Mr. Brad Fedora reports

CANYON SERVICES GROUP INC. REPORTS SECOND QUARTER 2015

Canyon Services Group Inc. has released its second quarter 2015 results. The following results should be read in conjunction with management's discussion and analysis, the audited consolidated financial statements, and notes of Canyon Services Group for the year ended Dec. 31, 2014, and the annual information form for the year ended Dec. 31, 2014, 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, well site 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 six months ended June 30, 2015, are summarized as follows:

• On July 21, 2015, Canyon entered into a new credit facility, replacing its previous credit facility, by entering into a new extendible revolving operating credit facility with a syndicate of financial institutions. Under the facility, the total committed facilities have been increased from $90-million to $100-million, and the accordion feature has been increased from $10-million to $50-million. The accordion feature is available upon request by Canyon, subject to review and approval by the lenders. The facility has a term of three years, extendible annually, and includes the removal of the debt to earnings before interest, taxes, depreciation and amortization covenant for a period of one year.
• Under the facility, Canyon now has available bank credit facilities of about $101-million, including the accordion feature (total of $150-million less $49-million drawn net of cash and cash equivalents as at June 30, 2015), allowing the company to actively pursue growth opportunities. Canyon maintains a strong balance sheet with a very low financed debt to earnings before interest, taxes, depreciation and amortization before share-based payments expense ratio of 0.53 to 1.00 as at June 30, 2015, significantly below the maximum of 3.00 to 1.00 permitted under Canyon's previous credit facility.
• For the six months ended June 30, 2015, consolidated revenue was $198.7-million, largely unchanged from the $198.4-million earned in the comparable 2014 period. The current period includes $24.0-million contributed by Fraction, acquired by Canyon July 1, 2014. Consolidated EBITDA before share-based expense decreased to $8.6-million for the six months ended June 30, 2015, from $18.2-million in the 2014 period due to industrywide reduced activity and decreased pricing.
• Second quarter 2015 consolidated revenues totalled $43.2-million, down from $60.3-million in second quarter 2014 due to industrywide reduced activity resulting from the significant decline in commodity prices since mid-2014, as well as an extended seasonal spring breakup. To mitigate the impact of reduced activity and decreased pricing, operating and input cost concessions have been realized resulting in consolidated EBITDA before share-based payments expense of negative $9.8-million in second quarter 2015 compared with negative $9.2-million in second quarter 2014.
• Canyon has been working diligently since late 2014 to reduce all operating and input costs in both the pressure-pumping and fluid management divisions. In addition, Canyon is making changes to permanently reorganize and transform certain business processes with the goal of moving away from the fixed-cost model for certain groups within the company to a variable pay model, in which expenses are more closely linked to revenue. In the third quarter, Canyon will introduce an hourly rate of pay for the transportation group, replacing the existing fixed-salary structure for this group.
• On June 24, 2015, Canyon declared a quarterly dividend of 7.5 cents per common share, or $5.2-million, which was paid to shareholders on July 24, 2015. This reflects the 50-per-cent reduction in the dividend announced on May 6, 2015. The board will continue to regularly review the dividend payout in the context of the market for Canyon's services.

                                  OVERVIEW OF SECOND QUARTER 2015
              ($000s except per share, job amounts and hydraulic pumping capacity)
 
                                                           Three months ended           Six months ended 
                                                                 June 30,                     June 30,
                                                        2015      2014      2013      2015     2014     2013

Consolidated revenues                                $43,159   $60,253   $27,431  $198,744 $198,448 $114,318
(Loss) and comprehensive (loss)                     $(21,857) $(15,263) $(17,186) $(22,939) $(3,413) $(8,659)
Per share, basic                                      $(0.32)   $(0.24)   $(0.28)   $(0.33)  $(0.05)  $(0.14)
Per share, diluted                                    $(0.32)   $(0.24)   $(0.28)   $(0.33)  $(0.05)  $(0.14)
EBITDA before share-based payments                   $(9,754)  $(9,186) $(13,134)   $8,581  $18,246   $7,230
Funds from (used in) operations                      $(4,504)  $(4,071) $(11,822)  $11,082  $19,795   $6,826
Adjusted (loss) and comprehensive (loss)            $(18,881) $(14,244) $(15,555) $(17,087) $(1,501) $(6,488)
Adjusted per share, basic                             $(0.27)   $(0.23)   $(0.25)   $(0.25)  $(0.02)  $(0.10)
Adjusted per share, diluted                           $(0.27)   $(0.23)   $(0.25)   $(0.25)  $(0.02)  $(0.10)
Total pressure-pumping jobs completed                    283       347       151       903    1,237      621
Consolidated pressure-pumping revenue per job       $131,585  $178,028  $181,979  $195,149 $161,333 $184,389
Average fracturing revenue per job                  $232,569  $275,423  $320,769  $255,162 $214,580 $261,204
Hydraulic pumping capacity
Average HHP                                          255,500   245,500   225,500   255,500  238,000  225,500
Exit HHP                                             255,500   245,500   225,500   255,500  245,500  225,500
Capital expenditures                                  $6,053   $18,589    $2,310   $23,671  $31,871   $5,811

The current three and six months ended June 30, 2015, include the results of Canyon's pressure-pumping business, as well as the results of Fraction Energy Services, which was acquired by Canyon, effective July 1, 2014. Fraction is a leading provider of fracturing fluid management, including water sourcing, transfer, well site storage, fluid heating, flowback transfer and produced water storage services.

In second quarter 2015, industry activity across the Western Canadian sedimentary basin was significantly lower due to continuing low commodity prices. Current oil and natural gas prices have declined dramatically by about 50 per cent and 40 per cent, respectively, from year-ago levels, causing reduced capital expenditures by the company's customers, resulting in lower completions activity. In pressure pumping, the lower industry activity led to rapidly deteriorating customer pricing levels commencing in January, 2015, and resulted in current pricing levels 25 per cent to 30 per cent lower than those reached in fourth quarter 2014. In fluid management, prices have declined for this range of services by 15 per cent to 30 per cent compared with fourth quarter 2014.

Once activity resumed in June following the extended spring breakup, Canyon was able to remain relatively busy with its core group of customers in both its pressure-pumping and fluid management divisions. In second quarter 2015, consolidated revenues decreased by 28 per cent to $43.2-million from $60.3-million in second quarter 2014, with the current quarter, including a revenue contribution of $6.6-million from fluid management. For the six months ended June 30, 2015, consolidated revenues were $198.7-million, including revenue of $24.0-million from fluid management, virtually unchanged from consolidated revenues of $198.4-million in the prior year.

In the current quarter, the impact of the reduced activity and of the lower customer pricing was mostly offset by reductions and efficiencies gained in operating and input costs and by a positive contribution from the fluid management division. As a result, second quarter 2015 consolidated earnings before interest, taxes, depreciation and amortization before share-based payments decreased by 6 per cent to negative $9.8-million from negative $9.2-million in the comparable 2014 quarter. For the six months ended June 30, 2015, consolidated EBITDA before share-based payments decreased to $8.6-million from $18.2-million in the comparable 2014 period as severe pricing degradation set in early in the year due to lower industrywide activity while cost-efficiencies and savings did not take effect until the second quarter.

Pressure-pumping services

In the first six months of 2015, drilling and completions activity levels are down approximately 50 per cent (source: Nickles Energy Group) due to the sharp reduction of oil and natural gas prices. Canyon has been able to increase its market share in the face of difficult industry activity and pricing levels and thereby maintain fairly flat revenue year over year even though prices have declined by 25 per cent to 30 per cent since late 2014.

In 2015, the lower overall WCSB activity and a late postbreakup start by Canyon's core customers resulted in an 18-per-cent decrease in second quarter 2015 pressure-pumping jobs to 283 from 347 jobs completed in second quarter 2014. Revenues decreased by 39 per cent to $36.6-million from $60.3-million in second quarter 2014. Average fracturing revenue per job decreased 16 per cent to $232,569 in second quarter 2015 from $275,423 in second quarter 2014 due primarily to lower pricing.

For the six months ended June 30, 2015, Canyon completed 903 jobs, a 27-per-cent decrease from 1,237 jobs completed in the comparable 2014 period, while revenues decreased 12 per cent to $174.7-million for the current six-month period from $198.4-million in the same period last year. Although pricing was lower, average fracturing revenue per job increased 19 per cent to $255,162 in the current period from $214,580 in the six months ended June 30, 2014, due to larger job sizes.

Importantly, in the first half of 2015, the completion of larger jobs partially offset the impact of reduced activity and lower pricing. Specifically, changing well designs have resulted 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 about 15 per cent in the total metres per well drilled (source: Nickels Energy Group) in the six months ended June 30, 2015, over the comparable 2014 period. In addition, proppant usage per stage increased dramatically throughout 2014 and has led to year-to-date 2015 total proppant volumes pumped per fracturing job by Canyon increasing by 60 per cent compared with the comparable 2014 period. Also contributing to Canyon's increasing fracturing revenue per job was the increased use of Ottawa White sand, which is typically sold at higher prices than domestic sand. In the six months ended June 30, 2015, average Ottawa White sand volumes pumped per fracturing job by Canyon's customers increased by 168 per cent and represented approximately 70 per cent of total sand pumped.

Pressure-pumping cash flow and profitability remain highly levered to changes in activity and pricing due to the fixed-cost nature of the business. Since fourth quarter 2014, Canyon has been working with suppliers to reduce both variable and fixed input costs, including proppants, chemicals, third party hauling, fuel, accommodation and labour. These cost reduction efforts have succeeded in partially offsetting the impact of significantly lower customer pricing and reduced activity. As a result, second quarter 2015 EBITDA before share-based payments expense for the pressure-pumping segment was negative $10.4-million, compared with negative $7.9-million in second quarter 2014, although revenues have declined by 39 per cent to $36.6-million. For the six months ended June 30, 2015, EBITDA before share-based payments expense was $3.4-million compared with $21.1-million for the prior-year six-month period. The decrease in EBITDA before share-based payments expense in the current six-month period is due to sharply lower customer activity and pricing levels taking effect as early as January, while cost reductions, especially pertaining to labour, could not be implemented until the second quarter.

Fluid management services

For the three and six months ended June 30, 2015, Fraction contributed $6.6-million and $24.0-million, respectively, in revenue and $1.5-million and $7.0-million, respectively, in EBITDA before share-based payments expense.

Industry conditions, including lower completion activity, decreased pricing and the seasonal spring breakup, impacted second quarter 2015 revenues and profitability in this division. This year's breakup was longer than expected with the prolonged road bans preventing the company from accessing customer sites to provide services. As a result, a number of fluid management projects were pushed into third quarter 2015. In addition, depending on the type of service, customer pricing was 15 per cent to 30 per cent lower than peak levels experienced in 2014, which further reduced revenue and EBITDA before share-based payments.

During the quarter, Fraction worked on 67 fluid transfer and fluid containment projects, of which 62 were completed and five are continuing into third quarter 2015. The job mix was largely skewed toward lease site fluid management and fluid containment projects as road bans prevented the company from mobilizing equipment to site for large-scale fluid transfer projects that the company was awarded. These fluid transfer projects were pushed into third quarter 2015.

Tank rental revenues in second quarter 2015 were also lower than first quarter 2015. For the quarter, utilization averaged 38 per cent compared with 58 per cent for first quarter 2015. The utilization rates for second quarter 2015 are consistent with historical trends and not unexpected as customers return storage tanks just before the start of spring breakup and begin to rent them again just before the end of breakup. As a result, utilization rates tend to decrease in March and pick back up toward the end of June.

Cost reduction measures

To mitigate the significant decreases in industry pricing, Canyon has been working diligently to reduce all operating and input costs in both the pressure-pumping and fluid management divisions, including chemicals, proppants, fuel, third party hauling, accommodations and labour. To date, chemical costs have been reduced by about 15 per cent, and third party hauling rates have decreased by approximately 30 per cent. The cost of both Canadian- and U.S.-sourced proppants has been reduced by approximately 10 per cent, net of exchange rate fluctuations. Minor concessions have been received from fuel suppliers due to lower oil prices, and accommodation costs have been reduced by about 15 per cent. As previously reported, Canyon reduced its permanent employee count in the pressure-pumping and fluid management divisions by 22 per cent and 15 per cent, respectively, in late March to match the anticipated reduced activity levels over the rest of the year. In addition, all remaining employee salaries in both divisions were rolled back between 5 per cent and 10 per cent with a 10-per-cent reduction of executive management salaries and directors fees.

Canyon does not view the reduction of input costs as a one-time exercise and is continuing to work with suppliers and customers to gain concessions and economies. More importantly, the company is making changes to permanently reorganize and transform certain business processes with the goal of moving away from the fixed-cost model for certain groups within the company to a variable pay model in which expenses are more closely linked to revenue. The pressure-pumping industry has historically experienced significant volatility of cash flows due to the fact that approximately 75 per cent of Canyon's fixed operating costs are salaried field positions. This lack of flexibility in the company's cost structure causes cash flow losses during low activity periods. Any changes it can make to move toward a variable cost structure will aid in reducing cash flow volatility during periods of low activity levels. For example, in the third quarter, Canyon will introduce an hourly rate for the transportation group to more closely match the compensation structure of the trucking industry.

Dividend

The board of directors continuously reviews the long-term capital structure of the company and its corresponding dividend policy each fiscal quarter. In May, 2015, the board determined that a 50-per-cent reduction to Canyon's dividend was prudent in the context of the continuing industry uncertainty. Therefore, effective for the July, 2015, payment, Canyon's quarterly dividend was reduced to 7.5 cents per common share providing estimated annualized cash savings of $20.6-million. The reduction in the quarterly dividend payout will enable Canyon to preserve its strong balance sheet and provide the company with additional financial flexibility to pursue organic growth prospects and asset acquisitions, should such attractive opportunities arise. The board will continue to regularly review the dividend payout in the context of the market for Canyon's services.

Pressure-pumping services:

Revenue

The lower WCSB activity, together with a longer than expected spring breakup, resulted in an 18-per-cent decrease in second quarter 2015 pressure-pumping jobs to 283 from 347 jobs completed in second quarter 2014. In addition, the reduced industry activity has led to sharply lower customer pricing, which the company estimates at about 25 per cent to 30 per cent lower than fourth quarter 2014 levels. As a result, pressure-pumping revenues decreased by 39 per cent to $36.6-million from $60.3-million in second quarter 2014. With fracturing revenues accounting for over 90 per cent of total pressure-pumping revenues, average fracturing revenue per job decreased 16 per cent to $232,569 in second quarter 2015 from $275,423 in second quarter 2014 due to job mix and lower pricing.

Cost of services

Cost of services for the three months ended June 30, 2015, totalled $54.2-million (2014: $73.3-million) and included materials, products, transportation and repair costs of $29.0-million (2014: $45.4-million), employee benefits expense of $14.2-million (2014: $18.5-million), and depreciation of property and equipment of $11.0-million (2014: $9.4-million).

• Materials, products, transportation and repair costs decreased by 36 per cent in second quarter 2015 when compared with second quarter 2014 mainly due to lower activity and input cost reductions, as previously discussed.
• Employee benefits expense has decreased by 21 per cent in the second quarter 2015 due to a reduction in the permanent employee count and a companywide wage rollback as a result of decreased activity.
• The increase in depreciation of property and equipment to $11.0-million in second quarter 2015 from $9.4-million in second quarter 2014 was mainly due to the addition of equipment to Canyon's fleet throughout 2014 particularly in the second half of the year. In 2014, Canyon added 30,000 hydraulic horsepower of pumping capacity, coiled-tubing equipment, transportation and logistics equipment, nitrogen and cement, and acid equipment.

Administrative expenses

Administrative expenses for the three months ended June 30, 2015, totalled $4.6-million (2014: $5.3-million) and included employee benefits expense of $1.8-million (2014: $2.6-million), share-based payments expense of $900,000 (2014: $700,000) and other administrative expenses of $1.3-million (2014: $1.6-million).

The decrease in employee benefits expense was mainly attributable to the wage and benefit rollbacks and reduced head count, as previously discussed. The decrease in other administrative expenses is mainly the result of lower professional, consulting and travel costs. Administrative expenses also include depreciation of buildings and office equipment, and amortization of intangibles of $600,000 (2014: $500,000).

EBITDA before share-based payments

In second quarter 2015, EBITDA before share-based payments expense decreased by 32 per cent to negative $10.4-million from negative $7.9-million in the comparable 2014 quarter. As previously discussed, lower customer pricing due to decreased industrywide activity levels and a longer than expected spring breakup led to the decrease.

Fluid management services

Revenue

The fluid management services business, acquired July 1, 2014, contributed $6.6-million of revenue to Canyon in second quarter 2015. This is lower than the prior-quarter revenues of $17.4-million due to annual spring breakup conditions and lower industrywide activity.

Cost of services

Cost of services for the three months ended June 30, 2015, totalled $5.7-million and includes materials, products, transportation and repair costs of $2.1-million, employee benefits expense of $1.7-million, and depreciation of property and equipment of $1.9-million.

Administrative expenses

Administrative expenses for the three months ended June 30, 2015, totalled $1.4-million and include employee benefits expense, depreciation of buildings and office equipment, and amortization of intangibles and other administrative expenses. The amortization expense of $1.5-million relates to the amortization of customer relationships and non-competition agreements pursuant to the acquisition of Fraction.

Corporate

This segment consists of costs incurred to operate a public company, including corporate management, head office costs, corporate share-based payment expenses and professional fees.

Administrative expenses

Administrative expenses for the three months ended June 30, 2015, totalled $1.4-million compared with $1.7-million in second quarter 2014 and include employee benefits expense, share-based payments and other head office administrative expenses. The decrease in administrative expenses is mainly due to wage rollbacks implemented, effective April 1, 2015, as previously discussed.

Other items -- quarterly consolidated statement of operations

Finance costs and foreign exchange gain

Finance costs include interest on loans, finance lease obligations and automobile loans and totalled $900,000 in second quarter 2015 (2014: $100,000), with the increase mainly attributable to the increase in loans and borrowings used to partially finance the company's capital program in the second half of 2014 and in 2015. In second quarter 2015, the company recorded a foreign exchange gain of $300,000 compared with $100,000 in second quarter 2014. The increase is due to fluctuations in the Canadian-dollar versus the U.S.-dollar exchange rate in relation to the purchase of U.S.-sourced proppants.

Income tax recovery

At the expected combined income tax rate of 26 per cent, the loss before income tax for second quarter 2015 of $25.9-million would have resulted in an income tax recovery of $6.7-million, compared with the actual income tax recovery of $4.1-million. The decrease in the actual income tax recovery was due to the impact of non-deductible expenses, as well as an increase in the corporate income tax rate in Alberta.

EBITDA before share-based payments

In second quarter 2015, Canyon recorded consolidated EBITDA before share-based payments of negative $9.8-million, down 6 per cent from $9.2-million recorded in the comparable 2014 quarter. As previously discussed, the reductions and savings achieved in input and operating costs, combined with a contribution of $1.5-million in EBITDA before share-based payments expense from the fluid management division, largely offset the impact of lower activity and pricing on revenues in the quarter.

Loss and comprehensive loss and loss per share

Loss and comprehensive loss increased to $21.9-million in second quarter 2015 from a loss and comprehensive loss of $15.3-million in second quarter 2014 mainly due to the aforementioned lower pricing, reduced industrywide activity, higher depreciation charges related to capital additions in the second half of 2014 and amortization expense related to intangible assets arising pursuant to the acquisition of Fraction.

Basic and diluted loss per share was 32 cents for the three months ended June 30, 2015, compared with basic and diluted loss per share of 24 cents for the comparable 2014 quarter.

Pressure-pumping services

Revenue

Pressure-pumping revenues for the six months ended June 30, 2015, decreased by 12 per cent to $174.7-million compared with $198.4-million earned in the six months ended June 30, 2014. Jobs completed decreased by 27 per cent to 903 for the six months ended June 30, 2015, from 1,237 jobs completed in the prior-year comparable period. The percentage decrease in revenues did not match the percentage decrease in the job count due to Canyon completing larger jobs as previously discussed. This is evident in the average fracturing revenue per job, which increased by 19 per cent to $255,162 in the six months ended June 30, 2015, from $214,580 in the six months ended June 30, 2014, as job sizes more than offset the impact of lower pricing.

Cost of services

Cost of services for the three months ended June 30, 2015, totalled $186.2-million (2014: $187.9-million) and included materials, products, transportation and repair costs of $120.0-million (2014: $124.0-million), employee benefits expense of $43.7-million (2014: $45.1-million), and depreciation of property and equipment of $22.5-million (2014: $18.8-million).

Materials, products, transportation and repair costs decreased by 3 per cent for the six months ended June 30, 2015, compared with the six months ended June 30, 2014. These costs did not decrease in line with revenues mainly due to larger job sizes and the increase in the usage of more expensive Ottawa White sands by customers as previously discussed.

Employee benefits expense has decreased by 3 per cent for the six months ended June 30, 2015, in comparison with the six months ended June 30, 2014. In 2014, staff levels increased over the second half of the year to handle the increase in 24-hour operations and higher activity. These higher staff levels were maintained through to the end of first quarter 2015 as Canyon was busy to mid-March. Second quarter 2015 employee benefits expense decreased by 21 per cent compared with second quarter 2014 as the aforementioned staff reductions were implemented at the end of March.

The increase in depreciation of property and equipment for the six months ended June 30, 2015, in comparison with the six months ended June 30, 2014, is due to the addition of equipment to Canyon's fleet particularly in the second half of 2014 and accelerated depreciation relating to the replacement of a number of pump components. This was partially offset by a change in the expected useful life of coiled-tubing, nitrogen and cementing equipment, which reduced the depreciation expense of these assets.

Administrative expenses

Administrative expenses for the six months ended June 30, 2015, totalled $10.4-million compared with $10.2-million for the six months ended June 30, 2014, and included employee benefits expense of $4.8-million (2014: $5.0-million) and share-based payments expense of $1.7-million (2014: $1.1-million). The decrease in employee benefits expense was mainly attributable to wage and benefits rollbacks implemented at the beginning of second quarter 2015.

Administrative expenses also include depreciation of buildings and office equipment and amortization of intangibles of $1.1-million (2014: $900,000). In addition, other administrative expenses totalled $2.8-million for the six months ended June 30, 2015, compared with $3.2-million for the six months ended June 30, 2014.

EBITDA before share-based payments

For the six months ended June 30, 2015, EBITDA before share-based payments decreased by 84 per cent to $3.4-million from $21.1-million in the comparable 2014 period. As previously discussed, lower customer pricing due to decreased industrywide activity levels more than offset input cost reductions in the period.

Fluid management services

Revenue

The fluid management services business contributed $24.0-million of revenues to Canyon for the six months ended June 30, 2015. Water access restrictions in the northern regions of the WCSB were lifted in December, 2014, which resulted in increased activity levels for the segment in the first half of 2015.

Cost of services

Cost of services for the six months ended June 30, 2015, totalled $17.6-million and includes materials, products, transportation and repair costs of $7.8-million, employee benefits expense of $6.2-million, and depreciation of property and equipment of $3.6-million.

Administrative expenses

Administrative expenses for the six months ended June 30, 2015, totalled $3.0-million and include employee benefits expense, depreciation of buildings and office equipment, and other administrative expenses. The amortization expense of $3.0-million relates to the amortization of customer relationships and non-competition agreements pursuant to the acquisition of Fraction.

EBITDA before share-based payments

For the six months ended June 30, 2015, EBITDA before share-based payments totalled $7.0-million in the fluid management services segment, or 29 per cent of revenue.

Corporate

This segment consists of costs incurred to operate a public company, including corporate management, head office costs, corporate share-based payment expenses and professional fees.

Administrative expenses

Administrative expenses for the six months ended June 30, 2015, totalled $2.9-million compared with $3.6-million in second quarter 2014 and include employee benefits expense, share-based payments and other head office administrative expenses. The decrease in administrative expenses is mainly due to lower employee benefits expense as a result of wage rollbacks and staff reductions in 2015.

Other items -- six months ended June 30, 2015, statement of operations

Finance costs and foreign exchange loss

Finance costs include interest on loans, finance lease obligations and automobile loans and totalled $1.4-million for the six months ended June 30, 2015 (2014: $0.3-million), with the increase mainly attributable to the increase in loans and borrowings used to partially finance the company's capital program in the second half of 2014 and in 2015.

For the six months ended June 30, 2015, the company recorded a foreign exchange loss of $1.3-million compared with $300,000 for the six months ended June 30, 2014. The increase is due to the declining Canadian-dollar versus the U.S.-dollar exchange rate during the year to date mostly in relation to the purchase of U.S.-sourced proppants.

Income tax recovery

At the expected combined income tax rate of 26 per cent, the loss before income tax for the six months ended June 30, 2015, of $27.0-million would have resulted in an income tax recovery of $7.0-million, compared with the actual income tax recovery of $4.0-million. The decrease in the actual income tax recovery was due to the impact of non-deductible expenses, as well as an increase in the corporate income tax rate in Alberta.

EBITDA before share-based payments

For the six months ended June 30, 2015, Canyon recorded consolidated EBITDA before share-based payments of $8.6-million, down 53 per cent from $18.2-million for the six months ended June 30, 2014. As previously discussed, the decreased EBITDA before share-based payments expense is due to significantly reduced industrywide activity and resulting pricing pressure partially offset by the addition of Fraction, which contributed $7.0-million in EBITDA before share-based payments for the six months ended June 30, 2015.

Loss and comprehensive loss and loss per share

The aforementioned reduced industrywide activity and resulting lower pricing resulted in a loss and comprehensive loss totalling $22.9-million for the six months ended June 30, 2015, compared with loss and comprehensive loss of $3.4-million for the six months ended June 30, 2014.

Basic and diluted loss per share was 33 cents for the six months ended June 30, 2015, compared with basic and diluted loss per share of five cents for the comparable 2014 period.

We seek Safe Harbor.