Savanna Energy Services Corp. Announces Q3 2013 Results and Rig Additions for Australia

Savanna Energy Services Corp. Announces Q3 2013 Results and Rig Additions for 
Australia 
CALGARY, ALBERTA -- (Marketwired) -- 11/07/13 -- Savanna Energy
Services Corp. ("Savanna" or "the Company") (TSX:SVY) generated
EBITDAS of $38.2 million on $170.6 million of revenue in Q3 2013,
compared to EBITDAS of $36.4 million on $158.7 million of revenue in
Q3 2012. The increases were primarily a result of substantial
increases in Australian activity and operating results, and higher
utilization in Canadian drilling. Revenue and EBITDAS in the quarter
were also considerably higher than the Q2 2013 revenue of $112.1
million and EBITDAS of $10.1 million, as a result of the typical Q3
seasonal increase in activity in Canada, coming out of the second
quarter. 
Activity in Australia continued to accelerate through Q3 2013 and
improved utilization and operating margins from Savanna's Australian
operations drove Savanna's overall operating margin increases in the
quarter relative to Q3 2012. Overall operating margins from Australia
totaled $5.4 million in Q3 2013, in-line with the $5.6 million
generated in Q2 2013, and more than double the $2.6 million in
operating margins in Q3 2012. Activity levels are ramping up in
Australia and Savanna's position within the Australian market is
expanding along with them. Subsequent to the end of the quarter,
Savanna was awarded long-term contracts for an additional three
workover rigs for Australia, all outside of the tender process. These
rigs are expected to be delivered in Q2 and Q3 2014, with an
aggregate capital commitment of $31 million. A portion of this
capital cost will be spent in 2013, under Savanna's previously
committed amount for long-lead items. Including these three new rigs,
Savanna will be adding one drilling rig and five service rigs into
Australia in less than twelve months, increasing the Company's fleet
in the region by 75%. 
In Canada, overall operating margins were fairly flat in Q3 2013
relative to Q3 2012, as improved utilization on a larger active
drilling fleet offset decreased pricing, and lower well servicing
activity was tempered by an improved fixed cost structure and
increased revenue and operating margins from oilfield rentals.
Savanna generated $29.8 million in operating margins on $98.7 million
of revenue in Canada in Q3 2013, compared to $30.3 million in
operating margins on $94.2 million of revenue in Q3 2012, and $2.7
million in operating margins on $40.2 million of revenue in Q2 2013.
The decrease in operating margin percentages compared to Q3 2012 was
in large part a result of lower pricing. The increase in operating
margin percentages compared to Q2 2013 was primarily a result of
higher activity levels and the effect fixed costs had on operating
margins.  
Operating margins in the U.S. in Q3 2013 also remained fairly flat
compared to Q3 2012, as higher per day revenue offset lower activity
levels. Savanna generated $15.4 million in operating margins on $44.9
million of revenue in the U.S. in Q3 2013, compared to $14.5 million
in operating margins on $45.4 million of revenue in Q3 2012, and
$14.3 million in operating margins on $43.8 million of revenue in Q2
2013. 
Savanna's Q3 2013 net earnings attributable to the shareholders of
the Company, decreased by $0.3 million to $6.7 million, or $0.08 per
share, from $7 million, or $0.08 per share, in Q3 2012, as higher
EBITDAS was offset by higher depreciation and amortization expenses.
In Q2 2013, Savanna had a net loss attributable to the shareholders
of the Company of $8.6 million, or $0.10 per share. The seasonal
increase in Canadian activity levels coming out of the second quarter
drove the increase in earnings from Q2 2013.  
On a year-to-date basis, overall economic uncertainty, pipeline
capacity constraints in Canada, and continuing low natural gas
prices, have depressed oilfield service demand levels in North
America in 2013 relative to 2012. This led to lower utilization in
both drilling and well servicing in Canada and decreased pricing on
Savanna's spot market drilling rigs. Despite these industry demand
decreases, an increase in Savanna's overall active drilling rig
fleet, driven by the refurbishment and retrofit initiatives of the
last few years, and in Canadian oilfield rentals revenue, have
partially mitigated the negative effect that the activity declines in
North America have had on Savanna's overall operating margins. A
sharp year-over-year increase in operating margin contributions from
Savanna's Australian drilling and oilfield services operations has
also offset much of the weakness in North American activity. In the
first nine months of 2013, higher general and administrative
expenses, higher depreciation expenses based on an increased capital
asset cost base and higher activity in Australia, and higher finance
expenses, also negatively impacted Savanna's net earnings compared to
the same period in 2012. In addition, in the first nine months of
2013, Savanna incurred $1.1 million in severance and bad debt
expenses, approximately 60% of which is included in general and
administrative expenses. 
Financial Highlights 
The following is a summary of selected financial information of the
Company: 


 
                                                                            
(Stated in thousands                                                        
 of dollars, except    Three months                                         
 per share amounts)       ended                 Nine months ended           
September 30            2013     2012  Change       2013      2012  Change  
----------------------------------------------------------------------------
OPERATING RESULTS                                                           
Revenue              170,611  158,748       7%   519,584   515,572       1% 
Operating expenses   119,988  111,086       8%   364,620   354,600       3% 
Operating margin(1)   50,623   47,662       6%   154,964   160,972      (4%)
Operating margin                                                            
 %(1)                     30%      30%                30%       31%         
EBITDAS(1)            38,182   36,398       5%   116,301   126,658      (8%)
 Attributable to                                                            
  shareholders of                                                           
  the Company         37,129   35,090       6%   113,017   122,430      (8%)
 Per share: diluted     0.42     0.41       2%      1.30      1.43      (9%)
Net earnings           7,338    7,991      (8%)   28,357    37,850     (25%)
 Attributable to                                                            
  shareholders of                                                           
  the Company          6,692    6,984      (4%)   25,815    34,620     (25%)
 Per share: diluted     0.08     0.08       0%      0.30      0.40     (25%)
                                                                            
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CASH FLOWS                                                                  
Operating cash                                                              
 flows(1)             38,258   34,464      11%   108,755   116,886      (7%)
Acquisition of                                                              
 capital assets(1)   (26,692) (42,153)    (37%)  (75,266) (141,646)    (47%)
Proceeds on disposal                                                        
 of capital assets       268    8,829     (97%)    4,578    10,961     (58%)
Dividends paid        (5,548)  (5,862)     (5%)  (17,070)  (10,085)     69% 
                                                                            
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                                                 Sep. 30   Dec. 31          
FINANCIAL POSITION                                  2013      2012          
----------------------------------------------------------------------------
Working capital(1)                                94,837    94,125       1% 
Capital assets(1)                              1,154,062 1,145,554       1% 
Total assets                                   1,344,268 1,338,489       0% 
Long-term debt                                   237,241   249,939      (5%)

 
Effective January 1, 2013, Savanna adopted International Financial
Reporting Standard ("IFRS") 10, Consolidated Financial Statements.
Adoption of the standard changed how Savanna accounted for its
partnerships with Aboriginal communities, from 50% proportionate
consolidation to full consolidation. As a result, the comparative
figures included in this press release, have been restated. The
changes on adoption of the new standard are described in detail in
the Company's Q1 2013 management's discussion and analysis, under the
heading "Accounting Policies", and in Note 4 of the Company's
condensed consolidated financial statements for the three months
ended March 31, 2013. 
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: 
 
--  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 in North America based on standard hours of 3,650 per rig per year.
    Utilization for Savanna's service rigs in Australia is calculated based
    on standard hours of 8,760 per rig per year to reflect 24 hour operating
    conditions in that country. Reliable industry average utilization
    figures, specific to well servicing, are not available. 

 
Segmented Results 
CONTRACT DRILLING 
The following is a summary of selected financial and operating
information of the Company's contract drilling segment:  


 
                                                                            
(Stated in                                                                  
 thousands                                                                  
 of                                                                         
 dollars,                                                                   
 except                                                                     
 revenue                                                                    
 per day)     Three Months Ended              Nine Months Ended             
----------------------------------------------------------------------------
September                                                                   
 30               2013        2012  Change        2013        2012  Change  
----------------------------------------------------------------------------
Revenue     $  123,507  $  114,330       8% $  374,214  $  378,603      (1%)
Operating                                                                   
 expenses   $   85,156  $   77,856       9% $  256,052  $  251,540       2% 
Operating                                                                   
 margin(1)  $   38,351  $   36,474       5% $  118,162  $  127,063      (7%)
Operating                                                                   
 margin                                                                     
 %(1)               31%         32%                 32%         34%         
Operating                                                                   
 days            5,578       5,365       4%     16,148      16,424      (2%)
Revenue per                                                                 
 operating                                                                  
 day        $   22,142  $   21,310       4% $   23,174  $   23,052       1% 
Spud to                                                                     
 release                                                                    
 days            4,881       4,649       5%     14,012      14,428      (3%)
Wells                                                                       
 drilled           717         554      29%      1,870       1,705      10% 
Meters                                                                      
 drilled     1,199,186   1,054,514      14%  3,237,187   2,935,982      10% 

 
THIRD QUARTER RESULTS 
Overall, improved utilization on a larger active drilling fleet in
Canada, higher per day revenue in the U.S., and improved utilization
in Australia in Q3 2013, resulted in more operating days and higher
overall revenue and operating margins in Savanna's contract drilling
segment compared to Q3 2012.  
The following summarizes the operating results in the third quarter
of 2013 and 2012 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 drilling rigs.  


 
                                                                            
                                 Long-reach  Shallow      Drilling          
(Stated in thousands of dollars)   Drilling Drilling      U.S. and          
Q3 2013                              Canada   Canada International    Total 
----------------------------------------------------------------------------
Revenue                              67,125    3,881        52,501  123,507 
Operating margin(1)                  22,889     (557)       16,019   38,351 
Operating margin %(1)                    34%     (i)            31%      31%
----------------------------------------------------------------------------
                                                                            
Revenue excluding cost recoveries    60,861    3,701        50,507  115,069 
Operating margin(1)                  22,889     (557)       16,019   38,351 
Operating margin %(1)                    38%     (i)            32%      33%
----------------------------------------------------------------------------
                                                                            
Average number of rigs deployed          50       20            30      100 
Utilization %(2)                         57%      12%           73%      53%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                Long-reach   Shallow      Drilling          
(Stated in thousands of dollars)  Drilling  Drilling      U.S. and          
Q3 2012                             Canada    Canada International    Total 
----------------------------------------------------------------------------
Revenue                             60,356     2,703        51,271  114,330 
Operating margin(1)                 23,025      (797)       14,246   36,474 
Operating margin %(1)                   38%      (i)            28%      32%
----------------------------------------------------------------------------
                                                                            
Revenue excluding cost                                                      
 recoveries                         54,932     2,539        50,477  107,948 
Operating margin(1)                 23,025      (797)       14,246   36,474 
Operating margin %(1)                   42%      (i)            28%      34%
----------------------------------------------------------------------------
                                                                            
Average number of rigs deployed         47        20            30       97 
Utilization %(2)                        54%        8%           79%      52%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
(i) Calculation not meaningful 
In the contract drilling segment, significant costs are incurred and
passed through to customers with little or no markup. For Q3 2013
these costs aggregated $8.4 million (Q3 2012 - $6.4 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 to 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.  
The Canadian long-reach drilling rigs delivered improved utilization
on a larger active drilling fleet in Q3 2013 compared to Q3 2012. In
addition, as activity improved coming out of the second quarter, the
prevailing downward pressure on day rates for Savanna's spot market
rigs did subside somewhat; however, pricing is still below that of Q3
2012. In addition, variable costs per day were slightly higher than
last year, primarily as a result of labour cost increases that took
effect in Q4 2012. The lower per day revenue and higher per day costs
were offset by an increase in operating days, and as a result,
overall operating margins were flat relative to Q3 2012. The 57%
utilization rate for Savanna's long-reach drilling rigs in Q3 2013
was above the Canadian industry utilization rates of 50% in the same
depth categories.  
The Company's shallow drilling rig fleet achieved higher revenues and
utilization in Q3 2013 relative to Q3 2012. The increase in revenues
was not sufficient to cover fixed operating costs in Q3 2013, and the
shallow drilling rig fleet contributed negatively to overall
operating margins, although less so than in Q3 2012. However, the
higher utilization in Q3 2013 should reduce the costs required to
fully crew rigs for Q4 2013 and Q1 2014. 
Despite fewer operating days, Savanna's U.S. drilling operation
increased operating margins in Q3 2013 compared to Q3 2012. Higher
per day revenue and lower per day labour costs more than offset the
decrease in operating days, and as a result, operating margin
percentages for the quarter increased by three percentage points
relative to Q3 2012. 
In Australia, improved utilization in Q3 2013 led to an increase in
operating days, revenue, and operating margins compared to Q3 2012.
Operating margins for Savanna's drilling operations in Australia
increased by 37% in Q3 2013 compared to Q3 2012. The improved
utilization in Australia also drove average per day revenue up for
the drilling segment as a whole as day rates are significantly higher
in Australia than they are in North America.  
YEAR-TO-DATE RESULTS  
To date in 2013, in Savanna's contract drilling segment, a
significant increase in activity levels in Australia has partially
offset operating day declines in the U.S. and Canada relative to the
first nine months of 2012. A $6.3 million, or 194%, increase in
operating margins from drilling in Australia, and having five more
active rigs in the overall fleet to date in 2013 partially offset
decreased demand levels and utilization in North America. Similarly,
lower day rates in Canada, particularly on Savanna's telescoping
double drilling rigs, were offset by higher per day rates in the U.S.
and Australia.   
The following summarizes the operating results in the first nine
months of 2013 and 2012 by type of rig or geographic area.  


 
                                                                            
                                Long-reach   Shallow      Drilling          
(Stated in thousands of dollars)  Drilling  Drilling      U.S. and          
YTD 2013                            Canada    Canada International    Total 
----------------------------------------------------------------------------
Revenue                            186,028    29,679       158,507  374,214 
Operating margin(1)                 62,626     8,887        46,649  118,162 
Operating margin %(1)                   34%       30%           29%      32%
----------------------------------------------------------------------------
                                                                            
Revenue excluding cost                                                      
 recoveries                        165,472    28,701       152,711  346,884 
Operating margin(1)                 62,626     8,887        46,649  118,162 
Operating margin %(1)                   38%       31%           31%      34%
----------------------------------------------------------------------------
                                                                            
Average number of rigs deployed         50        20            30      100 
Utilization %(2)                        49%       20%           75%      51%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                Long-reach   Shallow      Drilling          
(Stated in thousands of dollars)  Drilling  Drilling      U.S. and          
YTD 2012                            Canada    Canada International    Total 
----------------------------------------------------------------------------
Revenue                            195,991    35,531       147,081  378,603 
Operating margin(1)                 75,134    10,457        41,472  127,063 
Operating margin %(1)                   38%       29%           28%      34%
----------------------------------------------------------------------------
                                                                            
Revenue excluding cost                                                      
 recoveries                        176,413    33,999       142,547  352,959 
Operating margin(1)                 75,134    10,457        41,472  127,063 
Operating margin %(1)                   43%       31%           29%      36%
----------------------------------------------------------------------------
                                                                            
Average number of rigs deployed         45        21            29       95 
Utilization %(2)                        55%       24%           79%      55%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
In the first nine months of 2013 cost recoveries aggregated $27.3
million compared to $25.6 million in the same period in 2012. Lower
day rates and lower utilization in the first nine months of 2013
resulted in decreased revenue for the Company's long-reach drilling
rigs in Canada compared to the same period in 2012. This lower
revenue, coupled with higher per day pass through costs and the
increased impact of fixed costs on lower activity levels, led to a
17% decrease in operating margins and lower operating margin
percentages compared to the first nine months of 2012. The relatively
low overall industry demand in Canada heading into the winter
drilling season in 2012 put pressure on day rates for Savanna's spot
market rigs in early 2013. While rates have now stabilized, they are
still lower relative to this time last year. Although utilization in
the first nine months of 2013 decreased compared to the same period
in 2012, the 49% utilization rate for Savanna's long-reach drilling
rigs in 2013 still exceeded Canadian industry utilization rates of
47% in the same depth categories. 
The majority of the revenue and operating margins for Savanna's
shallow fleet in the first nine months of both 2013 and 2012 was
earned performing coring work for oil sands customers in the first
quarter of each year. The CT-1500 hybrid drilling rigs have had
considerable success in applying coil based drilling to coring. In
addition, as a result of improved utilization post Q1 and cost
control initiatives to date in 2013, the shallow fleet improved
operating margin percentages relative to the first nine months of
2012 despite lower activity this year versus last.  
Revenue and operating margins for Savanna's U.S. drilling operation
were lower in the first nine months of 2013 compared to the same
period in 2012, as a result of fewer operating days. Pricing pressure
in the Permian basin in Texas, which began in Q3 2012, has leveled
off and average per day revenue was actually higher in the first nine
months of 2013 relative to the same period in 2012. The increase in
per day revenue was offset by higher per day labour costs and
operating margin percentages in the U.S. were flat relative to the
first nine months of 2012. Although demand levels have decreased
overall in the U.S., to date in 2013, Savanna has been able to
maintain high utilization rates in the regions where its rigs are
deployed.  
In Australia, operating days and revenue increased significantly in
the first nine months of 2013 compared to the same period in 2012 as
utilization improved on a larger rig fleet in the region. The larger
fleet also reduced the impact of fixed costs on per day costs, and
operating margins for Savanna's drilling operations in Australia
increased to $9.5 million in the first nine months of 2013, which is
more than three times higher than at this time last year. 
OILFIELD SERVICES 
The following is a summary of selected financial and operating
information of the Company's oilfield services segment:  


 
                                                                            
(Stated in thousands                                                        
 of dollars, except                                                         
 revenue per hour)   Three Months Ended          Nine Months Ended          
----------------------------------------------------------------------------
September 30              2013     2012 Change       2013      2012 Change  
----------------------------------------------------------------------------
Revenue               $ 47,716 $ 44,978      6% $ 147,595 $ 139,347      6% 
Operating expenses    $ 35,528 $ 33,896      5% $ 111,072 $ 105,764      5% 
Operating margin(1)   $ 12,188 $ 11,082     10% $  36,523 $  33,583      9% 
Operating margin %(1)       26%      25%               25%       24%        
Operating hours -                                                           
 well servicing         41,824   43,598     (4%)  119,825   133,917    (11%)
Revenue per operating                                                       
 hour - well                                                                
 servicing            $    879 $    840      5% $     934 $     861      8% 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
THIRD QUARTER RESULTS  
Despite a decline in operating hours, revenue for Savanna's oilfield
services division increased in Q3 2013 compared to Q3 2012, as a
result of an increase in oilfield rentals revenue and higher overall
per hour rates in well servicing. Increased utilization in Australia
in the quarter, where per hour revenue is higher than in North
America, contributed to the higher per hour revenue and the higher
utilization also led to a significant increase in operating margins
in Australia in Q3 2013 relative to Q3 2012. In addition, a
restructured fixed cost base in Canadian well servicing resulted in
higher operating margin percentages in Q3 2013, despite a decrease in
operating hours and operating margins compared to Q3 2012. 
Included in revenue for Q3 2013, was $10.9 million from oilfield
rentals (Q3 2012 - $8.4 million). Of the Q3 2013 rental revenue, $5.1
million (Q3 2012 - $3.9 million) was generated in Australia and $0.7
million (Q3 2012 - $0.7 million) is eliminated on overall
consolidation as inter-segment revenue. Oilfield rentals revenue is
excluded from the per hour revenue calculations above.  
The following summarizes the operating results by geographic area: 


 
                                                                            
(Stated in thousands of dollars)                           U.S. and         
Q3 2013                                        Canada International   Total 
----------------------------------------------------------------------------
Revenue                                        27,679        20,037  47,716 
Operating margin(1)                             7,389         4,799  12,188 
Operating margin %(1)                              27%           24%     26%
Average number of rigs deployed - well                                      
 servicing                                         84            15      99 
Utilization %(2) - well servicing                  36%           76%     46%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(Stated in thousands of dollars)                           U.S. and         
Q3 2012                                        Canada International   Total 
----------------------------------------------------------------------------
Revenue                                        30,986        13,992  44,978 
Operating margin(1)                             8,174         2,908  11,082 
Operating margin %(1)                              26%           21%     25%
Average number of rigs deployed - well                                      
 servicing                                         87            15     102 
Utilization %(2) - well servicing                  41%           64%     47%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Lower industry demand in Canada resulted in lower activity levels for
Savanna's well servicing operations in Q3 2013 compared to Q3 2012.
The number of operating hours from the well servicing fleet in Canada
decreased by 16% compared to Q3 2012. Variable per hour costs in well
servicing remained relatively flat from Q3 2012 but overall fixed
costs decreased as a result of a restructuring of the well servicing
field operations in Canada. This led to a percentage point increase
in operating margin percentages relative to Q3 2012, despite fewer
hours. For rentals, revenues increased by 30% and operating margins
increased by 24% in Q3 2013 compared to Q3 2012, as a result of the
December 2012 acquisition of oilfield accommodation buildings. 
Revenue for well servicing in the U.S. increased in Q3 2013 as a
result of more operating hours and higher pricing relative to Q3
2012. The increase in revenue was offset by an increase in labour
costs associated with crewing three additional rigs being transferred
from Canada in Q4 of this year, and as a result operating margins
remained flat compared to Q3 2012. With the pending rig transfers
from Canada in Q4 2013 and the first half of 2014, operating margin
contributions from Savanna's U.S. well servicing operations should
increase in future quarters.  
In Australia, revenue from service rigs and rental equipment
increased by 39% and operating margins increased by $1.9 million, or
332%, in Q3 2013 compared to Q3 2012. The increases are a result of
improved utilization on a larger equipment base. 
YEAR-TO-DATE RESULTS  
Savanna's oilfield services division generated higher revenues,
despite achieving fewer operating hours in the first nine months of
2013 compared to same period in 2012. The increase was a result of
higher overall per hour rates in well servicing, due primarily to a
larger contribution from Australia, and an $11.6 million increase in
oilfield rentals revenue. Overall, operating margins increased by
$2.9 million in the first nine months of 2013 and operating margin
percentages increased by one percentage point. The operating margin
increase was driven in large part by increases in Australia;
operating margins from service rigs and rental equipment in Australia
increased by $5.1 million, or 902%, in the first nine months of 2013
compared to the same period in 2012.  
Included in revenue for the first nine months of 2013, was $35.7
million from oilfield rentals (2012 - $15.7 million), a 32% increase
from the same period in 2012. Of the year-to-date rental revenue in
2013, $15 million (2012 - $9.9 million) was generated in Australia
and $2.5 million (2012 - $2.7 million) is eliminated on overall
consolidation as inter-segment revenue. Oilfield rentals revenue is
excluded from the per hour revenue calculations above.  
The following summarizes the operating results by geographic area: 


 
                                                                            
(Stated in thousands of dollars)                           U.S. and         
YTD 2013                                       Canada International   Total 
----------------------------------------------------------------------------
Revenue                                        90,095        57,500 147,595 
Operating margin(1)                            25,018        11,505  36,523 
Operating margin %(1)                              28%           20%     25%
Average number of rigs deployed - well                                      
 servicing                                         84            14      98 
Utilization %(2) - well servicing                  36%           71%     45%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(Stated in thousands of dollars)                          U.S. and          
YTD 2012                                      Canada International    Total 
----------------------------------------------------------------------------
Revenue                                      101,519        37,828  139,347 
Operating margin(1)                           25,635         7,948   33,583 
Operating margin %(1)                             25%           21%      24%
Average number of rigs deployed - well                                      
 servicing                                        90            14      104 
Utilization %(2) - well servicing                 43%           62%      48%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
In Canada, industry demand was lower in the first nine months of 2013
compared to the same period in 2012, which led to lower utilization
and revenue from Savanna's well servicing fleet. However, the
decrease in well servicing revenue was partially offset by a 46%
increase in rentals revenue related to the Q4 2012 acquisition of
oilfield accommodation buildings. In well servicing, revenue per hour
remained relatively flat while both per hour variable costs and
overall fixed costs were lower compared to the first nine months of
2012. Based on these factors, Savanna's oilfield services division in
Canada was able to maintain operating margins and increase operating
margin percentages despite a decrease in overall activity and
revenue.  
In the U.S., Savanna operated two fewer service rigs on average in
the first nine months of 2013 compared to the same period in 2012.
Consequently, revenues and operating margins for well servicing in
the U.S. decreased relative to the first nine months of 2012.  
In Australia, revenue from service rigs and rental equipment nearly
doubled in the first nine months of 2013 compared to the first nine
months of 2012 and operating margins increased by $5.1 million from
$0.6 million in the same period in 2012. The increases were a result
of a larger equipment base and significantly improved utilization.  
Balance Sheet 
Savanna's working capital at September 30, 2013, was $94.8 million
and its net debt position was $142.4 million, a decrease of $13.4
million or 9% from the Company's $155.8 million net debt position at
December 31, 2012. Savanna's total long-term debt outstanding on
September 30, 2013, excluding unamortized debt issue costs, was
$237.2 million, compared to $249.9 million outstanding at December
31, 2012. The decrease in the total debt outstanding is due primarily
to the excess of operating cash flows generated in the first nine
months of 2013, over cash paid in dividends and on the purchase of
property and equipment.  
In May 2013, Savanna renewed its revolving credit facility, extending
the term of the facility by one year so all drawn amounts are not due
until May 2017. At September 30, 2013, the amount drawn on this
facility was $103.9 million and the amount drawn on the Canadian
operating facility was $0.2 million.  
Subsequent to the end of the quarter, Savanna completed an offering
of $50 million aggregate principal amount of 7.0% senior unsecured
notes. The offering was an add-on to Savanna's $125 million senior
unsecured notes outstanding at September 30, 2013. The proceeds of
the offering were used to repay a portion of the amounts outstanding
on the Company's revolving credit facility.  
As of the date of this release, $62.5 million was drawn on Savanna's
total available credit facilities of $200 million.  
Dividend 
In the first nine of 2013, Savanna declared dividends totaling $23.4
million or $0.27 per share. Of the dividends declared, $6.3 million
was reinvested in additional common shares through the Company's
dividend reinvestment plan.  
Outlook 
Canadian activity levels for the remainder of 2013 remain uncertain.
In Canada, overall industry activity levels will have a greater
impact on Savanna's performance due to the relatively lower contract
status on the Company's fleet. Compounding this, Savanna is still
highly dependent on activity levels in Canada to drive results.
However, Savanna believes it has a more marketable Canadian drilling
rig fleet this year compared to last, and day rates appear to have
stabilized after declines earlier in the year. In addition, higher
utilization of the shallow drilling rig fleet in Q3 2013 should
reduce the costs required to fully crew rigs for the winter drilling
season. The increased scale of the Company's oilfield rentals
business should also provide improved returns. Savanna also continues
to support its firm belief that North American well servicing is in
the early stages of a long-term upturn.  
In the U.S., Savanna has most of its drilling rigs under contract.
While these contracts will expire over the next 18 months, many have
been renewed at existing terms and as a result should continue to
mitigate any near-term drilling market deterioration. Additionally,
Savanna's U.S. drilling and well servicing fleets are positioned in
markets where activity is expected to remain relatively stronger, and
Savanna believes it has strong operating positions in those markets.
Savanna did not encounter any difficulties in utilizing the three
new-build North Dakota service rigs commissioned in June and July
2013, nor does it anticipate any difficulty utilizing rigs slated for
transfer from Canada in Q4 2013 and the first part of 2014. 
In Australia, utilization and operating margins continue to improve
every quarter and with the fifth drilling rig expected to commence
operations later in Q4 2013 this trend should continue. Savanna has
now established sufficient scale in Australia to take advantage of
the expected sharp increase in activity levels in that country. With
five additional workover rigs commencing operations under long-term
contract in Australia in 2014, Savanna is well positioned to continue
generating improved returns from this division. Savanna remains very
optimistic on the future prospects of Australia. With looming
liquefied natural gas deliveries for 2014 in sight, activity levels
continue to increase in the region overall and support a further
ramp-up in activity, and resulting equipment and service requirements
as well.  
Savanna's focus on right-sizing its operating and general and
administrative costs, to better align with anticipated volatility and
base levels of activity, is also continuing. It is anticipated that
cost management will continue to improve in forward quarters relative
to 2013 and Q4 2012. 
The oilfield service market continues to face uncertainty in the
near-term. Commodity pricing, particularly for natural gas and heavy
oil, and pipeline capacity issues in North America, are impacting
customer demand for services. Offsetting this uncertainty is the
looming prospects for Canadian liquefied natural gas development.
This should provide further growth potential for Canadian oilfield
services going forward. In the interim, renewed oil development and
improved liquefied natural gas pricing should increase activity
levels. Savanna's recently announced partnership with Fort McKay
First Nation should also provide improved access for Savanna to the
already active oil sands regions. Savanna remains optimistic in the
potential of this partnership in the medium-term. In Australia,
long-term prospects remain strong and Savanna's contract position in
both Australia and the U.S. should result in stable activity in those
markets. Savanna is confident in the long-term prospects for every
region in which the Company operates, and in its ability to deliver
the safest, most effective drilling, completion and workover services
possible to its customers. 
Cautionary Statement Regarding Forward-Looking Information and
Statements 
Certain statements and information contained in this press release
including statements related to the Company's 2013 capital program
and other strategic or growth initiatives, the expected timing for
delivery of workover rigs in Australia and the capital commitment
therefor, the expectation of utilizing service rigs slated for
transfer from Canada to North Dakota and increasing operating margin
contributions from Savanna's U.S. well servicing operations, the
expectation that higher utilization in Q3 2013 will reduce the costs
required to crew the shallow drilling fleet in Q4 2013 and Q1 2014,
the expectation of increased activity levels and improved
utilization, operating margins, and returns from Savanna's Australian
operations, the expectation of overall cost management improvements,
the expectation that Savanna's partnership with Fort McKay First
Nation should provide improved access to the already active oil sands
regions, the expectation of near-term uncertainty in North American
activity levels and the oilfield service market, and the Company's
ability to mitigate the effect of such, the expectation of increased
demand for oilfield service equipment as liquefied natural gas export
terminal projects move forward, the expectation that renewed oil
development and improved liquefied natural gas pricing should
increase activity levels, the expectation of a long-term increase in
well servicing activity in North America, 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 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 expected timing for delivery of
workover rigs in Australia and the capital commitment therefor is
premised on Savanna's past experience in building and deploying rigs
into the Australian market. The Company's expectation of utilizing
service rigs slated for transfer from Canada to North Dakota is
premised on the Company's current outlook for industry activity in
that region and increasing operating margin contributions form
Savanna's U.S. well servicing operations is premised on the expected
increase in the scale of those operations both through newly
constructed rigs and in rigs slated for transfer from Canada. The
Company's expectation that higher utilization in Q3 2013 will reduce
the costs required to crew the shallow drilling fleet in Q4 2013 and
Q1 2014 is premised on the shallow fleet maintaining current
utilization levels and retaining their crews. The Company's
expectation of increased activity levels and improved utilization,
operating margins, and returns from Savanna's Australian operations
is premised on actual results experienced to date in 2013, the
contracts currently in place, including those for six new-build rigs,
communications with its customers in the region, and the general
expectation that coal seam gas activity will increase in that country
as the deliveries to, and plans for, liquefied natural gas plants
progress. 
The Company's expectation of overall cost management improvements, is
premised on cost management and process improvement initiatives
undertaken or currently underway. The Company's expectation that its
partnership with Fort McKay First Nation should provide improved
access to the already active oil sands regions is premised on
agreements and relationships between Fort McKay First Nation and
potential customers working in the oil sands and the exclusivity of
the partnership to Savanna and Fort McKay First Nation in the
Regional Municipality of Wood Buffalo. The Company's expectation of
increased demand for oilfield service equipment as liquefied natural
gas export terminal projects move forward, its expectation that
renewed oil development and improved liquefied natural gas pricing
should increase activity levels, and its ability to mitigate the
effect of near-term uncertainty in North American activity levels and
the oilfield service market are premised on actual results
experienced to date in 2013, customer contracts and commitments, the
Company's expectations for its customers' capital budgets and
geographical areas of focus, the status of current negotiations with
its customers, the focus of its customers on oil directed drilling
opportunities in the current natural gas pricing environment in North
America, and regulatory approvals granted for liquefied natural gas
export terminals in Canada. The Company's expectation of a long-term
increase in well servicing activity in North America is premised on
the increase in the number of oil and natural 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. 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, oilfield rentals and contract drilling; the effects of
weather conditions on operations and facilities; the existence of
competitive operating risks inherent in well servicing, oilfield
rentals 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; the other risk factors set forth
under the heading "Risks and Uncertainties" in the Company's Annual
Report 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. 
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 full Q3 2013 report, including its management's discussion
and analysis and condensed consolidated financial statements, is
available on Savanna's website (www.savannaenergy.com) under the
investor relations section and has also been filed on SEDAR at
www.sedar.com.  
Savanna will host a conference call for analysts, investors and
interested parties today at 10:00 a.m. Mountain Time (12:00 p.m.
Eastern Time) to discuss the Company's third quarter results. The
call will be hosted by Ken Mullen, Savanna's President and Chief
Executive Officer and Darcy Draudson, Executive 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 November 14, 2013 by
dialing 1-800-937-6305 and entering passcode 950173. 
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
EVP Finance and Chief Financial Officer
(403) 503-9990
www.savannaenergy.com