PHOENIX OILFIELD HAULING INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended September 30, 2010 and 2009 (unaudited)

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1 INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended September 30, 2010 and 2009

2 Interim Consolidated Balance Sheets (In thousands of Canadian dollars) (Unaudited) ASSETS September 30, 2010 December 31, 2009 CURRENT ASSETS Accounts receivable $ 7,414 $ 5,946 Income taxes recoverable Prepaid expenses ,390 6,541 Equipment and leasehold improvements 27,528 33,268 Intangible assets Goodwill $ 36,530 $ 40,547 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Revolving credit facility (note 4) $ 1,970 $ 1,905 Accounts payable and accrued liabilities 3,217 2,949 Current portion of long-term debt (note 5) 17,179 17,856 Current portion of obligations under capital lease 2,150 3,506 24,516 26,216 Long-term debt (note 5) Obligations under capital lease Secured debentures (note 6) - 11,557 Future income taxes (note 3) Deferred gain on sale SHAREHOLDERS' EQUITY Share capital (note 6) 49,943 41,815 Contributed surplus (note 7) 8,570 3,036 Deficit (47,304) (42,507) 11,209 2,344 $ 36,530 $ 40,547 Basis of presentation - going concern (note 1) Subsequent event (note 12) See accompanying notes to the unaudited interim consolidated financial statements. Approved by the Board: "David Werklund" Director "Arthur "Gerry Dumont" Gilewicz" Director

3 Interim Consolidated Statements of Loss and Comprehensive Loss and Deficit (In thousands of Canadian dollars, except per share amounts) (Unaudited) For the three months ended September 30, For the nine months ended September 30, REVENUE $ 10,031 $ 5,862 $ 24,958 $ 26,767 EXPENSES: Operating 7,761 5,261 19,383 20,224 Selling, general and administrative 1,259 1,602 3,986 5,046 1,011 (1,001) 1,589 1,497 Depreciation - equipment and leasehold improvements 1,067 1,434 3,366 4,417 Loss on disposal of equipment , Interest on long-term debt 491 1,972 1,481 3,647 Other interest Amortization of intangible assets Foreign exchange loss ,919 4,121 6,574 9,265 LOSS BEFORE INCOME TAXES (908) (5,122) (4,985) (7,768) INCOME TAXES (RECOVERY) (note 3): Current (312) 9 (271) 8 Future 245 (47) 83 (56) (67) (38) (188) (48) LOSS AND COMPREHENSIVE LOSS $ (841) $ (5,084) $ (4,797) $ (7,720) DEFICIT, beginning of period $ (46,463) $ (33,911) $ (42,507) $ (31,275) DEFICIT, end of period $ (47,304) $ (38,995) $ (47,304) $ (38,995) Loss per common share: Basic $ - $ (0.08) $ (0.03) $ (0.12) Diluted $ - $ (0.08) $ (0.03) $ (0.12) Weighted average common shares outstanding ('000's): Basic 168,541 66, ,293 66,248 Diluted 168,541 66, ,293 66,248 See accompanying notes to the unaudited interim consolidated financial statements.

4 Interim Consolidated Statements of Cash Flows (In thousands of Canadian dollars) (Unaudited) For the three months ended September 30, For the nine months ended September 30, CASH PROVIDED BY (USED IN): OPERATING ACTIVITIES: Loss $ (841) $ (5,084) $ (4,797) $ (7,720) Items not involving cash: Depreciation 1,067 1,434 3,366 4,417 Future income taxes (recovery) (note 3) 245 (47) 83 (56) Loss on disposal of equipment , Stock based compensation expense Amortization of intangible assets Accrued interest on long-term debt Accrued interest on secured debentures Accretion and amortization expense - 1,163-1, (1,611) 654 (475) Changes in non-cash working capital (note 8) (2,181) 479 (1,581) 4,455 (1,246) (1,132) (927) 3,980 INVESTING ACTIVITIES: Purchase of equipment and leasehold improvements (34) (81) (92) (1,737) Proceeds on disposal of equipment and leasehold improvements , ,617 (1,553) FINANCING ACTIVITIES: Increase in revolving credit facilty 1, Proceeds on issuance of common shares, net of issue costs - - 1,965 - Repayment of long-term debt (127) (1,059) (1,164) (3,193) Proceeds on sale/leaseback of equipment ,508 Repayment of obligations under capital lease (427) (369) (1,556) (1,263) 1,094 (513) (690) (2,427) CHANGE IN CASH - (1,562) - - CASH, beginning of period - 1, CASH, end of period $ - $ - $ - $ - Supplemental cash flow information: Interest paid $ 512 $ 409 $ 1,510 $ 1,614 Income taxes paid (recovered) $ - $ (72) $ 73 $ 726 Non-cash financing activity: Acquisition of equipment under capital lease $ 514 $ - $ - $ - Secured debentures settled with common shares $ - $ - $ 11,557 $ - See accompanying notes to the unaudited interim consolidated financial statements.

5 1. Basis of Presentation Going Concern Phoenix Oilfield Hauling Inc. s ( the Company ) primary business activity is the transportation of products, materials and equipment required for the exploration, development and production of petroleum resources. The Company operates in Western Canada and the United States. These unaudited interim consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles ( GAAP ) which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the unaudited interim consolidated financial statements and the reported amounts of revenue and expenses during the period. Significant items subject to such estimates and assumptions include the useful lives of equipment and leasehold improvements, the valuation of intangible assets, equipment and leasehold improvements, goodwill, accounts receivable and future income taxes. Assumptions underlying asset valuations are impacted by the uncertainty of predictions concerning future events. By their nature, asset valuations are subjective and do not necessarily result in precise determinations. For business combinations, key areas of estimation and judgment include the allocation of the purchase price. Actual results could differ materially from these estimates. These unaudited interim consolidated financial statements have been prepared on a going concern basis in accordance with Canadian GAAP. The going concern basis of presentation reflects the assumption that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. There is significant doubt about the appropriateness of the use of the going concern assumption because the Company: experienced significant losses during the years ended December 31, 2009, 2008 and 2007, as well as during the three and nine months ended September 30, 2010; has a significant working capital deficiency as at September 30, 2010; and is in default under the terms of its long-term debt agreements because it failed to make payments of principal due in September 2009 through September 2010 under the non-revolving term loan and under the bank loan. This default constitutes a default under the Company s lending agreements. In addition, the Company is not in compliance with certain existing financial covenants within its revolving credit facility and long-term debt agreements as at September 30, The Company has not received a waiver from its lenders for these covenant breaches or for failure to make the required principal payments. There is no certainty that these covenants will be modified and, if they are not, this violation of the covenants and failure to make the required principal payments under its lending agreements could result in a requirement to immediately repay all amounts due under the revolving credit facility and longterm debt agreements. As a result of cross covenant violations, the Company has reclassified certain scheduled repayments under its capital lease facility and long-term debt due beyond one year as a current liability. The Company entered into a forbearance agreement with its principal lender effective December 1, 2009 under which the lender agreed to forbear demanding repayment of its loans until February 28, 2010 and then by way of extension agreements further extended forbearance until October 31, 2010.

6 1. Basis of Presentation (continued) An extension of the agreements beyond this date has not been granted. Management is in the process of renegotiating the extension on the forbearance agreement with its lenders. During the forbearance period no principal payments were required on the Company s long-term debt. There is no certainty that the forbearance agreement will be extended beyond October 31, Based on the Company s current projections, Management believes it is unlikely that the Company will be in compliance with certain existing financial covenants within its revolving credit facility and long-term debt loan agreements during the next twelve months without an amendment or waiver by its lender. There is no certainty that sufficient working capital will be obtained from operations, shareholders and other external financing sources to meet the Company s liabilities and commitments as they become payable. Future operations are dependant on the Company s ability to generate sufficient profits to discharge its liabilities and service its debt and maintain the ongoing support of its lenders and shareholders. These financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis was not appropriate for these financial statements, then significant adjustments would likely be necessary in the carrying amount of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. 2. Significant Accounting Policies These unaudited interim consolidated financial statements are prepared in accordance with GAAP for interim financial statements and do not include all of the disclosures normally contained in the Company s annual consolidated financial statements. Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the Company s audited annual consolidated financial statements and notes thereto for the year ended December 31, 2009 included in the Company s Annual Report. The unaudited interim consolidated financial statements include the accounts of Phoenix Oilfield Hauling Inc. and its wholly-owned subsidiaries. All material inter-company amounts have been eliminated upon consolidation. 3. Income Taxes The provision for income taxes reflects changes in the valuation allowance respecting the fact that the net future income tax asset has been reduced by a valuation allowance to the extent that it is more likely than not that some portion or all of the assets will not be realized. Consequently the effective income tax rate on the financial statements differs significantly from the currently enacted statutory income tax rate.

7 4. Revolving Credit Facility The revolving credit facility is secured by a general security agreement creating first security interest on all present and after acquired assets and is subject to a borrowing base formula based upon eligible accounts receivable. The maximum amount available on the revolving credit facility was $4,000 on September 30, 2010 (December 31, $3,656). As disclosed in note 1, the Company entered into a forbearance agreement with the lender effective December 1, 2009 under which the lender agreed to forbear demanding repayment of the loan until February 28, 2010 and then by way of extension agreements further extended forbearance until October 31, Pursuant to the first forbearance agreement effective December 1, 2009 the revolving credit facility bears interest at the Company s principal lender s Canadian prime rate plus 4.00%, and in the case of the extensions, the lender s Canadian prime rate plus 6.75%. The bank credit facility requires that the Company satisfy certain financial covenants, including the maintenance of certain financial ratios. As at September 30, 2010 the Company was not in compliance with the financial covenants contained within its revolving credit facility, which have not been waived by its lender. An extension of the agreements beyond this date has not been granted. Management is in the process of renegotiating the extension on the forbearance agreement with its lenders. 5. Long-term Debt As described in note 1, the Company is in default of its obligations under its non-revolving term loan because it failed to make required principal payments for the period of September 2009 through September 2010 paying interest only during this period. The Company entered into a forbearance agreement with the lender effective December 1, 2009 under which the lender agreed to forbear demanding repayment of the loan until February 28, 2010 and then by way of an extension agreements further extended forbearance until October 31, During the forbearance period no principal payments were required on this facility and interest was increased to, in the case of the initial term, the lender s Canadian bank prime rate plus 4.00%, and in the case of the extensions, the lender s Canadian bank prime rate plus 6.75%. An extension of the agreements beyond this date has not been granted. Management is in the process of renegotiating the extension on the forbearance agreement with its lenders. As described in note 1, the Company is also in default of its obligations under its bank loan because it failed to make required principal payments from September 2009 through September 2010 paying certain interest and fees only during this period. The Company entered into a forbearance agreement with the lender effective December 1, 2009 under which the lender agreed to forbear demanding repayment of the loan until February 28, 2010 and then by way of an extension agreements further extended forbearance until October 31, During the forbearance period no principal payments were required on this facility and the fee was increased to 18% per annum in the case of the initial term and to 20.75% per annum in the case of the second term. Payment of fees equal to 14% will be deferred until maturity of the loan. During the nine months ended September 30, 2010, the Company renegotiated the terms of the bank loan, including deferred interest, such that the cost of the loan is the lenders prime rate plus 14% of which prime plus 0.5% is payable monthly and 13.5% accrues and is deferred until maturity of the loan.

8 6. Share Capital a) Issued share capital: Number of common shares Amount Balance at December 31, ,247,716 $ 41,815 Issued to settle secured debentures 77,043,601 6,163 Issued for cash 25,250,000 2,020 Share issuance costs - (55) Balance at September 30, ,541,317 $ 49,943 In January 2010, Phoenix Oilfield Hauling Inc. announced the closing of its Capital Restructuring and the closing of its Private Placement (the Re-organization ). Pursuant to the Re-organization, Werklund Capital Corp., an entity related to the Chairman of the Board of the Company, ("Werklund Co.") and Alberta Ltd. ("Leo Co"), an entity related to a Director of the Company, each exchanged their combined secured debentures, including accrued interest, of approximately $11,557 (the "Debt") for 77,043,601 common shares of the Company. The 77,043,601 common shares were valued at $0.15 per common share, an 87.5% premium to the closing price of the Company s common shares on the date of issue. As part of the Re-organization, Werklund Co. was granted a second seat on the Board of Directors and agreed to re-price the exercise price of its 5,000,000 previously issued warrants of the Company from $0.35 to $0.15 per share. Share capital was increased respecting this transaction by $0.08 per share issued, being the closing price of the Company s common shares immediately prior to the conversion, with the remainder of the carrying value of the debt recorded as an increase to contributed surplus. In connection with the Re-organization, the Company also completed a private placement (the "Private Placement") of common shares of the Company. A total of 25,250,000 common shares were issued for cash at a price of $0.08 per common share for aggregate gross proceeds of $2,020,000. Issuance costs of $55 were incurred related to the Re-organization and have been recorded as a reduction of share capital.

9 6. Share Capital (continued) b) Options outstanding: The number of options outstanding, their weighted average exercise price and changes through grants, exercise or forfeiture are summarized below for the nine months ended September 30, 2010: September 30, 2010 Number of options Weighted average exercise price Outstanding, December 31, ,140,000 $ 0.24 Granted - $ - Cancelled (1,425,000) $ 0.30 Forfeited (555,000) $ 0.38 Outstanding, September 30, ,160,000 $ 0.16 Exercisable 1,440,000 $ 0.16 Information about options outstanding as at September 30, 2010 is as follows: Exercise Prices as at September 30, 2010 Number outstanding Options outstanding Remaining life (years) Weighted average exercise price Number exercisable Options exercisable Weighted average exercise price $ , $ ,000 $ 0.30 $ ,650, $ ,100,000 $ ,160,000 $ ,440,000 $ 0.16

10 7. Contributed Surplus Balance, December 31, 2009 $ 3,036 Incremental fair value of re-priced warrants issued with respect to the settlement of the Werklund Co. secured debenture 47 Incremental cost of re-priced warrants issued with respect to the settlement of the Werklund Co. secured debenture (47) Excess of carrying value of secured debentures over fair value of common shares issued to settle the debentures. 5,394 Stock-based compensation expense 140 Balance, September 30, 2010 $ 8,570 As disclosed in note 6, in connection with the Re-organization the Company agreed to re-price 5,000,000 previously issued warrants from $0.35 to $0.15 per share. The re-pricing was accounted for as a modification of the original issuance and since the modified terms of the grant made it more valuable than the original grant, the Company recorded an expense of $47 directly to contributed surplus as (i) the transaction occurred with a related party and (ii) the incremental cost was determined to be an integral part of the Re-organization. The incremental per share weighted average fair value of these warrants was approximately $0.01 calculated using the Black-Scholes option pricing model and incorporating the following weighted average assumptions: risk-free interest rate 2.47%, expected life 3.67 years, expected dividends of nil and expected volatility of 128%.

11 8. Changes in Non-cash Working Capital For the three months ended September 30, For the nine months ended September 30, Accounts receivable $ (3,272) $ (19) $ (1,468) $ 6,855 Income taxes recoverable or payable (312) (4) (344) (799) Prepaid expenses and deposits (37) 9 Accounts payable and accrued liabilities 1, (1,610) 9. Related Party Transactions $ (2,181) $ 479 $ (1,581) $ 4,455 The following table summarizes the Company s related party transactions and the nature of the relationships for the periods noted. Nature of relationship Selling, general and administrative expense: For the three months ended September 30, For the nine months ended September 30, i) Alberta Ltd. (a) $ 45 $ 83 $ 135 $ 343 ii) Calgary landlords (b) (g) iii) Strathmore landlord (e) iv) Legal services (c) Operating expense: v) Equipment rental (d) (g) Interest on long-term debt: vi) Debenture interest (f) ,227 Share issuance costs: vii) Legal services (c) $ - $ - $ 55 $ - a) The Company leases its facilities in Nisku, Alberta and Slave Lake, Alberta from a company which is related to a Director of the Company. The amounts paid for the periods noted are rental charges per the terms of the lease agreements, which are currently month to month. The Company ceased leasing the facility in Slave Lake in August 2009.

12 9. Related Party Transactions (continued) b) The Company leases its facilities in Calgary, Alberta from companies owned or related to a significant shareholder. The leases commenced on October 16, The amounts paid for the periods noted are rental charges per the terms of the lease agreement. c) The Company purchased legal services from a legal firm in which one of the Company s directors is a partner and the Board Secretary is an associate. d) The Company has entered into rental agreements with various companies controlled by significant shareholders of the Company for the rental of equipment. e) The Company leases its office facility in Strathmore, Alberta from a company owned or related to one of its employees who is a significant shareholder. The amounts paid for the periods noted are rental charges per the terms of the lease agreement, which are currently month to month. The Company ceased leasing the facility in Strathmore in August f) The secured debentures were due to related parties. The amounts indicated are for interest paid with respect to these debentures. g) Due to the additional shares issued as a result of the Re-organization discussed in note 6, certain transactions are no longer considered related party transactions, as the shareholders are no longer considered significant shareholders of the Company. All related party transactions have been recorded at the exchange amounts. At September 30, 2010 and December 31, 2009 amounts due to related parties are as follows: September 30, 2010 December 31, 2009 Accounts payable and accrued liabilities: i) Alberta Ltd $ - $ 21 Secured debentures (note 6): i) Werklund Co debenture ii) Leo Co debenture iii) Accrued interest ,500 2,500 1, Segment Information Management has determined that the Company operates in one dominant industry segment, which involves the transportation of products, materials, and equipment required for the exploration, development and production of petroleum resources.

13 11. Seasonality of Operations The Company's earnings generally follow the seasonal activity pattern of western Canada's oil and gas industry because of the significance of its operations in Canada. The oil and gas industry in western Canada is typically more active during the winter months as the movement of heavy equipment over frozen ground is generally easier. During the spring the effect of road bans that limit load weights and wet weather can adversely impact the Company s ability to generate revenue. Rain through the spring, summer and fall also reduces activity levels because of the weather s effect on ground conditions and consequently its load bearing capacity. The Company s operations in the United States are generally less affected by weather and are less seasonal by nature. 12. Subsequent event Subsequent to September 30, 2010 the Company granted 11,847,892 stock options to certain of its senior executives. The options have a term of five years, are exercisable at $0.10 per share, and vest over three years.