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Cost Controls Conserve Capital As Revenue Declines 30% in Second Quarter Ended June 30, 2009

NEWS RELEASE - August 12, 2009

HSE Integrated Ltd. (“HSE”, “Our”, “We”, or the “Company”) today announced its financial results for the second quarter and first six months of the 2009 fiscal year ended June 30, 2009.

Total revenue for the quarter declined 30.3% to $19.6 million from $28.1 million for the same period in the 2008 fiscal year. For the six month period, revenue declined 24.6% from $55.7 million to $42.0 million. These significant contractions in HSE’s business reflect the impact of both a severe recession in North America and a major downturn in conventional oil and gas well drilling and capital spending in western Canada compared to prior years.

These revenue declines had a very negative impact on operating margins. For the quarter, the operating margin declined 69.4% to $1.4 million (7.3% of revenue) from $4.6 million (16.5% of revenue) in the prior year. For the six month period, the operating margin contracted 64.7% to $3.4 million (8.1% of revenue) from $9.7 million (17.4% of revenue) in the 2008 fiscal year.

In response to the contraction in business, the Company has focused on cost control wherever possible. Sales, general and administrative expenses (“SG&A”) for the quarter declined 23.9% to $1.9 million from $2.5 million in the prior year. For the first six months, SG&A declined 15.8% to $4.1 million from $4.8 million in fiscal 2008.

HSE reported a loss for the quarter of $1.9 million (a loss of $0.05 per share) compared to a loss of $0.6 million (a loss of $0.02 per share) in Q2 2008. For the six month period the loss was $3.7 million (a loss of $0.10 per share) compared to a loss of $0.6 million (a loss of $0.02 per share) for the prior year.

EBITDA for the quarter declined 120.6% from $2.2 million in Q2 2008 to ($0.5) million in Q2 2009. For the six month period ended June 30, EBITDA fell 113.8% from $4.8 million in 2008 to ($0.7) million in 2009.

The bulk of the revenue decline took place in the Oilfield portion of the Company’s activities, the segment of the business related to health and safety services for conventional oil and gas exploration, drilling, completion and workover activities. Because of the collapse in crude oil and natural gas prices and the global credit crisis

that took place in the latter half of 2008, HSE’s client E&P companies drastically reduced capital and operating expenditures in the second quarter and first half of the current fiscal year. Oilfield revenues in Q2 fell 50.2% to $4.3 million from $8.7 million in 2008 and accounted for only 22.1% of total business. For the six month period, Oilfield revenue declined 40.8% from $24.6 million to $14.6 million. Oilfield represented only 34.7% of total business compared to 44.3% in 2008 and 55.6% for the same period in 2007. Due to the sharp decline in drilling and capital expenditures referenced above, all companies supporting this sector are experiencing similar business contractions in Canada and the United States.

Revenue generated from Industrial health and safety services also declined in the second quarter, primarily as a result of postponement of scheduled plant shutdown and maintenance services in western Canada as a cost-cutting measure and intense pricing pressure from competitors desperate to secure business. For the quarter, Industrial revenues declined 21.4% from $19.4 million to $15.2 million. This is the first time this portion of HSE’s business has experienced a significant revenue decline. For the first six months, Industrial revenues declined 11.7% from $31.0 million to $27.4 million.

In the second quarter Industrial health and safety services accounted for 77.9% of total revenue, up from 69.1% in 2008 and 66.5% in 2007. For the first six months the same figures are 65.3%, 55.7% and 44.4% respectively. To highlight the Company’s continued diversification of its client base compared to two years ago, the contracted Industrial revenues in Q2 were still 18.5% higher than in 2007. For the first six months of the current fiscal year, Industrial revenues were still 30.3% higher than for the same period two years ago.

The Company’s balance sheet remained strong. At June 30, 2009, working capital (excluding current portions of debt repayments) was $18.4 million compared to $21.7 million at June 30, 2008 and $19.5 million at March 31, 2009. Bank debt remained unchanged from year end and March 31 at $10.8 million. HSE had $5.9 million in cash or cash equivalents on hand at June 30, 2009 compared to $0.2 million at June 30, 2008 and $1.1 million at March 31, 2009. Accounts receivables plus cash at June 30, 2009 exceeded all cash liabilities by $4.5 million.

The modest reduction in working capital at June 30, 2009 and increase in cash on hand compared to March 31, 2009 despite a 30.3% decline in revenue reflects HSE’s determination to reduce costs and manage cashflow as effectively as possible without permanently impairing the Company’s ability to return to historic levels of revenue and operating margin when the various sectors of the economy in which HSE operates recover.

At June 30, 2009 HSE had net tangible assets per share of $1.01. Tangible assets include cash, accounts receivable, inventory and book value of capital assets (property, plant and equipment). Tangible liabilities include accounts payable, income taxes payable, capital leases, bank debt and long-term equipment loans.

David Yager, Chairman and CEO, offered the following comments for HSE’s second quarter 2009 financial results:

“Despite operating in an extremely difficult business environment, HSE is doing what it must to operate as efficiently as possible with the intention of conserving working capital and maintaining the Company’s ability to exploit a recovery when it occurs. Based on communications with clients, the Company is now cautiously optimistic that contraction in demand for its products and services has stopped and the go-forward trend will be an increase in demand in most industries and markets. It appears the worst is behind us. However, it is unlikely the rate of revenue recovery will be as fast as revenue reduction experienced in the first half of the current year.

Regardless, the discipline tough economic times have forced upon our organization and labor markets makes us cautiously optimistic that HSE can earn a higher operating margin on the same revenue than in prior years. Part of this is internal, based on the way we pay our field service personnel, particularly in western Canada. Part of this is external where the end of the economic boom has tempered what were continually rising costs in every area, particularly labor and direct operating expenses.

The downturn in conventional oil and gas drilling in western Canada is unprecedented in modern times. The oilfield service sector has the capacity to drill in excess of 20,000 new wells annually. In 2009 drilling of new wells will likely be at 40% of that level. Fortunately for HSE, five years ago we began development of business opportunities in new industries and markets such as oilsands, refining, power generation, utilities, petrochemical, forestry, manufacturing, food and beverage, and the east coast offshore. While it is difficult to measure from total revenue, HSE continues to grow through new clients and markets. However, recession-based shrinkage in established markets obscures our success.

HSE’s staff has done an outstanding job helping our Company through this difficult period. Management and the Board of Directors recognize the company-wide sacrifice. But considering the economy in which HSE is operating – and the devastation that the recession has inflicted on so many companies in so many markets and industries – our Company will emerge from this downturn as a stronger player in its field and remain a challenging, exciting and rewarding career opportunity”.

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

Conference Call
HSE will be hosting a conference call to discuss their results at 1:30 PM (Eastern Daylight Time), 11:30 AM (Mountain Daylight Time) on Thursday, August 13, 2009.

Thursday August 13, 2009 1:30 PM ET (11:30 AM MT)
Dial-In Number: 1-866-250-4910 or 1-416-644-3428

Conference Replay until September 13, 2009: 1-416-640-1917 or 1-877-289-8525
(Passcode: 21312984 followed by the pound [#] sign)

Webcast:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2773540

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, Newfoundland-Labrador and Michigan. HSE also operates in Midland, Texas, through a jointly owned company called Boots & Coots HSE Services LLC. HSE trades on the TSX under the symbol “HSL”.

Forward Looking Statements

This news release contains forward-looking information and statements (collectively “forward-looking statements”) within the meaning of applicable securities laws 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, would, could, might, intend, plan, continue, ongoing, project, objective and other similar terms and phrases. These forward-looking 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 forward-looking statements are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results and events to differ materially from that expressed in the forward-looking statements. Accordingly this news release is subject to the disclaimer and qualified by the assumptions and risk factors referred to in the Management Discussion and Analysis in the 2009 second quarter report, in the 2008 annual report, and in other filings with securities commissions in Canada as reported in the Company’s profile at www.sedar.com. Any forward-looking statements in this news release speak only as of the date of this news release. Except as required by law, the Company disclaims any intention to update or revise any forward-looking statements to reflect new events or circumstances.

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:

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

Lori McLeod-Hill, CFO
Telephone: (403) 266-1833
E-Mail: lmcleod-hill@hseintegrated.com