Selected Highlights

Generated gross margin of CAD3.2 million (24%) compared to CAD2.5 million (28%) for the corresponding period of 2008.

Recorded net loss of CAD2 million for the three-month period ended March 31, 2009 compared to a net loss of CAD3.3 million for the corresponding period of 2008.

Announced approximately CAD12 million1 in new contracts during the quarter to supply process equipment to large national and international oil and gas producers.

Sales backlog totalled at CAD24.1 million at April 1, 2009.

Launched a new line of conventional produced water treatment products, complementing the Company’s existing product portfolio.

Received important industry recognition for ProSalt, a compact and highly efficient crude desalting technology.

Initiated a program to recapitalize the organization while reducing overall debt.

Concluded new covenant structure with DnB Nor, releasing NOK18 million (approximately CAD3.4 million as of April 29, 2009) previously escrowed.

Signed a long-term credit agreement with National Bank of Canada, providing for long term limited recourse financing against the Asset Backed Commercial Paper.

“Our 2009 first quarter revenues have shown significant growth of 45% over last year’s quarter. Our increased level of activity in South East Asia, dedication to expanding our product lines and focus on leveraging operational synergies are all recent initiatives that have supported our momentum,” said Jacques L. Drouin, president and chief executive offcier of ProSep. “In order to continue delivering strong results in this challenging environment, we are continually focusing on actively promoting our new produced water treatment line and proprietary products across our global distribution network.”

“We believe that worldwide reductions in CAPEX programs are not expected to occur equally across all regions. In this context, our global diversification strategy should continue to serve us well as we are now positioned to target promising markets such as South East Asia and the Middle-East,” added Drouin. “In fact, in the last two quarters, ProSep has been invited to quote on a large number of potential projects, mostly for National Oil Companies. Even though lower hydrocarbon prices and global reductions in capital spending programs have lengthened our industry’s sales cycle, we continue to experience a high level of activity.”

“The Company’s current debt obligations and debt repayment schedule impose a burden on projected growth and, in particular, debt servicing in the parent Company cannot be met in the second half of 2009 due to debt covenants restricting the use of available liquidities from operations. As a result, we are currently exploring ways to reduce our overall debt, preserve our cash position and align our credit facilities to better suit the capital needs of the entire organization. We have initiated discussions with current debtholders with a view to reorganizing our capital structure. The outcome of these discussions may result in the swapping of all or part the Company’s debt for equity. If successful, a reorganization will significantly strengthen our financial position and enable us to take better advantage of future market opportunities,” concluded Drouin.

Financial Results

Earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at (CAD0.148) million for Q1-2009 compared to (CAD0.441) million for the comparable period in 2008. Increased revenue and costs reduction programs implemented in 2008 and 2009 account for this improvement, in line with the Company’s continued efforts to streamline operations, leverage global synergies and control costs.

Sales and marketing expenses were CAD0.5 million or 3.6% of revenues for Q1-2009 compared to CAD0.6 million or 6.2% for Q1-2008. These reductions result from a smaller sales and marketing team and better cost control measures at the Company’s Norwegian operations.

General and administrative (“G&A”) expenses were CAD2.7 million or 21% of revenues for Q1-2009 compared to CAD2.1 million or 23% for Q1-2008. The increase in G&A is mainly explained by a higher US conversion rate which accounts for about CAD0.225 million and new hires at the US and Asia Pacific operations to support growth, representing approximately CAD0.2 million. Pension accrual charges related to reduction in staff at the Norwegian operations and various head office and business unit expenses account for the remainder of the increase in quarterly G&A.

Research and development expenses decreased to CAD0.161 million or 1.2% of revenues in Q1-2009 from CAD0.303 million or 3.3% in Q1-2008. The expenses incurred by the Company relating to R&D activities (mostly salaries) have and will continue to be reduced significantly as development activities are increasingly conducted in collaboration with industry partners.

At March 31, 2009, ProSep held cash and cash equivalents of CAD8.9 million.