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HSE Integrated Ltd. Announces Record Second Quarter 2008 Financial Results

NEWS RELEASE - August 13, 2008

HSE Integrated Ltd. (“HSE”, “Our”, “We”, or the “Company”) today announced its financial results for the second quarter and year to date ended June 30, 2008. Financial and operating highlights are summarized below:

  • Quarterly revenue was $28.1 million, the highest quarterly revenue in the history of the company and 45% higher than the same period in the previous year.
  • EBITDA for the quarter was $2.2 million, a $4 million increase from EBITDA of ($1.8) million last year.
  • Six month revenue was $55.7 million, also the highest for two consecutive quarters in HSE’s history and an 18% improvement over the previous year.
  • EBITDA for the first six months was $4.8 million, a 60% increase from the same period in fiscal 2007.
  • Industrial safety revenues continue to grow, increasing to record levels of $19.4 million for the second quarter, a 51% gain from 2007 and a 191% increase over the second quarter of 2006. For the first six months, Industrial revenue was $31.0 million, a 48% gain over the first half of 2007. As measured by revenue, in the first half of the 2008 fiscal year HSE’s Industrial safety services group is approximately three times the size it was during the same period in 2006.
  • For the first time, Industrial safety revenue exceeded Oilfield safety revenue for the first six months of the year
  • Oilfield revenues for the quarter were $8.7 million, an increase of 34% over 2007, reflecting a shorter spring break up and an improvement in natural gas prices and related activity. However, total Oilfield safety services for the quarter were still significantly lower than the $13.3 million generated in the second quarter of fiscal 2006.
  • Oilfield safety service revenues for the first six months were $24.6 million compared to $26.3 million in 2007 and $36.6 million in the first half of 2006.
  • Revenue from the Oilsands region of Northeast Alberta continued to grow, accounting for 16% of revenues in the first six months, an increase of 62% over the prior year and 558% higher than in 2006.
  • Central and Atlantic Canada continue to enjoy strong rates of growth. To June 30, revenue totaled $10.3 million, a 103% increase over the same period in 2007.
  • SG&A as a percentage of revenues continued to decline reflecting the Company’s commitment to cost control and improved margins. SG&A for the quarter was $2.5 million or 9% of revenues compared to $2.6 million and 13% in the prior year. For the first six months, SG&A declined to $4.8 million from $5.1 million and as a percentage of revenue declined to 9% in 2008 from 11% in 2007.
  • Announced May 7, 2008, HSE made significant progress in developing its partnership with Boots & Coots International Well Control, Inc. (“Boots & Coots”) to exploit expansion into the continental U.S. marketplace. The first field service equipment is scheduled to arrive in Texas in mid-August with more scheduled to follow in the third and fourth quarters.

David Yager, Chairman and CEO, offered the following comments for HSE’s second quarter 2008 results:

“For four years HSE has invested in diversifying its revenue base away from conventional oil and gas in order to offset the historical seasonal and commodity-driven cyclicality that characterizes this business in Canada. This makes for a better business in every way, from cashflow management to creating a more attractive working environment for our valuable employees.

To accomplish this, for four years HSE has had a strategy of moving into new industries and geographic markets in order to achieve and hopefully sustain consistent levels of growth regardless of the historic cyclicality of the oilfield services sector in western Canada.

With the financial results HSE is releasing today reflecting the continued growth in markets in which the Company did not even have a presence prior to 2005, we at HSE are confident our business model is sound with more opportunities in the future. It is obvious from this growth that HSE provides essential and quality services for our growing client base across the country.

Internal efforts to improve operating margins continue. With SG&A and field delivery costs fixed, the Company expects that profit margins will increase with revenue and ongoing efficiency gains. An improvement in demand for Oilfield safety services in Alberta – plus initiatives to expand into other provinces and the United States – should help HSE achieve more historic utilization levels for this capital asset class. This will continue to improve revenue and margins.

On behalf of the Board of Directors, we’re extremely proud of the outstanding work and commitment our managers and staff have made in the past two years to achieve this dramatic change in our business going forward, a change for the better of all HSE’s stakeholders: employees, clients, and capital providers. The effort in the second quarter by everyone is particularly commendable.”

For further information and analysis please see the attached Management Discussion and Analysis and Financial Statements.

CONFERENCE CALL

HSE will be hosting a conference to discuss their results at 10 AM (Eastern Daylight Time), 8 AM (Mountain Daylight Time) on Thursday August 14, 2008.

Dial-In Number: 1-800-587-1893 or 1- 416-915-5761 2

Conference Replay toAugust 28, 2008: 1-416-640-1917 or 1-877-289-8525 (Passcode: 21280295 followed by the pound sign)

Webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID= 2368520

HSE is an integrated, national supplier of industrial Health, Safety and Environmental services. From its head office in Calgary, Alberta, it serves its clients from field service locations in Alberta, British Columbia, Saskatchewan, Ontario, Nova Scotia, New Brunswick and Michigan. Expansion in to the United States is underway. HSE trades on the TSX under the symbol “HSL”.

Forward Looking Statements

This news release may contain forward-looking statements concerning, among other things, the Company’s prospects, expected revenues, expenses, profits, financial position, strategic direction, and growth initiatives, all of which are subject to risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms and phrases such as expect, anticipate, estimate, believe, may, will, intend, plan, continue, project, objective and other similar terms and phrases. These statements are based on certain assumptions and analyses made by the Company based on its experience and assessment of current conditions, known trends, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to numerous external variables, both known and unknown, such as changes in commodity prices for natural gas and oil, changes in drilling activity, weather conditions, industry-specific and general economic conditions and exchange rate fluctuations. If any of these risks and uncertainties materializes or if assumptions are incorrect, actual results may differ materially from those expressed or implied in the forward-looking statements. The forward-looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon.

Non GAAP Measures

This report makes reference to EBITDA, a measure that is not recognized under generally accepted accounting principles (GAAP). Management believes that, in addition to net earnings, EBITDA is a useful supplementary measure. EBITDA provides investors with an indication of earnings before provisions for interest, taxes, amortization, gains or losses on the disposal of property and equipment, foreign exchange gains or losses, and the non-cash effect of stock-based compensation expense. Investors should be cautioned that EBITDA should not be construed as an alternative to net earnings determined by GAAP as an indication of the Company’s performance. This method of calculating EBITDA may differ from that of other companies and accordingly may not be comparable to measures used by other companies.

For more information please contact:

HSE Integrated Ltd.
David Yager, Chairman & CEO
Telephone: (403) 266-1833
E-Mail:

James M. Hill, President, COO and Acting CFO
Telephone: (519) 429-0080
E-Mail: jhill@hseintegrated.com