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Ensign Energy Services Inc. Reports Record Revenue and Funds from Operations in 2012


Ensign Energy Services Inc. Reports Record Revenue and Funds from Operations in 2012

CALGARY, March 18, 2013 /CNW/ -

Overview

Ensign Energy Services Inc. ("Ensign" or the "Company") generated record revenue of $2,197.3 million for the year ended December 31, 2012, an increase of 16 percent over revenue of $1,890.4 million recorded in the prior year.  Net income for the year ended December 31, 2012 was $217.5 million ($1.42 per common share), a two percent increase from $212.4 million ($1.39 per common share) recorded in 2011.  Operating earnings, expressed as EBITDA (defined as earnings before interest, income taxes, depreciation, and share-based compensation expense (recovery)), for 2012 were $554.5 million ($3.63 per common share), a 10 percent increase from EBITDA of $502.0 million ($3.28 per common share) for the year ended December 31, 2011.  Funds from operations were also the highest in the Company's history, increasing five percent to $500.5 million ($3.28 per common share) from $475.6 million ($3.11 per common share) in the prior year.

During the fourth quarter of 2012, the Company generated revenue of $530.1 million, a decrease of eight percent from revenue of $578.0 million recorded in the fourth quarter of 2011.  Net income decreased eight percent to $48.5 million ($0.32 per common share) compared to $52.6 million ($0.34 per common share) recorded in 2011.  EBITDA was $123.3 million ($0.81 per common share) for the fourth quarter of 2012, a decrease of 21 percent from EBITDA of $155.2 million ($1.02 per common share) recorded in the fourth quarter of 2011.  Funds from operations were $117.1 million ($0.77 per common share) for the fourth quarter of 2012, a 17 percent decrease from $140.5 million ($0.92 per common share) recorded in the fourth quarter of 2011.

The financial results for the three and twelve months ended December 31, 2012 reflect what was a mixed year overall for the Company's operations.  North American oilfield services, particularly in Canada, experienced a strong start in 2012; however, a slowdown towards the latter half of the year, as customers reacted to unfavorable price differentials for Canadian commodities, a continuing over-supply of natural gas and uncertainty in global economic conditions, weakened activity levels and financial contributions in the last half of the year.  The Company's United States operations recorded an increase to revenues in 2012 compared to the prior year primarily due to the positive impact from the first full year of operations from the land drilling division of Rowan Companies, Inc. ("Rowan Land Drilling", subsequently referred to as "Ensign US Southern") which was acquired in September 2011.  For the Company's international operations, higher activity levels and revenue rates in Latin America and the eastern hemisphere generated improved financial and operating results for the three and twelve months ended December 31, 2012.

In 2012 the Company added 13 new Automated Drill Rigs ("ADR(®)") to its drilling rig fleet: six in the Canadian market; five in the United States market; and two in Australia through the new build program.  All of the newly constructed ADRs are subject to long-term contracts.  The new build program also added 12 new well servicing rigs in the United States.

The Company increased its dividend in 2012 with a 4.8 percent fourth quarter increase in the quarterly dividend rate to $0.110 per common share from the previous quarterly dividend rate of $0.105 per common share.  During the year ended December 31, 2012, the Company declared dividends of $0.4250 per common share, an increase of nine percent over dividends of $0.3900 per common share declared in 2011.  The dividend has been increased at a 17 percent compound annual growth rate since the Company first paid a dividend in 1995.

The Company issued USD $300.0 million of senior unsecured notes (the "Notes") in February 2012.  The proceeds from the issuance of the Notes, along with an expanded global revolving credit facility (the "Global Facility") and funds generated from operations, were used to repay the USD $400.0 million term loan, incurred to finance the September 2011 acquisition of Rowan Land Drilling.  The Notes consist of:  USD $100.0 million in five year notes with an interest rate of 3.43 percent; USD $100.0 million in seven year notes with an interest rate of 3.97 percent; and USD $100.0 million in ten year notes with an interest rate of 4.54 percent.  The Company also increased its credit facilities in 2012 resulting in an increase in available borrowings to $164.3 million at December 31, 2012 compared to $10.1 million at December 31, 2011.  Changes to the Company's capital structure during 2012 provide the Company with a measure of financial stability and support for future growth opportunities.

FINANCIAL AND OPERATING HIGHLIGHTS

($ thousands, except per share data and operating information)


                        Three months ended       Year ended December 31
                               December 31
                      2012    2011       %      2012      2011 % change
                                    change

Revenue            530,106 577,967     (8) 2,197,321 1,890,372      16 

EBITDA (1)         123,262 155,167    (21)   554,529   502,031      10 

EBITDA per share                                                       
(1)

  Basic              $0.81   $1.02    (21)     $3.63     $3.28      11 

  Diluted            $0.81   $1.01    (20)     $3.62     $3.28      10 

Adjusted net
income (2)          47,943  57,926    (17)   215,314   216,654      (1)

Adjusted net
income per share                                                       
(2)

  Basic              $0.31   $0.38    (18)     $1.41     $1.42      (1)

  Diluted            $0.31   $0.38    (18)     $1.41     $1.42      (1)

Net income          48,489  52,640     (8)   217,522   212,393       2 

Net income per                                                         
share

  Basic              $0.32   $0.34     (6)     $1.42     $1.39       2 

  Diluted            $0.32   $0.34     (6)     $1.42     $1.39       2 

Funds from
operations (3)     117,088 140,465    (17)   500,517   475,587       5 

Funds from
operations per                                                         
share (3)

  Basic              $0.77   $0.92    (16)     $3.28     $3.11       5 

  Diluted            $0.77   $0.92    (16)     $3.27     $3.11       5 
                                            

Weighted average
shares - basic     152,617 152,844     -     152,664   152,865       - 
(000s) 

Weighted average
shares - diluted   152,921 152,994     -     152,995   153,062       - 
(000s) 
                                            

Drilling                                                               

  Number of                                                            
  marketed rigs
    Canada(4)          124     131     (5)       124       131      (5)
    United             121     117      3        121       117       3 
    States  
    International
    (5)                 54      59     (8)        54        59      (8)

Operating days                                                         

  Canada (4)         4,135   6,000    (31)    18,398    22,750     (19)

  United States      5,555   6,671    (17)    24,226    20,827      16 

  International
  (5)                3,010   2,698     12     11,612    10,748       8 
                                            

Well Servicing                                                         

  Number of                                                            
  marketed rigs
    Canada              99     103     (4)        99       103      (4)
    United              46      36     28         46        36      28 
    States 

  Operating hours                                                      
    Canada          35,054  38,663     (9)   140,978   145,220      (3)
    United          28,097  25,559     10    121,766    82,453      48 
    States  

(1 )EBITDA is defined as "income before interest, income taxes, depreciation 
and share-based compensation expense (recovery)".  Management believes that 
in addition to net income, EBITDA and EBITDA per share are useful supplemental 
measures as they provide an indication of the results generated by the 
Company's principal business activities prior to consideration of how these 
activities are financed, how the results are taxed in various jurisdictions or 
how the results are impacted by the accounting standards associated with the 
Company's share-based compensation plans.  EBITDA and EBITDA per share as 
defined above are not recognized measures under International Financial 
Reporting Standards and accordingly may not be comparable to measures used by 
other companies.

(2) Adjusted net income is defined as "net income before share-based 
compensation expense (recovery), tax-effected using an income tax rate of 35 
percent".  Adjusted net income and Adjusted net income per share are useful 
supplemental measures as they provide an indication of the results generated 
by the Company's principal business activities prior to consideration of how 
the results are impacted by the accounting standards associated with the 
Company's share-based compensation plans, net of income taxes.  Adjusted net 
income and Adjusted net income per share as defined above are not recognized 
measures under International Financial Reporting Standards and accordingly may 
not be comparable to measures used by other companies.

(3) Funds from operations is defined as "cash provided by operating activities 
before the change in non-cash working capital".  Funds from operations and 
Funds from operations per share are measures that provide additional 
information regarding the Company's liquidity and its ability to generate 
funds to finance its operations.  Management utilizes these measures to 
assess the Company's ability to finance operating activities and capital 
expenditures.  Funds from operations and Funds from operations per share are 
not measures that have any standardized meaning prescribed by International 
Financial Reporting Standards and accordingly may not be comparable to similar 
measures used by other companies.

(4 )Excludes coring rigs.

(5) Includes workover rigs.

2012 Highlights
    --  Revenue for 2012 was at record levels, reaching $2,197.3
        million, up 16 percent from 2011.
    --  13 new ADRs were added to the Company's drilling fleet: six in
        the Canadian market; five in the United States market; and two
        in Australia through the new build program.  The new build
        program also added 12 new well servicing rigs in the United
        States.
    --  For the first time in the Company's history, United States
        oilfield services generated the largest contribution to
        consolidated revenues in 2012, representing 43 percent of total
        revenue.
    --  EBITDA for 2012 was $554.5 million, a ten percent increase from
        EBITDA of $502.0 million for the year ended December 31, 2011. 
        Funds from Operations were the highest in the Company's
        history, increasing five percent to $500.5 million from $475.6
        million in the prior year.
    --  The Company issued USD $300.0 million of senior unsecured notes
        (the "Notes") in February 2012.  The proceeds from the issuance
        of the Notes, along with expanded credit facilities and funds
        generated from operations, were used to repay the USD $400.0
        million term loan, incurred to finance the September 2011
        acquisition of Rowan Land Drilling.  The Company also increased
        its credit facilities in 2012 resulting in an increase in
        available borrowings to $164.3 million as of December 31, 2012
        compared to $10.1 million at December 31, 2011.
    --  The Company declared a quarterly cash dividend on common shares
        of $0.110 per common share payable April 5, 2013.  In 2012 the
        Company declared dividends of $0.4250 per common share, an
        increase of nine percent over dividends of $0.3900 per common
        share declared in 2011.  The Company has increased its dividend
        every year since the first dividend was paid in 1995.
    --  Canadian drilling operating days totaled 18,398 in 2012, a 19
        percent decrease from 22,750 operating days in the previous
        year.  Canadian well servicing hours decreased by three percent
        in the year ended December 31, 2012 from the prior year.
    --  United States drilling operating days totaled 24,226 in 2012, a
        16 percent increase from 20,827 operating days in 2011.  United
        States well servicing hours increased by 48 percent in 2012
        compared with 2011.
    --  International drilling operating days totaled 11,612 in 2012,
        an eight percent increase from 10,748 operating days recorded
        in 2011.

Revenue and Oilfield Services Expense
                  Three months ended December            Year ended December 31
                                           31

($ thousands)         2012      2011        %         2012        2011        %
                                       change                            change

Revenue                                                                   

  Canada           176,693   225,153     (22)      774,444     786,158      (1)

  United States    213,667   236,821     (10)      944,580     727,678      30 

  International    139,746   115,993      20       478,297     376,536      27 
                                                                          
                   530,106   577,967      (8)    2,197,321   1,890,372      16 

Oilfield services  384,553   411,040      (6)    1,555,509   1,322,926      18 
expense  
                                                                          

Gross margin       145,553   166,927     (13)      641,812     567,446      13 

Gross margin          27.5      28.9                  29.2        30.0
percentage %

The Company generated the highest revenue in its history for the year ended 
December 31, 2012, totaling $2,197.3 million, an increase of 16 percent over 
$1,890.4 million for the year ended December 31, 2011.  Revenue recorded in 
the fourth quarter of 2012 totaled $530.1 million, a decrease of eight percent 
from $578.0 million recorded in the fourth quarter of 2011.  Growth in the 
Company's operations, particularly in the United States through the 2011 
acquisition of Rowan Land Drilling, as well as additions to the Company's 
global fleet through an active new build program led to increased revenues in 
2012 compared to the prior year.  The acquisition of Rowan Land Drilling 
added 30 drilling rigs to the Company's United States operations; and the new 
build program added 13 new ADR(®) drilling rigs: six in Canada, five in the 
United States and two in Australia throughout 2012.  Positive contributions 
from the aforementioned growth of the Company's operations were dampened by 
reduced demand for North American oilfield services, particularly in Canada, 
in the latter half of the year as customers reacted to volatile commodity 
prices and the general uncertainty of global economic conditions.

Gross margin as a percentage of revenue was similar to the prior year 
decreasing only slightly to 29.2 percent from 30.0 percent in 2011.  Gross 
margin as a percentage of revenue for the fourth quarter of 2012 decreased to 
27.5 percent compared to 28.9 percent for the fourth quarter of the prior 
year.  With the softening of demand for North American oilfield services, 
certain equipment classes experienced reduced revenue rates when compared to 
the prior year; however, revenue rates in the Company's international 
operations were higher in 2012 compared to 2011 as certain areas experienced 
improved levels of demand for oilfield services.  Expenditures for major 
maintenance were higher for the year ended December 31, 2012 compared to the 
year ended December 31, 2011, negatively impacting margins as these costs are 
generally expensed as incurred.  Higher spending on major maintenance in the 
current year compared to the prior year resulted primarily from the increased 
activity levels in the first half of 2012 compared to 2011.  The reduction in 
gross margin in the fourth quarter of 2012 compared to the same period in 2011 
was due in part to higher direct costs associated with ongoing maintenance 
programs and slightly lower margins for certain equipment classes.

Canadian Oilfield Services
                        Three months ended                   Year ended
                               December 31                  December 31
                    2012     2011        %      2012      2011        %
                                    change                       change

Drilling rigs(1)                                                  

  Opening            133      130                131       136         
  balance  
    Additions          1        1                  6         2         
    Transfers(2)    (10)        -               (10)         1         
    Decommissions      -        -                (3)                   
     / Disposals                                           (8)
                                                                  

  Ending             124      131      (5)       124       131      (5)
  balance  

Drilling
operating days
(1)                4,135    6,000     (31)    18,398    22,750     (19)

Drilling rig        36.2     50.0     (28)      38.8      48.3     (20)
utilization %  
                                                                  

Well servicing rigs                                               

  Opening             99      103                103        99         
  balance 
    Additions          -        -                  -         4         
    Decommissions      -        -                (4)         -         
     / Disposals 
                                                                  

  Ending              99      103      (4)        99       103      (4)
  balance  

Well servicing    35,054   38,663      (9)   140,978   145,220      (3)
operating hours  

Well servicing      38.5     40.8      (6)      38.1      39.5      (4)
utilization %  

(1 )Excludes coring rigs.

(2 )Includes transfers to coring rigs.

The Company recorded revenue of $774.4 million in Canada for the year ended 
December 31, 2012, a one percent decrease from $786.2 million recorded in the 
year ended December 31, 2011.  Revenue generated in Canada decreased 22 
percent to $176.7 million for the three months ended December 31, 2012, from 
$225.2 million for the three months ended December 31, 2011.  In the fourth 
quarter of 2012, Canadian revenues accounted for 33 percent of total revenue 
(2011 - 39 percent), and during the year ended December 31, 2012, Canadian 
revenues were 35 percent of total revenue (2011 - 42 percent).

The Company's Canadian operations saw a strong start to 2012 as increased 
levels of demand and improved pricing for Canadian oilfield services that 
began in 2011 continued into the current year. However, as the year 
progressed, the Company's customers reacted to reduced levels of cash flows 
from natural gas and crude oil production, and a softening in demand for 
oilfield services occurred, negatively impacting operating and financial 
results for the year.

During the year ended December 31, 2012, operating days recorded by the 
Company's Canadian operations decreased 19 percent compared to the level of 
activity in the prior year.  Operating days in the fourth quarter of 2012 
decreased 31 percent from the comparable quarter in the prior year.  
Similarly, Canadian well servicing hours decreased by three percent in the 
year ended December 31, 2012 and by nine percent in the fourth quarter of 2012 
compared to the corresponding periods in the prior year.

The Company decommissioned or disposed of three inactive drilling rigs and 
four inactive well servicing rigs during 2012 and transferred nine drilling 
rigs to the oil sands coring fleet and one drilling rig to the Australian 
market.  Six new build ADRs were added to the Company's Canadian equipment 
fleet in 2012.  Subsequent to December 31, 2012, the Company disposed of its 
manufacturing facility located in Calgary, Alberta.

United States Oilfield Services
                          Three months ended                     Year ended
                                 December 31                    December 31
                     2012      2011        %        2012      2011        %
                                      change                         change

Drilling rigs                                                         

  Opening             116       116      117          80                   
  balance  
    Additions           -         1                    5        38         
    Transfers           5         -                    5       (1)         
    Decommissions       -         -                  (6)        -          
      / Disposals
                                                                      

  Ending balance      121       117        3         121       117        3

Drilling            5,555     6,671     (17)      24,226    20,827       16
operating days

Drilling rig         50.2      62.5     (20)        57.4      60.7      (5)
utilization %
                                                                      

Well servicing rigs                                                   

  Opening balance      46        34                   36        24         
    Additions           1         2                   12        12         
    Decommissions     (1)         -                  (2)         -         
      / Disposals
                                                                      

  Ending balance       46        36       28          46        36       28

Well servicing     28,097    25,559       10     121,766    82,453       48
operating hours  

Well servicing       66.4      78.6     (16)        78.1      73.4        6
utilization %

The Company's United States operations recorded revenue of $944.6 million 
during the year ended December 31, 2012, an increase of 30 percent from the 
$727.7 million recorded in the year ended December 31, 2011.  Revenue 
recorded in the United States was $213.7 million in the fourth quarter of 
2012, a 10 percent decrease from the $236.8 million recorded in the 
corresponding period of the prior year.  The United States segment accounted 
for 40 percent of the Company's revenue in the fourth quarter of 2012 (2011 - 
41 percent); and 43 percent of the Company's revenue in the current year (2011 
- 38 percent) making it the largest contributor to consolidated revenue in 
2012.

The number of operating days recorded by the Company's United States 
operations for the year ended December 31, 2012 increased 16 percent to 24,226 
operating days from 20,827 operating days in 2011.  During the fourth quarter 
of 2012 the Company recorded 5,555 operating days in the United States, a 
decrease of 17 percent over 6,671 operating days recorded during the fourth 
quarter of the prior year.  United States well servicing hours in the fourth 
quarter of 2012 were up 10 percent compared to the prior year and well 
servicing hours for 2012 were up 48 percent compared to 2011 due to expansions 
in the Company's United States well servicing rig fleet.

The Company's presence in the United States oilfield services market continued 
to grow in 2012 through the addition of five new ADR(®) drilling rigs and 12 
new well servicing rigs constructed under the Company's ongoing new build 
program.  These equipment additions, combined with the positive impact from a 
full year of contribution from Ensign US Southern, strengthened operating and 
financial results in 2012 compared to 2011.

The Company transferred six drilling rigs to the United States equipment fleet 
from the Company's operations in Mexico late in 2012.  Other changes to the 
Company's United States equipment fleet during 2012 included the 
decommissioning or disposal of six inactive drilling rigs and two inactive 
well servicing rigs; and the transfer of one drilling rig to the international 
segment.

Operating results for the United States segment were further improved on 
translation to Canadian dollars by the strengthening of the United States 
dollar through 2012 compared to the prior year. The average exchange rate for 
the year increased one percent during the twelve months ended December 31, 
2012 to 1.00, compared to an average of 0.99 during the prior year.

International Oilfield Services
                            Three months ended               Year ended
                                   December 31              December 31
                           2012  2011 % change   2012    2011  % change

Drilling and workover rigs

  Opening balance            58    59              59      59          
    Additions                 -     -               2       -          
    Transfers               (4)     -             (4)       -          
        Decommissions /       -     -             (3)       -          
              Disposals
                                                

  Ending balance             54    59      (8)     54      59       (8)

Drilling operating days   3,010 2,698       12 11,612  10,748         8

Drilling rig               59.9  49.7       21   56.9    49.9        14
utilization % 

The Company's international operations recorded revenue of $478.3 million for 
the year ended December 31, 2012, a 27 percent increase from revenue of $376.5 
million in 2011.  International revenue totaled $139.7 million in the fourth 
quarter of 2012, a 20 percent increase from $116.0 million recorded in the 
corresponding period of the prior year.  International operations contributed 
27 percent of the Company's revenue in the fourth quarter of 2012 (2011 - 20 
percent) and 22 percent in the year ended December 31, 2012 (2011 - 20 
percent).

The Company's international operations recorded 11,612 operating days in 2012, 
an eight percent increase from 10,748 operating days recorded in 2011.  
International operating days for the three months ended December 31, 2012 
increased 12 percent over the comparable prior year period to 3,010 operating 
days compared to 2,698 operating days in the fourth quarter of 2011.

Stronger demand for oilfield services in Latin America and throughout the 
eastern hemisphere increased operating activity and revenue rates in 2012 
leading to improved operating and financial results when compared to 2011.  
In 2011 international operating results were weakened due to the disruption of 
operations arising from challenges outside of the Company's control, including 
severe flooding in Australia and political unrest in parts of the Middle East 
and North Africa.  The Company resumed its operations in Libya late in 2012 
with the start-up of one drilling rig and a second drilling rig is expected to 
start-up in the first half of 2013.

The Company added two new ADRs to its Australian equipment fleet in 2012.  In 
addition, one drilling rig was transferred to Australia from the Company's 
Canadian drilling rig fleet and one drilling rig was transferred to Latin 
America from the Company's United States drilling rig fleet during the year.  
The Company also decommissioned or disposed of three inactive drilling rigs 
from its international operations during the year and six drilling rigs were 
transferred from Mexico to the United States operations.

Consistent with the translation of results from the Company's United States 
operations, the operating results from the Company's international operations 
were further improved on translation into Canadian dollars by the 
strengthening of the United States dollar relative to the Canadian dollar in 
2012 when compared to the prior year.

Depreciation
               Three months ended December     Year ended December 31
                                        31

($ thousands)     2012   2011     % change     2012    2011  % change

Depreciation    54,029 57,540          (6)  220,227 177,927        24

Depreciation expense increased 24 percent to $220.2 million for the year ended 
December 31, 2012 compared with $177.9 million for the year ended December 31, 
2011.  Depreciation expense totaled $54.0 million for the fourth quarter of 
2012 compared with $57.5 million for the fourth quarter of 2011, a decrease of 
six percent.  The decrease in depreciation for the fourth quarter of 2012 
reflects the reduced operating activity for the three months ended December 
31, 2012 compared to the three months ended December 31, 2011.  Higher 
depreciation expense in 2012 over 2011 is attributable to higher-valued 
drilling and well servicing rigs being added to the equipment fleet throughout 
2012 as well as a full year of depreciation being taken on the drilling rigs 
operating in Ensign US Southern. 

General and Administrative Expense
                Three months ended December     Year ended December 31
                31

($ thousands)      2012   2011     % change    2012    2011   % change

General and      21,638 20,878            4  80,837  70,258         15
administrative 

% of revenue        4.1    3.6                  3.7     3.7

General and administrative expense totaled $80.8 million (3.7 percent of 
revenue) for the year ended December 31, 2012 compared with $70.3 million (3.7 
percent of revenue) for the year ended December 31, 2011, an increase of 15 
percent.   General and administrative expense increased four percent to 
$21.6 million (4.1 percent of revenue) for the fourth quarter of 2012 compared 
with $20.9 million (3.6 percent of revenue) for the fourth quarter of 2011.  
The increase in general and administrative expense was incurred to support the 
expectations for increased operating activity, the addition of Ensign US 
Southern in the third quarter of 2011, and reflects the negative translational 
impact of a stronger United States dollar on United States and international 
administrative expenses in the current year.

Share-Based Compensation (Recovery) Expense
               Three months ended December 31   Year ended December 31

($ thousands)   2012   2011           % change     2012  2011 % change
                                                               

Share-based    (840)  8,132              (110)  (3,397) 6,555    (152)
compensation  

Share-based compensation (recovery) expense  arises from the Black-Scholes 
valuation accounting associated with the Company's share-based compensation 
plans, whereby the liability associated with share-based compensation is 
adjusted for the effect of granting and vesting of employee stock options and 
changes in the underlying price of the Company's common shares.

For the 2012 fiscal year, share-based compensation was a recovery of $3.4 
million compared with an expense of $6.6 million for the year ended December 
31, 2011.  For the three months ended December 31, 2012, share-based 
compensation recovery was $0.8 million compared with an expense of $8.1 
million recorded in the fourth quarter of 2011.  The decrease in share-based 
compensation expense for the three and twelve months ended December 31, 2012 
arises from the change in the fair value of share-based compensation liability 
primarily due to a decrease in the price of the Company's common shares during 
the year and the expiry of options in the year.  The closing price of the 
Company's common shares was $15.37 at December 31, 2012, compared with $16.25 
at December 31, 2011.

Interest Expense
              Three months ended December 31   Year ended December 31

($ thousands)   2012    2011        % change    2012   2011  % change

Interest       3,862   4,071             (5)  18,666  6,586       183
expense 

Interest       (139)   (136)               2   (504)  (647)      (22)
income 
                                                             
               3,723   3,935             (5)  18,162  5,939       206

The Company increased its Global Facility by $150.0 million to $400.0 million 
in the second quarter of 2012; and also repaid in full the USD $400.0 million 
term loan incurred to finance the September 2011 acquisition of Rowan Land 
Drilling during the first half of the year.  Interest is incurred on the 
Company's $10.0 million Canadian-based revolving credit facility (the 
"Canadian Facility"), the $400.0 million Global Facility, the USD $300.0 
million Notes issued in February 2012 and the portion of the USD $400.0 
million term loan outstanding during the first half of 2012.  The 
amortization of deferred financing costs associated with the issuance of the 
Company's long-term debt is included in interest expense for the three and 
twelve month periods ended December 31, 2012 and 2011.

The increase in interest expense in 2012 compared to 2011 reflects the 
increases in credit facilities in 2012 and a full year of interest being 
incurred on the Company's long-term debt which was added to the Company's 
capital structure in September 2011.

Foreign Exchange and Other (Loss/(Gain))
               Three months ended December 31    Year ended December 31

($ thousands)   2012      2011       % change   2012     2011  % change
                                                               

Foreign
exchange and     653   (9,118)          (107)  6,446  (4,843)     (233)
other  

Included in this amount are foreign currency movements in the Company's 
subsidiaries which have functional currencies other than Canadian dollars.  
In general the United States dollar strengthened in 2012 compared to 2011 when 
compared to other world currencies but weakened against the Canadian dollar at 
December 31, 2012 compared to December 31, 2011.

Income Taxes
              Three months ended December 31     Year ended December 31

($ thousands)    2012    2011       % change      2012    2011 % change

Current         4,172  12,985           (68)    45,189  26,882       68
income tax  

Deferred       13,689  19,935           (31)    56,826  72,335     (21)
income tax 
                                                                
               17,861  32,920           (46)   102,015  99,217        3

Effective
income tax       26.9    38.5                     31.9    31.8
rate % 

The effective income tax rate for the year ended December 31, 2012 was 31.9 
percent compared with 31.8 percent for the year ended December 31, 2011.  The 
effective income tax rate for the three months ended December 31, 2012 was 
26.9 percent compared with 38.5 percent for the three months ended December 
31, 2011.  The increase in the current portion and decrease in the proportion 
of deferred income tax in the year ended December 31, 2012 when compared with 
the prior year is primarily attributable to the phased elimination of the 
deferral of income tax related to the Company's partnerships operating in 
Canada.

Financial Position

The following chart outlines significant changes in the consolidated statement 
of financial position from December 31, 2011 to December 31, 2012:

($ thousands)                    Change    Explanation 
                                            

Cash and cash                     30,595   See consolidated statements
equivalents                                of cash flows.
                                            

Accounts receivable             (53,983)   Decrease is consistent with
                                           decreased operating activity
                                           in the fourth quarter of
                                           2012 compared to the fourth
                                           quarter of 2011 and also
                                           reflects foreign exchange
                                           fluctuations on the
                                           consolidation of the
                                           Company's foreign
                                           subsidiaries.
                                            

Inventories and other            (5,633)   Decrease is due to normal
                                           course use of consumables
                                           and amortization of prepaid
                                           expenses offset by
                                           additional inventory.
                                            

Property and equipment            53,625   Increase was due to
                                           additions from the current
                                           new build construction
                                           program offset by
                                           depreciation and a decrease
                                           in the year-end foreign
                                           exchange rate on the
                                           consolidation of the
                                           Company's foreign
                                           subsidiaries.
                                            

Note receivable                  (1,740)   Decrease is due to partial
                                           collection of the note
                                           receivable and the
                                           reclassification of the
                                           current portion to accounts
                                           receivable offset by
                                           accretion of interest income
                                           during 2012.
                                            

Accounts payable and            (44,929)   Decrease is consistent with
accruals                                   reduced operating activity
                                           in the fourth quarter of
                                           2012 compared to the fourth
                                           quarter of 2011 and also
                                           reflects foreign exchange
                                           fluctuations on the
                                           consolidation of the
                                           Company's foreign
                                           subsidiaries and timing of
                                           payments to external vendors
                                           during the year.
                                            

Operating lines of credit        (6,450)   Decrease is due to
                                           repayments during the year
                                           offset by additional draws
                                           of the expanded operating
                                           lines of credit to partially
                                           repay the term loan incurred
                                           to finance the acquisition
                                           of Rowan Land Drilling in
                                           2011 and fund the ongoing
                                           new build construction
                                           program.
                                            

Share-based compensation         (3,390)   Decrease is due to a
                                           decrease in the price of the
                                           Company's common shares as
                                           at December 31, 2012
                                           compared with December 31,
                                           2011, as well as options
                                           expiring at the end of the
                                           current year.
                                            

Income taxes payable               (297)   Decrease is due to the
                                           current income tax provision
                                           for the period, net of tax
                                           instalments.
                                            

Dividends payable                    766   Increase is due to a 4.8
                                           percent increase in the
                                           quarterly dividend rate in
                                           the fourth quarter of 2012
                                           compared to the dividend
                                           rate in the fourth quarter
                                           of 2011.
                                            

Long-term debt                 (109,364)   Decrease reflects the
                                           repayment of the term loan
                                           and accounting for financing
                                           costs associated with
                                           long-term debt and the
                                           impact of foreign exchange
                                           fluctuations on the United
                                           States dollar denominated
                                           debt, offset by the issuance
                                           of senior unsecured notes in
                                           February 2012.
                                            

Deferred income taxes             51,992   Increase primarily due to
                                           accelerated tax depreciation
                                           of assets added during the
                                           current year.
                                            

Shareholders' equity             134,536   Increase due to net income
                                           for the year offset by the
                                           amount of dividends declared
                                           in the year and the impact
                                           of foreign exchange rate
                                           fluctuations on net assets
                                           of foreign subsidiaries.

Funds from Operations and Working Capital
                  Three months ended December 31               Year ended December 31

($                                             %                                    %
thousands)          2012         2011     change         2012         2011     change

Funds from                                                                    
operations       117,088      140,465       (17)      500,517      475,587          5

Funds from
operations                                                                    
per share          $0.77        $0.92       (16)        $3.28        $3.11          5

Working                                                                       
capital           13,861     (10,233)        235       13,861     (10,233)        235

Funds from operations totaled a record $500.5 million ($3.28 per common share) 
for 2012, an increase of five percent compared to $475.6 million ($3.11 per 
common share) generated in 2011.  During the three months ended December 31, 
2012, the Company generated funds from operations of $117.1 million ($0.77 per 
common share) compared with $140.5 million ($0.92 per common share) for the 
three months ended December 31, 2011, a decrease of 17 percent.  The decrease 
in funds from operations for the fourth quarter of 2012 compared to the fourth 
quarter of 2011 reflects the reduced operating activity in North America in 
the fourth quarter of the current year compared to the fourth quarter of 
2011.  The increase in funds from operations in 2012 compared to 2011 is due 
to growth of the Company's operations, particularly in the United States and 
increased demand for international oilfield services.

At December 31, 2012, the Company's working capital totaled $13.9 million 
compared to negative working capital of $10.2 million at December 31, 2011.  
In 2011 the Company utilized its cash resources to partially fund the 
acquisition of Rowan Land Drilling.  This resulted in a temporary negative 
working capital balance in the prior year.  The Company expects the growth in 
operating results, combined with current and future credit facilities, to 
fully support current operating and capital requirements.  Existing revolving 
credit facilities provide for total borrowings of $410.0 million, of which 
$164.3 million was available as at December 31, 2012.

Investing Activities
                     Three months ended December 31                 Year ended December 31

($                                                %                                      %
thousands)            2012          2011     change          2012          2011     change

Purchase of
property and                                                                       
equipment         (80,329)     (134,209)       (40)     (306,689)     (386,833)       (21)

Acquisition            -             -          -             -       (497,352)      (100)

Net change
in non-cash                                                                        
working
capital           (23,392)      (14,892)         57      (15,040)        31,510      (148)
                                                                                     

Cash used in
investing                                                                          
activities       (103,721)     (149,101)       (30)     (321,729)     (852,675)       (62)

The Company did not complete any significant acquisitions in 2012.  Effective 
September 1, 2011 the Company acquired Rowan Land Drilling for USD $510.0 
million plus working capital of USD $5.5 million.  Rowan Land Drilling was 
comprised of 30 deeper capacity electric land drilling rigs in the southern 
United States. The purchase was funded with existing cash balances and 
expanded credit facilities, including an unsecured term loan of USD $400.0 
million.

Purchases of property and equipment for the year ended December 31, 2012 
totaled $306.7 million (2011 - $386.8 million).  The purchases of property 
and equipment relate primarily to expenditures made pursuant to the Company's 
ongoing new build program.  Significant additions as a result of the new 
build program included:
    --  Completion of six new ADR(®) drilling rigs in Canada (three in
        the first quarter and one in each of the second, third and
        fourth quarters);
    --  Completion of five new ADR(®) drilling rigs in the United
        States (two in the first quarter, one in the second quarter and
        two in the third quarter);
    --  Construction of 12 new well servicing rigs in the United States
        (three in each of the first and second quarters, five in the
        third quarter and one in the fourth quarter); and
    --  Completion of two new ADR(®) drilling rigs in Australia, both
        in the third quarter.

Financing Activities
                   Three months ended December 31                Year ended December 31

($                                              %                                     %
thousands)           2012         2011     change          2012         2011     change

Net
(decrease)
increase in                                                                     
operating
lines of
credit           (30,586)        6,604      (563)       (1,398)       73,601      (102)

Issue of
senior                                                                          
unsecured
notes                 -            -          -         300,000          -            -

(Repayment)
issue of                                                                        
unsecured
term loan             -            -          -       (403,279)      390,080      (203)

Issue of
capital                                                                         
stock                 -            -           -             43          -            -

Purchase of
shares held                                                                     
in trust            (535)        (674)       (21)       (8,579)      (6,202)         38

Deferred
financing                                                                       
costs                 -            -           -        (2,156)      (2,078)          4

Dividends (16,854) (16,087) 5 (65,116) (59,752) 9

Net change in non-cash working capital 2,570 1,468 75 3,500 1,371 155


                                                                                  

Cash (used
in) provided                                                                    
by financing                                                   
activities       (45,405)      (8,689)        423     (176,985)      397,020      (145)

The Company's Global Facility was increased by $150.0 million during the 
second quarter of 2012 to a new limit of $400.0 million.  Additionally, the 
Company has available a $10.0 million Canadian Facility.  The Global Facility 
is available to the Company and certain of its wholly-owned subsidiaries, and 
may be drawn in Canadian, United States or Australian dollars, up to the 
equivalent value of $400.0 million Canadian dollars.  The amount available 
under the Canadian Facility is $10.0 million or the equivalent in United 
States dollars.

The change in the operating lines of credit for the year ended December 31, 
2012 reflects funding for the ongoing new build program which is anticipated 
to deliver an additional eight new ADR(®) drilling rigs and six new well 
servicing rigs throughout 2013.  As of December 31, 2012, the operating lines 
of credit are primarily being used to fund the completion of the most recent 
new build program and to support international operations.

In February 2012, the Company completed the private placement of USD $300.0 
million of senior unsecured notes (the "Notes"), with the proceeds from the 
issuance being used to repay a portion of the term loan.  The Notes consist 
of: USD $100.0 million in five year notes with an interest rate of 3.43 
percent and a maturity date of February 22, 2017; USD $100.0 million in seven 
year notes with an interest rate of 3.97 percent and a maturity date of 
February 22, 2019; and USD $100.0 million in ten year notes with an interest 
rate of 4.54 percent and a maturity date of February 22, 2022.  The Notes 
rank equally with the Company's Global Facility.  Proceeds from the issuance 
of the Notes in combination with internally generated cash flows and expanded 
credit facilities were used to fully repay the USD $400.0 million unsecured 
term loan incurred in the prior year to partially finance the acquisition of 
Rowan Land Drilling.   Financing costs associated with the issuance of the 
Company's long-term debt are being deferred and amortized using the effective 
interest method.

On June 14, 2012 the Company received approval from the Toronto Stock Exchange 
to acquire for cancellation up to three percent of the Company's issued and 
outstanding common shares under a Normal Course Issuer Bid (the "Bid").  The 
Company may purchase up to 4,596,397 common shares for cancellation.  The Bid 
commenced on June 18, 2012 and will terminate on June 17, 2013 or such earlier 
time as the Bid is completed or terminated at the option of the Company.  As 
at December 31, 2012, no common shares have been purchased and cancelled 
pursuant to the Bid.

The Company previously had a Bid that commenced on June 7, 2011 and terminated 
on June 6, 2012, under which no common shares were purchased and cancelled.

The Company increased its dividend in 2012 with a 4.8 percent fourth quarter 
increase in the quarterly dividend rate to $0.110 per common share from the 
previous quarterly dividend rate of $0.105 per common share.  During the year 
ended December 31, 2012, the Company declared dividends of $0.4250 per common 
share, an increase of nine percent over dividends of $0.3900 per common share 
declared in 2011.  The Company had nominal receipts from the issuance of 
common shares in connection with the employee stock option program in 2012 
compared to nil in 2011.

Subsequent to December 31, 2012, the Company declared a dividend for the first 
quarter of 2013. A quarterly dividend of $0.110 per common share is payable 
April 5, 2013 to all Common Shareholders of record as of March 27, 2013.  The 
dividend is pursuant to the quarterly dividend policy adopted by the 
Company.  Pursuant to subsection 89(1) of the Canadian Income Tax Act 
("ITA"), the dividend being paid is designated as an eligible dividend, as 
defined in subsection 89(1) of the ITA.

New Builds

During the year ended December 31, 2012, the Company commissioned six new 
ADR(®) drilling rigs in Canada; five new ADR(®) drilling rigs and 12 new 
well servicing rigs in the United States; and two new ADR(®) drilling rigs in 
Australia.

The remaining new build estimated delivery schedule, by geographic area, is as 
follows:
                                            Estimated Delivery Date
                      Q1-2013     Q2-2013     Q3-2013     Q4-2013     Total

ADRs                                                                       

  Canada                    1           1           -           -         2

  United States             1           1           1           1         4

  International             -           -           -           2         2

Total                       2           2           1           3         8
                                                                       

Well Servicing                                                             

  Canada                    3           3           -           -         6

  United States             -           -           -           -         -

  International             -           -           -           -         -

Total                       3           3           -           -         6

Outlook

Recently, there have been encouraging signs of improvement in the general 
global economic outlook.  The stimulus commitments by the European Central 
Bank and commitments to austerity appear to signal a recovery for the 
Eurozone, although at a very gradual pace.  Continued job growth and an early 
housing recovery are positive factors in the United States, subject to ongoing 
debates regarding budgetary policies in the President's second term of 
office.  Against this improving economic backdrop, global crude oil commodity 
prices remain firm, in part due to geopolitical tensions; however, widening 
regional crude oil price differentials between Brent and WTI for the United 
States and a further regional discount in Canada, produced drag on the 
industry.  Natural gas prices in North America have stabilized at low levels 
and prospects for recovery appear weak for the foreseeable future; given the 
abundance of shale resources, it remains to be seen when the balance of supply 
and demand for natural gas will equalize.

Activity levels in the Company's Canadian operations trended down over the 
latter three quarters of 2012 compared to the prior year and increased 
competitive pressures are continuing to place downward pressure on activity 
and revenue rates.  The Company expects the coming year to present continuing 
challenges in sustaining current activity levels.  This condition will likely 
persist until regional deliverability discounts on crude oil netbacks are 
largely eliminated by new pipeline capacity.  Increases in demand and 
improvements in prices for natural gas are likely an eventual outcome, but 
game-changing technologies and anemic economic growth prospects will continue 
to delay recovery in this highly export-dependent market.

In the United States, Company activity levels remained fairly consistent 
throughout the year in the face of softening industry demand in the latter 
half of the year.  The redirection of oilfield services equipment away from 
natural gas development to crude oil and liquids-rich plays added to the 
challenge of maintaining equipment utilization.  The coming year is expected 
to be a continuation of the current year, with stable activity in liquids and 
ongoing weakness in natural gas development.

The Company's international operations exceeded expectations during the year, 
with operating days up eight percent and total annual revenues up 27 percent 
over the previous year.  In addition to a broad base of long-term contracts 
in most of the Company's operating regions, growth in international operations 
is expected to continue in 2013, as new opportunities are pursued and global 
demand for crude oil and natural gas increases in developing regions.

Despite the headwinds encountered during 2012, the Company continued to 
successfully pursue its fleet expansion, modernization and redeployment 
program.  In addition, debt net of cash was reduced by $146.4 million 
year-over-year. This improving financial strength will position the Company 
well in pursuing its strategy of opportunistic growth in the coming year and 
beyond.

Risks and Uncertainties

This document contains forward-looking statements based upon current 
expectations that involve a number of business risks and uncertainties.  The 
factors that could cause results to differ materially include, but are not 
limited to, political and economic conditions, crude oil and natural gas 
prices, foreign currency fluctuations, weather conditions and the ability of 
oil and natural gas companies to raise capital or other unforeseen conditions 
which could impact on the use of the services supplied by the Company.

Conference Call

A conference call will be held to discuss the Company's year-end 2012 results 
at 2:00 p.m. MDT (4:00 p.m. EDT) on Monday, March 18, 2013.  The conference 
call number is (647) 427-7450 (in Toronto) or 1-888-231-8191 (outside 
Toronto).  A taped recording will be available until March 25, 2013 by 
dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside Toronto) and 
entering the reservation number 20090003.  A live broadcast may be accessed 
through the Company's web site at www.ensignenergy.com.

Ensign Energy Services Inc. is an international oilfield services contractor 
and is listed on the Toronto Stock Exchange under the trading symbol ESI.

 

 

Ensign Energy Services Inc.                                         

Consolidated Statements of Financial                                
Position
                                                         

As at                                   December 31      December 31
                                              2012              2011

(Unaudited, in thousands of Canadian                                
dollars)   
                                                         

Assets                                                              

Current Assets                                                      

  Cash and cash equivalents           $      33,208   $        2,613

  Accounts receivable                       423,160          477,143

  Inventories and other                      76,345           81,978
                                            532,713          561,734
                                                         

Property and equipment                    2,533,243        2,479,618

Note receivable                               5,021            6,761
                                      $   3,070,977   $    3,048,113
                                                         

Liabilities                                                         

Current Liabilities                                                 

  Accounts payable and accruals       $     244,612   $      289,541

  Operating lines of credit                 231,990          238,440

  Income taxes payable                       11,197           11,494

  Dividends payable                          16,853           16,087

  Share-based compensation                   14,200           16,405
                                            518,852          571,967
                                                         

Long-term debt                              296,589          405,953

Share-based compensation                      4,119            5,304

Deferred income taxes                       393,459          341,467
                                          1,213,019        1,324,691
                                                         

Shareholders' Equity                                                

  Share capital                             164,670          166,864

  Contributed surplus                         4,811            3,448

  Foreign currency translation             (16,007)            1,032
  reserve     

  Retained earnings                       1,704,484        1,552,078
                                          1,857,958        1,723,422
                                      $   3,070,977   $    3,048,113
                                                           
    
                                                                    
                                                                    

Ensign Energy Services Inc.                                         

Consolidated Statements of Income                                   

For the three months and year ended                                   
December 31
                                                                    

(Unaudited, in thousands of
Canadian dollars, except per share                                  
data)
                                                    
                           Three months ended                       Year ended
                        December     December        December      December 31
                              31           31              31
                            2012         2011            2012             2011
                                                                    

Revenue               $  530,106   $  577,967    $  2,197,321    $   1,890,372
                                                                    

Expenses                                                            

  Oilfield               384,553      411,040       1,555,509        1,322,926
  services     

  Depreciation            54,029       57,540         220,227          177,927

  General and             21,638       20,878          80,837           70,258
  administrative     

  Share-based              (840)        8,132         (3,397)            6,555
  compensation    

  Foreign exchange           653      (9,118)           6,446          (4,843)
  and other    
                         460,033      488,472       1,859,622        1,572,823
                                                                    

Income before
interest and income       70,073       89,495         337,699          317,549
taxes  
                                                                    

Interest income              139          136             504              647

Interest expense         (3,862)      (4,071)        (18,666)          (6,586)
                                                                    

Income before income      66,350       85,560         319,537          311,610
taxes  
                                                                    

Income taxes                                                        

  Current tax              4,172       12,985          45,189           26,882

  Deferred tax            13,689       19,935          56,826           72,335
                          17,861       32,920         102,015           99,217
                                                                    

Net income            $   48,489   $   52,640    $    217,522    $     212,393
                                                                 
                                                                 
                                                                    

Net income per share                                                

  Basic               $     0.32   $     0.34    $       1.42    $        1.39

  Diluted             $     0.32   $     0.34    $       1.42    $        1.39
    
                                                                      
                                                                      

Ensign Energy Services Inc.                                           

Consolidated Statements of Cash                                       
Flows

For the three months and year ended December 31                
                                                        

(Unaudited, in thousands of Canadian dollars)                               
                                                        
                               Three months ended                   Year ended
                         December        December       December      December
                               31              31             31            31
                             2012            2011           2012          2011

Cash provided by                                                              
(used in)
                                                                      

Operating                                                                     
activities

Net income           $     48,489   $      52,640    $   217,522   $   212,393

Items not affecting                                                   
cash

  Depreciation             54,029          57,540        220,227       177,927

  Share-based
  compensation, net           805           9,499          4,363        11,778
  of cash paid   

  Accretion on
  long-term                    76             851          1,579         1,154
  debt     

Deferred income            13,689          19,935         56,826        72,335
tax     

Net change in                                                                 
non-cash working           18,164         (7,641)         25,038     (105,101)
capital   
                          135,252         132,824        525,555       370,486
                                                                      

Investing                                                                     
activities

Purchase of                                                                   
property and             (80,329)       (134,209)      (306,689)     (386,833)
equipment  

Acquisition                     -              -               -              
                                                                     (497,352)

Net change in
non-cash working         (23,392)        (14,892)       (15,040)        31,510
capital   
                        (103,721)                      (321,729)              
                                        (149,101)                    (852,675)
                                                                      

Financing                                                                     
activities

Net (decrease)
increase in              (30,586)           6,604        (1,398)        73,601
operating lines of
credit  

Issue of senior                 -              -         300,000             -
unsecured notes    

(Repayment) issue                                               
of unsecured term               -              -       (403,279)       390,080
loan   

Issue of capital                -              -              43             -
stock    

Purchase of shares          (535)           (674)        (8,579)       (6,202)
held in trust    

Deferred financing              -             -          (2,156)       (2,078)
costs    

Dividends                (16,854)        (16,087)       (65,116)      (59,752)

Net change in
non-cash working            2,570           1,468          3,500         1,371
capital   
                         (45,405)         (8,689)      (176,985)       397,020
                                                                      

Net (decrease)
increase in cash                                                    
and cash
equivalents              (13,874)        (24,966)         26,841      (85,169)

  Effects of
  foreign exchange                                                  
  on cash and cash
  equivalents             (2,057)          21,125          3,754       (1,738)
                                                                      

Cash and cash                                                                 
equivalents

  Beginning of             49,139           6,454          2,613        89,520
  period     

  End of period       $    33,208     $     2,613    $    33,208   $     2,613
                                                                      

Supplemental                                                                  
information

  Interest paid       $     6,840     $     3,295    $    16,162   $     5,425

  Income taxes paid   $     8,572     $   (2,318)    $    45,486   $    21,186
  (received)   
                                                                      

 

  

 

Glenn Dagenais, Executive Vice President Finance and Chief Financial  Officer, 
(403) 262-1361.

SOURCE: Ensign Energy Services Inc.

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/March2013/18/c5702.html

CO: Ensign Energy Services Inc.
ST: Alberta
NI: OIL ERN CONF 

-0- Mar/18/2013 09:00 GMT

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