MANAGEMENT’S DISCUSSION AND ANALYSISfilecache.drivetheweb.com/.../87490/FES-Q2-2011.pdf ·...

Flint Energy Services Ltd. | 2011 Q2 1

MANAGEMENT’S DISCUSSION AND ANALYSIS This Management’s Discussion and Analysis (“MD&A”) for Flint Energy Services Ltd. (“Flint” or the “Company”) should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements (“interim financial statements”) for the three and six months ended June 30, 2011 and accompanying notes, the interim financial statements as of and for the three months ended March 31, 2011, and the audited consolidated financial statements and MD&A for the fiscal year ended December 31, 2010. On January 1, 2011, Flint adopted International Financial Reporting Standards (“IFRS”) for financial reporting purposes, using a transition date of January 1, 2010. The interim financial statements for the three and six months ended June 30, 2011, including required comparative information, have been prepared in accordance with International Financial Reporting Standards 1, First-time Adoption of International Financial Reporting Standards, and with International Accounting Standard ("IAS") 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB"), and are reported in Canadian dollars. Previously, the Company prepared its Interim and Annual Consolidated Financial Statements in accordance with Canadian generally accepted accounting principles ("previous GAAP"). Unless otherwise noted, 2010 comparative information has been prepared in accordance with IFRS. Flint Energy Services Ltd. is a market leader providing an expanding range of integrated products and services for the energy industry including: production services, infrastructure construction, oilfield transportation, and maintenance services. Flint provides this unique breadth of products and services through over 65 strategic locations in the oil and gas producing areas of western North America, from Inuvik in the Northwest Territories to Mission, Texas. Flint is a preferred provider of infrastructure construction management, module fabrication, and maintenance services for upgrading and production facilities in Alberta's oil sands sector. The Company’s common stock is traded on the Toronto Stock Exchange under the symbol “FES”. Advisory Regarding Forward Looking Statements This report dated as at August 8, 2011 contains forward-looking statements under the heading “Outlook” and elsewhere concerning future events or the Company’s future performance, including the Company’s projected operating results for 2011 and beyond, and anticipated capital expenditure trends and drilling activity in the oil and gas industry. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. Actual events or results may differ materially from those reflected in the Company’s forward-looking statements due to a number of known and unknown risks, uncertainties and other factors affecting the Company’s business and the oil and gas industry generally. These factors include, but are not limited to, fluctuations in oil and gas prices, fluctuations in the level of oil and gas industry capital expenditures and expenditures on production and remedial work and other factors that affect demand for the Company’s services, industry competition, the need to effectively integrate acquired businesses, uncertainties as to the Company’s ability to implement its business strategy effectively in Canada and the United States, political and economic conditions, the Company’s ability to attract and retain key personnel, and other risks and uncertainties described under the heading “Risk Factors” and elsewhere in the Company’s Annual Information Form for the year ended December 31, 2010 and other documents filed with Canadian provincial securities authorities and are available to the public at www.sedar.com. The Company believes that the expectations reflected in these forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be relied upon. These statements speak only as of the date of this report. The Company does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the Company or on the Company’s behalf, except as may be required under applicable securities laws. The forward-looking statements contained in this report are expressly qualified by this statement. Description of Non-IFRS Measures Throughout this MD&A, management uses terms, measures and ratios not found in IFRS or previous GAAP, which do not have a standardized meaning and therefore are considered non-IFRS measures. Non-IFRS measures are used by the Company to provide shareholders and potential investors with additional information regarding the Company’s

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Three and Six Months Ended June 30, 2011 (in thousands of Canadian dollars except share data or unless otherwise specified) (unaudited)


liquidity and its ability to generate funds to finance its operations. The following definitions of non-IFRS measures are provided: “Adjusted net profit” is equal to net profit (loss) excluding non-recurring items for debt restructuring, severance related to internal reorganization, and gain on sale of business. The Company uses adjusted net profit as a measure of profitability excluding extraordinary items to evaluate the Company’s performance. Adjusted net profit (loss) per share is equal to net profit (loss) per share excluding non-recurring items. “Cash flow to interest bearing debt” is equal to cash flow divided by interest bearing loans, borrowings and finance leases, expressed as a percentage. Cash flow is equal to funds provided by operations before changes in non-cash working capital. Interest bearing debt is equal to loans and borrowings including the current portion. “Days Sales Outstanding” (“DSO”) is calculated by taking the trade and other accounts receivable and inventories, and subtracting billings in excess of revenue for the period. The result is then converted into days using the revenue count-back method. Management uses DSO to evaluate the effectiveness of billing and collection of revenues. “Debt to total capitalization” is equal to loans, borrowings and finance leases, divided by total capitalization, expressed as a percentage. Debt is equal to loans, borrowings and finance leases, including the current portion. Total capitalization is equal to loans and borrowings including the current portion plus equity. “EBITDA” is equal to profit (loss) before finance charges, taxes, depreciation, amortization, impairment of intangible assets and goodwill, share of post-tax results of joint ventures, and share based compensation. The Company presents EBITDA as a supplemental earnings measure as it is used by the chief operating decision makers of the Company to measure reportable segment profitability. Management uses EBITDA to establish performance benchmarks for incentive compensation for employees and to evaluate the performance of its reportable segments. “Funds provided by operations before changes in non-cash working capital” is equal to net profit (loss) adjusting for items not affecting cash. The Company presents funds provided by operations before changes in non-cash working capital to measure funds generated from operations. “Gross profit” is calculated by subtracting cost of sales and other services before depreciation from revenue. The Company believes gross profit is a measure of project profitability and is commonly used to evaluate the Company’s performance. “Gross profit percentage” is calculated by taking gross profit and dividing by revenue, expressed as a percentage. These non-IFRS financial measures and ratios may not be comparable to similar measures and statistics presented by other issuers. The ratios are presented because they are commonly referred to by lenders and other interested parties in evaluating the Company’s financial position. Certain comparative figures have been reclassified to conform to current period presentation.



Highlights of the quarter • Revenues for the three month period ending June 30, 2011 were $339.1 million, consistent with $339.8 million in the comparative quarter of 2010, with decreased revenues in the Facilities Infrastructure segment offset by increased revenues in the Oilfield Services segment. Oilfield Services revenues for the quarter were $65.5 million, up $30.6 million from the comparative quarter in 2010. For the six month period ended June 30, 2011, revenues were $665.9 million, down $97.1 million or 12.7% from the comparative period in 2010 as a result of weather delays and the extended bidding period for oil sands projects for the Facilities Infrastructure segment after the recent economic slowdown. • EBITDA for the three months ended June 30, 2011 was $23.6 million compared to $30.1 million for the second quarter of 2010. Overall, EBITDA margins declined to 7.0% in the second quarter of 2011 from 8.9% in 2010 due to increased non-reimbursable bidding costs, as well as approximately $0.8 million of non-recurring severance costs relating to an internal reorganization, partially offset by a $2.2 million gain relating to the sale of a business. For the six month period ended June 30, 2011, EBITDA was $38.7 million, down $36.7 million from the comparative period of 2010 due to lower revenues in first quarter of 2011. • Including the three non-recurring items: severance costs noted above, financing costs of approximately $7.8 million due to prepayment costs relating to the repayment of the outstanding term loans and the amendment of the credit facility, and the gain on sale of business of $2.2 million, the loss for the three months ended June 30, 2011 was $0.9 million, compared to profit of $8.8 million in the same period of 2010. Excluding these non-recurring costs (net of taxes), earnings for the quarter were $4.5 million. • The fully diluted loss per share for the quarter ended June 30, 2011 was $0.02 per common share, compared to profit of $0.19 per common share for the same period in 2010. Excluding the non-recurring costs, adjusted net profit was $0.09 per fully diluted share for the quarter ended June 30, 2011. • For the six months ended June 30, 2011, the loss was $5.4 million compared to a profit of $26.8 million in 2010. For the six month period ended June 30, 2011, diluted loss per share was $0.12 compared to diluted profit per share of $0.58 in 2010. Excluding the non-recurring costs, adjusted net profit was $0.00 per fully diluted share for the six months ended June 30, 2011. • On May 25, 2011, the Company issued $175 million of 7.5% senior unsecured notes maturing in 2019. The notes were issued at 99.0% of their face value ($173.2 million) resulting in a discount of $1.8 million. Net of the discount and transaction costs, the Company received total net proceeds of $168.3 million. • As of June 30, 2011, all term loans under the previous credit agreement were repaid. $71.7 million Canadian and $43.1 million US was repaid including prepayment costs of $7.0 million and $0.8 million of other fees relating to the amendment of the credit facility. • The Company renewed its revolver credit facility with its lenders in conjunction with the issuance of the senior unsecured notes. The revolver credit facility totaling $175 million has a four year term to 2015. Operating loans remained undrawn in the second quarter of 2011, and Flint’s cash holdings as of June 30, 2011 were $65.5 million. Recent Events Senior Notes Offering and New Credit Facility



On June 8, 2011, the Company announced the closing of its offering of $175 million aggregate principal amount of 7.50% senior unsecured notes due 2019 (the "notes"), pursuant to a private placement in Canada and the United States. The notes were issued at 99.0% of their face amount. The net proceeds from the notes offering was used by the Company to repay the remaining outstanding indebtedness under its term loans and for general corporate purposes. In conjunction with the closing of the notes offering, the Company has also entered into a new $175 million senior secured revolving credit facility with a syndicate of banks. The new revolving credit facility which runs until 2015, replaces the previous revolver credit facility. MEG Energy Award On June 20, 2011, the Company announced that it has signed a letter of intent for a major oil sands construction contract with MEG Energy. The agreement covers MEG Energy's Christina Lake Phase II SAGD project near Conklin, Alberta. The agreement includes both field construction and pipe fabrication, the latter of which will be manufactured at the Company's fabrication facilities in Sherwood Park, Alberta. Construction will begin in Q3 of 2011 with completion in Q1 of 2013. Flint anticipates its work on the project will employ over 600 people at peak. Summary of Consolidated Financial Results The following table summarizes key financial data to be read in conjunction with the interim financial statements of the Company as at and for the three and six months ended June 30, 2011. Such financial statements are prepared in accordance with IFRS and are reported in Canadian dollars.

(For the three months ended June 30) 2011% of

Revenue 2010% of

RevenueIncrease

(decrease) % Change

Revenue $ 339.1 100.0% $ 339.8 100.0% $ (0.7) (0.2%)EBITDA 23.6 7.0% 30.1 8.9% (6.5) (21.6%)Adjusted net profit 4.5 0.7% 8.8 1.2% (4.3) (48.9%)

per common share – basic $ 0.10 $ 0.19 $ (0.09)per common share – diluted $ 0.09 $ 0.19 $ (0.10)

Net (loss) profit (0.9) (0.3%) 8.8 2.6% (9.7) (110.2%)per common share – basic $ (0.02) $ 0.19 $ (0.21)per common share – diluted $ (0.02) $ 0.19 $ (0.21)

(For the six months ended June 30) 2011% of

Revenue 2010% of

RevenueIncrease

(decrease) % Change

Revenue $ 665.9 100.0% $ 763.0 100.0% $ (97.1) (12.7%)EBITDA 38.7 5.8% 75.3 9.9% (36.6) (48.6%)Adjusted net profit 0.0 - 26.8 3.5% (26.8) (100.0%)

per common share – basic $ 0.00 $ 0.59 $ (0.59)per common share – diluted $ 0.00 $ 0.58 $ (0.58)

Net (loss) profit (5.4) (0.8%) 26.8 3.5% (32.2) (120.1%)per common share – basic $ (0.12) $ 0.59 $ (0.71)per common share – diluted $ (0.12) $ 0.58 $ (0.70)



Reconciliation of EBITDA 2011 2010 2011 2010

(Loss) profit $ (0.9) $ 8.8 $ (5.4) $ 26.8 Depreciation on property, plant and equipment 16.7 18.4 36.1 37.8 Amortization on intangible assets 0.5 0.4 0.9 0.8 Share based compensation expense (0.2) 1.1 1.2 2.7 Share of profit of equity accounted investees (net of taxes) (5.3) (6.0) (8.7) (9.9)Net finance costs 11.3 4.7 15.8 9.1 Income tax expense 1.5 2.7 (1.2) 8.0 EBITDA $ 23.6 $ 30.1 $ 38.7 $ 75.3

Three months ended June 30 Six months ended June 30

Revenue Revenue for the three months ended June 30, 2011 was $339.1 million, consistent with $339.8 million for the same period in 2010 as increased revenues from the Oilfield Services segment offset reduced revenues in Facilities Infrastructure. Canadian operations generated $242.9 million in revenues, down $20.7 from the comparative period in 2010. The United States operations generated $96.2 million in revenues, up $20.0 million as a result of expansion of the Oilfield Services segment into the US late in 2010. For the six months ended June 30, 2011, revenue was $665.9 million, down $97.1 million or 12.7% from the same period in 2010. Canadian operations generated $487.8 million in revenues, down $126.3 million from the comparative period in 2010. The United States operations generated $178.1 million in revenues, up $29.2 million from the comparative period in 2010. The unfavorable impact of foreign exchange on revenue for the six months ended June 30, 2011 was approximately $8.1 million. Gross Profit Gross profit and gross profit percentage for the three months ended June 30, 2011 were $60.3 million and 17.8%, respectively, a decrease of $1.8 million or 0.5% to $62.1 million and 18.3%. For the six months ended June 30, 2011, gross profit and gross profit percentage were $114.6 million and 17.2% respectively, representing a decrease of $28.3 million and 1.5% respectively from the comparative period in 2010. The following table summarizes gross profit and percentage by reportable segment:

(in thousands of Canadian dollars, for the three months ended June 30) 2011Gross Profit

% 2010Gross Profit

% Change in % Production Services $ 34,323 17.8% $ 42,019 21.5% (3.7%)

- Canada 18,018 14.6% 24,333 20.2% (5.6%)- United States 16,305 23.3% 17,686 23.6% (0.3%)

Facility Infrastructure 6,663 8.3% 14,859 13.5% (5.2%) Oilfield Services 17,401 26.6% 4,024 11.5% 15.1% Maintenance Services 9,200 9.5% 9,680 8.1% 1.4%

67,587 15.5% 70,582 15.4% 0.1% Corporate 1,888 1,197

69,475 15.9% 71,779 15.6% Less: Maintenance Services Joint Ventures (9,200) (9.5%) (9,680) (8.1%) (1.4%) Total $ 60,275 17.8% $ 62,099 18.3% (0.5%)



(in thousands of Canadian dollars, for the six months ended June 30) 2011Gross Profit

% 2010Gross Profit

% Change in % Production Services $ 62,256 16.4% $ 84,610 20.6% (4.2%)



128,470 15.5% 157,969 16.1% (0.6%)Corporate 1,781 1,085

130,251 15.7% 159,054 16.2% Less: Maintenance Services Joint Ventures (15,687) (9.7%) (16,172) (7.4%) (2.3%) Total $ 114,564 17.2% $ 142,882 18.7% (1.5%) The gross profit percentage in Production Services for the three months ended June 30, 2011 was 17.8%, compared to 21.5% quarter over quarter. Canadian Production Services gross profit percentage was 14.6%, compared to 20.2% for the same quarter in 2010. This decrease is a result of increased costs due to low utilization of equipment and resources and weather-related delays. US Production Services gross margin percentage decreased slightly to 23.3% from 23.6%. For the six months ended June 30, 2011, the gross profit percentage in Production Services was 16.4%, down 4.2% from the comparative period in 2010. Both Canada and US Production Services saw decreased gross profit percentages (4.5% and 3.6% respectively) due to low volumes and non-recurring job losses experienced in the period. The gross profit percentage in Facility Infrastructure for the three months ended June 30, 2011, was 8.3%, compared to 13.5% quarter over quarter due to low utilization of equipment and resources along with lower profit work, as well as non-reimbursable bidding and estimating costs. For the six months ended June 30, 2011, the gross profit percentage was 10.1% compared to 15.9% in the same period of 2010. The Oilfield Services segment gross profit percentage for the three months ended June 30, 2011 was 26.6%, an increase of 15.1% from the same period in 2010. Increased volumes and higher utilization of equipment contributed to this higher profit level. For the six months ended June 30, 2011, the gross profit percentage for this segment was 24.4%, an increase of 7.4% from the comparative period in 2010. An extended winter helped contribute to the increased activity in this segment in the first quarter. The gross profit percentage in the Maintenance Services segment was 9.5% for the three months ended June 30, 2011 compared to 8.1% for the same period last year. For the six months ended June 30, 2011 the gross profit percentage was 9.7% compared to 7.4% for the same period in 2010. Recognition of performance-related bonuses helped contribute to the increase in margin. EBITDA The following table summarizes EBITDA by reportable segment and geographic location:



(in thousands of Canadian dollars, for the three months ended June 30) 2011 EBITDA % 2010 EBITDA % Change in % Production Services $ 19,687 10.2% $ 26,581 13.6% (3.4%)

- Canada 7,088 5.8% 14,307 11.9% (6.1%)- United States 12,599 18.0% 12,274 16.4% 1.6%

Facility Infrastructure 3,988 5.0% 12,818 11.7% (6.7%) Oilfield Services 9,706 14.8% (240) (0.7%) 15.5% Maintenance Services 7,862 8.1% 10,545 8.8% (0.8%)

41,243 9.5% 49,704 10.8% (1.4%)Corporate (9,784) (9,071)

31,459 40,633 Less: Maintenance Services Joint Ventures (7,862) (8.1%) (10,545) (8.8%) 0.8% Total $ 23,597 7.0% $ 30,088 8.9% (1.9%) (in thousands of Canadian dollars, for the six months ended June 30) 2011 EBITDA % 2010 EBITDA % Change in % Production Services $ 29,279 7.7% $ 52,001 12.7% (5.0%)



75,508 9.1% 111,480 11.4% (2.3%)Corporate (23,709) (20,927)

51,799 90,553 Less: Maintenance Services Joint Ventures (13,127) (8.1%) (15,230) (7.0%) (1.1%) Total $ 38,672 5.8% $ 75,323 9.9% (4.1%) Overall, EBITDA margins declined 1.9% to 7.0% in the second quarter of 2011 from 8.9% for the same period in 2010. The EBITDA margin in the Facility Infrastructure segment was 5.0% compared to 11.7% for 2010, a decrease of 6.7% as a result of non-reimbursable costs for ongoing bidding and estimating for future projects. The Production Services segment EBITDA margin percentage of 10.2% was a decrease of 3.4% from 13.6% in 2010. This decrease resulted from low utilization of equipment and resources due to delays in work in Canada and poor weather in parts of the United States, both of which caused certain locations to have operating losses during the period. EBITDA margins in the Oilfield Services segment increased to 14.8% compared to negative 0.7% for 2010, as a result of profitable expansion into the US market and improved asset utilization. The EBITDA percentage for the Maintenance Services segment decreased to 8.1% from 8.8% in 2010. For the six months ended June 30, 2011, EBTIDA margins declined 4.1% overall to 5.8% compared to 9.9% in the same period in 2010. Included in these results are approximately $1.3 million of non-recurring severance costs relating to an internal reorganization. The EBITDA margin in the Facility Infrastructure segment was 7.1% compared to 14.3% for 2010, a decrease of 7.2%. The Production Services segment EBITDA margin percentage of 7.7% was a decrease of 5.0% from 12.7% in 2010. EBITDA margins in the Oilfield Services segment increased to 15.6% compared to 8.3% for 2010. The EBITDA percentage for the Maintenance Services segment increased to 8.1% from 7.0% in 2010. Net (Loss) Profit The Company realized a net loss of $0.9 million ($0.02 per common share – diluted) during the three months ended June 30, 2011 compared to net profit of $8.8 million ($0.19 per common share – diluted) in 2010 for a net decrease of $9.7 million. The decrease in profit was primarily the result of non-recurring restructuring and financing costs, offset by the gain on sale of business during the quarter. Excluding these non-recurring items, profit for the quarter was $4.5 million ($0.09 per common share – diluted), in line with the comparative period in 2010.



For the six months ended June 30, 2011, the Company realized a net loss of $5.4 million ($0.12 per common share – diluted) compared to a net profit of $26.8 million ($0.58 per common share – diluted) in the same period in 2010. Consolidated Financial Position The following table summarizes key consolidated financial position data:

As at June 30, 2011 December 31, 2010Increase

(decrease) % Change

Current assets $ 471.6 $ 477.1 $ (5.5) (1.2%)Current liabilities 145.2 275.8 (130.6) (47.4%)Net working capital 326.4 201.3 125.1 62.1%

Loans and borrowings (including finance leases) 218.5 272.9 (54.4) (19.9%)Current 27.2 165.4 (138.2) (83.6%)Non-current 191.3 107.5 83.8 78.0%

Total assets 866.8 918.1 (51.3) (5.6%)Total liabilities 359.1 406.7 (47.6) (11.7%)Total equity 507.7 511.4 (3.7) (0.7%)

Days sales outstanding (DSO) 99 84 15 As at June 30, 2011, the Company’s net working capital was $326.4 million compared to $201.3 million at December 31, 2010. The increase was primarily attributed to the repayment of the Company’s term loans with the amendment of the credit facility. Days sales outstanding for the quarter ended June 30, 2011 increased fifteen days to 99 days compared to 84 days at the end of December 31, 2010, due to changes in the client’s billing approval process in the Facilities Infrastructure segment which are in the process of being resolved between the Company and the client. DSO fluctuates due to the timing of client milestone billings and pre-payments from clients; however, improving cash generating ability continues to be a priority given uncertainties in the current economic environment. Assets Consolidated total assets decreased by $51.3 million or 5.6% to $866.8 million at June 30, 2011 from $918.1 million at December 31, 2010. The decrease in total assets was primarily due to a decrease in cash and equivalents, discussed below. Cash and cash equivalents decreased by $98.0 million to $65.5 million at June 30, 2011 from $163.5 million at the end of 2010 and cash was used to settle outstanding debt obligations that came due in April, and to pay the associated transaction costs and make early repayments on term loans. Trade and other receivables increased by $107.2 million or 47.0% to $335.2 million at June 30, 2011 up from $227.9 million at the end of 2010. The increase primarily resulted from delays in the billing process in the Facilities Infrastructure segment, as well as increased activity in the quarter compared to lower activity levels in the fourth quarter of last year, which is typical of the Company’s revenue cycle. As a result of the billing delays in the Facilities Infrastructure segment, trade accounts receivable as at June 30, 2011 became more aged, with 22.1% of trade receivables outstanding greater than 60 days, up from 10.1% at the end of 2010.



Inventory levels increased by $0.9 million or 1.7% to $51.9 million at June 30, 2011 from $51.0 million at the end of the prior year. Property, plant and equipment decreased by $53.7 million or 13.7% to $337.1 million at June 30, 2011 from $390.8 million at the end of the prior year. A significant portion of this decrease is due to the sale of the assets of the Entrec business. Net capital asset purchases during the six months ended June 30, 2011 were $24.8 million, comprised of purchases of $28.6 million and disposal proceeds of $53.4 million including proceeds from the sale of the Entrec assets, which were offset by amortization of $36.1 million contributing to the decline in property, plant and equipment. As part of the Company’s efforts to improve the utilization of its balance sheet, the Company continues to monitor the usage rates of equipment to identify items that are under-utilized for potential sale or internal transfer. Liabilities Consolidated total liabilities decreased by $47.6 million to $359.1 million at June 30, 2011 from $406.7 million at December 31, 2010. This decrease was primarily a result of repayments on loans and borrowings, partially offset by increases in trade and other payables caused by increasing activity during the year. Loans, borrowings and finance leases, including the current portion, decreased by $54.4 million to $218.5 million at June 30, 2011 compared to $272.9 million at the end of 2010 as the Company’s credit agreement was amended for its revolving loans and outstanding term loans under the previous agreement were repaid. The Company provided a first charge over all assets under a General Security Agreement as security for the revolving operating loans. Also the Company provided a general assignment of book debts, a first charge over all real property assets, pledged all shares of its subsidiaries and an assignment of insurance for security. The credit facilities require the Company to meet certain covenants. The Company was in compliance with these covenants at June 30, 2011 and 2010. Equity Consolidated total equity decreased by $3.7 million to $507.7 million at June 30, 2011 from $511.4 million at December 31, 2010. Results of Operations Selected financial information for each reportable business segment is as follows:



(in thousands of Canadian dollars, for the three months ended June 30) 2011 2010

Increase (decrease) % Change

Revenue by reportable segment Production Services $ 193,203 57% $ 195,205 57% $ (2,002) (1.0%) Facility Infrastructure 80,385 24% 109,715 32% (29,330) (26.7%) Oilfield Services 65,514 19% 34,903 10% 30,611 87.7% Maintenance Services 97,288 29% 119,348 35% (22,060) (18.5%)

436,390 129% 459,171 135% (22,781) (5.0%)Corporate - - - - - -

436,390 129% 459,171 135% (22,781) (5.0%)Less: Maintenance Services Joint Ventures (97,288) (29%) (119,348) (35%) 22,060 (18.5%) Total $ 339,102 100% $ 339,823 100% $ (721) (0.2%)

EBITDA by reportable segment Production Services $ 19,687 83% $ 26,581 88% $ (6,894) (25.9%) Facility Infrastructure 3,988 17% 12,818 43% (8,830) (68.9%) Oilfield Services 9,706 41% (240) (1%) 9,946 (4,144.2%) Maintenance Services 7,862 33% 10,545 35% (2,683) (25.4%)

$ 41,243 174% $ 49,704 165% $ (8,461) (17.0%)Corporate (9,784) (41%) (9,071) (30%) (713) 7.9%

31,459 133% 40,633 135% (9,174) (22.6%)Less: Maintenance Services Joint Ventures (7,862) (33%) (10,545) (35%) 2,683 (25.4%) Total $ 23,597 100% $ 30,088 100% $ (6,491) (21.6%)

(in thousands of Canadian dollars, for the six months ended June 30) 2011 2010


Revenue by reportable segment Production Services $ 379,818 57% $ 410,181 54% $ (30,363) (7.4%) Facility Infrastructure 135,134 20% 250,786 33% (115,652) (46.1%) Oilfield Services 150,975 23% 102,061 13% 48,914 47.9% Maintenance Services 162,385 24% 217,512 29% (55,127) (25.3%)

828,312 124% 980,540 129% (152,228) (15.5%)Corporate - - - - - -


EBITDA by reportable segment Production Services $ 29,279 75% $ 52,001 69% $ (22,722) (43.7%) Facility Infrastructure 9,559 25% 35,745 47% (26,186) (73.3%) Oilfield Services 23,543 61% 8,504 11% 15,039 176.8% Maintenance Services 13,127 34% 15,230 20% (2,103) (13.8%)

$ 75,508 195% $ 111,480 147% $ (35,972) (32.3%)Corporate (23,709) (61%) (20,927) (27%) (2,782) 13.3%




Production Services The Production Services segment provides pipeline work, day-to-day field facility installation and maintenance services, as well as electrical, instrumentation, mechanical, safety, plant shutdown, turnaround services and tubular management and manufacturing. Selected financial information for each geographic location in this segment is as follows: For the three months ended (in thousands of Canadian dollars) June 30, 2011 June 30, 2010


Revenue by geographic locationCanada $ 123,136 $ 120,328 $ 2,808 2.3% United States 70,067 74,877 (4,810) (6.4%)

Total $ 193,203 $ 195,205 $ (2,002) (1.0%)

EBITDA by geographic locationCanada $ 7,088 $ 14,307 $ (7,219) (50.5%)United States 12,599 12,274 325 2.6%

Total $ 19,687 $ 26,581 $ (6,894) (25.9%) For the six months ended (in thousands of Canadian dollars) June 30, 2011 June 30, 2010


Revenue by geographic locationCanada $ 246,157 $ 263,366 $ (17,209) (6.5%)United States 133,661 146,815 (13,154) (9.0%)

Total $ 379,818 $ 410,181 $ (30,363) (7.4%)

EBITDA by geographic locationCanada $ 12,034 $ 31,181 $ (19,147) (61.4%)United States 17,245 20,820 (3,575) (17.2%)

Total $ 29,279 $ 52,001 $ (22,722) (43.7%) Revenue Revenue from the Production Services segment for the quarter ended June 30, 2011 decreased 1% to $193.2 million from $195.2 million in the second quarter of 2010. In Canada, revenues increased to $123.1 million from $120.3 million in the second quarter of 2010, an increase of $2.8 million or 2.3% due to increased activity in the Tubular businesses. In the United States, revenues decreased to $70.1 million from $74.9 million in the second quarter of 2010, a reduction of $4.8 million or 6.4% due to project delays and the expected lag between drilling and completion/tie in work. For the six months ended June 30, 2011, Production Services revenue decreased 7.4% to $379.8 million from $410.2 million in the same period of 2010. In Canada, revenues decreased to $246.2 million from $263.4 million in the first six months of 2010 due to decreased activity in Southern Alberta. In the United States, revenues decreased to $133.7 million from $146.8 million due to low activity and the impact of poor weather in the region. Severe weather in February resulted in a number of offices in Texas being shut down for three weeks, resulting in decreased revenues for the period. EBITDA Production Services’ EBITDA for the quarter ended June 30, 2011 decreased by 25.9% to $19.7 million compared to $26.6 million in the second quarter of 2010. In Canada, EBITDA decreased $7.2 million or 50.5% over the prior year as under-utilization of resources impacted margins. In the United States, EBITDA increased $0.3 million or 2.6% to



$12.6 million from $12.3 million in the prior year. EBITDA as a percentage of revenue decreased to 10.2% compared to 13.6% in the second quarter of 2010, due to lower gross profit margins caused by weather-related costs. For the six months ended June 30, 2011, Production Services’ EBITDA decreased by $22.7 million or 43.7% to $29.3 million compared to $52.0 million in the same period of 2010. In Canada, EBITDA decreased $19.1 million or 61.4% over the prior year due to decreased activity in Southern Alberta and lower gross profit margins. The 2010 results also included a major project that was completed during 2010. In the United States, EBITDA decreased $3.6 million or 17.2% as jobs were impacted by inclement weather and increased competition exerting downward pressure on gross profit margins. Facility Infrastructure The Facility Infrastructure segment provides major facility project construction services to the energy and natural resources sector, providing a full-cycle approach to all phases of project development from concept and design to fabrication and installation. Revenue Revenue from the Facility Infrastructure segment for the quarter ended June 30, 2011 decreased to $80.4 million from $109.7 million in the second quarter of 2010, a decrease of $29.3 million or 26.7%. The 2010 second quarter revenue for this segment was generated from work on the Shell Albian Sands, Suncor Energy Firebag, and Statoil Hydro projects, which were completed late in 2010. Facility Infrastructure has not yet been able to benefit from increased activity in the oil sands due to the length of the bid cycle, as current bid work is for construction and fabrication for late 2011 and beyond. Revenue is also down in the segment year over year, as the Company is choosing to be patient in accepting work to avoid taking on higher risk contracts during a period of low activity for the industry. For the six months ended June 30, 2011, revenues decreased $115.7 million or 46.1% to $135.1 million from $250.8 million in the same period of 2010. EBITDA Facility Infrastructure’s EBITDA for the quarter ended June 30, 2011 decreased $8.8 million or 68.9% to $4.0 million compared to $12.8 million in the second quarter of 2010. EBITDA as a percentage of revenue was 5.0% compared to 11.7% in the prior year as non-reimbursable bidding and estimating for future projects is actively under way. For the six months ended June 30, 2011, EBITDA for the segment decreased $26.2 million or 73.3% to $9.6 million compared to $35.7 million in the same period of 2010 as the 2010 figures included major projects that were completed prior to the end of the year. Oilfield Services The Oilfield Services segment includes activities focused on energy related transportation and hauling such as drilling rig moving, pressure and vacuum services, fluid hauling, specialized hauling, service rig moving and light hauling. Revenue Revenue for the quarter ended June 30, 2011 increased $30.6 million or 87.7% to $65.5 million from $34.9 million in the second quarter of 2010. The increase is due to revenues generated in the US by operations that were not in place during the second quarter of 2010. For the six months ended June 30, 2011, revenues increased $48.9 million or 47.9% to $151.0 million from $102.1 million in the same period of 2010 due to the US operations established in late 2010.



EBITDA Oilfield Services’ EBITDA for the quarter ended June 30, 2011 increased to $9.7 million compared to an immaterial loss in the second quarter of 2010. The increase in EBITDA was a result of increased work in the US in 2011 from the addition of assets late in 2010, whereas in 2010 the US operations realized losses in the first quarter due to start up costs in Pennsylvania and reduced work in Utah. EBITDA as a percentage of revenue was 14.8%, up from (0.7%) in the prior year. For the six months ended June 30, 2011, EBITDA for the segment increased $15.0 million to $23.5 million from $8.5 million in the same period of 2010 as a result of the expansion of operations into the United States. Maintenance Services The Maintenance Services segment provides asset management services for all routine plant maintenance, coordination of third party services, sustaining capital projects, and turnaround services for oil sands production facilities in Alberta, oil refineries and related chemical, energy, electrical and processing plants. This work is performed through a 50% owned joint venture company, FT Services. Also included in this business segment is the proportional share of two other joint venture companies: Mackenzie Valley Construction, with a base operation in Inuvik, Northwest Territories, and SRP North Ventures, with a base operation in Norman Wells, Northwest Territories. These joint venture companies provide a variety of services including construction, maintenance and logistical services. The Company recognizes its interest in these jointly controlled entities using the equity method of accounting. The investment in these jointly controlled entities resides in Corporate and Oilfield Services. The financial information provided represents the Company’s proportionate share of the financial position and operating results of the jointly controlled entities, as this information is presented in internal management reports reviewed by the Company’s CEO. Revenue Revenue for the quarter ended June 30, 2011 decreased $22.1 million or 18.5% to $97.3 million from $119.3 million in the second quarter of 2010. Maintenance revenues decreased as a result of lower volumes from FT Services for maintenance agreement work performed for Suncor Energy as compared to 2010. For the six months ended June 30, 2011, revenues decreased $55.1 million or 25.3% to $162.4 million from $217.5 million in the same period of 2010. EBITDA Maintenance Services’ EBITDA for the quarter ended June 30, 2011 decreased by $2.7 million to $7.9 million, compared to $10.5 million in the second quarter of 2010. +EBITDA as a percentage of revenue was 8.1%, down from 8.8% in the first quarter of 2010. For the six months ended June 30, 2011, EBITDA decreased $2.1 million or 13.8% to $13.1 million from $15.2 million in the same period of 2010 due to reduced revenues for the segment.



Quarterly Information

Q2 Q1 Q4 Q3 Q2 Q1 Q4(2) Q3(2)

Revenue $ 339.1 $ 326.8 $ 294.8 $ 301.9 $ 339.8 $ 423.2 $ 462.5 $ 459.7 Adjusted net (loss) profit 4.5 (4.5) 3.9 4.4 8.8 18.0 14.5 9.7

per common share - basic 0.10 (0.10) 0.08 0.10 0.19 0.39 0.32 0.21 per common share - diluted 0.09 (0.10) 0.08 0.10 0.19 0.39 0.32 0.21

Net (loss) profit (0.9) (4.5) 3.9 4.4 8.8 18.0 14.5 9.7 per common share - basic (0.02) (0.10) 0.08 0.10 0.19 0.39 0.32 0.21 per common share - diluted (0.02) (0.10) 0.08 0.10 0.19 0.39 0.32 0.21

2010 2009 (Previous GAAP)(1)2011

(1) As Flint’s IFRS transition date was January 1, 2010, 2009 comparative information as presented has not been prepared under IFRS. (2) Quarterly information for 2009 were not restated to IFRS. A number of factors contribute to variations in the Company’s results between periods. These include, but are not limited to weather, customer capital spending, as well as drilling programs which are affected by oil and natural gas commodity prices, and seasonal behaviors in customer spending caused by activities such as plant shutdown work. The Company continues to create the optimum portfolio of services to meet customer needs and maximize shareholder returns. Certain business lines within the Company relate to the maintenance and operation of oilfield facilities, which generally produce consistent revenues, while other business lines relate to large projects, potentially resulting in fluctuating revenue streams over time. While a significant amount of the business activity related to the maintenance and operation of oilfield facilities is under long-term contract, the work is still primarily call-out related and is provided on an as-needed basis and, therefore, may not generate a consistent revenue stream between periods. The Oilfield Services segment’s primary business drivers are related to the drilling cycle in the Western Canadian Sedimentary Basin, while the specialized heavy haul operation, included as part of the Oilfield Services segment, will have more specific business drivers related to the movement of large pieces of equipment and module components of construction projects. As the Company has United States operations, the consolidated financial results may vary between periods due to the effect of foreign exchange fluctuations in translating the revenues and expenses of its United States operations to Canadian dollars. During the quarter ended June 30, 2011, 28.4% (2010 – 22.4%) of the Company’s business activity was in the United States. Liquidity and Capital Resources At June 30, 2011, the Company had $65.5 million in cash and cash equivalents. The Company’s principal sources of capital are cash flows from operations and proceeds from the senior notes. The Company’s principal uses of cash are for the financing of working capital and capital expenditures. Selected cash flow and capitalization data is as follows: As at and for the six months ended June 30, 2011 June 30, 2010

Funds provided by operations before changes in non-cash working capital $ 26.4 $ 44.2 Cash (used in) provided by operating activities (72.4) 22.1 Cash flow to interest bearing debt (annualized) 24.2% 30.2%

Loans and borrowings (including finance leases) 218.5 292.7 Debt to total capitalization 30.1% 36.6%



Cash Flow and Liquidity Cash used by operating activities for the six months ended June 30, 2011 was $72.4 million compared to $22.1 million generated in the same period of 2010. The increase in cash used by operating activities was the result of the decreased profit in the period as well as fluctuations in non-cash balances related to operations during the quarter. Cash flows provided by investing activities for the six months ended June 30, 2011 was $30.6 million compared to $12.4 million used in investing activities in the comparative period. The Company received net capital proceeds of $23.7 million, compared to net expenditures of $11.8 million in 2010 due to the sale of assets relating to the Entrec business as well as disposals of equipment to optimize the size of the capital fleet. Cash flows used in financing activities for the six months ended June 30, 2011 were $55.8 million compared to $17.7 million for 2010. During the period, the proceeds from loans and borrowings increased to $173.2 million compared to proceeds of $0.1 million in 2010 due to issuance of the senior unsecured notes. In addition, the Company made repayments of $224.9 million the six months ending June 30, 2011 compared to net repayments of $18.4 million on loans and borrowings and finance leases in 2010 as repayments were made on matured debt and early payments were made on the term loans. The Company uses cash flow to interest bearing debt, and debt to total capitalization as key indicators of leverage and to monitor the strength of its balance sheet. Cash flow to interest bearing debt for the six months ended June 30, 2011 decreased to 24.2% from 30.2% over the prior year and the target of over 16% was met. The reduction in operational activity levels compared to the prior year resulted in a decline of performance of the Company’s funds provided by operations before changes in non-cash working capital. Debt to total capitalization for the six months ended June 30, 2011 declined to 30.1% from 36.6% in the prior year, which was primarily the result of reductions in long-term debt over the prior year. This ratio was also well ahead of the target of below 50%. The Company closely monitors its cash generating ability and continues to focus efforts upon improving billing and collection processes, in addition to reducing long-term debt.



Commitments and Contingencies The following table presents the Company’s future payment obligations: Maturity < 1 year 1 - 3 years 3 - 5 years > 5 years Total

Loans and borrowings $ 13.8 $ 27.3 $ 26.9 $ 214.4 $ 282.4 Operating leases 25.9 34.2 17.5 5.2 82.8 Finance leases 4.0 3.6 0.1 - 7.7 Total contractual obligations $ 43.7 $ 65.1 $ 44.5 $ 219.6 $ 372.9 *The Statement of Financial Position presents the finance lease obligation as $50.6 million, including the current portion. While for most finance leases the Company is contractually obligated to pay for only one month after the initial six month term has passed, historically the Company keeps the leased assets for the full lease term. On January 29, 2010, a customer filed an action in the Court of Queen’s Bench of Alberta against a number of defendants, including Flint, alleging that the negligent provision of a pipe coating and insulation system, engineering services, design services and other work caused damage to the customer’s pipeline in Canada. The customer alleges that it has suffered damages in the amount of $85.0 million. While Flint was the construction contractor on the project and did construct the pipeline, it was constructed to a design specified and with materials supplied by others. The customer served the Statement of Claim against Flint in late January 2011, prior to the first anniversary of the filing of the claim. Although the claim was served in January, 2011, the Plaintiff advised that Flint was not required to file a Statement of Defense or to take any other steps at that time. The Plaintiff has since requested that a Statement of Defense be prepared and filed in August 2011. Flint has retained counsel and a Statement of Defense is being prepared. Based on management’s current understanding of the facts of this claim, management believes it is unlikely that a payment will be made on this claim, therefore no provision for losses has been reflected in the accounts of the Company for this matter. The Company is also involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity. Off-Balance Sheet Arrangements The Company has not entered into any off-balance sheet arrangements.

Outstanding Share Data The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at June 30, 2011, 45,874,880 common shares were outstanding and no preferred shares were outstanding. Certain employees, officers and directors of the Company have been granted options to purchase common shares and/or units under the Company’s share based payment plans. There were 2,005,499 stock options and 1,190,438 units outstanding at June 30, 2011. As of August 8, 2011, there are 45,874,880 common shares, 2,005,499 stock options and 1,190,438 units outstanding. Changes in Accounting Policies Refer to note 2(a) of the Company’s interim financial statements for a detailed discussion of the Company’s compliance with IFRS.



Future Accounting Pronouncements

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended December 31, 2011, and have not been applied in preparing the interim financial statements. Management is currently reviewing the standards to determine the impact on the interim financial statements.

IAS 1 Presentation of Financial Statements – Presentation of items of Other Comprehensive Income (OCI) On June 16, 2011 the International Accounting Standards Board (IASB) issued amendments to IAS 1 which will require entities to present separately items of OCI that may be reclassified to profit or loss in the future from items that would never be reclassified to profit or loss. Consequently, those entities that present items of OCI before related tax effects will have to allocate the aggregated tax amount between these categories. The amendments are effective for annual periods beginning on or after July 1, 2012 and are to be applied retrospectively. Early adoption is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IFRS 10 Consolidated Financial Statements

On May 12, 2011, the IASB issued IFRS 10 which establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation—Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements.

IFRS 11 Joint Arrangements On May 12, 2011, the IASB issued IFRS 11 which provides an improved reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 replaces IAS 31 Interest in Joint Ventures and is effective for annual periods beginning on or after January 1, 2013. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IFRS 12 Disclosure of Interests in Other Entities On May 12, 2011 the IASB issued IFRS 12. This is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IFRS 13 Fair Value Measurement On May 12, 2011 the IASB issued new guidance on fair value measurement and disclosure requirements for International Financial Reporting Standards (IFRSs). The harmonization of fair value measurement and disclosure requirements internationally is expected to improve consistency and reduce complexity by providing, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The amendments are



effective for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IAS 19 Employee Benefits On June 16, 2011 the IASB issued an amendment on IAS 19. The amendment introduced changes related to: •eliminating an option to defer the recognition of gains and losses, known as the ‘corridor method’, improving

comparability and faithfulness of presentation. •streamlining the presentation of changes in assets and liabilities arising from defined benefit plans, including

requiring re-measurements to be presented in other comprehensive income (OCI), thereby separating those changes from changes that many perceive to be the result of an entity’s day-to-day operations.

•enhancing the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.

The amended version of IAS 19 comes into effect for financial years beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements.

Use of Accounting Estimates In preparing the interim financial statements, various accounting estimates are made in applying the Company’s accounting policies. These estimates require significant judgment on the part of management and are considered critical as they are important to the Company’s financial condition and results. The following represents the estimates that management considers most critical to the application of the Company’s significant accounting policies. Revenue Recognition The Company’s Production Services and Facility Infrastructure reporting segments perform the majority of their projects under construction contracts. Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognized as incurred unless they create an asset related to future contract activity. The stage of completion is assessed by reference to the percentage of costs to date compared to the total estimated contract costs, contractual milestones or performance. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Company’s contract activities based on normal operating capacity. A claim is an amount that the Company seeks to collect from a customer or another party as reimbursement for costs not included in the contract price. A claim may arise from, for example, customer caused delays, errors in specifications or design, and disputed variations in contract work. The measurement of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore, claims are included in contract revenue only when: negotiations have reached an advanced stage such that is probable that the customer will accept the claim; and the amount that is probable will be accepted by the customer can be measured reliably.



Within the Facility Infrastructure reporting segment, the length of contracts varies from one year to several years, whereas within the Production Services reporting segment, the length of contracts are typically less than one year. The Company’s long-term contracts typically allow its customers to unilaterally reduce, delay or eliminate the scope of the work as contracted without cause. As a result, these long-term contracts represent higher risk due to uncertainty of total contract value and estimated costs to complete potentially impacting revenue recognition in future periods. This stage of completion method places considerable importance on accurate estimates of the extent of progress towards completion. Depending on the methodology to determine contract progress, the significant estimates include total contract costs, remaining costs to completion, total contract revenues, contract risks and other judgments. The accuracy of the Company’s revenue and profit recognition in a given period is dependent, in part, on the accuracy of its estimates of the cost to complete on cost plus and fixed fee contracts. The Company’s cost estimates are based upon a detailed approach, using inputs such as labor and equipment hours, detailed drawings and material lists. These estimates are reviewed and updated monthly. However, major changes in cost estimates can have a significant effect on revenue and profit recognition. The Company’s experience allows it to produce materially reliable estimates. However, the Company’s projects can be highly complex. Profit margin estimates for a project may either increase or decrease to some extent from the amount that was originally estimated at the time of the related bid. With many projects of varying levels of complexity and size in process at any given time, changes in estimates can offset each other without materially impacting its profitability. Major changes in cost estimates, particularly in larger, more complex projects, can have a significant effect on profitability. In particular, internal reviews focus on the timing and recognition of incentive payments and the age and recoverability of any unagreed income from variations to the contract scope or claims. The impact of the changes in these accounting estimates is then reflected in the ongoing results. Depreciation of Property, Plant and Equipment The Company’s Production Services and Oilfield Services reportable segments require a significant investment in construction and hauling equipment. In accordance with the Company’s accounting policy related to the depreciation of property, plant and equipment, the cost of construction and hauling equipment is amortized over its estimated useful life. Judgment is involved in determining the useful life of the equipment, the estimated residual value and the appropriate method of depreciation. Factors considered in estimating the useful life and residual value of an item of construction or hauling equipment include expected future usage, effects of technological or commercial obsolescence, expected wear and tear from use or the passage of time, the effectiveness of the Company’s maintenance program and historical information of similar items retired. The accuracy in estimating the residual value of an item of construction or hauling equipment becomes increasingly more difficult the further the estimated useful life extends into the future. The Company’s investment in construction and hauling equipment results in depreciation expense being a significant operating cost to the Company, and any misjudgment in estimating the useful life or the residual value of the equipment could result in a misstatement of consolidated depreciation expense. Allowance for Doubtful Accounts Receivable The Company performs ongoing credit evaluations of its customers and grants credit based upon the customer’s past payment history and financial condition, taking into consideration anticipated changes in industry and economic conditions. Customer payments are regularly monitored and estimates of the allowance for doubtful accounts are determined on a customer-by-customer evaluation of collectability at each reporting date, taking into consideration the following factors: the length of time the receivable has been outstanding, specific knowledge of each customer’s financial condition, and historical experience. The Company’s experience with respect to the incurrence of bad debt losses have been within expectations and have generally been limited to a select number of specific customer situations. Given the cyclical nature of the North American oil and natural gas services industry and the risk associated with finding and producing hydrocarbons, a customer’s ability to fulfill its obligations can change without notice.



Accounting for Impairment of Assets The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value is determined using prices for similar items or the results of discounted cash flows when quoted market prices are not available. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or “CGU”). For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from the synergies of the combination. This allocation is subject to an operating segment ceiling test and reflects the lowest level at which that goodwill is monitored for internal reporting purposes. The Company’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. The Company makes assumptions about the future cash flows expected from the use of its assets, such as: applicable industry performance and prospects, general business and economic conditions that prevail and are expected to prevail, expected growth, maintaining its customer base, and achieving cost reductions. There can be no assurance that expected future cash flows will be realized, or will be sufficient to recover the carrying amount of assets. Furthermore, the process of determining fair values is subjective and requires management to exercise judgment in making assumptions about future results, including revenue and cash flow projections and discount rates. Business Risks The Company’s results are affected by a number of external factors, including commodity prices, which drive producer capital spending levels and the demand for Flint’s project related services, foreign currency, interest rates, operational, credit and safety risks. Producer Capital Spending Levels The Company’s business is directly affected by fluctuations in the levels of exploration, oil sands development and production activity carried on by its customers, which in turn is dictated by numerous factors, including world energy prices and government policies. Projected crude oil and natural gas prices drive oil and natural gas producer capital expenditures, including drilling, and production and exploration activity, which in turn impacts the Company’s activity levels. Producer capital spending levels have a relatively significant impact on the results of the Company’s Facility Infrastructure and Oilfield Services reportable segments, compared to the Production Services reportable segment and Maintenance Services reportable segment, as the latter perform services more related to the ongoing operation and maintenance of producers’ physical plants and production. As it is difficult for the Company to effectively anticipate the fluctuations in activity levels resulting from the peaks and troughs in producer spending related to large capital projects, the Company manages to operate its reportable segments in such a manner so as to maximize their



scalability relative to activity levels. A significant prolonged decline in commodity prices could have a material adverse effect on the Company’s results of operations and financial condition. Foreign Currency The Company minimizes its exposure to unrealized translation gains and losses on United States denominated monetary items related to the translation of its net United States investment, by financing the investment with United States dollar denominated debt. The Company may enter into derivative contracts to manage the exposure to foreign currency related to contracted purchases. The Company does not manage the exposure to fluctuations in the United States to Canadian exchange rate related to translating the results of its United States operations. Interest Rates In order to minimize the Company’s exposure to fluctuating interest rates, the Company has structured its senior credit facility such that a significant amount of its long-term debt has fixed interest rates. Operational Risk and Insurance The Company’s operations are subject to risks inherent in the oil and gas industry such as equipment defects, malfunctions, failures and natural disasters. These risks could expose the Company to substantial liability for personal injury, loss of life, business interruptions, property damages or destruction, pollution and other environmental damages. In addition, the Company’s operations are subject to risks normally inherent in the transportation industry, including potential liability, which could result from, among other things, personal injury, loss of life or property damages arising from motor vehicle accidents. The Company minimizes its exposure to operational risk through comprehensive vehicle and equipment maintenance programs designed to prevent failure and maximize the useful life of the related assets. In addition, the Company follows a complete quality assurance and control program designed to maximize performance in its work and minimize deficiencies potentially leading to failures and remedial re-work. The Company maintains insurance against certain risks to which it is exposed. However, such insurance is subject to coverage limits and no assurance can be given that such insurance will be adequate to cover the Company’s liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition, could be materially adversely affected. Safety Risk Safety risks are managed through the application of safety policies and procedures conducive to promoting safe work practices to a standard either complying with or exceeding government regulations and industry requirements. The Company maintains a behaviour-based safety program, which uses positive reinforcement to create a culture of safety consciousness within its employees and contractors. Labour Supply Risk The Company requires a large number of trades personnel to conduct its operations. Recruiting and training these individuals is critical to the Company’s ability to continue to meet customer requirements and generate increasing levels of revenue. As there is a very high demand for many of these skilled positions, the Company devotes significant resources and planning to the recruiting, retaining and training of people in order to secure the required level of staffing and skills necessary to support anticipated levels of work.



Credit Risk and Reliance on Major Customers The risk of losses from customer non-payment is minimized through the Company’s credit granting policies and other procedures designed to limit the exposure to credit risk. As a result of such practices, the Company’s bad debt expense has historically been minimal. Substantial portions of the Company’s accounts receivable are with customers involved in the oil and gas industry whose revenues may be impacted by fluctuations in crude oil and natural gas prices. Management currently considers the risk of a significant loss to be remote. There can be no assurance that the Company’s current customers will continue their relationships with the Company. The loss of one or more major customers, or any significant decrease in services provided to a customer, prices paid, or any other changes to the terms of service with customers, could have a material adverse effect on the profitability of the Company. Fuel Prices Fuel is one of the Company’s major costs and as such, higher fuel prices could materially affect the Company’s results. The Company manages this exposure to rising fuel costs through inclusion of fuel surcharges in customer agreements and contracts. Legislation and Regulation Income tax, environmental and other applicable legislation may change in a manner which adversely affects the Company. Transportation regulations governing the Oilfield Services segment require licensing from or registration with, provincial and territorial authorities in order to carry goods extra-provincially or to transport goods within any province or territory. Changes in regulations applicable to the Company could increase operating costs and have a material adverse effect on the Company’s operations and financial condition. The right to continue to hold applicable licenses and permits is generally subject to maintaining satisfactory compliance with regulatory and safety guidelines, policies and regulations. Although the Company is committed to compliance and safety, there is no assurance that the Company will be in full compliance at all times with such policies, guidelines and regulations. Consequently, at some future time, the Company could be required to incur significant costs to maintain or improve its compliance record. Environmental Liability Risks Certain reportable segments within the Company routinely deal with natural gas, oil and other petroleum products. The Company has programs to address compliance with current environmental standards and monitors its practices concerning the handling of environmentally hazardous materials. There can be no assurance that the Company’s procedures will prevent environmental damage occurring from spills of materials handled by the Company or that such damage has not already occurred. Although the Company is not aware of any contamination which, if remediation or clean up were required, would have a material adverse effect on the Company, there can be no assurance that the Company will not be required at some future date, to incur significant costs to comply with current or future environmental laws. Weather and Seasonality Weather conditions can restrict or impede the Company’s ability to deliver its services. Municipalities and provincial transportation departments enforce road bans during certain times of the year which restrict the movement of the Company’s equipment or those of the customer, thereby reducing the Company’s activity levels during these periods. Additionally, certain oil and gas producing areas are only accessible in the winter months due to ground conditions. Seasonal factors and unexpected weather patterns may lead to declines in activity levels of exploration and production companies and corresponding declines in the demand for the goods and services of the Company. The Company’s



operations are geographically dispersed throughout the major oil and gas producing areas in North America and therefore the risk associated with seasonal and inclement weather is somewhat mitigated. Refer to the Annual information form for further information on risks.



Disclosure Controls and Procedures and Internal Controls over Disclosure and Financial Reporting The Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for designing disclosure controls and procedures to ensure that material information is being made known to the appropriate individuals. In addition, the CEO and CFO are responsible to design internal controls over financial reporting or cause them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Disclosure Controls and Procedures An evaluation of the effectiveness of the Company’s disclosure controls and procedures was conducted as of June 30, 2011, by and under the supervision of the Company’s management, including the CEO and CFO. Based on this evaluation, the CEO and CFO concluded that the disclosure controls and procedures were effective as at June 30, 2011. Internal Controls over Financial Reporting The CEO and CFO evaluated the design and operating effectiveness of the Company’s internal controls over financial reporting as at the quarter ended June 30, 2011. Based on that evaluation, they concluded that the design and operation of internal controls over financial reporting were effective as at June 30, 2011 to provide reasonable assurance regarding the reliability and the preparation of financial statements for external purposes in accordance with IFRS. On January 1, 2011, The Company adopted IFRS as its standard for financial reporting. The Company’s transition to IFRS in the period did not result in any significant changes to the Company’s internal controls over financial reporting. Limitations on the Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting Management does not expect that the Company’s disclosure controls and procedures and ICFR will prevent all error or fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance for both prevention and detection of errors or fraud. The inherent limitations include: judgments in decision-making can be faulty; breakdowns can occur because of simple errors or mistakes; controls can be circumvented by individual acts or collusion; and management can override controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Outlook The second half of 2011 is poised to be very busy in all of Flint’s operating segments as a result of strong drilling activity in the first half of the year, and increasing drilling in the second half of the year. This stronger drilling activity benefits our Oilfield Services division, particularly in the US, and we also expect to see increasing activity for the mid-stream Production Services segment in the second half as well. Canadian drilling activity in the first half of 2011 was up 12% to 5,400 wells and second half drilling is forecast to increase 17% to 8,800 wells over 2010. Drilling activity in the US in the first half was up 36% over the first half of 2010, with an estimated 31,500 wells drilled. Land-based rig activity averaged 1,753 in the first half with early July seeing 1,854 active rigs. Forecasts for the second half see US drilling complete a further 33,888 wells, up 18% over second half 2010 with average rig activity of 1,825 in Q3 and 1,950 in Q4. Oilfield Services’ rig moving will see increased activity in both Canada and the United States through the balance of 2011 due to increased drilling, and fluid hauling revenues will continue to benefit as a result of expanding crude oil



production in both Canada and the United States. The Company was recently awarded a rig moving contract with a major producer covering its Canadian and US operations, with significant activity to take place in Northeastern BC. Production Services activities, which lag drilling activity, are expected to improve in the second half with well tie-ins from first half drilling, and facilities and pipeline projects, which typically occur in the second half of the year. The Company has been awarded a number of pipeline construction contracts in Northeast BC as well as the Marcellus basin in the eastern United States, and in some areas present commitments are at capacity, and the Company has had to turn away or decline to bid on some jobs which do not meet the Company’s expected risk and return expectations. Oil sands capital project awards have been secured, providing Flint with visibility for second half revenues, and while our maintenance services segment was awarded a maintenance contract with a new major oil sands producer, maintenance revenues for 2011 will be lower than 2010 as a result of lower scheduled turnaround and shutdown work expected in 2011. Oil sands capital spending for 2011 is expected to reach $16 billion, up from an estimated $11 billion in expenditures in 2010. A number of the previously delayed projects should see contract awards in the second half of 2011. Facilities Infrastructure contract backlog is approximately $300 million and includes additional work releases on Suncor’s Firebag SAGD projects and the recently awarded MEG Energy Christina Lake Phase 2 SAGD project near Fort McMurray. Flint also is bidding on additional contract work with several oil sands producers and expects further announcements on contract awards during the second half of this year. FT Services, our Maintenance Services operation, was recently awarded a new multi-year maintenance contract with a major oil sands producer. The contract, while modest in size, represents an opportunity expand our scope with the new customer over time. Ongoing cost management and the re-allocation of assets to areas with higher activity continues to be a focus to improve margins. Management continues to review several acquisition opportunities to fill in the geographic reach of the Company’s existing business lines in both Canada and the United States. Overall the outlook for the balance of 2011 is positive for all divisions. Additional Information Additional information related to the Company is available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, including a copy of the latest Annual Information Form of the Company. August 8, 2011



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands of Canadian dollars)

(unaudited)

As at Note June 30, 2011 December 31, 2010

ASSETSCurrent assets:

Cash and cash equivalents 65,487$ 163,494$ Trade and other receivables 335,150 227,928 Inventories 51,877 51,007 Prepaid expenses and deposits 10,607 13,323 Current tax assets 8,484 21,309

471,605 477,061

Long-term investment 6,281 1,989 Property, plant and equipment 337,111 390,768 Intangible assets 7,842 7,695 Investment in equity accounted investees 8 17,420 18,124 Other long-term assets 8,631 5,303 Deferred tax assets 17,839 17,060 Goodwill 84 84 Total assets 866,813$ 918,084$

LIABILITIES AND EQUITYCurrent liabilities:

Trade and other payables 110,221$ 102,100$ Billings in excess of revenue 5,459 5,788 Current tax liabilities 2,349 2,536 Current portion of finance leases 27,192 31,842

Current portion of loans and borrowings 9 - 133,565 145,221 275,831

Derivative financial instruments - 1,259 Finance leases 23,373 29,777 Loans and borrowings 9 167,967 77,723 Other liabilities 6,196 5,497 Deferred tax liabilities 16,361 16,588

359,118 406,675

Equity:Accumulated other comprehensive loss (4,286) (3,671) Deficit (69,124) (63,734)

(73,410) (67,405)

Share capital 556,033 554,015 Contributed surplus 25,072 24,799 Equity attributable to owners of the Company 507,695 511,409

Total liabilities and equity 866,813$ 918,084$ The accompanying notes are an integral part of these condensed consolidated interim financial statements. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF (LOSS) PROFIT For the Three Months Ended



(in thousands of Canadian dollars, except share data)

(unaudited) Note

BeforeDepreciation

and Amortization

Depreciation and

Amortization Total

BeforeDepreciation

and Amortization

Depreciation and

Amortization TotalRevenue 339,102$ -$ 339,102$ 339,823$ -$ 339,823$ Cost of sales and other services 278,827 15,038 293,865 277,724 17,067 294,791 Gross profit 60,275 (15,038) 45,237 62,099 (17,067) 45,032

Administrative expenses 38,829 1,880 40,709 33,347 1,498 34,845 Gain on sale of business 5 (2,186) - (2,186) - - - Finance costs 7 11,619 - 11,619 4,899 - 4,899 Finance income 7 (281) - (281) (168) - (168)

12,294 (16,918) (4,624) 24,021 (18,565) 5,456 Share of profit of equity accounted investees (net of taxes) 5,262 5,262 6,037 - 6,037 Profit before income taxes 17,556 (16,918) 638 30,058 (18,565) 11,493

Income taxes:Current tax recovery (509) - (509) (1,686) - (1,686) Deferred tax expense 2,022 - 2,022 4,345 - 4,345

1,513 - 1,513 2,659 - 2,659

(Loss) profit 16,043$ (16,918)$ (875)$ 27,399$ (18,565)$ 8,834$

(Loss) earnings per share:Basic 10 (0.02)$ 0.19$ Diluted 10 (0.02)$ 0.19$

Weighted average number of common shares outstanding:Basic 45,844,682 45,612,730 Diluted 46,191,943 46,092,624

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

June 30, 2011 June 30, 2010

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF (LOSS) PROFIT For the Six Months Ended



(in thousands of Canadian dollars, except share data)

(unaudited) Note

BeforeDepreciation

and Amortization

Depreciation and

Amortization Total

BeforeDepreciation

and Amortization

Depreciation and

Amortization TotalRevenue 665,927$ -$ 665,927$ 763,028$ -$ 763,028$ Cost of sales and other services 551,363 33,136 584,499 620,146 35,247 655,393 Gross profit 114,564 (33,136) 81,428 142,882 (35,247) 107,635

Administrative expenses 79,746 3,356 83,102 70,806 2,821 73,627 Gain on sale of business 5 (2,186) - (2,186) - - - Finance costs 7 16,488 - 16,488 9,477 - 9,477 Finance income 7 (647) - (647) (328) - (328)

21,163 (36,492) (15,329) 62,927 (38,068) 24,859 Share of profit of equity accounted investees (net of taxes) 8,723 8,723 9,938 - 9,938 (Loss) profit before income taxes 29,886 (36,492) (6,606) 72,865 (38,068) 34,797

Income taxes:Current tax expense 4,071 - 4,071 5,963 - 5,963 Deferred tax (recovery) expense (5,287) - (5,287) 2,035 - 2,035

(1,216) - (1,216) 7,998 - 7,998

(Loss) profit 31,102$ (36,492)$ (5,390)$ 64,867$ (38,068)$ 26,799$

(Loss) earnings per share:Basic 10 (0.12)$ 0.59$ Diluted 10 (0.12)$ 0.58$

Weighted average number of common shares outstanding:Basic 45,758,000 45,558,804 Diluted 46,210,277 46,034,084

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

June 30, 2011 June 30, 2010



CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE LOSS For the Three and Six Months Ended (in thousands of Canadian dollars)

(unaudited) 2011 2010 2011 2010

Loss (875)$ 8,834$ (5,390)$ 26,799$

Other comprehensive gain (loss)Foreign currency translation differences for foreign operations (313) 3,120 (1,801) 888 Change in fair value of available for sale investment, net of tax 1,186 - 1,186 -

Other comprehensive gain (loss) 873 3,120 (615) 888

Comprehensive loss (2)$ 11,954$ (6,005)$ 27,687$ The accompanying notes are an integral part of these condensed consolidated interim financial statements.


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands of Canadian dollars)(unaudited)

Accumulated Other

Comprehensive Gain

ShareCapital

Contributed Surplus Deficit Total

Balance, January 1, 2010 -$ 553,018$ 23,566$ (98,785)$ 477,799$

Profit - - - 26,799 26,799 Exercised employee stock options - 614 - - 614 Transfer for employee stock options exercised - 211 (211) - - Employee stock option expense - - 739 - 739 Foreign currency translation differences for

foreign operations 888 - - - 888 Balance, June 30, 2010 888$ 553,843$ 24,094$ (71,986)$ 506,839$ The accompanying notes are an integral part of these condensed consolidated interim financial statements. (in thousands of Canadian dollars)(unaudited)

Accumulated Other

Comprehensive Loss

ShareCapital


Balance, December 31, 2010 (3,671)$ 554,015$ 24,799$ (63,734)$ 511,409$

Loss - - - (5,390) (5,390) Exercised employee stock options - 1,471 - - 1,471 Transfer for employee stock options exercised - 547 (547) - - Employee stock option expense - - 820 - 820 Foreign currency translation differences for

foreign operations (1,801) - - - (1,801) Change in fair value of available for sale investment, net of tax 1,186 - - - 1,186 Balance, June 30, 2011 (4,286)$ 556,033$ 25,072$ (69,124)$ 507,695$ The accompanying notes are an integral part of these condensed consolidated interim financial statements.



CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW For the Six Months Ended (in thousands of Canadian dollars)

(unaudited) Note June 30, 2011 June 30, 2010Cash provided by (used in):

Operating activities:(Loss) profit for the period (5,390)$ 26,799$ Items not affecting cash:

Depreciation on property, plant and equipment 36,084 37,799 Amortization on intangible assets 915 769 Current tax expense 4,071 5,963 Finance costs, net of finance income 15,841 9,149 (Gain) loss on sale of property, plant and equipment (2,691) 75 Gain on sale of business 5 (2,186) - Share based compensation expense 1,161 2,747 Share of profit of equity accounted investees (net of taxes) (8,723) (9,938) Deferred tax (recovery) expense (5,287) 2,035

Cash generated from operating activities 33,795 75,398 Changes in non-cash balances relating to operations (98,795) (22,070) Current tax received (paid) 8,523 (22,596) Finance costs paid (15,914) (8,598) Net cash (used in) provided by operating activities (72,391) 22,134

Investing activities:Purchase of property, plant and equipment (28,615) (14,310) Purchase of intangible assets (1,164) - Proceeds from sale of property, plant and equipment 24,922 2,493 Proceeds from sale of business 28,527 - Long-term investment (2,456) (2,129) Deposit for acquisition of business - (7,191) Dividends received from equity accounted investees 9,426 8,766 Net cash provided by (used in) investing activities 30,640 (12,371)

Financing activities:Proceeds from loans and borrowings 173,250 58 Repayments of loans and borrowings (210,000) (4,313) Repayment of obligations under finance leases (14,963) (14,060) Proceeds from issue of capital stock on exercise of options 1,471 614 Transaction costs (5,565) - Net cash used in financing activities (55,807) (17,701)

Effect of foreign exchange rate changes on cash balances (449) (240)

Decrease in cash and cash equivalents (98,007) (8,178) Cash and cash equivalents, beginning of period 163,494 163,159

Cash and cash equivalents, end of period 65,487$ 154,981$ The accompanying notes are an integral part of these condensed consolidated interim financial statements.



1) Reporting Entity

Flint Energy Services Ltd. (the "Company" or “Flint”) is incorporated in Canada under the Business Corporations Act (Alberta). The address of the Company’s registered office is 700, 300 – 5th Avenue S.W., Calgary, Alberta, T2P 3C4. The condensed consolidated interim financial statements as at and for the six months ended June 30, 2011 comprise the Company and its subsidiaries and its interest in associates and jointly controlled entities (the “Group”). The Group provides a full range of integrated products and services for the oil and gas industry including: production services, infrastructure construction, oilfield transportation, and maintenance services. The Group provides these services from over 60 centers in North America’s oil and gas producing regions, from Inuvik in the Northwest Territories to Mission, Texas. The Company’s common stock is traded on the Toronto Stock Exchange under the symbol “FES”.

2) Basis of Preparation

a) Statement of Compliance:

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements are prepared in accordance with IFRSs. Certain disclosures that are required to be included in the annual financial statements prepared in accordance with IFRS that are not included in the Group’s most recent annual financial statements prepared in accordance with previous Canadian generally accepted accounting principles (“previous GAAP”) have been included in these financial statements for the comparative periods. These condensed consolidated interim financial statements do not include all of the information required for full annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with the Group’s 2010 annual financial statements prepared in accordance with previous GAAP as well as the Group’s March 31, 2011 condensed consolidated interim financial statements prepared in accordance with IFRS. The Group’s March 31, 2011 condensed consolidated interim financial statements include certain disclosures not repeated in the June 30, 2011 condensed consolidated interim financial statements, including: disclosure of IFRS 1 elections made by the Group; the Group’s significant accounting policies in accordance with IFRS; the Group’s use of judgments and estimates; explanation of how the transition from previous GAAP to IFRSs affected the reported financial position, financial performance and cash flows, and reconciliations of equity and total comprehensive income reported under previous GAAP to those reported under IFRS as at January 1, 2010, as at and for the three months ended March 31, 2010, and as at and for the year ended December 31, 2010; and certain other supplementary annual disclosures for the year ended December 31, 2010. An explanation of how the transition from previous GAAP to IFRSs has affected the reported financial position, financial performance and cash flows of the Group as at and for the three and six months ended June 30, 2010 is set out in note 12. These notes include reconciliations of equity and total comprehensive income for comparative periods under previous GAAP to those reported for those periods under IFRS. These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 3, 2011. The policies applied in these condensed consolidated interim financial statements are based upon IFRSs issued and outstanding as of August 3, 2011, the date the Board of Directors approved the financial statements. Any subsequent changes to IFRS, that are given effect in the Group’s annual consolidated financial statements for the year ending December 31, 2011 could result in restatement of these condensed consolidated interim financial statements, including adjustments recognized upon transition to IFRS.



3) New Standards and Interpretations not yet Adopted

IAS 1 Presentation of Financial Statements – Presentation of items of Other Comprehensive Income (OCI) On June 16, 2011 the International Accounting Standards Board (IASB) issued amendments to IAS 1 which will require entities to present separately items of OCI that may be reclassified to profit or loss in the future from items that would never be reclassified to profit or loss. Consequently, those entities that present items of OCI before related tax effects will have to allocate the aggregated tax amount between these categories. The amendments are effective for annual periods beginning on or after July 1, 2012 and are to be applied retrospectively. Early adoption is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IFRS 10 Consolidated Financial Statements

On May 12, 2011, the IASB issued IFRS 10 which establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation—Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements.

IFRS 11 Joint Arrangements On May 12, 2011, the IASB issued IFRS 11 which provides an improved reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 replaces IAS 31 Interest in Joint Ventures and is effective for annual periods beginning on or after January 1, 2013. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IFRS 12 Disclosure of Interests in Other Entities On May 12, 2011 the IASB issued IFRS 12. This is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements. IFRS 13 Fair Value Measurement On May 12, 2011 the IASB issued new guidance on fair value measurement and disclosure requirements for International Financial Reporting Standards (IFRSs). The harmonization of fair value measurement and disclosure requirements internationally is expected to improve consistency and reduce complexity by providing, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The amendments are effective for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements.



IAS 19 Employee Benefits On June 16, 2011 the IASB issued an amendment on IAS 19. The amendment introduced changes related to: •eliminating an option to defer the recognition of gains and losses, known as the ‘corridor method’, improving

comparability and faithfulness of presentation. •streamlining the presentation of changes in assets and liabilities arising from defined benefit plans, including

requiring re-measurements to be presented in other comprehensive income (OCI), thereby separating those changes from changes that many perceive to be the result of an entity’s day-to-day operations.

•enhancing the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.

The amended version of IAS 19 comes into effect for financial years beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently reviewing the standard to determine the impact on the consolidated financial statements.

4) Seasonality

There are factors causing quarterly variances that may not be reflective of the Group’s future performance. These include, but are not limited to weather, customer capital spending, as well as drilling programs which are affected by oil and natural gas commodity prices, and seasonal behaviours in customer spending caused by activities such as plant shutdown work. As the Group has operations in the United States, the consolidated financial results may vary between periods due to the effect of foreign exchange fluctuations in translating the revenues and expenses of its operations in the United States to Canadian dollars. As a result, quarterly operating results should not be relied upon as any indication of results for any future period.

5) Sale of Business On May 12, 2011, the Company completed its previously announced disposal of the business of Entrec Transportation Services Ltd. (“Entrec”), which is reported in the Oilfield Services segment. All of the issued and outstanding shares of Entrec as well as certain assets used to conduct the business were sold to a third party, EIS Capital Corp., for cash consideration of $28,527.

6) Operating Segments The Group has four reportable business segments, as described below, each of which are the Group’s strategic business units. The strategic business units offer different products and services within the oil and natural gas industry and are managed separately. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

a) Facility Infrastructure

The Facility Infrastructure segment provides construction management, modular fabrication, field construction services on major oil sands construction projects primarily in Edmonton and Fort McMurray, Alberta.

b) Production Services

The Production Services segment focuses on midstream oil and gas field production services. These services encompass: fabrication, construction and maintenance of production facilities, mid-inch pipelines, production



equipment, and mid-sized construction management with the inspection repair and refurbishing of production tubing, drill pipe, sucker rods, casing, small diameter pipelines and polyethylene pipe and liners.

c) Oilfield Services

The Oilfield Services segment provides drill rig and service rig moving; module and equipment hauling; fluid handling, pressure and vacuum services, industrial and chemical cleaning; and coiled tubing and flush-by services.

d) Maintenance Services The Maintenance Services segment comprises the results of the jointly controlled entities: FT Services, Mackenzie Valley Construction, and SRP North Ventures. Services provided by this segment include oil and gas production and maintenance, construction, logistical oilfield services, asset management and project management services to the North American energy sector.

The Company recognizes its interest in these jointly controlled entities using the equity method of accounting. The investment in these jointly controlled entities resides in Corporate and Oilfield Services. The financial information provided in the tables below represent the Company’s proportionate share of the financial position and operating results of the jointly controlled entities, as this information is presented in internal management reports reviewed by the Group’s CEO.

There are varying levels of integration between the four reportable segments. This integration includes sharing labour and asset resources and selling services between the segments. Corporate costs, depending on their nature, are allocated based on a ratio of asset utilization to total asset utilization. Unallocated corporate costs which include head office expenses are disclosed separately as Corporate. Financial information regarding the results of each reportable segment is included below. Performance is measured based on EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, impairment of intangible assets and goodwill, share of profit of equity accounted investees (net of taxes), and share based compensation, as included in the internal management reports that are reviewed by the Group’s CEO and follow the organization, management and reporting structure of the Group. Management uses EBITDA to establish performance benchmarks for incentive compensation for employees and to evaluate the performance of its operating segments. EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS, and may not be comparable to similar measures presented by other issuers.



(a) Reportable Segments

Three months ended June 30, 2011 RevenueInter-segment

revenueNet external

revenue EBITDAProduction Services $ 198,325 $ (5,122) $ 193,203 $ 19,687 Facility Infrastructure 81,579 (1,194) 80,385 3,988 Oilfield Services 66,982 (1,468) 65,514 9,706 Maintenance Services 97,288 - 97,288 7,862

444,174 (7,784) 436,390 41,243 Corporate - - - (9,784)

444,174 (7,784) 436,390 31,459 Less: Maintenance Services Joint Ventures (97,288) - (97,288) (7,862)Total $ 346,886 $ (7,784) $ 339,102 $ 23,597

Three months ended June 30, 2010 RevenueInter-segment

revenueNet external

revenue EBITDAProduction Services $ 196,100 $ (895) $ 195,205 $ 26,581 Facility Infrastructure 109,773 (58) 109,715 12,818 Oilfield Services 37,182 (2,279) 34,903 (240)Maintenance Services 119,348 - 119,348 10,545

462,403 (3,232) 459,171 49,704 Corporate - - - (9,071)


Six months ended June 30, 2011 RevenueInter-segment

revenueNet external

revenue EBITDAProduction Services $ 387,314 $ (7,496) $ 379,818 $ 29,279 Facility Infrastructure 136,418 (1,284) 135,134 9,559 Oilfield Services 154,801 (3,826) 150,975 23,543 Maintenance Services 162,385 - 162,385 13,127

840,918 (12,606) 828,312 75,508 Corporate - - - (23,709)


Six months ended June 30, 2010 RevenueInter-segment

revenueNet external

revenue EBITDAProduction Services $ 412,444 $ (2,263) $ 410,181 $ 52,001 Facility Infrastructure 250,844 (58) 250,786 35,745 Oilfield Services 106,727 (4,666) 102,061 8,504 Maintenance Services 217,512 - 217,512 15,230

987,527 (6,987) 980,540 111,480 Corporate - - - (20,927)




As at June 30, 2011 Segment assets Segment liabilitiesProduction Services 404,786$ $ 45,861 Facility Infrastructure 137,233 37,205 Oilfield Services 217,941 84,371 Maintenance Services 95,953 76,441

855,913 243,878 Corporate 106,853 191,681

962,766 435,559 Less: Maintenance Services Joint Ventures (95,953) (76,441)Total $ 866,813 $ 359,118

As at December 31, 2010 Segment assets Segment liabilitiesProduction Services 409,684$ 77,252$ Facility Infrastructure 62,513 21,520 Oilfield Services 253,646 99,756 Maintenance Services 100,536 80,386

826,379 278,914 Corporate 192,241 208,147

1,018,620 487,061 Less: Maintenance Services Joint Ventures (100,536) (80,386) Total $ 918,084 $ 406,675 As at June 30, 2011, Oilfield Services held an investment in equity accounted investees of $760 (December 31, 2010 - $771) and Corporate held an investment in equity accounted investees of $16,660 (December 31, 2010 - $17,353) for a total of $17,420 (December 31, 2010 - $18,124).



Other information:

Three months ended June 30, 2011

Depreciation of property, plant and equipment

Share of post tax results of JVs

Purchase of property, plant and

equipmentProduction Services 8,222$ -$ 14,189$ Facility Infrastructure 1,352 - 1,151 Oilfield Services 6,635 1 4,074 Maintenance Services 436 - 18

16,645 1 19,432 Corporate 469 5,261 -

17,114 5,262 19,432 Less: Maintenance Services Joint Ventures (436) - (18) Total 16,678$ 5,262$ 19,414$

Three months ended June 30, 2010




equipmentProduction Services 10,605$ -$ 4,930$ Facility Infrastructure 1,887 - 335 Oilfield Services 5,435 (250) 2,250 Maintenance Services 263 - 628

18,190 (250) 8,143 Corporate 480 6,287 -


Six months ended June 30, 2011




equipmentProduction Services 18,610$ -$ 19,920$ Facility Infrastructure 2,033 - 1,484 Oilfield Services 14,514 (18) 7,211 Maintenance Services 658 - 18

35,815 (18) 28,633 Corporate 927 8,741 -


Six months ended June 30, 2010




equipmentProduction Services 21,663$ -$ 8,431$ Facility Infrastructure 4,041 - 1,539 Oilfield Services 11,049 (353) 4,340 Maintenance Services 480 - 743

37,233 (353) 15,053 Corporate 1,046 10,291 -




(b) Geographic Information For the three and six months ended June 30, 2011, the Group had revenues of $242,857 and $487,790 (June 30, 2010 - $263,561 and $614,075) within Canada and revenues of $96,245 and $178,137 (June 30, 2010 - $76,262 and $148,953) within the U.S.

(c) Reconciliation of EBITDA

2011 2010 2011 2010

(Loss) profit (875)$ 8,834$ (5,390)$ 26,799$ Depreciation on property, plant and equipment 16,678 18,407 36,084 37,799 Amortization on intangible assets 504 404 915 769 Share based compensation expense (299) 1,090 1,161 2,747 Share of profit of equity accounted investees (net of taxes) (5,262) (6,037) (8,723) (9,938) Finance costs, net of finance income 11,338 4,731 15,841 9,149 Tax expense (recovery) 1,513 2,659 (1,216) 7,998

EBITDA 23,597$ 30,088$ 38,672$ 75,323$


7) Finance Income and Finance Costs

Three months ended June 30, 2011 June 30, 2010

Finance costs:Interest expense on finance leases 765$ 1,091$ Interest expense on loans and borrowings 3,043 4,093 Prepayment penalty on loans and borrowings 6,916 - Derecognition of transaction costs 317 - Modification costs on revolving credit facility 535 - Unrealized foreign exchange loss 804 206 Unrealized gain on change in fair value of derivatives (761) (491)

11,619 4,899

Finance income:Interest income on bank balances 265 118 Interest income on money market fund 16 50

281 168

Net financing expense 11,338$ 4,731$



Six months ended June 30, 2011 June 30, 2010Finance costs:Interest expense on finance leases 2,234$ 2,361$ Interest expense on loans and borrowings 6,230 7,364 Prepayment penalty on loans and borrowings 6,916 - Derecognition of transaction costs 317 - Modification costs on revolving credit facility 535 - Unrealized foreign exchange loss 676 191 Unrealized gain on change in fair value of derivatives (420) (439)

16,488 9,477

Finance income:Interest income on bank balances 566 150 Interest income on money market fund 81 178

647 328

Net financing expense 15,841$ 9,149$

8) Equity Accounted Investees

The Group participates in the following three jointly controlled entities, which have been accounted for using the equity method.

i) 50% interest in Flint Transfield Services Ltd. (“FT Services”), a joint venture with Transfield Services Limited (Canada) a subsidiary of a publicly traded Australian Group. The joint venture provides operations, maintenance and asset management and project management services to the North American energy sector.

ii) 49% interest in Mackenzie Valley Construction Ltd. (“MVC”), a joint venture with Gwich’in Development

Corporation. The joint venture provides construction, oil and gas production and maintenance services in the Northwest Territories area.

iii) 33 ⅓% interest in S.R.P. North Ventures Ltd. (“SRP”). This joint venture provides a variety of logistical oilfield

services in the Norman Wells, Northwest Territories area.

The Group’s share of profit in its equity accounted investees for the three and six months ended June 30, 2011 was $5,262 and $8,723 (June 30, 2010 - $6,037 and $9,938). The Group received $9,426 in dividends from its investments in equity accounted investees during the six months ended June 30, 2011 (June 30, 2010 - $ 8,766). For the year ended December 31, 2010, the Group received $15,355 in dividend payments. Summary financial information for equity accounted investees, adjusted for the percentage ownership held by the Group:

Current assets

Non - current assets

Total assets

Current liabilities

Non - current

liabilitiesTotal

liabilities Revenues Expenses ProfitJune 30, 2011 (1) 86,067$ 6,809$ 92,876$ 72,422$ 4,019$ 76,441$ 162,385$ 153,662$ 8,723$

December 31, 2010 (2) 86,860 10,364 97,224 74,035 6,351 80,386 421,674 402,234 19,440

(1) The period displayed is as at and for the six months ended June 30, 2011

(2) The period displayed is as at and for the year ended December 31, 2010



The Group provides management services to MVC whereby certain administrative and management functions are the responsibility of the Group. The management fee is calculated as 5% of gross revenues.

9)Loans and Borrowings

Credit Facilities Term Loans As of June 30, 2011, all term loans under the previous credit agreement have been repaid. The amended credit agreement does not contemplate any term loan arrangements. The total repayments made for term loans that reached maturity in 2011 were $67,471 Canadian and $29,880 US. On June 8, 2011 the Company made early repayments on the remaining balances of the term loans, which amounted to $71,654 Canadian and $43,120 US. The Company incurred penalties on early repayments of $6,916. Revolving Credit Facility On June 8, 2011 the Company entered into an amended and restated credit agreement for its revolving loans with its lenders which was extended to June 8, 2015. The Company has the ability to request an extension of the maturity date, which cannot be any later than six months prior to the maturity date of the unsecured notes. Maximum available credit under the Canadian and US revolving operating loans is $150,000, available in Canadian and USD (when drawn) and can be used for both Canadian and US operations, and $25,000, available in Canadian and USD (when drawn) and can only be used for US operations. The Company has the ability to request the expansion of the borrowing capacity to $275,000. The unused borrowing availability under the facility is $127,128 Canadian and $25,000 US. As at June 30, 2011 the Company issued $22,872 in letters of credit. The funds available under the revolving credit facility are reduced by any outstanding letters of credit. Interest on the loans is as follows: i)Canadian dollar loans at the adjusted prime rate per annum, defined as the greater of the floating annual prime

rate of interest announced from time to time by the lender and the 30-day CDOR rate plus 1% per annum, plus the applicable margin which ranges from 0.50% to 2.00% depending on the ratio of total funded debt to EBITDA;

ii)US base rate loans at the US base rate per annum plus the applicable margin which ranges from 0.50% to 2.00% depending on the ratio of total funded debt to EBITDA;

iii)US prime rate loans at US prime rate per annum plus the applicable margin which ranges from 0.50% to 2.00% depending on the ratio of total funded debt to EBITDA;

iv)LIBOR loans at LIBO rate per annum plus the applicable margin which ranges from 2.00% to 3.25% depending on the ratio of total funded debt to EBITDA; and

v)Bankers’ acceptance at a stamping fee equal to the applicable margin which ranges from 2.00% to 3.25% depending on the ratio of total funded debt to EBITDA.

The Company has provided a first charge over all assets under a General Security Agreement as security for the revolving operating loans. The Company has also provided a general assignment of book debts, a first charge over all real property assets, pledged all shares of its subsidiaries and an assignment of insurance. The credit facility requires the Company to meet certain covenants. As at June 30, 2011, the Company is in compliance with the covenants. As a result of modifying the credit facility, the remaining transaction costs of $317 on the previous credit agreement were derecognized and expensed in finance costs. The transaction costs related to the new revolving credit



facility of $636 are deferred as a prepaid asset and amortized over the term of the agreement. The transaction costs related to the revolving credit facility are recognized in finance costs on the consolidated statements of (loss) profit. Senior Unsecured Notes On June 8, 2011, the Company issued, through private placement in Canada and the US, $173,250 of 7.5% senior, unsecured notes (the “notes”). The notes were issued at 99% of their face value ($175,000) resulting in a discount of $1,750. Transaction costs incurred amounted to $4,929, resulting in total net proceeds of $168,321. The difference between the amount due on maturity and the initial liability will be amortized over the term of the notes using the effective interest rate method and recorded as finance costs. The notes bear interest at 7.5% per year, payable in equal installments semi-annually in arrears on June 15 and December 15 in each year, commencing on December 15, 2011. The notes mature on June 15, 2019. The notes are senior unsecured obligations and rank equally in right of payment with all other existing and future senior unsecured indebtedness and senior to any future subordinated indebtedness. The notes are effectively subordinated to all secured debt and other obligations to the extent of the value of the assets securing such debt or other obligations. At any time prior to June 15, 2014, the Company may redeem up to 35.0% of the principal amount of the outstanding notes, with the net cash proceeds of one or more qualified equity offerings at a redemption price equal to 107.5% of the principal amount, plus accrued and unpaid interest to the date of redemption, provided that: i)at least 65.0% of the aggregate principal amount of the notes issued remains outstanding immediately after

giving effect to any such redemption; and ii)the redemption occurs not more than 90 days after the date of the closing of any such qualified equity offering.

At any time prior to June 15, 2015, the Company may redeem the notes at a price equal to 100.0% of the principal amount plus the applicable premium as of, and accrued and unpaid interest to, the applicable redemption date. The applicable premium is defined as the greater of: 1)1.0% of the principal amount of the notes; and

2)the excess, if any, of

a)the present value at the redemption date of (i) the redemption price at June 15, 2015 (the redemption price

is set forth in the table below) plus (ii) all interest payments due on the notes to be redeemed up to June 15, 2015, computed using a discount rate equal to the Government of Canada rate at the redemption date plus 100 basis points; over

b) the principal amount of the notes to be redeemed.

The notes are redeemable at the option of the Company, in whole or in part, at any time on or after June 15, 2015, at the redemption prices (expressed as percentages of the principal amount of the notes to be redeemed) below: Year Redemption price2015 103.750%2016 101.875%2017 and thereafter 100.000% Upon the occurrence of a change in control, the note holders have the right to require that the Company purchase all or any portion of each holder’s notes equal to 101.0% of the principal amount of the notes to be purchased plus accrued interest to the date of purchase.



The early prepayment options included in the senior notes that are available to the Company along with the contingent option that provides for accelerated redemption by the holders in certain instances meet the definition of embedded derivatives and as such are bifurcated from the host contract. The embedded derivatives were initially measured at a fair value of $3,647 at the issuance of the senior notes and the residual amount of the proceeds was allocated to the debt. Changes in fair value of the embedded derivatives are recorded in finance costs on the consolidated statements of profit (loss). The fair value of the Company’s embedded derivatives was estimated using appropriate price modeling commonly used by market participants with inputs of observable market data including future interest rates, implied volatilities, and the credit risk of the Company or the counterparties. Within the fair value hierarchy, embedded derivatives are segregated into Level 2 as they are valued using observable inputs of similar instruments. As at June 30, 2011, the fair value of the embedded derivatives was $3,251. The table below summarizes the net carrying amount of the senior notes as at June 30, 2011: Face value of senior notes 175,000$ Change in fair value of early redemption features (396) Transaction costs and discount (net of amortization) (6,637) Net carrying amount of senior notes 167,967$

10)(Loss) Earnings per Share (a) Basic (Loss) Earnings per Share Three months ended June 30, 2011 June 30, 2010

Basic (Loss) profit (875)$ 8,834$ Weighted average number of common shares outstanding 45,844,682 45,612,730 Basic (loss) earnings per share (0.02)$ 0.19$ Six months ended June 30, 2011 June 30, 2010Basic (Loss) profit (5,390)$ 26,799$ Weighted average number of common shares outstanding 45,758,000 45,558,804 Basic (loss) earnings per share (0.12)$ 0.59$ (b)Diluted (Loss) Earnings per Share Three months ended June 30, 2011 June 30, 2010

Diluted (Loss) profit (875)$ 8,834$ Weighted average number of common shares outstanding 45,844,682 45,612,730 Dilutive effect of options 347,261 479,893 Diltuted weighted number of common shares outstanding 46,191,943 46,092,624 Diluted (loss) earnings per share (0.02)$ 0.19$



Six months ended June 30, 2011 June 30, 2010Diluted (Loss) profit (5,390)$ 26,799$ Weighted average number of common shares outstanding 45,758,000 45,558,804 Dilutive effect of options 452,277 475,280 Diltuted weighted number of common shares outstanding 46,210,277 46,034,084 Diluted (loss) earnings per share (0.12)$ 0.58$

11)Contingencies On January 29, 2010, a customer filed an action in the Court of Queen’s Bench of Alberta against a number of defendants, including Flint, alleging that the negligent provision of a pipe coating and insulation system, engineering services, design services and other work caused damage to the customer’s pipeline in Canada. The customer alleges that it has suffered damages in the amount of $85,000. While Flint was the construction contractor on the project and did construct the pipeline, it was constructed to a design specified and with materials supplied by others. The customer served the Statement of Claim against Flint in late January 2011, prior to the first anniversary of the filing of the claim. Although the claim was served in January, 2011, the Plaintiff advised that Flint was not required to file a Statement of Defense or to take any other steps at that time. The Plaintiff has since requested that a Statement of Defense be prepared and filed in August 2011. Flint has retained counsel and a Statement of Defense is being prepared. Based on management’s current understanding of the facts of this claim, management believes it is unlikely that a payment will be made on this claim, therefore no provision for losses has been reflected in the consolidated financial statements of the Company for this matter. The Company is also involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

12)Explanation of Transition to IFRS The accounting policies set out in note 3 of the March 31, 2011 condensed consolidated interim financial statements have been applied in preparing the financial statements for the three and six months ended June 30, 2011, and the comparative information presented in these financial statements for the three and six months ended June 30, 2010. In preparing its opening IFRS statement of financial position, the Group has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. An explanation of how the transition from previous GAAP to IFRSs has affected the Group’s financial performance and cash flows is set out in the following tables and the notes that accompany the tables. Material Adjustments to the Statement of Cash Flows for 2010 In addition to the changes required to adjust for the accounting policy differences described in the following notes, interest paid and income taxes paid have been moved into the body of the consolidated statement of cash flows as part of operating activities, whereas they were previously disclosed as supplementary information. Also, the Group has elected to use the equity method to account for jointly controlled entities using the equity method, whereas they were previously accounted for using proportionate consolidation under previous GAAP. There are no other material differences between the statement of cash flows presented under IFRS and the statement of cash flows presented under previous GAAP.



Statement of Financial Position The following is a reconciliation of the Group’s balance sheet reported in accordance with previous GAAP to its statement of financial position in accordance with IFRS for the period ended June 30, 2010:

Note June 30, 2010 Joint Ventures Other June 30, 2010Previous GAAP Note c IFRS

ASSETSCurrent assets:

Cash and cash equivalents 155,101$ (120)$ -$ 154,981$ Trade and other receivables 338,085 (75,445) - 262,640 Inventories 52,639 (224) - 52,415 Prepaid expenses and deposits 13,059 (947) - 12,112 Current tax assets 24,810 - - 24,810 Deferred tax assets e 10,440 - (10,440) -

594,134 (76,736) (10,440) 506,958 Non-current assets:Long-term investment g 2,129 - - 2,129 Property, plant and equipment a,b 365,691 (12,499) 22,678 375,870 Intangible assets 9,017 (1,781) - 7,236 Investment in equity accounted investees - 15,210 - 15,210 Other long-term assets 988 4,112 - 5,100 Deferred tax assets e 25,260 (122) 9,003 34,141 Goodwill 367 - - 367 Total assets 997,586$ (71,816)$ 21,241$ 947,011$

LIABILITIES AND EQUITYCurrent liabilities:

Trade and other payables 160,203$ (53,665)$ -$ 106,538$ Billings in excess of revenue 3,823 (414) - 3,409 Current tax liabilities 4,539 (847) - 3,692

Deferred tax liabilities e 5,231 - (5,231) - Current portion of finance leases b 3,416 (105) 40,041 43,352

Current portion of loans and borrowings 116,907 (13,752) - 103,155 294,119 (68,783) 34,810 260,146

Non-current liabilities: Derivative financial instruments 848 - - 848 Finance leases b 1,378 (35) 27,400 28,743 Loans and borrowings 119,037 (1,633) - 117,404 Other liabilities d 3,328 (975) (509) 1,844 Deferred tax liabilities e 38,807 (390) (7,230) 31,187

457,517 (71,816) 54,471 440,172

Equity:Accumulated other comprehensive loss (11,180) - 12,068 888 Deficit f (26,228) - (45,758) (71,986)

(37,408) - (33,690) (71,098)

Share capital 553,843 - - 553,843 Contributed surplus d 23,634 - 460 24,094 Equity attributable to owners of the Company 540,069 - (33,230) 506,839

Total liabilities and equity 997,586$ (71,816)$ 21,241$ 947,011$

IFRS Adjustments



Statement of Profit The following is a reconciliation of the Group’s profit reported in accordance with previous GAAP to its profit in accordance with IFRS for the three and six months ended June 30, 2010:

Three months ended Three months ended

June 30, 2010 Joint Ventures Other Presentation (1) June 30, 2010Note Previous GAAP Note c IFRS

Revenue 459,171$ (119,348)$ -$ -$ 339,823$ Direct costs b 394,486 (109,681) (7,346) (277,459) - Cost of sales and other services - - - 294,791 294,791

64,685 (9,667) 7,346 (17,332) 45,032

General and administrative expense 32,705 (446) - 2,586 34,845 Depreciation on property, plant and equipment a,b 13,356 (264) 5,069 (18,161) - Amortization on intangible assets 525 (121) - (404) - Share based compensation expense d 1,203 - (113) (1,090) - Loss on disposal of property, plant, and equipment a 556 15 (308) (263) - Finance costs b 3,814 (103) 1,188 - 4,899 Finance income (168) - - - (168) Share of profit of equity accounted investees (net of taxes) c - (6,037) - - (6,037) Profit before income taxes 12,694 (2,711) 1,510 - 11,493

Income taxes:Current tax expense (recovery) 819 (2,505) - - (1,686) Deferred tax expense e 3,644 (206) 907 - 4,345

4,463 (2,711) 907 - 2,659

Profit 8,231$ -$ 603$ -$ 8,834$

IFRS Adjustments

Six months ended Six months ended

June 30, 2010 Joint Ventures Other Presentation (1) June 30, 2010Previous GAAP Note c IFRS

Revenue 980,541$ (217,513)$ -$ -$ 763,028$ Direct costs b 835,726 (201,354) (14,302) (620,070) - Cost of sales and other services - - - 655,393 655,393

144,815 (16,159) 14,302 (35,323) 107,635

General and administrative expense 69,003 (943) - 5,567 73,627 Depreciation on property, plant and equipment a,b 27,624 (481) 10,156 (37,299) - Amortization on intangible assets 1,012 (243) - (769) - Share based compensation expense d 3,002 - (255) (2,747) - Loss on disposal of property, plant, and equipment a 587 17 (529) (75) - Finance costs b 7,205 (219) 2,491 - 9,477 Finance income (328) - - - (328) Share of profit of equity accounted investees (net of taxes) c - (9,938) - - (9,938) Profit before income taxes 36,710 (4,352) 2,439 - 34,797

Income taxes:Current tax expense 10,142 (4,179) - - 5,963 Deferred tax expense e 671 (173) 1,537 - 2,035

10,813 (4,352) 1,537 - 7,998

Profit 25,897$ -$ 902$ -$ 26,799$

IFRS Adjustments

(1) The previous income statement captions under previous GAAP known as direct costs and loss (gain) on disposal of property, plant, and equipment are now grouped into a new category called “Cost of sales and other services.” Share based compensation expense and amortization on intangible assets are now included in administrative expenses. Depreciation on property, plant and equipment is allocated to cost of sales and other services and administrative expenses.



Statement of Changes in Equity The following is a reconciliation of the Group’s equity reported in accordance with previous GAAP to its equity in accordance with IFRS as at June 30, 2010:

Note

Accumulated Other

Comprehensive Gain (Loss)

CapitalStock


As reported under previous GAAP - June 30, 2010 (11,180)$ 553,843$ 23,634$ (26,228)$ 540,069$ Adjustments: Transition to IFRS a - e 12,106 - 545 (46,660) (34,009) Increase in profit f - - - 902 902 Employee stock option expense d - - (85) - (85) Translation impact from IFRS adjustments (38) - - - (38) As reported under IFRS - June 30, 2010 888$ 553,843$ 24,094$ (71,986)$ 506,839$ Statement of Comprehensive Income

The following is a reconciliation of the Group’s comprehensive income reported in accordance with previous GAAP to its comprehensive income in accordance with IFRS for the three and six months ended June 30, 2010:

Three months ended Three months ended

June 30, 2010 IFRS Adjustments June 30, 2010Previous GAAP Other IFRS

Profit 8,231$ 603$ 8,834$

Other comprehensive gainForeign currency translation differences for foreign operations 3,172 (52) 3,120 Other comprehensive gain 3,172 (52) 3,120

Comprehensive earnings 11,403$ 551$ 11,954$

Six months ended Six months ended

June 30, 2010 IFRS Adjustments June 30, 2010Previous GAAP Other IFRS

Profit 25,897$ 902$ 26,799$

Other comprehensive gainForeign currency translation differences for foreign operations 926 (38) 888 Other comprehensive gain 926 (38) 888

Comprehensive earnings 26,823$ 864$ 27,687$



a) Property, Plant and Equipment

i) Impairment

In accordance with IFRSs, for purposes of assessing impairment of property, plant and equipment, management has identified cash-generating units (CGUs) based on the smallest group of assets that are capable of generating largely independent cash inflows. Under previous GAAP, property, plant and equipment was allocated to asset groups defined as the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In addition, the recoverable amount for impairment analysis is based on discounted cash flows under IFRSs, unlike previous GAAP, where the recoverable amount was assessed on an undiscounted basis. Under IFRSs, management determined that the carrying value of property, plant and equipment in the Oilfield Transportation CGU, within the Oilfield Services reporting segment, was in excess of its associated recoverable amount. The recoverable amount of this CGU was estimated based on fair value less costs to sell as this was determined to be higher than the value in use calculations. Fair value less costs to sell was determined by using a discounted cash flow approach that incorporated marketplace participant assumptions.

ii) Deemed Cost Exemption

The Group has applied the fair value as deemed cost exemption with respect to certain equipment contained within its Global Poly and Oilfield Transportation CGU’s, within the Production Services and Oilfield Services segments, respectively.

iii) Componentization

Under IFRS, when parts of an item of property, plant and equipment had different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. This has resulted in a more detailed approach to determining the useful lives for certain asset components under IFRS than was used under previous GAAP.

The impact of the IFRS measurement differences related to property, plant and equipment are as follows: Consolidated statement of financial position:

Note June 30, 2010

Decrease in property, plant and equipment a (i) - (iii) (41,774) Related tax effect 12,000 Increase in deficit (29,774)$ Consolidated statement of profit:

Six months ended Three months ended

June 30, 2010 June 30, 2010

Decrease in depreciation, before taxes (2,135) (951) Decrease in loss on disposal of property, plant and equipment, before taxes 529$ 308$



b) Leases

Under previous GAAP, certain equipment leases were classified as operating leases. Unlike previous GAAP, the qualitative criteria included in certain indicators generally are given greater weighting and there are more indicators to be considered. Under IFRS, the equipment is classified as a finance lease if substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred from the lessor to the lessee after consideration of all indicators. The impact from the change is summarized as follows: Consolidated statement of financial position:

June 30, 2010

Increase in property, plant and equipment $ 64,452 Increase in current portion of finance lease obligations (40,041)Increase in finance lease obligations (27,400)Pre-tax adjustment (2,989)Related tax effect 879 Increase in deficit $ (2,110)


June 30, 2010 June 30, 2010

Decrease in lease expense (14,302)$ (7,346)$ Increase in depreciation 12,291 6,020 Increase in finance costs 2,491 1,188 Adjustment before taxes 480$ (138)$

c) Investment in Joint Venture Entities

The Group is involved in the following jointly controlled entities:

i) 50% interest in Flint Transfield Services Ltd. (“FT Services”), a joint venture with Transfield Services Limited (Canada) a subsidiary of a publicly traded Australian Group. The joint venture provides operations, maintenance and asset management and project management services to the North American energy sector.

ii) 49% interest in Mackenzie Valley Construction Ltd. (“MVC”), a joint venture with Gwich’in Development

Corporation. The joint venture provides construction, oil and gas production and maintenance services in the Northwest Territories area.

iii) 33⅓% interest in S.R.P. North Ventures Ltd. (“SRP”). This joint venture provides a variety of logistical

oilfield services in the Norman Wells, Northwest Territories area. The Group has elected to use the equity method to recognize interests in joint ventures. Previous GAAP required that the Group proportionately consolidate its interests in joint ventures. The impact of the transition from proportionate consolidation to equity method for the Group’s joint ventures does not impact the Group’s net assets and consequently is presented as a reclassification difference.



The effects of the adoption of the equity method are as follows: Consolidated statement of financial position:

June 30, 2010

Decrease in Group assets $ 87,026 Decrease in Group liabilities (71,816)Increase in investment in equity accounted investees $ 15,210 Consolidated statement of profit:


June 30, 2010 June 30, 2010

Increase in share of profit of equity accounted investees (net of taxes) 9,938$ 6,037$

d) Share Based Compensation

Under IFRS, the Group accrues the cost of share based payments over the vesting period using the graded method of amortization with each installment accounted for as a separate arrangement. Under previous GAAP, the Group elected to treat the share based payments as a pool and determine fair value using an average life of the instruments, provided that compensation was recognized on a straight-line basis, subject to at least the value of the vested portion of the award being recognized at each reporting date. The impact from the change is summarized as follows: Consolidated statement of financial position:

June 30, 2010

Decrease in other liabilities $ 509 Increase in contributed surplus 460 Decrease (increase) in deficit $ 49 Consolidated statement of profit:


June 30, 2010 June 30, 2010

Decrease in share based compensation expense, before taxes (255)$ (113)$

e) Deferred Taxes

The above changes increased (decreased) the net deferred tax liability as follows based on an average tax rate of 27.8%.



Consolidated statement of financial position:

Note June 30, 2010

Property, plant and equipment a $ (12,000)

Leases b 879

Share based payments d 97 (11,024)

Joint ventures (268)Decrease in net deferred tax liability $ (11,292) Consolidated statement of profit:


June 30, 2010 June 30, 2010Income taxes:

Deferred tax 1,537 907 Joint ventures (173) (206)

Increase in deficit 1,364$ 701$ Under IFRSs, all deferred tax is classified as non-current, irrespective of the classification of the underlying assets or liabilities to which they relate, or the expected reversal of the temporary difference. The reclassification of all items to long-term also impacts the netting of deferred tax assets and liabilities that arise in each of the Group’s legal entities.

f) Deficit

The impact arising from the above changes (increased) decreased deficit as follows:

Note June 30, 2010

Property, plant and equipment a $ (41,774)

Leases b (2,989)

Joint venture deferred tax impact net of equity pick up c (268)

Share based payments d 49

Cumulative translation adjustments (12,068)

Deferred taxes e 11,292 Increase in deficit $ (45,758)

g) Financial Instruments – Long-term Investment

IAS 39 requires that the Company measure at fair value its investments in equity instruments that do not have a quoted market price in an active market are classified as available for sale. Under previous GAAP, this investment was classified as available for sale and measured at cost. Since cost under previous GAAP closely approximates fair value, there are no measurement differences between IFRS and previous GAAP.

MANAGEMENT’S DISCUSSION AND ANALYSIS For the Six Months ended June 30, 2011 (in millions of Canadian dollars except share data and per share amounts, unless otherwise stated)


Directors Stuart O’Connor Chairman of the Board Flint Energy Services Ltd. President Timber Ridge Capital Ltd. Alberta, Canada W. J. (Bill) Lingard President and Chief Executive Officer Flint Energy Services Ltd. Alberta, Canada John Bates President Flint Resources Company, LLC Oklahoma, USA T. D. (Terry) Freeman Managing Director Northern Plains Capital Edmonton, Alberta C. Douglas Annable President CD Consulting Inc. Former President Energy & Mining Divison AMEC Americas Ltd. Alberta, Canada Philip C. Lachambre President PCML Consulting Inc. Former Executive Vice President and Chief Financial Officer Syncrude Canada Ltd. Alberta, Canada Roger Thomas Chairman Maxxam Analytics International Corporation Former Executive Vice President, North America Nexen Inc. Alberta, Canada Ian Reid Vice Chair The Churchill Corporation Former President Finning (Canada) Alberta, Canada

Executive Officers W. J. (Bill) Lingard President and Chief Executive Officer Paul M. Boechler Executive Vice President and Chief Financial Officer Wayne Shaw President Operations Keith Lambert Senior Vice President, Oilfield Services North America Bryce Satter President, Flint Energy Services Inc. (U.S.A.) Glen Greenshields Senior Vice President, Production Services Neil Wotton Senior Vice President, Facility Infrastructure Steve Russom Senior Vice President, Process Equipment Ray Sandhu Senior Vice President, Finance and IT Brad McFarlane Vice President Environment Health & Safety Joel Jarding Vice President, Business Development Sean Fitzgerald Vice President, Human Resources

Bankers Bank of Montreal Auditors KPMG LLP Legal Counsel Bennett Jones LLP Transfer Agent and Registrar Computershare Trust Company of Canada 600, 530–8th Ave. S.W. Calgary, Alberta T2P 3S8 Tel: 1-888-267-6555 Email: caregistryinfo@ computershare.com www.computershare.com Stock Exchange Listing Toronto Stock Exchange (TSX) Common Shares – FES

Corporate Head Office 700, 300–5th Ave. S.W. Calgary, Alberta, Canada T2P 3C4 Tel: 403-218-7100 Toll Free: 1-877-215-5499 Fax: 403-215-5445 www.flintenergy.com

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