Condensed Interim Consolidated Financial Statements Six months ended October 31, 2011 (Unaudited)

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Condensed Interim Consolidated Financial Statements

Six months ended October 31, 2011

(Unaudited)

500 – 435 - 4th Avenue S.W. Calgary, AB T2P 3A8 Tel: 403-984-9798

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NOTICE TO READER

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NEW WEST ENERGY SERVICES INC.

Condensed Interim Consolidated Statement of Financial Position (Unaudited) October 31 April 30 2011 2011 (unaudited) (Note 15)

Assets

Current:

Cash and cash equivalents $ 408,334 $ 131,999 Accounts receivable, work in process and prepaids 5,098,653 4,620,965 Inventory 245,020 797,129

5,752,007

5,550,093

Investments (Note 9) 12,081 12,081

Property and equipment - (Note 6) 1,422,129 1,319,049

Intangible assets (Note 7) 111,622 118,692 7,297,839

$ $ 6,999,915

LIABILITIES

Current liabilities:

Bank indebtedness (note 8) $ 632,156 $ -Accounts payable and accrued liabilities 1,763,417 3,199,672 Current portion of long term debt (note 8) 276,965 394,608 2,672,538 3,594,280

Long term debt (note 8) 325,798 134,571 2,998,336 3,728,851

SHAREHOLDERS' EQUITY

Share Capital (note 4) 32,294,710 32,294,710 Contributed surplus (note 5) 1,846,905 1,625,669 Deficit (29,842,112) (30,649,315) 4,299,503 3,271,064 7,297,839

$ $ 6,999,915

See accompanying notes to consolidated financial statements. Approved on behalf of the Board on December 23, 2011:

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NEW WEST ENERGY SERVICES INC.

Condensed Interim Consolidated Statement of Income and Comprehensive Income (Unaudited)

31-Oct-11 31-Oct-10 31-Oct-11 31-Oct-10

Revenue:

Product sales, engineering,

environmental and other $ 5,184,095 $ 2,527,254 $ 9,793,827 $ 5,075,144

Direct costs:

Product costs, field, commissions,

environmental and other 3,356,711 1,773,548 6,599,948 3,459,514

Gross margin 1,827,384 753,706 3,193,879 1,615,630

Operating expenses:

General and administrative expenses 1,062,766 734,089 2,046,185 1,302,896 Stock-based compensation 110,618 - 221,236 -Interest and bank charges 12,340 16,177 22,400 25,702 Amortization 45,674 46,165 96,855 68,775

1,231,398

796,431 2,386,676 1,397,373

Net income and comprehensive

Income for the period $ 595,986 $ (42,725) $ 807,203 $ 218,257

Income (loss) per share, basic $ 0.006 0.000 $ 0.009 $ 0.002

Income (loss) per share, diluted $ 0.005 0.000 $ 0.006 $ 0.002

Weighted average number of shares

Basic (note 4(e)) 91,780,431 70,539,883 91,780,431 70,539,883 Diluted (note 4(e)) 92,057,372 70,539,883 92,057,372 70,539,883 See accompanying notes to consolidated financial statements.

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New West Energy Services Inc.

Condensed Interim Consolidated Statement of Changes in Equity (unaudited)

Retained

Capital Stock Contributed Earnings Total

Number of shares Amount Surplus (Deficit) Equity

Balance, May 1, 2010 58,170,431 $ 30,712,572 $ 1,420,858 $ (31,624,867) $ 508,563 Shares issued for private placement 34,140,000 116,201 - - 116,201 Finders fees 1,100,000 55,000 - - 55,000 Shares issued costs (82,062) - - (82,062) Fair value of warrants issued 34,140,000 1,590,799 - - 1,590,799 Net income for the period - - - 260,982 260,982 Balance, July 31, 2010 127,550,431 32,392,510 1,420,858 (31,363,885) 2,449,483

Expired warrants (1,630,000) (97,800) 97,800 - -Stock-based compensation - - 107,011 - 107,011 Net income for the period - - - 714,570 714,570 Balance, April 30, 2011 125,920,431 32,294,710 1,625,669 (30,649,315) 3,271,064

Stock-based compensation - - 110,618 - 110,618 Net Income for he period - - - 211,217 211,217 Balance, July 31, 2011 125,920,431 32,294,710 1,736,287 (30,438,098) 3,592,899

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NEW WEST ENERGY SERVICES INC.

Condensed Interim Consolidated Statement of Cash Flows (Unaudited)

31-Oct-11 31-Oct-10 31-Oct-11 31-Oct-10

Operating activities:

Net Income $ 595,986 $ (42,725) $ 807,203 $ 218,257 Add (deduct): Items not involving cash

Stock based compensation 110,618 - 221,236 -Amortization 45,674 46,165 96,855 68,775 752,278 3,440 1,125,294 287,032 Change in non-cash working capital:

Decrease (increase) in

accounts receivable, workin process and prepaids (1,235,521) (678,729) (477,688) (972,582) Decrease in inventory 255,177 (230,306) 552,109 105,760 (Decrease) in accounts payable

and accrued liabilities (522,553) 588,492 (1,436,255) 260,913 Cash provided by (used in) operating activities (750,619) (317,103) (236,540) (318,877)

Investing activities:

Business combinations - - -Equipment (acquisitions) dispostions, net (197,024) 82,837 (192,865) (1,526,834) Cash provided by (used in) investing activities (197,024) 82,837 (192,865) (1,526,834)

Financing Activities:

Increase (decrease) in long-term debt 129,490 (52,883) 73,584 637,993 (Decrease) in loans payable - - - (270,696) Proceeds from issuance of shares - - - 1,680,038 Cash provided by (used in) financing activities 129,490 (52,883) 73,584 2,047,335

Increase in cash during the period (818,153) (287,149) (355,821) 201,624

Cash, beginning of period 594,331 521,730 131,999 32,957

Cash, end of period $ (223,822) $ 234,581 $ (223,822) $ 234,581

See accompanying notes to consolidated financial statements.

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NEW WEST ENERGY SERVICES INC.

Notes to Condensed Consolidated Interim Financial Statements Six months ended October 31, 2011 (unaudited)

1. Nature of operations

New West Energy Services Inc. (the “Company”) provides oilfield services to oil and gas exploration and production companies in Canada. The Company’s head office, records and registered office are located at #500 – 435 – 4th Avenue S.W., Calgary, Alberta.

The Company has two wholly owned operating subsidiaries. The two operating entities are New West Drilling Fluids Inc. (“NWDF”) that sell chemicals and provides field engineering services and BearStone Environmental Solutions Inc. (“BearStone”) that provides environmental services and operates a fleet of specialized vacuum and water trucks to the upstream oil and gas industry throughout western Canada.

2. Basis of presentation (a) Statement of compliance

The preparation of financial statements of the Company for the year ending April 30, 2012, will be prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company previously prepared its financial statements in accordance with pre-changeover Canadian Generally Accepted Accounting Principles (“Canadian GAAP”). These condensed consolidated interim financial statements for the period ended October 31, 2011, have been prepared in accordance with IAS 34 Interim Financial Reporting, and as they are part of the Company’s first IFRS annual reporting period, IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied.

As these condensed consolidated interim financial statements are the Company’s second quarter financial statements prepared using the IFRS, certain disclosures that are required to be included in annual financial statements prepared in accordance with IFRS that were not included in the Company’s most recent annual financial statements prepared in accordance with Canadian GAAP have been included in these financial statements for the comparative annual period. However, these condensed consolidated interim financial statements do not include all of the information required for full annual financial statements.

These condensed consolidated interim financial statements should be read in conjunction with the Company’s April 30, 2011 annual financial statements and the explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 15.

(b) Basis of presentation

These consolidated financial statements have been prepared on the historical cost basis, except for financial instruments which are measured at their estimated fair value. The consolidated financial statements have been prepared using accounting policies issued by the International Accounting Standards Board (“IASB”) that are anticipated to be effective for the year ended April 30, 2012. Any subsequent changes to IFRS effective on or before April 30, 2012 could result in restatement of these consolidated interim financial statements. These accounting policies, subject to certain transition exemptions at May 1, 2010 have been used throughout all periods presented in the consolidated financial statements. The effects of transition to IFRS and exemptions applied by the Company are presented in Note 15.

(c) Consolidation

These consolidated financial statements include the accounts of the Company and its three wholly owned subsidiaries, NWDF, BearStone and Ark Chemicals Inc. (“Ark”). Ark is an inactive corporation. All intercompany transactions and balances have been eliminated.

(d) Functional and presentation currency

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NEW WEST ENERGY SERVICES INC.

(e) Use of Estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on a ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected. Significant areas where estimation uncertainty and critical judgements are applied include valuation of financial instruments, valuation of property, plant and equipment, impairment losses, amortization and measurement of stock based compensation.

3. Summary of Significant Accounting Policies (a) Inventory

Inventory is valued at the lower of cost, determined on a first-in, first-out basis, and net realizable value. Inventory is comprised of raw materials and finished goods.

(b) Property and equipment

Property and equipment are recorded at cost less accumulated amortization and accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset.

Property and equipment is amortized over the estimated useful life of the assets using the straight-line method over 2 – 10 years at the following annual rates:

Field Equipment and office equipment 20%

Computer equipment 25%

Laboratory and testing equipment 20%

Leasehold improvements 20%

The trucks and trailers are recorded at cost and are amortized over the estimated useful life on a straight-line basis, less the 10% salvage value.

Trucks 12.5%

Trailers 12.5%

Amortization methods, useful lives and residual values are reviewed at each financial period and adjusted prospectively if appropriate. The Company regularly reviews its property and equipment to assess for impairment.

(c) Identifiable intangible asset

The Company’s intangible assets include computer software. Intangible assets are initially recorded at cost and are amortized using straight-line method over their estimated useful lives:

Computer software 20% annual rate

Amortization methods, useful lives and residual values are reviewed at each financial period and adjusted prospectively if appropriate. The Company regularly reviews its identifiable intangible assets to assess for impairment.

(d) Revenue Recognition

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NEW WEST ENERGY SERVICES INC.

BearStone’s oilfield services generates revenue from providing testing, treatment and disposal of drilling waste and revenue from supplying services of the equipment of vacuum and water trucks. Revenues are recognized on a monthly basis either through provision of invoice to the customer for work completed during the month or recognized utilizing a month end accrual of work in process.

(e) Cash and cash equivalents

Cash and cash equivalents are highly liquid investments, such as term deposits with major financial institutions, having a term to maturity of three months or less at acquisition, that are readily convertible to specified amounts of cash.

(f) Earnings per Share

Basic earnings per share are computed by dividing net earnings by the weighted average shares outstanding during the reported period. Diluted earnings per share is calculated based on the treasury-stock method, which assumes that any proceeds obtained on the exercise of options would be used to purchase common shares at the average market price during the reporting period. The weighted average number of shares outstanding is then adjusted by the net change.

(g) Impairment

At each reporting date the carrying amounts of the Company’s long-lived assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use, which is the present value of future cash flows expected to be derived from the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period.

For the purpose of impairment testing, items are allocated to cash-generating units to which the activity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

(h) Stock-based Compensation

The fair value of stock options granted is measured using the Black Scholes model, at the time of grant and the expense is recognized over the tranche’s vesting period. Measurement inputs include share price on measurement date, exercise price of the option, expected volatility, actual and expected life of the options, expected dividends based on the dividend yield at the date of grant, anticipated forfeiture rate, and the risk-free interest rate. The Company estimates volatility based on historical trading history excluding specific time frames in which volatility was affected by specific transactions that are not considered to be indicative of the Company’s normal share price volatility. The expected life of the options is based on historical experience and general option holder behaviour. Management also makes an estimate of the number of options that will forfeit and the rate is adjusted to reflect the actual number of options that actually vest.

(i) Measurement uncertainty

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NEW WEST ENERGY SERVICES INC.

(j) Provisions

Provisions are recognized in other liabilities when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the operating period and are discounted to present value as applicable. The Company reviews to identify onerous contracts and, where applicable, records provisions for such contacts.

(k) Financial instruments

The Company classifies its financial assets in the following categories: fair value through profit and loss held for trading category, available for sale, loans and receivables and other. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of assets at recognition.

The Company has made the following classification:

• Cash and cash equivalents are classified as “Held for trading”. They are measured at fair value and the gains or losses resulting from the re-measurement at the end of each period are recognized in net income.

• Investments are classified as “Available for sale”. They are measured at fair value as determined by active market prices and the gains or losses resulting from the re-measurement at the end of each period are recognized in other comprehensive income. Transaction costs are capitalized upon initial recognition. If a decline in fair value is deemed to be other than temporary, the unrealized loss is recognized in net income. Investments in equity instruments that do not have an active quoted market price are measured at cost.

• Accounts receivable are classified as “Loans and receivables”. They are recorded at cost, which upon their initial measurement is equal to their fair value. Subsequent measurements are recorded at amortized cost using the effective interest method.

• Loans payable and accounts payable and accrued liabilities are classified as “Other”. They are initially measured at their fair value. Subsequent measurements are recorded at amortized cost using the effective interest method.

The fair values of these financial instruments approximate their carrying values, unless otherwise noted. (l) Income Taxes

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting or taxable loss, not differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using the tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

(m) Future Accounting policies not yet adopted

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NEW WEST ENERGY SERVICES INC.

- IFRS 9 is effective for the Company on April 1, 2013. Early adoption is permitted and the standard is required to be applied retrospectively. This is not expected to be a significant impact on the Company upon implementation of the issued standard.

- IFRS 10, “Consolidated Financial Statements” replaces IAS27: Consolidated and Separate Financial Statements and establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. This new standard is effective January 1, 2013 with earlier application permitted.

- IAS 1, “Presentation of Financial Statements” requires companies to group items presented within Other Comprehensive Income based on whether they may be subsequently reclassified to profit or loss. This amendment to IAS 1 is effective for annual periods beginning on or after July 1, 2012 with full retrospective application.

- IAS 27, “Separate Financial Statements” has been amended to conform to the changes made in IFRS 10 but retains the current guidance for separate financial statements.

4. Share Capital

(a) Authorized

(i) Preferred shares, unlimited number, issuable in series (none issued) (ii) Common shares, unlimited number without nominal or par value. (b) Issued Common

Six months ended October 31, 2011

For the year ended April 30, 2011 Number of

common shares Amount

Number

of shares Amount Balance at beginning of period

91,780,431 $ 30,703,911 56,540,431 $ 30,614,772 Transactions for the period - - 35,240,000 89,139 Balance at end of period 91,780,431 $ 30,703,911 91,780,431 $ 30,703,911 Warrants (convertible to common)

Six months ended October 31, 2011

For the year ended April 30, 2011 Number

of shares Amount

Number

of shares Amount Balance, beginning of period

34,140,000 $ 1,590,799 1,630,000 $ 97,800 Transactions for the period - - 32,510,000 1,492,999 Balance at end of period 34,140,000 $ 1,590,799 34,140,000 $ 1,590,799 Total equity instruments

125,920,431 $ 32,294,710

(c) Stock options

The Company has an Incentive Stock Option Plan that has been approved by the shareholders and that allows the Company’s Board of Directors to grant up to 10% of the Company’s outstanding shares to its officers, directors, key employees and consultants. Stock options can be granted with an exercise price equal to the prevailing market price on the date of the grant less a discount in accordance with the policies of the TSX Venture Exchange. Stock options granted generally have varying terms of up to five years and vest at the discretion of the directors.

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NEW WEST ENERGY SERVICES INC.

October 31, 2011 April 30, 2011 Number options Weighted average exercise price Number options Weighted average exercise price

Balance, beginning of period 8,200,000 $ 0.10 1,689,000 $ 0.11 Transaction for the period - - 6,511,000 0.10 Balance, end of period 8,200,000 $ 0.10 8,200,000 $ 0.10 The following table gives summary information on outstanding options as of October 31, 2011:

Options Outstanding Options Exercisable Weighted Average Weighted Average Weighted Average Exercise Price Number of Years to Maturity Exercise Price Number Exercise Price $ Shares (years) $ Exercisable $ 0.10 8,200,000 2.50 0.10 - - 8,200,000 2.50 0.10 - -

In February 2011, a total of 8,200,000 options were granted with an estimated fair value of $107,011 (at April 30, 2011) and a estimated fair value of $110,618 (at October 31, 2011) exercisable at a price of $0.10 per share with one-half vesting in February 2012 and one-half vesting in February 2013.

The estimate of $107,011 (April 30, 2011) and $110,618 (October 31, 2011) was determined using the Black-Scholes option-pricing model used the following assumptions: Tranche 1 had Dividend yield (NIL), expected volatility (174.759%), risk free interest (1.71%) and weighted average life of 2 years. Tranche 2 had Dividend yield (NIL), expected volatility (198.964%), risk free interest (1.88%) and weighted average life of 3 years.

The expected volatility is based on the Company’s historical prices. The risk free rate of return is the yield on a zero-coupon Canadian Treasury Bill of a term consistent with the assumed option life. The weighted average life is the average expected period to exercise, based on the historical activity patterns for each individually vesting tranche.

(d) Warrants

As at October 31, 2011 and April 30, 2011 the Company had the following warrants convertible to common shares outstanding:

October 31, 2011 April 30, 2011 Number of warrants Weighted average exercise price Number of warrants Weighted average exercise price

Balance, beginning of period 34,140,000 $ 0.10 1,630,000 $ 0.10 Warrants issued - 0.10 34,140,000 0.10 Warrants expired - 0.10 (1,630,000) 0.10

Balance, end of period 34,140,000 $ 0.10 34,140,000 $ 0.10 Each warrant consists of the right to purchase one common share at $0.10 per share expiring June 8, 2013.

(e) Earnings per share

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NEW WEST ENERGY SERVICES INC.

5. Contributed Surplus

Balance at April 30, 2011 $ 1,625,669

Transactions for the three months ended July 31, 2011

Stock-based compensation 110,618

Transactions for the three months ended Oct 31, 2011

Stock-based compensation 110,618

Balance at October 31, 2011 $ 1,846,905

6. Property and Equipment

TRUCKS AND TRAILERS FIELD EQUIPMENT AND OFFICE EQUIPMENT COMPUTERS AND OFFICE FURNITURE LABORATORY AND TESTING EQUIPMENT LEASEHOLD IMPROVEMENTS TOTAL Cost at April 30, 2011 $ 1,340,493 $ 80,145 $ 191,083 $ 117,695 $ 5,229 $ 1,734,645 Q1 - period additions $ - $ 4,659 $ - $ - $ - $ 4,659 Q1 - period disposals $ (10,000) $ - $ - $ - $ - $ (10,000) Cost at July 31, 2011 $ 1,330,493 $ 84,804 $ 191,083 $ 117,695 $ 5,229 $ 1,729,304 current period additions $ 182,335 $ 26,936 $ - $ - $ 3,109 $ 212,380 Current period disposals $ (17,500) $ - $ - $ - $ - $ (17,500) Cost at October 31, 2011 $ 1,495,328 $ 111,740 $ 191,083 $ 117,695 $ 8,338 $ 1,924,184

Accumulated amortization at April 30, 2011 $ 132,632 $ 11,625 $ 177,708 $ 88,402 $ 5,229 $ 415,596 Q1 -period retirements $ (1,181) $ - $ - $ - $ - $ (1,181) Q1 -period amortization/depletion $ 37,620 $ 4,150 $ 894 $ 1,446 $ - $ 44,110 Balance at July 31, 2011 $ 169,071 $ 15,775 $ 178,602 $ 89,848 $ 5,229 $ 458,525 Current period retirements $ (2,462) $ - $ - $ - $ - $ (2,462) Current period amortization/depletion $ 38,719 $ 4,829 $ 894 $ 1,446 $ 104 $ 45,992 Accumulated amortization at Oct 31, 2011 $ 205,328 $ 20,604 $ 179,496 $ 91,294 $ 5,333 $ 502,055

Net book value at October 31, 2011 $ 1,290,000 $ 91,136 $ 11,587 $ 26,401 $ 3,005 $ 1,422,129

TRUCKS AND TRAILERS FIELD EQUIPMENT AND OFFICE EQUIPMENT COMPUTERS AND OFFICE FURNITURE LABORATORY AND TESTING EQUIPMENT LEASEHOLD IMPROVEMENTS TOTAL Cost at May 1, 2010 $ - $ - $ 184,466 $ 115,940 $ 5,229 $ 305,635 Current period additions $ 1,365,993 $ 80,145 $ 6,617 $ 18,305 $ - $ 1,471,060

Current period disposals $ (25,500) - - $ (16,550) - $ (42,050)

Cost at April 30, 2011 $ 1,340,493 $ 80,145 $ 191,083 $ 117,695 $ 5,229 $ 1,734,645

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NEW WEST ENERGY SERVICES INC.

7. Intangible Assets

COMPUTER

SOFTWARE TOTAL

Cost at April 30, 2011 $ 133,635 $ 133,635

Current period additions $ - $ -Current period disposals $ - $

-Cost at October 31, 2011 $ 133,635 $ 133,635

Accumulated amortization at April 30, 2011 $ 14,943 $ 14,943 Current period retirements $ - $ -Current period amortization/depletion $ 7,070 $ 7,070 Accumulated amortization at October 31, 2011 $ 22,013 $ 22,013

Net book value at October 31, 2011 $ 111,622 $ 111,622

COMPUTER

SOFTWARE TOTAL

Cost at May 1, 2010 $ 2,000 $ 2,000

Current period additions $ 131,635 $ 131,635

Current period disposals $ - $

-Cost at April 30, 2011 $ 133,635 $ 133,635

Accumulated amortization at May 1, 2010 $ 2,000 $ 2,000 Current period retirements $ - $ -Current period amortization/depletion $ 12,943 $ 12,943 Accumulated amortization at April 30, 2011 $ 14,943 $ 14,943

Net book value at April 30, 2011 $ 118,692 $ 118,692

8. Debt

a) Bank indebtedness

BearStone has an overdraft lending agreement secured by receivables with the Canadian Western Bank for $1,750,000 at a daily balance rate of 1.50% per annum above prime lending rate of 3.0% per annum. At the year ended October 31, 2011 BearStone had drawn on the line of credit in the amount of $632,156.

b) Long-Term Debt

October 31, 2011 April 30, 2011

Total amount $ 602,763 $ 529,179

Less current portion 276,965 394,608

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NEW WEST ENERGY SERVICES INC.

The CWB loan is $400,000 for 36 months at 6.5% maturing June 2013, due on demand. The combined monthly principal and interest payment is $12,261. The GE Capital loan is $301,000 for 36 months at 8.323% maturing July 2013. The combined monthly principal and interest payment is $9,477. The next two mature in January 2016 and the combined monthly principle and interest payment are $2,337. The final loan matures in August 2015 with combined monthly principle and interest payment of $1,302.

The loans are guaranteed by the Company and NWDF. Principal repayments over the next three years are anticipated to be as follows: October 31, 2012 $ 276,965 October 31, 2013 218,184 October 31, 2014 41,398 $ 563,547 9. Investment October 31, 2011 April 30, 2011

204,500 Preferred Shares of GenWay Biotech Inc., at impaired

cost $ 1 $ 1

111,907 Common Shares of GenWay Biotech Inc., at cost 12,080 12,080 $ 12,081 $ 12,081

10. Segmented Information

The Company operates in four segments that are Corporate, Drilling, Environmental and Vacuum Services. Management defines these segments based on the type of revenue earned. All of the Company’s revenue is earned in Canada and all of its assets are located in Canada. Segmented information for the three months ended October 31, 2011 and October 31, 2010 are as follows:

For the three months ended October 31, 2011 Corporate $ Drilling $ Environmental Services $ Vacuum Services $ Total $ Revenues - 799,237 3,133,126 1,251,732 5,184,095 Gross margin - 297,487 975,025 554,872 1,827,384 Interest expense 154 363 2,198 9,625 12,340 Amortization - 2,341 - 43,333 45,674

Earnings before income tax (128,580) (36,031) 421,740 338,857 595,986 Total assets 60,493 1,015,306 3,201,546 3,020,494 7,297,839

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NEW WEST ENERGY SERVICES INC.

For the three months ended October 31, 2010 Corporate $ Drilling $ Environmental Services $ Vacuum Services $ Total $ Revenues - 176,536 1,744,543 606,175 2,527,254 Gross margin - 18,561 655,475 79,670 753,706 Interest expense - 392 3,507 12,278 16,177 Amortization - 2,224 - 43,941 46,165

Earnings before income tax (35,965) (227,817) 305,431 (84,374) (42,725) Total assets 68,574 564,669 1,479,967 2,378,612 4,491,822

● Note the above figures are prior to any inter-company management fees. 11. Related party transactions

The Company engaged the services of 902871 Alberta Ltd. and Westhaven Securities Inc. commencing August 2005 and November 2006 for $11,000 and $10,000 per month respectively. These fees were increased in February 2011 from $11,000 to $14,500 and from $10,000 to $12,500. During the current quarter the $12,500 was reduced to $6,250. The President and COO respectively of NWDF control the two companies. They provide the Company with technical direction, advisory services relating to general corporate development, financial matters, raising additional capital, strategic planning and other matters relating to the financial affairs of the Company. These agreements may be terminated at the end of any calendar month on one months notice. For the three months ended October 31, 2011, management fees in the amount of $114,750 (2010 - $63,000) have been paid or accrued to these companies. This includes a bonus based on performance of $40,000 paid to the President of NWDF. The six months ended October 31, 2011, management fees in the amount of $195,750 (2010 - $126,000) have been paid or accrued to these companies. This includes the bonus paid to the President of NWDF referred to above. No interest is payable on the management fees and expenses and repayment is expected on demand.

The Company also has engaged the services of Black Dot Consulting Ltd. commencing July 2010 to provide marketing and consulting services at $4,000 per month. A total of $12,000 is included in consulting fees expense for the three months ended October 31, 2011 (2010 - $12,000). A total of $24,000 is included in consulting fees expense for the six months ended October 31, 2011 (2010 - $16,000). The firm is related to an officer and director of BearStone. In addition, the CFO and Corporate Secretary receive monthly $750 (2010 - $Nil) and $250 (2010 - $Nil) respectively for providing additional financial and administrative services effective February 2011. All of these agreements can be terminated at the end of any calendar month on one months notice. No interest is payable on fees and expenses and repayment is expected on demand.

In addition, the Company has also engaged Rand Edgar Investment Corp. (“REIC”), a company partially owned by one of the directors of the Company. REIC is paid or accrued $6,000 per month for providing administrative and accounting services to the Company. This fee commenced in June 2007 and a total of $18,000 (2010 - $12,000) is recorded in professional fees for the three months ended October 31, 2011. For the six months ended October 31, 2011 a total of $36,000 (2010 - $21,000) was recorded. The fee was increased from $3,000 to $6,000 per month commencing October 31, 2010. This agreement may be terminated at the end of any calendar month on one months notice. A balance of $76,512 is included in accounts payable and accrued liabilities. No interest is payable on fees and expenses and repayment is expected on demand.

12. Capital Management

The Company manages its capital structure in order to ensure sufficient resources are available to meet operational requirements, to allow it to enhance existing product offerings as well as develop new ones and to maintain the Company’s ability to operate. There are no externally imposed capital requirements.

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NEW WEST ENERGY SERVICES INC.

The Company’s capital management objective is to raise money for working capital and asset purchases if appropriate. Management considers its cash and cash equivalents, loans from shareholders, long-term debt and shareholder’s equity as capital, which consists of the following:

October 31, 2011 April 30, 2011 October 31, 2010 Cash and cash equivalents $ 408,334 $ 131,997 $ 234,581

Bank indebtedness (632,156) -0- -0-

Loans payable -0- -0- -0-

Long-term debt 602,798 529,179 416,393

Shareholder’ equity (deficiency) 4,299,503 3,271,064 2,406,858 Total Capitalization $ 4,678,479 $ 3,932,240 $ 3,057,832

13. FINANCIAL INSTRUMENTS AND RISK

(a) Credit Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s cash is held through large Canadian financial institutions which are guaranteed. Substantially all of the Company’s accounts receivable are due from customers in the oil and natural gas industry and are subject to normal industry credit risks. One of the subsidiaries, NWDF, has 96% of the accounts receivable due from one customer that is an international oil company. Substantially all of the NWDF revenue is with this one customer. The loss of this one customer or unexpected termination of the contract could have a material adverse effect on the Company’s results of operations, financial condition and cash flows. The Company’s other subsidiary has a more balanced flow of customers.

(b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure and financial leverage as outlined in Note 12 Capital Management.

(c) Market Risk

Market risk is the risk that fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk.

It is management’s opinion that the Company is not exposed to significant interest rate risk, currency risk or other price risk because the Company does not transact in other currencies and the long term debt has fixed interest rate charge. The bank indebtedness was not used in the current quarter but any interest charge varies with the market prime rate fluctuation.

14. COMMITMENTS

(a) The Company has commitments under operating leases for office space, vehicles, and employee retention bonuses. The amount to be paid during the next five years is estimated at:

2012 $ 855,178 2013 781,012 2014 486,922 2015 370,831 2016 224,841 $ 2,718,784

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NEW WEST ENERGY SERVICES INC.

15. Transition to IFRS

Effective January 1, 2011 Canadian publicly listed entities are required to prepare their financial statements in accordance with IFRS. The Company has adopted IFRS effective May 1, 2010, (“the Transition Date”) and has prepared its opening IFRS statement of financial position as at that date. Prior to the adoption of IFRS the Company prepared its financial statements in accordance with Canadian GAAP.

The Company’s consolidated financial statements for the year ending April 30, 2012, will be the first annual financial statements that comply with IFRS.

IFRS 1 – First Time Adoption

In preparing these consolidated financial statements in accordance with IFRS 1, “First-time Adoption of International Financial Reporting Standards” (“IFRS-1”), the Company has applied certain of the optional exemptions from full retrospective application of IFRS. Based on management’s analysis of the various accounting policy choices available, the IFRS 1 optional exemptions applied are described below:

- Business combinations: The Company has applied the business combinations exemption under IFRS 1 to not apply IFRS 3, “Business Combinations”, retrospectively to past business combinations. Accordingly, Management has elected not to restate any business combinations that occurred prior to the Transition Date.

- Share based payments: The Company has elected to apply IFRS 2, “Share-based Payments” (“IFRS 2”), to equity instruments granted after November 7, 2002, which have not vested by the Transition Date. Accordingly, Management has elected not to restate the stock-based compensation expense for share based payments granted and vested prior to the Transition Date. Further, the Company changed its accounting policy with respect to stock-based compensation, effective May 1, 2010, for new issuance under the Share Rights Incentive Plan to comply with the IFRS guidelines under IFRS 2. The resultant change required the Company to account for an estimate of forfeitures at the time of grant and the associated compensation expense on a tranche by tranche basis.

- Borrowing costs: IAS 23, “Borrowing Costs”, has not been applied to borrowing cash relating to qualifying assets for which the commencement date for capitalization is before May 1, 2010. Accordingly, the Company has not capitalized borrowing costs relating to qualifying assets for which the commencement date for capitalization was before May 1, 2010.

The adoption of IFRS has resulted in no changes to the Company’s reported financial position and results of operations. The Company’s adoption of IFRS did not have an impact on the total operating, investing or financing cash flows.

The transition from Canadian GAAP to IFRS had no effect on the equity as at May 1, 2010 and no effect on the equity, total comprehensive income and reported cash flows of the amounts previously reported by the Company in accordance with Canadian GAAP as at and for the periods ended October 31, 2010 and April 30, 2011.

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NEW WEST ENERGY SERVICES INC.

New West Energy Services Inc. Opening Balance Sheet Reconciliation

As at May 1, 2010 As at October 31, 2010 As at April 30, 2011

Effect of Effect of Effect of

Canadian transition Canadian transition Canadian transition

GAAP to IFRS IFRS GAAP to IFRS IFRS GAAP to IFRS IFRS

Assets

Cash and cash equivalents 32,957 - 32,957 234,581 - 234,581 131,999 - 131,999 Accounts recievable and prepaids 1,458,830 - 1,458,830 2,431,412 - 2,431,412 4,620,965 - 4,620,965 Inventory 436,789 - 436,789 331,029 - 331,029 797,129 - 797,129

1,928,576

- 1,928,576 2,997,022 - 2,997,022 5,550,093 - 5,550,093

Investments 12,081 - 12,081 12,081 - 12,081 12,081 - 12,081 Property and equipment 24,661 - 24,661 1,482,719 - 1,482,719 1,319,049 - 1,319,049 Intangible assets - - - - - - 118,692 - 118,692

Total Assets 1,965,318 - 1,965,318 4,491,822 - 4,491,822 6,999,915 - 6,999,915

Liabilities

Accounts payable and others 1,186,059 - 1,186,059 1,446,971 - 1,446,971 3,199,672 - 3,199,672 Long term debt (current portion) - - 221,600 - 221,600 394,608 - 394,608 Loans payable 270,696 - 270,696 - - - - -

-1,456,755

- 1,456,755 1,668,571 - 1,668,571 3,594,280 - 3,594,280

Long term debt - - - 416,393 - 416,393 134,571 - 134,571

Equity Share capital 30,712,572 - 30,712,572 32,392,610 - 32,392,610 32,294,710 - 32,294,710 Contributed surplus 1,420,858 - 1,420,858 1,420,858 - 1,420,858 1,625,669 - 1,625,669 Deficit (31,624,867) - (31,624,867) (31,406,610) - (31,406,610) (30,649,315) - (30,649,315) 508,563 - 508,563 2,406,858 - 2,406,858 3,271,064 - 3,271,064

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NEW WEST ENERGY SERVICES INC.

New West Energy Services Inc. Opening Balance Sheet Reconciliation

Canadian Effect of Q1 Q2 Q3 IFRS

GAAP transition Balance Balance Balance Balance Balance to IFRS Sheet Sheet Sheet Sheet 30-Apr-11 Adjustments Adjustments Adjustments 30-Apr-11 Assets

Cash and cash equivalents 131,999 131,999 Accounts recievable and prepaids 4,620,965 4,620,965

Inventory 797,129 797,129

5,550,093

- - - - 5,550,093

Investments 12,081 12,081 Property and equipment 1,319,049 1,319,049 Intangible assets 118,692 118,692

6,999,915

- - - - 6,999,915

Liabilities

Accounts payable and others 3,199,672 3,199,672 Long term debt (current portion) 394,608 394,608

3,594,280

- - - - 3,594,280

Long term debt 134,571 134,571

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NEW WEST ENERGY SERVICES INC.

New West Energy Services Inc.

Reconciliation of Net Income and Comprehensive Income

For the three months ended Fo the year ended

31-Oct-10 30-Apr-11

Effect of Effect of

Canadian transition Canadian transition

GAAP to IFRS IFRS GAAP to IFRS IFRS

Revenue

Product sales, engineering, environmental and other 2,527,254 - 2,527,254 15,339,882 - 15,339,882 Direct costs

Product costs, field, commissions, environmental and other 1,773,548 - 1,773,548 10,743,481 - 10,743,481 Gross margin 753,706 - 753,706 4,596,401 - 4,596,401 Operating expenses

General and administrative expenses 734,089 - 734,089 3,291,828 - 3,291,828 Stock-based compensation - - - 107,011 - 107,011 Interest and bank charges 16,177 - 16,177 56,472 - 56,472 Amortization 46,165 - 46,165 165,538 - 165,538

796,431

- 796,431 3,620,849 - 3,620,849 Net income before income tax (42,725) - (42,725) 975,552 - 975,552 Future income tax expense - - - - -Net income and comprehensive income (42,725) - (42,725) 975,552 - 975,552 Deficit, beginning of the period (31,363,885) - (31,363,885) (31,624,867) - (31,624,867) Deficit, end of the period (31,406,610) - (31,406,610) (30,649,315) - (30,649,315)