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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 20-F

|  |  |                                                                                               
|- |  | ----------------------------------------------------------------------------------------------
|o |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

|  |  |                                                                                     
|- |  | ------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission file number 1-12570

CE Franklin Ltd.

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ALBERTA, CANADA(Jurisdiction of incorporation or organization)

Suite 1900
300  5th Avenue S.W.
Calgary, Alberta, Canada T2P 3C4(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

|                           |  |                                          
|-------------------------- |  | -----------------------------------------
|Title of each class        |  | Name of each exchange on which registered
|                           |  |                                          
|Common Stock, no par value |  | American Stock Exchange                  
|Common Stock, no par value |  | Toronto Stock Exchange                   

Securities registered or to be registered pursuant to Section 12(g) of the Act.
None.

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act. None.

Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report.

As of December 31, 2002, there were 17,178,696 shares of Common Stock
outstanding.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|        |  |       
|------- |  | ------
|Yes   þ |  | No   o

Indicate by check mark which financial statement item the registrant has elected to follow.

|            |  |            
|----------- |  | -----------
|Item 17   o |  | Item 18   þ

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

|        |  |       
|------- |  | ------
|Yes   o |  | No   o



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|         |                                                                                       |                                                         |  |  |  |  |  | 
|-------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------- |  |  |  |  |  | 
|PART I  
|         | Item 1: Identity of Directors, Senior Management and Advisors                        
|         | Item 2: Offer Statistics and Expected Timetable                                      
|         | Item 3: Key Information                                                              
|         |                                                                                       | A. Selected financial data                             
|         |                                                                                       | B. Capitalization and indebtedness                     
|         |                                                                                       | C. Reasons for the offer and use of proceeds           
|         |                                                                                       | D. Risk factors                                        
|         | Item 4: Information on the Company                                                   
|         |                                                                                       | A. History and development of the Company              
|         |                                                                                       | B. Business overview                                   
|         |                                                                                       | C. Organizational structure                            
|         |                                                                                       | D. Property, plant and equipment                       
|         | Item 5: Operating and Financial Review and Prospects                                 
|         |                                                                                       | A. Results of Operations                               
|         |                                                                                       | B. Liquidity and Capital Resources                     
|         |                                                                                       | C. Research and Development, Patents and Licenses, etc.
|         |                                                                                       | D. Trend Information                                   
|         | Item 6: Directors, Senior Management and Employees                                   
|         |                                                                                       | A. Directors and Senior Management                     
|         |                                                                                       | B. Compensation                                        
|         |                                                                                       | C. Board practices                                     
|         |                                                                                       | D. Employees                                           
|         |                                                                                       | E. Share ownership                                     
|         | Item 7: Major Shareholders and Related Party Transactions                            
|         |                                                                                       | A. Major shareholders                                  
|         |                                                                                       | B. Related party transactions                          
|         |                                                                                       | C. Interests of Experts and Counsel                    
|         | Item 8: Financial Information                                                        
|         |                                                                                       | A. Statements and Other Financial Information          
|         |                                                                                       | B. Significant Changes                                 
|         | Item 9: The Offer and Listing                                                        
|         |                                                                                       | A. Offer and Listing Details                           
|         |                                                                                       | B. Plan of Distribution                                
|         |                                                                                       | C. Markets                                             
|         |                                                                                       | D. Selling shareholders                                
|         |                                                                                       | E. Dilution                                            
|         |                                                                                       | F. Expenses of the issue                               
|         | Item 10: Additional Information                                                      
|         |                                                                                       | A. Share capital                                       
|         |                                                                                       | B. Memorandum and articles of association              
|         |                                                                                       | C. Material contracts                                  
|         |                                                                                       | D. Exchange controls                                   
|         |                                                                                       | E. Taxation                                            
|         |                                                                                       | F. Dividends and paying agents                         
|         |                                                                                       | G. Statement by experts                                
|         |                                                                                       | H. Documents on display                                
|         |                                                                                       | I. Subsidiary Information                              
|         | Item 11: Quantitative and Qualitative Disclosures about Market Risk                  
|         | Item 12: Description of Securities Other than Equity Securities                      
|PART II 
|         | Item 13: Defaults, Dividend Arrearages ad Delinquencies                              
|         | Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
|         | Item 15: Controls and Procedures                                                     
|         | Item 16: Reserved.                                                                   
|PART III
|         | Item 17: Financial Statements                                                        
|         | Item 18: Financial Statements                                                        
|         | Item 19: Exhibits                                                                    



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##### Table of Contents



CONTENTS

|       |  |          |  |                                                            |  |                                                            |    |  |    |      |  | 
|------ |  | -------- |  | ---------------------------------------------------------- |  | ---------------------------------------------------------- | -- |  | -- | ---- |  | 
|       |  |          |  |                                                            |  |                                                            |    |  |    | Page
|       |  |          |  |                                                            |  |                                                            |    |  |    |     
|PART I |  |          |  |                                                            |  |                                                            |    |  |    |      |  | 
|       |  | Item 1:  |  | Identity of Directors, Senior Management and Advisors      |  |                                                            | 4  | 
|       |  | Item 2:  |  | Offer Statistics and Expected Timetable                    |  |                                                            | 4  | 
|       |  | Item 3:  |  | Key Information                                            |  |                                                            | 4  | 
|       |  |          |  |                                                            |  | A.     Selected financial data                             |    |  | 4  |     
|       |  |          |  |                                                            |  | B.     Capitalization and indebtedness                     |    |  | 5  |     
|       |  |          |  |                                                            |  | C.     Reason for the offer and use of proceeds            |    |  | 5  |     
|       |  |          |  |                                                            |  | D.     Risk factors                                        |    |  | 5  |     
|       |  | Item 4:  |  | Information on the Company                                 |  |                                                            | 7  | 
|       |  |          |  |                                                            |  | A.     History and development of the company              |    |  | 7  |     
|       |  |          |  |                                                            |  | B.     Business overview                                   |    |  | 8  |     
|       |  |          |  |                                                            |  | C.     Organizational structure                            |    |  | 10 |     
|       |  |          |  |                                                            |  | D.     Property, plant and equipment                       |    |  | 10 |     
|       |  | Item 5:  |  | Operating and Financial Review and Prospects               |  |                                                            | 10 | 
|       |  |          |  |                                                            |  | A.     Results of operations                               |    |  | 11 |     
|       |  |          |  |                                                            |  | B.     Liquidity and capital resources                     |    |  | 14 |     
|       |  |          |  |                                                            |  | C.     Research and development, patent and licenses, etc. |    |  | 15 |     
|       |  |          |  |                                                            |  | D.     Trend information                                   |    |  | 15 |     
|       |  | Item 6:  |  | Directors, Senior Management and Employees                 |  |                                                            | 15 | 
|       |  |          |  |                                                            |  | A.     Directors and senior management                     |    |  | 15 |     
|       |  |          |  |                                                            |  | B.     Compensation                                        |    |  | 16 |     
|       |  |          |  |                                                            |  | C.     Board practices                                     |    |  | 18 |     
|       |  |          |  |                                                            |  | D.     Employees                                           |    |  | 19 |     
|       |  |          |  |                                                            |  | E.     Share ownership                                     |    |  | 20 |     
|       |  | Item 7:  |  | Major Shareholders and Related Party Transactions          |  |                                                            | 20 | 
|       |  |          |  |                                                            |  | A.     Major shareholders                                  |    |  | 20 |     
|       |  |          |  |                                                            |  | B.     Related party transactions                          |    |  | 21 |     
|       |  |          |  |                                                            |  | C.     Interests of experts and counsel                    |    |  | 21 |     
|       |  | Item 8:  |  | Financial Information                                      |  |                                                            | 21 | 
|       |  |          |  |                                                            |  | A.     Statements and other financial information          |    |  | 21 |     
|       |  |          |  |                                                            |  | B.     Significant changes                                 |    |  | 21 |     
|       |  | Item 9:  |  | The Offer and Listing                                      |  |                                                            | 22 | 
|       |  |          |  |                                                            |  | A.     Offer and listing details                           |    |  | 22 |     
|       |  |          |  |                                                            |  | B.     Plan of distribution                                |    |  | 22 |     
|       |  |          |  |                                                            |  | C.     Markets                                             |    |  | 22 |     
|       |  |          |  |                                                            |  | D.     Selling shareholders                                |    |  | 23 |     
|       |  |          |  |                                                            |  | E.     Dilution                                            |    |  | 23 |     
|       |  |          |  |                                                            |  | F.     Expenses of the issue                               |    |  | 23 |     
|       |  | Item 10: |  | Additional Information                                     |  |                                                            | 23 | 
|       |  |          |  |                                                            |  | A.     Share capital                                       |    |  | 23 |     
|       |  |          |  |                                                            |  | B.     Memorandum and articles of association              |    |  | 23 |     
|       |  |          |  |                                                            |  | C.     Material contracts                                  |    |  | 25 |     
|       |  |          |  |                                                            |  | D.     Exchange controls                                   |    |  | 25 |     
|       |  |          |  |                                                            |  | E.     Taxation                                            |    |  | 25 |     
|       |  |          |  |                                                            |  | F.     Dividends and paying agents                         |    |  | 26 |     
|       |  |          |  |                                                            |  | G.     Statement by experts                                |    |  | 26 |     
|       |  |          |  |                                                            |  | H.     Documents on display                                |    |  | 26 |     
|       |  |          |  |                                                            |  | I.     Subsidiary information                              |    |  | 26 |     
|       |  | Item 11: |  | Quantitative and Qualitative Disclosures About Market Risk |  |                                                            | 26 | 
|       |  | Item 12: |  | Description of Securities Other than Equity Securities     |  |                                                            | 26 | 

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|         |  |          |  |                                                                              |  |  |    |  |  |      |  | 
|-------- |  | -------- |  | ---------------------------------------------------------------------------- |  |  | -- |  |  | ---- |  | 
|         |  |          |  |                                                                              |  |  |    |  |  | Page
|         |  |          |  |                                                                              |  |  |    |  |  |     
|PART II  |  |          |  |                                                                              |  |  |    |  |  |      |  | 
|         |  | Item 13: |  | Defaults, Dividend Arrearages and Delinquencies                              |  |  | 26 | 
|         |  | Item 14: |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  |  | 26 | 
|         |  | Item 15: |  | Controls and Procedures                                                      |  |  | 26 | 
|         |  | Item 16: |  | Reserved                                                                     |  |  | 26 | 
|PART III |  |          |  |                                                                              |  |  |    |  |  |      |  | 
|         |  | Item 17: |  | Financial Statements                                                         |  |  | 27 | 
|         |  | Item 18: |  | Financial Statements                                                         |  |  | 27 | 
|         |  | Item 19: |  | Exhibits                                                                     |  |  | 43 | 

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PART I






|Item 1: |  | Identity of Directors, Senior Management and Advisors
|------- |  | -----------------------------------------------------
|       
|        |  | Not applicable.                                      






|Item 2: |  | Offer Statistics and Expected Timetable
|------- |  | ---------------------------------------
|       
|        |  | Not applicable.                        






|Item 3: |  | Key Information
|------- |  | ---------------






| | A. |  | Selected financial data
| | -- |  | -----------------------

The selected financial data presented below for the five years ended December
31, 2002 is derived from CE Franklin Ltd. (CE Franklin or the Company)
financial statements that were examined by the Companys independent auditors.
The information set forth below should be read in conjunction with the
Financial Statements of CE Franklin (including notes thereto) included under
Item 18 and Operating and Financial Review and Prospects included under item
5. The data is presented in Canadian dollars.

|                                                  |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |       |  
|------------------------------------------------- | ------------------ | ---- | ------------------------------------------------------------------- | ----- | -- | ---- | ---------- | ----- | - | ---- | ---------- | ----- | - |  | ---------- | ----- | -- |  | ---------- | ----- | -
|                                                  |                    |      | As at and for the Year Ended December 31                           
|                                                  |                    |      |                                                                    
|CANADIAN GAAP                                     |                    | 2002 |                                                                     | 2001  |    | 2000 |            | 1999  |   | 1998
|                                                  |                    |      |                                                                     |       |    |      |            |       |   |     
|                                                  |                    |      | (in millions of Cdn. dollars except percentages and per share data)
|Statement of Operations:                          |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|Sales                                             |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|                                                  | General supplies   |      |                                                                     | 178.0 |    |      |            | 223.1 |   |      |            | 204.3 |   |  |            | 140.3 |    |  |            | 180.9 |  
|                                                  | Tubulars           |      |                                                                     | 77.1  |    |      |            | 148.0 |   |      |            | 148.8 |   |  |            | 91.1  |    |  |            | 120.2 |  
|                                                  | Manufacturing      |      |                                                                     | 6.2   |    |      |            | 6.7   |   |      |            | 6.3   |   |  |            | 5.7   |    |  |            | 6.8   |  
|                                                  |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|                                                  | Total sales        |      |                                                                     | 261.3 |    |      |            | 377.8 |   |      |            | 359.4 |   |  |            | 237.1 |    |  |            | 307.9 |  
|Gross Profit                                      |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|                                                  | General supplies   |      |                                                                     | 30.7  |    |      |            | 34.3  |   |      |            | 33.6  |   |  |            | 22.4  |    |  |            | 34.4  |  
|                                                  | % of sales         |      |                                                                     | 17.3  | %  |      |            | 15.4  | % |      |            | 16.4  | % |  |            | 16.0  | %  |  |            | 19.0  | %
|                                                  | Tubulars           |      |                                                                     | 4.3   |    |      |            | 7.7   |   |      |            | 8.1   |   |  |            | 4.0   |    |  |            | 7.2   |  
|                                                  | % of sales         |      |                                                                     | 5.5   | %  |      |            | 5.2   | % |      |            | 5.4   | % |  |            | 4.4   | %  |  |            | 6.0   | %
|                                                  | Manufacturing      |      |                                                                     | 1.7   |    |      |            | 1.8   |   |      |            | 1.0   |   |  |            | 1.0   |    |  |            | 0.9   |  
|                                                  | % of sales         |      |                                                                     | 27.3  | %  |      |            | 26.9  | % |      |            | 16.9  | % |  |            | 17.5  | %  |  |            | 13.2  | %
|                                                  |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|                                                  | Total gross profit |      |                                                                     | 36.7  |    |      |            | 43.8  |   |      |            | 42.7  |   |  |            | 27.4  |    |  |            | 42.5  |  
|                                                  | % of sales         |      |                                                                     | 14.0  | %  |      |            | 11.6  | % |      |            | 11.9  | % |  |            | 11.5  | %  |  |            | 13.8  | %
|Income (loss) from continuing operations          |                    |      | (2.5                                                                | )     |    |      | (1.6       | )     |   |      | 0.2        |       |   |  | (5.5       | )     |    |  | 1.5        |      
|Income from discontinued operations               |                    |      |                                                                    |       |    |      | 2.2        |       |   |      | 1.3        |       |   |  | 0.1        |       |    |  | 0.7        |      
|                                                  |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|Net Income (loss)                                 |                    |      | (2.5                                                                | )     |    |      | 0.6        |       |   |      | 1.5        |       |   |  | (5.4       | )     |    |  | 2.2        |      
|                                                  | % of Sales         |      |                                                                     | (1.0  | %) |      |            | 0.2   | % |      |            | 0.4   | % |  |            | (2.3  | %) |  |            | 0.7   | %
|Net income (loss) per share continuing operations |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|                                                  | Basic and diluted  |      |                                                                     | (0.15 | )  |      |            | (0.09 | ) |      |            | 0.01  |   |  |            | (0.33 | )  |  |            | 0.09  |  
|Net income (loss) per share                       |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|                                                  | Basic              |      |                                                                     | (0.15 | )  |      |            | 0.04  |   |      |            | 0.09  |   |  |            | (0.33 | )  |  |            | 0.14  |  
|                                                  | Diluted            |      |                                                                     | (0.15 | )  |      |            | 0.04  |   |      |            | 0.08  |   |  |            | (0.33 | )  |  |            | 0.13  |  
|Balance sheet data:                               |                    |      |                                                                     |       |    |      |            |       |   |      |            |       |   |  |            |       |    |  |            |      
|Total Assets                                      |                    |      | 99.5                                                                |       |    |      | 112.9      |       |   |      | 166.2      |       |   |  | 138.1      |       |    |  | 127.7      |      
|Capital Stock                                     |                    |      | 19.3                                                                |       |    |      | 19.2       |       |   |      | 19.1       |       |   |  | 17.7       |       |    |  | 17.3       |      
|Shareholders Equity                              |                    |      | 47.2                                                                |       |    |      | 50.0       |       |   |      | 49.3       |       |   |  | 46.4       |       |    |  | 51.4       |      
|Number of Shares Outstanding                      |                    |      | 17,178,696                                                          |       |    |      | 17,158,091 |       |   |      | 17,149,153 |       |   |  | 16,725,961 |       |    |  | 16,553,809 |      
|Dividends Declared                                |                    |      | nil                                                                 |       |    |      | nil        |       |   |      | nil        |       |   |  | nil        |       |    |  | nil       

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Net income (loss), shareholders equity, and other balance sheet amounts as
determined in accordance with Canadian GAAP differ from those determined in
accordance with US GAAP, due principally to the recording of certain
restructuring expenditures as goodwill, the realization of certain deferred tax
benefits, the change in tax rates and the transitional provision in 2002 with
respect to impairment of goodwill. Under US GAAP, the restructuring
expenditures, the change in tax rates and the transitional provision with
respect to goodwill would have been recorded in the statement of operations and
the benefit of the deferred tax assets would have been recorded as a reduction
of goodwill. See Note 17 to the December 31, 2002 Financial Statements
included under Item 18.

AMOUNTS IN ACCORDANCE WITH US GAAP

|                            |                            |                       |      |                                                     |       |      |       |      |       |      |       |      |       |   |       |   |       |   |       |  |      | 
|--------------------------- | -------------------------- | --------------------- | ---- | --------------------------------------------------- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | - | ----- | - | ----- | - | ----- |  | ---- | 
|                            |                            |                       |      | As at and for the Year Ended December 31           
|                            |                            |                       |      |                                                    
|                            |                            |                       |      | 2002                                                |       | 2001 |       | 2000 |       | 1999 |       | 1998
|                            |                            |                       |      |                                                     |       |      |       |      |       |      |       |     
|                            |                            |                       |      | (in millions of Cdn. dollars except per share data)
|Net Income (loss)           |                            |                       | (2.9 | )                                                   |       |      | 1.3   |      |       |      | 0.9   |      |       |   | (5.4  | ) |       |   | 2.3   | 
|Net Income (loss) Per Share |                            |                       |      |                                                     |       |      |       |      |       |      |       |      |       |   |       |   |       |   |       | 
|                            | Basic earnings per share   |                       |      |                                                     |       |      |       |      |       |      |       |      |       |   |       |   |       |   |       |  |     
|                            |                            | Continuing operations |      |                                                     | (0.17 | )    |       |      | (0.05 | )    |       |      | (0.03 | ) |       |   | (0.32 | ) |       |  | 0.09 | 
|                            |                            | Net income (loss)     |      |                                                     | (0.17 | )    |       |      | 0.08  |      |       |      | 0.05  |   |       |   | (0.32 | ) |       |  | 0.14 | 
|                            | Diluted earnings per share |                       |      |                                                     |       |      |       |      |       |      |       |      |       |   |       |   |       |   |       |  |     
|                            |                            | Continuing operations |      |                                                     | (0.17 | )    |       |      | (0.05 | )    |       |      | (0.03 | ) |       |   | (0.32 | ) |       |  | 0.09 | 
|                            |                            | Net income (loss)     |      |                                                     | (0.17 | )    |       |      | 0.08  |      |       |      | 0.05  |   |       |   | (0.32 | ) |       |  | 0.13 | 
|Total Assets                |                            |                       | 98.2 |                                                     |       |      | 111.5 |      |       |      | 164.7 |      |       |   | 136.6 |   |       |   | 126.2 | 
|Shareholders Equity        |                            |                       | 45.8 |                                                     |       |      | 48.6  |      |       |      | 47.2  |      |       |   | 44.9  |   |       |   | 49.9  | 

All dollar amounts set forth in this Annual Report on Form 20-F are in Canadian
dollars, except where otherwise indicated. The following table sets forth (i)
the rates of exchange for the Canadian dollar, expressed in US dollars, in
effect at the end of each of the periods indicated; (ii) the average of
exchange rates in effect on the last day of each month during such periods; and
(iii) the high and low month end exchange rates during such periods in each
case based on the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York.

|                           |  |                         |       |      |  |      |       |      |  |      |       |  |  |  |       |  |  |  |       | 
|-------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- |  |  |  | ----- | 
|                           |  | Year Ended December 31,
|                           |  |                        
|                           |  | 2002                    |       | 2001 |  | 2000 |       | 1999 |  | 1998
|                           |  |                         |       |      |  |      |       |      |  |     
|Rate at end of period      |  |                         | .6331 |      |  |      | .6279 |      |  |      | .6666 |  |  |  | .6929 |  |  |  | .6534 | 
|Average rate during period |  |                         | .6368 |      |  |      | .6460 |      |  |      | .6733 |  |  |  | .6730 |  |  |  | .6740 | 
|High                       |  |                         | .6618 |      |  |      | .6695 |      |  |      | .6902 |  |  |  | .6929 |  |  |  | .7105 | 
|Low                        |  |                         | .6199 |      |  |      | .6242 |      |  |      | .6428 |  |  |  | .6537 |  |  |  | .6343 | 

|                           |  |       |       |       |  |          |       |         |  |          |       |          |  |  |       |  |  |  |       |  |  |  |       | 
|-------------------------- |  | ----- | ----- | ----- |  | -------- | ----- | ------- |  | -------- | ----- | -------- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                           |  | 2003  |       | 2002 
|                           |  |       |       |      
|                           |  | April |       | March |  | February |       | January |  | December |       | November
|                           |  |       |       |       |  |          |       |         |  |          |       |         
|Rate at end of period      |  |       | .6976 |       |  |          | .6806 |         |  |          | .6724 |          |  |  | .6540 |  |  |  | .6331 |  |  |  | .6388 | 
|Average rate during period |  |       | .6856 |       |  |          | .6775 |         |  |          | .6612 |          |  |  | .6489 |  |  |  | .6413 |  |  |  | .6364 | 
|High                       |  |       | .6976 |       |  |          | .6823 |         |  |          | .6725 |          |  |  | .6570 |  |  |  | .6462 |  |  |  | .6439 | 
|Low                        |  |       | .6736 |       |  |          | .6708 |         |  |          | .6531 |          |  |  | .6350 |  |  |  | .6331 |  |  |  | .6289 | 

On May 12, 2003, the noon buying rate in Canadian dollars was US$.7200 = Cdn.
$1.00.






| | B. |  | Capitalization and indebtedness
| | -- |  | -------------------------------
|
| |    |  | Not applicable.                






| | C. |  | Reasons for the offer and use of proceeds
| | -- |  | -----------------------------------------
|
| |    |  | Not applicable.                          






| | D. |  | Risk factors
| | -- |  | ------------

CE Franklin has made in this Form 20-F, and may from time to time otherwise
make in other public filings, press releases and discussions with management,
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements include statements, among others, about CE
Franklins operations, performance and financial results and conditions, as
described in more detail in Item 5 of this Form 20-F, under the heading
Forward-Looking Statements. Such statements are subject to risks and
uncertainties, and actual results may differ materially from those expressed or
implied by the forward-looking statements. Some of these risks and
uncertainties are detailed below and elsewhere in this Form 20-F and in CE
Franklins other public filings, press releases and discussions with CE
Franklins

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management. CE Franklin undertakes no obligation to update or revise any
forward-looking statements, except as required by law.

In addition to the information set forth elsewhere in this Form 20-F, the
following factors should be carefully considered when evaluating CE Franklin.

Fluctuations in oil and gas prices could affect the demand for CE Franklins
products and services and, therefore, CE Franklins revenues, cash flows and
profitability.CE Franklins operations are materially dependent upon the
level of activity in oil and gas exploration and production. Both short-term
and long-term trends in oil and gas prices affect the level of such activity.
Oil and gas prices and, therefore, the level of drilling, exploration and
production activity can be volatile. Factors that can cause price fluctuations
include:



| |  |  | relatively minor changes in the worldwide supply of and demand for
oil and natural gas;                                                                                                                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the ability of the members of the Organization of Petroleum
Exporting Countries (OPEC) to maintain price stability through
voluntary production limits;                                                                                                                                                                                     
|
| |  |  | the level of production by non-OPEC countries;                                                                                                                                                                                                                                                                                                
|
| |  |  | North American demand for gas;                                                                                                                                                                                                                                                                                                                
|
| |  |  | general economic and political conditions; and                                                                                                                                                                                                                                                                                                
|
| |  |  | the presence or absence of drilling incentives such as Canadian
provincial royalty holidays, fluctuation in the value of the Canadian
dollar, availability of new leases and concessions and government
regulations regarding, among other things, export controls,
environmental protection, taxation, price controls and product
allocation.

Worldwide military, political and economic events, including initiatives by
OPEC, affect both the demand for, and the supply of, oil and gas. Fluctuations
during the last few years in the demand and supply of oil and gas have
contributed to, and are likely to continue to contribute to, price volatility.
CE Franklin believes that any prolonged reduction in oil and gas prices would
depress the level of exploration and production activity. This would likely
result in a corresponding decline in the demand for CE Franklins products and
services and could have a material adverse effect on CE Franklins revenues,
cash flows and profitability. There can be no assurances as to the future
level of demand for CE Franklins products and services or future conditions in
the oil and gas and oilfield supply industries.

Adverse weather conditions could temporarily decrease the demand for CE
Franklins products and services.CE Franklins financial performance is tied
closely to the seasonality of drilling activity. Higher drilling activity in
Canada is generally experienced in the winter months. In the spring and early
summer, drilling activity slows due to the difficulty in moving equipment
during the spring thaws. To the extent that unseasonable weather conditions
such as excessive rain or unusually warm winters affect the ability of CE
Franklins customers to access their oil and gas wells, then the demand for CE
Franklins products and services would temporarily decrease and the Companys
cash generated from operations would be adversely affected.

CE Franklin operates in a highly competitive industry, which may adversely
affect CE Franklins revenues, cash flows and profitability.The Canadian
oilfield supply industry in which CE Franklin operates is very competitive.
The Company believes that its future profitability is partially influenced by
competitive factors beyond its control, including:



| |  |  | the ability of some customers to purchase oilfield supplies
directly from the manufacturer rather than from independent oilfield
supply distributors;                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the ability for new brokers and distributors to enter the tubular
supply business and the general supply business if the oil and gas
industry were to experience significant growth in drilling activity;
and
|
| |  |  | price competition among major supply companies.                                                                                                                                                              

CE Franklin and its largest competitors generally operate at low profit margins
due to price competition. Price competition is due in part to consumer price
pressure, in addition to the major supply companies competing for the same
business.

Shifts in drilling activity from conventional oil to gas would decrease CE
Franklins revenues, cash flows and profitability.CE Franklin sells an
average of 3.5 times more product into an oil well versus a gas well and as a
result a change in oil well completion activity has an impact on sales.

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The loss of CE Franklins major supplier for its tubular goods business could
adversely affect the Companys revenue and gross profit.A substantial portion
of CE Franklins business is the sale of tubular goods that are primarily
obtained from one supplier. For the year ended December 31, 2002, 29.5% of CE
Franklins revenue and 11.6% of CE Franklins gross profit was from the sale of
oilfield tubular goods. Although the Company believes that it has historically
had and continues to have a good relationship with its supplier, there can be
no assurance that such relationship will continue. In the event the Company is
unable to source tubular supplies from its existing supplier, then CE Franklin
would need to search for an alternate supplier of these goods. Such suppliers
are available.






|Item 4: |  | Information on the Company
|------- |  | --------------------------

Overview

CE Franklin Ltd. engages in the purchasing, warehousing, selling and servicing
of supplies and equipment for oil and gas exploration and production in Canada.
CE Franklin also distributes pipe, valves and fittings, to large capital
construction projects in the oilsands, refining, heavy oil and petrochemical
industries. Brittania Industries Inc., a 50% owned subsidiary of CE Franklin,
manufactures, sells, rents and services natural gas boosters, casing gas
compressors and vapor recovery equipment. The Companys main focus is to
leverage on long-term relationships with many leading manufacturers who depend
on CE Franklin to get their products efficiently into the hands of hundreds of
engineering, drilling, production and well servicing companies throughout
Canadas oil and gas producing regions.






| | A. |  | History and development of the Company
| | -- |  | --------------------------------------

In November 1993, Franklin Supply Company Ltd., a Canadian company (Franklin)
completed its initial public offering and its shares were listed on the
American Stock Exchange and now trade under the symbol CFK.

CE Franklin is the result of the combination by reverse takeover of Franklin
and Continental Emsco Company Limited (CEL) on November 3, 1995. On January
1, 1996, Franklin Supply and its wholly owned subsidiary CEL amalgamated,
resulting in CE Franklin. On September 26, 1996, the common shares of CE
Franklin began trading on The Toronto Stock Exchange under the symbol CFT.

On May 29, 1999, Smith International Inc. acquired all the common shares
previously held by Continental Emsco Company, which constituted 51.2% of the
Companys outstanding common shares. As of May 12, 2003 Smith International
owned 55.1% of common stock outstanding.

On February 1, 2002 CE Franklin amalgamated with its wholly owned subsidiary
CEF Technologies Inc.

On January 31, 2003 the Company transferred the property and equipment and
operations of its Brittania Compression operations into a wholly owned
subsidiary, Brittania Industries Inc. Subsequently a 50% interest in the new
subsidiary was sold for $538,000.

The Company is registered in the province of Alberta in the country of Canada.
The principal address and telephone number is as follows:



| | CE Franklin Ltd.
Suite 1900
300  5th Avenue S.W.
Calgary, Alberta Canada
T2P 3C4
 
403-531-5600
| | ------------------------------------------------------------------------------------------------

Principal Capital Expenditures and Divestitures

On January 31, 2003 the Company transferred the property and equipment and
operations of its Brittania Compression operations into a wholly owned
subsidiary, Brittania Industries Inc. Subsequently a 50% interest in the new
subsidiary was sold for $538,000..

On December 18, 2001 the Company sold its Domino Machine operations for net
cash proceeds of $7,924,000 resulting in a net after tax gain of $1,102,000.
Domino Machine provided custom machining services to the energy industry and
was not considered a core operation to the Company. The net proceeds from this
transaction were used to reduce the Companys outstanding bank operating loan.

CE Franklin did not acquire or divest any businesses from 2000 to 2002 other
than those disclosed above.

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The Company has discussed possible combinations with complementary businesses
and competitors. The Company has not entered into any agreement with respect
to any prospective acquisition. The Company intends to continue discussions
and to make acquisitions in the future when they are deemed advantageous to the
Company. There can be no assurance that the Company will be able to expand its
Canadian operations by further acquisitions. In addition, if the Company makes
acquisitions, there can be no assurance that such transactions will prove to be
profitable for the Company.






| | B. |  | Business overview
| | -- |  | -----------------

General

CE Franklin has two identifiable industry segments, which are the distribution
of equipment and supplies, including tubular goods, to producers of oil and gas
(Distribution) and manufacturing for rent or sale of gas compression
equipment (Manufacturing). See note 14 Segmented Information to the
December 31, 2002 Financial Statements included under Item 18.

Distribution

CE Franklin sells general oilfield supplies (General Supplies) through its 37
service center locations, which are mainly situated in Western Canadian towns
and smaller cities that have grown to serve particular oil and gas fields. In
addition, CE Franklin targets major capital construction projects in oilsands,
refining, heavy oil and petrochemical as well as non-oilfield related
industries. For the year ended December 31, 2002, the Company generated $178.0
million (68.1% of its sales) in sales (2001  $223.1 million; 2000  $204.3
million) from the sale of General Supplies. CE Franklin, from time to time,
will open or close service centers to meet customers requirements and
fluctuating market conditions. The service centers not only act as the retail
one stop shop for the oil and gas industry by providing over 26,000
regularly-stocked Stock Keeping Units (SKUs) of product, but they also
provide the field with essential services to support the oil and gas producers.
The service centers provide materials management services to enable the
customers to get the right products at the right time. Should the service
center not have a particular product in stock, it has overnight access to the
centralized distribution center in Edmonton, Alberta.

Other services provided by the service centers include pump repair, customized
pump designs and testing, convenient hours and locations plus 24-hour on call
service. In addition, CE Franklin provides well optimization analysis and
onsite project management.

CE Franklin manages its buying and distribution through a 100,000 square-foot
centralized distribution center (the Distribution Center) located in
Edmonton, Alberta. The Distribution Center is strategically located within
reasonable proximity to a majority of vendors and acts as the hub for the
service centers. Its location reduces freight costs through effective
consolidation of shipments. It provides a cross-dock function that minimizes
inventory levels and maximizes service through automatic stock replenishment.
The Distribution Center is International Standards Organization 9002-94 (ISO)
certified which is required by a growing number of customers in conformance
with their own ISO programs.

For the supply chain to be effective, strong relationships must be cultivated
between the Company and its customers. Several customers have looked to CE
Franklin for its expertise in materials management and other service support.
The formal arrangement between the Company and its customers is referred to as
an alliance or an enhanced business relationship.

Through building alliances, the Company now manages over 50 warehouses for its
customers. The trend is for customers to focus on their core competencies and
outsource non-core areas.

The Company sells tubular goods in Canada, the steel pipe, which is used to
line oil and gas wells, and the tubing that is used to bring the production to
the surface. It is also a major distributor of line pipe for oil and gas
gathering systems.

During 2002, the Company generated $77.1 million 29.5% of its sales) from the
sale of tubular goods (2001  $148.0 million; 2000  $148.8 million). Although
margins are lower in these products, operating efficiencies, a small
infrastructure, and low inventory levels make these sales and earnings a
significant part of the Companys operations. Most tubular sales are made from
the Companys headquarters in downtown Calgary, where most of the Canadian oil
and gas producers also have their headquarters. Deliveries of pipe are made
directly from the field inventories of the manufacturers to the well site or
the site where surface line pipe will be laid.

A significant portion of the tubular goods sold by the Company are primarily
products manufactured by IPSCO Inc., which is a steel manufacturer with
manufacturing facilities for tubular goods in Regina, Calgary and Red Deer in
Canada. The Company relies on IPSCO Inc. for the supply of tubular products

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that comprise a material portion of its revenues. The Company believes that it
has historically had and continues to have a good relationship with IPSCO Inc.
The Company will import tubular goods from overseas manufacturers to supplement
its inventory from Ipsco Inc.

Manufacturing

The Companys manufacturing operations is comprised of Brittania Compression.
Brittania operates out of one service center, which manufactures, sells and
rents air and gas compressor packages. During 2002, Brittania Compression
generated $6.2 million (2.4% of sales) (2001  $6.7 million; 2000  $6.3
million).

On January 31, 2003 the Company transferred the property and equipment and
operations of its Brittania Compression operations into a wholly owned
subsidiary, Brittania Industries Inc. Subsequently, a 50% interest in the new
subsidiary was sold for $538,000.

Business and operating strategy

The Company implemented a return to basics strategy in 2002. This strategy
includes improving the Companys value offering and service to its customers,
increasing market share, maximizing gross profit margins, rationalizing
expenses and improving earnings. CE Franklin has revised its value offering
for its customer base and is leveraging its relationship with Wilson Supply, (a
wholly owned division of Smith International, a 55.1% shareholder) to offer a
North American solution to its customer base. Actions will continue in
customer service excellence and operational effectiveness. CE Franklin will
continue to grow its market share in the General Supplies business and is
leveraging Wilsons investment in mill and safety supplies. Inventory
management and accounts receivable initiatives have significantly reduced the
Companys debt in the past two years.

Operations

Management of CE Franklins operations is divided into: sales, which includes
product and account management and inside sales; marketing and supply, which
includes central purchasing; operations, which includes strategically located
service centers, the Distribution Centre, and information technologies;
customer service, safety and quality; finance and administration; and business
effectiveness (human resources).

Product management includes the technical and sales personnel who specialize in
providing sales and service for one of the Companys prominent or specialized
product lines, such as steel and fiberglass tubulars, valves and production
equipment. Product managers are responsible for the profitability of their
product specialty, from the vendor through to the customer. To ensure
coordination and close contact with all of the Companys major customers, a
group of salesmen, working out of Calgary, Alberta where the Companys
customers head offices are located, act as account managers with specific
individual responsibilities for managing the Companys business and alliance
relationships with its customers. The inside sales group is responsible for
coordinating the preparation of hundreds of competitive bid packages each year
for Canadian and international sales.

Individual district managers are responsible for the service center in their
district. The service center is the front line interface with the customer.
The Distribution Center provides centralized materials management services for
CE Franklins service centers. The information technologies group is a
fundamental component of providing service to customers. The marketing and
supply group is responsible for inventory procurement, pricing and margins.
Customer service, safety and quality ensure processes and procedures are in
place to deliver customer service.

Competition

The Canadian oilfield supply industry is highly competitive and fragmented. CE
Franklin and its largest competitors generally operate at low profit margins
due to price competition. Price competition is due to customer price pressure
and to competition among the major supply companies for the same business.
Costs of goods may not be subject to competitive pressures due to the ability
of manufacturers of certain products, particularly tubular products, to hold
the prices at which they sell their products. The Company believes that its
future profitability is partially influenced by additional competitive factors
beyond its control, including the ability of some customers to purchase
oilfield supplies directly from the manufacturer rather than from independent
oilfield supply distributors. In addition, if the oil and gas industry were to
experience significant growth in drilling activity, new brokers could enter the
tubular supply business. The business of selling supplies from service centers
is less susceptible to entry by new competitors because this business requires
greater capital investment.

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There are approximately 230 oilfield supply stores in Canada operated by 14
substantial companies, and there are approximately 20 dealers in oilfield
tubulars. However, only CE Franklin and one other company can offer a
North-American solution and eCommerce capabilities similar to CE Franklin Ltd.
The oilfield supply market is part of the larger industrial supply market,
which is also served in part by numerous other competitors. Some of CE
Franklins major competitors have manufacturing divisions or affiliates that
produce some of their product lines. This vertical integration may place the
Company at a cost disadvantage. The general supply market is further
fragmented by (i) other companies that specialize in the sales of certain
oilfield products, (ii) general industrial supply houses that overlap with the
oilfield suppliers, (iii) manufacturers who sell directly to the oil and gas
industry and (iv) major oil companies that sometimes purchase directly from
manufacturers on large orders.

Smith International Inc., which owns 55.1% of the Company as of May 12, 2003,
and its affiliates, including Wilson Supply has indicated that they will not
compete with CE Franklin Ltd. However, Smith International and Wilson Supply
may compete with CE Franklin at a future date, particularly with respect to
international sales.

In many of the established oil and gas producing countries outside of North
America, oilfield equipment and supplies are sold and supplied differently and
accordingly, North American-style service centers are not common. As a result
of price competition in Canada, profit margins in the industry are typically
not high and profitability is achieved by continuously improving the
effectiveness of personnel and the efficiency of systems.

CE Franklins financial performance is tied closely to the seasonality of
drilling activity. Higher drilling activity in Canada is generally experienced
in the winter months. In the spring and early summer, drilling activity slows
due to the difficulty in moving equipment during the spring thaws. To the
extent that unseasonable weather conditions such as excessive rain or unusually
warm winters affect the ability of CE Franklins customers to access their oil
and gas wells, then the demand for CE Franklins products and services would
temporarily decrease.






| | C. |  | Organizational structure
| | -- |  | ------------------------

On February 1, 2002 CE Franklin amalgamated with its wholly owned subsidiary,
CEF Technologies Ltd. The Company operated under one legal entity, CE Franklin
Ltd. from February 1, 2002 to January 31, 2003.

On January 31, 2003 the Company transferred the property and equipment and
operations of its Brittania Compression operations into a wholly owned
subsidiary, Brittania Industries Inc. Subsequently a 50% interest in the new
subsidiary was sold for $538,000.






| | D. |  | Property, plant and equipment
| | -- |  | -----------------------------

Description of Property

The Companys headquarters is located in Calgary, Alberta and its Distribution
Center is based in Edmonton, Alberta. The Company has 27 service centers in
Alberta, five in Saskatchewan, five in British Columbia, one in Manitoba and
one in Ontario. In addition, the Company has one assembly facility in Alberta.
The Company leases 33 facilities, and owns four facilities. The owned
properties represent three service centers in Alberta, and one service center
in Saskatchewan. The owned properties are subject to a general security
agreement in favor of the Companys principal lender.

The current capacity at the Companys facilities is considered adequate to meet
current market demand, therefore there are no current material plans to
construct new facilities.

The Company is not aware of any environmental issues that could have a material
impact on any of its properties.






|Item 5: |  | Operating and Financial Review and Prospects
|------- |  | --------------------------------------------

Forward Looking Statements

The information in this Form 20-F, including this Item 5, may contain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements, other than statements of historical facts, that address
activities, events, outcomes and other matters that CE Franklin plans, expects,
intends, assumes, believes, budgets, predicts, forecasts, projects, estimates
or anticipates (and other similar expressions) will, should or may occur in the
future are forward-looking statements. These forward-looking statements are
based on managements current belief, based on currently available information,
as to the outcome and timing of future events. When considering
forward-looking statements, you should keep in mind the risk factors

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and other cautionary statements in this Form 20-F, including those in Item 3D
under the caption Risk Factors.

Forward-looking statements appear in a number of places and include statements
with respect to, among other things:



| |  |  | planned capital expenditures and working capital and availability
of capital resources to fund capital expenditures and working capital;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the Companys future financial condition or results of operations
and future revenues and expenses;                                     
|
| |  |  | the Companys future gross profit and net profit margins;                                                                               
|
| |  |  | the Companys business strategy and other plans and objectives for future operations;                                                   
|
| |  |  | fluctuations in worldwide prices and demand for oil and gas;                                                                            
|
| |  |  | fluctuations in levels of gas and oil exploration and development activities; and                                                       
|
| |  |  | fluctuations in the demand for the Companys products and services.                                                                     

We caution you that these forward-looking statements are subject to all of the
risks and uncertainties, many of which are beyond CE Franklins control. These
risks include, but are not limited to, economic conditions, seasonality of
drilling activity, any shift in drilling activity from conventional oil to gas
and heavy oil, commodity price volatility for oil and gas, currency
fluctuations, inflation, regulatory changes and the other risks described in
Item 3D under the caption Risk Factors.

Should one or more of the risks or uncertainties described above or elsewhere
in this Form 20-F occur, or should underlying assumptions prove incorrect, the
Companys actual results and plans could differ materially from those expressed
in any forward-looking statements.

All forward-looking statements expressed or implied, included in this Form 20-F
and attributable to CE Franklin are qualified in their entirety by this
cautionary statement. This cautionary statement should also be considered in
connection with any subsequent written or oral forward-looking statements that
CE Franklin or persons acting on its behalf might issue. CE Franklin does not
undertake any obligation to update any forward-looking statements to reflect
events or circumstances after the date of filing this Form 20-F with the
Securities and Exchange Commission, except as required by law.






| | A. |  | Results of Operations
| | -- |  | ---------------------

Comparison of 2002 to 2001

The average price of oil during 2002 was U.S. $26.10 (West Texas Intermediate)
and the average price of gas was Cdn. $4.18 (Aeco spot price). Oil and gas
commodity prices started 2002 with the price of oil at U.S. $19.51 and the
price of gas at Cdn. $3.52, and as a result many exploration and production (E
& P) companies reduced their capital spending programs for 2002. Although
commodity prices improved significantly during the year with the price of oil
and gas ending the year at U.S. $29.42 and Cdn. $5.97, respectively, this
increase in oil and gas prices did not result in a revision in E & P companies
capital spending programs for 2002.

The total number of oil and gas wells completed during 2002 (excluding
dry/service wells) in western Canada decreased 18.4% to 12,977 wells completed
as compared to 15,902 wells completed during 2001. The average rig count
decreased 22.7% to 265 rigs during 2002 compared to 343 rigs during 2001.

Oil well completions accounted for 3,856 (29.7%) of total wells competed in
2002 as compared to 4,702 (29.6%) in 2001, while gas well completions accounted
for 9,121 (70.3%) of total wells completed in 2002 as compared to 11,200
(70.4%) in 2001.

Sales

Sales for the year ended December 31, 2002 decreased to $261.3 million from
$377.8 million for the year ended December 31, 2001.

Sales for General Supplies decreased $45.1 million or 20.2% to $178.0 million
during 2002 from $223.1 million during 2001. Of this decline, $19.8 million
relates to the completion of a large capital oilsands project in northern
Alberta in 2001. Excluding this capital project, General Supplies sales
decreased 12.7% or $25.3 million for the year ended December 31, 2002 while
well completion activity decreased 18.4% during 2002.

Tubulars sales for the year ended December 31, 2002 were $77.1 million, a
decline of 47.9% or $70.9 million, as compared to $148.0 million for the year
ended December 31, 2001. The decrease in Tubulars

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sales is attributed to E & P customer merger and acquisition activity,
resulting in larger customers now being able to directly access steel mills
and to the overall decline in activity levels.

Gross Profit

Total gross profit decreased $7.1 million or 16.2% to $36.7 million in 2002 as
compared to $43.8 million during 2001. Included in the 2001 gross profit of
$43.8 million was a $1.1 million inventory write-down. Excluding the inventory
write-down, total gross profit decreased $8.2 million or 18.2% for the year
ended December 31, 2002 as compared to the year ended December 31, 2001.

Average gross profit margin for the year ended December 31, 2002 increased to
14.0% from 11.6% for the year ended December 31, 2001. General Supplies
profit margin increased to 17.3% from 15.4% due to the $1.1 million inventory
write down described above coupled with lower margins earned on the capital
oilsands project, which was completed in 2001. Excluding these two items, 2002
General Supplies profit margin was consistent with 2001.

Tubulars gross profit margin increased marginally in 2002 to 5.5% from 5.2%.

Selling, General and Administrative Costs (SG&A)

For the year ended December 31, 2002, SG&A costs decreased $4.2 million or
10.5% to $35.5 million from $39.7 million. Included in 2002 and 2001 SG&A were
approximately $1.2 million and $1.7 million, respectively, in charges relating
to severance, termination and closure costs. With the decline in drilling
activity and well completions during the last six months of 2001, and during
2002 the Company adjusted its infrastructure to support the reduced revenue
levels.

As a result of the Companys restructuring efforts, SG&A decreased by $3.7
million or 9.7% during 2002 as compared to 2001. CE Franklin reduced its
employee base by 25.3% to 327 employees as at December 31, 2002 from 438
employees as at September 30, 2001 to offset the decline in activity levels.
As a result of the employee reductions, gross profit per employee increased to
$112,000 per employee in 2002 from $98,000 in 2000 and $107,000 in 2001.

EBITDA1

Earnings before interest, tax, depreciation, amortization and other expenses
(EBITDA) for the year ended December 31, 2002 decreased to $1.2 million from
$4.1 million. The $116.5 million decrease in sales resulting from the 18.4%
decline in well completion activity coupled with the reduction in Tubulars
sales resulted in only 2.5% decremental flow through to EBITDA. This was due
to an improvement in gross profit margins from 11.6% to 14.0%, and a reduction
in SG&A by $4.2 million.

Income (loss) before Income Taxes, and Income (loss) from Continuing Operations

Loss from continuing operations before income taxes was $3.9 million for the
year ended 2002 as compared to a loss of $2.1 million for the year ended 2001.
The $1.8 million decline in income reflects the $2.9 million reduction in
EBITDA coupled with an increase in depreciation expense of $366,000 relating to
the Companys eCommerce initiative offset by a reduction in interest and other
expense of $1.4 million. The reduction in interest expense reflects lower debt
levels due to better working capital management by the Company and the sale of
its Domino Machine operations at the end of 2001.

Loss from continuing operations was $2.5 million or a loss of $0.15 per share
(diluted) for 2002 as compared to a loss of $1.6 million or $0.09 per share
(diluted) for 2001.

Discontinued Operations  Year Ended December 31, 2001

On December 18, 2001 the Company sold its Domino Machine operations for net
cash proceeds of $7.9 million resulting in an after tax gain on disposition of
$1.1 million. Domino Machine provided custom-machining services to the energy
industry, which was not considered a core operation to the Company. The net
proceeds from this transaction were used to reduce the Companys outstanding
bank operating loan. Results for Domino Machine operations were included in
the 2001 and 2000 Statements of Operations.



---

|1 |  | Non-GAAP Earnings Measures
The Companys EBITDA results are presented to provide the reader with operating
financial information that is comparable to prior years operating financial
information. It should be noted that EBITDA is not defined by Canadian
generally accepted accounting principles and has no standardized meaning.
Therefore, these results may not be readily comparable to other companies
presentations of operating results. EBITDA is defined as earnings before
interest, tax, depreciation and amortization.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Net Income and Earnings per Share

Net loss for the year ended 2002 was $2.5 million or $0.15 per share (diluted)
as compared to net income of $619,000 or $0.04 per share (diluted) for 2001.

Comparison of 2001 to 2000

Commodity prices for oil and gas had a significant impact on drilling activity
in western Canada during 2001. The average price for oil in 2001 was U.S.
$25.41 and the average price for gas was Cdn. $6.09. However, commodity prices
dropped significantly during the last six months of 2001, and as at December
31, 2001 the price of oil and gas was U.S. $19.51 and Cdn. $3.52, respectively.

The total number of oil and gas wells completed during 2001 (excluding
dry/service wells) in western Canada increased 10.5% to 15,902 wells completed
as compared to 14,395 wells completed during 2000. Oil and gas wells
completed in western Canada for the first six months of 2001 exceeded 2000 by
28.5%. However, the number of well completions during the last six months of
2001 declined by 3.0% as compared to 2000 reflecting the decline in activity
levels during the second half of 2001 as a result of the weakening in commodity
prices during the year.

Oil well completions accounted for 4,702 (30%) of total wells completed in 2001
as compared to 5,466 (38%) in 2000, while gas completions accounted for 11,200
(70%) of total wells completed in 2001 as compared to 8,929 (62%) in 2000.

Sales

Sales for the year ended December 31, 2001 increased 5.1% to $377.8 million
from $359.4 million for the year ended December 31, 2000.

Sales for General Supplies increased 9.2% or $18.7 million to $223.1 during
2001 from $204.4 million in 2000. Approximately $10.7 million of the sales
increase relates to the Company delivering pipe, valves and fittings to a large
oilsands project. This project was completed in 2001. The remainder of the
increase relates to the Companys traditional General Supplies sales reflecting
the general increase in well completion activity during 2001.

Tubular sales remained relatively constant at $148.0 million during 2001 as
compared to 2000. Although drilling activity increased during 2001, the
majority of the increase was in shallow gas wells, which has a small component
of Tubular sales.

Gross Profit

Total gross profit increased $1.1 million or 2.5% to $43.8 million in 2001 as
compared to $42.7 million during 2000. The increase in gross profit dollars
reflects the increased sales for the Companys General Supplies and
manufacturing operations offset by $1.1 million inventory write-down. As a
result of the decline in activity levels during the last six months of 2001,
the Company reviewed its inventory to determine if there was an increase in
obsolescence or impairment in value. This resulted in the additional inventory
write-down of $1.1 million relating to the General Supplies and manufacturing
operations.

Average gross profit margin for the year ended December 31, 2001 decreased
marginally to 11.6% from 11.9%. Excluding the inventory write-down, gross
profit margin for 2001 was 11.9% and consistent with 2000. General Supplies
profit margin decreased to 15.4% from 16.4% due to the inventory write-down
described above coupled with lower gross profit margins for the large oilsands
project, which is typical with distribution of pipe valves and fittings to such
projects.

Selling, General and Administrative Costs (SG&A)

For the year ended December 31, 2001, SG&A costs increased $5.0 million or
14.4% to $39.7 million from $34.7 million. Included in SG&A was approximately
$1.7 million in charges relating to severance, termination and closure costs.
With the decline in drilling activity and well completions during the last six
months of 2001, the Company adjusted its infrastructure to support the reduced
revenue levels.

Excluding these charges SG&A increased by $3.3 million or 9.5% during 2001 as
compared to 2000. This increase relates to salary costs in General Supplies
and Tubulars of $2.0 million relating to increased activity levels in the last
half of 2000 and the first half of 2001.

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EBITDA1

Earnings before interest, tax, depreciation and amortization and other expenses
(EBITDA) for the year ended December 31, 2001 decreased to $4.1 million from
$8.0 million. Included in the $3.9 million decrease was the $2.8 million of
charges relating to inventory write-downs, severance, termination and closure
costs, the $3.3 million increase in SG&A from operations offset by the $2.1
million increase in gross profit.

Income (Loss) from Continuing
Operations before Income Taxes, and Income (loss) from Continuing Operations

Loss from continuing operations before income taxes was $2.1 million for the
year ended 2001 as compared to income of $1.5 million for 2000. The decline in
income reflects the $3.9 million reduction in EBITDA coupled with an increase
in an amortization expense of $352,000 relating to the Companys eCommerce
initiative offset by a reduction in interest expense of $668,000. The
reduction in interest expense reflects lower debt levels due to better working
capital management by the Company coupled with a reduction in the Canadian
prime interest rate.

Loss from continuing operations was $1.6 million or a loss of $0.09 per share
(diluted) for 2001 as compared to income of $210,000 or $0.01 per share
(diluted).

Net Income and Earnings per Share

Net income for the year ended 2001 was $619,000 or $0.04 per share (diluted) as
compared to $1.5 million or $0.08 per share (diluted) for 2000. Domino
Machine, which was sold on December 18, 2001, was included in the 2001 and 2000
results.






| | B. |  | Liquidity and Capital Resources
| | -- |  | -------------------------------

Asset Management

CE Franklin maintains debt primarily to finance its working capital
requirements. CE Franklins total average capitalization (financed debt plus
equity) improved in 2002 with average debt of 31.2% (of total capitalization)
in 2002 and 43.5% in 2001 and average equity of 68.8% in 2002 and 56.5% in
2001.

Average Days Sales Outstanding (DSO) was 49.8 days in 2002 as compared to 46.1
days in 2001. Trade accounts receivable is tightly managed by the Company with
daily calls to customers to solve payment issues. In addition, the Companys
accounts receivable team works closely with customers to help simplify payment
and approval processes. Bad debt expense in 2002 was $688,000 compared to $1.0
million in 2001.

Total inventory for the Company decreased by $10.2 million ($9.3 million from a
cash flow perspective) or 20.0% to $40.7 million. CE Franklin measures the
quality of inventory with an inventory turns calculation. Inventory turned 4.9
times in 2002, compared to 5.4 times in 2001. The Company monitors its
inventory on a daily basis in order to reduce surplus, improve turns, and
reduce obsolescence.

In the normal course of business, the Company enters into foreign currency
exchange contracts with financial institutions to fix the value of liabilities
and future commitments.

Cash Management

In 2002, CE Franklin generated $974,000 in cash flow from continuing
operations, $1.4 million of cash flow from the collection of accounts
receivable and generated $9.3 million in cash flow from the reduction of
inventories. The Company used this cash generated to reduce its accounts
payable and accrued liabilities and bank overdraft by $14.8 million, and
invested $1.2 million in capital assets. These primary activities resulted in
CE Franklin increasing its bank line of credit by $5.2 million.

At December 31, 2002, CE Franklin had a $35.0 million credit facility. During
the year ended December 31, 2002, the Company was offside of certain financial
ratio covenants relating to earnings, which were



---

|1 |  | Non-GAAP Earnings Measures
The Companys EBITDA results are presented to provide the reader with operating
financial information that is comparable to prior years operating financial
information. It should be noted that EBITDA is not defined by Canadian
generally accepted accounting principles and has no standardized meaning.
Therefore, these results may not be readily comparable to other companies
presentations of operating results. EBITDA is defined as earnings before
interest, tax, depreciation and amortization.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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waived by the Companys primary lender. In managements opinion the $35.0
million credit facility is considered sufficient to finance its current
operating needs.

See item 3D, Risk factors.






| | C. |  | Research and Development, Patents and Licenses, etc.
| | -- |  | ----------------------------------------------------
|
| |    |  | Not applicable.                                     






| | D. |  | Trend Information       
| | -- |  | ------------------------
|
| |    |  | See Item 4B and Item 5A.






|Item 6: |  | Directors, Senior Management and Employees
|------- |  | ------------------------------------------






| | A. |  | Directors and Senior Management
| | -- |  | -------------------------------

The following table sets forth-certain information about our directors and
leadership team, as of May 12, 2003.

|                                   |  |     |  |                                         
|---------------------------------- |  | --- |  | ----------------------------------------
|Name and Municipality of Residence |  | Age |  | Position with CE Franklin Ltd.          
|                                   |  |     |  |                                         
|Michael S. West(1)                 |  | 40  |  | President, Chief Executive Officer      
|Calgary, Alberta                   |  |     |  | and Director                            
|James E. Baumgartner               |  | 48  |  | Vice President, Sales                   
|Edmonton, Alberta                  |  |     |  |                                         
|Brent W. Greenwood                 |  | 48  |  | Vice President, Marketing and Supply    
|Calgary, Alberta                   |  |     |  |                                         
|Ronald L. Koper                    |  | 44  |  | Vice President, Business Effectiveness  
|Calgary, Alberta                   |  |     |  |                                         
|Timothy M. Ritchie                 |  | 32  |  | Vice President, Operations              
|Calgary, Alberta                   |  |     |  |                                         
|Salvatore Secreti                  |  | 43  |  | Vice President and                      
|Calgary, Alberta                   |  |     |  | Chief Financial Officer                 
|Roderick H. Tatham                 |  | 44  |  | Director of Quality and Customer Service
|Calgary, Alberta                   |  |     |  |                                         
|John J. Kennedy(3)(4)              |  | 50  |  | Director                                
|Houston, Texas                     |  |     |  |                                         
|S. Douglas Martin(1)(2)(3)(4)      |  | 71  |  | Director                                
|Calgary, Alberta                   |  |     |  |                                         
|Douglas L. Rock(1)(2)              |  | 56  |  | Director                                
|Houston, Texas                     |  |     |  |                                         
|Gordon R. Schnell(3)(4)            |  | 69  |  | Director                                
|Cochrane, Alberta                  |  |     |  |                                         



---

|Notes: |  |                                                         
|------ |  | --------------------------------------------------------
|      
|1)     |  | Member of Corporate Governance and Nominating Committee.
|      
|2)     |  | Member of Compensation Committee.                       
|      
|3)     |  | Member of Audit Committee.                              
|      
|4)     |  | Member of Environment, Health & Safety Committee.       

The terms of office for each of the directors will expire at the time of the
May 2004 annual shareholders meeting. The following is a summary of the
background of each director and member of the Companys leadership team.

Michael S. Westis the President and Chief Executive Officer. He was appointed
to CE Franklins Board of Directors in January 2002. Mr. West has held various
positions including Vice President, Operations for a major competitor in the
oilfield supply and distribution business. Prior to joining the oil and gas
sector in 1996, he worked for 11 years in various capacities in the automotive
after-markets industry.

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James E. Baumgartneris Vice President, Sales. He has over 21 years experience
in the management of the pipe, valves and fittings in the supply industry in
Canada in addition to domestic and international oilfield supply experience.

Brent W. Greenwoodis Vice President, Marketing and Supply. He graduated from
the University of Saskatchewan with a Bachelor of Arts (Honours) in 1974 and a
Masters of Arts in History in 1976. He graduated from the University of
Calgary in 1999 with a Masters of Business Administration (MBA). He started
his career with Franklin Supply in 1980 and has held various positions with the
Company over the past 21 years primarily specializing in the Tubulars division.

Ronald L. Koperis the Vice President, Business Effectiveness. He graduated
from the University of Calgary in 1984 with a Bachelor of Commerce. Since then
he has dedicated his career to the human resources and organizational
development profession. Prior to joining the Company in 2000 he completed over
six years experience as a private organizational change consultant with a
diverse client list of large and mid-sized Canadian Corporations.

Timothy M. Ritchieis the Vice President, Operations. He graduated from the
University of Lethbridge with a Bachelor of Arts in 1993 and in 2000 earned his
Masters of Business Administration (MBA) from the University of Calgary. He
began his career with Franklin Supply in the field over nine years ago and has
progressively taken on more senior roles for the Company.

Salvatore Secretiis the Vice President and Chief Financial Officer. He
graduated from the University of Calgary with a Bachelor of Commerce degree in
1981 and earned his Chartered Accountant (CA) designation in 1985. Since
leaving public practice in 1985, he has been the Controller or Chief Financial
Officer at various public and private companies in a variety of industries. He
joined CE Franklin as Vice President and Chief Financial Officer in January
2001.

Roderick H. Tathamis the Director of Customer Service and Quality. He is
responsible and accountable for the redesign and implementation of all business
processes related to customer service and operational performance. Prior to
joining CE Franklin Ltd. in May 2002 he worked in various capacities as Manager
of Business Process & Quality, Branch Manager, Quality Assurance Manager and
Materials Coordinator.

John J. Kennedybecame a Director of CE Franklin Ltd. In May 1999. He is
President and Chief Executive Officer of Wilson Supply, a division of Smith
International, Inc. Prior to this position Mr. Kennedy was the Chief Financial
Officer of Smith International, Inc. Mr. Kennedy has worked in the energy
industry for the past 24 years, and has held various executive and management
level positions with Smith International, Bow Valley Petroleum, and Brown &
Root. Mr. Kennedy has several professional memberships in both the United
Kingdom and United States, including the Institute of Petroleum and Association
of Corporate Treasurers.

S. Douglas Martingraduated from the University of Oklahoma with a Bachelor of
Business Administration in 1955. He became a Director of Franklin Supply in
1993 and a Director of CE Franklin in 1995. Mr. Martin became Chairman of the
Company in October 2001. Mr. Martin has over 47 years of experience in the
energy industry in both the United States and Canada. His broad range of
experience has been with energy supply and distribution companies as well as
exploration and production companies.

Douglas L. Rockhas been a Director of CE Franklin since 1999. He graduated
from The Pennsylvania State University. Mr. Rock began his career with Smith
International in 1974 and since then has had senior management roles. He is
currently Chairman of the Board, Chief Executive Officer and President of Smith
International, Inc.

Gordon R. Schnellwas the President and Chief Operating Officer of CE Franklin
Ltd. from 1995 to 1998 and interim President and Chief Executive Officer from
October 2001 to January 2002. Before that time he started his career with
Continental Supply Company in 1956 where he took on increasingly senior roles
and eventually became the President of Continental Emsco Company Limited.
Since his retirement in 1998, he has consulted to various companies in the
oilfield service industry. Mr. Schnell has been on the Board since 1995.






| | B. |  | Compensation
| | -- |  | ------------

The following table sets forth the compensation paid by the Company to the
President and Chief Executive Officer and to each of the next four most highly
compensated executive officers who were serving in such capacities at December
31, 2002, (collectively, the Named Executive Officers) for services rendered
to the Company for the years ending December 31, 2002, 2001 and 2000
respectively:

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|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |         |  |                        |         |            |  |           |   |  |  |  |   |  |  |  |   | 
|-------------------------------------------------------- |  | ------------------- | ---- | -------- |  | ---------- | ------- | ------- |  | --------------- | ------ | ------- |  | ------------ | - | ------- |  | ---------------------- | ------- | ---------- |  | --------- | - |  |  |  | - |  |  |  | - | 
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |         |  | Long-Term Compensation |         |            |  |          
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |         |  |                        |         |            |  |          
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |         |  | Awards                 |         |            |  |           |   |  |  | 
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |         |  |                        |         |            |  |           |   |  |  | 
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |         |  | Securities             |         | Restricted |  |           |   |  |  |  |   | 
|                                                         |  | Annual Compensation |      | Under    |  | Shares or  |         | Payouts |  |                 |        |        
|                                                         |  |                     |      | Options/ |  | Restricted |         |         |  |                 |        |        
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  | Other Annual |   | SARs    |  | Share                  |         | LTIP       |  | All Other
|Name and                                                 |  |                     |      |          |  | Salary     |         | Bonus   |  | Compensation(1) |        | Granted |  | Units        |   | Payouts |  | Compensations         
|Principal Position                                       |  | Year                |      | ($)      |  | ($)        |         | ($)     |  | (#)             |        | ($)     |  | ($)          |   | ($)    
|                                                         |  |                     |      |          |  |            |         |         |  |                 |        |         |  |              |   |        
|Michael
S. West
President and
Chief Executive
Officer(2) |  |                     | 2002 |          |  |            | 187,642 |         |  |                 |       |         |  |              |  |         |  |                        | 211,495 |            |  |           |  |  |  |  |  |  |  |  |  | 
|Gordon
R. Schnell                                        |  |                     | 2002 |          |  |            | 24,616  |         |  |                 |       |         |  |              |  |         |  |                        | 10,000  |            |  |           |  |  |  |  |  |  |  |  |  | 
|Interim President and
Chief Executive Officer(3)         |  |                     | 2001 |          |  |            | 46,540  |         |  |                 |       |         |  |              |  |         |  |                        | 5,000   |            |  |           |  |  |  |  |  |  |  |  |  | 
|Salvatore Secreti                                        |  |                     | 2002 |          |  |            | 176,000 |         |  |                 | 15,520 |         |  |              |  |         |  |                        | 78,083  |            |  |           |  |  |  |  |  |  |  |  |  | 
|Vice President and
Chief Financial Officer(4)            |  |                     | 2001 |          |  |            | 144,615 |         |  |                 |       |         |  |              |  |         |  |                        | 44,907  |            |  |           |  |  |  |  |  |  |  |  |  | 
|Brent Greenwood                                          |  |                     | 2002 |          |  |            | 120,000 |         |  |                 | 11,640 |         |  |              |   |         |  |                        | 55,748  |            |  |           |   |  |  |  |   |  |  |  |   | 
|Vice President,                                          |  |                     | 2001 |          |  |            | 109,846 |         |  |                 |       |         |  |              |  |         |  |                        | 9,968   |            |  |           |  |  |  |  |  |  |  |  |  | 
|Marketing and Supply                                     |  |                     | 2000 |          |  |            | 94,915  |         |  |                 |       |         |  |              |  |         |  |                        | 8,037   |            |  |           |  |  |  |  |  |  |  |  |  | 
|Tim Ritchie                                              |  |                     | 2002 |          |  |            | 120,000 |         |  |                 | 11,640 |         |  |              |   |         |  |                        | 55,748  |            |  |           |   |  |  |  |   |  |  |  |   | 
|Vice President,                                          |  |                     | 2001 |          |  |            | 111,538 |         |  |                 |       |         |  |              |  |         |  |                        | 10,378  |            |  |           |  |  |  |  |  |  |  |  |  | 
|Operations                                               |  |                     | 2000 |          |  |            | 98,192  |         |  |                 |       |         |  |              |  |         |  |                        | 8,371   |            |  |           |  |  |  |  |  |  |  |  |  | 
|Jim Baumgartner                                          |  |                     | 2002 |          |  |            | 120,000 |         |  |                 | 11,640 |         |  |              |  |         |  |                        | 55,748  |            |  |           |  |  |  |  |  |  |  |  |  | 
|Vice President,
Sales(5)                                 |  |                     | 2001 |          |  |            | 57,230  |         |  |                 |       |         |  |              |  |         |  |                        | 10,000  |            |  |           |  |  |  |  |  |  |  |  |  | 



---

|(1) |  | Perquisites and other personal benefits do not, in the aggregate, exceed
the lesser of $50,000 and 10 percent of the total of the annual salary and
bonus for the financial year for any of the Named Executive Officers.                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Mr. West was appointed President and Chief Executive Officer on January
15, 2002.                                                                                                                                                                     
|   
|(3) |  | Mr. Schnell acted as interim President and Chief Executive Officer from
October 16, 2001 to January 15, 2002. Mr. Schnells total compensation for
2002 includes a directors fee and stock options of $10,000 and 10,000
stock options, respectively.
|   
|(4) |  | Mr. Secreti joined the Company on January 29, 2001.                                                                                                                                                                                                   
|   
|(5) |  | Mr. Baumgartner joined the Company on July 3, 2001.                                                                                                                                                                                                   

Aggregate Option Exercises During
2002 and Option Values at December 31, 2002

The following table sets forth information in respect of the aggregate stock
options exercised by the Named Executive Officers during 2002 and the value of
unexercised, in-the-money options as at December 31, 2002. The actual value of
the unexercised in-the-money options will be determined by the market price of
the Companys common shares on the date such options may be exercised by any of
the Named Executive Officers. There is no assurance that the values of such
in-the-money options shown in this table will be realized.

|                     |  |             |   |             |  |             |   |               |  |                             |        |                              |         |  |         |  |   |                              |   |  |   |  |   | 
|-------------------- |  | ----------- | - | ----------- |  | ----------- | - | ------------- |  | --------------------------- | ------ | ---------------------------- | ------- |  | ------- |  | - | ---------------------------- | - |  | - |  | - | 
|                     |  |             |   |             |  |             |   |               |  |                             |        |                              |         |  |         |  |   | Value of Unexercised in-the-
|                     |  |             |   |             |  |             |   |               |  | Unexercised Options/SARs at |        | Money Options/SARs at FY-End
|                     |  | Securities  |   | Aggregate   |  | FY-End 2002 |   | ($)          
|                     |  | Acquired    |   | Value       |  |             |   |              
|                     |  | on Exercise |   | Realized(1) |  | Exercisable |   | Unexercisable |  | Exercisable                 |        | Unexercisable(2)            
|Name                 |  | (#)         |   | ($)         |  | (#)         |   | (#)           |  | (#)                         |        | (#)                         
|                     |  |             |   |             |  |             |   |               |  |                             |        |                             
|Michael S. West(3)   |  |             |  |             |  |             |  |               |  | nil                         |        |                              | 211,495 |  |         |  |  |                              |   |  |  | 
|Gordon R. Schnell(4) |  |             |  |             |  |             |  |               |  |                             | 3,334  |                              |         |  | 14,166  |  |   |                              |  |  |   |  |  | 
|Salvatore Secreti    |  |             |  |             |  |             |  |               |  |                             | 21,635 |                              |         |  | 101,355 |  |   |                              |  |  |   |  |  | 
|Brent Greenwood      |  |             |  |             |  |             |  |               |  |                             | 16,679 |                              |         |  | 64,069  |  |   |                              |  |  |   |  |  | 
|Tim Ritchie          |  |             |  |             |  |             |  |               |  |                             | 13,040 |                              |         |  | 65,457  |  |   |                              |  |  |   |  |  | 
|Jim Baumgartner      |  |             |  |             |  |             |  |               |  |                             | 3,333  |                              |         |  | 62,415  |  |   |                              |  |  |   |  |  | 

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---

|(1) |  | The Aggregate Value Realized was calculated by determining the
difference between the market value of the securities acquired on the date
of exercise (based on the Closing Price on the Toronto Stock Exchange on
the date of exercise) less the exercise price of the options exercised.                                                                                                        
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The Value of Unexercised In-The-Money Options at FY End was calculated
by determining the difference between the market value of the securities
underlying the option at the end of the financial year and the exercise
price of such options. At the end of the most recently completed
financial year, the closing price of the Companys Common Shares on the
Toronto Stock Exchange was $3.20.
|   
|(3) |  | Mr. West was appointed President and Chief Executive Officer on January
15, 2002.                                                                                                                                                                                                                                                                                                                   
|   
|(4) |  | Mr. Schnell acted as interim President and Chief Executive Officer from
October 16, 2001 to January 15, 2002. Mr. Schnells stock options
represent stock options he holds as a director of the Company.                                                                                                                                                                                            

Stock Options Granted During 2002

The following options to purchase common shares of the Company were granted
during 2002 to the Named Executive Officers of the Company pursuant to the
terms of the Companys Stock Option Plan.

|                     |  |              |         |                |  |              |      |                     |  |                       |       |  |  |  |       |  |  |                   |  | 
|-------------------- |  | ------------ | ------- | -------------- |  | ------------ | ---- | ------------------- |  | --------------------- | ----- |  |  |  | ----- |  |  | ----------------- |  | 
|                     |  | Securities   |         | % of Total     |  |              |      |                     |  | Market Value of       |       |  |  | 
|                     |  | Under        |         | Options/SARs   |  |              |      |                     |  | Securities Underlying |       |  |  | 
|                     |  | Options/SARs |         | Granted to     |  | Exercise or  |      | Options/SARs on the |  |                       |       | 
|                     |  | Granted(3)   |         | Employees in   |  | Base Price   |      | Date of Grant       |  |                       |       | 
|Name                 |  | (#)          |         | Financial Year |  | ($/Security) |      | ($/Security)        |  | Expiration Date      
|                     |  |              |         |                |  |              |      |                     |  |                      
|Michael S. West(1)   |  |              | 55,217  |                |  |              | 6.3  | %                   |  |                       | $3.50 |  |  |  | $3.50 |  |  | January 1, 2012  
|                     |  |              | 100,000 |                |  |              | 11.4 | %                   |  |                       | $3.30 |  |  |  | $3.30 |  |  | January 15, 2012 
|                     |  |              | 56,278  |                |  |              | 6.4  | %                   |  |                       | $3.49 |  |  |  | $3.49 |  |  | December 13, 2012
|Gordon R. Schnell(2) |  |              | 5,000   |                |  |              | 0.57 | %                   |  |                       | $3.50 |  |  |  | $3.50 |  |  | February 15, 2012
|                     |  |              | 5,000   |                |  |              | 0.57 | %                   |  |                       | $3.49 |  |  |  | $3.49 |  |  | December 13, 2012
|Salvatore Secreti    |  |              | 36,812  |                |  |              | 4.2  | %                   |  |                       | $3.50 |  |  |  | $3.50 |  |  | January 1, 2012  
|                     |  |              | 41,271  |                |  |              | 4.7  | %                   |  |                       | $3.49 |  |  |  | $3.49 |  |  | December 13, 2012
|                     |  |              | 27,609  |                |  |              | 3.1  | %                   |  |                       | $3.50 |  |  |  | $3.50 |  |  | January 1, 2012  
|Brent Greenwood      |  |              | 28,139  |                |  |              | 3.2  | %                   |  |                       | $3.49 |  |  |  | $3.49 |  |  | December 13, 2012
|                     |  |              | 27,609  |                |  |              | 3.1  | %                   |  |                       | $3.50 |  |  |  | $3.50 |  |  | January 1, 2012  
|Tim Ritchie          |  |              | 28,139  |                |  |              | 3.2  | %                   |  |                       | $3.49 |  |  |  | $3.49 |  |  | December 13, 2012
|                     |  |              | 27,609  |                |  |              | 3.1  | %                   |  |                       | $3.50 |  |  |  | $3.50 |  |  | January 1, 2012  
|Jim Baumgartner      |  |              | 28,139  |                |  |              | 3.2  | %                   |  |                       | $3.49 |  |  |  | $3.49 |  |  | December 13, 2012



---

|(1) |  | Mr. West was appointed President and Chief Executive officer on January 15, 2002.                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Mr. Schnell acted as interim President and Chief Executive Officer from
October 16, 2001 to January 15, 2002. Mr. Schnells 10,000 stock options
granted during 2002 represents stock options he was granted as a director.
|   
|(3) |  | Each option granted vests over three years at a rate of 1/3 per year.                                                                                                                                                      

Mr. Schnell and Mr. Boswell (a former director of the Company who did not stand
for reelection at the May 1, 2003 annual general meeting) were paid $10,000 as
Directors fees in 2002. For 2002, Mr. Schnell and Mr. Boswell were each
granted 10,000 stock options, 5,000 on February 15, 2002 and 5,000 on December
13, 2002, at a price of $3.50 and $3.49 respectively per share. Mr. Martin was
paid $30,000 plus out-of-pocket expenses and granted 30,000 stock options,
5,000 on February 15, 2002, 10,000 on March 5, 2002 and 15,000 on December 13,
2002 at exercise prices of $3.50, $4.00 and $3.49, respectively, to act as
Chairman of the Company. Directors are also reimbursed for their expenses
incurred in respect of each meeting of the directors or special service.
Employees of the Company receive no additional compensation for acting as
directors of the Company. Directors who are not officers of the Company or an
affiliate of the Company have in the past also been granted options to purchase
common shares. No compensation was paid to any director of the company for
their services as consultants or experts to the Company.






| | C. |  | Board practices
| | -- |  | ---------------

Directors are elected at each annual meeting to hold office for a term expiring
at the close of the next annual meeting of shareholders. No specific term of
office is applicable to executive officers; however, they are normally
re-appointed annually. The last annual meeting was held May 1, 2003, and the
next annual meeting is expected to be held during May 2004.

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The Company has entered into employment contracts with the Director, President
and Chief Executive Officer and the Vice President and Chief Financial Officer
which provide for payment of up to 24 months and 12 months salary respectively,
if employment is terminated without cause.

The members of CE Franklins audit committee are John J. Kennedy, S. Douglas
Martin and Gordon R. Schnell and discharge their duties in accordance with the
audit committee charter. The audit committee reviews and approves the scope of
the audit procedures employed by the Companys independent auditors, reviews
the results of the auditors examination, the scope of audits, and the
auditors comments with respect to internal controls and quality of financial
reporting and CE Franklins accounting, financial and operating controls. The
audit committee also reports to the board of directors with respect to such
matters and recommends the selection of independent auditors. Before financial
statements that are to be submitted to the shareholders at an annual general
meeting are considered by the board of directors, such financial statements are
submitted to the audit committee for review with the independent auditors. The
audit committee then submits a report on the financial statements to the board
of directors.

The compensation committee is comprised of S. Douglas Martin and Douglas L.
Rock, all of whom are independent, non-employee directors of the Company.
During 2002, no such member was a current or former officer or employee of the
Company or any of its subsidiaries. The compensation committee of the board of
directors is responsible for, among other matters, reviewing the performance
objectives and compensation package for the President and Chief Executive
Officer, recommending compensation and benefits packages for the Companys
leadership team and reviewing and approving fees paid to members of the board
of directors.






| | D. |  | Employees
| | -- |  | ---------

|     |  |                                        |  |                                         
|---- |  | -------------------------------------- |  | ----------------------------------------
|Year |  | Number of Employees as at December 31, |  | Percent of employees in General Supplies
|     |  |                                        |  |                                         
|2002 |  | 327                                    |  | 86                                      
|2001 |  | 421                                    |  | 80                                      
|2000 |  | 523                                    |  | 80                                      

As of December 31, 2002, the Company had 327 employees, including part-time and
hourly, all employed in Canada. During 2002 the Company reduced its employees
due to a reduction in activity levels. The Company does not anticipate any
material changes in its employee structure. CE Franklins personnel are not
unionized, and there is very little union activity in the Canadian oilfield
supply industry. The Company does not employ a significant number of temporary
employees.

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| | E. |  | Share ownership
| | -- |  | ---------------

As at May 12, 2003 no individual Director or individual listed under item 6A
holds greater than 1% of the common stock outstanding.

Options Granted.As at May 12, 2003, the following options were outstanding
under the Companys 2002 Stock Option Plan:

|                    |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|------------------- |  | ----------------- | --------- | --------------------- |  | ------------- | ----- | ----------- |  | ----------------- |  | -----------------
|Holder              |  | Number of Options |           | Exercise Price - Cdn$ |  | Date of Grant |       | Expiry Date
|                    |  |                   |           |                       |  |               |       |            
|Directors (current) |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|                    |  |                   | 7,500     |                       |  |               | $7.50 |             |  | February 18, 2000 |  | February 8, 2005 
|                    |  |                   | 15,000    |                       |  |               | $6.05 |             |  | February 16, 2001 |  | February 16, 2006
|                    |  |                   | 15,000    |                       |  |               | $3.50 |             |  | February 15, 2002 |  | February 15, 2012
|                    |  |                   | 10,000    |                       |  |               | $4.00 |             |  | March 5, 2002     |  | March 5, 2012    
|                    |  |                   | 25,000    |                       |  |               | $3.49 |             |  | December 13, 2002 |  | December 13, 2012
|                    |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|                    |  |                   | 72,500    |                       |  |               |       |             |  |                   |  |                  
|                    |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|Employees           |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|                    |  |                   | 93,802    |                       |  |               | $4.40 |             |  | April 28, 1999    |  | April 28, 2004   
|                    |  |                   | 58,500    |                       |  |               | $5.50 |             |  | October 21, 1999  |  | October 21, 2004 
|                    |  |                   | 145,864   |                       |  |               | $7.50 |             |  | February 18, 2000 |  | February 18, 2005
|                    |  |                   | 49,500    |                       |  |               | $8.50 |             |  | April 25, 2000    |  | April 25, 2005   
|                    |  |                   | 227,846   |                       |  |               | $6.05 |             |  | February 16, 2001 |  | February 16, 2006
|                    |  |                   | 41,500    |                       |  |               | $3.28 |             |  | August 20, 2001   |  | August 20, 2011  
|                    |  |                   | 310,831   |                       |  |               | $3.50 |             |  | January 1, 2002   |  | January 1, 2012  
|                    |  |                   | 100,000   |                       |  |               | $3.30 |             |  | January 15, 2002  |  | January 15, 2012 
|                    |  |                   | 339,178   |                       |  |               | $3.49 |             |  | December 13, 2002 |  | December 13, 2012
|                    |  |                   | 39,458    |                       |  |               | $3.30 |             |  | February 17, 2003 |  | February 17, 2013
|                    |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|                    |  |                   | 1,406,479 |                       |  |               |       |             |  |                   |  |                  
|                    |  |                   |           |                       |  |               |       |             |  |                   |  |                  
|TOTAL               |  |                   | 1,478,979 |                       |  |               |       |             |  |                   |  |                  

The Companys Stock Option Plan (the Plan) was established on September 14,
1993 and was amended on November 21, 1994, October 24, 1995, September 10,
1996, February 12, 1998, April 30, 1998 and May 1, 2001 to increase the number
of Common Shares available under the Plan by 3,022,786 shares in total. The
Plan provides that the board of directors of the Company may grant options,
subject to the terms of the Plan, to director, officers and employees of, and
to persons and corporations who provide management or consulting services to,
the Company and its subsidiaries. All stock options vest one-third per year
commencing on the first anniversary date after grant.






|Item 7: |  | Major Shareholders and Related Party Transactions
|------- |  | -------------------------------------------------






| | A. |  | Major shareholders
| | -- |  | ------------------

The following table sets forth information, as of May 12, 2003, ownership of
the Companys outstanding voting securities by (i) the officers and directors
of the Company as a group and (ii) any person known by the Company to own more
than 5% of such voting securities:

|               |  |                                   |  |              |           |                     |  |  |      |     |  | 
|-------------- |  | --------------------------------- |  | ------------ | --------- | ------------------- |  |  | ---- | --- |  | 
|Title of Class |  | Identity of Group                 |  | Amount Owned |           | Percent of Class(1)
|               |  |                                   |  |              |           |                    
|Common Stock   |  | Smith International               |  |              | 9,465,382 | (2)                 |  |  | 55.1 |    
|Common Stock   |  | Westcliff Capital Management, LLC |  |              | 1,466,600 |                     |  |  | 8.5  |    
|Common Stock   |  | Officers and Directors            |  |              | 185,656   |                     |  |  | 1.1  | (3)



---

|(1) |  | Percentage ownership is based on 17,178,696 shares of Common Stock
outstanding as of May 12, 2003.                                            
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on the Certificate of Registered Holders registered with
Computershare Trust Company of Canada, the transfer agent for the Common
Stock.

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|(3) |  | Includes 121,238 shares issuable upon exercise of options as of May 12,
2003 exercisable under the 2001 Stock Option Plan.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

At May 12, 2003, Smith International held 55.1% of the issued and outstanding
shares of CE Franklin. Smith International has a pre-emptive right to acquire
additional shares of the Company, at market value, to maintain its
proportionate ownership of voting shares of the Company. Smith International
has, by virtue of holding over 50% of the outstanding common shares, the power
to elect the board of directors of the Company; however, it has agreed that at
least two independent directors will be elected. Smith International and
Westcliff Capital Management LLC have the same voting rights as other
shareholders.






| | B. |  | Related party transactions
| | -- |  | --------------------------

Messrs. Douglas L. Rock and John L. Kennedy, directors of the Corporation, are
directors or officers of, or otherwise interested in, Smith International,
Inc., which holds 55.1% of the Company. During 2002, the Company purchased
inventory in the ordinary course of business at market rates from Smith
International, Inc. Included in inventory at December 31, 2002 is $2,160,000
(2001  $2,653,000) of inventory purchased from Smith International, Inc. Cost of
sales included $5,960,000 (2001  $7,387,000) of inventory purchased from Smith
International. Such inventory purchases were made in the ordinary course of
business and on the same terms as those prevailing at the time to comparable
purchases from other suppliers.






| | C. |  | Interests of Experts and Counsel
| | -- |  | --------------------------------
|
| |    |  | Not applicable.                 




Item 8: Financial Information

CE Franklins financial statements are stated in Canadian Dollars (CDN $) and
are prepared in accordance with Canadian Generally Accepted Accounting
Principles with reconciliation to US Generally Accepted Accounting Principles
included under note 17 under item 18. In the Form 20-F, unless otherwise
specified, all other amounts are expressed in Canadian Dollars.






| | A. |  | Statements and Other Financial Information
| | -- |  | ------------------------------------------

Financial Statements of CE Franklin as at and for the Years Ended December 31,
2002, 2001 and 2000 (audited), are reported on by PricewaterhouseCoopers LLP
and include the following:



| |  | An Auditors Report dated January 31, 2003                                                        
|- |  | --------------------------------------------------------------------------------------------------
| 
| |  | Balance Sheets as at December 31, 2002 and 2001                                                   
| 
| |  | Statements of Operations for the years ended December 31, 2002, 2001 and 2000                     
| 
| |  | Statements of Changes in Shareholders Equity for the years ended December 31, 2002,
2001 and 2000
| 
| |  | Statements of Cash Flow for the years ended December 31, 2002, 2001 and 2000                      
| 
| |  | Notes to Financial Statements                                                                     

See Part III, Item 18 for detailed information.

Dividend Distributions

In accordance with the terms and conditions of the Companys credit facility
with its primary lenders, holders of common stock are not entitled to receive
dividends.






| | B. |  | Significant Changes
| | -- |  | -------------------

On January 31, 2003 the Company transferred the property and equipment and
operations of its Brittania Compression operations into a wholly owned
subsidiary, Brittania Industries Inc. Subsequently a 50% interest in the new
subsidiary was sold for cash proceeds of $538,000.

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Item 9: The Offer and Listing






| | A. |  | Offer and Listing Details
| | -- |  | -------------------------
|
| |    |  | Not applicable.          






| | B. |  | Plan of Distribution
| | -- |  | --------------------
|
| |    |  | Not applicable.     






| | C. |  | Markets
| | -- |  | -------

The Companys common stock is traded on The Toronto Stock Exchange (TSE) under
the symbol CFT and also on the American Stock Exchange (AMEX) under the
symbol CFK. The following table sets forth the range of high and low prices
per share for the common stock on both the AMEX and TSE. The Company was
initially listed on the AMEX on November 18, 1993, and subsequently began
trading on the TSE on September 26, 1996.

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The Toronto Stock Exchange ($CDN) American Stock Exchange ($US)

|     |  |                |  |  |      |      |       |     |      |      |      |     |      |  |      |  |      |  |      | 
|---- |  | -------------- |  |  | ---- | ---- | ----- | --- | ---- | ---- | ---- | --- | ---- |  | ---- |  | ---- |  | ---- | 
|     |  |                |  |  |      | High |       | Low |      | High |      | Low
|     |  |                |  |  |      |      |       |     |      |      |      |    
|1998 |  |                |  |  |      |      | 12.25 |     |      |      | 2.25 |     |      |  | 9.13 |  |      |  | 1.50 | 
|1999 |  |                |  |  |      |      | 7.35  |     |      |      | 2.20 |     |      |  | 5.12 |  |      |  | 1.44 | 
|2000 |  |                |  |  |      |      | 11.50 |     |      |      | 3.75 |     |      |  | 8.00 |  |      |  | 2.38 | 
|2001 |  | First Quarter  |  |  | 6.85 |      |       |     | 4.80 |      |      |     | 4.62 |  |      |  | 3.05 | 
|     |  | Second Quarter |  |  | 6.15 |      |       |     | 4.17 |      |      |     | 4.17 |  |      |  | 2.65 | 
|     |  | Third Quarter  |  |  | 4.56 |      |       |     | 2.62 |      |      |     | 3.00 |  |      |  | 1.65 | 
|     |  | Fourth Quarter |  |  | 3.85 |      |       |     | 2.70 |      |      |     | 2.45 |  |      |  | 1.70 | 
|2002 |  | First Quarter  |  |  | 4.20 |      |       |     | 3.17 |      |      |     | 2.70 |  |      |  | 2.00 | 
|     |  | Second Quarter |  |  | 5.08 |      |       |     | 3.82 |      |      |     | 3.34 |  |      |  | 2.41 | 
|     |  | Third Quarter  |  |  | 4.00 |      |       |     | 3.10 |      |      |     | 3.00 |  |      |  | 2.10 | 
|     |  | Fourth Quarter |  |  | 3.91 |      |       |     | 3.19 |      |      |     | 2.45 |  |      |  | 1.95 | 
|2002 |  | November       |  |  | 3.64 |      |       |     | 3.45 |      |      |     | 2.44 |  |      |  | 2.10 | 
|     |  | December       |  |  | 3.65 |      |       |     | 3.19 |      |      |     | 2.41 |  |      |  | 1.95 | 
|2003 |  | January        |  |  | 3.45 |      |       |     | 2.90 |      |      |     | 2.29 |  |      |  | 1.91 | 
|     |  | February       |  |  | 3.35 |      |       |     | 3.10 |      |      |     | 2.29 |  |      |  | 1.99 | 
|     |  | March          |  |  | 3.31 |      |       |     | 3.30 |      |      |     | 2.30 |  |      |  | 2.20 | 
|     |  | April          |  |  | 3.30 |      |       |     | 3.00 |      |      |     | 2.30 |  |      |  | 2.05 | 

On May 12, 2003, the closing price for the Companys common stock was Cdn.
$2.85 per share on the TSE and US$2.05 per share on the AMEX. As of, May 12,
2003, the Company had 17,178,697 shares of common stock outstanding and 45
holders of record of the Common Stock, of whom 29 were located in the United
States and 16 were located in Canada.






| | D. |  | Selling shareholders
| | -- |  | --------------------
|
| |    |  | Not applicable.     






| | E. |  | Dilution       
| | -- |  | ---------------
|
| |    |  | Not applicable.






| | F. |  | Expenses of the issue
| | -- |  | ---------------------
|
| |    |  | Not applicable.      




Item 10: Additional Information






| | A. |  | Share capital  
| | -- |  | ---------------
|
| |    |  | Not applicable.






| | B. |  | Memorandum and articles of association
| | -- |  | --------------------------------------

The Company was created by an amalgamation pursuant to the Business
Corporations Act(Alberta) on December 20, 1997 with corporate access number
207725136. On February 1, 2002 the Company amalgamated with its wholly owned
subsidiary CEF Technologies Inc. with corporate access number 209671916.

The Articles of the Company place no restrictions on businesses the Company may
carry on.

The Articles of the Company and By-Law No. 1 of the Company may be viewed at
the Companys registered office which is 3700, 400  Third Avenue S.W.,
Calgary, Alberta, T2P 4H2.

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Directors

Directors need not hold shares in the Company to qualify and be appointed as a
director of the Company. The Articles of the Company provide that the minimum
number of directors of the Company shall be one and the maximum number of
directors of the Company shall be 15.

Pursuant to the Business Corporations Act(Alberta), the directors of the
Company are required to disclose to the board of the directors of the Company
any personal interest that they may have in any material contract prior to the
approval of such contract and are required to abstain from voting as a director
for the approval of such contract. A directors compensation must be approved
by ordinary resolution of the board of directors and the directors are
permitted to vote on their own compensation. Any new credit arrangements with
lenders must be approved by ordinary resolution of the board of directors.

Every director of the Company is entitled to be indemnified out of the assets
of the Company against all costs, charges and expenses, including any amount
paid to settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director of the Company.

Shareholders Rights

The Company is authorized to issue an unlimited number of common shares and an
unlimited number of preferred shares, issuable in series.

The holders of any common shares are entitled to dividends if, as and when
declared by the directors, to one vote per share at meetings of the holders
common shares of the Company and, upon liquidation, to receive such assets of
the Company as are distributable to the holders of the common shares.

Holders of the preferred shares are not entitled to vote except at meetings of
the holders of preferred shares only or as required by the Business
Corporations Act(Alberta). The holders of the preferred shares are entitled
to dividends in priority to the holders of common shares. Upon liquidation,
dissolution or winding up of the Company or other distribution of assets of the
Company, holders of Preferred Shares shall be entitled to receive payments or
distributions before any amount shall be paid or distributed to the holders of
the common shares.

Amendments to the rights of the shareholders of the Company can only be
effected by alteration of the Articles of the Company, which requires a special
resolution of the shareholders of the Company. There are no limitations on the
rights to own securities of the Company other than pursuant to the Investment
Canada Act(Canada) described elsewhere in this Form 20-F.

Shareholders Meetings

The requirements to hold meetings of the shareholders of Company are described
by the Business Corporations Act(Alberta) and By-Law No. 1 of the Company and
the Articles of the Company. Shareholders meetings may be held at any place
within the Province of Alberta or in Toronto, New York, Chicago or San
Francisco. The time and place of shareholders meetings is determined by a
resolution of the board of directors.

In certain circumstances, and subject to the provisions of the Business
Corporations Act(Alberta), shareholders may requisition a meeting of the
shareholders without a resolution of the board of directors of the Company.

The calling of shareholder meetings is also subject to securities legislation
in Canada, which prescribes the process by which the Company must send proxy
materials to its shareholders. Under such securities legislation, proxy
materials will generally be mailed to shareholders not less than 25 days before
the date of the shareholders meeting.

The proxy materials relating to any shareholders meeting will include a notice
of the meeting setting out the time and place of the meeting and the nature of
the business to be transacted at the meeting, a form of proxy and management
proxy circular containing, together with certain other prescribed information,
sufficient description of the matters to be considered at the meeting such that
the shareholder can form a reasoned judgment concerning such matters.

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Change of Control

Neither the Articles nor By-Laws of the Company restrict the transfer of
shares. Therefore, any change of control of the Company or merger, acquisition
or corporate restructuring involving the Company would only be subject to
generally applicable laws.






| | C. |  | Material contracts
| | -- |  | ------------------

See Note 5 Bank Operating Loan to the Companys December 31, 2002 Financial
Statements included under Item 18 for a description of the Companys bank
operating loan.






| | D. |  | Exchange controls
| | -- |  | -----------------

There are no Canadian laws that restrict the export or import of capital,
including foreign exchange controls, or that affect the payment of dividends to
non-resident holders, except as described in Item 10 E below. The acquisition
of control of the Company by non-Canadians is subject to the Investment Canada
Act(the Act). The Act provides, among other things, that any non-Canadian,
as defined in the Act, proposing to acquire control of a Canadian business such
as the Company through the direct or indirect acquisition of voting interests
or the acquisition of all or substantially all the assets of the Canadian
business, must give notice in the prescribed form to Investment Canada, an
agency of the Canadian government, and may be required to obtain approval from
Investment Canada prior to implementation of such acquisition. The term
non-Canadian is defined in the Act to include an individual who is neither a
citizen nor a permanent resident of Canada, a foreign government, or any
corporation or other entity that is not Canadian-controlled.

The Act deems that the acquisition of a majority of the voting interests of the
Company, or entity that controls the Company, by a non-Canadian constitutes
acquisition of control of the Company. The acquisition of one-third or more
(but less than a majority) of the voting interests of the Company, or entity
that controls the Company, by a non-Canadian is presumed to be an acquisition
of control of the Company unless it can be established that the acquirer(s)
do(es) not in fact control the Company through the ownership of voting
interests. The acquisition of less than one-third of the voting shares of the
Company is deemed not to be an acquisition of control of the Company. If an
acquisition is made in contravention of the Act, a court of competent
jurisdiction may make any order it thinks fit including requiring the acquirer
to divest its common shares of the Company.

Except as described above, statutes in Canada and the Province of Alberta and
the charter documents of the Company do not restrict the right of non-resident
or foreign owners to hold or vote common shares of the Company.






| | E. |  | Taxation
| | -- |  | --------

The following is a summary of certain Canadian federal income tax
considerations, pursuant to the Income Tax Act(Canada) (the Tax Act),
generally applicable to holders of Common Stock who, for purposes of the Tax
Act, are not resident and are not deemed to be resident in Canada, do not carry
on an insurance business in Canada, hold the Common Stock as capital property
and do not use or hold, and are not deemed to use or hold, Common Stock in the
course of carrying on a business in Canada (non-resident holders).

Non-Resident Holders will not be subject to Canadian federal income tax on
dispositions of Common Stock unless such holder, together with non-arms length
persons, owned 25% or more of the shares of any class of capital stock of the
Company at any time within the previous 5 years. Where the Holder, together
with such non-arms length persons, has held 25% or more of the shares of any
class of capital stock of the Company in the previous 5 year period, such
holder will be subject to Canadian income tax on such dispositions unless the
applicable tax treaty (if any) between Canada and the country in which such
holder resides provides that Canadian income tax is not applicable. The
Canada-U.S. Income Tax Convention (1980) (the Canada-US Treaty) provides that
Canadian income tax will not be eligible on a disposition of Common Stock by a
holder thereof who is resident in the United States for the purposes of the
Canada-U.S. Treaty.

Dividends paid or credited, or deemed to be paid or credited, to Non-Resident
Holders will be subject to Canadian withholding tax. The rate of Canadian
withholding tax on the Tax Act is 25%, subject to any

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reduction in the provisions of a tax treaty between Canada and the country in
which the recipient is resident. The Canada-U.S. Treaty provides for a
reduction in the rate of Canadian withholding tax to persons who are residents
of the United States for the purpose of the Canada-U.S. Treaty. The
withholding tax rate on dividends paid to such United States residents, who are
beneficial owners of the dividends, is reduced to 15% by the provisions of the
Canada-U.S. Treaty. The withholding rate is further reduced to 5% in the case
of a recipient that is a United States corporation that beneficially owns at
least 10% of the voting stock of the Canadian corporation.






| | F. |  | Dividends and paying agents
| | -- |  | ---------------------------
|
| |    |  | Not applicable.            






| | G. |  | Statement by experts
| | -- |  | --------------------
|
| |    |  | Not applicable.     






| | H. |  | Documents on display
| | -- |  | --------------------

The articles of the Company and By-Law No. 1 of the Company and the other
documents referred to in this Form 20-F may be viewed at the Companys
registered office which is 3700, 400  Third Avenue S.W., Calgary, Alberta,
Canada, T2P 4H2






| | I. |  | Subsidiary Information
| | -- |  | ----------------------
|
| |    |  | Not applicable.       




Item 11: Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risks from changes in foreign exchange and
interest rates.

Prices for certain of the products purchased by the Company are in US dollars.
These goods are subsequently sold to its customers in Canadian dollars. From
time to time the Company will enter into financial instruments to manage its
exposure to currency risk fluctuations. As at December 31, 2002, no such
financial instruments were outstanding.

The Company is exposed to interest fluctuations on its bank borrowings. From
time to time the Company uses certain financial instruments to manage its
exposure to interest rate fluctuations. As at December 31, 2002, no such
financial instruments were outstanding.




Item 12: Description of Securities Other than Equity Securities



| |  | Not applicable.
| |  | ---------------




PART II




Item 13: Defaults, Dividend Arrearages ad Delinquencies



| |  | Not applicable.
| |  | ---------------




Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds



| |  | Not applicable.
| |  | ---------------




Item 15: Controls and Procedures



| |  | The Company maintains disclosure controls and procedures and
internal controls designed to ensure that information required to
be disclosed in the Companys filings under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within
the time frame specified in the commissions rules and regulations.
CE Franklins principal executive and financial officers have
evaluated our disclosure controls and procedures within 90 days
prior to the filing of the Annual Report on Form 20-F and have
determined that such disclosure controls and procedures are
effective.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | There were no significant changes in the Companys internal
controls or in other factors that could significantly affect those
controls subsequent to the evaluation date.                                                                                                                                                                                                                                                                                                                                                                                                                                   




Item 16:Reserved.

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PART III




Item 17: Financial Statements



| |  | See Item 18.
| |  | ------------




Item 18: Financial Statements

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AUDITORS REPORT

TO THE SHAREHOLDERS OF CE FRANKLIN LTD.

We have audited the balance sheets of CE Franklin Ltd. as at December 31, 2002
and 2001 and the statements of operations, changes in shareholders equity and
cash flows for each of the years in the three-year period ended December 31,
2002. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2002 and
2001 and the results of its operations and its cash flows for each of the years
in the three year period ended December 31, 2002 in accordance with Canadian
generally accepted accounting principles.

signed
PricewaterhouseCoopers LLP
Chartered Accountants
Calgary, Alberta, Canada
January 31, 2003

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is a
change in accounting principles that has a material effect on the comparability
of the Companys financial statements, such as the change described in note 2a
to the financial statements. Our report to the shareholders dated January 31,
2003 is expressed in accordance with Canadian reporting standards which do not
require a reference to such a change in accounting principles in the auditors
report when the change is properly accounted for and adequately disclosed in
the financial statements.

signed
PricewaterhouseCoopers LLP
Chartered Accountants
Calgary, Alberta, Canada
January 31, 2003

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CE Franklin Ltd.
Balance Sheets
As at December 31
(in thousands of Canadian dollars)

|                                                                           |                                            |  |        |        |      |  |         |        | 
|-------------------------------------------------------------------------- | ------------------------------------------ |  | ------ | ------ | ---- |  | ------- | ------ | 
|                                                                           |                                            |  | 2002   |        | 2001
|                                                                           |                                            |  |        |        |     
|Assets                                                                     |                                            |  |        |        |      |  |         |       
|Current assets                                                             |                                            |  |        |        |      |  |         |       
|                                                                           | Accounts receivable (note 3)               |  |        | 36,992 |      |  |         | 38,407 | 
|                                                                           | Inventories                                |  |        | 40,679 |      |  |         | 50,876 | 
|                                                                           | Income taxes recoverable (note 8)          |  |        | 741    |      |  |         |       | 
|                                                                           | Other                                      |  |        | 600    |      |  |         | 500    | 
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  | 79,012 |        |      |  | 89,783  |       
|                                                                           |                                            |  |        |        |      |  |         |        | 
|Property and equipment(note 4)                                             |                                            |  | 12,757 |        |      |  | 14,963  |       
|Goodwill, net of accumulated amortization of
$1,366 (2001-$1,439) (note 2) |                                            |  | 7,765  |        |      |  | 8,180   |       
|Other assets                                                               |                                            |  |       |        |      |  | 3       |       
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  | 99,534 |        |      |  | 112,929 |       
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  |        |        |      |  |         |        | 
|Liabilities                                                                |                                            |  |        |        |      |  |         |       
|Current liabilities                                                        |                                            |  |        |        |      |  |         |       
|                                                                           | Bank overdraft                             |  |        | 1,148  |      |  |         | 1,836  | 
|                                                                           | Bank operating loan (note 5)               |  |        | 21,500 |      |  |         | 16,300 | 
|                                                                           | Accounts payable                           |  |        | 16,525 |      |  |         | 25,066 | 
|                                                                           | Accrued liabilities                        |  |        | 10,213 |      |  |         | 15,414 | 
|                                                                           | Current portion of long-term debt (note 6) |  |        | 297    |      |  |         | 251    | 
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  | 49,683 |        |      |  | 58,867  |       
|                                                                           |                                            |  |        |        |      |  |         |        | 
|Long-term debt(note 6)                                                     |                                            |  | 299    |        |      |  | 614     |       
|                                                                           |                                            |  |        |        |      |  |         |        | 
|Future income taxes(note 8)                                                |                                            |  | 2,381  |        |      |  | 3,491   |       
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  | 52,363 |        |      |  | 62,972  |       
|                                                                           |                                            |  |        |        |      |  |         |       
|Commitments and contingencies(note 13)                                     |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  |        |        |      |  |         |        | 
|Shareholders Equity                                                       |                                            |  |        |        |      |  |         |       
|                                                                           | Capital stock (note 9)                     |  |        | 19,268 |      |  |         | 19,186 | 
|                                                                           | Contributed surplus                        |  |        | 13,566 |      |  |         | 13,566 | 
|                                                                           | Retained earnings                          |  |        | 14,337 |      |  |         | 17,205 | 
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  | 47,171 |        |      |  | 49,957  |       
|                                                                           |                                            |  |        |        |      |  |         |       
|                                                                           |                                            |  | 99,534 |        |      |  | 112,929 |       
|                                                                           |                                            |  |        |        |      |  |         |       

The accompanying notes are an integral part of these financial statements.

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CE Franklin Ltd.
Statements of Changes in Shareholders Equity
(in thousands of Canadian dollars, except number of shares)

|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|---------------------------------------------- |  | ------------- | ---------- | - |  | ------------------- | ------ | -------- |  | ------ | ------ | -------- |  | ------------- | ------ | - |  |  | ------ | -
|                                               |  | Capital stock |            |   |  |                     |        |          |  |        |        |          |  |              
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |              
|                                               |  | Number of     |            |   |  |                     |        |          |  |        |        | Retained |  | Shareholders
|                                               |  | Shares        |            | $ |  | Contributed surplus |        | earnings |  | Equity
|                                               |  |               |            |   |  |                     |        |          |  |       
|December 31, 1999                              |  |               | 16,725,961 |   |  |                     | 17,709 |          |  |        | 13,566 |          |  |               | 15,086 |   |  |  | 46,361 |  
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|Issue of shares for cash                       |  |               | 6,580      |   |  |                     | 25     |          |  |        |       |          |  |               |       |   |  |  | 25     |  
|Stock options exercised (note 9)               |  |               | 416,612    |   |  |                     | 1,403  |          |  |        |       |          |  |               |       |   |  |  | 1,403  |  
|Net income                                     |  |               |           |   |  |                     |       |          |  |        |       |          |  |               | 1,500  |   |  |  | 1,500  |  
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|December 31, 2000                              |  |               | 17,149,153 |   |  |                     | 19,137 |          |  |        | 13,566 |          |  |               | 16,586 |   |  |  | 49,289 |  
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|Stock options exercised (note 9)               |  |               | 8,938      |   |  |                     | 49     |          |  |        |       |          |  |               |       |   |  |  | 49     |  
|Net income                                     |  |               |           |   |  |                     |       |          |  |        |       |          |  |               | 619    |   |  |  | 619    |  
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|December 31, 2001                              |  |               | 17,158,091 |   |  |                     | 19,186 |          |  |        | 13,566 |          |  |               | 17,205 |   |  |  | 49,957 |  
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|Effect of change in accounting policy
(note 2) |  |               |           |   |  |                     |       |          |  |        |       |          |  |               | (375   | ) |  |  | (375   | )
|Stock options exercised (note 9)               |  |               | 20,605     |   |  |                     | 82     |          |  |        |       |          |  |               |       |   |  |  | 82     |  
|Net loss                                       |  |               |           |   |  |                     |       |          |  |        |       |          |  |               | (2,493 | ) |  |  | (2,493 | )
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  
|December 31, 2002                              |  |               | 17,178,696 |   |  |                     | 19,268 |          |  |        | 13,566 |          |  |               | 14,337 |   |  |  | 47,171 |  
|                                               |  |               |            |   |  |                     |        |          |  |        |        |          |  |               |        |   |  |  |        |  

The accompanying notes are an integral part of these financial statements.

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CE Franklin Ltd.
Statements of Operations
For the years ended December 31
(in thousands of Canadian dollars, except per share amounts)

|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|--------------------------------------------------- | ----------------------------------------------------- |  | ---------- | ------- | ---- |  | ---------- | ------- | - |  | ---------- | ------- | -
|                                                    |                                                       |  | 2002       |         | 2001 |  | 2000      
|                                                    |                                                       |  |            |         |      |  |           
|Sales                                               |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | General supplies                                      |  |            | 177,990 |      |  |            | 223,137 |   |  |            | 204,351 |  
|                                                    | Tubulars                                              |  |            | 77,138  |      |  |            | 148,030 |   |  |            | 148,787 |  
|                                                    | Manufacturing                                         |  |            | 6,201   |      |  |            | 6,678   |   |  |            | 6,289   |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    |                                                       |  | 261,329    |         |      |  | 377,845    |         |   |  | 359,427    |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Cost of Sales                                       |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | General supplies                                      |  |            | 147,245 |      |  |            | 188,871 |   |  |            | 170,762 |  
|                                                    | Tubulars                                              |  |            | 72,868  |      |  |            | 140,311 |   |  |            | 140,724 |  
|                                                    | Manufacturing                                         |  |            | 4,510   |      |  |            | 4,883   |   |  |            | 5,227   |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    |                                                       |  | 224,623    |         |      |  | 334,065    |         |   |  | 316,713    |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Gross Profit                                        |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | General supplies                                      |  |            | 30,745  |      |  |            | 34,266  |   |  |            | 33,589  |  
|                                                    | Tubulars                                              |  |            | 4,270   |      |  |            | 7,719   |   |  |            | 8,063   |  
|                                                    | Manufacturing                                         |  |            | 1,691   |      |  |            | 1,795   |   |  |            | 1,062   |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    |                                                       |  | 36,706     |         |      |  | 43,780     |         |   |  | 42,714     |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Other expenses (income)                             |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | Selling, general and administrative expenses (note 7) |  |            | 35,537  |      |  |            | 39,696  |   |  |            | 34,696  |  
|                                                    | Amortization                                          |  |            | 4,245   |      |  |            | 3,879   |   |  |            | 3,527   |  
|                                                    | Interest expense                                      |  |            | 1,099   |      |  |            | 2,031   |   |  |            | 2,699   |  
|                                                    | Foreign exchange loss (gain)                          |  |            | (116    | )    |  |            | 299     |   |  |            | 259     |  
|                                                    | Other expense (income)                                |  |            | (151    | )    |  |            | (52     | ) |  |            | 13      |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    |                                                       |  | 40,614     |         |      |  | 45,853     |         |   |  | 41,194     |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Income (loss) before income taxes                   |                                                       |  | (3,908     | )       |      |  | (2,073     | )       |   |  | 1,520      |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|Income tax expense (recovery)(note 8)               |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | Current                                               |  |            | (678    | )    |  |            | (835    | ) |  |            | (153    | )
|                                                    | Future                                                |  |            | (737    | )    |  |            | 315     |   |  |            | 1,463   |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    |                                                       |  | (1,415     | )       |      |  | (520       | )       |   |  | 1,310      |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Income (loss) from continuing operations            |                                                       |  | (2,493     | )       |      |  | (1,553     | )       |   |  | 210        |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|Income from discontinued operations(note 10)        |                                                       |  |           |         |      |  | 2,172      |         |   |  | 1,290      |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Net income (loss) for the year                      |                                                       |  | (2,493     | )       |      |  | 619        |         |   |  | 1,500      |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Net income (loss) per share                         |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|Continuing operations                               |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | Basic and diluted                                     |  |            | (0.15   | )    |  |            | (0.09   | ) |  |            | 0.01    |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|Discontinued operations                             |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | Basic                                                 |  |            | 0.00    |      |  |            | 0.13    |   |  |            | 0.08    |  
|                                                    | Diluted                                               |  |            | 0.00    |      |  |            | 0.13    |   |  |            | 0.07    |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|Net income (loss) per share                         |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                    | Basic                                                 |  |            | (0.15   | )    |  |            | 0.04    |   |  |            | 0.09    |  
|                                                    | Diluted                                               |  |            | (0.15   | )    |  |            | 0.04    |   |  |            | 0.08    |  
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Weighted average basic number of shares outstanding |                                                       |  | 17,172,373 |         |      |  | 17,156,964 |         |   |  | 16,993,647 |        
|                                                    |                                                       |  |            |         |      |  |            |         |   |  |            |        

The accompanying notes are an integral part of these financial statements.

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CE Franklin Ltd.
Statements of Cash Flows
For the years ended December 31
(in thousands of Canadian dollars)

|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |        |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------- |  | ------ | ------ | ---- |  | ------- | ------- | - |  | ------- | ------ | -
|                                                                                         |                                                      |  | 2002   |        | 2001 |  | 2000   
|                                                                                         |                                                      |  |        |        |      |  |        
|Cash flows from operating activities                                                     |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Income (loss) from continuing operations                                                 |                                                      |  | (2,493 | )      |      |  | (1,553  | )       |   |  | 210     |       
|Items not affecting cash                                                                 |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         | Amortization                                         |  |        | 4,245  |      |  |         | 3,879   |   |  |         | 3,527  |  
|                                                                                         | Loss (gain) on disposal of property and equipment    |  |        | (128   | )    |  |         | (48     | ) |  |         | 56     |  
|                                                                                         | Future income tax expense (recovery)                 |  |        | (737   | )    |  |         | 315     |   |  |         | 1,463  |  
|                                                                                         | Increase (decrease) in inventory reserves            |  |        | 87     |      |  |         | 1,593   |   |  |         | (290   | )
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         |                                                      |  | 974    |        |      |  | 4,186   |         |   |  | 4,966   |       
|(Decrease) increase in non-cash working capital
balances related to operations (note 11) |                                                      |  | (4,244 | )      |      |  | 22,331  |         |   |  | (13,743 | )     
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Net cash flow from continuing operations                                                 |                                                      |  | (3,270 | )      |      |  | 26,517  |         |   |  | (8,777  | )     
|Net cash flow from discontinued operations                                               |                                                      |  |       |        |      |  | 2,699   |         |   |  | 2,687   |       
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         |                                                      |  | (3,270 | )      |      |  | 29,216  |         |   |  | (6,090  | )     
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Cash flows from financing activities                                                     |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         | Issuance of capital stock                            |  |        | 82     |      |  |         | 49      |   |  |         | 1,428  |  
|                                                                                         | Increase (decrease) in bank operating loan           |  |        | 5,200  |      |  |         | (31,700 | ) |  |         | 11,500 |  
|                                                                                         | Decrease in bank overdraft                           |  |        | (688   | )    |  |         | (4,093  | ) |  |         | (2,366 | )
|                                                                                         | Decrease in long-term debt                           |  |        | (269   | )    |  |         | (278    | ) |  |         | (299   | )
|                                                                                         | Other                                                |  |        |       |      |  |         | 225     |   |  |         |       |  
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         |                                                      |  | 4,325  |        |      |  | (35,797 | )       |   |  | 10,263  |       
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Cash flows from investing activities                                                     |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         | Purchase of property and equipment                   |  |        | (1,234 | )    |  |         | (2,313  | ) |  |         | (4,297 | )
|                                                                                         | Proceeds on disposal of property and equipment       |  |        | 179    |      |  |         | 970     |   |  |         | 124    |  
|                                                                                         | Net proceeds on disposal of Domino Machine (note 10) |  |        |       |      |  |         | 7,924   |   |  |         |       |  
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         |                                                      |  | (1,055 | )      |      |  | 6,581   |         |   |  | (4,173  | )     
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Change in cash and cash equivalents during the year                                      |                                                      |  |       |        |      |  |        |         |   |  |        |       
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |        |  
|Cash and cash equivalents  beginning of year                                            |                                                      |  |       |        |      |  |        |         |   |  |        |       
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Cash and cash equivalents  end of year                                                  |                                                      |  |       |        |      |  |        |         |   |  |        |       
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       
|Cash paid during the year                                                                |                                                      |  |        |        |      |  |         |         |   |  |         |       
|                                                                                         | Interest on bank operating loan                      |  |        | 1,046  |      |  |         | 2,589   |   |  |         | 3,426  |  
|                                                                                         | Interest on long-term debt                           |  |        | 53     |      |  |         | 60      |   |  |         | 58     |  
|                                                                                         | Income taxes                                         |  |        | 247    |      |  |         | 567     |   |  |         | 104    |  
|                                                                                         |                                                      |  |        |        |      |  |         |         |   |  |         |       

The accompanying notes are an integral part of these financial statements.

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CE Franklin Ltd.
Notes to Financial Statements
December 31, 2002, 2001 and 2000
(tabular amounts in thousands of Canadian dollars except share and per share amounts)



|1. |  | Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Generally accepted accounting principles                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | The financial statements of the Company have been prepared in accordance
with accounting principles generally accepted in Canada. These principles
differ in certain respects from accounting principles generally accepted in
the United States (U.S.). The material differences that affect the
Companys financial statements are described in note 17.                                                                                       
|  
|   |  | The preparation of financial statements in conformity with generally
accepted accounting principles 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
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
|  
|   |  | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | On February 1, 2002 the Company amalgamated with its wholly owned subsidiary
CEF Technologies Ltd.                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | Inventories, consisting primarily of goods purchased and held for resale,
are valued at the lower of cost or net realizable value. Cost is determined
on an average cost basis.                                                                                                                                                                                                                                                                    
|  
|   |  | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | Monetary assets and liabilities are translated into Canadian dollars at
year-end exchange rates and gains or losses from translation are recognized
in the Statements of Operations. Revenue and expenses are translated at the
exchange rate prevailing on the date the transaction occurs.                                                                                                                                                       
|  
|   |  | In the normal course of business, the Company enters into foreign currency
forward exchange contracts with financial institutions to fix the value of
liabilities or future commitments. Gains and losses arising from these
contracts offset the losses and gains from the underlying hedged
transactions.                                                                                                                                        
|  
|   |  | Property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Property and equipment are recorded at cost less related accumulated
amortization. The Company provides for amortization of property and
equipment using rates as follows:                                                                                                                                                                                                                                                                         

|                                |  |            |  |               |  |  |  | 
|------------------------------- |  | ---------- |  | ------------- |  |  |  | 
|Buildings                       |  | 5% to 10%  |  | straight line
|Leasehold improvements          |  | 10% to 20% |  | straight line
|Computer equipment and software |  | 15% to 33% |  | straight line
|Equipment and machinery         |  | 10% to 20% |  | straight line
|Furniture and office equipment  |  | 15% to 20% |  | straight line
|Automotive equipment            |  | 30%        |  | straight line



| |  | Assets held under capital lease are amortized by the straight-line method
over the term of the lease or the estimated useful life of the assets
whichever is shorter.                                                                                                                                                                                                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Goodwill and other intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Goodwill represents the excess of the purchase price over the fair value of
net assets acquired related to the acquisition. Effective January 1, 2002
(see note 2a), the company adopted the new Canadian Institute of Chartered
Accountants (CICA) standard relating to goodwill and other intangible
assets. The new standard requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, and are tested annually for
a permanent impairment.
|
| |  | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Revenue from the sale of general supplies, tubular goods and manufactured
products is recognized upon delivery to the customer.                                                                                                                                                                                                                                                                                                                                                         

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|   |  | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Earnings per share are computed based on the weighted average basic number
of shares outstanding for the period. Diluted earnings per share have been
calculated using the treasury stock method, whereby diluted earnings per
share are calculated as if options were exercised at the beginning of the
year and funds received were used to purchase the Companys own stock.                                                                                                                                                                                                                                                                             
|  
|   |  | In the year ended December 31, 2000, the Company adopted the new CICA
standard relating to earnings per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The Company uses the liability method of accounting for income taxes under
which future tax assets and liabilities are recognized when there are
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Future tax assets and
liabilities are measured using substantively enacted tax rates in effect in
the period in which those temporary differences are expected to be recovered
or settled. The effect on future tax assets and liabilities of a change in
tax rates is recognized as part of the provision for income taxes in the
period that includes the enactment date.
|  
|   |  | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Cash and cash equivalents are defined as cash and short-term, highly liquid
investments, which have a maturity of less than 90 days at the time of
purchase.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The Company has a stock option plan, which is described in note 9c. The
Company applies the intrinsic method in accounting for common share options
granted. No compensation expense is recognized when stock options are
issued to and paid by employees. Any consideration received on exercise of
stock options is credited to share capital.                                                                                                                                                                                                                                                                                                            
|  
|2. |  | Changes in Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| | a) |  | Goodwill and other intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | Effective January 1, 2002, the Company adopted the new CICA standard
relating to goodwill and other intangible assets. The new standard
requires that goodwill and intangible assets with indefinite useful lives
no longer be amortized, and are tested annually for a permanent
impairment. As a result of adopting the new standard, the Company has
determined that $415,000 of its goodwill ($375,000 after-tax) is
impaired, and in accordance with the new standard, applied the $375,000
impairment against retained earnings as at January 1, 2002.
|
| |    |  | The Companys net income for the year ended December 31, 2001 would have
been $859,000 (2000  $1,740,000) versus $619,000 (2000  $1,500,000) as
previously reported had this amortization expense not been recorded in
that period. The Companys basic and diluted earnings per share for the
year ended December 31, 2001 would have been $0.05 (2000  $0.10) versus
$0.04 (2000  $0.09 basic, $0.08 diluted) as previously reported.                                                                                                                 
|
| | b) |  | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |    |  | On January 1, 2002 the Company adopted the new CICA standard relating to
stock-based compensation and other stock-based payments, and has
continued to account for common share options granted to employees,
officers and directors using the intrinsic method. Accordingly, no
compensation expense has been recognized in the Statements of Operations.                                                                                                                                                                                                  



|3. |  | Accounts Receivable                                                                                                                                                                                     
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Concentration of credit risk                                                                                                                                                                            
|  
|   |  | The Company specializes in the distribution of equipment and supplies to
producers of oil and gas in Canada. These customers principally operate in
the oil and gas exploration and production industry.

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|4. |  | Property and Equipment
|-- |  | ----------------------

|                                           |  |      |        |              |  |             |        |  |  |  |        | 
|------------------------------------------ |  | ---- | ------ | ------------ |  | ----------- | ------ |  |  |  | ------ | 
|                                           |  |      |        |              |  | Accumulated |        |  |  | 
|As at December 31, 2002                    |  | Cost |        | Amortization |  | Net        
|                                           |  |      |        |              |  |            
|Land, buildings and leasehold improvements |  |      | 3,628  |              |  |             | 2,465  |  |  |  | 1,163  | 
|Computer equipment and software            |  |      | 21,645 |              |  |             | 12,391 |  |  |  | 9,254  | 
|Equipment and machinery                    |  |      | 4,703  |              |  |             | 2,651  |  |  |  | 2,052  | 
|Furniture and office equipment             |  |      | 1,701  |              |  |             | 1,428  |  |  |  | 273    | 
|Automotive equipment                       |  |      | 61     |              |  |             | 46     |  |  |  | 15     | 
|                                           |  |      |        |              |  |             |        |  |  |  |        | 
|                                           |  |      | 31,738 |              |  |             | 18,981 |  |  |  | 12,757 | 
|                                           |  |      |        |              |  |             |        |  |  |  |        | 

|                                           |  |      |        |              |  |             |        |  |  |  |        | 
|------------------------------------------ |  | ---- | ------ | ------------ |  | ----------- | ------ |  |  |  | ------ | 
|                                           |  |      |        |              |  | Accumulated |        |  |  | 
|As at December 31, 2001                    |  | Cost |        | Amortization |  | Net        
|                                           |  |      |        |              |  |            
|Land, buildings and leasehold improvements |  |      | 3,086  |              |  |             | 2,334  |  |  |  | 752    | 
|Computer equipment and software            |  |      | 21,362 |              |  |             | 9,091  |  |  |  | 12,271 | 
|Equipment and machinery                    |  |      | 3,749  |              |  |             | 2,204  |  |  |  | 1,545  | 
|Furniture and office equipment             |  |      | 1,658  |              |  |             | 1,284  |  |  |  | 374    | 
|Automotive equipment                       |  |      | 61     |              |  |             | 40     |  |  |  | 21     | 
|                                           |  |      |        |              |  |             |        |  |  |  |        | 
|                                           |  |      | 29,916 |              |  |             | 14,953 |  |  |  | 14,963 | 
|                                           |  |      |        |              |  |             |        |  |  |  |        | 



|   |  | Included in computer equipment and software at December 31, 2002 are leased
computer equipment with a cost of $1,060,000 (2001  $1,060,000) and related
accumulated amortization of $529,000 (2001  $252,000).                                                                                                                                                                                                                                                                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | Bank Operating Loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The Company has a demand operating loan facility in the amount of $35.0
million (2001  a 364-day revolving loan facility  $53.0 million). Amounts
drawn against this facility bear interest at prime plus 0.5%. The prime
rate as at December 31, 2002 was 4.5% (2001  4.0%). The maximum amount
available under this facility is subject to a borrowing base formula applied
to accounts receivable and inventories. As at December 31, 2002 the maximum
available under this facility based on the borrowing base formula was $35.0
million (2001  $40.8 million).
|  
|   |  | The facility is collateralized by general security agreement covering all
present and after-acquired property of the Company including accounts
receivable, inventories and property and equipment.                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | This facility contains certain restrictive covenants which include a
requirement to obtain prior approval for acquisitions and capital asset
additions in excess of certain limits, to maintain certain financial ratios
and obtain approval prior to payment of dividends, repurchase or redemption
of shares.                                                                                                                                                                                                                                                         

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|6. |  | Long-term Debt
|-- |  | --------------

|                                |  |      |      |      |  |  |      |  
|------------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|As at December 31               |  | 2002 |      | 2001
|                                |  |      |      |     
|Obligations under capital lease |  |      | 596  |      |  |  | 865  |  
|Less: Current portion           |  |      | (297 | )    |  |  | (251 | )
|                                |  |      |      |      |  |  |      |  
|                                |  |      | 299  |      |  |  | 614  |  
|                                |  |      |      |      |  |  |      |  



| |  | The capital leases are payable in equal monthly installments of $27,000
including principal and interest at a rate of 7%. The leases are
collateralized by the underlying assets and expire in November 2004.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Repayments of capital leases are as follows:                                                                                                                                                                 

|                        |  |  |     | 
|----------------------- |  |  | --- | 
|Year ending December 31 |  |  |     | 
|                       
|2003                    |  |  | 333 | 
|2004                    |  |  | 305 | 
|                        |  |  |     | 
|                        |  |  | 638 | 
|Less: interest          |  |  | 42  | 
|                        |  |  |     | 
|                        |  |  | 596 | 
|                        |  |  |     | 



|7. |  | Selling, General and Administrative Expenses                               
|-- |  | ---------------------------------------------------------------------------
|  
|   |  | Selling, general and administrative expenses include the following amounts:

|                                |  |      |       |      |  |      |       |  |  |  |       | 
|------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|For the years ended December 31 |  | 2002 |       | 2001 |  | 2000
|                                |  |      |       |      |  |     
|Bad debt expense                |  |      | 688   |      |  |      | 1,027 |  |  |  | 889   | 
|Rental expense                  |  |      | 3,773 |      |  |      | 4,204 |  |  |  | 3,577 | 
|                                |  |      |       |      |  |      |       |  |  |  |       | 



|8. |  | Income Taxes
|-- |  | ------------



| | a) |  | Reconciliation of the income tax provision                                                                                                                        
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The difference between the income tax provision recorded and the provision
obtained by applying the combined federal and provincial statutory rates
is as follows:

|                                                     |  |      |        |   |  |      |       |   |  |      |        |   |  |  |       |   |  |  |       |   |  |  |       |  
|---------------------------------------------------- |  | ---- | ------ | - |  | ---- | ----- | - |  | ---- | ------ | - |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|For the Years Ended December 31                      |  | 2002 |        | % |  | 2001 |       | % |  | 2000 |        | %
|                                                     |  |      |        |   |  |      |       |   |  |      |        |  
|Income (loss) before income taxes                    |  |      | (3,908 | ) |  |      |       |   |  |      | (2,073 | ) |  |  |       |   |  |  | 1,520 |   |  |  |       |  
|                                                     |  |      |        |   |  |      |       |   |  |      |        |   |  |  |       |   |  |  |       |   |  |  |       |  
|Income taxes (recovery)
calculated at expected rates |  |      | (1,547 | ) |  |      | (39.6 | ) |  |      | (884   | ) |  |  | (42.6 | ) |  |  | 681   |   |  |  | 44.8  |  
|Losses not previously
recognized                     |  |      | (139   | ) |  |      | (3.5  | ) |  |      |       |   |  |  |      |   |  |  |      |   |  |  |      |  
|Non-deductible items                                 |  |      | 156    |   |  |      | 4.0   |   |  |      | 224    |   |  |  | 10.8  |   |  |  | 193   |   |  |  | 12.7  |  
|Difference in tax rates                              |  |      | (116   | ) |  |      | (3.0  | ) |  |      | 143    |   |  |  | 6.9   |   |  |  | 205   |   |  |  | 13.5  |  
|Effect of changes in tax rates                       |  |      |       |   |  |      |      |   |  |      |       |   |  |  |      |   |  |  | (649  | ) |  |  | (42.7 | )
|Future tax asset not recognized                      |  |      |       |   |  |      |      |   |  |      |       |   |  |  |      |   |  |  | 669   |   |  |  | 44.0  |  
|Capital taxes and other items                        |  |      | 231    |   |  |      | 5.9   |   |  |      | (3     | ) |  |  | (0.2  | ) |  |  | 211   |   |  |  | 13.9  |  
|                                                     |  |      |        |   |  |      |       |   |  |      |        |   |  |  |       |   |  |  |       |   |  |  |       |  
|                                                     |  |      | (1,415 | ) |  |      | (36.2 | ) |  |      | (520   | ) |  |  | (25.1 | ) |  |  | 1,310 |   |  |  | 86.2  |  
|                                                     |  |      |        |   |  |      |       |   |  |      |        |   |  |  |       |   |  |  |       |   |  |  |       |  

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| | b) |  | Significant components of future income tax assets and liabilities are as follows:
| | -- |  | ----------------------------------------------------------------------------------

|                                |  |      |       |      |  |  |       | 
|------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|As at December 31               |  | 2002 |       | 2001
|                                |  |      |       |     
|Assets                          |  |      |       |      |  |  |       | 
|Unused loss carry forwards      |  |      | 142   |      |  |  |      | 
|Warranty provision              |  |      | 39    |      |  |  | 43    | 
|Other                           |  |      | 131   |      |  |  | 7     | 
|                                |  |      |       |      |  |  |       | 
|                                |  |      | 312   |      |  |  | 50    | 
|                                |  |      |       |      |  |  |       | 
|Liabilities                     |  |      |       |      |  |  |       | 
|Property and equipment          |  |      | 1,811 |      |  |  | 2,740 | 
|Goodwill                        |  |      | 567   |      |  |  | 648   | 
|Other                           |  |      | 315   |      |  |  | 153   | 
|                                |  |      |       |      |  |  |       | 
|                                |  |      | 2,693 |      |  |  | 3,541 | 
|                                |  |      |       |      |  |  |       | 
|Net future income tax liability |  |      | 2,381 |      |  |  | 3,491 | 
|                                |  |      |       |      |  |  |       | 



| | c) |  | Income taxes recoverable represent amounts due to the Company, net
of amounts received, for recovery of prior years taxes paid due to the
application of tax losses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | d) |  | As at December 31, 2002 the Company had non-capital loss carry
forwards for income tax purposes of $399,000, which expire in 2009.                                  



|9. |  | Capital Stock
|-- |  | -------------



| | a) |  | The Company has authorized an unlimited number of common shares
with no par value.                                                                                                                                                                                                                                        
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | On October 24, 2001 the Company extended, until November 3, 2003,
its principal shareholders irrevocable option to acquire an amount of
common shares, at market value, such that its interest in the Company
will not be diluted.                                                                                       
|
| | c) |  | The Board of Directors may grant options to substantially all
employees, officers and directors to purchase
up to 2,240,925 common shares. The exercise period and the vesting
schedule after the grant date are not to exceed 10 years and are to be
established by the Compensation Committee of the Board of Directors.
|
| |    |  | Option activity for each of the years ended December 31 was as follows:                                                                                                                                                                                                                                                   

|                                |  |           |           |                |  |           |      |                |  |           |           |                |  |  |      |  |  |           |          |   |  |  |      | 
|------------------------------- |  | --------- | --------- | -------------- |  | --------- | ---- | -------------- |  | --------- | --------- | -------------- |  |  | ---- |  |  | --------- | -------- | - |  |  | ---- | 
|                                |  | 2002      |           | 2001           |  | 2000     
|                                |  |           |           |                |  |          
|                                |  |           |           |                |  | Weighted- |      |                |  |           |           | Weighted-      |  |  |      |  |  | Weighted-
|                                |  |           |           |                |  | average   |      |                |  |           |           | average        |  |  |      |  |  | average  
|                                |  | Number of |           | exercise price |  | Number of |      | exercise price |  | Number of |           | exercise price
|                                |  | options   |           | per share      |  | options   |      | per share      |  | options   |           | per share     
|                                |  |           |           |                |  |           |      |                |  |           |           |               
|Outstanding  Beginning of year |  |           | 1,123,164 |                |  |           | 6.43 |                |  |           | 845,747   |                |  |  | 6.85 |  |  |           | 949,026  |   |  |  | 5.15 | 
|Granted                         |  |           | 876,951   |                |  |           | 3.48 |                |  |           | 470,161   |                |  |  | 5.73 |  |  |           | 417,082  |   |  |  | 7.76 | 
|Exercised                       |  |           | (20,605   | )              |  |           | 4.40 |                |  |           | (8,938    | )              |  |  | 4.48 |  |  |           | (416,612 | ) |  |  | 3.42 | 
|Cancelled and expired           |  |           | (484,593  | )              |  |           | 6.11 |                |  |           | (183,806  | )              |  |  | 6.67 |  |  |           | (103,749 | ) |  |  | 7.46 | 
|                                |  |           |           |                |  |           |      |                |  |           |           |                |  |  |      |  |  |           |          |   |  |  |      | 
|Outstanding  End of year       |  |           | 1,494,917 |                |  |           | 4.83 |                |  |           | 1,123,164 |                |  |  | 6.43 |  |  |           | 845,747  |   |  |  | 6.85 | 
|                                |  |           |           |                |  |           |      |                |  |           |           |                |  |  |      |  |  |           |          |   |  |  |      | 
|Exercisable  End of year       |  |           | 470,056   |                |  |           | 6.61 |                |  |           | 538,149   |                |  |  | 6.73 |  |  |           | 324,070  |   |  |  | 6.94 | 
|                                |  |           |           |                |  |           |      |                |  |           |           |                |  |  |      |  |  |           |          |   |  |  |      | 

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| |  |  | As at December 31, 2002 the following stock options were outstanding:
| |  |  | ---------------------------------------------------------------------

|               |  |                           |           |                  |  |            |  |  |         |             |  | 
|-------------- |  | ------------------------- | --------- | ---------------- |  | ---------- |  |  | ------- | ----------- |  | 
|               |  |                           |           |                  |  |            |  |  |         | Exercisable
|               |  | Outstanding stock options |           | stock options   
|               |  |                          
|               |  |                           |           |                  |  | Weighted   |  |  |         |            
|               |  |                           |           |                  |  | average    |  |  |         |            
|               |  |                           |           |                  |  | remaining  |  |  |         |            
|Exercise price |  | Number                    |           | contractual life |  | Number    
|               |  |                           |           |                  |  |           
|$3.28          |  |                           | 41,500    |                  |  | 8.67 years |  |  | 13,833  |            
|$3.30          |  |                           | 100,000   |                  |  | 9.04 years |  |  |        |            
|$3.49          |  |                           | 364,178   |                  |  | 9.96 years |  |  |        |            
|$3.50          |  |                           | 325,831   |                  |  | 9.01 years |  |  |        |            
|$4.00          |  |                           | 10,000    |                  |  | 9.17 years |  |  |        |            
|$4.40          |  |                           | 93,802    |                  |  | 1.33 years |  |  | 93,802  |            
|$5.50          |  |                           | 58,500    |                  |  | 0.61 years |  |  | 58,500  |            
|$6.05          |  |                           | 242,846   |                  |  | 3.13 years |  |  | 80,949  |            
|$7.50          |  |                           | 153,364   |                  |  | 2.17 years |  |  | 118,076 |            
|$8.50          |  |                           | 49,500    |                  |  | 2.42 years |  |  | 49,500  |            
|$9.60          |  |                           | 55,396    |                  |  | 0.17 years |  |  | 55,396  |            
|               |  |                           |           |                  |  |            |  |  |         |             |  | 
|               |  |                           | 1,494,917 |                  |  | 3.79 years |  |  | 470,056 |            
|               |  |                           |           |                  |  |            |  |  |         |             |  | 



| |  |  | The Company applies the intrinsic method of accounting for common share
options granted to employees, officers and directors. Accordingly, no
compensation expense has been recognized in the Statements of
Operations. Had the Company adopted the fair value based method of
accounting, the amount expensed in each period would be the fair value
of the options, calculated using the Black-Scholes options-pricing model
and net of options forfeited in the period, amortized over the expected
life of the options. The pro forma net earnings attributable to common
shareholders and pro forma net earning attributable to common
shareholders per common share of the company would be as follows:
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  |             |  |      |        |      |  |      |       |   |  |  |       | 
|--------------------------------- | ----------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ----- | 
|                                  |             |  | 2002 |        | 2001 |  | 2000
|                                  |             |  |      |        |      |  |     
|Net income (loss)                 |             |  |      |        |      |  |      |       |   |  |  |      
|                                  | As reported |  |      | (2,493 | )    |  |      | 619   |   |  |  | 1,500 | 
|                                  | Proforma    |  |      | (2,857 | )    |  |      | (401  | ) |  |  | 647   | 
|                                  |             |  |      |        |      |  |      |       |  
|Basic earnings (loss) per share   |             |  |      |        |      |  |      |       |   |  |  |      
|                                  | As reported |  |      | (0.15  | )    |  |      | 0.04  |   |  |  | 0.09  | 
|                                  | Proforma    |  |      | (0.17  | )    |  |      | (0.02 | ) |  |  | 0.04  | 
|                                  |             |  |      |        |      |  |      |       |  
|Diluted earnings (loss) per share |             |  |      |        |      |  |      |       |   |  |  |      
|                                  | As reported |  |      | (0.15  | )    |  |      | 0.04  |   |  |  | 0.08  | 
|                                  | Proforma    |  |      | (0.17  | )    |  |      | (0.02 | ) |  |  | 0.03  | 



| |  |  | The fair value of common share options granted in 2002 is $1,831,000
(2001  $1,269,000). The fair value of common share options granted is
estimated as at the grant date using the Black-Scholes option-pricing
model, using the following assumptions:
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |  |         | 
|----------------------- |  |  | ------- | 
|Dividend yield          |  |  | nil     | 
|Risk-free interest rate |  |  | 4.83%   | 
|Expected life           |  |  | 7 years | 
|Expected volatility     |  |  | 70%     | 

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|10. |  | Discontinued Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On December 18, 2001 the Company sold its Domino Machine operations for net
cash proceeds of $7,924,000 resulting in a net after tax gain of $1,102,000.
Domino Machine provided custom machining services to the energy industry
and was not considered a core operation to the Company. The net proceeds
from this transaction were used to reduce the Companys outstanding bank
operating loan. The results of discontinued operations for the years ended
December 31, 2001 and 2000 were as follows:

|                                               |  |      |       |      |  |  |       | 
|---------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|For the years ended December 31                |  | 2001 |       | 2000
|                                               |  |      |       |     
|Sales                                          |  |      | 9,390 |      |  |  | 9,333 | 
|Income before interest, taxes and gain on sale |  |      | 2,207 |      |  |  | 2,603 | 
|Gain on sale                                   |  |      | 1,355 |      |  |  |      | 
|                                               |  |      |       |      |  |  |       | 
|Income before interest and taxes               |  |      | 3,562 |      |  |  | 2,603 | 
|Interest expense                               |  |      | 500   |      |  |  | 616   | 
|Income taxes  operations                      |  |      | 637   |      |  |  | 697   | 
|Income taxes  gain on sale                    |  |      | 253   |      |  |  |      | 
|                                               |  |      |       |      |  |  |       | 
|Income for the year                            |  |      | 2,172 |      |  |  | 1,290 | 
|                                               |  |      |       |      |  |  |       | 
|Total assets, excluding goodwill               |  |      | 4,582 |      |  |  | 5,570 | 
|Total liabilities                              |  |      | 588   |      |  |  | 679   | 
|Goodwill                                       |  |      | 2,575 |      |  |  | 2,647 | 
|                                               |  |      |       |      |  |  |       | 



|11. |  | Decrease (Increase) in Non-cash Working Capital Balances Related to
Operations
|--- |  | ------------------------------------------------------------------------------

|                                |  |      |        |      |  |      |         |   |  |  |         |  
|------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- | - |  |  | ------- | -
|For the years ended December 31 |  | 2002 |        | 2001 |  | 2000
|                                |  |      |        |      |  |     
|Accounts receivable             |  |      | 1,415  |      |  |      | 23,950  |   |  |  | (11,224 | )
|Income tax recoverable          |  |      | (741   | )    |  |      | 4,094   |   |  |  | 1,113   |  
|Inventories                     |  |      | 9,254  |      |  |      | 11,639  |   |  |  | (15,429 | )
|Other current assets            |  |      | (100   | )    |  |      | 1,825   |   |  |  | (1,958  | )
|Accounts payable                |  |      | (8,541 | )    |  |      | (15,857 | ) |  |  | 14,955  |  
|Accrued liabilities             |  |      | (5,531 | )    |  |      | (3,320  | ) |  |  | (1,200  | )
|                                |  |      |        |      |  |      |         |   |  |  |         |  
|                                |  |      | (4,244 | )    |  |      | 22,331  |   |  |  | (13,743 | )
|                                |  |      |        |      |  |      |         |   |  |  |         |  



|12. |  | Related Parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | During the year, the Company purchased inventory from subsidiaries of its
principal shareholder at commercial rates. Included in inventory at
December 31, 2002 is $2,160,000, (2001  $2,653,000) of inventory purchased
from subsidiaries of its principal shareholder. Cost of sales includes
$5,960,000 (2001  $7,387,000; 2000  $7,786,000) of inventory purchased
from subsidiaries of its principal shareholder. Accounts payable and
accrued liabilities include $926,000 (2001  $535,000) owing to subsidiaries
of its principal shareholder. Transactions with related parties are in the
normal course of business and are recorded at the exchange amount. Accounts
payable and accrued liabilities are non-interest bearing and have no fixed
terms of repayment.

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|13. |  | Commitments and Contingencies
|--- |  | -----------------------------



| | a) |  | The Company leases certain office, warehouse and store facilities
and automobiles under long-term operating leases. Commitments for such
non-cancellable operating leases for the next five years are as
follows:
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         |      |  |       |       | 
|------------------------ | ---- |  | ----- | ----- | 
|Year ending December 31, | 2003 |  |       | 3,393 | 
|                         | 2004 |  |       | 2,653 | 
|                         | 2005 |  |       | 1,678 | 
|                         | 2006 |  |       | 800   | 
|                         | 2007 |  |       | 538   | 
|                         |      |  |       |      
|                         |      |  | 9,062 |      
|                         |      |  |       |      



| | b) |  | The Company is involved in various lawsuits, the losses from which,
if any, are not anticipated to be material to the financial statements.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------



|14. |  | Segment Information                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company has two identifiable industry segments, which are the
distribution of equipment and supplies to producers of oil and gas
(Distribution) and manufacturing for rent or sale of air and gas
compression equipment for the producers of oil and gas (Manufacturing).

|                                        |  |              |         |               |  |       |        |   |  |  |         |  
|--------------------------------------- |  | ------------ | ------- | ------------- |  | ----- | ------ | - |  |  | ------- | -
|                                        |  | Distribution |         | Manufacturing |  | Total
|                                        |  |              |         |               |  |      
|2002                                    |  |              |         |               |  |       |        |   |  |  |         |  
|Revenue                                 |  |              | 255,128 |               |  |       | 6,201  |   |  |  | 261,329 |  
|Gross Profit                            |  |              | 35,015  |               |  |       | 1,691  |   |  |  | 36,706  |  
|Loss before interest and taxes          |  |              | (2,233  | )             |  |       | (576   | ) |  |  | (2,809  | )
|Assets                                  |  |              | 94,764  |               |  |       | 4,770  |   |  |  | 99,534  |  
|Goodwill                                |  |              | 7,765   |               |  |       |       |   |  |  | 7,765   |  
|Capital expenditures                    |  |              | 1,230   |               |  |       | 4      |   |  |  | 1,234   |  
|                                        |  |              |         |               |  |       |        |   |  |  |         |  
|2001                                    |  |              |         |               |  |       |        |   |  |  |         |  
|Revenue                                 |  |              | 371,167 |               |  |       | 6,678  |   |  |  | 377,845 |  
|Gross Profit                            |  |              | 41,985  |               |  |       | 1,795  |   |  |  | 43,780  |  
|Income (loss) before interest and taxes |  |              | 604     |               |  |       | (646   | ) |  |  | (42     | )
|Assets                                  |  |              | 107,534 |               |  |       | 5,395  |   |  |  | 112,929 |  
|Goodwill                                |  |              | 7,916   |               |  |       | 264    |   |  |  | 8,180   |  
|Capital expenditures                    |  |              | 2,274   |               |  |       | 39     |   |  |  | 2,313   |  
|                                        |  |              |         |               |  |       |        |   |  |  |         |  
|2000                                    |  |              |         |               |  |       |        |   |  |  |         |  
|Revenue                                 |  |              | 353,138 |               |  |       | 6,289  |   |  |  | 359,427 |  
|Gross Profit                            |  |              | 41,652  |               |  |       | 1,062  |   |  |  | 42,714  |  
|Income (loss) before interest and taxes |  |              | 5,276   |               |  |       | (1,057 | ) |  |  | 4,219   |  
|Assets                                  |  |              | 152,832 |               |  |       | 5,103  |   |  |  | 157,935 |  
|Goodwill                                |  |              | 8,147   |               |  |       | 272    |   |  |  | 8,419   |  
|Capital expenditures                    |  |              | 4,232   |               |  |       | 65     |   |  |  | 4,297   |  
|                                        |  |              |         |               |  |       |        |   |  |  |         |  



|15. |  | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Companys financial instruments recognized in the balance sheets consist
of accounts receivable, bank overdraft, accounts payable, accrued
liabilities, income taxes recoverable, bank operating loan and long-term
debt. The fair values of these recognized financial instruments, excluding
long-term debt, approximate their carrying amounts due to the short-term
maturity of these instruments. At December 31, 2002 the fair value of the
demand operating loan facility approximated its carrying value since the
cost of the Companys borrowing approximated the current market rate of such
borrowings.

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|16. |  | Economic Dependency                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In respect of the Companys revenue, 30% (2001  39%; 2000  41%) is derived
from the sale of oilfield tubular goods, where the majority of these
products are purchased from one supplier.
|   
|17. |  | Reconciliation of Canadian and United States Generally Accepted
Accounting Principles
(GAAP)                                                                                               
|   
|    |  | These financial statements have been prepared in accordance with Canadian
GAAP. The Companys accounting policies are consistent with U.S. GAAP with
the following exceptions:             



| | a) |  | Statement of operations
| | -- |  | -----------------------

|                                                        |  |      |        |      |  |      |       |   |  |  |       |  
|------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ----- | -
|For the years ended December 31                         |  | 2002 |        | 2001 |  | 2000
|                                                        |  |      |        |      |  |     
|Net income (loss) for the year under Canadian GAAP      |  |      | (2,493 | )    |  |      | 619   |   |  |  | 1,500 |  
|Effect of change in accounting policy (i)               |  |      | (375   | )    |  |      |      |   |  |  |      |  
|Effect of change in tax rates (ii)                      |  |      |       |      |  |      | 649   |   |  |  | (649  | )
|Restructuring provision adjustment (iii)                |  |      |       |      |  |      | 9     |   |  |  | 9     |  
|Benefit of deferred tax assets applied to
goodwill (iv) |  |      |       |      |  |      | 30    |   |  |  | 30    |  
|                                                        |  |      |        |      |  |      |       |   |  |  |       |  
|Net income (loss) for the year under U.S. GAAP          |  |      | (2,868 | )    |  |      | 1,307 |   |  |  | 890   |  
|                                                        |  |      |        |      |  |      |       |   |  |  |       |  
|Basic and diluted earnings per share
(U.S. GAAP)        |  |      |        |      |  |      |       |   |  |  |       |  
|Continuing Operations                                   |  |      | (0.17  | )    |  |      | (0.05 | ) |  |  | (0.03 | )
|Net Income (loss)                                       |  |      | (0.17  | )    |  |      | 0.08  |   |  |  | 0.05  |  
|                                                        |  |      |        |      |  |      |       |   |  |  |       |  



|i)   |  | Under Canadian GAAP, the transitional impairment of goodwill, net of
tax, is recorded as a charge to opening retained earnings, whereas under
U.S. GAAP, the transitional impairment of goodwill, net of tax, is
recorded as a charge to net income.                                                                                                                                                                            
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|ii)  |  | Under Canadian GAAP, future income tax assets and liabilities are
calculated using substantively enacted tax rates, whereas under U.S.
GAAP changes in tax rates are not applied to the future income tax
calculation until they are actually enacted. Changes to Canadian tax
rates were entered into legislation in 2001 and as a result these rates
are applied to future tax assets and liabilities under U.S. GAAP in
2001.
|    
|iii) |  | The restructuring provision adjustment relates to a 1995 transaction
where $379,386 in restructuring expenditures were recorded in the
purchase equation as goodwill under Canadian GAAP but were recorded in
the statement of operations for U.S. GAAP.                                                                                                                                                                        
|    
|iv)  |  | In 1996, the company realized the benefit of certain deferred tax
assets on which a 100% valuation provision had been recorded in 1995.
This benefit was recorded as a reduction of goodwill for U.S. GAAP.                                                                                                                                                                                                                     



| |    |  | The 2001 and 2000 adjustments in respect of both of the GAAP differences
identified in (iii) and (iv) relate to differences in annual goodwill
amortization.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Statements of changes in shareholders equity                                                                                                               
|
| |    |  | The reconciliation of the changes in shareholders equity from Canadian to
U.S. GAAP is as follows:                                                         

|                                                           |  |      |        |      |  |      |        |   |  |  |        |  
|---------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|As at December 31                                          |  | 2002 |        | 2001 |  | 2000
|                                                           |  |      |        |      |  |     
|Shareholders equity under Canadian GAAP                   |  |      | 47,171 |      |  |      | 49,957 |   |  |  | 49,289 |  
|Restructuring provision adjustment (a)(iii)                |  |      | (324   | )    |  |      | (324   | ) |  |  | (333   | )
|Benefit of deferred tax assets applied to
goodwill (a)(iv) |  |      | (1,058 | )    |  |      | (1,058 | ) |  |  | (1,088 | )
|Effect of change in tax rates (a)(ii)                      |  |      |       |      |  |      |       |   |  |  | (649   | )
|                                                           |  |      |        |      |  |      |        |   |  |  |        |  
|Shareholders equity under U.S. GAAP                       |  |      | 45,789 |      |  |      | 48,575 |   |  |  | 47,219 |  
|                                                           |  |      |        |      |  |      |        |   |  |  |        |  

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| | c) |  | Balance sheets                                                                                                                                                                                       
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The following table indicates the restated amounts for the items in the
balance sheets of the company that would be affected had the financial
statements been prepared in accordance with U.S. GAAP.

|                                      |  |      |        |      |  |  |        | 
|------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|As at December 31                     |  | 2002 |        | 2001
|                                      |  |      |        |     
|Goodwill (a)(i), (a)(iii) and (a)(iv) |  |      | 6,383  |      |  |  | 6,798  | 
|Retained earnings(a)(iii) and (a)(iv) |  |      | 12,955 |      |  |  | 15,823 | 
|                                      |  |      |        |     



| | d) |  | Recent accounting pronouncements
| | -- |  | --------------------------------



|i)   |  | SFAS 145 Accounting for Gains and Losses on Settlement of Debt                                                                                                                                                                                                                                                               
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | In April 2002, Statement of Financial Accounting Standard No. 145 was
issued rescinding the requirement to include gains and losses on the
settlement of debt as extraordinary items. FAS 145 is applicable for
fiscal years beginning on or after May 15, 2002. The standard has been
adopted by the Company with no impact.
|    
|ii)  |  | SFAS 146 Accounting for Costs Associated with Exit or Disposal
Activities                                                                                                                                                                                                                                                    
|    
|     |  | In June 2002, Statement of Financial Accounting Standard No. 146 was
issued. The standard requires that liabilities for exit or disposal
activity costs be recognized and measured at fair value when the
liability is incurred. This standard is effective for disposal
activities initiated after December 31, 2002.       
|    
|iii) |  | SFAS 148 Accounting for Stock-Based Compensation  Transition
and Disclosure                                                                                                                                                                                                                                                 



| |  |  | In December 2002, Statement of Financial Accounting Standard No. 148
was issued as an amendment to FAS 123 Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. FAS 148 is applicable for fiscal
years beginning after December 15, 2003. The Company does not expect
that the adoption of this pronouncement will have an impact on its
financial statements.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|18. |  | Subsequent Event                                                                                                                                                                                                                                                             
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Effective January 31, 2003, the Company sold for a net cash proceeds of
$538,000, a 50% interest in the property and equipment and operations of its
Brittania Compression operations. Brittania Compression manufactures air
and gas compression equipment for sale or rent.

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Item 19: Exhibits

The following exhibits have been previously filed as part of this report on
Form 20-F and are incorporated by reference:



|1.1 |  | Certificate and Articles of Amalgamation as amended, incorporated herein
by reference to Exhibit 3.1 to the Companys Registration Statement on
Form F-1, as amended (33-68944).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|1.2 |  | Bylaws incorporated herein by reference to Exhibit 3.2 to the Companys
Registration Statement on Form F-1, as amended (33-68944).                                              
|   
|4.1 |  | Cdn. $60,000,000 Revolving Extendible Credit Facility incorporated herein
by reference.                                                                                         

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |              |  |                                                             
| | ------------ |  | ------------------------------------------------------------
| | By:          |  | /s/ Salvatore Secreti                                       
| | Name:
Title: |  | Salvatore Secreti
Vice President and
Chief Financial Officer

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CERTIFICATIONS

Certification of Principal Executive Officer

I, Michael West, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of CE Franklin Ltd.;                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function);
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|       |  |                                      
|------ |  | -------------------------------------
|Date:  |  | May 20, 2003                         
|       |  |                                      
|       |  |                                      
|       |  |                                      
|By:    |  | /s/ Michael West                     
|       |  |                                      
|Name:  |  | Michael West                         
|Title: |  | President and
Chief Executive Officer

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Certification of Principal Financial Officer

I, Salvatore Secreti, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of CE Franklin Ltd.;                                                                                                                                                                                                                                                    
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|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
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|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function);
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| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
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|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
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|       |  |                                           
|------ |  | ------------------------------------------
|Date:  |  | May 20, 2003                              
|       |  |                                           
|       |  |                                           
|       |  |                                           
|By:    |  | /s/ Salvatore Secreti                     
|       |  |                                           
|Name:  |  | Salvatore Secreti                         
|Title: |  | Vice President and
Chief Financial Officer

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