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GASFRAC Announces Second Quarter 2014 Financial Results

New Board Elected at Annual Meeting of Shareholders

CALGARY, ALBERTA -- (Marketwired) -- 08/08/14 -- GASFRAC Energy Services Inc. (TSX: GFS) (the "Company") today announced second quarter 2014 financial results and various corporate updates.

Mark Williamson, Interim CEO and Executive Chairman of Gasfrac, said "Despite a challenging second quarter with a much lower utilization rate than anticipated, we believe we have started making progress in refocusing the Company's operations, controlling costs and cleaning up our balance sheet through refinancing our banking credit facility."

Added Mr. Williamson, "What is clear to the new board is that Gasfrac has proven commercial technology, superior results for clients in a wide variety of formations, has demonstrated to be competitive on costs and has an expanding range of fluid systems including slickwater. Our business review process is intended to capitalize on the strengths of Gasfrac and unlock value for all shareholders."

OPERATIONAL AND STRATEGIC UPDATE

Under the leadership of an entire new Board of Directors elected at the annual meeting of shareholders on May 27, 2014, the Company has taken the following proactive steps to immediately enhance shareholder value, including:


--  The appointment of Mark Williamson as Interim Chief Executive Officer
    and Executive Chairman of the Gasfrac Board of Directors, effective
    immediately. As previously contemplated, James M. Hill retired from his
    position as Chief Executive Officer and Director.  Mr. Hill has entered
    into a consultancy agreement and will remain as an advisor to the
    Company until the end of the calendar year to assist in the smooth
    transition of managerial duties.

--  The retention of Egon Zehnder International Inc., a worldwide leading
    executive search firm, to assist the Company with its executive search
    process for the appointment of a new Chief Executive Officer expected to
    be announced before the end of the year.
--  The appointment of Larry Lindholm as Lead Independent Director of the
    Board of Directors and a member of the Audit Committee.
--  The initiation by the Board of Directors of a business review of the
    business to reposition the Company to improve performance, position for
    growth and create shareholder value. The review process underscores the
    Company's commitment to improving its efficiency, reducing its cost
    structure and integrating new activities including, but not limited to,
    providing hydraulic fracturing services and expanding the fluid systems.
--  Writing down ceramic proppant inventory and other assets to net
    realizable value and entering into discussions in order to terminate an
    onerous proppant purchase contract.
--  The refinancing of outstanding senior debt with a new revolving long-
    term credit facility. The Company believes it is adequately capitalized
    to pursue its strategic priorities.

Added Mr. Williamson, "On behalf of the Company and the Board of Directors we express our sincere appreciation to Jim, for his dedication and hard work. We wish him the very best in his future endeavors."

SECOND QUARTER 2014 FINANCIAL RESULTS

COMPARATIVE QUARTERLY FINANCIAL INFORMATION


                                          June 30     June 30     June 30
                                            2014        2013        2012
----------------------------------------------------------------------------
                                            CAD$        CAD$        CAD$
Revenue                                       7,326      30,561      16,734
Operating expenses                           10,509      23,747      21,704
Selling, general and administrative
 expenses                                     3,991       5,100       5,164
Adjusted EBITDA(1)                           (7,193)      1,736      (9,872)
(Loss) for the period                       (31,689)     (4,811)    (16,949)
(Loss) per share - basic                      (0.50)      (0.08)      (0.27)
(Loss) per share - diluted                    (0.50)      (0.08)      (0.27)
Weighted average number of shares -
 basic                                       63,614      63,520      62,536
Total assets                                192,361     249,033     307,669
Total non-current liabilities                58,297      35,922      41,815
Revenue days                                     22          59          40
Revenue per revenue day                         333         518         418
----------------------------------------------------------------------------
(1) Prior period amounts have been have been adjusted to conform to the
    definition per the Company's new credit facility. Defined under Non-IFRS
    Measures

OVERVIEW OF THE QUARTER ENDED JUNE 30, 2014

At the May 27, 2014 meeting of shareholders, a new board of directors was elected. Over the last two months the board has worked with management to review the Company's capabilities and opportunities in order to focus its strategy to maximize shareholder value going forward. The Board of Directors has initiated a review of the business to reposition the Company to improve performance, position for growth and create shareholder value. This review process underscores the Company's commitment to improving its efficiency, reducing its cost structure and integrating new activities including, but not limited to, providing hydraulic fracturing services. As previously contemplated James M. Hill retired from his position as Gasfrac Chief Executive Officer and Director, effective August 7, 2014. Mr. Hill has entered into a consultancy agreement and will remain as an advisor to the Company until the end of the calendar year to assist in the smooth transition of managerial duties. On the same date, the Board of Directors appointed Mark Williamson Interim Chief Executive Officer and Executive Chairman of the Gasfrac Board of Directors. The board has engaged a globally recognized search firm to identify Chief Executive Officer candidates with a goal to having a new CEO in place this year.

During the second quarter, the Company experienced low utilization with two of its core customers not being as active as anticipated. Our major customer in the USA was not active as it was undergoing a change of ownership. On June 17, 2014 they announced new private equity ownership providing them access to additional capital to continue growing their asset base. Activity with this customer is restarting in August and we have been advised that they anticipate fracturing three wells per month on average going forward. We are reviewing a proposed new three year contract with this customer providing an agreed minimum monthly level of activity.

In Canada, a major customer reallocated a significant amount of its Western Canada capital budget to the East Coast of Canada mid way through the year. While we anticipate work to continue with them in 2014 it will be at reduced levels. Work in 2015 related to this customer will be dependent on budget allocations but based on preliminary discussions we anticipate it will increase. Based on these items our revenue and EBITDA declined significantly in the second quarter compared to prior year.

As discussed further in our financial statements and this MD&A, on June 19, 2014, the Company entered into a Revolving Credit and Security Agreement (the "Facility") to replace its former short term bank credit facility. The Facility is a five-year revolving credit facility of up to $60 million subject to a borrowing base. Initially $35 million will be available under the Facility, with availability subject to increase based on future performance of the Company.

FINANCIAL OVERVIEW - FOR THE THREE MONTHS ENDED


                                         June 30, 2014
                   ---------------------------------------------------------
                       Canada          U.S.       Corporate      Total
                   ---------------------------------------------------------
                     CAD$           CAD$             CAD$     CAD$

Revenue              6,947  100.0%    379  100.0%          -   7,326  100.0%

Cost of sales        3,156   45.4%    124   32.7%          -   3,280   44.8%
Variable operating
 costs               1,721   24.8%    473  124.8%          -   2,194   29.9%
Fixed operating
 costs               3,447   49.6%  1,588  419.0%          -   5,035   68.7%
----------------------------------------------------------------------------
Operating expenses   8,324  119.8%  2,185  576.5%          -  10,509  143.4%
----------------------------------------------------------------------------

Selling, general
 and administration  2,182   31.4%    873  230.3%        936   3,991   54.5%

Number of revenue
 days                   19              3                         22
Revenue per day        366            126                        333
----------------------------------------------------------------------------

                                         June 30, 2013
                   ---------------------------------------------------------
                       Canada          U.S.       Corporate      Total
                   ---------------------------------------------------------
                      CAD$           CAD$               CAD$    CAD$

Revenue             22,331  100.0%  8,230  100.0%          -  30,561  100.0%

Cost of sales       12,846   57.5%  2,527   30.7%          -  15,373   50.3%
Variable operating
 costs               2,342   10.5%    847   10.3%          -   3,189   10.4%
Fixed operating
 costs               3,601   16.1%  1,584   19.2%          -   5,185   17.0%
----------------------------------------------------------------------------
Operating expenses  18,789   84.1%  4,958   60.2%          -  23,747   77.7%
----------------------------------------------------------------------------

Selling, general
 and administration  2,888   12.9%  1,634   19.9%        578   5,100   16.7%

Number of revenue
 days                   43             16                         59
Revenue per day        519            514                        518
----------------------------------------------------------------------------

FINANCIAL OVERVIEW - FOR THE SIX MONTHS ENDED


                                        June 30, 2014
                 -----------------------------------------------------------
                      Canada           U.S.       Corporate      Total
                 -----------------------------------------------------------
                   CAD$            CAD$              CAD$     CAD$

Revenue            19,106  100.0%    393   100.0%          -  19,499  100.0%

Cost of sales      11,875   62.2%    134    34.3%          -  12,009   61.6%
Variable
 operating costs    3,765   19.7%    705   180.3%          -   4,470   22.9%
Fixed operating
 costs              7,074   37.0%  3,423   875.4%          -  10,497   53.8%
----------------------------------------------------------------------------
Operating
 expenses          22,714  118.9%  4,262  1090.0%          -  26,976  138.3%
----------------------------------------------------------------------------

Selling, general
 and
 administration     4,574   23.9%  1,552   396.9%      2,184   8,310   42.6%

Number of revenue
 days                  44              3                          47
Revenue per day       434            130                         415
----------------------------------------------------------------------------

                                        June 30, 2013
                  ----------------------------------------------------------
                      Canada          U.S.       Corporate       Total
                  ----------------------------------------------------------
                    CAD$           CAD$             CAD$      CAD$

Revenue            50,792  100.0% 11,227  100.0%          -   62,019  100.0%

Cost of sales      27,436   54.0%  4,168   37.1%          -   31,604   51.0%
Variable operating
 costs              5,182   10.2%  1,666   14.8%          -    6,848   11.0%
Fixed operating
 costs              7,492   14.8%  3,847   34.3%          -   11,339   18.3%
----------------------------------------------------------------------------
Operating expenses 40,110   79.0%  9,681   86.2%          -   49,791   80.3%
----------------------------------------------------------------------------

Selling, general
 and
 administration     5,548   10.9%  2,821   25.1%      1,374    9,743   15.7%

Number of revenue
 days                 108             24                         132
Revenue per day       471            468                         470
----------------------------------------------------------------------------

Revenue

Revenue for the second quarter decreased 76.1% to $7.3 million from $30.6 million in the second quarter of 2013. This decrease is primarily due to postponements or cancelations of projects with our major customers as well as some of our Canadian customers supplying their own LPG.

During the quarter, the Company earned revenues from four customers with the top three customers representing 99.3% of the total revenue. During the second quarter of 2013, the Company earned revenues from six customers with the top three customers representing 97% of the total revenue.

Canadian Operations

Second quarter revenue from the Canadian operations decreased 69.1% to $6.9 million from $22.3 million in the second quarter of 2013. The Canadian operations performed 19 revenue days in the second quarter of 2014 with average daily revenue of $366 compared to 43 revenue days in the second quarter of 2013 with average daily revenue of $519.

The decrease in average daily revenue is due to the procurement of LPG. In the second quarter of 2014, our customers supplied their own LPG with GASFRAC instead charging a pumping charge on the fluid pumped. This resulted in a decrease in revenue per revenue day of approximately $140 with an offsetting decrease to Cost of Sales.

During the second quarter of 2013, revenue includes pad fracturing for two customers that the Company was able to execute during spring break up. During the second quarter of 2014, revenue was generated from one major customer. The Company expects that revenue from this major customer will be limited for the rest of 2014 as the customer has reallocated its capital budget to different areas for the balance of 2014.

U.S. Operations

Second quarter revenue from the U.S. operations decreased 95.1% to $0.4 million from $8.2 million in the second quarter of 2013. The US operations performed 3 revenue days in the second quarter of 2014 with average daily revenue of $126 compared to 16 revenue days in the second quarter of 2013 with average daily revenue of $514. One major customer contributed 92.5% of revenue in the second quarter 2013. The same customer did not contribute any revenue in second quarter 2014 but is expected to be active in third quarter 2014. The major customer was recapitalized in a transaction that was completed in mid-June 2014.

During the quarter, the Company continued to negotiate the renewal of our contract with our major US customer. However, there can be no assurances at this time that such renewal can be obtained or, if obtained, what the terms of such renewal will be.

The decrease in average daily revenue is attributed to the Company executing smaller fracturing treatments.

During the second quarter of 2014, revenue was generated from three customers. During the second quarter of 2013, the top three customers generated 98.7% of the total revenue.

Operating Expenses

Operating expenses consist of the following categories:


--  cost of sales (variable costs directly attributable to a fracturing
    treatment),
--  variable operating costs (variable costs not directly attributable to a
    fracturing treatment), and
--  fixed operating costs (costs that do not fluctuate with the Company's
    level of activity).

During the quarter, the Company's operating expenses decreased 55.7% to $10.5 million (143.4% of revenue) from $23.7 million (77.7% of revenue) in the second quarter of 2013. This is primarily due to the decrease in the Company's activity.

As a percentage of revenue, cost of sales decreased to 44.8% of revenue ($3.3 million) from 50.3% ($15.4 million) of revenue in the second quarter of 2013. The decrease in cost of sales as a percentage of revenue was largely attributable to our customers supplying their own frac fluid and GASFRAC charging a pumping charge. This has the effect of lowering both the revenue and the cost of sales. This was partially offset by GASFRAC lowering the price of our services in order to attract new customers.

As a percentage of revenue, variable operating expenses increased to 29.9% of revenue ($2.2 million) from 10.4% of revenue ($3.2 million) of revenue in the second quarter of 2013. The percentage increase in variable operating expenses is due to costs such as maintenance and repairs having both a variable and fixed component.

Fixed operating costs decreased 3.8% to $5.0 million in the second quarter of 2014 as compared to $5.2 million in the second quarter of 2013. Fixed operating costs include operational salaries (excluding bonuses), facility leases and maintenance, and safety programs.

Canadian Operations

Total operating expenses for the quarter were $8.3 million (cost of sales - $3.2 million, variable operating costs - $1.7 million and fixed operating costs - $3.4 million) as compared to $18.8 million (cost of sales - $12.8 million, variable operating costs - $2.3 million and fixed operating costs - $3.6 million) in the second quarter of 2013.

Cost of sales was 45.4% of revenue for the quarter as compared to 57.5% of revenue in the second quarter of 2013. The decrease in cost of sales as a percentage of revenue was largely attributable to GASFRAC's customer supplying LPG for our services and GASFRAC charging the customer a pumping charge. In contrast, for the three month period ended June 30, 2013, GASFRAC supplied the LPG for our services with a markup. The net result is that the revenue and the cost of sales decreased by approximately $140 per revenue day.

Variable operating expenses increased to 24.8% of revenue ($1.7 million) from 10.5% of revenue ($2.3 million) in the second quarter of 2013. The percentage increase in variable operating expenses is primarily due to repairs and maintenance that has been incurred to maintain existing equipment and minor modifications due to the expansion of the Company's product line (approximately 9%), and fuel expenses incurred to reposition our fleet (approximately 2%).

Fixed operating costs decreased to $3.4 million from $3.6 million in the second quarter of 2013. Fixed operating costs include operational salaries (excluding bonuses), facility leases and maintenance, and safety programs.

U.S. Operations

Total operating expenses for the quarter were $2.2 million (cost of sales - $0.1 million, variable operating costs - $0.5 million and fixed operating costs - $1.6 million) as compared to $5.0 million (cost of sales - $2.5 million, variable operating costs - $0.8 million and fixed operating costs - $1.6 million) in the second quarter of 2013.

Cost of sales was 32.7% of revenue for the quarter as compared to 30.7% of revenue in the second quarter of 2013.

Variable operating costs of $0.5 million increased to 124.8% of revenue from 10.3% of revenue ($0.8 million) in the second quarter of 2013. The percentage increase in variable operating expenses is primarily due to an increase in repairs and maintenance that has been incurred due to the expansion of the Company's product line (approximately 50%), fuel expenses incurred to reposition our fleet (approximately 16%), and increased travel and accommodations (approximately 20%).

Fixed operating costs remained consistent at $1.6 million in the second quarter of 2014 and in the second quarter of 2013. Fixed operating costs include operational salaries (excluding bonuses), facility leases and maintenance, and safety programs.

Sales, General & Administrative ("SG&A") Expenses

SG&A expenses for the second quarter of 2014 decreased 21.6% to $4.0 million from $5.1 million in the second quarter of 2013. The decrease is primarily due to bad debt expense incurred in the second quarter of 2013 ($0.5 million) as well as decreased salaries and benefits and consultants ($0.2 million)

Impairment

During the quarter an impairment loss of $16.6 million was recorded. The loss is composed of a $6.8 million write-down of inventory to net realizable value, a $5.4 million write-down of a long-term deposit and $4.4 million on specific items classified as field equipment.

During the quarter, $6.8 million in ceramic proppant inventory was written down from its carrying amount to its net realizable value. The write down was a result of an industry decrease in price for specific types of ceramic proppant and excess supply of the ceramic proppant.

Following the write down of ceramic proppant the decision was made to terminate one of two proppant contracts which resulted in the write-off of a long-term deposit of $5.4 million. The write-off of $5.4 million was the Company's estimate of costs associated with terminating the contract.

The write down of specific fixed assets resulted from the Company reviewing the carrying value of specific field equipment. The assets were valued at the estimated proceeds of disposal (estimated fair value less costs of disposal).

Adjusted EBITDA

For the second quarter of 2014, Adjusted EBITDA decreased to a loss of $7.2 million from $1.7 million in the second quarter of 2013. The decrease in Adjusted EBITDA was primarily the result of a 76.1% decrease in revenue as well as an increase in the cost of sales.

Net Loss

For the second quarter of 2014, the net loss increased to $31.7 million compared to a net loss of $4.8 million during the second quarter of 2013. The increase in net loss is mainly attributable to the decrease in revenue as well as the impairment of assets ($16.6 million). Depreciation and amortization decreased $0.3 million from second quarter 2013 to the second quarter of 2014 due to the sale of assets and minimal capital expenditures throughout 2013. The Company's interest expense of $1.6 million in the second quarter of 2014 (2013: $1.6 million) is comprised of accrued debenture interest, and credit facility and finance lease interest paid. The Company recognized $0.2 million (2013: $0.3 million) in share based compensation expense. The Company has four share based compensation plans in place. The performance share unit and deferred share unit plans are cash settled and the restricted share and option plans are equity settled. The Company does not recognize any current tax expense as it has tax losses to offset any taxable income.

FINANCIAL OVERVIEW - SUMMARY OF QUARTERLY RESULTS


                                     Sept 30,   Dec 31,   Mar 31,   Jun 30,
                                         2012      2012      2013      2013
----------------------------------------------------------------------------
                                         CAD$      CAD$      CAD$      CAD$
Revenue                                40,851    46,888    31,458    30,561
(Loss) for the period                  (7,144)  (48,450)   (7,884)   (4,811)
(Loss) per share - basic                (0.11)    (0.77)    (0.12)    (0.08)
(Loss) per share - diluted              (0.11)    (0.77)    (0.12)    (0.08)
Adjusted EBITDA (1)                       182     5,921       751     1,736
Capital expenditures (recovery)         4,955     6,593       509     1,404
Working capital (deficiency) (2)       (1,092)   25,740    (4,384)    2,627
Working capital excluding current
 portion of credit facility            21,127    28,240    19,474    21,992
Total short and long term credit
 facility                              22,219    30,000    23,858    19,365
Shareholders' equity                  237,201   190,444   184,266   181,951
----------------------------------------------------------------------------

                                      Sep 30,   Dec 31,   Mar 31,   Jun 30,
                                         2013      2013      2014      2014
----------------------------------------------------------------------------
                                         CAD$      CAD$      CAD$      CAD$
Revenue                                30,423    29,381    12,173     7,326
(Loss) for the period                  (5,061)   (6,673)  (12,093)  (31,689)
(Loss) per share - basic                (0.08)    (0.10)    (0.22)    (0.50)
(Loss) per share - diluted              (0.08)    (0.10)    (0.22)    (0.50)
Adjusted EBITDA (1)                     3,364       186    (8,727)   (7,193)
Capital expenditures (recovery)           274       963     2,425      (494)
Working capital (deficiency) (2)        4,108     7,070     4,454    11,462
Working capital excluding current
 portion of credit facility            28,541    25,643    19,491    11,462
Total short and long term credit
 facility                              24,433    18,573    15,037    23,189
Shareholders' equity                  175,884   171,209   159,164   125,600
----------------------------------------------------------------------------
 (1)Prior period amounts have been have been adjusted to conform to the
    EBITDA definition in the Company's new credit facility. Defined under
    Non-IFRS Measures
(2) Working capital is defined as current assets less current liabilities
    (includes short term portion of credit facility)

Additional information on revenue trends and losses are addressed in the Outlook section.

The Company's North American business is seasonal. The lowest activity is typically experienced during the second quarter of the year when road weight restrictions are in place due to spring break-up weather conditions and access to well sites in Canada is reduced. Also, in certain areas of the U.S. in which the Company operates, access to work locations is limited or entirely banned during hunting season which typically occurs December through February. The highest activity typically occurs in the first quarter of the year.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Generally the Company ensures that it has sufficient cash or available credit facilities to meet expected operational requirements.

For the six month period ended June 30, 2014, the Company had a net loss of $45.9 million and negative cash flow from operating activities of $15.9 million (before changes in non-cash working capital). The Company maintained positive working capital of $11.5 million. The increase of working capital of $11.5 million compared to $4.5 million as at March 31, 2014 and $2.6 million as at June 30, 2013 is primarily due to reclassification of current debt to long term debt in June 30, 2014. Cash plus accounts receivable exceeded current liabilities by $0.3 million.

The Company's operations remain concentrated with a few key customers and revenues are subject to fluctuation dependent on the level of drilling operations by these customers in the areas in which the Company is servicing them. Their levels of drilling activity can be impacted by numerous factors including, but not limited to, operational difficulties, project scheduling, infrastructure limitations, weather conditions, hunting restrictions, and budgetary priorities. These fluctuations add uncertainty to the timing of the Company's cash flows, and can and have resulted in breaches to bank covenants.

The Company's 2014 operating results have negatively affected the balance sheet and liquidity. The Company will continue to minimize discretionary expenses, supplement its operating cash flow with sales of excess inventory and non-revenue generating assets such as land and buildings and if required increase its borrowings under the credit facility. In addition, the Company has planned minimal capital expenditures in 2014 and manages the timing of its capital expenditures based on the ongoing financial results.

When the Company will regain positive cash flows from operations is uncertain. The Company may need to raise capital to fund its operations and capital expenditures. The Company could seek financing through equity financings, additional subordinated debt and rights offerings to existing shareholders. If the Company is unable to obtain suitable financing it may be necessary for the Company to examine other alternatives to continue and enhance shareholder value, including but not limited to seeking a joint venture partner or the possible sale of the some or all of the assets of the Company or the merger, amalgamation or sale of the Company with or to a larger, better financed entity. The outcome of these matters cannot be predicted at this time.

The timing of cash outflows relating to financial liabilities and commitments are outlined in the following table:


                                                                    Greater
                         Contractual Less than  1 to 3    4 to 5    than 5
                         cash flows   1 year     years     years     years
----------------------------------------------------------------------------
                            CAD$       CAD$      CAD$      CAD$      CAD$
Trade payables and
 accrued liabilities           5,695     5,695         -         -         -
Provisions                       911       911         -         -         -
Finance lease obligation       1,815       993       822         -         -
Credit facility
 (including expected
 interest)                    28,407     1,044     2,087    25,276         -
Debentures (including
 expected interest)           48,703     2,818    45,885         -         -
Operating lease payments       8,410     1,730     2,649     2,018     2,013
Commitment to purchase
 proppant                      9,419     2,392     2,956     3,246       825
Commitment to purchase
 plant and equipment           2,392     2,392         -         -         -
----------------------------------------------------------------------------
Total                        105,752    17,975    54,399    30,540     2,838
----------------------------------------------------------------------------
----------------------------------------------------------------------------

To meet these financial obligations, the Company has available the following resources available within 1 year:


                                                Jun 30, 2014   Dec 31, 2013
----------------------------------------------------------------------------
                                                    CAD$           CAD$

Cash and cash equivalents                               3,966          1,955
Trade receivables                                       3,776         26,037
Unused credit facility - based on initial
 availability of $35 million                           11,811         31,427
----------------------------------------------------------------------------
                                                       19,553         59,419
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Capital Management

The Company's objectives when managing its capital structure are to maintain a balance between debt and capitalization so as to withstand industry and seasonal volatility, maintain investor, creditor and market confidence and to sustain growth of the business. Debt includes the current and long term portions of finance leases, the outstanding balance of the credit facility and the debt portion of the convertible debentures less cash and cash equivalents. Capitalization is calculated as the debt, as described above, and shareholders' equity including the equity portion of the convertible debentures.

The Company also manages its capital structure to ensure compliance with financial and other affirmative and negative covenants on its credit facilities. The covenants are monitored on a regular basis and controls are in place to ensure the Company maintains compliance with these covenants. The Company is required to maintain a fixed charge coverage ratio for a rolling consecutive four quarters commencing for the quarter ended December 31, 2014 and as at the end of each calendar quarter thereafter. The credit facility includes maximum allowable amounts for finance leases, capital expenditures, and asset disposals. The credit facility also includes provisions related to the redemption of convertible debentures and renewal terms for the convertible debentures. As at June 30, 2014, the Company was in compliance with all the applicable covenants related to the Revolving Credit Facility.

As at June 30, 2014, the Company had commitments to purchase field equipment of $2.4 million.

Working Capital

As at June 30, 2014, the Company had $11.5 million of working capital compared to $4.5 million as at March 31, 2014 and $2.6 million as at June 30, 2013. The increase in working capital from June 30, 2013 and March 31, 2014 to June 30, 2014 is primarily due to the reclassification of the credit facility from current to long term in June 30, 2014.

Working capital excluding the current portion of the credit facility as at June 30, 2014 is $11.5 million, as at March 31, 2014 $19.5 million and as at June 30, 2013 $22.0 million. The decline in working capital excluding the current portion of the credit facility is due to lower accounts receivable from lower revenue and operating activities.

New Revolving Credit Facility

On June 19, 2014, the Company entered into a Revolving Credit and Security Agreement (the "Revolving Credit Facility") The Facility is a five-year revolving credit facility of up to $60 million subject to a borrowing base. As at June 30, 2014 $35 million is available under the Facility, with availability subject to increase based on future performance of the Company.

The term of the Facility may be accelerated to November 30, 2016 in the event that the subordinated debentures are not refinanced under terms acceptable to the bank. Early termination fees also apply in the first two years of the agreement.

Any failure or neglect of the Company to perform or keep any term, provision or covenant is considered to be an Event of Default under the Revolving Credit Facility. In the Event of Default and at any time thereafter the Bank shall have the right to terminate the Revolving Credit Facility and to terminate the obligation to make advances.

The borrowing base is calculated as a percentage of eligible accounts receivable, eligible inventories, and the net orderly liquidation value (NOLV) of the machinery and equipment to a maximum amount for each category ("sublimit"). Eligible inventories are based on the lower of cost or market value and the NOLV of the machinery and equipment is determined based on appraisals.

The Revolving Credit Facility is available in Canadian and US dollars and bears interest at the applicable Canadian or US prime rate plus 1.5% or the Banker's Acceptance rate or LIBOR plus 3.5%. The Revolving Credit Facility requires the Company to comply with certain financial and non-financial covenants.

The Revolving Credit Facility requires the Company to maintain, as of December 31, 2014 and each quarter thereafter measured on a rolling four quarter basis, a Fixed Charge Coverage Covenant Ratio (FCC) of 1.15:1.00. The FCC is defined as the ratio of EBITDA minus Unfunded Capital Expenditures minus Cash Taxes divided by all Annualized Debt Payments.

EBITDA is a non-GAAP measure and is defined as the sum of:


a.  Net income or loss for such period excluding extraordinary gains and
    losses, plus
b.  All interest expense for such period (to the extent deducted in
    determining net earnings), plus
c.  All charges against income for such period for income taxes in
    accordance with GAAP, plus
d.  Depreciation expense, plus
e.  Amortization expense, plus or minus
f.  Permitted EBITDA Adjustments.

Permitted EBITDA Adjustments shall mean, to the extent deducted in the calculation of net earnings, the following non-cash items: equity settled share-based compensation, impairment losses, unrealized foreign exchange gains or losses, and gains or losses on the sale of assets (other than inventory sold in the ordinary course of business).

Debt Payments is defined as:


a.  All cash actually expended by the Company to make:
    a.  Interest payments on the revolving credit facility, plus
    b.  Payments for all fees, commissions and charges related to the
        agreement; plus
    c.  Payments on Capitalized Lease Obligations; plus
    d.  Permitted Subordinated Debenture Redemptions, plus
    e.  Payments with respect to any other Indebtedness for borrowed money,
        including the Subordinated Debt, plus
b.  The aggregate amortization amount ($4.5 million) commencing for the
    March 31, 2015 and thereafter Fixed Charge Coverage Covenant

For the first 11 months of the agreement the debt payments are annualized.

The lender has a continuing security interest in all of its collateral whether now owned or hereafter created or acquired. Collateral includes all assets and property of the Company including receivables, machinery and equipment, intangibles, and inventory.

The Company was compliant with all applicable covenants at June 30, 2014.

The Company's previous credit facility consisted of a $10 million revolving operating facility and a $40 million revolving facility. Both facilities were secured by a floating charge over all of the assets (excluding leased assets). The facility was to mature on June 30, 2014 and pursuant to IAS 1 the Company presented the entire credit facility as current in prior reporting periods.

Consolidated Cash Flow Summary


For the three months ended:                    Jun 30, 2014   Jun 30, 2013
----------------------------------------------------------------------------
                                                   CAD$           CAD$
Net cash provided (used) by:
  Operating activities                                (6,338)        (1,708)
  Financing activities                                 7,906         (4,385)
  Investing activities                                   666          2,149
----------------------------------------------------------------------------
Net decrease in cash and cash equivalents              2,234         (3,944)
Effects of exchange rate changes on the
 balance of cash held in foreign currencies             (170)           102
Cash and cash equivalents, beginning of period         1,902          4,644
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD               3,966            802
----------------------------------------------------------------------------

Operating Activities

Net cash used in operating activities was $6.3 million as compared to net cash used in operating activities of $1.7 million in the second quarter of 2013. The decrease is primarily due to the loss in the period caused by the decrease in second quarter 2014 revenue and activity.

Financing Activities

Net cash provided by financing activities was $7.9 million compared to $4.4 million of cash used in the second quarter of 2013, an absolute change of $12.3 million. The cash provided by and cash used in both the second quarter of 2014 and 2013 consists primarily of draws and repayments on the Company's credit facility.

Investing Activities

Net cash provided by investing activities was $0.7 million compared to $2.1 million in the second quarter of 2013. During the quarter, the Company sold excess plant and equipment for gross proceeds of $0.7 million and received a credit on the purchase of property and equipment of $0.5 million. Proceeds from equipment sales in the second quarter of 2013 were $4.0 million and the purchase of property and equipment of $1.4 million.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is not party to any off balance sheet arrangements or transactions.

RELATED PARTY TRANSACTIONS

Effective with the change in the Board of Directors on May 27, 2014, the former directors' performance share units and deferred share units totaling $555 thousand were paid out in cash.

During the six months ended June 30, 2014, the Company incurred legal fees of $52 thousand from a law firm of which a departing officer was a partner.

During the six months ended June 30, 2014, the Company incurred legal fees of $21 thousand from a law firm of which an officer is a partner.

FINANCIAL INSTRUMENTS FAIR VALUES

The Company's financial instruments included on the consolidated balance sheet and measured at amortized cost include: trade payables and accrued liabilities; provisions; finance lease obligations; the credit facility and convertible debentures with accrued interest.

The fair value of most of the Company's financial instruments included on the consolidated balance sheet approximate their carrying amounts due to their short term maturity. The carrying amount of the debt outstanding pursuant to the credit agreement (the revolving credit facility) approximates fair value as the interest rate on this instrument approximates current market rates (level 2 criteria).

The Company's convertible debentures trade on the Toronto Stock Exchange under the symbol GFS.DB. The fair value of the convertible debentures is based on quoted market prices and is considered to be a Level 1 fair value measurement. The carrying value includes the debt and equity portion of the convertible debentures and excludes the deferred income tax impact of the debentures charged against the equity portion. As at June 30, 2014, the fair value of the convertible debentures was $34,217 thousand (December 31, 2013 $33,408 thousand) and the carrying value was $37,209 thousand (December 31, 2013 $36,587 thousand).

The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.


--  Level 1 fair value measurements are those derived from quoted prices
    (unadjusted) in active markets for identical assets or liabilities.
--  Level 2 fair value measurements are those derived from inputs other than
    quoted prices included within Level 1 that are observable for the asset
    or liability, either directly (i.e. as prices) or indirectly (i.e.
    derived from prices).
--  Level 3 fair value measurements are those derived from valuation
    techniques that include inputs for the asset or liability that are not
    based on observable market data (unobservable inputs).

The Company's finance department is responsible for performing the valuation of financial instruments. The valuation processes and results are reviewed and approved by the CFO and CEO at least once every quarter, in line with the Company's quarterly reporting dates. Valuation results are discussed with the Audit Committee as part of its quarterly review of the Company's financial statements.

ACCOUNTING ESTIMATES

This MD&A summarizes GASFRAC's financial condition and results of operations and is based upon its Interim Financial Statements, which have been prepared in accordance with Canadian GAAP and comply with IAS 34 Interim Financial Reporting. The Interim Financial Statements require management to select significant accounting policies and make certain critical accounting estimates that affect the reported assets, liabilities, revenue and expenses. A description of critical accounting estimates can be found beginning on page 9 of the December 31, 2013 MD&A. As at June 30, 2014, GASFRAC's critical accounting estimates have not changed from such description.

BUSINESS RISK

A description of business risks can be found on pp. 13-17 of the December 31, 2013 MD&A and in the Corporation's 2013 Annual Information Form filed on SEDAR March 14, 2014 available at www.sedar.com. As at June 30, 2014, these business risks have not changed significantly from those descriptions. Also refer to the cautionary statements regarding "Forward Looking Information".

COMMON SHARES AND CONVERTIBLE DEBENTURES

The Company at June 30, 2014 had 63,616,170 and at August 7, 2014 had 63,617,587 common shares outstanding (December 31, 2013: 63,607,668). At June 30, 2014 and August 7, 2014, GASFRAC had 3,627,500 share options outstanding (December 31, 2013: 3,295,000) at a weighted average exercise price of $2.11 per share (December 31, 2013: $2.31).

At June 30, 2014 and August 7, 2014, the Company had $40.25 million convertible debentures outstanding that were convertible to 3,833,334 common shares based on the applicable conversion price.

NON-IFRS MEASURES

Certain supplementary measures in this MD&A do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-IFRS measures. These measures have been described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and ability to generate funds to finance its operations. These measures may not be comparable to similar measures presented by other entities, and are further explained as follows:

Adjusted EBITDA is defined as net income (loss) before finance cost, income taxes, depreciation and amortization, equity settled share based compensation, unrealized foreign exchange, and gain or losses on disposition. Adjusted EBITDA is used in the calculation of GASFRAC's financial covenant related to its revolving credit facility.

Adjusted EBITDA is calculated as follows:


                                Jun 30, 2014   Jun 30, 2013   Jun 30, 2012
----------------------------------------------------------------------------
                                    CAD$           CAD$           CAD$

Net loss                              (31,689)        (4,811)       (16,949)
(Deduct) Add back
  Finance cost                          1,551          1,564          1,252
  Depreciation and amortization         6,034          6,377          6,495
  Impairment                           16,600            120             20
  Equity settled share based
   compensation                           155            216            532
  Unrealized foreign exchange
   loss                                    33             68              9
  Income tax benefit                        -              -         (1,231)
  (Gain) loss on disposition of
   assets                                 123         (1,798)             -
----------------------------------------------------------------------------
Adjusted EBITDA                        (7,193)         1,736         (9,872)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no changes in the Company's internal controls over financial reporting during the quarter ended June 30, 2014, which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

OUTLOOK

The North American pressure pumping market has been oversupplied during the last several years as a result of significant equipment builds in 2010 through 2012 and the addition of numerous small entrants during that period. This overcapacity has resulted in depressed margins during the last several years as capacity has been gradually absorbed. Industry utilization has improved significantly in Canada during the first half of 2014 and is expected to continue throughout the year resulting in industry price increases of 5% - 10%. In the USA equipment utilization has also improved during 2014 but not to the extent of Canada. As a result, pricing is expected to remain firm in the USA with improvements in 2015.

While the fundamentals of the overall pressure pumping market are an important factor in our operations, the most significant factor remains the pace of adoption of our technology by E&P companies. The industry as a whole has experienced significant change over the last decade with the emergence of multi-stage horizontal fracturing in resource formations. Although there have been positive production results, in some ways, the technology of fracturing in resource plays is just beginning. There are some indications that, as past results and economics are examined, the industry is beginning to examine methods to optimize fracturing operations and move away from simply using brute force along the horizontal section. The more recent utilization of energized fracturing fluids, rather than only slick water, is an indication of the beginning of more focus on customized fracturing solutions. As we have noted earlier, this has been more prevalent in Canada than in the USA to date. We believe that the GASFRAC technology and resultant production benefits in targeted formations provide our customers an advantage and that the major challenge for the Company is increasing our market share through succinct demonstration of this benefit. The key barriers we have encountered impacting the pace of adoption are; demonstration of the cost/benefit, safety considerations, awareness and the inertia of the factory frac model that has emerged. Operators tend to be cautious in their adoption of new technologies, particularly given the significance of fracturing costs as a percentage of total drilling and completions costs. As such, the higher up front cost of GASFRAC's service can be a key criteria in purchasing decisions. Thus, the keys on the cost/benefit side are:


a.  the collection of basin by basin production data to provide more case
    studies to potential customers showing the positive impact on production
    and net present values,
b.  continued reduction in the up-front costs of our service through
    enhancements such as engineered fluids,
c.  recruiting of strong technical sales and sales support staff,
d.  expanded fracturing fluid systems including HRVP, C3+, Poly C3 and H2O
    energized with C3+, and
e.  focus on areas where the GASFRAC technology creates the most benefit or
    is the enabling technology.

We expect that the service delivery initiatives we undertook over the last few quarters, particularly engineered fluids that allow significant recovery of frac load fluids, will reduce the net cost of our service to our customers. Further, our expanded fracturing fluid systems and enhanced technical sales team provide our clients with customized solutions to meet their specific needs. This change in our value proposition creates an opportunity to attract customers to trial our technology and observe the specific impact on their wells and production. Due to the significant investment by operators in fracturing services, the sales and trial process is relatively long. We would anticipate a time from of six to nine months from initial trial to ultimate adoption of our services. We have added and will continue to add technical resources to assist our sales team in demonstrating the production benefits of our technology. In addition we are actively recruiting strong technical sales staff that can work with our customers to demonstrate technical benefits as well as assist in demonstrating our service execution capabilities. While safety will always remain a key focus for the Company, the equipment and procedures put in place during 2011 have largely removed this as a barrier for most customers - although education and safety audits will remain part of the sales cycle. We have observed an increased awareness and expressed interest in GASFRAC services in the basins we are targeting.

During this period of adoption, our operations in both Canada and the U.S. remain concentrated with a few key customers and our revenues are subject to fluctuation dependent on the level of drilling operations by these customers in the areas in which we are servicing them. Their levels of drilling activity can be impacted by numerous factors including, but not limited to, operational difficulties, project scheduling, infrastructure limitations, weather conditions, hunting restrictions, and budgetary priorities. As noted, our revenues are impacted by the activity of our two major customers. In Canada, a major customer has re-allocated a large amount of its 2014 capital expenditure budget from Western Canada to offshore East Coast Canada and as a result we do not anticipate significant revenues from them in the second half of 2014. However we are currently completing a project with Corridor Resources in New Brunswick and have several smaller jobs in the pipeline for new customers. In the USA, BlackBrush has resumed drilling and fracturing activity in the San Miguel formation in August and has indicated their intention to complete three wells a month on average. In addition we anticipate trials in the Permian, Utica and Eagle Ford formations in the second half of 2014.

On June 19, 2014, the Company entered into a Revolving Credit and Security Agreement (the "Facility") to replace its former short term bank credit facility. The Facility is a five-year revolving credit facility of up to $60 million subject to a borrowing base. Initially $35 million will be available under the Facility, with availability subject to increase based on future performance of the Company. During this period of customer adoption, there remains the risk of fluctuations and uncertainty to the timing of our cash flows, and this can and have resulted in breaches to bank covenants.

FORWARD-LOOKING STATEMENTS

This document contains certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. These statements are only as of the date of this document and we do not undertake to publicly update or revise these forward looking statements whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. These forward looking statements include, among other things:


--  expectations that the market focus is moving toward customized
    fracturing fluids;
--  expectations that the US mandate to eliminate flaring comes into effect
    in 2015;
--  expectations that the Company's innovative technology will provide the
    Company with opportunities to expand the Company's market share in
    Canada and the U.S.;
--  expectations of securing financing for 2014 and beyond;
--  expectations as to the level of funding available under the Company's
    credit facility;
--  expectations as to the degree of activity by key customers;
--  expectations as to fluctuations in revenue due to customer
    concentration;
--  expectations of the impact of weather on activity in Canada in 2014;
--  expectations as to activity levels in North America;
--  expectations as to capital development programs of major customers;
--  expectations as to the rate of trials and adoption of the Company's
    technology by E&P companies;
--  expectations as to the Company's future market position in the industry;
--  expectations as to the supply of raw materials and timing of purchase
    commitments;
--  expectations as to the pricing of the Company's services in Canada and
    the U.S.;
--  expectations as to obtaining long term contracts with customers;
--  expectations of fracturing industry pricing and the pricing of the
    Company services in North America in 2014 and beyond;
--  expectations of oil and natural gas commodity prices in 2014; and
--  expectations of propane and other LPG prices in 2014 and forward.

These statements are only predictions and are based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things, industry activity; effect of market conditions on the demand for the Company's services; the ability to obtain qualified staff, equipment and services in a timely manner; the effect of current plans; the timing of capital expenditures, receipt of added equipment operating capacity; future oil and natural gas prices and the ability of the Company to successfully market its services.

By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. These risks and uncertainties include: changes in drilling activity; fluctuating oil and natural gas prices; general economic conditions; weather conditions; regulatory changes; the successful development and execution of technology; customer acceptance of new technology; the potential of competing technologies by market competitors; the availability of qualified staff, raw materials and property and equipment, the Company's liquidity and financial capacity, the Company sourcing funding to meet ongoing obligations and foreign currency fluctuations. The Company's annual MD&A for December 31, 2013, Annual Information Form and other documents fled with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the other risks, the material assumptions and other factors that could influence actual results and which are incorporated herein.

Actual results, performance or achievement could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive from them.


Condensed Interim Consolidated Statement of Financial Position
Unaudited

As at:                                         Jun 30, 2014   Dec 31, 2013
----------------------------------------------------------------------------
                                                 CAD$ '000      CAD$ '000
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                            3,966          1,955
  Trade and other receivables                          4,752         26,037
  Inventory                                            9,500         12,645
  Prepaid expenses                                     1,708          1,459
----------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                  19,926         42,096
----------------------------------------------------------------------------

NON-CURRENT ASSETS
  Plant and equipment                                170,857        193,612
  Intangible assets                                      617            780
  Other assets                                           961          6,309
----------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS                             172,435        200,701
----------------------------------------------------------------------------
TOTAL ASSETS                                         192,361        242,797
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Trade payables and accrued liabilities               6,634         14,352
  Provisions                                             911            742
  Current portion of finance lease obligation            919          1,359
  Current portion of credit facility                       -         18,573
----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                              8,464         35,026
----------------------------------------------------------------------------

NON-CURRENT LIABILITIES
  Finance lease obligation                               770            835
  Operating lease obligation                              98             79
  Credit facility                                     21,159              -
  Convertible debentures                              36,270         35,648
  Commitments and contingencies
----------------------------------------------------------------------------
TOTAL NON-CURRENT LIABILITIES                         58,297         36,562
----------------------------------------------------------------------------
TOTAL LIABILITIES                                     66,761         71,588
----------------------------------------------------------------------------

CAPITAL & RESERVES
  Share capital                                      259,859        259,823
  Contributed surplus                                  6,628          6,461
  Foreign currency translation reserve                 5,372          5,326
  Retained earnings (deficit)                       (146,259)      (100,401)
----------------------------------------------------------------------------
TOTAL EQUITY                                         125,600        171,209
----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           192,361        242,797
----------------------------------------------------------------------------
On behalf of the Board

James Hill               Mark Williamson

Condensed Interim Consolidated Statements of Comprehensive Loss
Unaudited

                              For the three months     For the six months
                                     ended                   ended
                            ------------------------------------------------
                              Jun 30,     Jun 30,     Jun 30,     Jun 30,
                                2014        2013        2014        2013
----------------------------------------------------------------------------
                             CAD$ '000   CAD$ '000   CAD$ '000   CAD$ '000

REVENUE                           7,326      30,561      19,499      62,019
----------------------------------------------------------------------------

EXPENDITURES
  Direct operating costs         10,509      23,747      26,976      49,791
  Selling, general and
   administrative                 3,991       5,100       8,310       9,743
  Share based compensation          185         311         257         576
  Depreciation and
   amortization                   6,034       6,377      12,337      12,970
  Impairments                    16,600         120      16,600         120
  Finance cost                    1,551       1,564       2,951       3,334
  Foreign exchange (gain)
   loss                              25         (45)       (590)         (7)
----------------------------------------------------------------------------
                                 38,895      37,174      66,841      76,527
----------------------------------------------------------------------------

OTHER INCOME (LOSS)
  Gain / (loss) on
   disposition of assets           (123)      1,798       1,479       1,798
  Interest income                     3           4           5          15
----------------------------------------------------------------------------
                                   (120)      1,802       1,484       1,813
----------------------------------------------------------------------------

LOSS BEFORE INCOME TAXES        (31,689)     (4,811)    (45,858)    (12,695)
  Income tax benefit                  -           -           -           -
----------------------------------------------------------------------------
LOSS FOR THE PERIOD             (31,689)     (4,811)    (45,858)    (12,695)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

OTHER COMPREHENSIVE
 (LOSS)/INCOME ITEMS THAT
 WILL BE RECLASSIFIED TO
 PROFIT AND LOSS
  Exchange differences on
   translating foreign
   operations                    (1,805)      2,131          46       3,633
----------------------------------------------------------------------------
OTHER COMPREHENSIVE (LOSS)/
 INCOME                          (1,805)      2,131          46       3,633
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE LOSS FOR
 THE PERIOD                     (33,494)     (2,680)    (45,812)     (9,062)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LOSS PER SHARE
  Basic (per share)              (0. 50)      (0.08)      (0.72)      (0.20)
----------------------------------------------------------------------------
  Diluted (per share)             (0.50)      (0.08)      (0.72)      (0.20)
----------------------------------------------------------------------------

Condensed Interim Consolidated Statement of Changes in Equity
Unaudited
                                                Foreign
                                               currency  Retained
                         Share Contributed  translation  earnings     Total
                       capital     surplus      reserve  (Deficit)   Equity
----------------------------------------------------------------------------
                     CAD$ '000   CAD$ '000    CAD$ '000 CAD$ '000 CAD$ '000

Balance as at
 January 1, 2013       259,551       5,810        1,055   (75,972)  190,444
 Loss For the six
  months ended June
  30, 2013                                                (12,695)  (12,695)
 Other comprehensive
  income for the six
  months ended June
  30, 2013, net of
  income tax                                      3,633               3,633
----------------------------------------------------------------------------
Total comprehensive
 loss for the six
 months ended June
 30, 2013                                         3,633   (12,695)   (9,062)
 Exercise of share
  options                  200         (50)           -         -       150
 Release from
  restricted shares         36         (36)           -         -         -
 Recognition of
  share based
  compensation               -         419            -         -       419
----------------------------------------------------------------------------
Balance as at June
 30, 2013              259,787       6,143        4,688   (88,667)  181,951
----------------------------------------------------------------------------

                                                Foreign
                                               currency  Retained
                         Share Contributed  translation  earnings     Total
                       capital     surplus      reserve  (Deficit)   Equity
----------------------------------------------------------------------------
                     CAD$ '000   CAD$ '000    CAD$ '000 CAD$ '000 CAD$ '000
Balance as at
 January 1, 2014       259,823       6,461        5,326  (100,401)  171,209
 Loss For the six
  months ended June
  30, 2014                                            -   (45,858)  (45,858)
 Other comprehensive
  income for the six
  months ended June
  30, 2014, net of
  income tax                                         46                  46
----------------------------------------------------------------------------
Total comprehensive
 loss for the six
 months ended June
 30, 2014.                   -           -           46   (45,858)  (45,812)
 Exercise of share
  options                    -           -            -         -         -
 Release from
  restricted shares         36         (36)           -         -         -
 Recognition of
  share based
  compensation                         203            -         -       203
----------------------------------------------------------------------------
Balance as at June
 30, 2014              259,859       6,628        5,372  (146,259)  125,600
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Condensed Interim Consolidated Statements of Cash Flows
Unaudited

                              For the three months     For the six months
                                     ended                   ended
                            ------------------------------------------------
                              Jun 30,     Jun 30,     Jun 30,     Jun 30,
                                2014        2013        2014        2013
----------------------------------------------------------------------------
                             CAD$ '000   CAD$ '000   CAD$ '000   CAD$ '000
CASH FLOWS PROVIDED BY (USED
 IN):
OPERATING ACTIVITIES
  Net loss for the period       (31,689)     (4,811)    (45,858)    (12,695)
  Adjusted for:
    Depreciation and
     amortization                 6,034       6,377      12,337      12,970
    Equity settled share
     based compensation             155         216         203         419
    Impairments                  16,600         120      16,600         120
    Bad debt expense                  -         528           -         528
    Finance cost per income
     statement                    1,551       1,564       2,951       3,334
    Unrealized foreign
     exchange loss / (gain)          33          68        (674)        137
    (Gain) / loss on
     disposition of assets          123      (1,798)     (1,479)     (1,798)
----------------------------------------------------------------------------
                                 (7,193)      2,264     (15,920)      3,015
  Net change in non-cash
   operating working capital      1,367      (3,373)      8,432       1,478
----------------------------------------------------------------------------
Cash provided (used) by
 operating activities            (5,826)     (1,109)     (7,488)      4,493
  Interest paid                    (512)       (599)     (2,235)     (2,425)
----------------------------------------------------------------------------
Net cash provided (used) by
 operating activities            (6,338)     (1,708)     (9,723)      2,068
----------------------------------------------------------------------------

INVESTING ACTIVITIES
  Purchases of plant and
   equipment                        518      (1,363)     (1,892)     (1,831)
  Acquisition of intangible
   assets                           (24)        (41)        (39)        (82)
  Proceeds from sale of
   plant and equipment              685       3,988      10,009       3,988
  Net change in non-cash
   investing working capital       (513)       (435)       (516)       (770)
----------------------------------------------------------------------------
Net cash provided (used) by
 investing activities               666       2,149       7,562       1,305
----------------------------------------------------------------------------

FINANCING ACTIVITIES
  Proceeds from common
   shares issued (net of
   share issue cost)                  -         150           -         150
  Net finance leases
   repayments                      (277)        (42)       (509)       (266)
  HSBC credit facility
   repayment                    (15,037)     (4,493)    (18,573)    (10,635)
  PNC credit facility draw       23,220           -      23,220           -
----------------------------------------------------------------------------
Net cash provided (used) by
 financing activities             7,906      (4,385)      4,138     (10,751)
----------------------------------------------------------------------------

Net increase (decrease) in
 cash and cash equivalents        2,234      (3,944)      1,977      (7,378)
Cash and cash equivalents at
 beginning of period              1,902       4,644       1,955       7,927
Effects of exchange rate
 changes on the balance of
 cash held in foreign
 currencies                        (170)        102          34         253
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS -
 END OF THE PERIOD                3,966         802       3,966         802
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Company will host a conference call on August 8, 2014 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's results for the second quarter of 2014.

To listen to the webcast of the conference call, please enter: http://www.gowebcasting.com/5688 in your web browser or visit the Investor Information section of our website www.gasfrac.com.

To participate in the Q&A session, please call the conference call operator at 1-800-769-8320 or 1-416-340-8530 and ask for "GASFRAC Second Quarter Results Conference Call".

A replay of the call will be available until August 15, 2014 by dialing 1-800-408-3053 (North America) or 1-905-694-9451 (outside North America). Playback passcode: 2949462. The Company will also archive the conference on its website at www.gasfrac.com.

GASFRAC Energy Services, Inc. is an oil and gas technology and service company headquartered in Calgary, Alberta and the sole provider of gelled LPG fracturing technology in North America.

This news release contains certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. These statements are only as of the date of this document and we do not undertake to publicly update or revise these forward looking statements whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. Forward-looking statements including estimates, projections and assumptions which we believe are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: industry activity; the general stability of the economic and political environment; effect of market conditions on demand for the Company's products and services; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate its business in a safe, efficient and effective manner; the performance and characteristics of various business segments; the effect of current plans; the timing and costs of capital expenditures; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services.

Forward-looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: the ability of the Company to satisfy all conditions related to the financing, fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; the successful exploitation and integration of the technology; customer acceptance of the technology; success in obtaining issued patents; the potential development of competing technologies by market competitors; availability of products, qualified personnel, manufacturing capacity and raw materials, the Company's liquidity and financial capacity, the Company sourcing funding to meet ongoing obligations and foreign currency fluctuations. In addition, actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth under the section entitled "Business Risks" in the Company's annual MD&A and Annual Information Form filed on SEDAR at www.sedar.com.

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The BPM world is going through some evolution or changes where traditional business process management solutions really have nowhere to go in terms of development of the road map. In this demo at 15th Cloud Expo, Kyle Hansen, Director of Professional Services at AgilePoint, shows AgilePoint’s unique approach to dealing with this market circumstance by developing a rapid application composition or development framework.
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The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo (http://www.CloudComputingExpo.com), moderated by Ashar Baig, Research Director, Cloud, at Gigaom Research, Nate Gordon, Director of T...
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