Ensign Energy Services Inc. Reports 2014 First Quarter Results

CALGARY, May 12, 2014 /CNW/ - 
Overview 
Revenue for Ensign Energy Services Inc. ("Ensign" or the "Company") for the 
first quarter of 2014 was $624.2 million, an increase of seven percent from 
first quarter 2013 revenue of $581.1 million.  Operating earnings, expressed 
as Adjusted EBITDA (defined as earnings before interest, income taxes, 
depreciation, share-based compensation expense (recovery) and foreign exchange 
and other), totaled $160.1 million ($1.05 per common share) in the first 
quarter of 2014, three percent lower than adjusted EBITDA of $164.4 million 
($1.08 per common share) in the first three months of 2013.  Net income for 
the first quarter of 2014 decreased seven percent to $60.4 million ($0.40 per 
common share), compared to net income of $65.0 million ($0.43 per common 
share) for the first quarter of 2013.  Adjusted net income (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), for the first 
quarter of 2014 was $54.0 million ($0.35 per common share), 19 percent lower 
than adjusted net income of $66.6 million for the first quarter of 2013 ($0.44 
per common share).  Funds from operations decreased two percent to $137.0 
million ($0.90 per common share) in the first three months of 2014 from $139.8 
million ($0.92 per common share) in the first three months of the prior year.  
Operating days in Canadian operations were lower in the first quarter of 2014 
when compared to the first quarter of 2013, while results from the United 
States and the eastern hemisphere operations were higher due to increased 
demand and upgrades in recent years to the Company's equipment fleets in these 
areas.  A strengthening of the United States dollar against the Canadian 
dollar positively impacted United States and international financial results 
on translation to Canadian dollars.  The average United States exchange rate 
for the first three months of 2014 increased nine percent, compared to the 
first three months of 2013. 
Gross margin decreased to $182.2 million (29.2 percent of revenue) for the 
first quarter of 2014 compared with gross margin of $183.9 million (31.7 
percent of revenue) for the first quarter of 2013.  The decrease in gross 
margin in the first quarter of 2014 compared to the first quarter of 2013 was 
primarily attributed to weaker Canadian activity levels, higher costs related 
to ongoing maintenance and start-up costs of international rigs preparing for 
work later in 2014. 
Working capital at March 31, 2014 was a deficit of $81.0 million, compared to 
a deficit of $71.1 million at December 31, 2013.  Available borrowings at 
March 31, 2014 were $36.9 million compared to $70.7 million at December 31, 
2013 as additional draws were used to support first quarter activity levels; 
the first quarter dividend payment; and the ongoing new build and major 
retrofit program that delivered one new ADR(®) drilling rig and completed two 
major retrofits to existing drilling rigs during the first three months of 
2014. 


    FINANCIAL AND OPERATING                   
    HIGHLIGHTS                                                             
    ($ thousands, except per share data and                       
    operating information)                                                 
                                                Three months ended March 31
                                                  2014      2013   % change
    Revenue                                    624,194   581,142          7
    Adjusted EBITDA 1                          160,069   164,382        (3)
    Adjusted EBITDA per share 1                                            
      Basic                                      $1.05     $1.08        (3)
      Diluted                                    $1.04     $1.07        (3)
    Adjusted net income 2                       53,958    66,617       (19)
    Adjusted net income per share 2                                        
      Basic                                      $0.35     $0.44       (20)
      Diluted                                    $0.35     $0.43       (19)
    Net income                                  60,411    64,987        (7)
    Net income per share                                                   
      Basic                                      $0.40     $0.43        (7)
      Diluted                                    $0.39     $0.42        (7)
    Funds from operations 3                    137,011   139,802        (2)
    Funds from operations per share           
    3                                                                      
      Basic                                      $0.90     $0.92        (2)
      Diluted                                    $0.89     $0.91        (2)
    Weighted average shares - basic           
    (000s)                                     152,864   152,708          -
    Weighted average shares -                 
    diluted (000s)                             153,654   153,391          -
    Drilling                                                               
      Number of marketed rigs                                              
        Canada 4                                   104       120       (13)
        United States                              111       116        (4)
        International 5                             55        53          4
        Rigs in transit 6                            2         -          -
      Operating days                                                       
        Canada 4                                 4,792     5,329       (10)
        United States                            5,673     5,504          3
        International 5                          3,152     2,712         16
    Well Servicing                                                         
      Number of marketed rigs                                              
        Canada                                      91        91          -
        United States                               45        46        (2)
      Operating hours                                                      
        Canada                                  34,680    35,137        (1)
        United States                           28,861    22,777         27
       1Adjusted EBITDA is defined as "income before interest expense, income
    taxes, depreciation, share-based compensation expense (recovery) 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.
    4Excludes coring rigs.
    5 Includes workover rigs.
    6Drilling rigs being retrofitted and transferred to a new geographic
    market.

First Quarter Highlights
        --  Revenue for the first three months of 2014 was $624.2 million,
            up 16 percent from the fourth quarter of 2013 and seven percent
            from the first quarter of 2013.
        --  One new ADR® drilling rig was added to the Company's United
            States drilling fleet in the first quarter of 2014.  The new
            build and major retrofit program also completed two major
            retrofits to existing drilling rigs: one transferred from the
            United States to Canada and one transferred from Canada to
            Australia.
        --  First quarter revenue by segment:
      o Canada - 36 percent;
      o United States - 40 percent; and
      o International - 24 percent.
        --  Adjusted EBITDA for the first quarter of 2014 was $160.1
            million, a three percent decrease from adjusted EBITDA of
            $164.4 million for the first quarter of 2013.  Funds from
            operations for the first quarter of 2014 decreased two percent
            to $137.0 million from $139.8 million in the first quarter of
            the prior year.
        --  Canadian drilling recorded 4,792 operating days in the first
            three months of 2014, a 10 percent decrease from 5,329
            operating days in the first three months of 2013.  Canadian
            well servicing hours decreased by one percent in the first
            quarter of 2014 compared to the first quarter of 2013.
        --  United States drilling recorded 5,673 operating days in the
            first quarter of 2014, a three percent increase from 5,504
            operating days in the first quarter of 2013.  United States
            well servicing hours increased by 27 percent in the first three
            months of 2014 compared to the first three months of 2013.
        --  International drilling recorded 3,152 operating days in the
            first quarter of 2014, a 16 percent increase from 2,712
            operating days recorded in the first quarter of 2013.
        --  The Company declared a quarterly cash dividend on common shares
            of $0.1175 per common share payable July 4, 2014.
        --  The Company's construction in progress currently includes 11
            new ADR® drilling rigs, one new well servicing rig and eight
            major retrofits to existing drilling rigs.  In addition, due to
            increases in customer demand for the Company's ADR® drilling
            rigs, the Company's Board of Directors has approved a
            pre-committed new build program that will deliver 1 ADR®
            drilling rig a month in the first and second quarters of 2015
            and 1.5 ADR® drilling rigs per month in the third and fourth
            quarters of 2015.

Revenue and Oilfield Services Expense
                                                Three months ended March 31
    ($ thousands)                      2014      2013     Change   % change
    Revenue                                                                
      Canada                        226,468   255,988   (29,520)       (12)
      United States                 248,363   200,470     47,893         24
      International                 149,363   124,684     24,679         20
                                                                           
                                    624,194   581,142     43,052          7
    Oilfield services expense       442,020   397,201     44,819         11
    Gross margin                    182,174   183,941    (1,767)        (1)
    Gross margin percentage        
    (%)                                29.2      31.7                      

Revenue recorded in the first quarter of 2014 totaled $624.2 million, an 
increase of seven percent from the first quarter of 2013 and was the second 
highest quarterly revenue in the Company's history.  As a percentage of 
revenue, gross margin for the first quarter of 2014 decreased to 29.2 percent 
from 31.7 percent for the first quarter of 2013.

The Company continued to upgrade and grow its equipment fleet throughout 2013 
and the first quarter of 2014 which led to stronger revenue in the current 
year first quarter when compared to the first quarter of 2013.  During the 
first three months of 2014 the Company added one new build ADR(®) to its 
United States drilling fleet and completed two major retrofits to existing 
drilling rigs; one in Canada and one in Australia.  In addition, the United 
States dollar strengthened by nine percent in the first three months of 2014 
compared to the first three months of 2013 and contributed to the higher 
revenue levels.  Offsetting these positive impacts to consolidated revenue was 
uneven demand levels in certain areas in Canada and continuing challenges in 
Venezuela during the first quarter of 2014, as discussed further below under 
"International Oilfield Services".

Canadian Oilfield Services

Revenue decreased 12 percent to $226.5 million for the three months ended 
March 31, 2014, from $256.0 million for the three months ended March 31, 2013, 
but was 43 percent higher than the immediately preceding quarter as the 
seasonal winter drilling season peaked in the first quarter.  Canadian revenue 
accounted for 36 percent of the Company's total revenue in the first quarter 
of 2014, compared with 44 percent in the first quarter of 2013. Demand for the 
Company's Canadian oilfield services was mixed as some areas experienced 
higher activity levels in the current quarter compared with the prior year 
first quarter while others, particularly the oil sands coring division, saw 
decreases in the current quarter when compared to the first quarter of 2013.  
Through the current new build and major retrofit program the Company is 
continuing to transition its Canadian drilling fleet from shallow drilling 
rigs to deeper drilling rigs as the industry shifts toward deeper, longer 
reach drilling.  The expansion of the Company's Canadian directional drilling 
business and oilfield rental business through the 2013 second quarter 
acquisitions of substantially all of the assets of Departure Energy Services 
Inc. ("Departure") and EGOC Enviro Group of Companies Ltd. ("EGOC") helped to 
partially offset the year-over-year reduction in Canadian drilling revenue.

The Company recorded 4,792 drilling days in the first quarter of 2014, a 10 
percent decrease from the 5,329 drilling days recorded in the first quarter of 
2013, but up 39 percent over the immediately preceding quarter.  Canadian well 
servicing hours were mainly consistent with the prior year, decreasing only 
one percent in the first quarter of 2014 to 34,680 operating hours, compared 
with 35,137 operating hours in the corresponding period of 2013.

During the three months ended March 31, 2014, the Company added one 
retrofitted drilling rig transferred from the United States fleet to the 
Canadian fleet; decommissioned 13 inactive drilling rigs and four inactive 
well servicing rigs; and transferred two drilling rigs to the oil sands coring 
fleet and one retrofitted drilling rig to Australia.  In addition two drilling 
rigs have been removed from the Canadian fleet and are undergoing major 
retrofit for the Australian market.

United States Oilfield Services

The Company's United States operations recorded revenue of $248.4 million in 
the first quarter of 2014, a 24 percent increase from the $200.5 million 
recorded in the corresponding period of the prior year.  The Company's United 
States operations accounted for 40 percent of the Company's revenue in the 
first quarter of 2014, compared to 35 percent in the first quarter of 2013.  
Drilling rig operating days increased by three percent to 5,673 drilling days 
in the first quarter of 2014 from 5,504 drilling days in the first quarter of 
2013.  Well servicing activity increased by 27 percent in the first quarter of 
2014 to 28,861 operating hours from 22,777 operating hours in the first 
quarter of 2013.

Activity levels and revenue rates in United States oilfield services began to 
pick up late in 2013 after a slowdown earlier in the year.  This combined with 
the positive translational impact of a stronger United States dollar and 
upgrades to the United States fleet throughout 2013 and the first quarter of 
2014 resulted in higher revenue in the current quarter compared to the first 
quarter of the prior year.

In 2013, the Company added three new build ADRs and one new well servicing rig 
to the United States fleet.  An additional ADR(®) was added in the first 
quarter of 2014.  The Company also decommissioned six inactive drilling rigs 
and transferred one retrofitted drilling rig to Canada in the first quarter of 
2014.

Current quarter results from the Company's United States operations were 
positively impacted on translation to Canadian dollars by a strengthening 
United States dollar against the Canadian dollar.  In the first three months 
of 2014 the United States dollar increased by nine percent when compared to 
the same period of the prior year.

International Oilfield Services

The Company's international operations recorded revenue of $149.4 million in 
the first quarter of 2014, a 20 percent increase from $124.7 million recorded 
in the corresponding period of the prior year.  International operations 
contributed 24 percent of the Company's revenue in the first quarter of 2014, 
compared with 21 percent in the same period of 2013.  International operating 
days for the three months ended March 31, 2014 totaled 3,152 drilling days, 
compared with 2,712 drilling days in 2013, an increase of 16 percent.

Changes to the Company's international fleet in the latter half of 2013 and in 
the first quarter of 2014 helped to drive international revenue up when 
compared to the first quarter of the prior year.  Late in 2013, the Company 
expanded its operations into Kurdistan with one drilling rig being deployed 
there, resumed operations with an additional drilling rig in Libya and 
transferred a retrofitted drilling rig to Australia from the Company's United 
States fleet.  In the first quarter of 2014 an additional retrofitted drilling 
rig was transferred from the Canadian fleet to Australia.  Two additional 
retrofitted drilling rigs are currently in transit from Canada to Australia 
and are expected to begin working in the second quarter of 2014.

Similar to the Company's United States operations, international operations 
were positively impacted from the strengthening United States dollar versus 
the Canadian dollar on translation into Canadian dollars for reporting 
purposes in the first quarter of 2014 compared to the first quarter of the 
prior year.

As part of the Company's international operations, it provides oilfield 
services in Venezuela pursuant to long-term contracts. Many of these existing 
contracts are due to expire in 2014 and as a result of the current political 
unrest in Venezuela, there is and there can be no assurance that the Company 
will be able to renew all of such contracts on terms acceptable to the Company 
or at all. In addition, as at March 31, 2014, the Company had net accounts 
receivable of approximately $37.4 million for work performed in Venezuela and, 
due to the continuing political unrest in Venezuela, there is and there can be 
no assurance that the Company will be successful in collecting all or any of 
such outstanding balance.

Depreciation
                                Three months ended March 31
    ($ thousands)         2014     2013   Change   % change
    Depreciation        73,309   57,190   16,119         28

Depreciation expense increased 28 percent to $73.3 million for the three 
months ended March 31, 2014, compared with $57.2 million for the three months 
ended March 31, 2013.  Higher depreciation expense in the current quarter when 
compared to the first quarter of 2013 was attributable to the utilization of 
higher-valued equipment during the current quarter, the additions to the 
Company's global fleet throughout the latter half of 2013 and in the first 
quarter of 2014, the impact of the 2013 second quarter acquisitions of assets 
from EGOC and Departure and the negative translational impact of a stronger 
United States dollar on United States and international depreciation in the 
current quarter.

General and Administrative Expense
                                             Three months ended March 31
    ($ thousands)                      2014     2013   Change   % change
    General and administrative       22,105   19,559    2,546         13
    % of revenue                        3.5      3.4                    

General and administrative expense was $22.1 million (3.5 percent of revenue) 
for the first quarter of 2014 increasing 13 percent, compared with $19.6 
million (3.4 percent of revenue) for the first quarter of 2013.  The increase 
in general and administrative expense reflects the negative translational 
impact of a stronger United States dollar on United States and international 
administrative expenses in the current quarter and increased costs to support 
growing international operations.

Share-Based Compensation (Recovery) Expense
                                          Three months ended March 31
    ($ thousands)                   2014    2013    Change   % change
    Share-based compensation       (913)   6,396   (7,309)      (114)

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

For the three months ended March 31, 2014, share-based compensation (recovery) 
expense was a recovery of $0.9 million, compared with an expense of $6.4 
million recorded in the first quarter of 2013.  The decrease in the 
share-based compensation expense in the first quarter of 2014 was a result of 
the change in the fair value of the share-based compensation liability 
primarily resulting from a decrease in the price of the Company's common 
shares during the first three months of 2014.  The closing price of the 
Company's common shares was $16.34 at March 31, 2014 ($17.32 at March 31, 
2013), compared with $16.73 at December 31, 2013 ($15.37 at December 31, 2012).

Interest Expense
                                   Three months ended March 31
    ($ thousands)             2014    2013   Change   % change
    Interest expense         5,426   4,121    1,305         32
    Interest income          (336)   (168)    (168)        100
                                                              
                             5,090   3,953    1,137         29

Interest is incurred on the Company's $10.0 million Canadian-based revolving 
credit facility (the "Canadian Facility"), the $400.0 million global revolving 
credit facility (the "Global Facility") and the United States dollar $300.0 
million senior unsecured notes (the "Notes") issued in February 2012.  The 
amortization of deferred financing costs associated with the issuance of the 
Notes is included in interest expense in both quarters.

Interest expense in the first quarter of 2014 increased over interest expense 
in the first quarter of 2013 due to increased draws on the Global Facility and 
the negative translational impact of a stronger United States dollar on United 
States and international interest expense in the current quarter.

Foreign Exchange and Other
                                                Three months ended March 31
    ($ thousands)                       2014      2013    Change   % change
    Foreign exchange and other       (9,015)   (3,888)   (5,127)        132

Included in this amount are foreign currency movements in the Company's 
subsidiaries that have functional currencies other than Canadian dollars.  
During the three months ended March 31, 2014 the Australian dollar 
strengthened by approximately four percent against the United States dollar 
causing a foreign currency gain on translation of the Company's United States 
dollar denominated debt into Australian dollars.  In general the United States 
dollar was stronger in the first three months of 2014, compared to the first 
three months of 2013 when compared to other world currencies.

Income Taxes
                                               Three months ended March 31
    ($ thousands)                       2014     2013    Change   % change
    Current income tax                19,476   24,205   (4,729)       (20)
    Deferred income tax               11,711   11,539       172          1
                                                                          
                                      31,187   35,744   (4,557)       (13)
    Effective income tax rate                                    
    (%)                                   34     35.5                     

The effective income tax rate for the three months ended March 31, 2014 was 
34.0 percent, compared with 35.5 percent for the three months ended March 31, 
2013.  The decrease in the effective income tax rate in the current quarter 
compared to the first quarter of the prior year was due to the tax impact of 
the currency devaluation in Venezuela that occurred in February 2013 being 
included in the prior year quarter.

Financial Position

The following chart outlines significant changes in the consolidated statement 
of financial position from December 31, 2013 to March 31, 2014:
    ($ thousands)                   Change     Explanation
                                                
    Cash and cash equivalents     (38,365)     See consolidated statements
                                               of cash flows.
                                                
    Accounts receivable            116,987     Increase was due to
                                               increased operating activity
                                               in the first quarter of 2014
                                               when compared to the fourth
                                               quarter of 2013. It also
                                               includes the impact of
                                               foreign exchange
                                               fluctuations on the
                                               consolidation of the
                                               Company's foreign
                                               subsidiaries.
                                                
    Inventories and other          (9,282)     Decrease was due to normal
                                               course use of consumables
                                               and amortization of prepaid
                                               expenses, offset by
                                               additional  inventory.
                                                
    Property and equipment         129,729     Increase was due to
                                               additions from the current
                                               new build and major retrofit
                                               construction program and the
                                               impact of an increase in the
                                               quarter-end foreign exchange
                                               rate on the consolidation of
                                               the Company's foreign
                                               subsidiaries, offset by
                                               depreciation. 
                                                
    Accounts payable and            38,593     Increase was due to
    accruals                                   increased operating activity
                                               in the first quarter of 2014
                                               when compared to the fourth
                                               quarter of 2013. It also
                                               includes the impact of
                                               foreign exchange
                                               fluctuations on the
                                               consolidation of the
                                               Company's foreign
                                               subsidiaries and changes in
                                               the timing of payments to
                                               external vendors during the
                                               period.
                                                
    Operating lines of credit       30,874     Increase was due to
                                               additional draws during the
                                               period on the Global
                                               Facility and the impact of
                                               foreign exchange
                                               fluctuations on the
                                               consolidation of the
                                               Company's foreign
                                               subsidiaries, offset by
                                               repayments during the
                                               period.
                                                
    Share-based compensation       (1,368)     Decrease was due to the
                                               decrease in the price of the
                                               Company's common shares as
                                               at March 31, 2014 compared
                                               with December 31, 2013.
                                                
    Income taxes payable            11,545     Increase was due to the
                                               current income tax provision
                                               for the period, offset by
                                               tax instalments made.
                                                
    Long-term debt                  12,533     Increase was due to foreign
                                               exchange fluctuations on the
                                               United States dollar
                                               denominated long-term debt.
                                                
    Deferred income taxes           12,757     Increase was primarily due
                                               to accelerated tax
                                               depreciation of assets added
                                               during the current quarter.
                                                
    Shareholders' equity            94,200     Increase was due to net
                                               income for the current
                                               quarter and the impact of
                                               foreign exchange rate
                                               fluctuations on net assets
                                               of foreign subsidiaries,
                                               offset by the amount of
                                               dividends declared in the
                                               first quarter.

Funds from Operations and Working Capital
                                              Three months ended March 31
    ($ thousands)                    2014       2013    Change   % change
    Funds from operations         137,011    139,802   (2,791)        (2)
    Funds from operations                                       
    per share                       $0.90      $0.92   $(0.02)        (2)
    Working capital                                             
    (deficit) 1                  (80,987)   (71,146)   (9,841)         14
    1 Comparative figure as of December 31, 2013.

During the three months ended March 31, 2014, the Company generated funds from 
operations of $137.0 million ($0.90 per common share), compared with funds 
from operations of $139.8 million ($0.92 per common share) for the three 
months ended March 31, 2013, a decrease of two percent.  This decrease was due 
to reduced operating and financial results for Canadian oilfield services and 
higher first quarter spending on continuing equipment maintenance that the 
Company generally expenses as incurred, offset by stronger results in the 
United States and the eastern hemisphere in the current quarter.

At March 31, 2014, the Company's working capital totaled a deficit of $81.0 
million, compared to a deficit of $71.1 million at December 31, 2013.  The 
decrease in working capital in the first three months of 2014 was mainly 
related to spending on the ongoing new build and major retrofits construction 
program that as at March 31, 2014 is anticipated to deliver an additional 26 
new build ADR(®) drilling rigs, one new well servicing rig and eight major 
retrofits of existing drilling rigs.  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 borrowings of $410.0 million, of which $36.9 
million was available at March 31, 2014.

Investing Activities
                                                Three months ended March 31
    ($ thousands)                     2014       2013     Change   % change
    Purchase of property                                          
    and equipment                (120,753)   (62,757)   (57,996)         92
    Net change in non-cash                                        
    working capital                  5,491        485      5,006      1,032
                                                                           
    Cash used in investing                                        
    activities                   (115,262)   (62,272)   (52,990)         85

Purchases of property and equipment during the first quarter of 2014 totaled 
$120.8 million (2013 - $62.8 million).  The purchase of property and equipment 
relates predominantly to expenditures made pursuant to the Company's ongoing 
new build and major retrofit program.

Financing Activities
                                                Three months ended March 31
    ($ thousands)                     2014       2013     Change   % change
    Net increase in
    operating lines of                                            
    credit                          18,042     72,553   (54,511)       (75)
    Issue of capital stock               -      1,238    (1,238)      (100)
    Purchase of shares held                                       
    in trust                         (489)      (510)         21        (4)
    Dividends                     (18,019)   (16,863)    (1,156)          7
    Net change in non-cash                                        
    working capital                  3,224      2,957        267          9
                                                                           
    Cash provided by                                              
    financing activities             2,758     59,375   (56,617)       (95)

The Company's available operating lines of credit consist of a $400.0 million 
Global Facility and a $10.0 million Canadian Facility. The Global Facility is 
available to the Company and certain of its wholly owned subsidiaries, and may 
be drawn in Canadian, United States or Australian dollars, up to the 
equivalent value of $400.0 million Canadian dollars. The amount available 
under the Canadian Facility is $10.0 million or the equivalent in United 
States dollars.

Net draws of the operating lines of credit were mainly used to fund the 
ongoing new build and major retrofit program that added one new ADR(®) 
drilling rig to the Company's United States fleet in the first quarter of 
2014; as well as completed two major retrofits to existing drilling rigs, one 
in Canada and one in Australia.  As of March 31, 2014, the operating lines of 
credit are primarily being used to fund the completion of the most recent new 
build and major retrofit program and to support international operations.

During the first quarter of 2014, the Company secured a $20.0 million 
uncommitted facility, solely for issuing letters of credit, primarily used for 
bidding on contracts in the normal course of business.

The Board of Directors of the Company has declared a second quarter dividend 
of $0.1175 per common share to be payable July 4, 2014 to all Common 
Shareholders of record as of June 20, 2014.  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 and Major Retrofits

During the three months ended March 31, 2014, the Company commissioned one new 
ADR(®) drilling rig in the United States; retrofitted one drilling rig 
transferred from the United States to Canada; and retrofitted one drilling rig 
transferred from Canada to Australia.

In response to contracts and advanced bid activity for Ensign's higher 
technology drilling rigs, the Company has ramped up its new build program and 
plans to deliver 26 new ADR(®) drilling rigs through to the end of 2015.  In 
Canada the Company is continuing to transition from shallow drilling to deeper 
drilling, building new ADRs and upgrading existing drilling rigs for deeper 
resource plays in the northwest part of the Western Canada Sedimentary Basin.  
In the United States the Company builds new ADRs for specific resource plays 
and has been upgrading existing drilling rigs for pad drilling operations.  
Internationally, the Company has been increasing its capabilities, through a 
combination of new ADRs and major retrofits of existing drilling rigs, to meet 
the requirements of specific markets.  In addition, the Company is in 
discussions with numerous customers for the possible supply of a number of 
additional new drilling rigs that may be constructed and delivered into 
operations between now and December 31, 2015, beyond these 26 new ADR(®) 
drilling rigs currently set for delivery.

The estimated delivery schedule for new ADRs and major retrofits of existing 
drilling rigs currently under construction at March 31, 2014, and as approved 
by the Company's Board of Directors, is as follows:
                                      Estimated Delivery Date              
                       Q2     Q3     Q4     Q1     Q2     Q3     Q4        
                     2014   2014   2014   2015   2015   2015   2015   Total
    New Build ADRs      2      2      5      4      4      4      5      26
    Major                                                            
    Retrofits           2      4      -      2      -      -      -       8
                        4      6      5      6      4      4      5      34

Outlook

The Company continues to believe that the global economy is improving, despite 
flattening economic growth in China and uncertainty in some other regions of 
the world. Less volatile energy prices are starting to provide support for 
increased development activities. Current geopolitical tensions are giving 
rise to concerns about global crude oil supply disruptions. Minor supply 
issues for natural gas in North America may emerge after a cold winter ended 
with unusually low storage levels. Except for delivery infrastructure 
development delays, downside factors for energy commodity prices currently 
appear limited for the next year or two. In particular, Canada's energy prices 
have recently been positively affected by a weaker currency and narrower 
transportation differentials.

Canadian exploration and development activities trended upward slightly in the 
first quarter of 2014, and capital investment activities may increase further 
in the second half of the year, based on increased industry cash flows from 
higher commodity prices. The trend is toward only a slightly higher well 
count, but with increased depths and longer reaches, particularly in key 
resource plays. Ensign's Canadian fleet utilization improved in the first 
quarter, with positive prospects for the balance of the year, as the Company 
continues with the fleet modernization program to more closely match industry 
demand.

Land-based drilling continues to expand in the United States, albeit at a slow 
and steady pace, as illustrated by weekly changes to the industry drilling rig 
count.  Oil and natural gas liquids projects continue to be preferred, but dry 
natural gas prospects are starting to improve, due to planned LNG exports. 
Typical with prior years, the Company's United States fleet activities were 
fairly flat with those in the immediately preceding quarter. The Company 
expects improving operating and financial results for the balance of the year.

The Company's international revenue and operating days were stronger in the 
current quarter compared to both the immediately preceding quarter and the 
prior year quarter, despite challenges in certain African and Latin American 
countries. The Company's activity levels are expected to continue to expand 
throughout 2014, particularly as drilling rigs are added or as existing rigs 
are repositioned into the international fleet to fulfill contracts.

The demand for higher technology drilling rigs, such as the Company's ADR(®), 
remains robust.  Accordingly, current plans for the remainder of 2014 and 2015 
include the addition of 26 new ADR(®) drilling rigs and one new well 
servicing rig, with eight major drilling rig retrofits planned for 2014 and 
2015.  The Company has the ability to ramp up new build activity as future 
customer demand dictates.

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 first quarter 2014 
results at 2:00 p.m. MST (4:00 p.m. EST) on Monday, May 12, 2014.  The 
conference call number is (647) 427-7450 (in Toronto) or 1-888-231-8191 
(outside Toronto).  A taped recording will be available until May 19, 2014 by 
dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside Toronto) and 
entering the reservation number 36001986.  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                                        March 31       December 31
                                                     2014              2013
                                                                           
    (Unaudited, in thousands of
    Canadian dollars)                                                      
                                                                           
    Assets                                                                 
    Current Assets                                                         
      Cash and cash equivalents            $       40,493   $        78,858
      Accounts receivable                         557,777           440,790
      Inventories and other                        57,565            66,847
      Income taxes receivable                           -             8,572
                                                                           
                                                  655,835           595,067
                                                                           
    Property and equipment                      2,918,060         2,788,331
    Note receivable                                 4,345             4,280
                                                                           
                                           $    3,578,240   $     3,387,678
                                                                           
    Liabilities                                                            
    Current Liabilities                                                    
      Accounts payable and
      accruals                             $      345,740   $       307,147
      Operating lines of credit                   357,399           326,525
      Dividends payable                            18,019            18,019
      Share-based compensation                     12,691            14,522
      Income taxes payable                          2,973                 -
                                                                           
                                                  736,822           666,213
                                                                           
    Long-term debt                                329,940           317,407
    Share-based compensation                        3,456             2,993
    Deferred income taxes                         451,253           438,496
                                                                           
                                                1,521,471         1,425,109
                                                                           
    Shareholders' Equity                                                   
      Share capital                               170,046           168,155
      Contributed surplus                           3,589             4,614
      Foreign currency translation
      reserve                                      76,007            25,065
      Retained earnings                         1,807,127         1,764,735
                                                                           
                                                2,056,769         1,962,569
                                                                           
                                           $    3,578,240   $     3,387,678
                                                                  
    Ensign Energy Services Inc.                                           
    Consolidated Statements of Income                                     
    For the three months ended                                            
                                                                          
    (Unaudited, in thousands of
    Canadian dollars, except per share        
    data)                                                                 
                                                   March 31       March 31
                                                       2014           2013
                                                                          
    Revenue                                    $    624,194   $    581,142
                                                                          
    Expenses                                                              
      Oilfield services                             442,020        397,201
      Depreciation                                   73,309         57,190
      General and administrative                     22,105         19,559
      Share-based compensation                        (913)          6,396
      Foreign exchange and other                    (9,015)        (3,888)
                                                                          
                                                    527,506        476,458
                                                                          
    Income before interest and income         
    taxes                                            96,688        104,684
                                                                          
    Interest income                                     336            168
    Interest expense                                (5,426)        (4,121)
                                                                          
    Income before income taxes                       91,598        100,731
                                                                 
    Income taxes                                                          
      Current tax                                    19,476         24,205
      Deferred tax                                   11,711         11,539
                                                                          
                                                     31,187         35,744
                                                                          
    Net income                                 $     60,411   $     64,987
                                                                          
                                                                          
    Net income per share                                                  
      Basic                                    $       0.40   $       0.43
      Diluted                                  $       0.39   $       0.42
                                                                   
    Ensign Energy Services Inc.                                            
    Consolidated Statements of Cash           
    Flows                                                                  
    For the three months ended                                             
                                                                           
    (Unaudited, in thousands of               
    Canadian dollars)                                                      
                                                                           
                                                    March 31       March 31
                                                        2014           2013
    Cash provided by (used in)                                             
                                                                           
    Operating activities                                                   
    Net income                                 $      60,411   $     64,987
    Items not affecting cash                                               
      Depreciation                                    73,309         57,190
      Share-based compensation, net         
      of cash paid                                     (182)          6,836
      Unrealized foreign exchange           
      and other                                      (8,326)          (830)
      Accretion on long-term debt                         88             80
      Deferred income tax                             11,711         11,539
    Net change in non-cash working            
    capital                                         (58,867)       (32,958)
                                                                           
                                                      78,144        106,844
                                                                           
    Investing activities                                                   
    Purchase of property and                  
    equipment                                      (120,753)       (62,757)
    Net change in non-cash working            
    capital                                            5,491            485
                                                                           
                                                   (115,262)       (62,272)
                                                                           
    Financing activities                                                   
    Net increase in operating lines           
    of credit                                         18,042         72,553
    Issue of capital stock                                 -          1,238
    Purchase of shares held in trust                   (489)          (510)
    Dividends                                       (18,019)       (16,863)
    Net change in non-cash working            
    capital                                            3,224          2,957
                                                                           
                                                       2,758         59,375
                                                                           
    Net (decrease) increase in cash           
    and cash equivalents                            (34,360)        103,947
                                                                           
    Effects of foreign exchange on            
    cash and cash equivalents                        (4,005)          1,524
                                                                           
    Cash and cash equivalents -               
    beginning of period                               78,858         33,208
                                                                           
    Cash and cash equivalents - end           
    of period                                  $      40,493   $    138,679
                                                                           
                                                                           
    Supplemental information                                               
      Interest paid                            $         899   $        107
      Income taxes paid                        $       7,931   $     31,588
                                                                    



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/May2014/12/c7789.html 
CO: Ensign Energy Services Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- May/12/2014 09:00 GMT
 
 
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