retention of a Operations with independent third parties could highly skilled workforce could impact its business. In periods create uncertainty. of high utilization it may become more difficult to find and retain qualified individuals. This could increase Trican’s costs Trican conducts some operations whereby control may be or have other adverse effects on its operations. shared with unaffiliated third parties. Although Trican currently has a controlling interest in such arrangements, differences in There are certain risks associated with Trican’s views among participants may result in delayed decisions or in dependence on third-party suppliers. failures to agree on major issues. Trican may enter into similar Trican sources raw materials, such as oilfield cement, proppant, arrangements as we pursue additional opportunities. Although guar, nitrogen, carbon dioxide and coiled tubing, from a variety the Company has not been constrained by our participation in of suppliers, most of whom are located in Canada, Russia and such arrangements to date, no assurance can be given that the the United States. Alternate suppliers exist for all raw materials. actions or decisions of third parties will not affect our business The source and supply of materials has been consistent in in a way that hinders our operations. the past; however, in periods of high industry activity, Trican Possible failure to realize anticipated benefits of has occasionally experienced periodic shortages of certain acquisitions. materials. Management maintains relationships with a number of suppliers in an attempt to mitigate this risk. However, if the Trican has completed acquisitions and may complete additional current suppliers are unable to provide the necessary materials, acquisitions to strengthen its position in its industry and to create or otherwise fail to deliver products in the quantities required, opportunity to realize certain benefits, including, among other any resulting delays in the provision of services to Trican’s things, potential cost savings. Achieving the benefits of any clients could have a material adverse effect on its results of future acquisitions depends, in part, on successfully consolidating operations and financial condition. functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as Trican’s ability to Merger and acquisition activity may reduce the realize the anticipated growth opportunities and synergies from demand for Trican’s services. combining the acquired businesses and operations with its own. Merger and acquisition activity in the oil and gas exploration and The integration of acquired businesses requires the dedication of production sector may constrain demand for the Company’s substantial management effort, time and resources which may services as customers focus on reorganizing the business prior divert management’s focus and resources from other strategic to committing funds to exploration and development projects. opportunities and from operational matters during this process.

2012 Annual Report | 23 Trican Well Service Ltd.

The integration process may result in the loss of key employees under Canadian securities law. DC&P include controls and and the disruption of ongoing business, customer and employee procedures designed to ensure that information required relationships that may adversely affect Trican’s ability to achieve to be so disclosed is accumulated and communicated to the anticipated benefits of these future acquisitions. management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely Improper access to confidential information could decisions regarding required disclosure. harm Trican’s reputation. The Chief Executive Officer and the Chief Financial Trican’s efforts to protect the confidential information of Officer of Trican evaluated the effectiveness of the design its customers may be unsuccessful due to the actions of and operation of the Company’s DC&P. Based on that third parties, software bugs or other technical malfunctions, evaluation, the Chief Executive Officer and Chief Financial employee error or malfeasance, or other factors. If any of these Officer concluded that Trican’s DC&P were effective as at events occur, our customers’ information could be accessed December 31, 2012. or disclosed improperly. Any incidents involving unauthorized access to the information of Trican’s customers could damage Internal Control Over Financial Reporting our reputation and diminish our competitive position. In Trican’s Chief Executive Officer and the Chief Financial addition, the affected customers could initiate legal or Officer are responsible for establishing and maintaining regulatory action against us in connection with such incidents, internal control over financial reporting (ICFR), as such term which could cause Trican to incur significant expense. Any of is defined in NI 52-109. They have, as at the financial year these events could have a material and adverse effect on the ended December 31, 2012, designed ICFR, or caused it to Company’s business, reputation, or financial results. be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and Ability to pay dividends the preparation of financial statements for external purposes The payment of dividends is at the discretion of our Board. in accordance with IFRS. The control framework the officers All dividends will be reviewed by the Board and may be used to design Trican’s ICFR is the Internal Control - Integrated increased, reduced or suspended from time to time. Our ability Framework published by The Committee of Sponsoring to pay dividends and the actual amount of such dividends Organizations of the Treadway Commission (COSO). is dependent upon, among other things, our financial Trican’s ICFR includes policies and procedures that: performance, our debt covenants and obligations, our ability to refinance our debt obligations on similar terms and at similar Pertain to the maintenance of records that, in interest rates, our working capital requirements, our future tax reasonable detail, accurately and fairly reflect obligations, our future capital requirements, the satisfaction transactions, acquisitions and dispositions of assets of of applicable solvency tests in the Business Corporations Act the Company; (Alberta) and the risk factors set forth in Trican’s AIF. Provide reasonable assurance that transactions are INTERNAL CONTROL OVER FINANCIAL recorded as necessary to permit preparation of financial REPORTING statements in accordance with generally accepted accounting principles; and Disclosure Controls & Procedures Provide reasonable assurance regarding prevention, or Disclosure controls and procedures (DC&P), as defined in timely detection, of unauthorized acquisition, use, or National Instrument 52-109 Certification of Disclosure in disposition of the Company’s assets that could have a Issuers’ Annual and Interim Filings (NI 52-109), are designed material effect on the financial statements. to provide reasonable assurance that information required to be disclosed in reports filed with, or submitted to, Trican conducted an evaluation of the effectiveness of securities regulatory authorities is recorded, processed, its ICFR as at December 31, 2012, based on the COSO summarized and reported within the time periods specified Framework, under the supervision of the Chief Executive

24 | 2012 Annual Report Trican Well Service Ltd.

Officer and the Chief Financial Officer. Based on this and fraud. A control system, no matter how well conceived or evaluation, the Officers concluded that as of December 31, operated, provides reasonable, but not absolute, assurance that 2012, Trican’s ICFR is effective. the objectives of the control system are met.

While the Officers believe that Trican’s controls are effective, There were no changes in the Company’s ICFR during the they do not expect that the disclosure controls and procedures year ended December 31, 2012 that materially affected the or internal control over financial reporting will prevent all errors Company’s ICFR.

SELECTED ANNUAL INFORMATION

($000s, except per share amounts and operational information)

2012 2011 2010 Revenue $2,213,400 $2,309,647 $1,478,345 Net income 53,339 338,636 150,362 Earnings per share: - Basic 0.37 2.32 1.09 - Diluted 0.37 2.30 1.09 Funds provided by operations* 122,751 558, 811 320,028 Capital expenditures 442,555 578,457 261,266 Total assets 2,396,519 2,217,183 1,413,886 Total long-term financial liabilities 694,972 400,256 107,152 Shareholders' equity 1,374,812 1,365,389 999,401 Average shares outstanding - Basic 146,620 145,805 137,400 Average shares outstanding - Diluted 146,690 147,085 138,571 Shares outstanding at year end 146,450 146,917 144,637 Dividend per share $0.30 $0.10 $0.10

*see first page of this report

2011 versus 2010 – Selected Annual Information Canadian operations continued to benefit from the strength Consolidated revenue for 2011 increased by 56% to $2.3 of horizontal drilling activity in 2011. The number of horizontal billion compared to 2010, and net income increased to wells drilled as a percentage of total wells drilled increased to $338.6 million compared to $150.4 million in 2010. Adjusted 55% in 2011, compared to 42% in 2010. diluted net income per share increased to $2.30 from $1.09 Our Canadian operations executed a large 2011 capital and funds from operations increased to $558.8 million from budget, increasing the size of our equipment fleet $320.0 million compared to 2010. accordingly. The Canadian fracturing fleet increased by 62,500 Our Canadian operations achieved record annual revenue of horsepower, during 2011, and the size of our cementing, $1.3 billion and record operating income of $464.7 million. acidizing and nitrogen fleets also expanded during the year. Strong demand in the Canadian market was led by activity in The new equipment was deployed throughout the second the oil and liquids-rich gas plays, as oil prices remained strong half of 2011 and contributed to the substantial increase in year- throughout 2011. Although the year-over-year Canadian rig over-year revenue. Year-over-year operating income increased count was up by 21%, the oil well count increased by 41%, by 65% and operating margins increased to 36.2%, compared while gas well count decreased by 5%. In addition, Trican’s to 32.8% in 2010. A key factor in the margin improvement was a 14% increase in 2011 pricing compared to 2010.

2012 Annual Report | 25 Trican Well Service Ltd.

Annual 2011 U.S. revenue of $738.9 million was 105% higher in the Eagle Ford and Permian regions and the addition of a than in 2010, and our operating income of $190.8 million second fracturing crew in the Marcellus region. However, our was a 173% increase compared to 2010, both record highs aggressive expansion initiatives also resulted in start-up costs for our U.S. operations. Operating income as a percentage in the second half of 2011 that negatively impacted operating of revenue was 25.8% compared to 19.4% in 2010, and margins in the third and fourth quarters. benefitted from year-over-year pricing increases of 34%. Our International operations include the financial results Demand for U.S. pressure pumping services grew in 2011, as for operations in Russia, Kazakhstan, Algeria, and Australia. the overall U.S. rig count increased by 22%. However, most Revenue from our International operations was $288.0 of the growth was generated from areas containing oil and million in 2011, up 11% compared to 2010. Our Russia liquids-rich gas, such as the Eagle Ford, Permian and Oklahoma and Kazakhstan operations comprise the majority of our regions. Conversely, dry gas areas such as the Haynesville, International results and revenue and activity levels were Fayetteville and Barnett shales all experienced a decrease in consistent with overall expectations for the region, based year-over-year rig count. Year-over-year rig count in the oil on the results of the 2011 tendering process. Activity levels and liquids-rich gas areas where Trican operates increased increased by approximately 7% and operating margins by 53%, compared to a 21% decline in the dry gas areas. were relatively flat, as pricing increases were fully offset Horizontal drilling continued to grow in the U.S. during 2011. by higher costs. Cost inflation was a factor during the Horizontal wells represented 57% of active U.S. drilling rigs in first half of the year, but stabilized during the second half. 2011, compared to 53% in 2010 and 45% in 2009. The growth of Despite the slowdown in overall inflation, our Russian and horizontal drilling benefited all of our U.S. service lines in 2011. Kazakhstan operations experienced cost increases for items such as hauling, fuel and products during the second half Our U.S. operations grew substantially during 2011. The of the year. expansion included commencement of fracturing operations

Operational Information 2012 2011 2010 Canadian operations Number of jobs completed 22,427 25,393 21,931 Revenue per job 50,486 49,964 38,733 United States Operations Number of jobs completed 7,110 5,065 3,130 Revenue per job 112,471 146,457 115,740 International operations Number of jobs completed 4,007 4,901 4,510 Revenue per job 65,027 55,902 56,206

SUMMARY OF QUARTERLY RESULTS

2012 2011 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenue 485.9 593.2 418.0 716.4 694.2 659.1 421.7 534.6 Profit / (loss) for the period (7.8) 22.6 (50.9) 89.4 114.9 111.3 30.1 82.4 Earnings / (loss) per share Basic (0.05) 0.16 (0.35) 0.61 0.78 0.76 0.21 0.57 Diluted (0.05) 0.16 (0.35) 0.61 0.78 0.75 0.21 0.56

26 | 2012 Annual Report Trican Well Service Ltd.

Q4 – 2012 temperatures typically experienced near the end of the Consolidated revenue for the fourth quarter of 2012 was fourth quarter. $485.9 million, a decrease of 30% compared to the fourth Q3 – 2012 quarter of 2011. Consolidated net loss was $7.8 million Consolidated revenue for the third quarter of 2012 was compared to net income of $114.9 million, and diluted $593.2 million, a decrease of 10% compared to the third loss per share was $0.05 compared to income of $0.78 for quarter of 2011. Consolidated profit was $22.6 million and the same period in 2011. diluted profit per share was $0.16 compared to $111.3 Our Canadian operations had quarterly revenue of $244.2 million and $0.75 per share for the same period in 2011. million and operating income of $51.0 million during the Third quarter revenue was $321.9 million for our Canadian fourth quarter of 2012. Canadian revenue decreased by operations, which was 13% lower than the third quarter 41% and operating income decreased by 69% compared of 2011. Canadian operating margins remained strong at to the fourth quarter of 2011. The decreases were indicative 31% and benefitted from a large Horn River project that of lower year-over-year activity levels in Canada due to was completed early in the quarter. Despite the strong reduced customer spending as 2012 capital program margins, Canadian results were negatively impacted came to close. Pricing decreased by 13% compared to the by a decline in drilling and completions activity as the fourth quarter of 2011, which also had a negative impact on number of active drilling rigs decreased by 28% and well Canadian revenue and operating margins. completions were down 31% on a year-over-year basis. Fourth quarter U.S. revenue was $173.6 million and the Canadian pricing decreased by 6% compared to the third operating loss was $2.1 million. U.S. operating margins quarter of 2011 due to the drop in demand combined with improved sequentially by 1050 basis points as we began a continued increase in equipment supply. to see the benefits of reduced guar costs and cost cutting U.S. operations third quarter revenue was $198.9 million initiatives. Trican pricing remained relatively stable on a down 4% compared to the second quarter of 2012. sequential basis for both contracted and spot market U.S. operating margins decreased to a loss of 11.7% as a crews. Despite the improved margins and stable pricing, percentage of revenue compared to a loss of 10.7% in U.S. activity levels weakened during the fourth quarter of the second quarter of 2012. U.S. results were significantly 2012. U.S. rig count decreased in our areas of operations impacted by low utilization in July when pricing was being by 13% compared to the fourth quarter of 2011 and by renegotiated with many of our U.S. customers. Our U.S. 5% compared to the third quarter of 2012. The drop in U.S. results improved in August and September due to the demand was largely due to reduced activity over the U.S. pricing increases obtained and progress made on cost Thanksgiving and Christmas holiday periods. cutting initiatives. U.S. pricing increased by 3% in the third Revenue from our International operations was $68.0 quarter of 2012 compared to the second quarter of 2012. In million in the fourth quarter of 2012, up 11% year- addition, our U.S. operations commenced operations in the over-year but down 6% sequentially. Russia comprises North Dakota Bakken during the second quarter of 2012. the majority of our International results and Russian International revenue was $72.4 million during the third activity levels were up year-over-year as several quarter of 2012, which was a 10% year-over-year decrease customers increased their work scope to meet capital and a 2% sequential increase. Our operations in Russia 2012 spending budgets. Russian fracturing activity comprise the majority of our International results and was particularly strong due to an increase in work revenue and operating income in this region improved performed on horizontal wells. Approximately 12% of sequentially due to increased activity levels from our our 2012 fourth quarter Russian fracturing revenue was customers. However, our Russian customers’ work programs from work performed on horizontal wells, compared to remain behind schedule and overall revenue is expected to approximately 3% in the fourth quarter of 2011. Russian come in below our initial expectations for this region. activity levels were down sequentially due to cold

2012 Annual Report | 27 Trican Well Service Ltd.

Trican announced its entry into Colombia through a on a year-over-year basis. Russian results were also negatively joint business arrangement with Independence Drilling impacted by a weaker Russian ruble as the average ruble to S.A. (Independence). Canadian dollar exchange rate for the second quarter of 2012 decreased by 6% compared to the second quarter of 2011. Q2 – 2012 Consolidated revenue for the second quarter of 2012 was Q1 – 2012 $418.0 million, a decrease of 1% compared to the second Consolidated revenue for the first quarter of 2012 was quarter of 2011. Consolidated net loss was $50.9 million $716.4 million, an increase of 34% compared to the first and diluted loss per share was $0.35 compared to profit quarter of 2011. Consolidated net income increased of $30.1 million and diluted earnings per share of $0.21 for by 9% to $89.4 million and diluted earnings per share the same period in 2011. increased to $0.61 compared to $0.56 for the same period in 2011. Funds provided by operations was $136.1 million Second quarter revenue was $140.2 million for our compared to $141.7 million in the first quarter of 2011. Canadian operations, which was 16% lower than the second quarter of 2011. Canadian results were negatively Our Canadian operations achieved quarterly revenue of impacted by wet weather in May and June that led to $433.1 million and operating income of $159.0 million during road bans and road weight restrictions throughout most the first quarter of 2012. Canadian revenue increased by 33% of the second quarter. Unlike 2011, no Horn River projects and operating income increased by 30% compared to the were completed in Canada during the second quarter, first quarter of 2011. Canadian pressure pumping demand which also contributed to the year-over-year reductions in remained strong during the first quarter of 2012 led by oil revenue and operating income. Horizontal drilling activity and liquids-rich gas directed activity. Oil prices remained continued to dominate the Canadian market as 71% of strong and supported oil directed activity as 72% of the wells drilled during the second quarter were horizontal active drilling rigs were directed towards oil plays during compared to 59% in the second quarter of 2011. the quarter. Our fracturing service line continued to benefit from the strength and growth of horizontal drilling as 64% U.S. operations second quarter revenue was $206.8 million, of wells drilled in Canada during the first quarter of 2012 20% higher than the second quarter of 2011. U.S. results were horizontal compared to 48% in the first quarter of 2011. were negatively impacted by a decrease in pricing, primarily Strong demand in Canada led to sustained pricing levels as in our dry gas areas of operation, and a significant increase Canadian pricing was up 8% compared to the first quarter of in guar costs which is a key ingredient in many fracturing 2011 and remained flat relative the fourth quarter of 2011. fluids. A number of cost cutting measures were initiated during the second quarter; however, they did not have a First quarter revenue for our U.S. operations increased by significant impact on the financial results for the quarter. 52% to $218.5 million and operating income fell 45% to Four cementing units and two coiled tubing units were $21.7 million compared to the first quarter of 2011. Market deployed in the U.S. during the second quarter, resulting in a conditions weakened in the U.S. during the first quarter of significant increase in activity in these two service lines. 2012 as U.S. rig count continued to decline in the dry gas regions of our U.S. operations and new pressure pumping International revenue was $71.0 million during the second equipment entered the U.S. market. Weakening operating quarter of 2012, which was a 13% year-over-year decrease conditions led to a 5% sequential decrease in U.S. pricing and a 10% sequential increase. Our Russian and Kazakhstan basis as declines in dry gas regions and the Eagle Ford were operations comprise the majority of our International results, partially offset by flat pricing in oil and liquids-rich gas areas and second quarter activity levels in these areas benefitted such as the Permian Basin and certain regions in Oklahoma from improved weather conditions compared to the first and flat pricing for our crews under contract. First quarter quarter of 2012. However, our customers’ work programs operating margins in the U.S. were also negatively were behind schedule and second quarter activity levels impacted by a significant increase in guar costs. and operating margins were below expectations and lower

28 | 2012 Annual Report Trican Well Service Ltd.

Revenue from our International operations was $64.7 sequentially, but consistent with overall expectations million in the first quarter of 2012, which was flat compared for the region. The sequential decrease in revenue and to the first quarter of 2011 and up 5% sequentially. operating margins was caused by low utilization, which Revenue and activity levels in Russia and Kazakhstan were resulted from the completion of our Russian customers negatively impacted by a slower than expected start to 2011 work programs and cold temperatures typically the 2012 work programs of our customers. experienced near the end of the fourth quarter in Russia.

Flooding throughout the first quarter had a negative Q3 – 2011 impact on our Australia operations. Utilization and activity Consolidated revenue for the third quarter of 2011 was levels in this region were well below expectations and as $659.1 million, an increase of 62% compared to the third a result, first quarter financial results in Australia reduced quarter of 2010. Consolidated net income increased by 108% International operating income by 270 basis points. to $111.3 million and diluted earnings per share increased to $0.75 compared to $0.40 for the same period in 2010. Q4 – 2011 Consolidated revenue for the fourth quarter of 2011 was Our Canadian operations achieved record quarterly $694.2 million, an increase of 60% compared to the fourth revenue of $371.5 million and operating income of quarter of 2010. Consolidated net income increased by 107% $146.9 million during the third quarter of 2011. Revenue to $114.9 million and diluted earnings per share increased to increased by 56% and operating income increased by $0.78 compared to $0.38 for the same period in 2010. 70% compared to the third quarter of 2010. Canadian operations benefitted from the continued strength of Our Canadian operations achieved record quarterly horizontal drilling and favourable weather conditions revenue of $417 million and operating income of $164.5 throughout most of the third quarter, which contributed million during the fourth quarter of 2011. Canadian to the 27% year-over-year increase in the number of active revenue increased by 56% and operating income drilling rigs in Canada. Oil directed activity supplied most increased by 63% compared to the fourth quarter of of the rig count increase and represented 70% of the active 2010. Canadian activity levels remained strong during the drilling rigs in Canada during the third quarter of 2011. fourth quarter of 2011 and were led by oil and liquids- rich gas directed activity. Horizontal drilling activity also Third quarter revenue of $207.3 million for our U.S. operations remained strong in Canada as 58% of wells drilled during was 20% higher than the second quarter of 2011 and the fourth quarter of 2011 were horizontal compared to represented a new quarterly record for this region. Operating 38% for the same period in the previous year. income was $54.5 million, an increase of 10% sequentially and 154% compared to the third quarter of 2010. Third quarter U.S. activity levels remained strong during the fourth results for our operations in the oil and liquids-rich gas plays, quarter as U.S. rig count increased by 19% year-over-year including our Eagle Ford and Oklahoma bases, were strong and 3% sequentially. Strong activity levels contributed and contributed to the sequential and year-over-year growth. to record quarterly U.S. revenue of $215.7 million, an Utilization levels in dry gas producing regions were also strong increase of 100% compared to the fourth quarter of as our contractual positions mitigated the decrease in activity 2010. U.S. pressure pumping demand continued to be in the Barnett and Haynesville shales. Third quarter results driven by strong oil and liquids-rich gas and horizontal were particularly strong for our Marcellus base, which services drilling activity. However, weak natural gas prices led to dry gas producing plays. activity declines in our dry gas regions, which partially offset the increases in the oil and liquids-rich gas areas. Russian revenue was $80.3 million during the third quarter of 2011, which was a 13% year-over-year increase Revenue from our International operations was $61.5 and a 1% sequential decrease. Activity levels met million in the fourth quarter of 2011, up 5% year-over-year expectations for all service lines as customers executed but down 23% sequentially. Revenue and activity levels on their 2011 work plans. Third quarter operating for our Russian and Kazakhstan operations were down

2012 Annual Report | 29 Trican Well Service Ltd.

income for our Russian operations decreased to $8.1 Q1 – 2011 million compared to $11.4 million in the third quarter of Trican’s consolidated revenue for the first quarter of 2011 2010 and $11.2 million in the second quarter 2011. increased to $534 million, a 62% increase relative to the first quarter of 2010. Net income for the quarter was Q2 – 2011 $82.4 million compared to $32.5 million for the same Consolidated revenue for the second quarter of 2011 was period in 2010. Diluted net income per share was $0.56 $421.7 million, an increase of 38% compared to the second in the first quarter of 2011 versus diluted net income per quarter of 2010. Consolidated net income increased by 237% share of $0.26 in the first quarter of 2010. to $30.1 million and diluted earnings per share increased to $0.21 compared to $0.06 for the same period in 2010. Record first quarter revenue of $326.4 million was achieved by our Canadian operations, which was a 53% increase over Record second quarter revenue of $167.8 million was the first quarter of 2010. Strong Canadian results continued achieved by our Canadian operations, which was 20% to be influenced by the strength of horizontal drilling and higher than the second quarter of 2010. Second quarter the growth in oil and liquids-rich gas directed activity. operating income of $31.3 million was also a new Canadian record and was 17% higher than same period Record quarterly revenue was also achieved by our U.S. in 2010. Canadian operations in the second quarter operations during the first quarter of 2011. U.S. revenues benefitted from the growth of pad well project work, increased to $143.6 million up 142% compared to the first which is less prone to spring break-up conditions. quarter of 2010. Activity levels benefitted from the first full quarter of operations for our base in the Marcellus region U.S. operations second quarter revenue of $172.4 million was and the continued strength of horizontal drilling activity. 20% higher than the first quarter of 2011 and represented a new quarterly record for this region. U.S. operating margins Revenue in our Russian region increased 12% compared were 28.9% in the second quarter of 2011, which was a 150 to the first quarter of 2010. Based on the results of the 2011 basis point improvement sequentially and a 1,070 basis point Russian contract tendering process, we expected activity improvement compared to the second quarter of 2010. levels to increase by approximately 7% relative to 2010. The Second quarter U.S. results benefitted from robust industry year-over-year job count increase of 5% was slightly below this activity levels and our geographic and service line expansion expectation due largely to warm weather experienced near initiatives started in 2010. the end of the first quarter that delayed certain jobs into the second quarter. Modest pricing increases were also achieved During the second quarter, our U.S. head office was officially during the 2011 tendering process; however, operating moved from Denton, Texas to Houston, Texas. This move margins in Russia remained consistent with the fourth quarter brought us closer to many of our key U.S. customers. of 2010 due to cost inflation experienced in the region. Russian revenue increased to $81.5 million, which was a 14% year-over-year increase and a 26% sequential NON-IFRS DISCLOSURE increase. Second quarter operating margins for our Russian Adjusted net income, operating income and funds provided by operations improved to 13.7% compared to 10.4% in the operations do not have any standardized meaning as prescribed second quarter of 2010. Second quarter activity levels in by IFRS and, therefore, are considered non-IFRS measures. Russia benefitted from improved weather conditions and allowed our customers to execute their 2011 work plans Adjusted net income and funds provided by operations after delays experienced in the first quarter. have been reconciled to net income and operating income has been reconciled to gross profit, being the most directly On April 28, 2011, Trican closed the issuance of U.S.$250 comparable measures calculated in accordance with IFRS. million and CAD$60 million senior unsecured notes on a The reconciling items have been presented net of tax. private placement basis (the “Private Placement”).

30 | 2012 Annual Report Trican Well Service Ltd.

Three months ended Twelve months ended Dec. 31, Dec. 31, Sept. 30, Dec. 31, Dec. 31, 2012 2011 2012 2012 2011 Adjusted net income ($5,375) $117, 873 $24,716 $63,028 $351,014 Deduct: Non-cash share-based compensation expense 2,455 3,003 2,068 9,689 12,378 Net income (IFRS financial measure) ($7,830) $114, 870 $22,648 $53,339 $338,636

Three months ended Twelve months ended Dec. 31, Dec. 31, Sept. 30, Dec. 31, Dec. 31, 2012 2011 2012 2012 2011 Funds provided by operations ($13,976) $181,916 $49,682 $122,750 $558, 811 Charges to income not involving cash Depreciation and amortization 41,564 36,443 37,270 152,837 126,576 Stock-based compensation 2,455 3,003 2,068 9,689 12,378 Loss/ (gain) on disposal of property and equipment 352 678 1,736 2,423 (369) Unrealized foreign exchange (gain)/loss (4,863) (2,273) 1,160 (50) (3,157) Income tax expense (2,957) 44,805 1,284 4,824 139,531 Income tax paid (42,697) (15,610) (16,484) (100,312) (54,784) Net income (IFRS financial measure) ($7,830) $114, 870 $22,648 $53,339 $338,636

Three months ended Twelve months ended Dec. 31, Dec. 31, Sept. 30, Dec. 31, Dec. 31, 2012 2011 2012 2012 2011 Operating income $35,123 $197,295 $71,355 $240,068 $614,524 Add: Administrative expenses 23,083 25,398 28,408 108,289 102,514 Deduct: Depreciation expense (41,564) (36,443) (37,270) (152,837) (126,576) Gross profit (IFRS financial measure) $16,642 $186,250 $62,493 $195,520 $590,462

FORWARD-LOOKING STATEMENTS future financing and capital activities are forward- looking statements. Some forward-looking information This document contains certain forward-looking and financial outlook are identified by the use of terms information and financial outlook based on Trican’s and phrases such as “anticipate,” “achieve”, “achievable,” current expectations, estimates, projections and “believe,” “estimate,” “expect,” “intend”, “plan”, “planned”, assumptions that were made by the Company in light and other similar terms and phrases. This forward-looking of information available at the time the statement was information and financial outlook speak only as of the made. Forward-looking information and financial outlook date of this document and we do not undertake to that address expectations or projections about the publicly update this forward-looking information and future, and other statements and information about the financial outlook except in accordance with applicable Company’s strategy for growth, expected and future securities laws. This forward-looking information and expenditures, costs, operating and financial results, financial outlook include, among others:

2012 Annual Report | 31 Trican Well Service Ltd.

The belief that fourth quarter Many of our maintenance spending The belief that most of the 2012 Canadian pricing levels reflect requirements for 2013 were incurred price declines in Canada occurred a balanced Canadian pressure in 2012 and we are confident our in the second half of 2012 and pumping market and the fleet will be maintained in top we do not expect any significant expectation that the market will operating condition throughout the additional pricing decreases in remained balanced throughout 2013; coming year. Trican will continue Canada during 2013; to closely monitor its capital The expectation that Canadian The expectation that a meaningful program and make any necessary activity levels will rebound in the first increase in Canadian horsepower modifications as greater visibility is quarter of 2013 as we enter the 2013 supply will not occur in 2013 and obtained throughout 2013; winter drilling season in Canada; that sustained demand levels will Demand for pressure pumping keep the market in balance; The expectation that the four idle services in Canada is expected to U.S. crews will remain inactive until The expectation that 2013 first quarter be stable throughout 2013, with U.S. market conditions improve or activity levels will increase relative to recent industry forecasts reflecting a strategic opportunity arises in the fourth quarter of 2012 as we enter a 3% increase in the number of North America or Internationally; the busy the Canadian drilling season; wells drilled compared to 2012; The expectation that the growth of The expectation that first Oil and liquids-rich gas directed horizontal drilling and multi-stage quarter activity levels will not be activity is expected to continue completions in Russia is an important as strong as the first quarter of to dominate the Canadian oil and development for the pressure 2012. As a result, we expect first gas market given the continued pumping industry in Russia, as the quarter operating margins will weakness in natural gas prices; shift towards more unconventional be higher sequentially due to drilling and completions will increase Horizontal drilling activity is also increased activity but lower year- the demand for horsepower in the expected to remain strong, as it over-year due to the declines in region and place a larger emphasis has become the leading drilling pricing and activity levels; on technology; method in the Canadian market; The expectation that U.S. pressure The expectation that Trican The expectation that demand pumping demand will continue will initially provide cementing for pressure pumping services to be driven by commodity prices services in the Colombian market, in Canada will be stable in 2013 and the cash flows and capital growing over time to become compared to the 2012; budgets of our U.S. customers; a full service pressure pumping The expectation that oil and The expectation that based company in the region; liquids-rich gas directed activity on the current commodity The expectation that Trican will will continue to dominate the price and capital spending commence operations in Colombia Canadian oil and gas market; environment in the U.S., no during the first half of 2013; significant change in 2013 The expectation that horizontal pressure pumping demand will The belief that the i-TEC acquisition drilling activity will remain strong occur relative to demand levels complements Trican’s existing in Canada; seen in the second half of 2012. completion systems and tools The expectation that increased business, and is expected to provide The expectation that a meaningful equipment supply in Canada will positive growth opportunities, as amount of new horsepower will result in a year-over-year reduction well as enhance our other pressure not enter the U.S. market in 2013; in pricing; pumping service lines;

32 | 2012 Annual Report Trican Well Service Ltd.

The potential for modest declines The belief that Trican’s U.S. The expectation of moderate in available U.S. horsepower to operating margins will increase improvements in Russian occur in 2013 if equipment is gradually throughout the year; operating margins in 2013; redeployed out of North American The expectation that cost cutting The expectation that the and into International markets initiatives will improve U.S. Kazakhstan pressure pumping and if older U.S. equipment is operating margins in 2013; market will be stable in 2013; permanently retired; The expectation that realized The expectation that activity The expectation that a significant guar prices will continue to levels in Kazakhstan will be down drop in U.S. pressure pumping decline in the first quarter of 2013 slightly; however, operating supply in 2013 will not occur; as we work through our higher margins are expected to remain The belief that the U.S. pressure priced inventory; strong in this region; pumping market will remain The expectation that we will grow The expectation that Algerian oversupplied throughout the our cementing and coiled tubing coiled tubing activity and pricing upcoming year; service lines in the U.S. during will remain stable in 2013; The expectation that the supply/ 2013 by increasing utilization on The expectation that the demand imbalance in the U.S. will existing equipment; cementing market in Algeria will not grow throughout 2013; The expectation that sales from be very competitive in 2013; The expectation that U.S. pricing our U.S. cementing and coiled The expectation of moderate will remain stable in 2013 given the tubing service lines will increase as growth in Australian cementing expectations of a steady supply and a percentage of total sales; revenue and operating income demand environment in the U.S.; The expectation that 2013 improvements in 2013; The expectation that we will be Russia revenue will increase by The expectation that Australia will working with new and existing approximately 25%, as measured in not generate a meaningful level of customers to obtain work for Russian rubles, compared to 2012; profitability in 2013. U.S. fracturing crews that have The expectation that the expiring contracts in 2013; The expectation that Trican will estimated revenue increase is participate in pressure pumping The expectation that we based on a 2% rise in overall tenders in 2013 in Saudi Arabia will realize moderate pricing activity combined with a 23% and Colombia. declines in the U.S. in 2013 due increase in average revenue to the contract expirations but per job. The expectation that Trican’s 2013 expect 2013 utilization of our capital budget spending will be The expectation that the increase U.S. fracturing fleet to remain approximately $130 - $150 million in average revenue per job is the consistent with 2012; combined result of the trend The expectation that Trican will The belief that U.S. pricing towards larger fracturing job sizes renew the NCIB in the first quarter could soften slightly in some of in multi-stage completions, a of 2013. the more active oil and liquids- shift in the sales mix toward more rich gas plays if equipment fracturing work relative to coiled The expectation that 2013 continues to be redeployed into tubing and cementing and a dividend payments will be these areas; modest increase in pricing; approximately $44.0 million.

2012 Annual Report | 33 Trican Well Service Ltd.

Forward-looking information and financial outlook are Forward-looking information and financial outlook is subject based on current expectations, estimates, projections to a number of risks and uncertainties, which could cause and assumptions, which we believe are reasonable but actual results to differ materially from those anticipated. which may prove to be incorrect. Trican’s actual results These risks and uncertainties include: fluctuating prices for may differ materially from those expressed or implied and crude oil and natural gas; changes in drilling activity; general therefore such forward-looking information and financial global economic, political and business conditions; weather outlook should not be unduly relied upon. In addition to conditions; regulatory changes; the successful exploitation other factors and assumptions which may be identified in and integration of technology; customer acceptance this document, assumptions have been made regarding, of technology; success in obtaining issued patents; the among other things: industry activity; the general stability potential development of competing technologies by of the economic and political environment; effect of market market competitors; and availability of products, qualified conditions on demand for the Company’s products and personnel, manufacturing capacity and raw materials. The services; the ability to obtain qualified staff, equipment and foregoing important factors are not exhaustive. In addition, services in a timely and cost efficient manner; the ability actual results could differ materially from those anticipated to operate its business in a safe, efficient and effective in forward-looking information and financial outlook manner; the performance and characteristics of various provided herein as a result of the risk factors set forth under business segments; the effect of current plans; the timing the section entitled “Risks Factors” in our Annual Information and costs of capital expenditures; future oil and natural gas Form dated March 22, 2012. Readers are also referred to the prices; currency, exchange and interest rates; the regulatory risk factors and assumptions described in other documents framework regarding royalties, taxes and environmental filed by the Company from time to time with securities matters in the jurisdictions in which the Company operates; regulatory authorities. and the ability of the Company to successfully market its Additional information regarding Trican including Trican’s products and services. most recent Annual Information Form is available under Trican’s profile on SEDAR (www.sedar.com).

34 | 2012 Annual Report Trican Well Service Ltd.

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Trican Well Service Ltd. is responsible policies and practices and the preparation of these for the preparation and integrity of the accompanying financial statements. The Audit Committee meets consolidated financial statements and all other information periodically with external auditors and management contained in these financial statements. The consolidated to review the work of each and the propriety of the financial statements have been prepared in conformity discharge of their responsibilities. Specifically, the Audit with accounting principles generally accepted in Canada Committee reviews with management and the external and include amounts that are based on management’s auditors the financial statements and annual report informed judgments and estimates where necessary. of the Company prior to submission to the Board of Directors for final approval. The external auditors have The Company maintains internal accounting control full and free access to the Audit Committee to discuss systems which are adequate to provide reasonable auditing and financial reporting matters. assurance that assets are safeguarded, transactions are executed in accordance with management’s authorization The shareholders have appointed KPMG LLP as the external and accounting records are reliable as a basis for the auditors of the Company and, in that capacity, they have preparation of the consolidated financial statements. examined the financial statements for the periods ended December 31, 2012. The Auditors’ Report to the shareholders The Board of Directors, through its Audit Committee, is presented herein. monitors management’s financial and accounting

SIGNED “DALE M. DUSTERHOFT” DALE M. DUSTERHOFT CHIEF EXECUTIVE OFFICER

SIGNED “MICHAEL A. BALDWIN” MICHAEL A. BALDWIN VICE PRESIDENT FINANCE AND CHIEF FINANCIAL OFFICER

February 26, 2013

2012 Annual Report | 35 Trican Well Service Ltd.

To the Shareholders of Trican Well Service Ltd. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the We have audited the accompanying consolidated consolidated financial statements. The procedures selected financial statements of Trican Well Service Ltd., which depend on our judgment, including the assessment of the comprise the consolidated statements of financial risks of material misstatement of the consolidated financial position as at December 31, 2012 and December 31, 2011, statements, whether due to fraud or error. In making those the consolidated statements of comprehensive income, risk assessments, we consider internal control relevant changes in equity and cash flows for the years then ended, to the entity’s preparation and fair presentation of the and notes, comprising a summary of significant accounting consolidated financial statements in order to design audit policies and other explanatory information. procedures that are appropriate in the circumstances, Management’s Responsibility for the Consolidated but not for the purpose of expressing an opinion on the Financial Statements effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting Management is responsible for the preparation and fair policies used and the reasonableness of accounting presentation of these consolidated financial statements estimates made by management, as well as evaluating in accordance with International Financial Reporting the overall presentation of the consolidated financial Standards, and for such internal control as management statements. determines is necessary to enable the preparation of consolidated financial statements that are free from material We believe that the audit evidence we have obtained in our misstatement, whether due to fraud or error. audits is sufficient and appropriate to provide a basis for our audit opinion. Auditors’ Responsibility Opinion Our responsibility is to express an opinion on these consolidated financial statements based on our audits. In our opinion, the consolidated financial statements We conducted our audits in accordance with Canadian present fairly, in all material respects, the consolidated generally accepted auditing standards. Those standards financial position of Trican Well Service Ltd. as at December require that we comply with ethical requirements and 31, 2012 and December 31, 2011, and its consolidated plan and perform the audit to obtain reasonable assurance financial performance and its consolidated cash flows for about whether the consolidated financial statements are the years then ended in accordance with International free from material misstatement. Financial Reporting Standards.

SIGNED “KPMG LLP” Chartered Accountants Calgary, Canada

February 26, 2013

36 | 2012 Annual Report Trican Well Service Ltd.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Stated in thousands)

As at December 31, 2012 2011 ASSETS Current assets Cash and cash equivalents (note 4) $113,506 $125,855 Trade and other receivables (note 5) 437,038 607,672 Current tax assets 647 1,553 Inventory (note 6) 211,794 173,515 Prepaid expenses 33,002 31,996 795,987 940,591 Property and equipment (note 7) 1,458,562 1,178,410 Intangible assets (note 8) 10,081 14,662 Deferred tax assets (note 15) 76,302 33,369 Other assets (note 9) 11,898 6,445 Goodwill (note 8) 43,689 43,706 $2,396,519 $2,217,183

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Bank loans (note 11) $9,119 $- Trade and other payables (note 10) 228,788 287,689 Contingent consideration (note 3) 2,860 2,867 Current tax liabilities 7,853 3,363 Current portion of loans and borrowings (note 11) - 25,425 248,620 319,344

Loans and borrowings (note 11) 694,972 400,256 Deferred tax liabilities (note 15) 77,012 132,031

Shareholders’ equity Share capital (note 12) 527,860 529,062 Contributed surplus 55,352 45,894 Accumulated other comprehensive loss (note 12) (24,100) (22,805) Retained earnings 815,700 813,238 Total equity attributable to equity holders of the Company 1,374,812 1,365,389 Non-controlling interest 1,103 163 $2,396,519 $2,217,183

Contractual obligations (note 19) Contingencies (note 22) Subsequent event (note 25) See accompanying notes to the consolidated financial statements.

SIGNED “DALE M. DUSTERHOFT” SIGNED “KEVIN L. NUGENT” DALE M. DUSTERHOFT KEVIN L. NUGENT Director Director

2012 Annual Report | 37 Trican Well Service Ltd.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Stated in thousands, except per share amounts), For the year ended December 31, 2012 2011

Revenue $2,213,400 $2,309,647 Cost of sales 2,017,880 1,719,185 Gross profit 195,520 590,462 Administrative expenses 108,289 102,514 Other expense/ (income) 375 (2,089) Results from operating activities 86,856 490,037 Finance income (2,212) (3,896) Finance costs 30,497 20,041 Foreign exchange loss/ (gain) 408 (4,275) Profit before income tax 58,163 478,167 Income tax expense (note 15) 4,824 139,531 Profit for the year $53,339 $338,636

Other comprehensive income Unrealized loss/ (gain) on hedging instruments (898) 1,358 Foreign currency translation differences 2,193 2,219 Total comprehensive income for the year $52,044 $335,059

Profit attributable to: Owners of the Company 53,674 338,707 Non-controlling interest (335) (71) Profit for the year $53,339 $338,636

Total comprehensive income attributable to: Owners of the Company 52,379 335,175 Non-controlling interest (335) (116) Total comprehensive income for the year $52,044 $335,059

Earnings per share (note 13) Basic $0.37 $2.32 Diluted $0.37 $2.30 Weighted average shares outstanding - basic 146,620 145,805 Weighted average shares outstanding - diluted 146,690 147,085

See accompanying notes to the consolidated financial statements.

38 | 2012 Annual Report Trican Well Service Ltd.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Accumulated other Non Share Contributed comprehensive Retained Controlling Total (Stated in thousands) capital surplus loss earnings Total Interest Equity

Balance at January 1, 2011 $486,594 $42,919 $(19,273) $489,161 $999,401 $- $999,401 Profit/(loss) for the period - - - 338,707 338,707 (71) 338,636 Foreign currency translation differences - - (2,174) - (2,174) (45) (2,219) Dividends to equity holders ($0.10 per share annually) - - - (14,630) (14,630) - (14,630) Share-based payments transactions - 12,378 - - 12,378 - 12,378 Share options exercised 42,468 (9,403) - - 33,065 - 33,065 Unrealized loss on cash flow hedge - - (1,358) - (1,358) - (1,358) Investment in subsidiary - - - - - 279 279 Balance at December 31, 2011 $529,062 $45,894 $(22,805) $813,238 $1,365,389 $163 $1,365,552

Balance at January 1, 2012 $529,062 $45,894 $(22,805) $813,238 $1,365,389 $163 $1,365,552 Profit/(loss) for the period - - - 53,674 53,674 (335) 53,339 Foreign currency translation differences - - (2,193) - (2,193) - (2,193) Dividends to equity holders ($0.30 per share annually) - - - (43,923) (43,923) - (43,923) Share-based payments transactions - 9,689 - - 9,689 - 9,689 Share options exercised 1,520 (231) - - 1,289 - 1,289 Unrealized gain on cash flow hedge - - 898 - 898 - 898 Shares cancelled under NCIB (2,722) - - (7,289) (10,011) - (10,011) Investment in subsidiary - - - - - 1,275 1,275 Balance at December 31, 2012 $527,860 $55,352 $(24,100) $815,700 $1,374,812 $1,103 $1,375,915

See accompanying notes to the consolidated financial statements.

2012 Annual Report | 39 Trican Well Service Ltd.

CONSOLIDATED STATEMENT OF CASH FLOWS

Twelve Months Twelve Months Ended Dec 31, Ended Dec 30, (Stated in thousands) 2012 2011 Cash Provided By/ (Used In): Operations Profit for the period $53,339 $338,636 Charges to income not involving cash: Depreciation and amortization 152,837 126,576 Amortization of debt issuance costs 813 375 Stock-based compensation 9,689 12,378 Loss/(gain) on disposal of property and equipment 2,423 (369) Net finance costs 28,285 16,145 Unrealized foreign exchange gain (50) (3,157) Income tax expense 4,824 139,531 252,160 630,115 Change in inventories (39,471) (67,225) Change in trade and other receivables 167,427 (232,628) Change in prepayments (1,463) (21,995) Change in trade and other payables (67,688) 72,061 Cash generated from operating activities 310,965 380,328 Interest paid (24,278) (17,454) Income tax paid (100,312) (54,784) 186,375 308,090

Investing Interest received 1,163 1,851 Purchase of property and equipment (444,550) (578,457) Proceeds from the sale of property and equipment 3,325 2,489 Payments received on loan to an unrelated third party (24) 6,175 Business acquisitions - (9,372) (440,086) (577,314)

Financing Net proceeds from issuance of share capital 1,289 33,065 Repurchase and cancellation of shares under NCIB (10,011) - Issuance of loans and borrowings, net of financing fees 304,756 294,118 Repayment of loans and borrowings (25,425) - Dividend paid (29,300) (14,517) 241,309 312,666

Effect of exchange rate changes on cash 51 1,355

Increase / (decrease) in cash and cash equivalents (12,349) 44,797 Cash and cash equivalents, beginning of year 125,855 81,058 Cash and cash equivalents, end of year $113,506 125,855

See accompanying notes to the consolidated financial statements

40 | 2012 Annual Report Trican Well Service Ltd.

Notes to Consolidated Financial Estimates and underlying assumptions are reviewed on Statements an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised For the years ended December 31, 2012 and 2011 and in any future periods affected. NOTE 1 – NATURE OF BUSINESS AND Information about critical judgments in applying BASIS OF PRESENTATION accounting policies that have the most significant effect on the amounts recognized in the consolidated financial Nature of business statements is included in the following notes: Trican Well Service Ltd. (the “Company” or “Trican”) is an Note 7 – useful life and salvage values related to the oilfield Services Company incorporated under the laws of the depreciation of fixed assets; province of Alberta. These consolidated financial statements include the accounts of the Company and its subsidiaries, all of Note 8 – impairment testing of goodwill and non-financial which are wholly owned, with the exception of Saudi Arabia, assets is evaluated using discounted future cash flows; in which Trican has a 70% ownership and Colombia, in which Trican has an 80% ownership (together referred to as the Note 11 – present value of future minimum lease payments; “Company”). The Company provides a comprehensive array of Note 14 – weighted average fair values of options specialized products, equipment, services and technology for granted using the Black-Scholes option pricing model; use in the drilling, completion, stimulation and reworking of oil and gas wells in Canada, U.S., and International operations, Note 15 – tax calculations as a result of interpretation of made up of Russia, Kazakhstan, Algeria, and Australia. The complex tax legislation and reversal of timing differences; International operations also include Saudi Arabia and Note 16 – estimated allowance for doubtful accounts; and Colombia where Trican is currently establising its position. Basis of presentation Note 16 – fair value of cash flow hedges is determined using forward rates and is based on a future transaction. The consolidated financial statements have been prepared in accordance with International Financial Reporting These consolidated financial statements were approved by Standards (IFRS), as issued by the International Accounting the Board of Directors on February 26, 2013. Standards Board (IASB). NOTE 2 - SIGNIFICANT ACCOUNTING The consolidated financial statements have been prepared on an historical costs basis except for financial instruments at POLICIES fair value through profit or loss and liabilities for cash settled The following is a summary of significant accounting share based payment arrangements which are measured at policies used in the preparation of these consolidated fair value in the Consolidated Statement of Financial Position. financial statements.

The consolidated financial statements are presented in Consolidation Canadian dollars and have been rounded to the nearest Subsidiaries are entities controlled by the Company. The thousands, except where indicated. financial results of subsidiaries are included in the consolidated financial statements from the date that control commences Management is required to make estimates and assumptions until the date that control ceases. All inter-company balances that affect the application of accounting policies, reported and transactions have been eliminated on consolidation. amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial Transaction costs, other than those associated with the issue of statements and the reported amounts of revenue and debt or equity securities, that the Company incurs in connection expenses during the reported period. with a business combination are expensed as incurred.

2012 Annual Report | 41 Trican Well Service Ltd.

Non-controlling interests in subsidiaries are identified separately within the part will flow to the Company, and its cost can be from the Company’s equity therein. The interests of non- measured reliably. Repairs and maintenance expenditures which controlling shareholders may be initially measured either at fair do not extend the useful life of the property and equipment are value or at the non-controlling interests’ proportionate share of expensed in the period in which they are incurred. the fair value of the acquiree’s identifiable net assets. The choice Management bases the estimate of the useful life and salvage of measurement basis is made on an acquisition-by-acquisition value of property and equipment, with the exception of land basis. Subsequent to acquisition, the carrying amount of which is not depreciated, on expected utilization, technological non-controlling interests is the amount of those interests at change and effectiveness of maintenance programs. When parts initial recognition plus the non-controlling interests’ share of of an item of property or equipment have different useful lives, subsequent changes in equity. Total comprehensive income is they are accounted for as separate items (major components) of attributed to non-controlling interests even if this results in the property and equipment. Although management believes the non-controlling interests having a deficit balance. Acquisitions of estimated useful lives of the Company’s property and equipment non-controlling interests are accounted for as transactions with are reasonable, it is possible that changes in estimates could occur equity holders in their capacity as equity holders and therefore which may affect the expected useful lives and salvage values of no goodwill is recognized as a result of such transactions. the property and equipment. Cash and cash equivalents Gains and losses on disposal of an item of property and The Company’s short-term deposits with original maturities equipment are determined by comparing the proceeds from of three months or less are considered to be cash equivalents disposal with the carrying amount of property and equipment, and are recorded at cost, which approximates fair market and are recognized net within other income in profit or loss. value. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management Depreciation is recognized in profit or loss on a straight- are included as a component of cash and cash equivalents for line basis over the estimated useful lives of each part of an the purpose of the statement of cash flows. item of property and equipment, since this most closely Inventory reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Inventory is measured at the lower of cost and net realizable value. The cost of inventory is determined using the Leased assets are depreciated over the shorter of the lease standard cost method. Inventory balances include all costs term and their useful lives unless it is expected that the of purchase, costs of conversion and other costs incurred in Company will obtain ownership by the end of the lease term. bringing the inventory to its existing location and condition. Depreciation is calculated using the straight-line method over Net realizable value is the estimated selling prices in the estimated useful life less residual value of the asset as follows: the ordinary course of business, less estimated costs of completion and selling expenses. Buildings and improvements 20 years Equipment 6 to 10 years Property and equipment Furniture and fixtures 2 to 10 years Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes Depreciation methods, useful lives and residual values are expenditures that are directly attributable to the acquisition of reviewed each financial year end and adjusted if appropriate. the asset, and subsequent expenditure to the extent that they can be measured and future economic benefit is probable. The Impairment of non financial assets carrying values of replaced parts are derecognized when they The carrying amounts of the Company’s non financial assets are replaced. The cost of replacing a part of an item of property except inventory, prepaid expenses and deferred tax assets and equipment is recognized in the carrying amount of the item are reviewed at each reporting date to determine whether if it is probable that the future economic benefits embodied there is an indicator of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The

42 | 2012 Annual Report Trican Well Service Ltd.

recoverable amount of goodwill is estimated yearly in the The “CBM Process” relates to an acquisition by the Company fourth quarter, or more frequently, if triggers are identified. and was recorded at the estimated fair value on the acquisition date and amortized on a straight line basis over 10 years. The recoverable amount of an asset or cash generating unit (CGU) is the greater of its value in use and its fair value less costs All amortization of intangible assets is charged to cost of sales to sell. In assessing value in use, the estimated future cash in the consolidated Statement of Comprehensive Income. flows are discounted to their present value using a weighted Financial Instruments average cost of capital that reflects current market assessments Non-derivative financial assets of the time value of money and the risks specific to the asset. The Company initially recognizes loans and receivables on The Company’s corporate assets do not generate independent the date that they are originated. All other financial assets are cash inflows. An impairment loss is recognized if the carrying recognized initially on the trade date at which the Company amount of an asset or CGU exceeds its estimated recoverable becomes a party to the contractual provisions of the instrument. amount. Impairment losses are recognized in profit or loss. The Company derecognizes a financial asset when the Impairment losses recognized in respect of CGUs are allocated first contractual rights to the cash flows from the asset expire, or to reduce the carrying amount of goodwill allocated to the CGUs it transfers the rights to receive the contractual cash flows and then to reduce the carrying amounts of the other assets in on the financial asset in a transaction in which substantially the CGU on a pro rata basis. Impairment losses recognized in prior all the risks and rewards of ownership of the financial asset periods are assessed at each reporting date for any indication of are transferred. Any interest in transferred financial assets reversal. An impairment loss is reversed only to the extent that the that is created or retained by the Company is recognized as a assets carrying amount does not exceed the carrying amount that separate asset or liability. would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Loans and receivables Goodwill Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. The Company measures goodwill as the fair value of the Such assets are recognized initially at fair value plus any directly consideration transferred upon an acquisition, including attributable transaction costs. Subsequent to initial recognition, the recognized amount of any non-controlling interest in loans and receivables are measured at amortized cost using the the acquiree, less the net recognized amount (generally effective interest rate method less any impairment losses. fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Loans and receivables comprise trade and other receivables and the loan to an unrelated third party. Goodwill is allocated to the Company’s cash generating units that are expected to benefit from the synergies of Cash and cash equivalents the business combination. Goodwill is not amortized, but Cash and cash equivalents comprise cash balances and short- is tested for impairment annually, or more frequently in term deposits with original maturities of three months or less. the event that a trigger is identified. An impairment loss in respect of goodwill is not reversed. Impairment of financial assets The carrying amount of the Company’s financial assets includes Intangible Assets cash and cash equivalents, trade and other receivables, and a Non-compete agreements relate to the Company’s acquisitions loan to an unrelated third party, reported within other assets and are recorded at their estimated fair value on the acquisition on the Consolidated Statement of Financial Position. A financial date and amortized on a straight line basis over 8 years. asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial Customer relationships relate to the Company’s acquisitions recognition of the asset, and that loss event had an impact on and are recorded at their estimated fair value on the acquisition the estimated future cash flow resulting from that asset. date and amortized on a straight line basis over 5 years.

2012 Annual Report | 43 Trican Well Service Ltd.

Evidence of impairment would include default or delinquency Financial assets and liabilities are offset and the net amount by a debtor, restructuring of an amount due to the Company presented in the statement of financial position when, and on terms that the Company would not consider otherwise, only when, the Company has a legal right to offset the indications that a debtor will enter bankruptcy, adverse amounts and intends either to settle on a net basis or to changes in the payment status of borrowers or economic realize the asset and settle the liability simultaneously. conditions that correlate with defaults. Derivative financial instruments, including hedge The Company evaluates impairment for financial assets accounting measured at amortized cost at both a specific asset and The Company holds derivative financial instruments to collective level. All individually significant assets are assessed for manage its exposure to the risk associated with fluctuations specific impairment annually. Assets that are not individually in foreign exchange and interest rates. significant are collectively assessed for impairment by grouping The Company has designated all cross currency swap agreements together assets with similar risk profiles. as cash flow hedges. The Company formally documents all Impairment is assessed using historical trends of default, relationships between hedging instruments and hedged items, timing of recoveries and the amount of loss incurred, as well as the risk management objective and strategy for adjusted for management’s judgment in relation to how the undertaking the hedge transaction. This process includes linking all current economic and credit environment will impact losses derivatives that are designated in a cash flow hedging relationship being greater or less than historical trends. to a specific firm commitment or forecasted transaction. The Company also formally assesses both, at inception and at each An impairment loss is determined as the difference between reporting date, whether derivatives used in hedging transactions an assets’ carrying amount and the present value of future have been highly effective in offsetting changes in cash flows of cash flows. Losses are recognized in profit or loss and hedged items and whether those derivatives may be expected to reflected in a provision account against loans and receivables. remain highly effective in future periods. When an event occurring after the impairment was recognized causes the amount of impairment to decrease, The Company calculates the fair value of the cash flow hedges the recovery is reversed through profit and loss. using market forward rates reflecting the remaining term of the hedges at each reporting period. Under cash flow hedge Non-derivative financial liabilities accounting, the effective portion of the change in the fair value Financial liabilities are recognized initially on the trade date at which of the hedging instrument is recognized in other comprehensive the Company becomes a party to the contractual provisions of income (OCI) and presented within shareholders equity in the instrument. Such financial liabilities are recognized initially at fair accumulated other comprehensive income. The ineffective value plus any directly attributable transaction costs. Subsequent portion of the change in fair value is recognized in profit and to initial recognition these financial liabilities are measured at loss. Upon maturity of the financial derivative instrument, the amortized cost using the effective interest rate method, with the effective gains and losses previously accumulated in OCI within exception of contingent consideration which is stated at fair value. shareholders’ equity are recorded in profit and loss. Transaction costs related to the issuance of any long term debt are netted against the carrying value of the associated long term debt The Company utilizes foreign denominated long-term debt and amortized as part of financing costs over the life of the debt to hedge its exposure to changes in the carrying values of the using the effective interest rate method. Company’s net investment in certain foreign operations as a result of changes in foreign exchange rates. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. Under the accounting for hedges of a net investment in foreign operations, the foreign denominated long-term debt must be The Company has the following non-derivative financial designated and documented as a hedge, and must be effective liabilities: loans and borrowings, contingent consideration, at inception and on an ongoing basis. The documentation and trade and other payables. defines the relationship between the foreign denominated long-

44 | 2012 Annual Report Trican Well Service Ltd.

term debt and the net investment in the foreign operations. Russia, fluctuations in the exchange rate between the U.S. dollar/ The Company formally assesses, both at inception and on an Canadian dollar and Russian ruble/Canadian dollar can have a ongoing basis, whether the changes in fair value of the foreign significant effect on the operating results and the fair value or denominated long-term debt is highly effective in offsetting future cash flows of the Company’s financial assets and liabilities. changes in fair value of the net investment in the foreign Canadian entities are exposed to currency risk on foreign operations. The portion of gains or losses on the hedging item currency denominated financial assets and liabilities with that is determined to be an effective hedge is recognized in OCI, adjustments recognized as foreign exchange gains and/ net of tax and is limited to the translation gain or loss on the net or losses in the profit and loss, except for items that are investment, while the ineffective portion is recorded in earnings. designated in a hedging relationship, such as a portion of If the hedging instrument no longer meets the criteria the U.S. denominated debt. for hedge accounting, expires or is sold, terminated or Foreign entities with a domestic functional currency expose exercised, or the designation is revoked, then hedge the Company to currency risk on the translation of these accounting is discontinued prospectively. If the forecast entities’ financial assets and liabilities to Canadian dollars transaction is no longer expected to occur, then the balance for consolidation. For instance, the operations in Russia in shareholders’ equity is reclassified in profit or loss. have a ruble functional currency, and adjustments arising Share capital when translating this foreign entity into Canadian dollars Common shares are classified as equity. Incremental costs are reflected in the Consolidated Statement of Other directly attributable to the issue of common shares are Comprehensive Income as unrealized gains or losses on recognized as a deduction from equity, net of any tax effects. translating financial statements of foreign operations.

Provisions Foreign entities are exposed to currency risk on financial A provision is recognized if, as a result of a past event, the assets and liabilities denominated in currencies other than Company has a present legal or constructive obligation that their functional currency with adjustments recognized in can be reliably measured, and it is probable that an outflow the profit and loss. For instance, the operations in Russia of economic benefits will be required to settle the obligation. where the functional currency is the ruble will incur foreign exchange gains and/or losses on financial assets and Financial risk management liabilities denominated in currencies other than the ruble. The Company has exposure to the following risks from its use of financial instruments: Credit risk Credit risk refers to the possibility that a customer or Market risk counterparty will fail to fulfill its obligations and as a result, Credit risk create a financial loss for the Company.

Liquidity risk Customer The Company’s trade receivables are predominantly with Market risk customers who explore for and develop natural gas and Market risk is the risk that the fair value or future cash flows of petroleum reserves and are subject to normal industry financial assets or liabilities will fluctuate due to movements credit risks that include fluctuations in oil and natural gas in market rates and is comprised of the following: prices and the ability to secure adequate debt or equity financing. The Company assesses the creditworthiness of Interest rate risk its customers on an ongoing basis as well as monitoring the The Company partially mitigates its exposure to interest rate amount and age of balances outstanding. Accordingly, the changes by maintaining a mix of both fixed and floating rate debt. Company views the credit risks on these amounts as normal Foreign exchange rate risk for the industry. The carrying amount of accounts receivable As the Company operates primarily in North America and represents the maximum credit exposure on this balance.

2012 Annual Report | 45 Trican Well Service Ltd.

Payment terms with customers vary by region and contract; Income taxes however, standard payment terms are 30 days from invoice The Company uses the liability method of accounting for date. Historically, industry practice allows for payment up to income taxes. Under the liability method, deferred income 70 days from invoice date. tax assets and liabilities are recognized as the difference between the carrying amounts of assets and liabilities and Counterparties their respective income tax basis (temporary differences). A Counterparties to financial instruments expose the deferred tax asset may also be recognized for the benefit Company to credit losses in the event of non-performance. expected from unused tax losses available for carry forward, Counterparties to cash transactions are limited to high to the extent that it is probable that future taxable earnings credit quality financial institutions. The Company does not will be available against which the tax losses can be applied. anticipate non-performance that would materially impact the Company’s financial statements. Deferred income tax assets and liabilities are measured based on income tax rates and tax laws that are enacted Liquidity risk or substantively enacted by the end of the reporting Liquidity risk is the risk the Company will encounter period and that are expected to apply in the years in which difficulties in meeting its financial liability obligations. temporary differences are expected to be realized or settled. The Company manages its liquidity risk through cash Deferred income tax assets are reviewed at each reporting and debt management, which includes monitoring period and are reduced to the extent that it is no longer forecasts of the Company’s cash and cash equivalents and probable that the related tax benefit will be realized. borrowing facilities on the basis of projected cash flow. This is generally carried out at both the consolidated and Tax interpretations, regulations and legislation in the various geographic region levels in accordance with practices and jurisdictions in which the Company and its subsidiaries operate policies established by the Company. are subject to change. As such, income taxes are subject to measurement uncertainty and the interpretations can impact Revenue recognition net earnings through the income tax expense arising from The Company’s revenue comprises services and other changes in deferred income tax assets or liabilities. revenue and is generally sold based on fixed or agreed upon priced purchase orders or contracts with the Foreign currency translation and transactions customer. Service and other revenue is recognized when For foreign entities whose functional currency is the the services are provided and collectability is reasonably Canadian dollar, the Company translates monetary assets assured. Customer contract terms do not include provisions and liabilities at period-end exchange rates, and non- for significant post-service delivery obligations. monetary items are translated at historical rates. Income and expense accounts are translated at the average rates Finance income and finance costs in effect during the period. Gains or losses from changes Finance income is made up of interest income on funds invested in exchange rates are recognized in the profit or loss in the along with any fair value gains on financial assets at fair value period of occurrence. Foreign exchange gains or losses through profit or loss. Interest income is recognized as it is arising from a monetary item receivable from or payable earned in the profit or loss, using the effective interest method. to a foreign operation, the settlement of which is neither Finance costs are made up of interest expense on planned nor likely to occur in the foreseeable future and borrowings, fair value losses on financial assets through which in substance is considered to form part of the net profit or loss, and impairment losses recognized on financial investment in the foreign operation, are recognized in other assets (other than trade receivables). comprehensive income in the cumulative amount of foreign currency translation differences. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are For foreign entities whose functional currency is not the recognized in profit or loss using the effective interest method. Canadian dollar, the Company translates assets, including

46 | 2012 Annual Report Trican Well Service Ltd.

goodwill, and liabilities at period-end rates and income and The Company has a Performance Share Unit (PSU) plan for expense accounts at average exchange rates. Adjustments Executive Officers of the Company. Under the terms of the resulting from these translations are reflected in the Consolidated plan, the PSU’s vest when the Company meets a certain Statements of Other Comprehensive Income as unrealized gains financial target and expire on a date no later than December or losses as foreign currency translation differences. 31 of the third calendar year following the calendar year in which the grant occurs. Management makes an assessment When a foreign operation is disposed of, the relevant amount for each grant of units on the timing and likelyhood of the in the cumulative amount of foreign currency translation PSU’s vesting. PSUs can be settled in cash or equity at Trican’s differences is transferred to profit or loss as part of the profit discretion; currently Trican’s intention is to settle these in cash. or loss on disposal. On the partial disposal of a subsidiary The fair value of the units is expensed over the period until it that includes a foreign operation, the relevant proportion of is estimated that the vesting conditions will be met. such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, Earnings per share the relevant proportion is reclassified to profit or loss. Basic earnings per share are calculated using the weighted average number of common shares outstanding during the Employee benefits period. Diluted earnings per share is calculated based on the Short term employee benefits weighted average number of shares issued and outstanding Short term employee benefit obligations are measured on an during the year, adjusted by the total of the additional common undiscounted basis and are expensed as the related service is shares that would have been issued assuming exercise of all provided. A liability is recognized for the amount expected to share options with exercise prices at or below the average be paid under short term cash bonuses or profit sharing plans market price for the year, offset by the reduction in common if the Company has a present legal or constructive obligation shares that would be purchased with the exercise proceeds. to pay this amount as a result of past service provided by the employee, and the obligation can be reliably estimated. Segment reporting An operating segment is a component of the Company Share-based payment transactions that engages in business activities from which it may earn The Company has a share option plan and accounts for revenues and incur expenses. All operating results are share options by expensing the fair value of share options reviewed regularly on a segmented basis by the Company’s measured using a Black Scholes option pricing model. The Executive Officers to make decisions about resources to be fair value of the options is determined on their grant date allocated to the segment and to assess its performance, and and is recognized in administrative expense over the vesting for which discrete financial information is available. period while the share options are recorded in share capital. Segment results that are reported to the Executive Officers The Company has a Deferred Share Unit (DSU) plan for its include items directly attributable to a segment as well Directors. The DSUs vest immediately and the fair value as those that can be allocated on a reasonable basis. of the liability and the corresponding expense is charged Unallocated items comprise mainly corporate assets, head to profit or loss at the grant date. Subsequently, at each office expenses and public company costs. reporting date between grant date and settlement date, the fair value of the liability is re-measured with any changes in Leased assets fair value recognized in profit or loss for the period. Leases for which the Company assumes substantially all the risks and rewards of ownership are classified as The Company has a Restricted Share Unit (RSU) plan for its finance leases. Upon initial recognition the leased asset is employees and the fair value of the RSU’s is expensed into measured at an amount equal to the lower of its fair value profit and loss evenly over the unit vesting period and at and the present value of the minimum lease payments. each reporting date between grant date and settlement, Subsequent to initial recognition, the asset is accounted the fair value of the liability is re-measured with any changes for in accordance with the accounting policy applicable to in fair value recognized in profit or loss for the period.

2012 Annual Report | 47 Trican Well Service Ltd.

that asset. Minimum lease payments made under finance IFRS 11, Joint Arrangements, replaces IAS 31, Interests in leases are apportioned between the finance expense and Joint Ventures. IFRS 11 divides joint arrangements into two the reduction of the outstanding liability. The finance types, each having its own accounting model. A “joint expense is allocated to each period during the lease term operation” continues to be accounted for using proportional so as to produce a constant periodic rate of interest on the consolidation, where as a “joint venture” must be accounted remaining balance of the liability. Other leases are operating for using equity accounting. leases and are not recognized in the Company’s statement IFRS 12, Disclosure of Interests in Other Entities, is a new of financial position. Payments made under operating standard which combines all of the disclosure requirements leases are recognized in profit or loss on a straight-line basis for subsidiaries, associates and joint arrangements in order over the term of the lease. to provide information related to the risks associated with New standards and interpretations not yet adopted an entities interest in other entities, and the effects of A number of new standards and amendments to standards those interests on the entity’s financial positions, financial and interpretations are not yet effective for the year ended performance and cash flows. December 31, 2012, and have not been applied in preparing IFRS 13, Fair Value Measurement, is a new standard meant these consolidated financial statements. None of these are to clarify the definition of fair value, provide guidance on expected to have a significant effect on the consolidated measuring fair value and improve disclosure requirements financial statements of the Company, except for IFRS 13, Fair related to fair value measurement. Value Measurements, which becomes mandatory for the Company’s 2013 consolidated financial statements. The extent of NOTE 3 – BUSINESS COMBINATIONS the impact of the adoption of IFRS 13, has not been determined. Effective July 8, 2011, Trican acquired all of the outstanding As of January 1, 2015, Trican will be required to adopt IFRS 9, shares and units of Viking Energy Pty Ltd., Viking Energy Financial Instruments, which is the result of the first phase PNG, Viking Energy Unit Trust, and Thor Laboratories Pty Ltd. of the IASB’s project to replace IAS 39, Financial Instruments: (collectively “Viking”) for a purchase price of $12.1 million, Recognition and Measurement. The new standard replaces the which includes a $2.8 million performance contingency current multiple classification and measurement models for payment. All of Viking’s earnings have been included financial assets and liabilities with a single model that has only in Trican’s consolidated statement of comprehensive two classification categories: amortized cost and fair value. The income since July 8, 2011. In the year of acquisition, Viking adoption of this standard is currently not expected to have a contributed revenue of $4.4 million and a loss for the period material impact on Trican’s Consolidated Financial Statements. of $1.5 million. If the acquisition had occurred on January 1, In May 2011, the IASB issued four new standards, and revised 2011, management estimates that revenue for 2011 would two existing standards. All of the new standards are effective have been $8.8 million and the loss for the year would for annual periods beginning on or after January 1, 2013. have been $2.0 million. Costs related to the acquisition have been expensed into the consolidated statement of IFRS 10, Consolidated Financial Statements, introduces new comprehensive income as incurred. principle-based definition of control, applicable to all investees to determine the scope of consolidation. The standard provides The acquisition has been accounted for as follows: the framework for consolidated financial statements and their preparation based on the principle of control.

48 | 2012 Annual Report Trican Well Service Ltd.

(Stated in thousands) Acquired net assets: Property and equipment $5,495 Goodwill 6,551 Current assets acquired 1,360 Current liabilities acquired (1,267) $12,139 Financed as follows: Cash $9,372 Contingent consideration 2,767 $12,139

The goodwill is attributable mainly to the skills and talent of Viking’s workforce and the synergies expected to be achieved with the integration of Viking into the Company’s existing well service operations. None of the goodwill recognized is expected to be deducted for tax purposes.

NOTE 4 - CASH AND CASH EQUIVALENTS

(Stated in thousands) December 31, 2012 December 31, 2011 Bank balances $113,467 $125,825 Short-term deposits 39 30 Cash and cash equivalents in the statement of cash flows $113,506 $125,855

NOTE 5 - TRADE AND OTHER RECEIVABLES (Stated in thousands) December 31, 2012 December 31, 2011 Trade receivables $434,568 $599,669 Allowance for doubtful accounts (4,085) (4,528) Loans and other receivables 17,222 18,078 Total $447,705 $613,219 Non-current (Note 9) $10,667 $5,547 Current $437,038 $607,672

The company’s exposure to credit risk related to trade and other receivables is disclosed in Note 16.

NOTE 6 – INVENTORY

(Stated in thousands) December 31, 2012 December 31, 2011 Product inventory Chemicals and consumables $93,502 $73,376 Coiled tubing 19,669 21,310 Parts 98,623 78,829 $211,794 $173,515

2012 Annual Report | 49 Trican Well Service Ltd.

The total amount of inventory recognized as cost of sales during the year was $818 million (2011 – $676.5 million). There were no significant write-downs of inventory during the year-ended December 31, 2012 (2011 – nil).

NOTE 7 – PROPERTY AND EQUIPMENT

Land and Fixtures and (stated in thousands) buildings Equipment fittings Total Cost Balance at January 1, 2011 $82,000 $965,657 $32,025 $1,079,682 Additions 17,026 573,857 6,009 596,892 Acquisitions through business combinations - 5,495 - 5,495 Disposals - (28,711) - (28,711) Effect of movements in exchange rates 74 2,498 (11) 2,561 Balance at December 31, 2011 $99,100 $1,518,796 $38,023 $1,655,919

Additions 14,781 424,127 3,535 442,443 Disposals (27) (18,529) (92) (18,648) Effect of movements in exchange rates (457) (7,710) (167) (8,334) Balance at December 31, 2012 $113,397 $1,916,684 $41,299 $2,071,380

Accumulated Depreciation Balance at January 1, 2011 $15,620 $343,211 $20,096 $378,927 Depreciation 3,355 112, 850 5,386 121,591 Disposals - (20,848) - (20,848) Effect of movements in exchange rates (48) (2,094) (19) (2,161) Balance at December 31, 2011 $18,927 $433,119 $25,463 $477,509

Depreciation 4,011 141,031 3,398 148,440 Disposals - (12,587) - (12,587) Effect of movements in exchange rates (20) (498) (26) (544) Balance at December 31, 2012 $22,918 $561,065 $28,835 $612,818

Carrying amounts At December 31, 2011 $80,173 $1,085,677 $12,560 $1,178,410 At December 31, 2012 $90,479 $1,355,619 $12,464 $1,458,562

Included within equipment are assets held under finance $93.0 million in idle equipment and $326.5 million in assets lease with a gross value of $53.7 million (2011 - $35.2 under construction which have not been depreciated. million) and accumulated depreciation of $18.4 million At December 31, 2012, there were no impairment losses (2011 - $9.4 million). The lease obligations are secured by recognized (2011 – nil). the leased equipment. At December 31, 2012, Trican had

50 | 2012 Annual Report Trican Well Service Ltd.

NOTE 8 – INTANGIBLE ASSETS AND GOODWILL

Total Non-compete Customer intangible (stated in thousands) Goodwill agreements relationships CBM process asset Cost Balance at January 1, 2011 $36,916 $22,987 $13,154 $8,503 $44,644 Acquisitions through business combinations 6,551 - - - - Effect of movements in exchange rates 239 468 191 - 659 Balance at December 31, 2011 $43,706 $23,455 $13,345 $8,503 $45,303

Effect of movements in exchange rates (17) (462) (188) (3) (653) Balance at December 31, 2012 $43,689 $22,993 $13,157 $8,500 $44,650

Amortization and impairment losses Balance at January 1, 2011 $- $10,775 $9,866 $3,188 $23,829 Amortization - 2,859 2,620 850 6,329 Effect of movements in exchange rates - 293 190 - 483 Balance at December 31, 2011 $- $13,927 $12,676 $4,038 $30,641

Amortization - 2,992 554 849 4,395 Effect of movements in exchange rates - (394) (73) - (467) Balance at December 31, 2012 $- $16,525 $13,157 $4,887 $34,569

Carrying amounts At December 31, 2011 $43,706 $9,528 $669 $4,465 $14,662 At December 31, 2012 $43,689 $6,468 $- $3,613 $10,081

For the purposes of impairment testing, goodwill is allocated to the Company’s operating segments. The aggregate carrying amount of goodwill allocated to each region is as follows:

(Stated in thousands) December 31, 2012 December 31, 2011 Canada $22,690 $22,690 International 20,999 21,016 $43,689 $43,706

The recoverable amount was determined by discounting the future cash flows to be generated from the continuing operations of each cash generating unit, to which goodwill has been allocated, using useful lives of 5 to 9 years, and a discount rate of 11%. For both the Canadian and International operations the recoverable amount was in excess of the carrying amount attributable to each cash generating unit. No impairment was recorded relating to the year ended December 31, 2012 (2011 - no impairment).

NOTE 9 – OTHER ASSETS The non-current portion of the loan of U.S. $10.7 million (2011 - U.S. $5.5 million) has been included in other assets, At December 31, 2012, the Company had a U.S. $13.1 million on the statement of financial position. The current portion secured, interest bearing first mortgage real estate loan (the of the loan of U.S. $2.4 million (2011 - U.S. $7.4 million) “loan”) to an unrelated third party located in the U.S. (2011 – has been included in trade and other receivables on the U.S. $12.9 million). statement of financial position.

2012 Annual Report | 51 Trican Well Service Ltd.

NOTE 10 - TRADE AND OTHER PAYABLES December 31, (Stated in thousands) December 31, 2012 December 31, 2011 Trade payables 112,141 167,692 Accrued liabilities 55,603 78,693 Dividend payable 21,968 7,346 Finance lease obligations 13,275 8,828 Other payables 25,801 25,130 Total trade and other payables $228,788 $287,689

The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 16.

NOTE 11 – LOANS AND BORROWINGS

Bank loans interest at LIBOR plus a premium, as determined by the bank, The Company’s Russian subsidiary has a U.S. $20 million plus 2.75% and has been guaranteed by the Company. As at (Canadian equivalent of $19.9 million) demand revolving facility December 31, 2012, the amount drawn from this facility was with a large international bank. This facility is unsecured, bears $9.1 million (December 31, 2011 - nil).

Long term debt

(Stated in thousands) December 31, 2012 December 31, 2011 Notes payable $430,408 $412,646 Finance lease obligations 36,324 26,766 Revolving credit facilities 255,693 - Hedge receivable (5,059) (4,903) Total $717,366 $434,509 Current portion of finance lease obligations (1) 13,275 8,828 Russian demand revolving credit facility 9,119 - Current portion of long-term debt - 25,425 Non-current $694,972 $400,256

(1) Current portion of finance lease obligations is included in trade and other payables.

On November 27, 2012, Trican added an additional bank to its comply with certain financial and non-financial covenants that syndicate of banks and increased its Revolving Credit Facility are typical for this type of arrangement. from $450.0 million to $500.0 million. On October 18, 2012, During the first quarter of 2011, the Company replaced its existing Trican extended its Revolving Credit Facility by an additional Revolving Credit Facility with a new syndicated CAD $250 million year to 2016. On October 18, 2011, Trican entered into a new three-year extendible Revolving Credit Facility. This facility was $450 million four year extendible revolving credit facility unsecured and bore interest at Canadian prime rate, U.S. prime with a syndicate of banks. The new facility, which replaced rate, Banker’s Acceptance rate or at LIBOR plus 125 to 375 basis the previous $250 million three year extendible facility, is points, dependent on certain financial ratios of the Company. This unsecured and bears interest at the applicable Canadian prime facility was replaced by the new facility, as discussed above. rate, U.S. prime rate, Banker’s Acceptance rate, or at LIBOR, plus 50 to 325 basis points, dependent on certain financial ratios of As at December 31, 2012, Trican had $2.9 million in letters of the Company. The Revolving Credit Facility requires Trican to credit outstanding.

52 | 2012 Annual Report Trican Well Service Ltd.

Notes payable 2016, bearing interest at a fixed rate of 4.61% payable During the second quarter of 2012, Trican entered into an semi-annually on April 28 and October 28; uncommitted shelf agreement that could allow the issuance U.S. $80 million Series F Senior Notes maturing April 28, of up to U.S. $100 million in senior unsecured notes. On 2018, bearing interest at a fixed rate of 5.29% payable November 19, 2012, Trican issued U.S. $50 million in Senior semi-annually on April 28 and October 28; and Unsecured Notes from this shelf agreement. The notes have a seven-year final maturity, five-year average term, and a U.S. $105 million Series G Senior Notes maturing April coupon of 4.05% payable semi-annually on May 19 and 28, 2021, bearing interest at a fixed rate of 5.90% payable November 19. The notes are unsecured and rank equally with semi-annually on April 28 and October 28. Trican’s bank facilities and other outstanding senior notes. On June 21, 2007, the Company entered into an agreement On June 22, 2012, Trican repaid U.S. $25 million retiring its with institutional investors in the U.S. providing for the 2007 Series A Senior Unsecured Notes. issuance, by way of private placement of U.S. $100 million of Senior Unsecured Notes (the “Notes”) in two tranches: On April 28, 2011, the Company closed a private placement of Senior Unsecured Notes (the “Notes”) that will rank equally with U.S. $25 Million Series A Senior Notes maturing June 22, the Company’s bank facilities and other outstanding senior 2012, bearing interest at a fixed rate of 6.02% payable notes. The following outlines the terms of the new Notes: semi-annually on June 22 and December 22. This first tranche was repaid by Trican on June 22, 2012. Canadian $45 million Series C Senior Notes maturing April 28, 2016, bearing interest at a fixed rate of 5.22% U.S. $75 Million Series B Senior Notes maturing June 22, payable semi-annually on April 28 and October 28; 2014, bearing interest at a fixed rate of 6.10% payable semi-annually on June 22 and December 22. Canadian $15 million Series D Senior Notes maturing April 28, 2021, bearing interest at a fixed rate of 6.11% All Senior Unsecured Notes require the Company to comply payable semi-annually on April 28 and October 28; with certain financial and non-financial covenants that are typical for this type of arrangement. At December 31, 2012, U.S. $65 million Series E Senior Notes maturing April 28, the Company was in compliance with these covenants.

Finance lease liabilities Total Total future future minimum Minimum minimum Minimum lease Interest lease lease Interest lease (stated in thousands) payments payments payments payments payments payments As at December 31, 2012 2012 2012 2011 2011 2011 Less than one year 14,365 1,090 13,275 9,641 813 8,828 Between one and five years 24,083 1,034 23,049 18,727 789 17,938 More than five years ------Total 38,448 2,124 36,324 28,368 1,602 26,766

NOTE 12 - SHARE CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS Share capital Authorized: The Company is authorized to issue an unlimited number of common shares, issuable in series. The shares have no par value. All issued shares are fully paid.

2012 Annual Report | 53 Trican Well Service Ltd.

Issued and Outstanding - Common Shares:

(stated in thousands, except share amounts) Number of Shares Amount Balance, January 1, 2011 144,636,583 $486,594 Exercise of stock options 2,280,276 33,065 Reclassification from contributed surplus on exercise of options - 9,403 Balance, December 31, 2011 146,916,859 $529,062 Exercise of stock options 288,718 1,289 Reclassification from contributed surplus on exercise of options - 231 Shares repurchased and cancelled under NCIB (755,400) (2,722) Balance, December 31, 2012 146,450,177 $527, 860

Normal Course Issuer Bid The Company received approval from the Toronto Stock the financial statements of foreign operations, as well as the Exchange to purchase its own common shares, for translation of the liabilities that hedge the Company’s net cancellation, in accordance with a Normal Course Issuer Bid investment in a foreign operation. At December 31, 2012, (“NCIB”) for the one-year period of March 2, 2012, to March the Company had accumulated foreign currency translation 2, 2013. During the year ended December 31, 2012, 755,400 loss of $25.0 million (2011 - $21.4 million loss). common shares were purchased at a cost of $10.0 million, Unrealized gain on cash flow hedge of which $2.7 million was charged to Share Capital and $7.3 The unrealized gain on cash flow hedge comprises the million to retained earnings. effective portion of the cumulative net change in the fair Accumulated other comprehensive loss value of cash flow hedges related to hedged transactions Foreign currency translation differences that have not yet affected profit or loss. At December 31, The foreign currency translation differences comprise all 2012, the Company had an unrealized gain on cash flow foreign currency differences arising from the translation of hedge of $0.9 million (2011 - $1.4 million loss).

Note 13 - EARNINGS PER SHARE

(Stated in thousands, except share and per share amounts)

December 31, Basic Income Per Share 2012 2011 Net income available to common shareholders $53,674 $338,707 Weighted average number of common shares 146,619,743 145,804,728 Basic income per share $0.37 $2.32

Diluted Income Per Share 2012 2011 Net income available to common shareholders $53,674 $338,707 Weighted average number of common shares 146,619,743 145,804,728 Diluted effect of stock options 70,515 1,279,942 Diluted weighted average number of common shares 146,690,258 147,08 4,670 Diluted income per share $0.37 $2.30

At December 31, 2012, 6.0 million (2011 - 1.5 million) options were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

54 | 2012 Annual Report Trican Well Service Ltd.

NOTE 14 – SHARE-BASED PAYMENTS In 2010, the Company prospectively revised the stock option plan so that one-third of new options issued vest on each of The Company has four stock-based compensation plans the first, second and third anniversary dates with an expiry which are described below. date of five years from the date of the grant.

Incentive stock option plan (equity-settled): The compensation expense that has been recognized in Options may be granted at the discretion of the Board of profit for the year is $9.7 million (2011 - $12.4 million). The Directors and all officers and employees of the Company are corresponding amount has been recognized in contributed eligible for participation in the Plan. The option price equals surplus. The weighted average grant date fair value of the volume weighted average closing price of the Company’s options granted during 2012 has been estimated at $3.33 per shares on the Toronto Stock Exchange, for the five trading option (2011 - $7.04) using the Black-Scholes option pricing days preceding the date of grant. Options granted prior to model. Expected volatility is estimated by considering historic 2004 vest equally over a period of four years commencing on average share price volatility. The Company has applied the first anniversary of the date of grant, and expire on the the following assumptions in determining the fair value of fifth or tenth anniversary of the date of grant. options for grants during the years ended:

For the year ended December 31, 2012 2011 Share price $12.70 $21.73 Exercise price $12.70 $21.73 Expected life (years) 3.0 2.7 Expected volatility 43% 47% Risk-free interest rate 1.2% 2.0% Forfeitures 5.6% 6.2% Dividend yield 2.3% 0.5%

The Company has reserved 14,645,018 common shares outstanding at exercise prices ranging from $11.21 - $22.67 as at December 31, 2012 (December 31, 2011 – 14,691,686) per share with expiry dates ranging from 2013 to 2017. for issuance under a stock option plan for officers and The following table provides a summary of the status of the employees. The maximum number of options permitted Company’s stock option plan and changes during the years to be outstanding at any point in time is limited to 10% of ending December 31: the Common Shares then outstanding. As of December 31, 2012, 7,168,279 options (December 31, 2011 – 5,672,506) were

2012 2011 Weighted Average Weighted Average Options Exercise Price Options Exercise Price Outstanding at the beginning of year 5,672,506 $16.64 6,700,864 $14.55 Granted 2,144,691 12.70 1, 837,600 21.73 Exercised (288,718) 4.47 (2,280,276) 14.57 Forfeited (357,666) 17.56 (165,806) 17.82 Expired (2,534) 18.01 (419,876) 16.36 Outstanding at the end of year 7,168,279 15.91 5,672,506 16.64 Exercisable at end of year 2,795,209 16.40 1,301,496 12.90

The weighted average share price for the year ended December 31, 2012, was $13.72 (2011 - $20.27).

2012 Annual Report | 55 Trican Well Service Ltd.

The following table summarizes information about stock options outstanding at December 31, 2012:

Options Outstanding Options Exercisable Number Weighted Average Weighted Average Number Weighted Average Range of Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercisable Price $11.21 to $13.00 1,929,862 4.45 11.83 97,169 12.44 $13.01 to $16.00 3,185,099 2.22 15.03 2,060,937 15.02 $16.01 to $20.00 410,684 3.84 18.37 79,502 19.12 $20.01 to $22.67 1,642,634 3.28 21.79 557,601 21.77 $11.21 to $22.67 7,168,279 3.16 15.91 2,795,209 16.40

Deferred share unit plan (cash-settled): Performance share unit plan (cash-settled): In 2004, the Company implemented a Deferred Share Unit In 2010, the Company introduced a Performance Share plan for outside directors. Under the terms of the plan, Unit plan for Executive Officers of the Company. Under DSU’s awarded will vest immediately and will be settled the terms of the plan, the PSU’s vest when the Company with cash in the amount equal to the closing price of meets a certain financial target and expire on a date no later the Company’s common shares on the date the director than December 31 of the third calendar year following the specifies upon tendering their resignation from the Board, calendar year in which the grant occurs. which in any event must be after the date on which the In 2012, the Company revised the PSU plan so that new grants notice of redemption is filed with the Company and awarded will vest in three equal portions on the first, second within the period from the Director’s resignation date to and third anniversary of the grant date if the Company meets December 15 of the first calendar year commencing after certain financial targets and expire otherwise. PSU grants the Director’s termination date. There were 276,586 DSU’s will be settled in cash or equity, at Trican’s discretion, in the outstanding at December 31, 2012 (2011 – 221,996). amount equal to the volume weighted average trading price Restricted share unit plan (cash-settled): for the five trading days preceding the particular vesting In 2010, the Company introduced a Restricted Share Unit plan date of the common shares of the Company. The fair value for employees. Under the terms of the plan, the RSU’s awarded of the PSU’s is expensed into income evenly over the same will vest in three equal portions on the first, second and third period that the units vest and at each reporting date between anniversary of the grant date and will be settled in cash in the grant date and settlement, the fair value of the liability is re- amount equal to the volume weighted average trading price measured with any changes in fair value recognized in profit for the twenty trading days preceding the particular vesting or loss for the period. There were 155,200 PSU’s outstanding date of the award. The fair value of the RSU’s is expensed into at December 31, 2012 (2011 – 96,600). income evenly over the same period that the units vest and at The following table provides a summary of the status of the each reporting date between grant date and settlement, the Company’s cash-settled compensation plans and changes fair value of the liability is re-measured with any changes in fair during the years ending December 31: value recognized in profit or loss for the period. All officers and employees of the Company are eligible for participation in the plan. There were 1,743,249 RSU’s outstanding at December 31, 2012 (2011 – 1,113,616).

56 | 2012 Annual Report Trican Well Service Ltd.

(units) DSU RSU PSU Balance, January 1, 2011 215,779 501,300 222,106 Granted 27, 894 858,692 96,600 Exercised (21,677) (147,712) (222,106) Forfeited - (98,664) - Balance, December 31, 2011 221,996 1,113,616 96,600 Granted 54,590 1,156,422 155,200 Exercised - (372,068) - Forfeited - (154,721) (96,600) Balance, December 31, 2012 276,586 1,743,249 155,200 Vested at December 31, 2012 276,586 35,315 -

December 31, (Stated in thousands) 2012 2011 Stock based compensation expense $9,689 $12,378 Expense arising from DSU’s (267) 1,910 Expense arising from RSU’s 6,733 5,565 Expense arising from PSU’s 327 1,414 Total expense related to share based payments $16,482 $22,580 Total liabilities for cash-settled arrangements $14,800 $14,566

NOTE 15 - INCOME TAXES

(Stated in thousands) For the year ended December 31, 2012 2011 Current tax expense Current year $104,997 $62,088 Adjustment for prior years 546 876 Recognition of previously unrecognized tax losses - (370) $105,543 $62,594 Deferred tax expense/(recovery) Deferred tax expense/(recovery) recognized in the current year $(100,474) $76,827 Adjustment for prior years (245) 110 $(100,719) $76,937 Total tax expense $4,824 $139,531

Income Tax recognized in other comprehensive income

(Stated in thousands) For the year ended December 31, 2012 2011 Deferred tax Unrealized foreign exchange - (3,931) Total income tax recognized in other comprehensive income $- $(3,931)

2012 Annual Report | 57 Trican Well Service Ltd.

Profit before Income Taxes and non-controlling interest

(Stated in thousands) For the year ended December 31, 2012 2011 Canada $178,482 $361,007 Foreign (120,319) 117,160 $58,163 $478,167

The income tax expense differs from that expected by applying the combined federal and provincial income tax rate of 25.17% (2011 – 26.64%) to income before income taxes for the following reasons::

(Stated in thousands) For the year ended December 31, 2012 2011 Expected combined federal and provincial income tax $14,639 $127,38 4 Statutory and other rate differences (18,489) 9,297 Non-deductible expenses 5,719 5,304 Stock-based compensation 2,439 3,130 Translation of foreign subsidiaries 59 233 Adjustments related to prior years 301 987 Changes to deferred income tax rates 19 (7,354) Capital and other foreign tax 175 643 Other (38) (93) $4,824 $139,531

The decrease in statutory tax rate from 2011 to 2012 was mainly due to a reduction in the 2012 Canadian corporate tax rates as part of a series of corporate tax rate reductions previously enacted by the Canadian Federal Government.

Unrecognized Deferred Tax Assets Deferred tax assets have not been recognized in respect of the following items:

(Stated in thousands) For the year ended December 31, 2012 2011 Tax losses (capital in nature) $2,960 $3,236 Tax losses (income in nature) 1,829 1,312 $4,789 $4,548

Deferred tax assets are recognized only to the extent that it is probable that the assets can be recovered. At December 31,2012, the Company had $23.5 million (2011 - $25.7 million) of capital losses available for carry forward which may only be used to offset future capital gains. The deferred tax asset not recognized in respect of these losses was $3.0 million (2011 - $ 3.2 million).

Deferred Tax Balances The components of the deferred tax asset and liability are as follows:

58 | 2012 Annual Report Trican Well Service Ltd.

(Stated in thousands) For the year ended December 31, 2012 2011 Deferred tax assets: Goodwill $36,297 $41,778 Non-capital loss carry forwards 91,504 31,606 Deferred financing costs - 157 Property, equipment and other assets (53,942) (42,682) Other 2,443 2,510 $76,302 $33,369 Deferred tax liabilities: Non-capital loss carry forwards $1,707 $647 Property, equipment and other assets (38,088) (35,313) Partnership deferral (42,362) (100,408) Other 1,731 3,043 $(77,012) $(132,031) $(710) $(98,662)

Included in the above tax pools are $262.6 million when they do reverse. This requires assumptions regarding (2011 - $88.8 million) of gross non-capital losses that can be future profitability and is therefore inherently uncertain. carried forward to reduce taxable income in future years. Deferred tax liabilities of $1.7 million (2011 - $5.2 million) These losses are predominantly in the United States and have not been recognized on the unremitted earnings of expire between 2029 and 2032. Deferred tax assets are the Company’s foreign subsidiaries to the extent that the recognized only to the extent it is considered probable Company is able to control the timing of the reversal of the that those assets will be recoverable. This involves an temporary differences, and it is probable that the temporary assessment of when those deferred tax assets are likely to differences will not reverse in the foreseeable future. reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the tax assets

2012 Annual Report | 59 Trican Well Service Ltd.

Movement in Deferred Tax Balances During the Year

Recognized in Other Recognized Jan. 1, Recognized in Comprehensive Dec. 31, in Profit Dec. 31, 2011 Profit or Loss Income Other 2011 or Loss Other 2012 Goodwill $43,336 $(1,558) $- $- $41,778 $(5,481) $- $36,297 Non-capital loss carry forwards 50,090 (17, 837) - - 32,253 60,958 - 93,211 Deferred financing costs 9,399 (9,242) - - 157 (157) - - Property and equipment (63,101) (14,894) - - (77,995) (14,035) - (92,030) Partnership deferral (66,547) (33,861) - - (100,408) 58,046 - (42,362) Share issue costs 2,082 (520) - - 1,562 (515) - 1,047 Unrealized foreign (3,931) - 3,931 - - 64 - 64 exchange loss Employee benefits 3,481 238 - - 3,719 55 - 3,774 Other 1,515 737 - (1,980) 272 1,784 (2,766) (710) $(23,676) $(76,937) $3,931 $(1,980) $(98,662) $100,719 $(2,766) $(709)

NOTE 16 - FINANCIAL INSTRUMENTS

Fair values of financial assets and liabilities million) while the revolving credit facility has a fair value of The fair values of cash and cash equivalents, trade and approximately $252.8 million (2011 - nil). The fair value of the other receivables, and trade and other payables included bank loans approximate their carrying amount due to the in the consolidated statement of financial position, variable interest rates applied to these loans and credit spreads approximate their carrying amount due to the short-term on the facilities, approximate market rates. The fair value of maturity of these instruments. The fair value of contingent capital lease obligations was determined by calculating the consideration approximates its carrying amount as it is future cash flows, including interest, using market rates. The fair revalued to fair value at each reporting period. value of the loan to an unrelated third party (described in note 9) has a fair value of $13.1 million (2011 - $15.8 million). The fair Notes payable, have a fair value of approximately $451.5 value was calculated using a discounted cash flow approach million as at December 31, 2012, (December 31, 2011 - $435.5 with an effective interest rate of 12%.

60 | 2012 Annual Report Trican Well Service Ltd.

Fair value versus carrying value amounts

December 31, 2012 Cash flow hedging Loans and Other financial Total Total (stated in thousands of dollars) instruments receivables liabilities carrying value fair value

Cash and cash equivalents $- $113,506 $- $113,506 $113,506 Trade and other receivables(1) - 434,649 - 434,649 434,649 Loan to an unrelated third - 13,056 - 13,056 13,056 party Cash flow hedge 5,059 - - 5,059 5,059 $5,059 $561,211 $- $566,270 $566,270

Trade and other payables(2) $- $- $215,514 $215,514 $215,514 Bank loans - - 9,119 9,119 9,119 Contingent consideration - - 2,860 2,860 2,860 Revolving credit facility - - 246,574 246,574 252,835 Notes payable - - 430,408 430,408 451,487 Finance lease obligations - - 36,324 36,324 38,449 $- $- $940,799 $940,799 $970,264

(1) Trade and other receivables excludes the current portion of the loan to an unrelated third party. (2) Trade and other payables excludes the current portion of the finance lease obligations.

December 31, 2011 Cash flow hedging Loans and Other financial Total Total (stated in thousands of dollars) instruments receivables liabilities carrying value fair value

Cash and cash equivalents $- $125,855 $- $125,855 $125,855 Trade and other receivables(1) - 600,106 - 600,106 Loan to an unrelated third party - 13,500 - 13,800 15,838 Cash flow hedge 4,903 - - 4,903 4,903 $4,903 $739,461 $- $144,558 $746,702

Trade and other payables(2) $- $- $287,689 $287,689 $287,689 Contingent consideration - - 2,867 2,867 2,867 Notes payable - - 412,646 412,646 435,461 Finance lease obligations - - 26,766 26,766 28,368 $- $- $729,968 $729,968 $641,321

(1) Trade and other receivables excludes the current portion of the loan to an unrelated third party. (2) Trade and other payables excludes the current portion of the finance lease obligations.

2012 Annual Report | 61 Trican Well Service Ltd.

Fair values hierarchy Level 2: inputs other than quoted prices included within The table below analyses financial instruments carried at fair level 1 that are observable for the asset or liability, either value, by valuation method. The different levels have been directly (i.e. as prices) or indirectly (i.e. derived from defined as follows: prices); or

Level 1: quoted prices (unadjusted) in active markets for Level 3: inputs for the asset or liability that are not based identical assets or liabilities; on observable market data (unobservable inputs).

December 31, 2012 (stated in thousands of dollars) Level 1 Level 2 Level 3 Total Cash flow hedge $- $5,059 $- $5,059 Loan to unrelated third party - - 13,056 13,056 Total assets $- 5,059 $13,056 $18,115

Contingent consideration - - 2,860 2,860 Notes payable - 451,487 - 451,487 Revolving credit facility - 252,835 - 252,835 Finance lease obligations - 38,449 - 38,449 Total liabilities $- $742,771 $2,860 $745,631

December 31, 2012 (stated in thousands of dollars) Level 1 Level 2 Level 3 Total Cash flow hedge $- $4,903 $- $4,903 Loan to unrelated third party - 15,837 15,837 Total assets $- $4,903 $15,837 $20,740

Contingent consideration 2,867 2,867 Notes payable - 325,178 - 325,178 Finance lease obligations - 28,368 - 28,368 Total liabilities $- $353,546 $2,867 $356,413

Market risk Market risk is the risk that the fair value or future cash flows of Canadian dollar and Russian ruble/Canadian dollar can have a financial assets or liabilities will fluctuate due to movements significant effect on the operating results and the fair value or in market rates and is comprised of the following: future cash flows of the Company’s financial assets and liabilities.

Interest rate risk The Company manages risk to foreign currency exposure An increase or decrease in interest expense for each one percent by monitoring financial assets and liabilities denominated in change in interest rates on floating rate debt would have been foreign currency and foreign currency rates on an on-going $1.0 million (2011 - insignificant) for the year ended December 31, basis. Exposures to the U.S. Dollar and Russian ruble are 2012, based on the average debt balances for the year. mitigated by on-going operations within foreign entities as assets, liabilities, revenue and expenses are denominated Foreign exchange rate risk primarily in local currencies. The Company also mitigates As the Company operates primarily in North America and exposure to fluctuations in the U.S. Dollar by maintaining a Russia, fluctuations in the exchange rate between the U.S. dollar/ mix of both Canadian and U.S. dollar debt.

62 | 2012 Annual Report Trican Well Service Ltd.

During the second quarter of 2011, Trican entered into two a gain in other comprehensive income. There was no tax distinct hedges, each with the purpose of hedging the impact recorded in other comprehensive income related to gains and losses incurred on U.S. dollar debt balances. The the cross currency swap agreements. first hedge consists of cross-currency swap agreements, The second hedge is a net investment hedge in foreign which hedges U.S. $95 million of the U.S. $250 million operations. The Company utilizes the foreign denominated private placement of senior unsecured notes (the “Notes”) long-term debt to hedge its exposure to changes in the which were issued during the quarter ended June 30, carrying values of the Company’s net investment in its U.S. 2011. This hedge has been assessed as a highly effective operations. At December 31, 2012, the hedge was highly cash-flow hedge. The foreign exchange loss on the effective resulting in no gains or losses recognized in profit hedged portion of the Notes has been recorded in other or loss (2011 - highly effective). comprehensive income. The fair value of the cross-currency swap agreements at December 31, 2012, is $5.1 million (2011 For the years ended December 31, fluctuations in the value - $4.9 million) and has been recorded net of long-term debt of foreign currencies would have had the following impact on the consolidated statement of financial position and as on net income and other comprehensive income:

Impact to Net Income Impact to Other Comprehensive Income (stated in thousands of dollars) 2012 2011 2012 2011

1% increase in the value of the U.S. dollar 1,960 (2,265) (4,886) 389 1% decrease in the value of the U.S. dollar (1,960) 2,265 4,886 (389) 1% increase in the value of the Russian ruble 324 15 (1,517) 1,568 1% decrease in the value of the Russian ruble (324) (15) 1,517 (1,568)

Credit risk Credit risk refers to the possibility that a customer or its customers on an ongoing basis as well as monitoring the counterparty will fail to fulfill its obligations and as a result, amount and age of balances outstanding. Accordingly, the create a financial loss for the Company. Company views the credit risks on these amounts as normal for the industry. The carrying amount of accounts receivable Customer represents the maximum credit exposure on this balance. The Company’s accounts receivables are predominantly with customers who explore for and develop natural gas Payment terms with customers vary by region and contract; and petroleum reserves and are subject to normal industry however, standard payment terms are 30 days from invoice credit risks that include fluctuations in oil and natural gas date. Historically, industry practice allows for payment up to 70 prices and the ability to secure adequate debt or equity days from invoice date. The Company considers its accounts financing. The Company assesses the creditworthiness of receivable excluding doubtful accounts to be aged as follows:

December 31, (Stated in thousands) 2012 2011 Current (0 - 30 days from invoice date) $200,103 $234,420 31 - 60 days past due 92,266 221,635 60 - 90 days past due 60,215 94,924 Greater than 90 days past due 88,538 61,221 Total $441,122 $612,200 Provision for doubtful accounts $4,085 $4,528

2012 Annual Report | 63 Trican Well Service Ltd.

Movement in provision for the years ended December 31, (Stated in thousands) 2012 2011 Provision for doubtful accounts at January 1 $4,528 $4,588 Increase in provision 265 - write-off of provision (762) (60) Effect of movement in exchange rates 54 - Provision for doubtful accounts at December 31 $4,085 $4,528

The Company’s objectives, processes and policies for consolidated and geographic region levels in accordance with managing credit risk have not changed from the previous year. practices and policies established by the Company.

Counterparties In managing liquidity risk, the Company has access to a Counterparties to financial instruments expose the Company to wide range of funding at competitive rates through capital credit losses in the event of non-performance. Counterparties markets and banks. As at December 31, 2012, the Company to cash transactions are limited to high credit quality financial had available unused committed bank credit facilities in the institutions. The Company does not anticipate non-performance amount of $264.2 million (2011 - $450.0 million) plus cash that would materially impact the Company’s financial statements. and trade and other receivable of $113.5 million (2011 - $125.9 million) and $434.6 million (2011 - $600.1 million) respectively, Liquidity risk for a total of $812.3 million (2011 - $1,183.6 million) available to Liquidity risk is the risk the Company will encounter difficulties fund the cash outflows relating to its financial liabilities. The in meeting its financial liability obligations. The Company Company believes it has sufficient funding through the use of manages its liquidity risk through cash and debt management, these sources to meet foreseeable borrowing requirements. which includes monitoring forecasts of the Company’s cash and cash equivalents and borrowing facilities on the basis of The timing of cash outflows relating to financial liabilities are projected cash flow. This is generally carried out at both the outlined in the table below:

December 31, 2012 Carrying Less than 1 to 3 4 to 5 Greater (Stated in thousands) Value 1 year years years than 5 years Total Trade and other payables $215,512 $215,512 $- $- $- $215,512 Bank loans 9,119 9,119 - - - 9,119 Contingent consideration 2,860 2,860 - - - 2,860 Revolving credit facility (including interest) 246,574 6,260 12,521 249,704 268,485 Notes payable 430,408 - 74,618 109,669 246,121 430,408 Interest on notes payable - 23,187 39,546 29,275 30,914 122,922 Finance lease obligations (including interest) 36,324 14,366 24,083 - - 38,449 $271,304 $150,768 $388,648 $277,035 $1,087,756

December 31, 2011 Carrying Less than 1 to 3 4 to 5 Greater than (Stated in thousands) Value 1 year years years 5 years Total Trade and other payables $278,860 $278,860 $- $- $- $278,860 Contingent consideration 2,867 2,867 - - - 2,867 Notes payable 412,646 25,425 76,275 111,105 203,145 415,950 Interest on notes payable - 22,335 40,814 31,136 38,932 133,217 Finance lease obligations (including interest) 26,766 9,641 15,842 2,885 - 28,368 $339,128 $132,931 $145,126 $242,077 $859,262

64 | 2012 Annual Report Trican Well Service Ltd.

NOTE 17 – CAPITAL MANAGEMENT cyclical nature of the oilfield services sector. On a historical The Company’s strategy is to carry a capital base to maintain basis, the Company maintained and continues to maintain investor, creditor and market confidence and to sustain a conservative ratio of long-term debt to total capitalization. future development of the business. The Company seeks The Company may occasionally need to increase these to maintain a balance between the level of long-term levels to facilitate acquisition or expansionary activities. debt and shareholders’ equity to ensure access to capital markets to fund growth and working capital given the As at December 31, these ratios were as follows:

December 31, (Stated in thousands, except ratios) 2012 2011 Loans and borrowings $694,972 $400,256 Shareholders’ equity 1,374,812 1,365,389 Total capitalization $2,069,784 $1,765,645

Long-term debt to total capitalization 0.34 0.23

The Company is subject to various financial and non-financial NOTE 18 – OPERATING LEASES covenants associated with existing debt facilities. The covenants are monitored on a regular basis and controls are The Company has commitments for operating lease in place to maintain compliance with these covenants. The agreements, primarily for office space, with minimum Company complied with all financial covenants for the year payments due as of December 31, as follows: ended December 31, 2012.

Within 1 year 1 to 5 years After 5 years Total 2012 $23,228 $42,235 $- $65,463 2011 $19,182 $64,856 $607 $84,645

Lease payments recognized as an expense during the period NOTE 20- RELATED PARTY amounted to $19.2 million (2011- $6.0 million). TRANSACTIONS NOTE 19- CONTRACTUAL OBLIGATIONS Transactions with key management personnel In addition to their salaries, the Company also provides non- As at December 31, 2012, the Company has commitments cash benefits to directors and executive officers. Executive totaling approximately $82.4million (2011 - $505.0 million) officers also participate in the Company’s share option relating to the construction of fixed assets in 2012. program and performance share unit program (see note 14).

Key management personnel compensation comprised:

(stated in thousands) 2012 2011 Salaries $1,736 $1,729 Share-based awards 1,659 1,477 Option-based awards 1,326 1,128 Non-equity annual incentive plans 2,359 2,359 All other compensation 207 218 $7,287 $6,912

2012 Annual Report | 65 Trican Well Service Ltd.

NOTE 21 – OPERATING SEGMENTS

The Company operates in Canada and the U.S. along with a U.S. Operations provides cementing, fracturing, coiled number of international regions which include Russia, Algeria, tubing, nitrogen, and acidizing services, performed on Kazhakstan, Saudi Arabia, Colombia and Australia. Each geographic new and existing oil and gas wells. region has a General Manager that is responsible for the operation and strategy of their region’s business. Personnel working within International Operations provides cementing, fracturing, coiled the particular geographic region report to the General Manager; tubing, acidizing, completion systems and nitrogen services, the General Manager reports to the Corporate Executive. performed on new and existing oil and gas wells.

The Company provides a comprehensive array of specialized Information regarding the results of each geographic region is products, equipment, services and technology to customers included below. Performance is measured based on revenue through three operating divisions: and gross profit as included in the internal management reports which are reviewed by the Company’s executive Canadian Operations provides cementing, fracturing, management team. Each region’s gross profit is used to coiled tubing, nitrogen, geological, acidizing, reservoir measure performance as management believes that such management, industrial cleaning and pipeline, and information is most relevant in evaluating regional results completion systems and downhole tool services. relative to other entities that operate within the industry.

Canadian United States International (Stated in thousands) Operations Operations Operations Corporate Total Year ended December 31, 2012 Revenue $1,139,474 $797,783 $276,143 $- $2,213,400 Gross profit/(loss) 286,271 (77,379) 11,363 (24,735) 195,520 Finance income - - - (2,212) (2,212) Finance costs - - - 30,497 30,497 Tax expense/ (recovery) 46,884 (43,471) 883 528 4,824 Depreciation and amortization 53,810 71,683 26,422 922 152,837 Assets 910,888 1,109,657 323,134 52,840 2,396,519 Goodwill 22,690 - 20,999 - 43,689 Property and equipment 534,235 797,841 111,632 14,854 1,458,562 Capital expenditures 137,477 258,363 41,666 7,044 444,550

Year ended December 31, 2011 Revenue $1,282,684 $738,916 $288,047 $- $2,309,647 Gross profit/(loss) 448,895 150,311 13,923 (22,667) 590,462 Finance income - - - (3,896) (3,896) Finance costs - - - 20,041 20,041 Tax expense 93,704 43,997 1,814 16 139,531 Depreciation and amortization 47,687 54,274 23,935 680 126,576 Assets 911,635 882,391 257,4 41 165,716 2,217,183 Goodwill 22,690 - 21,016 - 43,706 Property and equipment 505,781 573,548 88,287 10,794 1,178,410 Capital expenditures 183,156 374,768 18,848 1,685 578,457 Goodwill expenditures - - 6,551 - 6,551

66 | 2012 Annual Report Trican Well Service Ltd.

The Corporate division does not represent an operating proceedings or related matters. The results of litigation or any segment and is included for informational purposes only. other proceedings or related matters cannot be predicted with Corporate division expenses consist of salary expenses, stock- certainty. Amounts involved in such matters are not reasonably based compensation and office costs related to corporate determinable due to uncertainty as to the final outcome. Trican’s employees, as well as public company costs. assessment of the likely outcome of these matters is based on its judgment of a number of factors including experience with similar Revenue reported above represents revenue generated from matters, past history, precedents, relevant financial and other external customers. There are no intersegment sales. Revenue evidence and facts specific to the matter. Notwithstanding the from one external customer for the year ended December uncertainty as to the final outcome, based upon the information 31, 2012, amounted individually to greater than 10% of the currently available to it, Trican does not currently believe these Company’s total revenue. The customer’s revenue is exclusively matters in aggregate will have a material adverse effect on its within the U.S. and totals $338.2 million (2011 - $359.7 million). consolidated financial position or results of operations.

NOTE 22 – CONTINGENCIES The tax regulations and legislation in the various jurisdictions that the Company operates in are continually From time to time, Trican is subject to costs and other effects of changing. As a result, there are usually some tax matters legal and administrative proceedings, settlements, investigations, under review. Management believes that it has adequately claims and actions. Trican may in the future be involved in disputes met and provided for taxes based on the Company’s with other parties which could result in litigation or other actions, interpretation of the relevant tax legislation and regulations.

NOTE 23- EMPLOYEE BENEFIT EXPENSE December 31, (Stated in thousands) 2012 2011 Wages and salaries $438,850 $368,240 Employee benefits 71,944 57,6 41 Equity-settled share-based transactions (note 14) 9,689 12,378 Cash-settled share-based transactions (note 14) 6,793 10,202 Total $527,276 $448,460

NOTE 24 – RESEARCH AND DEVELOPMENT COSTS will strategically differentiate Trican in the horizontal multi- stage fracturing completion and intervention tool markets. The During the year ended December 31, 2012, Trican expensed initial accounting for the acquisition is incomplete, as Trican is $43.5 million (2011 – $35.7 million) in research and working to quantify the opening fair values with the assistance development costs. of i-TEC Management. Therefore the fair values of the assets NOTE 25 – SUBSEQUENT EVENT acquired, liabilities assumed and intangible assets arising from the acquisition cannot be determined as of the date of the Effective January 11, 2013, Trican acquired all of the outstanding authorization of these financial statements. Furthermore, the shares and discharged the existing debt of Petro Tools value of goodwill arising from the synergies created through Holding AS, the holding company for i-TEC and its subsidiaries the i-TEC acquisition will be determined once the values at (collectively “i-TEC”), for initial consideration of $59.3 million acquisition have been established. In conjunction with the which is made up of cash of $29.8 million and 2.4 million Trican acquisition, Trican has agreed to pay contingent consideration common shares, issued at $12.40. The acquisition of i-TEC fits of up to U.S. $45 million subject to agreed upon financial well with Trican’s focus on being a technological leader and targets for i-TEC for the year ended December 31, 2013.

2012 Annual Report | 67 CORPORATE INFORMATION

BOARD OF DIRECTORS CORPORATE OFFICE

Murray L. Cobbe Trican Well Service Ltd. Chairman 2900, 645 – 7th Avenue S.W. Calgary, Alberta T2P 4G8 G. Allen Brooks (1) (3) (5) Telephone: (403) 266-0202 President Facsimile: (403) 237-7716 G. Allen Brooks, LLC Website: www.trican.ca Kenneth M. Bagan (1) (4) Independent Businessman AUDITORS KPMG LLP, Chartered Accountants Kevin L. Nugent (1) (3) Calgary, Alberta President Livingstone Energy Management Ltd. BANKERS Douglas F. Robinson (2) (4) HSBC Bank Canada Independent Businessman Calgary, AB Alexander J. Pourbaix (2) (3) President, Energy and Oil Pipelines REGISTRAR AND TRANSFER AGENT TransCanada Corporation Computershare Trust Company of Canada Calgary, Alberta Dean E. Taylor (2) (4) Independent Businessman STOCK EXCHANGE LISTING Dale M. Dusterhoft The Toronto Stock Exchange Chief Executive Officer Trading Symbol: TCW Donald R. Luft (4) President and Chief Operating Officer INVESTOR RELATIONS INFORMATION Requests for information should be directed to: OFFICERS Dale M. Dusterhoft Dale M. Dusterhoft Chief Executive Officer Chief Executive Officer Michael A. Baldwin, C.A. Donald R. Luft Vice President, Finance and Chief Financial Officer President and Chief Operating Officer Gary E. Summach, C.A. Michael A. Baldwin, C.A. Director of Reporting and Investor Relations Vice President, Finance and Chief Financial Officer

Bonita M. Croft Vice President, Legal, General Counsel (1) Member of the Audit Committee and Corporate Secretary (2) Member of the Compensation Committee (3) Member of the Corporate Governance Committee Rob J. Cox (4) Member of the Health, Safety and Environment Committee Vice President, Canadian Geographic Region (5) Lead Director