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Savanna Energy Services Corp. Announces Q4 and Year-End 2012 Results

Savanna Energy Services Corp. Announces Q4 and Year-End 2012 Results 
CALGARY, ALBERTA -- (Marketwire) -- 03/07/13 -- Savanna Energy
Services Corp. ("Savanna" or "the Company") (TSX:SVY) achieved
improved results in 2012, increasing EBITDAS(1) by 11% over 2011. In
addition, the Company achieved key milestones in its business
strategy including completing the TDS-3000(TM) rig conversion
program, and delivering and commissioning the Company's eighth rig to
Australia. These two accomplishments, among others, position Savanna
well for future growth and expansion in all of its operating areas in
2013 and future years. 
Fourth Quarter Highlights  
Revenue for Q4 2012 was $168.2 million, a decrease of 7% compared to
Q4 2011. Q4 2012 net earnings were $3.1 million compared to net
earnings of $16.7 million in Q4 2011 and diluted earnings per share
was $0.04 compared $0.20 in the same respective periods. EBITDAS(1)
was $29.3 million in Q4 2012 compared to $43.1 million in the fourth
quarter of 2011.  
Savanna's Canadian operations generated revenue of $99.3 million and
operating margins of $27.3 million during the fourth quarter of 2012.
Canadian revenue decreased by 23% and operating margins decreased by
35% compared to Q4 2011. Sequentially, Canadian operating margins
decreased by 4% compared to Q3 2012. The decreases were indicative of
lower year-over-year activity levels in Canada, due to reduced
customer spending on 2012 capital programs as a result of overall
economic uncertainty, lower relative oil commodity pricing in Canada
and lower natural gas prices. In the case of both drilling and well
servicing, utilization decreased compared to Q4 2011. Overall
drilling utilization in Canada was also below both Q3 2012 and
industry averages in Q4 2012. The overall reduced utilization
resulted in crew retention and fixed operating costs having a more
pronounced effect in Q4 2012, compared to both Q3 2012 and Q4 2011.  
Fourth quarter U.S. revenue was $46.2 million and operating margins
were $9.8 million. U.S. operating margins decreased from Q4 2011 by
$0.9 million, and sequentially from Q3 2012 by $4.7 million due to a
slight weakening in day rates, and increased repairs and maintenance
costs arising from high activity earlier in 2012. Competition in the
Permian basin in Texas, Savanna's highest activity area in the U.S.,
did increase during the quarter, which resulted in pricing pressure
relative to earlier in the year.  
Revenue from Savanna's Australian operations was $22.7 million in the
fourth quarter of 2012, up $14.1 million or 165% year-over-year, and
up 14% sequentially. Australian activity levels were up year over
year due to delivery of drilling and workover equipment to market by
Savanna, as well as Savanna's customers increasing their work scope
substantially. Australian drilling activity demonstrated the most
significant spike, although workover activity continued to increase
as well. Savanna exited the quarter with four drilling and four
workover rigs operating in Australia, along with expanded trucking
and rental operations. Operating margins were constrained due to the
costs of importing and commissioning the last of Savanna's initial
eight rig delivery to the country, as well as by extended holiday
downtime in the region. That said, operating margins were up 27%
compared to Q4 2011, and up 11% compared to Q3 2012.  
Overall, 2012 was a tumultuous year for the oilfield services
industry in North America. The first half of the year, backed by
relatively high oil prices and sustained activity levels in
liquids-rich natural gas and unconventional oil plays, was a period
of strong demand for drilling, completion and maintenance services.
In the second half of 2012, demand levels dropped off dramatically in
Canada as customers pulled back on their second half projects or
deferred their winter programs into Q1 2013. Savanna's results
tracked industry activity, although in Canada Savanna activity and
results were ahead of industry in Q1 2012, and well below industry in
Q4 2012. Overall, Savanna generated higher revenues, operating
margins and EBITDAS(1) in 2012 relative to 2011 and maintained
overall operating margin and EBITDAS(1) percentages. Additionally,
the Company upgraded four telescoping doubles, enhancing their
applicability to developing North American drilling demands, and
completed the TDS-3000(TM) conversion program, effectively adding
seven operating TDS-3000(TM) rigs to Savanna's fleet for Q1 2013. 


 
Financial Highlights                                                        
                                                                            
The following is a summary of selected financial information of the         
 Company:                                                                   
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                        Three Months Ended          Twelve Months Ended     
December 31              2012      2011 Change       2012      2011 Change  
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(Stated in thousands                                                        
 of dollars, except                                                         
 per share amounts)         $         $                 $         $         
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OPERATING RESULTS                                                           
Revenue               168,242   181,480     (7%)  669,321   610,737     10% 
Operating expenses    128,110   127,792      0%   474,083   434,244      9% 
Operating margin(1)    40,132    53,688    (25%)  195,238   176,493     11% 
Operating margin                                                            
 %(1)                      24%       30%               29%       29%        
EBITDAS(1)             29,336    43,071    (32%)  150,986   135,844     11% 
  Per share: basic       0.34      0.51    (33%)     1.77      1.65      7% 
  Per share: diluted     0.34      0.51    (33%)     1.76      1.64      7% 
Net earnings            3,129    16,742    (81%)   37,479    45,724    (18%)
  Per share: basic       0.04      0.20    (80%)     0.44      0.56    (21%)
  Per share: diluted     0.04      0.20    (80%)     0.44      0.55    (20%)
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CASH FLOWS                                                                  
Operating cash                                                              
 flows(1)              23,125    44,166    (48%)  135,180   140,546     (4%)
  Per diluted share      0.27      0.52    (48%)     1.58      1.70     (7%)
Acquisition of                                                              
 capital assets(1)     45,393    42,449      7%   185,541   260,471    (29%)
Dividends paid          5,707         -    100%    15,792         -    100% 
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FINANCIAL POSITION                                                          
 AT DECEMBER 31                                      2012      2011 Change  
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                                                        $         $         
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Working capital(1)                                 89,354    99,587    (10%)
Capital assets(1)                               1,119,764 1,033,241      8% 
Total assets                                    1,308,875 1,233,700      6% 
Long-term debt                                    245,820   207,637     18% 
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NOTES:  
(1) Operating margin, operating margin percentage, EBITDAS, and
operating cash flows are not recognized measures under IFRS, and are
unlikely to be comparable to similar measures presented by other
companies. Management believes that, in addition to net earnings, the
measures described above are useful as they provide an indication of
the results generated by the Company's principal business activities
both prior to and after consideration of how those activities are
financed, the effect of foreign exchange and how the results are
taxed in various jurisdictions. Similarly, capital assets, working
capital, and net debt are not recognized measures under IFRS;
however, management believes that these measures are useful as they
provide an indication of the Company's investment in operating
assets, liquidity and leverage. 


 
--  Operating margin is defined as revenue less operating expenses.  
    
--  Operating margin percentage is defined as revenue less operating
    expenses divided by revenue. 
    
--  EBITDAS is defined as earnings before finance expenses, income taxes,
    depreciation, amortization and share-based compensation and excludes
    other expenses (income). 
    
--  Operating cash flows are defined as cash flows from operating activities
    before changes in non-cash working capital.  
    
--  Capital assets are defined as property, equipment and intangible assets.
    
--  The acquisition of capital assets includes the purchase of property,
    equipment and intangible assets, capital assets acquired through
    business acquisitions and non-cash capital asset additions. 
    
--  Working capital is defined as total current assets less total current
    liabilities excluding the current portions of long-term debt. 
    
--  Net debt is defined as long-term debt, including the current portions
    thereof and excluding unamortized debt issue costs, less working capital
    as defined above.

 
(2) Certain industry related terms used in this press release are
defined or clarified as follows:  


 
--  The number of operating days, spud to release days and operating hours
    are all on a net basis which means only Savanna's proportionate share of
    any rigs held in 50/50 limited partnerships have been included.  
    
--  Savanna reports its drilling rig utilization based on spud to release
    time for its operational drilling rigs and excludes moving, rig up and
    tear down time, even though revenue may be earned during this time.
    Source of Canadian industry average utilization figures: Canadian
    Association of Oilwell Drilling Contractors. Industry utilization
    figures are calculated in the same manner as the Company. 
    
--  Savanna reports its service rig utilization for its operational service
    rigs based on standard hours of 3,650 per rig per year. Reliable
    industry average utilization figures, specific to well servicing, are
    not available.

 
In Q4 2012, relatively lower industry demand levels resulted in an
overall decrease in revenue compared to Q4 2011 and reduced Savanna's
Q4 2012 EBITDAS(1) by $13.8 million to $29.3 million from $43.1
million in Q4 2011. Savanna's net earnings also decreased compared to
Q4 2011 to $3.1 million, $13.6 million lower than the comparative
quarter. Net earnings for Q4 2012 include non-routine expenses
related to crew retention ($2.5 million) and non-cash impairment
losses ($1 million); crew retention costs were $1.5 million in Q4
2011. Q4 2012 net earnings also decreased due to higher depreciation
and amortization expenses based on an increased capital asset cost
base, higher finance expenses, and asset disposal and foreign
exchange losses compared to gains in Q4 2011. The Company incurred
$0.2 million in losses on asset disposals and foreign exchange in Q4
2012 compared to $1.3 million in gains in Q4 2011, reducing net
earnings by $1.5 million, comparatively. 
On an annual basis, total EBITDAS(1) increased by $15.1 million or
11% from 2011. Notwithstanding the higher year-over-year EBITDAS(1),
Savanna's net earnings decreased by $8.2 million to $37.5 million in
2012 compared to $45.7 million in 2011. Net earnings for 2012 include
non-routine expenses related to crew retention ($2.5 million) and
non-cash impairment losses ($6.7 million); crew retention costs were
$1.5 million in 2011. Net earnings for 2012 also decreased due to
higher share-based compensation expenses, higher depreciation and
amortization expenses based on an increased capital asset cost base,
higher finance expenses, and asset disposal and foreign exchange
losses compared to gains in 2011. The Company incurred $0.5 million
in losses on asset disposals and foreign exchange in 2012 compared to
$2.6 million in gains in 2011, reducing net earnings by $3.1 million,
comparatively.  
CONTRACT DRILLING 
Savanna's contract drilling segment achieved 6% fewer operating days
in Q4 2012 compared to Q4 2011. Combined with slightly lower day
rates, this resulted in an overall 7% decrease in revenue from $129.8
million in Q4 2011 to $120.1 million in Q4 2012. In addition, higher
per day operating expenses, driven by retention costs, increased
repairs and maintenance, and the increased impact of fixed costs
based on lower days, resulted in lower operating margin percentages
and overall operating margins decreased to $27.6 million in Q4 2012
compared to $38.5 million in Q4 2011. On an annual basis, an increase
in overall revenue per day and operating margin performance led to a
$21.4 million or 17% increase in contract drilling operating margins
in 2012 compared to 2011. Revenues increased to $487.2 million from
$451.1 million in 2011 and operating margins increased to $149.5
million (31% of revenue) in 2012 from $128.1 million (28% of revenue)
in 2011. All of this increase was generated from operations outside
of Canada.  
Savanna's drilling rigs in the U.S. achieved utilization rates of 81%
in 2012. Revenue from Savanna's U.S. drilling operation was 18%
higher in 2012 compared to 2011, as a result of adding three more
rigs to the average operating fleet for the year, and more operating
days. Also, operating margin performance in the U.S. improved
dramatically in 2012, as footage-based contracts were converted to
day work terms. As a result, operating margins increased by $16.5
million to $46.3 million from $29.9 million in 2011 and operating
margin percentages increased by seven percentage points. In Q4 2012,
an increase in operating days based on a larger rig fleet was offset
by lower per day revenue and increased repairs and maintenance in the
quarter. On a per day basis, repairs and maintenance costs were 44%
higher in Q4 2012 than the annual average, or an increase of $2.6
million compared to Q4 2011, and an increase of $1.7 sequentially, as
strong utilization rates throughout 2012 resulted in a significant
number of required repairs in the fourth quarter. As a result,
operating margins of $8 million in Q4 2012 remained relatively flat
compared to the $8.7 million in Q4 2011. The increase in repairs and
maintenance costs in Q4 2012 is expected to be lower in future
quarters and should track closer to the 2012 annual average.  
In Australia, Savanna's drilling division generated strong revenues
from an average of three drilling rigs working in 2012. Weather and
customer delays, particularly in Q2 2012, limited operating margin
increases in the first half of 2012. However, as the fleet began to
work more consistently in the second half of 2012, operating margin
contributions improved significantly. Overall operating margins
increased by $5.7 million compared to 2011. In Q4 2012, with four
drilling rigs operating, the drilling operations in Australia
generated $2.6 million of operating margin, marking its highest
quarterly operating margin performance since commencing operations.
On a per rig basis, the Q4 2012 operating margin generated in
Australia exceeded that of Savanna's Canadian and U.S. drilling
divisions.  
In Canada, in Q1 2012, a strong industry focus on developing oil and
liquids-rich prospects and coring and delineation of the oil sands,
propelled demand for Savanna's fleet of drilling rigs. Demand
decreased in all drilling categories post Q1 2012; however, Savanna's
long-reach horizontal drilling rigs managed to maintain utilization
rates higher than industry averages (in the same depth categories)
and day rates above those of 2011. As a result, the Canadian
long-reach horizontal drilling fleet, which contributed 45% of
Savanna's overall operating margin in 2012 (2011 - 51%), was able to
maintain overall operating margins and operating margin percentages
despite lower revenues year-over-year. Revenue for long-reach
drilling in Canada was $246.4 million in 2012 compared to $253.7
million in 2011 and operating margins were $88.7 million and $89.3
million in the same respective periods.  
Similarly, operating margins for Savanna's shallow drilling fleet
were virtually unchanged at $8.8 million in 2012 compared to $9
million in 2011, despite a $12.2 million decrease in revenues (to
$39.6 million), as a result of a decrease in the number of rigs in
the fleet. Operating margin percentages were five percentage points
higher in 2012 compared to 2011, a clear indication that Savanna's
shallow drilling rigs benefited from a reduction in the overall fleet
size, and consequently a reduction in the fleets' fixed operating
cost structure, to a level more aligned with base shallow drilling
and coring activity in Canada. 
In Q4 2012, customers continued to pull back on their second half
projects and deferred their winter programs into Q1 2013. This
resulted in a decrease in operating days from Q4 2011 and, although
day rates were virtually unchanged from a year ago, the decreased
utilization in Canada magnified the negative effect of fixed
operating costs and crew retention costs incurred in anticipation of
a busy Q1 2013. Retention costs for contract drilling in Canada
aggregated $2.5 million in Q4 2012, compared to $1.5 million in Q4
2011. The benefits of these costs are expected to be realized in Q1
2013 as Savanna believes the extra contribution from these crews in
Q1 2013 will exceed the costs incurred in the retention program.  
Revenue for the Canadian long-reach drilling rigs in Q4 2012 was
$61.9 million versus $78.2 million in Q4 2011 and operating margins
decreased to $18.7 million, or 35%, from $28.6 million in Q4 2011, on
the lower overall demand levels. Savanna's shallow fleet in Canada
generated negative $1.7 million in operating margins in Q4 2012,
compared to the $0.7 million positive operating margin contribution
made in Q4 2011. Lower demand for shallow drilling led to a decrease
in utilization relative to a year ago and the shallow rigs were not
able to generate sufficient revenues to cover fixed operating costs
or crew retention costs in Q4 2012. 
OILFIELD SERVICES 
Savanna's oilfield services division generated 7% lower revenues
based on an 18% decrease in operating hours in Q4 2012 compared to Q4
2011 based on lower overall demand levels. Overall revenues decreased
by $3.4 million to $48.8 million in Q4 2012 compared to $52.2 million
in Q4 2011 and operating margins decreased to $12.4 million from $15
million in Q4 2011. On an annual basis, the increase in the average
number of service rigs deployed and scale of oilfield service
equipment operating in 2012 compared to 2011, resulted in a $22.3
million increase in revenue. However, sharply reduced demand, post Q1
2012, resulted in lower year-over-year utilization which negatively
affected operating margins compared to 2011. Overall operating
margins were $45 million in 2012 compared to $47.7 million in 2011.  
In Canada, the muted demand levels encountered post Q1 2012 continued
through the rest of 2012 and overall utilization rates for well
servicing decreased by twelve percentage points in Q4 2012 compared
to Q4 2011. In Canadian rentals, the December 1st acquisition of
oilfield accommodation buildings somewhat mitigated the effect of
lower overall demand in Q4 2012. Revenue decreased to $34.1 million
in Q4 2012 from $42.6 million in Q4 2011 and operating margins
decreased by $2.6 million to $10.2 million from $12.8 million in the
same respective periods. On an annual basis reduced demand led to
significantly lower utilization rates and lower overall operating
hours in 2012 compared to 2011. Revenue in 2012 aggregated $132.4
million and operating margins were $34.9 million compared to $128.7
million of revenue and $40 million in operating margins in 2011.
Utilization challenges in 2012, in the face of a much larger service
rig and rental equipment fleet, resulted in re-supply, repair, and
fixed operating costs having a more pronounced effect in 2012
compared to 2011, and resulted in lower operating margin percentages
despite an increase in revenue per hour. These costs were incurred to
take advantage of available labour, as well as to ensure the service
rig fleet was in condition to fully benefit from an expected
long-term trend toward higher utilization of well servicing equipment
in North America. The re-supply and repair and maintenance costs
incurred in 2012, particularly in Q4, are not expected to be as high
going forward.  
U.S. well servicing demand did not decrease and Savanna's service
rigs in the U.S. generated strong utilization rates throughout 2012.
The U.S. well servicing division benefited from increased industry
activity levels, increased pricing, and an increased average rig
fleet in 2012 compared to 2011, increasing operating margins by 41%
year-over-year. In Q4 2012, despite operating two fewer rigs as a
result of equipment issues and a rig retirement, overall operating
margins were virtually unchanged compared to Q4 2011.  
In Australia, the service rigs and related rental equipment generated
improved revenues in 2012 based on an average of three rigs working
in that period. However, weather and customer delays in Q2 2012 and
rig commissioning delays in Q4 2012 reduced utilization of the
equipment and resulted in significant crew retention costs. As a
result, aggregate operating margins remained flat relative to Q4
2011. As the fleet has begun working more consistently, the Company
expects operating margin contributions to increase.  
BALANCE SHEET 
Savanna's working capital at December 31, 2012, was $89.4 million and
its net debt(1) position was $156.5 million. The amount owing on its
revolving credit facility was $114.9 million and Savanna's total
long-term debt outstanding, excluding unamortized debt issue costs,
was $245.8 million. As of the date of this release, $139.6 million
was drawn on Savanna's available revolving credit facility of $180
million, and $3.5 million was drawn on Savanna's available operating
facility of $20 million. Savanna's current financial position
provides the Company with the financial flexibility to execute its
strategic plans. 
DIVIDEND 
In Q4 2012, Savanna declared dividends of $7.8 million or $0.09 per
share, bringing the total dividends declared in the year to $23.1
million ($0.27 per share) since reinstating its dividend in April in
2012. Of the dividends declared, $4.7 million was reinvested in
additional common shares through the Company's dividend reinvestment
plan, $15.8 million was paid in cash and $2.6 million was payable at
December 31, 2012 (of which 31% was settled in shares subsequent to
the end of the year, through the dividend reinvestment plan).  
OUTLOOK  
Activity levels in Q1 2013 for Savanna in all of its operating areas
are tracking utilization levels for 2012. In Canada, day rates for
drilling are generally lower than 2012, reflecting the impact of slow
activity in Q3 and Q4 2012. Oilfield services activity in Canada was
slow to ramp up in Q1 2013, but has been tracking 2012 levels since.
The uncertain duration of Q1 activity in Canada as a result of the
timing of spring break-up, will ultimately dictate Q1 2013 activity
levels. In the United States, activity levels to date are also
consistent with Q1 2012 for both drilling and oilfield services. In
Australia, despite some weather delays caused by cyclone activity,
drilling utilization is up dramatically over the levels achieved in
Q1 2012. Oilfield services activity in Australia is also sharply
improved in Q1 2013 relative to Q1 2012; however the equipment is not
yet running on a full 24 hour basis as originally anticipated.
Savanna does expect continuing ramp-up in this activity in 2013.  
Savanna has executed its three-pronged strategy of shallow drilling
rig conversion to a deeper platform, Australia expansion, and
expansion of its oilfield services equipment base over the past few
years under frequently challenging economic and oilfield services
market conditions. While controlling field operating costs and
managing repairs and maintenance, the focus has been squarely on
execution of that three-pronged strategy. Savanna management has now
turned its attention to right-sizing Savanna's operating and general
and administrative costs to better align with anticipated volatility
and base levels of activity. It is anticipated that cost management
will improve in forward quarters relative to 2012 based upon the
completion of the core expansion strategies noted above, and the more
discrete capital additions going forward. Despite uncertain North
American base demand levels, Savanna is focused on reducing
operating, repairs and maintenance and mobilization costs, with a
view to maximizing returns from the restructured asset base. 
Segmented Results 
SUMMARY OF RESULTS - CONTRACT DRILLING 
The following is a summary of selected financial and operating
information of the Company's contract drilling segment:  


 
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(Stated in thousands of dollars, except                                     
 revenue per day)                                                           
                                                                            
                       Three Months Ended          Twelve Months Ended      
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December 31             2012      2011 Change        2012      2011 Change  
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Revenue            $ 120,143 $ 129,786     (7%) $ 487,197 $ 451,132      8% 
Operating expenses  $ 92,538  $ 91,307      1%  $ 337,695 $ 323,049      5% 
Operating                                                                   
 margin(1)          $ 27,605  $ 38,479    (28%) $ 149,502 $ 128,083     17% 
Operating margin                                                            
 %(1)                     23%       30%                31%       28%        
Operating days(2)      5,227     5,569     (6%)    21,194    21,136      0% 
Revenue per                                                                 
 operating day      $ 22,985  $ 23,305     (1%)  $ 22,987  $ 21,344      8% 
Spud to release                                                             
 days(2)               4,521     4,977     (9%)    18,541    18,701     (1%)
Wells drilled(2)         540       552     (2%)     2,224     2,245     (1%)
Meters drilled(2)  1,002,954   986,395      2%  3,865,547 3,633,315      6% 
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The following summarizes the operating results for the quarter and
year ended December 31, 2012 and 2011 by type of rig or geographic
area. Long-reach drilling in Canada includes the Company's
telescoping double drilling rigs, TDS-3000(TM) drilling rigs and
TDS-2200(TM) drilling rigs.  


 
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(Stated in thousands of                                                     
 dollars)                                                                   
                             Long-reach   Shallow       Drilling            
Quarter ended December 31,     Drilling  Drilling       U.S. and            
 2012                            Canada    Canada  International      Total 
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                                      $         $              $          $ 
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Revenue                          61,933     4,074         54,136    120,143 
Operating margin(1)              18,738    (1,697)        10,564     27,605 
Operating margin %(1)                30%      (42%)           20%        23%
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Revenue excluding cost                                                      
 recoveries                      54,640     3,830         51,224    109,694 
Operating margin(1)              18,738    (1,697)        10,564     27,605 
Operating margin %(1)                34%      (44%)           21%        25%
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Average number of net rigs                                                  
 deployed                            46        20             30         96 
Utilization %(2)                     50%        9%            81%        51%
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                             Long-reach    Shallow      Drilling            
(Stated in thousands of        Drilling   Drilling      U.S. and            
 dollars)                        Canada     Canada International      Total 
                                                                            
Quarter ended December 31,                                                  
 2011                                                                       
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                                      $          $             $          $ 
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Revenue                          78,151     10,036        41,599    129,786 
Operating margin(1)              28,619        740         9,120     38,479 
Operating margin %(1)                37%         7%           22%        30%
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Revenue excluding cost                                                      
 recoveries                      69,867      9,348        39,290    118,505 
Operating margin(1)              28,619        740         9,120     38,479 
Operating margin %(1)                41%         8%           23%        32%
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Average number of net rigs                                                  
 deployed                            41         24            26         91 
Utilization %(2)                     73%        16%           77%        56%
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(Stated in thousands of                                                     
 dollars)                                                                   
                             Long-reach    Shallow      Drilling            
                               Drilling   Drilling      U.S. and            
Year ended December 31, 2012     Canada     Canada International      Total 
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                                      $          $             $          $ 
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Revenue                         246,376     39,604       201,217    487,197 
Operating margin(1)              88,704      8,762        52,036    149,502 
Operating margin %(1)                36%        22%           26%        31%
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Revenue excluding cost                                                      
 recoveries                     220,563     37,853       193,770    452,186 
Operating margin(1)              88,704      8,762        52,036    149,502 
Operating margin %(1)                40%        23%           27%        33%
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Average number of net rigs                                                  
 deployed                            42         21            30         93 
Utilization %(2)                     55%        20%           79%        55%
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                             Long-reach    Shallow      Drilling            
(Stated in thousands of        Drilling   Drilling      U.S. and            
 dollars)                        Canada     Canada International      Total 
                                                                            
Year ended December 31, 2011                                                
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                                      $          $             $          $ 
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Revenue                         253,680     51,813       145,639    451,132 
Operating margin(1)              89,311      8,979        29,793    128,083 
Operating margin %(1)                35%        17%           20%        28%
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Revenue excluding cost                                                      
 recoveries                     222,896     49,189       137,403    409,488 
Operating margin(1)              89,311      8,979        29,793    128,083 
Operating margin %(1)                40%        18%           22%        31%
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Average number of net rigs                                                  
 deployed                            39         26            25         90 
Utilization %(2)                     69%        20%           76%        56%
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In the contract drilling segment, significant costs are incurred and
passed through to customers with little or no markup. For the quarter
and year ended December 31, 2012 these costs aggregated $10.4 million
and $35 million respectively. In the same respective periods in 2011
these costs amounted to $11.3 million and $41.6 million. Savanna's
accounting policy with respect to cost recoveries billed to customers
is to include them as both revenue and operating expenses rather than
net them. Although Savanna believes this most appropriately reflects
the substance of the underlying transactions, the accounting
treatment of cost recoveries varies in the oilfield services
industry. There is no effect on overall operating margins whether
cost recoveries are netted or not; however, the different treatments
do result in different operating margin percentages as the same
dollar margin is factored against lower revenue when cost recoveries
are netted. As a result, Savanna believes it is useful to provide
revenue excluding cost recoveries and the resulting operating margin
percentages for comparative purposes. 
SUMMARY OF RESULTS - OILFIELD SERVICES 
The following is a summary of selected financial and operating
information of the Company's oilfield services segment:  


 
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(Stated in thousands of dollars, except                                     
 revenue per hour)                                                          
                      Three Months Ended           Twelve Months Ended      
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December 31           2012      2011  Change        2012      2011  Change  
Revenue           $ 48,769  $ 52,244      (7%) $ 184,920 $ 162,607      14% 
Operating                                                                   
 expenses         $ 36,389  $ 37,274      (2%) $ 139,910 $ 114,924      22% 
Operating                                                                   
 margin(1)        $ 12,380  $ 14,970     (17%)  $ 45,010  $ 47,683      (6%)
Operating margin                                                            
 %(1)                   25%       29%                 24%       29%         
Operating                                                                   
 hours(2)           43,312    52,506     (18%)   173,190   170,936       1% 
Revenue per hour     $ 906     $ 839       8%      $ 874     $ 777      12% 
----------------------------------------------------------------------------

 
The following summarizes the operating results for the oilfield
services segment by geographic area for the quarter and year ended
December 31, 2012 and 2011: 


 
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                                                         U.S. and           
(Stated in thousands of dollars)            Canada  International     Total 
                                                                            
Quarter ended December 31, 2012                                             
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                                     34,060         14,709    48,769 
Operating margin(1)                         10,217          2,163    12,380 
Operating margin %(1)                           30%            15%       25%
Average number of net rigs deployed             86             14       100 
Utilization %(2)                                43%            59%       47%
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(Stated in thousands of dollars)                                            
                                                         U.S. and           
Quarter ended December 31, 2011             Canada  International     Total 
                                                                            
----------------------------------------------------------------------------
Revenue                                     42,593          9,651    52,244 
Operating margin(1)                         12,785          2,185    14,970 
Operating margin %(1)                           30%            23%       29%
Average number of net rigs deployed             89             13       102 
Utilization %(2)                                54%            67%       56%
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(Stated in thousands of dollars)                         U.S. and           
                                            Canada  International     Total 
                                                                            
Year ended December 31, 2012                                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                                    132,383         52,537   184,920 
Operating margin(1)                         34,899         10,111    45,010 
Operating margin %(1)                           26%            19%       24%
Average number of net rigs deployed             86             14       100 
Utilization %(2)                                43%            62%       47%
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(Stated in thousands of dollars)                         U.S. and           
                                            Canada  International     Total 
                                                                            
Year ended December 31, 2011                                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                                    128,686         33,921   162,607 
Operating margin(1)                         39,969          7,714    47,683 
Operating margin %(1)                           31%            23%       29%
Average number of net rigs deployed             73             12        85 
Utilization %(2)                                52%            76%       55%
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
STATEMENTS 
Certain statements and information contained in this press release
including statements related to the Company's financial flexibility
and its positioning for future growth and expansion, the expectation
of increased activity levels and operating margin contributions from
Savanna's Australian operations, the expectation that the
contribution from extra crews in Q1 2013 will exceed the costs
incurred in the 2012 retention program, the expectation of lower
future repairs and maintenance and re-supply costs in the Company's
U.S drilling and Canadian well servicing division relative to Q4 2012
and of overall cost management improvements, the expectation of a
long-term increase in well servicing activity, and statements that
contain words such as "could", "should", "can", "anticipate",
"expect", "believe", "will", "may", "likely", "estimate", "predict",
"potential", "continue", "maintain", "retain", "grow", and similar
expressions and statements relating to matters that are not
historical facts may constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the United States
Private Securities Litigation Reform Act of 1995.  
These statements are based on certain assumptions and analysis made
by the Company in light of its experience and its perception of
historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in
the circumstances. In particular, the Company's expectation that the
contribution from extra crews in Q1 2013 will exceed the costs
incurred in the 2012 retention program is premised on actual results
experienced to date in 2013 and current customer contracts and
commitments. The Company's expectation of lower future repairs and
maintenance and re-supply costs in the Company's U.S drilling and
Canadian well servicing divisions relative to Q4 2012 and of overall
cost management improvements, is premised on actual Q4 2012 costs
being higher than historical and anticipated levels and cost
management and process improvement initiatives currently underway.
The Company's expectation of increased activity levels and operating
margin contributions from Savanna's Australian operations is premised
on increases in the number of rigs Savanna operates in Australia, the
contracts in place with and communications with its customers in the
region, and the general expectation that coal seam gas activity will
increase in that country as plans for liquefied natural gas plants
move forward. 
The Company's expectation of a long-term increase in well servicing
activity is premised on the increase in the number of oil and gas
liquids based wells that have been drilled over the last several
years and the required maintenance through the life of such wells
compared to natural gas wells. The Company's estimate of its
financial flexibility and its positioning for future growth and
expansion is premised on its currently available debt, realizing its
working capital and generating cash flows at current levels or better
which in turn is premised on the pricing of the Company's services
remaining at or improving from present levels while maintaining its
current cost structure. Whether actual results, performance or
achievements will conform to the Company's expectations and
predictions is subject to a number of known and unknown risks and
uncertainties which could cause actual results to differ materially
from the Company's expectations. Such risks and uncertainties
include, but are not limited to: fluctuations in the price and demand
for oil and natural gas; fluctuations in the level of oil and natural
gas exploration and development activities; fluctuations in the
demand for well servicing and contract drilling; the effects of
weather conditions on operations and facilities; the existence of
competitive operating risks inherent in well servicing and contract
drilling; general economic, market or business conditions; changes in
laws or regulations, including taxation, environmental and currency
regulations; the lack of availability of qualified personnel or
management; receipt of regulatory approvals; the other risk factors
set forth under the heading "Risks and Uncertainties" in the
Company's Annual Management's Discussion and Analysis and under the
heading "Risk Factors" in the Company's Annual Information Form; and
other unforeseen conditions which could impact on the use of services
supplied by the Company. 
Consequently, all of the forward-looking information and statements
made in this press release are qualified by this cautionary statement
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially
realized, that they will have the expected consequences to or effects
on the Company or its business or operations. Except as may be
required by law, the Company assumes no obligation to update publicly
any such forward-looking information and statements, whether as a
result of new information, future events, or otherwise. 
Other  
Savanna's management's discussion and analysis and audited
consolidated financial statements for the year ended December 31,
2012, are available on Savanna's website (www.savannaenergy.com)
under the investor relations section and have also been filed on
SEDAR at www.sedar.com.  
Savanna will host a conference call for analysts, investors and
interested parties on Friday, March 8, 2013 at 9:00 a.m. Mountain
Time (11:00 a.m. Eastern Time) to discuss the Company's fourth
quarter and year-end results. The call will be hosted by Ken Mullen,
Savanna's President and Chief Executive Officer and Darcy Draudson,
Vice President, Finance and Chief Financial Officer.  
If you wish to participate in this conference call, please call
1-888-892-3255 (for participants in North America). Please call 10
minutes ahead of time.  
A replay of the call will be available until March 15, 2013 by
dialing 1-800-937-6305 and entering passcode 436282.  
Savanna is a Canadian-based drilling and oilfield services provider
with operations in Canada, the United States and Australia, focused
on providing fit for purpose equipment and technologies.
Contacts:
Savanna Energy Services Corp.
Ken Mullen
President and Chief Executive Officer
(403) 503-9990 
Savanna Energy Services Corp.
Darcy Draudson
Vice President Finance and Chief Financial Officer
(403) 503-9990
www.savannaenergy.com