Ensign Energy Services Inc. Reports 2013 Third Quarter Results

CALGARY, Nov. 11, 2013 /CNW/ - 
Overview 
Ensign Energy Services Inc. ("Ensign" or the "Company") recorded revenue of 
$543.0 million for the third quarter of 2013, an increase of three percent 
over revenue of $525.7 million recorded in the third quarter of 2012. 
Revenue for the nine months ended September 30, 2013 was $1,562.0 million, six 
percent lower than revenue of $1,667.2 million for the nine months ended 
September 30, 2012. Net income for the third quarter of 2013 decreased 25 
percent to $33.7 million ($0.22 per common share) compared to net income of 
$44.8 million ($0.29 per common share) for the third quarter of 2012. Net 
income for the nine months ended September 30, 2013 decreased 40 percent to 
$102.0 million ($0.67 per common share) compared to net income of $169.0 
million ($1.11 per common share) for the first nine months of 2012. Included 
in the year-to-date third quarter earnings is the negative impact of $15.4 
million foreign exchange and other loss, primarily due to the effect of a 
weakening AUS dollar on US dollar debt in the Company's Australian 
operations. Excluding the tax-effected impact of share-based compensation 
expense (recovery) and foreign exchange and other, adjusted net income for the 
third quarter of 2013 totaled $34.9 million ($0.23 per common share), 23 
percent lower than adjusted net income of $45.2 million ($0.30 per common 
share) in the third quarter of 2012. For the nine months ended September 30, 
2013 adjusted net income was $116.0 million ($0.76 per common share), 32 
percent lower than adjusted net income of $171.1 million ($1.12 per common 
share) for the nine months ended September 30, 2012. Adjusted EBITDA, 
defined as "income before interest, income taxes, depreciation, share-based 
compensation expense (recovery) and foreign exchange and other", totaled 
$123.1 million ($0.81 per common share) in the third quarter of 2013, seven 
percent lower than adjusted EBITDA of $132.6 million ($0.87 per common share) 
in the third quarter of 2012. For the first nine months of 2013 adjusted 
EBITDA was $373.3 million ($2.45 per common share), 15 percent lower than 
adjusted EBITDA of $437.1 million ($2.86 per common share) for the first nine 
months of 2012. Funds from operations decreased 13 percent to $105.9 million 
($0.69 per common share) in the third quarter of 2013 from $121.2 million 
($0.80 per common share) in the third quarter of the prior year. For the 
nine months ended September 30, 2013, funds from operations decreased 14 
percent to $334.4 million ($2.19 per common share) compared to $389.8 million 
($2.55 per common share) for the nine months ended September 30, 2012. 
Operating activity for the current quarter in North America continued to be at 
lower levels when compared to the third quarter of the prior year, consistent 
with the first half of 2013. Although activity levels began to show signs 
of recovery late in the third quarter of the current year, operating and 
financial results reflect the weakened demand for North American oilfield 
services when compared to the same periods of the prior year. As mentioned 
above, financial results for the nine months ended September 30, 2013 include 
the negative impact from a strengthening United States dollar on USD 
denominated debt in the Company's Australian operations. Increased activity 
in the Company's international operations, along with the positive 
translational impact from an increase in the average United States dollar 
foreign exchange rate, helped to partially offset these reductions. During 
the nine months ended September 30, 2013 the average United States dollar 
foreign exchange rate increased by approximately two percent against the 
Canadian dollar compared to the nine months ended September 30, 2012, 
positively impacting United States and international financial results on 
translation to Canadian dollars. 
Gross margin decreased five percent in the third quarter of 2013 to $144.4 
million (26.6 percent of revenue) compared with gross margin of $151.7 million 
(28.9 percent of revenue) for the third quarter of 2012. For the nine months 
ended September 30, 2013 gross margin decreased to $437.7 million (28.0 
percent of revenue) compared to $496.3 million (29.8 percent of revenue) for 
the nine months ended September 30, 2012. Reduced operating activity in 
North America and a greater proportion of operating activity being generated 
by lower margin international operations in the three and nine months ended 
September 30, 2013 compared to the same periods of 2012 resulted in lower 
consolidated gross margin percentages in the current year compared to the 
prior year. 
During the second quarter of 2013, the Company expanded its existing oilfield 
rental business when it acquired rental equipment assets through the 
acquisition of substantially all of the assets of EGOC Enviro Group of 
Companies ("EGOC"). Additionally, in the second quarter of the current year 
the Company expanded its directional drilling business in Canada through the 
acquisition of substantially all of the assets of Departure Energy Services 
Inc. ("Departure"). Both of these acquisitions were completed utilizing the 
Company's existing cash balances. The funding of these acquisitions, 
combined with funding the Company's active new build program, resulted in a 
working capital deficit at September 30, 2013, of $34.4 million compared to 
positive working capital of $13.9 million at December 31, 2012. The 
Company's ongoing new build program has delivered five new ADR(® )drilling 
rigs and six new well servicing rigs in the first nine months of the year and 
is expected to deliver an additional five new ADR(®) drilling rigs and two 
new well servicing rigs throughout the remainder of 2013 and into 2014. In 
addition to the above new builds, the Company is refurbishing and upgrading 
four drilling rigs into ADR(®)-style drilling rigs. 
FINANCIAL AND
OPERATING                                                                      
HIGHLIGHTS 
($ thousands, except per share data and                                        
operating information)                                       


                     
                            Three months ended   Nine months ended September 30
                                  September 30
                       2013      2012        %        2013        2012        %
                                        Change                           Change

Revenue             542,951   525,666        3   1,561,967   1,667,215      (6)
                                                              

Adjusted EBITDA     123,123   132,577      (7)     373,251     437,060     (15)
(1)

Adjusted EBITDA                                                                
per share (1)

  Basic               $0.81     $0.87      (7)       $2.45       $2.86     (14)

  Diluted             $0.80     $0.87      (8)       $2.43       $2.86     (15)
                                                              

Adjusted net         34,861    45,248     (23)     115,961     171,136     (32)
income (2)

Adjusted net
income per share                                                               
(2)

  Basic               $0.23     $0.30     (23)       $0.76       $1.12     (32)

  Diluted             $0.23     $0.30     (23)       $0.76       $1.12     (32)
                                                              

Net income           33,699    44,832     (25)     101,970     169,033     (40)

Net income per                                                                 
share

  Basic               $0.22     $0.29     (24)       $0.67       $1.11     (40)

  Diluted             $0.22     $0.29     (24)       $0.66       $1.11     (41)
                                                              

Funds from          105,923   121,229     (13)     334,402     389,799     (14)
operations (3)

Funds from
operations per                                                                 
share (3)

  Basic               $0.69     $0.80     (14)       $2.19       $2.55     (14)

  Diluted             $0.69     $0.79     (13)       $2.18       $2.55     (15)

Weighted average
shares - basic      152,605   152,480        -     152,654     152,680        -
(000s)

Weighted average
shares - diluted    153,641   152,838        1     153,468     152,923        -
(000s)

Drilling                                                                       

  Number of                                                                    
  marketed rigs
    Canada (4)          121       133      (9)         121         133      (9)
    United States       117       116        1         117         116        1
    International        54        58      (7)          54          58      (7)
    (5)

  Operating days                                                               
    Canada (4)        3,799     4,551     (17)      10,726      14,263     (25)
    United States     5,961     6,170      (3)      17,177      18,671      (8)
    International     2,979     2,960        1       8,496       8,602      (1)
    (5)

Well Servicing                                                                 

  Number of                                                                    
  marketed rigs
    Canada               94        99      (5)          94          99      (5)
    United States        45        46      (2)          45          46      (2)

  Operating hours                                                              
    Canada           30,355    35,098     (14)      90,835     105,924     (14)
    United States    27,529    33,029     (17)      75,203      93,669     (20)

(1) Adjusted EBITDA is defined as "income before interest expense,
income taxes, depreciation, share-based compensation (recovery) expense
and foreign exchange and other".  Management believes that in addition
to net income, Adjusted EBITDA and Adjusted 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, how the results are impacted by foreign
exchange or how the results are impacted by the accounting standards
associated with the Company's share-based compensation plans.  Adjusted
EBITDA and Adjusted 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) and foreign exchange and other,
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 foreign exchange and 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.

Third Quarter Highlights
    --  Revenue for the three months ended September 30, 2013 was
        $543.0 million, up three percent from revenue for the three
        months ended September 30, 2012.  The increase in revenue in
        the current year's third quarter over the third quarter of the
        prior year was mainly due to increased activity and revenue
        rates in the Company's international operations.
    --  Two new ADR(®) drilling rigs were added to the Company's fleet
        in the third quarter of 2013; one to the Canadian drilling
        fleet and one to the United States drilling fleet. The new
        build program also added three new well servicing rigs in the
        third quarter; two in Canada and one in the United States.


--  Third quarter revenue by geographic area:
  o Canada - 30 percent;
  o United States - 43 percent; and
  o International - 27 percent. 


    --  Adjusted EBITDA for the third quarter of 2013 was $123.1
        million, a seven percent decrease from adjusted EBITDA of
        $132.6 million for the third quarter of 2012.  Funds from
        operations for the third quarter of 2013 decreased 13 percent
        to $105.9 million from $121.2 million in the third quarter of
        the prior year.
    --  Canadian drilling recorded 3,799 operating days in the third
        quarter of 2013, a 17 percent decrease from 4,551 operating
        days in the third quarter of 2012.  Canadian well servicing
        hours decreased by 14 percent in the third quarter of 2013
        compared to the third quarter of 2012.
    --  United States drilling recorded 5,961 operating days in the
        third quarter of 2013, a three percent decrease from 6,170
        operating days in the third quarter of 2012.  United States
        well servicing hours decreased by 17 percent in the third
        quarter of 2013 compared to the third quarter of 2012.
    --  International drilling recorded 2,979 operating days in the
        third quarter of 2013, a one percent increase from 2,960
        operating days recorded in the third quarter of 2012.
    --  The Board of Directors of the Company has declared a fourth
        quarter dividend of $0.1175 per common share representing a 6.8
        percent increase over the previous quarterly dividend rate of
        $0.1100 per common share.  The dividend has increased by a
        compound annual growth rate of 17 percent since the Company
        first started to pay a dividend in 1995.

Revenue and Oilfield Services Expense
                          Three months ended   Nine months ended September 30
                                September 30

($ thousands)        2013      2012        %        2013        2012        %
                                      Change                           Change
                                                                      

Revenue                                                                      

  Canada          161,079   164,081      (2)     502,520     597,751     (16)

  United States   234,625   237,114      (1)     654,938     730,913     (10)

  International   147,247   124,471       18     404,509     338,551       19
                                                                      
                  542,951   525,666        3   1,561,967   1,667,215      (6)

Oilfield
services          398,546   373,982        7   1,124,317   1,170,956      (4)
expense
                                                                      
                  144,405   151,684      (5)     437,650     496,259     (12)

Gross margin         26.6      28.9                 28.0        29.8         
(%)

Revenue for the three months ended September 30, 2013 increased three percent 
to $543.0 million compared to $525.7 million for the comparable period in 
2012. Revenue for the nine months ended September 30, 2013 decreased six 
percent to $1,562.0 million from revenue of $1,667.2 million recorded for the 
nine months ended September 30, 2012. As a percentage of revenue, gross 
margin for the third quarter of 2013 decreased to 26.6 percent (2012 - 28.9 
percent) and decreased to 28.0 percent for the nine months ended September 30, 
2013 (2012 - 29.8 percent).

Reduced levels of demand for oilfield services in North America, which began 
late in 2012, resulted in reduced revenue in Canada and the United States in 
2013 compared to 2012 and reflects operators having delayed or reduced their 
capital programs in 2013 in reaction to current global economic conditions and 
concerns regarding the economics of oil and natural gas projects within North 
America. Growth of the Company's international operations has helped to 
somewhat offset the reductions in the North American operations throughout 
2013.

Canadian Oilfield Services

Revenue decreased two percent to $161.1 million for the three months ended 
September 30, 2013, from $164.1 million for the three months ended September 
30, 2012. For the nine months ended September 30, 2013, revenue decreased 16 
percent to $502.5 million compared to $597.8 million for the same period in 
2012. Canadian revenues accounted for 30 percent of the Company's total 
revenue in the third quarter of 2013 (2012 - 31 percent) and during the nine 
months ended September 30, 2013, Canadian revenues were 32 percent of total 
revenue (2012 - 36 percent).

The Company's Canadian operations recorded 3,799 drilling days in the third 
quarter of 2013, compared to 4,551 drilling days in the third quarter of 2012, 
a decrease of 17 percent. For the nine months ended September 30, 2013, the 
Company recorded 10,726 drilling days compared to 14,263 drilling days for the 
nine months ended September 30, 2012, a decrease of 25 percent. Canadian 
well servicing hours decreased by 14 percent to 30,355 operating hours in the 
third quarter of 2013 compared with 35,098 operating hours in the 
corresponding period of 2012. For the nine months ended September 30, 2013, 
well servicing hours decreased by 14 percent to 90,835 operating hours 
compared with 105,924 operating hours for the nine months ended September 30, 
2012.

Activity levels in Canada continued to be weakened by reduced demand for 
oilfield services in 2013 compared to 2012. Year-to-date Canadian results 
also reflect a particularly wet spring break-up in the second quarter of 2013, 
when weather conditions hindered mobility of the Company's equipment. The 
reduced field activity was partially offset by the positive impact from the 
expansion of the Company's oilfield rentals and directional drilling 
capabilities in the second quarter of 2013.

During the nine months ended September 30, 2013, the Company added two newly 
constructed ADR's to its Canadian drilling rig fleet and five new well 
servicing rigs. Five inactive drilling rigs and 10 inactive well servicing 
rigs were decommissioned, all in the first quarter. The Company also 
disposed of its non-rig manufacturing facility located in Calgary, Alberta in 
January, 2013.

United States Oilfield Services

The Company's United States operations recorded revenue of $234.6 million in 
the third quarter of 2013, a one percent decrease from the $237.1 million 
recorded in the corresponding period of the prior year. During the nine months 
ended September 30, 2013, revenue of $654.9 million was recorded, a decrease 
of 10 percent from the $730.9 million recorded for the nine months ended 
September 30, 2012. The Company's United States operations accounted for 43 
percent of the Company's revenue in the third quarter of 2013 (2012 - 45 
percent) and 42 percent of total revenue in the nine months ended September 
30, 2013 (2012 - 44 percent). Drilling rig operating days decreased by three 
percent to 5,961 drilling days in the third quarter of 2013 from 6,170 
drilling days in the third quarter of 2012. For the nine months ended 
September 30, 2013, drilling days decreased by eight percent to 17,177 
drilling days from 18,671 drilling days for the nine months ended September 
30, 2012. Well servicing activity decreased by 17 percent in the third 
quarter of 2013 to 27,529 operating hours from 33,029 operating hours in the 
third quarter of 2012. For the nine months ended September 30, 2013 well 
servicing activity decreased 20 percent to 75,203 operating hours from 93,669 
operating hours for the first nine months of 2012.

Similar to Canada and consistent with the second quarter of 2013, United 
States operating and financial results were weakened by reduced demand for 
United States oilfield services and the resultant decrease in revenue rates 
and margins in the three and nine months ended September 30, 2013, when 
compared to the same periods of 2012.

During the nine months ended September 30, 2013 the Company added three new 
ADR(®) drilling rigs and one new well servicing rig to its United States 
fleet. In addition one drilling rig was transferred to the Company's 
international fleet, six inactive drilling rigs were decommissioned and two 
well servicing rigs were disposed.

A strengthening United States dollar against the Canadian dollar in the first 
nine months of 2013 had a positive impact on the translation of the Company's 
United States financial results to Canadian dollars. In the first nine 
months of 2013 the average United States dollar exchange rate increased by 
approximately two percent to 1.02 when compared to the same period of the 
prior year.

International Oilfield Services

The Company's international operations recorded revenue of $147.2 million in 
the third quarter of 2013, an 18 percent increase over the $124.5 million 
recorded in the corresponding period of the prior year. Similarly, 
international revenues for the nine months ended September 30, 2013, increased 
by 19 percent to $404.5 million from $338.6 million recorded for the nine 
months ended September 30, 2012. International operations contributed 27 
percent of the Company's revenue in the third quarter of 2013 (2012 - 24 
percent) and 26 percent of the Company's revenue in the first nine months of 
2013 (2012 - 20 percent). International operating days for the three months 
ended September 30, 2013 totaled 2,979 drilling days compared with 2,960 
drilling days for the three months ended September 30, 2012, an increase of 
one percent. For the nine months ended September 30, 2013, international 
operating days totaled 8,496 drilling days compared with 8,602 drilling days 
for the nine months ended September 30, 2012, a decrease of one percent.

The increase in the Company's international revenue during the three and nine 
months ended September 30, 2013 was mainly due to additions to the 
international fleet in 2012 and 2013 and stronger demand for oilfield services 
in certain international markets. Late in 2012 two new ADR's were added to 
the international fleet through the continuing new build program and one 
existing drilling rig was relocated to the international market from the 
United States. Similarly, during the current quarter an additional drilling 
rig was relocated to the international market from the Company's United States 
fleet. These additions to the international fleet resulted in increased 
average revenue rates per day for international operations for the three and 
nine months ended September 30, 2013 compared to the same periods of 2012. 
The increase to international drilling days for the three and nine months 
ended September 30, 2013 as a result of these additions was partially offset 
by the expected reduction due to the completion of the Company's drilling 
contracts in Mexico in 2012.

The Company's international operations also benefited from the strengthening 
of the United States dollar relative to the Canadian dollar when translating 
financial results into Canadian dollars for reporting purposes in the first 
nine months of 2013 compared to the first nine months of the prior year.

During the nine months ended September 30, 2013 the Company decommissioned one 
inactive drilling rig from its international fleet and added one drilling rig 
from its existing United States fleet as mentioned above.

Depreciation
                     Three months ended    Nine months ended September
                           September 30                             30

($               2013     2012        %      2013      2012   % Change
thousands)                       Change
                                                               

Depreciation   66,264   57,599       15   178,873   166,198          8

The Company uses the unit of production method of calculating depreciation for 
the majority of its property and equipment. Depreciation expense totaled 
$66.3 million for the third quarter of 2013 compared with $57.6 million for 
the third quarter of 2012, an increase of 15 percent. Depreciation expense 
for the first nine months of 2013 was $178.9 million, an increase of eight 
percent over the $166.2 million recorded for the first nine months of 2012. 
Increased depreciation reflects higher-valued equipment being added to the 
Company's global fleet throughout the latter half of 2012 and into the first 
nine months of 2013 in addition to the impacts of the second quarter 
acquisitions of assets from EGOC and Departure.

General and Administrative Expense
                       Three months ended            Nine months ended
                             September 30                 September 30

($ thousands)      2013     2012        %     2013     2012   % Change
                                   Change
                                                               

General and      21,282   19,107       11   64,399   59,199          9
administrative
                                                      

% of revenue        3.9      3.6               4.1      3.6

General and administrative expense increased 11 percent to $21.3 million (3.9 
percent of revenue) for the third quarter of 2013 compared with $19.1 million 
(3.6 percent of revenue) for the third quarter of 2012. For the nine months 
ended September 30, 2013, general and administrative expense totaled $64.4 
million (4.1 percent of revenue) compared with $59.2 million (3.6 percent of 
revenue) recorded for the nine months ended September 30, 2012, an increase of 
nine percent. The overall increase in general and administrative expense in 
the current periods reflects the negative translational impact of a stronger 
United States dollar on United States and international administrative 
expenses and increased costs to support growing international operations.

Share-Based Compensation Expense (Recovery)
                       Three months ended   Nine months ended September
                             September 30                            30

($ thousands)    2013     2012   % Change    2013      2012    % Change
                                                               

Share-based     4,268   3,659         17    6,094   (2,557)       (338)
compensation 

Share-based compensation expense (recovery) 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 three months ended September 30, 2013, share-based compensation 
expense (recovery) was an expense of $4.3 million compared with an expense of 
$3.7 million recorded in the third quarter of 2012. For the nine months ended 
September 30, 2013, share-based compensation was an expense of $6.1 million 
compared with a recovery of $2.6 million for the nine months ended September 
30, 2012. The increase in share-based compensation expense in the three 
and nine months ended September 30, 2013, compared to the same periods of 2012 
was a result of the change in the fair value of share-based compensation 
liability primarily resulting from movements in the price of the Company's 
common shares. The closing price of the Company's common shares was $17.64 
at September 30, 2013 ($15.10 at September 30, 2012), compared with $16.28 at 
June 30, 2013 ($14.00 at June 30, 2012), $17.32 at March 31, 2013 ($14.91 at 
March 31, 2012) and $15.37 at December 31, 2012 ($16.25 at December 31, 2011).

Interest Expense
                     Three months ended    Nine months ended September
                           September 30                             30

($               2013     2012        %       2013     2012   % Change
thousands)                       Change
                                                               

Interest        4,741    4,926      (4)     13,400   14,804        (9)
expense  

Interest        (302)    (145)      108    (1,013)    (365)        178
income 
                                                               
                4,439    4,781      (7)     12,387   14,439       (14)

Interest is incurred on the Company's $10.0 million Canadian-based revolving 
credit facility, the $400.0 million global revolving credit facility and the 
USD $300.0 million senior unsecured notes issued in February 2012. The 
amortization of deferred financing costs associated with the issuance of the 
Company's long-term debt was included in interest expense in both the three 
and nine months ended September 30, 2013 and 2012.

The decrease in interest expense in the nine months ended September 30, 2013, 
compared to the same period of the prior year was mainly due to interest 
incurred in the prior year on the USD $100.0 million remaining balance of the 
short-term acquisition loan which was repaid in full during the second quarter 
of 2012.

Foreign Exchange and Other ((Gain)/Loss)
                       Three months ended   Nine months ended September
                            September 30                             30

($                2013      2012        %      2013      2012         %
thousands)                         Change                        Change
                                                                 

Foreign
exchange and   (2,481)   (3,018)     (18)    15,431     5,793       166
other  

Included in this amount is the impact of the conversion of the Australian 
operations from Australian dollars to United States dollars. The change in 
foreign exchange (gain) loss in the three and nine months ended September 30, 
2013, compared to same periods of 2012 was mainly due to movements in the 
Australian currency. During the nine months ended September 30, 2013 the 
Australian dollar weakened by approximately 10 percent against the United 
States dollar causing a foreign currency loss on translation of the Company's 
USD denominated debt into Australian dollars. The Australian dollar 
strengthened somewhat against the United States dollar during the three months 
ended September 30, 2013 resulting in a foreign currency gain in the current 
quarter.

Income Taxes
                       Three months ended      Nine months September 30
                           September 30  

($               2013      2012         %      2013       2012        %
thousands)                        Change                         Change
                                                                  

Current        13,044     9,795        33    36,570     41,017     (11)
income tax  

Deferred        3,890    14,929      (74)    21,926     43,137     (49)
income tax  
                                                                  
               16,934    24,724      (32)    58,496     84,154     (30)
                33.4%     35.5%               36.5%      33.2%

The effective income tax rate for the three months ended September 30, 2013 
was 33.4 percent compared with 35.5 percent for the three months ended 
September 30, 2012. The effective income tax rate for the nine months ended 
September 30, 2013 was 36.5 percent compared with 33.2 percent for the nine 
months ended September 30, 2012. The increase in the effective income tax rate 
for the nine months ended September 30, 2013 was due to a higher proportion of 
taxable income earned in higher tax rate jurisdictions outside of Canada, with 
the additional impact of foreign exchange translation losses affecting the 
effective rate in the first half of 2013.

Financial Position

The following chart outlines significant changes in the consolidated statement 
of financial position from December 31, 2012 to September 30, 2013:

($ thousands)                    Change   Explanation 
                                           

Cash and cash equivalents        47,718   See consolidated statements
                                          of cash flows.
                                           

Accounts receivable               5,216   Increase was due to increased
                                          operating activity in the
                                          third quarter of 2013
                                          compared to the fourth
                                          quarter of 2012.
                                           

Inventories and other          (22,133)   Decrease was due to normal
                                          course use of consumables
                                          offset by additional
                                          inventory.
                                           

Property and equipment          163,766   Increase was due to additions
                                          to fixed assets from the
                                          current new build
                                          construction program; the
                                          acquisitions of the EGOC and
                                          Departure assets during the
                                          second quarter; and a
                                          strengthening of the USD
                                          quarter-end foreign exchange
                                          rate on the consolidation of
                                          the Company's foreign
                                          subsidiaries, offset by
                                          depreciation.
                                           

Accounts payable and              6,235   Increase was due to increased
accruals                                  operating activity in the
                                          third quarter of 2013
                                          compared to the fourth
                                          quarter of 2012.
                                           

Operating lines of credit        86,074   Increase was due to
                                          additional draws during the
                                          period on the global
                                          revolving credit facility and
                                          the impact of foreign
                                          exchange fluctuations on the
                                          consolidation of USD
                                          denominated debt held by the
                                          Company's foreign
                                          subsidiaries, offset by
                                          repayments during the period.
                                           

Income taxes payable           (16,752)   Decrease was due to tax
                                          instalments and refunds, net
                                          of the current income tax
                                          provision for the period.
                                           

Share-based compensation          3,682   Increase was due to the
                                          increase in the price of the
                                          Company's common shares as at
                                          September 30, 2013 compared
                                          with December 31, 2012.
                                           

Long-term debt                   10,262   Increase was due to foreign
                                          exchange fluctuations on the
                                          USD denominated long-term
                                          debt.
                                           

Deferred income taxes            22,422   Increase was primarily due to
                                          tax depreciation of assets
                                          added during the first nine
                                          months of 2013.
                                           

Shareholders' equity             82,823   Increase was due to net
                                          income for the period and the
                                          impact of foreign exchange
                                          rate fluctuations on net
                                          assets of foreign
                                          subsidiaries, offset by the
                                          amount of dividends declared
                                          in the period.

Funds from Operations and Working Capital
               Three months ended September    Nine months ended September
                                         30                             30

($                 2013       2012        %       2013       2012        %
thousands)                           Change                         Change
                                                                     

Funds from      105,923    121,229     (13)    334,402    389,799     (14)
operations  

Funds from
operations        $0.69      $0.80     (14)      $2.19      $2.55     (14)
per share

Working
capital                     13,861    (348)                13,861    (348)
(deficit)      (34,355)                       (34,355)
(1)

(1) Comparative figure as of December 31, 2012.

During the three months ended September 30, 2013, the Company generated funds 
from operations of $105.9 million ($0.69 per common share) compared with funds 
from operations of $121.2 million ($0.80 per common share) for the three 
months ended September 30, 2012, a decrease of 13 percent. For the nine months 
ended September 30, 2013, the Company generated funds from operations of 
$334.4 million ($2.19 per common share), a decrease of 14 percent from funds 
from operations of $389.8 million ($2.55 per common share) generated in the 
first nine months ending of 2012. Reduced operating activity in North America 
was the main reason for the decrease in funds from operations for the three 
and nine months ended September 30, 2013 compared to the same periods in 2012.

At September 30, 2013, the Company had a working capital deficit of $34.4 
million, compared to positive working capital of $13.9 million at December 31, 
2012. The second quarter acquisitions of the assets of EGOC and Departure 
utilized the Company's working capital resources and this, in addition to 
funding of the Company's current new build program, resulted in a working 
capital deficit at September 30, 2013. The Company expects funds generated 
by operations, combined with current and future credit facilities, to fully 
support current operating and capital requirements. Existing revolving 
credit facilities provide for total borrowing of $410.0 million, of which 
$77.3 million was available at September 30, 2013.

Investing Activities
                Three months ended September   Nine months ended September 30
                                          30

($ thousands)       2013       2012        %        2013        2012        %
                                      Change                           Change
                                                                        

Acquisitions           -          -        -    (76,408)           -        -

Purchase of                                                         
property and    (88,951)   (69,751)       28   (235,313)   (226,360)        4
equipment 

Net change in
non-cash           1,647     21,801     (92)     (2,842)       8,352    (134)
working
capital
                                                                        

Cash used in                                                        
investing       (87,304)   (47,950)       82   (314,563)   (218,008)       44
activities 

Purchases of property and equipment during the third quarter of 2013 totaled 
$89.0 million (2012 - $69.8 million). Purchases of property and equipment 
during the first nine months of 2013 totaled $235.3 million (2012 - $226.4 
million). The purchase of property and equipment for the three and nine 
months ended September 30, 2013 relate predominantly to expenditures made 
pursuant to the Company's ongoing new build program.

During the second quarter of 2013 the Company acquired the rental assets of 
EGOC and the directional drilling assets of Departure. These acquisitions 
increased the Company's presence in the rental and directional drilling 
markets in Western Canada.

Financing Activities
               Three months ended September     Nine months ended September
                                         30                              30

($                 2013       2012        %       2013        2012        %
thousands)                           Change                          Change
                                                                      

Net
(decrease)
increase in       (142)   (40,493)    (100)     78,057      29,188      167
operating
lines of
credit 

Issue of
senior                -          -        -          -     300,000    (100)
unsecured
notes  

Repayment of          -          -        -          -                (100)
term loan                                                (403,279)

Issue of
capital             508          -        -      2,002          43      n/m
stock 

Purchase of
shares held       (559)      (524)        7    (5,917)     (8,044)     (26)
in trust 

Deferred
financing             -          -        -          -     (2,156)    (100)
costs 

Dividends                                 5               (48,262)        5
               (16,868)   (16,087)            (50,595)

Net change
in non-cash       2,995       (65)      n/m      2,876         930      209
working
capital 
                                                                      

Cash (used
in) provided   (14,066)                (75)     26,423                     
by financing              (57,169)                       (131,580)    (120)
activities  

n/m - Calculation not meaningful.

The Company's available operating lines of credit consist of a $400.0 million 
global revolving credit facility (the "Global Facility") and a $10.0 million 
Canadian based revolving credit facility (the "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 United States dollars.

Net draws of the operating lines of credit for the nine months ended September 
30, 2013 were mainly used to fund the ongoing new build program, which added 
five new ADR(®) drilling rigs to the Company's fleet in the first nine months 
of 2013 (two in Canada and three in the United States) as well as six new well 
servicing rigs (five in Canada and one in the United States). As of 
September 30, 2013, 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, with the proceeds from the issuance being 
used to repay a portion of the USD $400.0 million unsecured term loan with the 
remaining balance repaid in full in the second quarter of 2012.

On June 21, 2013 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 4,599,367 common shares for cancellation. The Bid 
commenced on June 25, 2013, and will terminate on June 24, 2014, or such 
earlier time as the Bid is completed or terminated at the option of the 
Company. As at September 30, 2013, no common shares have been purchased and 
cancelled pursuant to the Bid.

The Company previously had a Bid that commenced on June 18, 2012, and 
terminated on June 17, 2013, under which no common shares were purchased and 
cancelled.

During the nine months ended September 30, 2013 the Company received $2.0 
million from the issuance of common shares in connection with the employee 
stock option program compared to a nominal amount received during the nine 
months ended September 30, 2012.

The Board of Directors of the Company has declared a fourth quarter dividend 
of $0.1175 per common share, a 6.8 percent increase over the previous 
quarterly dividend rate of $0.1100 per common share. The Company has 
increased its dividend rate every year since it first started to pay a 
dividend in 1995. Dividends have been increased at a compound annual growth 
rate of 17 percent. The fourth quarter dividend is payable January 6, 2014, 
to all Common Shareholders of record as of December 20, 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 nine months ended September 30, 2013, the Company commissioned 
three new ADR(®) drilling rigs and one new well servicing rig in the United 
States; and two new ADR(®) drilling rigs and five new well servicing rigs in 
Canada.

The remaining new build estimated delivery schedule, by geographic area, is as 
follows:
                                           Estimated Delivery Date 
                    Q4-2013   Q1-2014   Q2-2014   Q3-2014   Q4-2014   Total

ADRs
                                                                       

  Canada                  -         -         1         1         -       2

  United                  -         1         -         -         -       1
  States   

  International           -         2         -         -         -       2
                                                                     

Total                     -         3         1         1         -       5
    Well Servicing
                                                                       

  Canada                  1         -         -         1         -       2

  United States           -         -         -         -         -       -
                                                                     

Total                     1         -         -         1         -       2

In addition to the above new builds, the Company is refurbishing and upgrading 
four drilling rigs into ADR(®)-style drilling rigs. One drilling rig is 
being refurbished for the Canadian market, with an estimated delivery date in 
the first quarter of 2014. The three remaining drilling rigs are being 
refurbished for the international market, one of the drilling rigs is 
scheduled for delivery in the fourth quarter of 2013, one drilling rig is 
scheduled for delivery in the first quarter of 2014 and the other drilling rig 
is scheduled for delivery in the second quarter of 2014. All of the major 
refurbishments are supported by contracts.

Outlook

Global economic indicators generally continue to improve, albeit at rates less 
than previously forecast. Muted economic growth, particularly in the United 
States, has resulted in reduced levels of demand for oilfield services in 
spite of general improvements in crude oil and natural gas commodity prices. 
The WTI crude oil price of USD$102.33 per barrel on September 30, 2013 was up 
11 percent compared to USD$92.19 per barrel on September 30, 2012. 
Similarly, the Henry Hub natural gas price improved 14 percent to USD$3.49 per 
mmbtu at the end of the third quarter of 2013 compared to USD$3.06 per mmbtu 
at the end of the third quarter of 2012. Canadian natural gas prices did not 
fare as well, with the AECO natural gas price closing at $1.92 per mcf at 
September 30, 2013 down 11 percent compared to $2.16 per mcf at September 30, 
2012. The overall improved levels of commodity prices, particularly in the 
United States, have not resulted in increased capital expenditures on oilfield 
services as measured by the active drilling and well servicing rig levels in 
2013 compared to 2012.

Canadian oilfield services industry activity levels as measured by total 
drilling operating days for the third quarter of 2013 were essentially flat 
with the number of drilling operating days recorded by the industry in the 
third quarter of the prior year. Earlier expectations were that third quarter 
oilfield services activity levels would rebound significantly from the second 
quarter seasonal lows due to strong crude oil prices throughout much of the 
third quarter. While crude oil drilling resumed later in the quarter as 
field conditions improved, natural gas prices in Canada continued to languish, 
providing little incentive for the exploration and production companies to 
increase natural gas related oilfield services expenditures. However, there 
are a number of potential Canadian natural gas liquids projects that continue 
to generate interest in the northwest part of the Western Canadian Sedimentary 
Basin. Additionally, the Montney, Horn River and Duvernay areas are expected 
to benefit from any potential LNG export projects touted for Canada's 
future. The Company currently has 11 drilling rigs operating in these key 
areas and all of the drilling rigs currently under construction or being 
refurbished for Canada are contracted for these areas. With respect to the 
next two quarters, the current expectations are that the upcoming winter 
drilling season will mirror that of last year.

The Company's United States operations continue to improve after a slow start 
to 2013. Some areas have fared better than others owing to strong prices and 
demand for crude oil and natural gas liquids. As mentioned above, current 
activity levels as reflected in the industry drilling rig count continue to 
underwhelm as exploration and production companies have not generally 
increased oilfield services demand in an environment of improving commodity 
prices. The hope is that there will be increased levels of demand in the 
near term as operators become more comfortable with general economic 
conditions and increase their 2014 budgets after realizing stronger levels of 
cash flow in 2013. The Company is currently constructing one new drilling rig 
for the United States and expects activity and financial results to improve 
slightly over the next couple of quarters.

The third quarter activity levels for the Company's international operations 
continued with the gains of the first half of 2013. International crude oil 
and natural gas prices remain attractive in many of the areas serviced by the 
Company and, accordingly, the demand for oilfield services has remained 
steady. The active international drilling rig count was 1,284 drilling rigs 
at September 30, 2013, up two percent compared to 1,254 active drilling rigs 
at September 30, 2012. The Company's established geographic diversification 
is important in international operations as there is still significant 
geopolitical risk in many of the international areas. The Company is 
currently building two drilling rigs and refurbishing three drilling rigs for 
the international market under term contracts. Accordingly, subject to any 
unexpected negative events in any of the international areas serviced by the 
Company, international operations are expected to continue to show modest 
growth in the next two quarters.

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, the Company's 
defense of lawsuits and the ability of oil and natural gas companies to pay 
accounts receivable balances and 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 third quarter 2013 
results at 2:00 p.m. MST (4:00 p.m. EST) on Monday, November 11, 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 November 18, 
2013 by dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside 
Toronto) and entering the reservation number 20605551. 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                                    September 30       December 31
                                                           
                                                 2013              2012
                                                           

(Unaudited, in thousands of Canadian                                   
dollars)
                                                           

Assets                                                                 

Current Assets                                                         

  Cash and cash equivalents            $       80,926     $      33,208

  Accounts receivable                         428,376           423,160

  Income taxes receivable                       5,555                 -

  Inventories and other                        54,212            76,345
                                                           
                                              569,069           532,713
                                                           

Property and equipment                      2,697,009         2,533,243

Note receivable                                 5,215             5,021
                                                           
                                       $    3,271,293     $   3,070,977
                                                           

Liabilities                                                            

Current Liabilities                                                    

  Accounts payable and accruals        $      250,847     $     244,612

  Operating lines of credit                   318,064           231,990

  Income taxes payable                              -            11,197

  Dividends payable                            16,868            16,853

  Share-based compensation                     17,645            14,200
                                                           
                                              603,424           518,852
                                                           

Long-term debt                                306,851           296,589

Share-based compensation                        4,356             4,119

Deferred income taxes                         415,881           393,459
                                                           
                                            1,330,512         1,213,019
                                                           

Shareholders' Equity                                                   

  Share capital                               168,735           164,670

  Contributed surplus                           3,199             4,811

  Foreign currency translation reserve         12,988          (16,007)

  Retained earnings                         1,755,859         1,704,484
                                                           
                                            1,940,781         1,857,958
                                                           
                                       $    3,271,293     $   3,070,977
                                                             



Ensign Energy
Services Inc.

Consolidated
Statements of Income

For the three and                                              
nine months ended


(Unaudited, in
thousands of Canadian
dollars, except per
share data) 


                         Three months ended           Nine months ended
                      September   September     September     September
                             30          30            30            30
                           2013        2012          2013          2012
                                                             

Revenue               $ 542,951   $ 525,666   $ 1,561,967   $ 1,667,215



Expenses                
Oilfield              398,546     373,982     1,124,317     1,170,956
  services      
Depreciation           66,264      57,599       178,873       166,198 
General and            21,282      19,107        64,399        59,199
  administrative      
Share-based             4,268       3,659         6,094       (2,557)
  compensation      
Foreign exchange      (2,481)     (3,018)        15,431         5,793
  and other    


                                                             
                        487,879     451,329     1,389,114     1,399,589
                                                             

Income before            55,072      74,337       172,853       267,626
interest and income                                        
taxes   
                                                             

Interest income             302         145         1,013           365

Interest expense        (4,741)     (4,926)      (13,400)      (14,804)
                                                             

Income before income     50,633      69,556       160,466       253,187
taxes   
                       

Income taxes                   

  Current tax            13,044       9,795        36,570        41,017

  Deferred tax            3,890      14,929        21,926        43,137
                                                             
                         16,934      24,724        58,496        84,154
                                                             

Net income            $  33,699   $  44,832   $   101,970   $   169,033
                                                               
                       

Net income per share           
                                                               

  Basic               $    0.22   $    0.29   $      0.67   $      1.11

  Diluted             $    0.22   $    0.29   $      0.66   $      1.11
                                                               



Ensign Energy
Services Inc.

Consolidated
Statements of Cash
Flows

For the three and                                               
nine months ended


(Unaudited, in
thousands of
Canadian dollars) 


                          Three months ended           Nine months ended
                      September    September     September     September
                             30           30            30            30
                           2013         2012          2013          2012


Cash provided by
(used in) 
Operating
activities 
Net income          $    33,699   $   44,832   $   101,970   $   169,033 
Items not affecting
cash 
Depreciation           66,264       57,599       178,873       166,198 
Share-based             6,020        6,499        10,080         3,558
  compensation, net                                         
  of cash paid    
Unrealized            (4,032)      (2,705)        21,309         6,370
  foreign exchange                                          
  and other    
Accretion on               82           75           244         1,503
  long-term                                                 
  debt     
Deferred income         3,890       14,929        21,926        43,137
  tax     
Net change in          (40,485)     (22,641)         3,808         2,602
non-cash working                                            
capital    


                                                                
                         65,438       98,588       338,210       392,401


Investing
activities 
Purchase of                         (69,751)     (235,313)     (226,360)
property and           (88,951)                             
equipment   
Acquisitions                  -            -      (76,408)             - 
Net change in             1,647       21,801       (2,842)         8,352
non-cash working                                            
capital    


                                                                
                       (87,304)     (47,950)     (314,563)     (218,008)


Financing
activities 
Net (decrease)            (142)     (40,493)        78,057        29,188
increase in                                                 
operating lines of
credit   
Issue of senior               -            -             -       300,000
unsecured                                                   
notes      
Repayment of term             -            -             -     (403,279)
loan      
Issue of capital            508            -         2,002            43
stock      
Purchase of shares        (559)        (524)       (5,917)       (8,044)
held in trust      
Deferred financing            -            -             -       (2,156)
costs     
Dividends              (16,868)     (16,087)      (50,595)      (48,262) 
Net change in             2,995         (65)         2,876           930
non-cash working                                            
capital   


                                                                
                       (14,066)                     26,423     (131,580)
                                    (57,169)
                                                                

Net (decrease)         (35,932)      (6,531)        50,070        42,813
increase in cash                                            
and cash
equivalents
                                                                

Effects of foreign        4,119        2,093       (2,352)         3,713
exchange on cash                                            
and cash
equivalents     


Cash and cash
equivalents 
                                                             
Beginning of            112,739       53,577        33,208         2,613
period    


                                                                

End of period       $    80,926   $   49,139   $    80,926   $    49,139
                                                                


Supplemental
information 
                                                             
Interest paid     $     1,669   $    1,827   $     9,088   $     9,322 
                                                           
Income taxes      $    18,599   $    9,949   $    53,322   $    36,914
  paid    
                                                            
 

SOURCE  Ensign Energy Services Inc. 
Glenn Dagenais, Executive Vice President Finance and Chief Financial  Officer, 
(403) 262-1361. 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2013/11/c6096.html 
CO: Ensign Energy Services Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- Nov/11/2013 10:00 GMT
 
 
Press spacebar to pause and continue. Press esc to stop.