Mr. Brad Fedora reports

CANYON SERVICES GROUP INC. REPORTS RECORD FOURTH QUARTER, 2015 CAPITAL EXPENDITURE UPDATE AND MAINTAINS DIVIDEND

Canyon Services Group Inc. has released its fourth quarter 2014 results. The following results should be read in conjunction with the management's discussion and analysis, the audited consolidated financial statements, and notes of Canyon Services Group for the year ended Dec. 31, 2014, and should also be read in conjunction with the audited consolidated financial statements and annual information form for the year ended Dec. 31, 2013, which are available on SEDAR.

The current quarter includes the results of Canyon's pressure-pumping business as well as the results of Fraction Energy Services Ltd., a leading provider of fracturing fluid management, including water sourcing, transfer, wellsite storage, fluid heating, flowback transfer and produced water storage services, which was acquired by Canyon, effective July 1, 2014.

Highlights

The operating and financial highlights for the three and 12 months ended Dec. 31, 2014, are summarized as follows:

• Fourth quarter 2014 was very active for Canyon, with consolidated revenues increasing by 81 per cent to $188.3-million compared with $104.2-million in Q4 2013. For the year ended Dec. 31, 2014, consolidated revenues almost doubled to $591.0-million, an increase of 97 per cent over the $299.6-million recorded in the 2013 year.
• As at Dec. 31, 2014, Canyon had available bank credit facilities combined with positive working capital totalling $92-million. As a result, Canyon remains in a very strong financial position and is well positioned to withstand the dramatically reduced industry activity levels expected in 2015 and to finance potential attractive investment opportunities.
• The increased activity and the inclusion of Fraction resulted in a fourfold increase in consolidated earnings before interest, taxes, depreciation and amortization before share-based payments to $45.6-million in the current quarter from $11.0-million in Q4 2013. Consolidated income and comprehensive income increased to $22.3-million in Q4 2014 from $400,000 in Q4 2013. For the year ended Dec. 31, 2014, consolidated EBITDA before share-based payments increased to $121.5-million from $32.5-million in 2013, while consolidated income and comprehensive income significantly increased to $49.1-million from a loss and comprehensive loss of $4.4-million for the comparable 2013 period.
• Effective July 1, 2014, Canyon acquired Fraction, a leading provider of water and fracturing fluid logistics, containment, transfer, and storage for the oil and gas industry in northwest Alberta and northeast British Columbia. In Q4 2014, Fraction contributed $12.9-million to consolidated revenue and $3.3-million to consolidated EBITDA before share-based payments expense. Water access restrictions, enacted in the third quarter but carrying on into the fourth quarter, impacted fourth quarter results for Fraction. These restrictions were lifted late in the fourth quarter, resulting in increased water transfer and storage tank utilization in 2015 to date.
• In 2014, Canyon added 30,000 hydraulic horsepower (HHP) to its equipment fleet, including 20,000 HHP purchased from a competitor in March and 10,000 HHP of newly constructed equipment added in Q4 2014. These additions brought Canyon's pressure-pumping equipment capacity to 255,500 HHP as at Dec. 31, 2014.
• Canyon's previously announced 2015 capital program totalling $63-million has been significantly reduced in response to anticipated lower industry activity levels in 2015. Canyon's 2015 capital program is now estimated at approximately $12-million, mostly for maintenance capital, which combined with a carryover of about $8-million to complete the 2014 program results in total capital expenditures of approximately $20-million for 2015.
• On Dec. 18, 2014, Canyon declared a quarterly dividend of 15 cents per common share, or $10.3-million, which was paid to shareholders on Jan. 26, 2015.

Industry commentary and 2015 outlook

To date in 2015, overall Canadian oil field industry activity levels have rapidly declined in response to the continuing dramatic drop in oil and natural gas prices since the summer of 2014. As the company's customers adjust to lower commodity prices, they have reduced or deferred drilling and completions activities, and have further high graded their projects. The deterioration of oil and natural gas prices over the last eight months has significantly altered industry and Canyon's expectations of activity levels and job pricing for 2015. Leading indicators such as drilling rig utilization in the WCSB (Western Canadian sedimentary basin) are down about 33 per cent over the first half of first quarter 2015 compared with the same period in Q1 2014. As expected, declining activity levels lead to pricing pressure and this is already evident in Q1 2015, with the pricing gains achieved throughout 2014 already eroding margins. To soften the impact on 2015 operating margins from lower job pricing, Canyon continues to implement measures to reduce its operating costs. The company's suppliers have also been very co-operative and have been lowering some cost of services, including proppants, diesel, nitrogen and third party trucking costs. Although the company has very low debt levels and an industry-leading cost structure, it is not immune to what will likely be the worst year-over-year drilling and completions activity reduction in decades. Canyon will take a defensive stance and will implement cost saving initiatives such as reducing compensation levels for staff, management and the board of directors, to reduce the negative impact reduced pricing and activity levels are expected to have on operating margins and cash flow. The company believes that Canyon has never been better positioned to not only navigate through this downturn, but to also grow its market share. The key to a successful emergence from this downturn will be keeping the impact of cost saving initiatives on staff to the minimum so that the company's valued employees are able to stay focused on adding value for customers and shareholders.

Despite sharply declining oil field activity levels and pricing pressure, Canyon has actually remained relatively active in both pressure-pumping and fluid management divisions in Q1 2015. These relationships will help to reduce margin pressure by increasing efficiencies in pad-based, 24-hour work programs resulting in improved value for customers. With the recent acquisition of the fluid management business, Canyon is able to bundle fracturing and water services for the customer thereby avoiding well completion delays. To date in 2015, the fluid management business has had a strong start to the year. In addition, the increased demand for 24-hour operations by the company's customers presents the opportunity for it to improve operating cost-efficiency. Canyon expects to remain active for the remainder of Q1 2015 as it is essentially fully booked until breakup 2015.

Liquefied natural gas-driven activity levels and timing remain a big question in this industry. Although Canada is still several years from seeing the first LNG exports, visibility has sharpened, overall risks have been marginalized and upstream momentum has been building. The federal government's recent announcement to accelerate the capital cost allowance for certain LNG-based expenditures combined with British Columbia's announcement detailing the proposed LNG tax structure have been viewed favourably by the energy industry. Numerous projects have been proposed, representing approximately 15 billion to 20 billion cubic feet per day in combined export capacity. Project approvals were granted in 2013, while site preparation and front-end engineering were initiated for some projects. The company continues to anticipate a positive final investment decision announcement for a West Coast of British Columbia project in 2015. The timing of meaningful ramp-up in activity remains uncertain.

As a result of a strong balance sheet and lean cost structure, Canyon's strategy remains essentially unchanged. The company's goal is to build a Canadian service provider that can succeed and grow over the long term and provide superior return on invested capital to investors by reducing finding and development costs for customers. In the short term, with a strong balance sheet and prudent fiscal management, the company can endure the approaching period of reduced oil field services activity levels brought on by the recent commodity price degradation without having to make significant adjustments to how it implements its strategy.

During this difficult operating period for the industry, a strong financial position also allows the company to seek out attractive investment opportunities. Canyon will actively screen, evaluate and pursue attractive oil field acquisition opportunities that will add both long-term value on a per-share basis and enhance relative competitive position with customers. The plan is to continue to grow Canyon's operating assets over the next five years, primarily to service the anticipated demand for pressure-pumping services in Western Canada. The company is actively working to cement relationships with top-tier multinational customers and continuing to grow in activity and reputation in the region's premier unconventional plays. Growth in market share in northwest Alberta and northeast British Columbia will be complemented by pursuit of attractive opportunities in the Cardium, Bakken and Lower Shaunavon plays. The company continues to believe that Western Canada is still a highly attractive pressure-pumping market as it continues to hold significant growth potential and offers superior supply-demand fundamentals to many other international markets.

Canyon will continue its pursuit to continue building a high-quality, growing service provider with a robust organization that can accommodate much higher revenue. This creates the foundation for rapidly growing revenue, operating margins and EBITDA on a per-share basis.

                                   OVERVIEW OF FOURTH QUARTER AND YEAR ENDED 2014
                   (In thousands, except per share, job amounts and hydraulic pumping capacity)

                                                         Three months ended Dec. 31,          Year ended Dec. 31,
                                                                 2014          2013           2014          2013

Consolidated revenues                                        $188,265      $104,227       $591,022      $299,614
Profit (loss) and comprehensive income (loss)                 $22,280          $377        $49,094       $(4,375)
Per share -- basic                                              $0.32         $0.01          $0.75        $(0.07)
Per share -- diluted                                            $0.32         $0.01          $0.74        $(0.07)
EBITDA before share-based payments                            $45,576       $11,026       $121,478       $32,496
Funds from operations                                         $38,084       $17,574       $103,819       $38,716
Adjusted profit (loss) and comprehensive income (loss)        $24,870        $1,690        $56,120          $(45)
Adjusted per share -- basic                                     $0.36         $0.03          $0.85        $(0.00)
Adjusted per share -- diluted                                   $0.36         $0.03          $0.84        $(0.00)
Total jobs completed                                              818           654          2,942         1,828
Consolidated average revenue per job                         $215,784      $159,835       $192,004      $164,529
Average fracturing revenue per job                           $318,705      $225,675       $269,894      $232,460
Hydraulic pumping capacity
Average HHP                                                   245,500       225,500        240,500       225,500
Exit HHP                                                      255,500       225,500        255,500       225,500
Capital expenditures                                          $36,830        $7,442       $112,677       $14,840

The current quarter and the 12 months ended Dec. 31, 2014, include the results of Canyon's pressure-pumping business. The results of Fraction Energy Services are included for the second half of 2014. Fraction was acquired by Canyon effective July 1, 2014, and is a leading provider of fracturing fluid management, including water sourcing, transfer, wellsite storage, fluid heating, flowback transfer and produced water storage services.

Continuing on from the record previous quarter, Q4 2014 was very busy for Canyon, with consolidated revenues increasing by 81 per cent to $188.3-million compared with $104.2-million in Q4 2013. For the year ended Dec. 31, 2014, consolidated revenues almost doubled to $591.0-million, an increase of 97 per cent over the $299.6-million recorded in the 2013 year. The company did experience an 8-per-cent sequential decline in consolidated revenues in Q4 2014 over third quarter 2014. This was a result of redeploying equipment from a major customer to other customers, non-typical operational and weather delays, as well as the holiday break.

Consolidated EBITDA before share-based payments increased over 300 per cent to $45.6-million in Q4 2014 from $11.0-million in Q4 2013. For the year ended Dec. 31, 2014, consolidated EBITDA before share-based payments expense increased almost 300 per cent to $121.5-million from $32.5-million in 2013.

The increased activity and revenues in 2014 combined with Canyon's considerable operating leverage in its pressure-pumping business and the inclusion of Fraction resulted in a significant improvement in profitability, with consolidated income and comprehensive income increasing to $22.3-million in Q4 2014 compared with $400,000 in Q4 2013. Adjusted consolidated income and comprehensive income for Q4 2014 increased to $24.9-million from $1.7-million in Q4 2013. For the year ended Dec. 31, 2014, consolidated income and comprehensive income increased significantly to $49.1-million from a consolidated loss and comprehensive loss of $4.4-million for 2013. Adjusted consolidated income and comprehensive income increased to $56.1-million from a consolidated loss and comprehensive loss of $45,000 in 2013.

Pressure-pumping services

The fourth quarter was very strong for Canyon's pressure-pumping business, with jobs completed and revenues earned increasing by 25 per cent and 68 per cent, respectively, compared with Q4 2013. Jobs completed did not increase proportionately with the percentage revenue increase due to the growing trend for larger job sizes as discussed below. Pressure-pumping revenues in the current quarter totalled $175.4-million from 818 jobs completed compared with $104.2-million from 654 jobs in the comparable quarter of 2013. For the year ended Dec. 31, 2014, pressure-pumping revenues increased by 88 per cent to $561.9-million compared with $299.6-million in 2013, while jobs completed increased by 61 per cent to 2,942 from 1,828 over the same year. In 2014, Canyon added 30,000 hydraulic horsepower to its equipment fleet including 20,000 HHP purchased from a competitor in March and 10,000 HHP of newly constructed pumps delivered in Q4 2014. These additions bring Canyon's equipment capacity to 255,500 HHP as at Dec. 31, 2014.

Canyon's equipment fleet was essentially fully utilized throughout most of 2014 due to higher industry activity in the year as well as the company's continuing sales initiatives which have resulted in increased market share with oil and gas exploration companies (E&P companies") operating in the deep basin. Market share continues to expand in southeast Saskatchewan and southwest Manitoba. In 2014, drilling activity across the Western Canadian sedimentary basin (WCSB) increased by about 9 per cent to an industry utilization rate of 46 per cent from 42 per cent in 2013. Industry activity remained strong throughout the second half of 2014 despite the significant decline in commodity prices since July. Customer activity levels were buoyed by strong commodity prices in the first half of the year, improved access to capital markets to finance capital programs, as well as continuing LNG-related reserve delineation drilling in northeast British Columbia. Also contributing to the higher pressure-pumping activity in the year were changing well designs resulting in increased fracturing intensity on a per-well basis in the form of more fractures per wellbore and/or larger fracture designs. One of the main predictors of service intensity for pressure pumping is the average total length in metres per well. The industry experienced an increase of 11 per cent in the total metres per well drilled in 2014 over 2013. In addition, increased proppant usage per stage has increased dramatically in 2014 with fourth quarter total proppant volumes pumped by Canyon increasing by 91 per cent compared with Q4 2013 and by 111 per cent for the year ended Dec. 31, 2014, compared with 2013. The growing trend by customers to use more proppant per stage and in particular more expensive Ottawa white sand rather than domestic sand has also contributed to larger job sizes reflected in the increased revenue per job. Therefore, Canyon's average fracturing revenue per job increased by 41 per cent to $318,705 in Q4 2014 from $225,675 in Q4 2013 mostly due to the larger job sizes. Over all, job pricing and cost recovery had only a modest impact on revenue per job and revenues in Q4 2014 as pricing improved by approximately 10 per cent from the beginning of the year.

Pressure-pumping cash flow and profitability remain highly levered to changes in revenue due to the fixed-cost nature of the business. The increased activity and revenues in the year led to significantly improved margins in Q4 2014 compared with the comparable quarter of 2013. In Q4 2014, EBITDA before share-based payments expense from pressure pumping was $44.0-million, or 25 per cent of revenues, compared with $12.8-million, or 12 per cent of revenues, in the comparable 2013 quarter. The increased activity has also significantly increased EBITDA before share-based payments expense from pressure pumping to $119.0-million, or 21 per cent of revenues, for the year ended Dec. 31, 2014, from $38.4-million, or 13 per cent of revenues, for 2013.

In 2014, Canyon increased its pressure-pumping field staff by approximately 20 per cent from the beginning of the year. In addition to hiring new staff, the company continued to increase its training and staff development, and upgraded business systems throughout the organization until late in 2014. Unfortunately, with the significant decline in commodity prices and the expected pullback in E&P companies' capital programs in 2015, Canyon began implementing cost-cutting measures in Q4 2014 including a slowdown of hiring new staff.

Fluid management services

Fraction was acquired by Canyon effective July 1, 2014, and continues as a wholly owned and independent operating subsidiary. Fraction is a leading provider of fracturing fluid logistics, containment, transfer and storage for the oil and gas industry in northwest Alberta and northeast British Columbia. The acquisition of Fraction complements Canyon's current offering of services to customers.

For the three months ended Dec. 31, 2014, Fraction contributed $12.9-million in revenue and $3.3-million in EBITDA before share-based payments expense. For the six-month period, the division contributed $29.1-million in revenue and $9.5-million in EBITDA before share-based payments.

As previously reported, water access restrictions in the northern regions of the WCSB were imposed in the latter half of the third quarter and continued to impact water transfer and fluid logistics revenues during the fourth quarter. As a result, there were a limited number of long-distance water transfer projects in the region limiting Fraction's water transfer projects during the quarter to lease site fluid management. Storage tank rental revenues were also lower in Q4 2014 compared with the prior quarter due to lower activity by certain customers in response to the declining commodity prices as well as the deferral of a final investment decision by an LNG project sponsor.

The water access restrictions were lifted in December, 2014, allowing Fraction to gain larger fluid transfer and logistics projects late in Q4 2014 and has resulted in a strong start to Q1 2015. In addition, storage tank rental revenues have rebounded in Q1 2015 to date with higher utilization rates of the division's tank fleet. The division took delivery of its two superheater units, which were part of the 2014 capital program, in December, 2014. This has further enhanced Fraction's full-service water management solutions and helped contribute to a strong start to Q1 2015.

Capital expenditure budget update for 2015

On Nov. 6, 2014, in the company's third quarter press release and management's discussion and analysis, Canyon reported a forecast 2015 capital expenditure budget of approximately $63-million. This budget included both maintenance and growth capital for each of the pressure-pumping and fluid management service lines. Given the unexpected and significant decrease in oil and natural gas prices that has caused material cuts to customer drilling and completions budgets, Canyon has effectively suspended all growth capital expenditures. The revised 2015 capital expenditure budget will consist of approximately $12-million for maintenance capital and approximately $8-million for 2014 capital items that have experienced delays into the first half of 2015. Canyon expects that its revised capital budget totalling $20-million will be financed from operating cash flow and existing banking facilities.

Dividend

The board of directors continuously reviews the long-term capital structure of the company and its corresponding dividend policy each fiscal quarter. The board sets a dividend rate that it believes will be sustainable over the long term in the context of future cash flows and capital spending opportunities. The board has determined that the liquidity and financial capacity of the company allow it to maintain the quarterly dividend at the current rate of 15 cents per common share per quarter.

Quarterly consolidated statements of operations

Pressure-pumping services

Revenues

Improved industry activity in 2014 led to Canyon having a very busy second half to the year and resulted in jobs completed and revenues earned by the pressure-pumping division increasing by 25 per cent and 68 per cent, respectively, compared with Q4 2013. Jobs completed did not increase proportionately with the percentage revenue increase due to the growing trend for larger job sizes as previously discussed. Pressure-pumping revenues in the current quarter totalled $175,398 from 818 jobs completed compared with $104,227 from 654 jobs in the comparable quarter of 2013. In Q4 2014, Canyon added 10,000 HHP of newly constructed equipment bringing Canyon's equipment capacity to 255,500 HHP as at Dec. 31, 2014.

Over 90 per cent of Q4 2014 pressure-pumping revenues was provided by hydraulic fracturing services with average fracturing revenue per job increasing by 41 per cent to $318,705 from $225,675 in Q4 2013. The increase in average fracturing revenue per job is more a function of larger job sizes than pricing increases due to a huge increase in product consumption, particularly proppants. Fourth quarter total proppant volumes pumped by Canyon increased by 91 per cent compared with Q4 2013 and by 111 per cent for the year ended Dec. 31, 2014, compared with 2013. The growing trend by customers to use more proppant per stage and in particular more expensive Ottawa sand rather than domestic sand has also contributed to larger job sizes with resulting increased revenue per job. On the other hand, Q4 2014 pricing averaged about 10 per cent higher than at the beginning of the year and as a result only had a modest impact on revenue per job and revenues in the quarter.

Cost of services

Cost of services for the three months ended Dec. 31, 2014, totalled $137,997 (2013: $96,764), and includes materials, products, transportation and repair costs of $96,631 (2013: $64,992), employee benefits expense of $29,836 (2013: $22,743), and depreciation of property and equipment of $11,530 (2013: $9,029).

Materials, products, transportation and repair costs increased by 49 per cent to $96,631 in the current quarter from $64,992 in Q4 2013, due to the increased job count in the quarter and due to the increase in materials consumed per well, especially sand as previously discussed. The increase in employee benefits expense is mainly due to field staff additions to support the higher activity levels, increased variable pay as a result of the higher activity and inflation in labour rates. The increase in depreciation of property and equipment is due to additional depreciation pertaining to equipment introduced into service in late 2013 and in 2014, and accelerated depreciation relating to the replacement of a number of pump components.

Administrative expenses

Administrative expenses for the three months ended Dec. 31, 2014, totalled $5,888 compared with $4,671 in Q4 2013, and include employee benefits expense, share-based payments expense, amortization of intangibles, depreciation of buildings, and office equipment and other administrative expenses. Share-based payments expense represents the value assigned to the granting of options and incentive-based units under the company's share purchase option plan and stock-based compensation plan, respectively, using the Black-Scholes model. For Q4 2014, $390 (Q4 2013 -- $462) was charged to expenses and included in contributed surplus in respect of these two plans.

EBITDA before share-based payments

Pressure-pumping profitability remains highly levered to changes in revenue due to the fixed-cost nature of the business and as a result the aforementioned 25-per-cent increase in the job count and the 68-per-cent increase in revenues led to significantly improved margins in Q4 2014 compared with the comparable quarter of 2013. As a result, Q4 2014, EBITDA before share-based payments totalled $43,960 in the pressure-pumping segment, or 25 per cent of revenues, compared with $12,822, or 12 per cent of revenues, in Q4 2013.

Fluid management services

Revenues

The water management services business, acquired effective July 1, 2014, contributed $12,867 of revenues to Canyon in Q4 2014. This compares with revenues of $16,256 recorded in the prior quarter. As discussed above, water access restrictions in the northern regions of the WCSB were enacted in the latter half of the third quarter and continued to impact water transfer and fluid logistics revenues during the fourth quarter until December when the restrictions were lifted.

Cost of services

Cost of services for the three months ended Dec. 31, 2014, totalled $9,620, and includes materials, products, transportation and repair costs of $4,681, employee benefits expense of $3,274, and depreciation of property and equipment of $1,665.

Administrative expenses

Administrative expenses for the three months ended Dec. 31, 2014, totalled $3,094, and include employee benefits expense, depreciation of buildings and office equipment, and amortization of intangibles and other administrative expenses. Administrative expenses include $1,443 relating to the amortization of customer relationships and non-competition agreements pursuant to the acquisition of Fraction.

EBITDA before share-based payments

Q4 2014 EBITDA before share-based payments totalled $3,321 in the fluid management services division, or 26 per cent of revenues.

Corporate

Administrative expenses

Administrative expenses for the three months ended Dec. 31, 2014, totalled $2,341 compared with $2,572 in Q4 2013, and include employee benefits expense, share-based payments and other head office administrative expenses. The decrease in administrative expenses is mainly due to lower share-based payments expense.

Share-based payments expense represents the value assigned to the granting of options and incentive-based units under the company's share purchase option plan and stock-based compensation plan, respectively, using the Black-Scholes model. For Q4 2014, $636 (Q4 2013 -- $667) was charged to expenses and included in contributed surplus in respect of these two plans. In addition, obligations for payments under the company's deferred share unit plan are accrued as share-based payments expense over the vesting period. The accrued liability increases or decreases with fluctuations in the price of the company's common shares with a corresponding increase or decrease in the share-based payments expense. In Q4 2014, share-based payments expense was nil (2013: $109) for the company's deferred share unit plan to reflect changes in the price of the common shares of the company.

Other items -- quarterly consolidated statement of operations

Finance costs

Finance costs include interest on bank indebtedness and finance lease obligations and totalled $534 in Q4 2014 (2013: $192). The increase in finance costs is due to the increase in loans and borrowings used to partially finance the company's 2014 capital program.

Income tax expense

At the expected combined income tax rate of 25 per cent, the income before income tax for the three months ended Dec. 31, 2014, of $29,073 would have resulted in an income tax expense of $7,268, compared with the actual income tax expense of $6,793. The actual income tax expense was reduced by deductible expenses for income tax filing purposes exceeding those for financial accounting purposes.

EBITDA before share-based payments

In Q4 2014, Canyon's increased activity resulted in consolidated EBITDA before share-based payments of $45,576. The fourfold increase over the $11,026 recorded in the comparable 2013 quarter is due to the increase in activity and improved pricing as discussed above.

Income and comprehensive income and earnings per share

Income and comprehensive income increased significantly to $22,280 in Q4 2014 from $377 in Q4 2013, due to the increase in activity as previously discussed.

Basic and diluted earnings per share were 32 cents and 32 cents, respectively, for the three months ended Dec. 31, 2014, compared with basic and diluted earnings per share of one cent for the comparable 2013 quarter.

Year-to-date consolidated statements of operations

Pressure-pumping services

Revenues

Canyon's equipment fleet was essentially fully utilized throughout most of 2014 due to higher industry activity in the year as well as the company's continuing sales initiatives, which have resulted in market share growth with companies operating in the deep basin as well as market share expansion in southeast Saskatchewan and southwest Manitoba. Accordingly, for the year ended Dec. 31, 2014, pressure-pumping revenues increased by 88 per cent to $561.9-million compared with $299.6-million in 2013, while jobs completed increased by 61 per cent to 2,942 from 1,828 over the same years. Over 90 per cent of 2014 pressure-pumping revenues was provided by hydraulic fracturing services with average fracturing revenue per job increasing by 16 per cent to $269,894 from $232,460 in 2013. The increase in average fracturing revenue per job is more a function of larger job sizes than pricing increases due to an increase in product consumption by customers, particularly proppants. Proppants pumped by Canyon in 2014 increased by 111 per cent over the tonnages pumped in 2013. On the other hand, over the course of the year, 2014 pricing increased by about 10 per cent from the beginning of the year. In 2014, Canyon added 30,000 hydraulic horsepower to its equipment fleet including 20,000 HHP purchased from a competitor in March and 10,000 HHP of newly constructed equipment added in Q4 2014.

Cost of services

Cost of services for the 12 months ended Dec. 31, 2014, totalled $467,006 (2013: $279,805), and includes materials, products, transportation and repair costs of $318,155 (2013: $174,965), employee benefits expense of $107,433 (2013: $73,539), and depreciation of property and equipment of $41,418 (2013: $31,301).

Materials, products, transportation and repair costs increased by 82 per cent to $318,155 in the current period from $174,965 as the job count increased by 61 per cent in the current year compared with the 2013 year. The increase in materials, products, transportation and repair costs was greater than the percentage increase in the job count mainly due to the larger job sizes in 2014 characterized by higher quantities of materials consumed per well, especially sand, as previously discussed. The increase in employee benefits expense is mainly due to field staff additions to support the higher activity levels, increased variable pay as a result of the higher activity and inflation in labour rates. Canyon had 1,115 employees in its pressure-pumping business as at Dec. 31, 2014, compared with about 900 at the same time last year. The increase in depreciation of property and equipment is due to additional depreciation pertaining to equipment introduced into service in late 2013 and in 2014 and accelerated depreciation relating to the replacement of pump components.

Administrative expenses

Administrative expenses for the 12 months ended Dec. 31, 2014, totalled $21,417 (2013: $16,826), and include employee benefits expense, share-based payments expense, depreciation of buildings and office equipment, and amortization of intangibles and other administrative expenses. Employee benefits expense increased mainly due to staff additions and the implementation of a cost of living increase, effective Q4 2013.

Share-based payments expense represents the value assigned to the granting of options and incentive-based units under the company's share purchase option plan and stock-based compensation plan, respectively, using the Black-Scholes model. For the year ended Dec. 31, 2014, $2,175 (2013: $2,392) was charged to expenses and included in contributed surplus in respect of these two plans.

EBITDA before share-based payments

For the year ended Dec. 31, 2014, Canyon's increased activity resulted in EBITDA before share-based payments for pressure-pumping services of $118,989, or 21 per cent of revenues, compared with $38,409, or 13 per cent of revenues, for the comparable 2013 year.

Fluid management services

Revenues

The water management services business contributed $29,123 of revenues in 2014 over the period from acquisition of Fraction by Canyon on July 1, 2014, to Dec. 31, 2014. As discussed above, water access restrictions in the northern regions of the WCSB were enacted late in the third quarter which impacted water transfer and fluid logistics revenues during in the current quarter. Storage tank rental revenues were also lower in the current quarter compared with the prior quarter due to lower activity by certain customers in response to the declining commodity prices, as well as the deferral of a final investment decision by an LNG project sponsor.

Cost of services

Cost of services for the period ended Dec. 31, 2014, totalled $19,255, and includes materials, products, transportation and repair costs of $9,941, employee benefits expense of $6,335, and depreciation of property and equipment of $2,979.

Administrative expenses

Administrative expenses for the period ended Dec. 31, 2014, totalled $6,305, and include employee benefits expense, depreciation of buildings and office equipment, and amortization of intangibles and other administrative expenses. Amortization of intangibles totals $2,884, and includes amortization of customer relationships and non-competition agreements pursuant to the acquisition of Fraction by Canyon, effective July 1, 2014.

EBITDA before share-based payments

EBITDA in 2014 before share-based payments totalled $9,546 in the fluid management services division, or 33 per cent of revenues.

Corporate

Administrative expenses

Administrative expenses for the year ended Dec. 31, 2014, totalled $8,866 (2013: $7,711), and include employee benefits expense, share-based payments and other head office administrative expenses.

For the year ended Dec. 31, 2014, employee benefits expense increased due to the larger scale of Canyon's operations and due to transaction costs pertaining to the acquisition of Fraction. Share-based payments expense represents the value assigned to the granting of options and incentive-based units under the company's share purchase option plan and stock-based compensation plan, respectively, using the Black-Scholes model. For the year ended Dec. 31, 2014, $1,809 (2013 - $1,798) was charged to expenses and included in contributed surplus in respect of these two plans.

Other items -- year ended Dec. 31, 2014, statements of operations

Finance costs

Finance costs include interest on bank indebtedness and finance lease obligations which total $1,512 for the year ended Dec. 31, 2014 (2013: $658). The increase in finance costs is due to the increase in loans and borrowings used to partially finance the company's 2014 capital program.

Income tax expense

At the expected combined income tax rate of 25 per cent, the income before income tax for the year ended Dec. 31, 2014, of $66,230 would have resulted in an income tax expense of $16,558, compared with the actual income tax expense of $17,136. The actual income tax expense was increased by non-deductible expenses.

EBITDA before share-based payments

For the year ended Dec. 31, 2014, improved industry-wide conditions as previously discussed, resulted in an increase in consolidated EBITDA before share-based payments to $121,478 from $32,496 recorded in the comparable 2013 year.

Income (loss) and comprehensive income (loss) and earnings (loss) per share

Income and comprehensive income totalled $49,094 for the year ended Dec. 31, 2014, compared with loss and comprehensive loss of $4,375 in 2013. The significant improvement in income and comprehensive income was due to the increase in activity as previously discussed.

Basic and diluted earnings per share were 75 cents and 74 cents, respectively, for the year ended Dec. 31, 2014, compared with basic and diluted loss per share of seven cents in 2013.

We seek Safe Harbor.