Ensign Energy Services Inc. Reports 2014 Second Quarter Results

CALGARY, Aug. 11, 2014 /CNW/ - 
Overview 
Revenue for the second quarter of 2014 for Ensign Energy Services Inc. 
("Ensign" or the "Company") was $511.6 million, 17 percent higher than revenue 
of $437.9 million recorded in the second quarter of 2013.  Revenue for the six 
months ended June 30, 2014 was $1,135.8 million, 11 percent higher than 
revenue of $1,019.0 million for the six months ended June 30, 2013.  Net 
income for the second quarter of 2014 increased 364 percent to $15.2 million 
($0.10 per common share) compared to net income of $3.3 million ($0.02 per 
common share) for the second quarter of 2013.  Net income for the six months 
ended June 30, 2014 increased 11 percent to $75.7 million ($0.50 per common 
share) compared to net income of $68.3 million ($0.45 per common share) for 
the first six months of 2013.  Included in the prior year comparative earnings 
for the second quarter was the negative impact of a $21.8 million foreign 
exchange and other loss primarily due to the effect of a weakening Australian 
dollar on United States 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 second 
quarter of 2014 totaled $14.4 million ($0.09 per common share), one percent 
lower than adjusted net income of $14.5 million ($0.09 per common share) in 
the second quarter of 2013.  For the six months ended June 30, 2014 adjusted 
net income was $68.3 million ($0.45 per common share), 16 percent lower than 
adjusted net income of $81.1 million ($0.53 per common share) for the six 
months ended June 30, 2013.  Adjusted EBITDA, defined as "income before 
interest, income taxes, depreciation, share-based compensation expense 
(recovery) and foreign exchange and other", totaled $97.1 million ($0.64 per 
common share) in the second quarter of 2014, 13 percent higher than adjusted 
EBITDA of $85.7 million ($0.56 per common share) in the second quarter of 
2013.  For the first six months of 2014 adjusted EBITDA was $257.2 million 
($1.68 per common share), three percent higher than adjusted EBITDA of $250.1 
million ($1.64 per common share) for the first six months of 2013.  Funds from 
operations increased two percent to $90.4 million ($0.59 per common share) in 
the second quarter of 2014 from $88.7 million ($0.58 per common share) in the 
second quarter of the prior year.  For the six months ended June 30, 2014, 
funds from operations was consistent with the prior year comparable period at 
$227.4 million ($1.49 per common share) compared to $228.5 million ($1.50 per 
common share) for the six months ended June 30, 2013. 
Canadian operating and financial results were improved in the current quarter 
compared to the prior year as Canadian operations experienced less of a 
reduction in the current year second quarter due to a shorter spring break-up 
period as a result of slightly longer winter weather conditions in Canada and 
a beneficial shift in the mix of drilling rigs working as the industry moves 
towards deeper drilling projects.  Demand for United States and international 
oilfield services also increased to help improve results for both the three 
and six months ended June 30, 2014 when compared to the same periods of the 
prior year.  An eight percent increase in the average United States exchange 
rate against the Canadian dollar for the six months ended June 30, 2014 
compared to the same period of the prior year helped to further increase 
United States and international financial results on translation to Canadian 
dollars. 
Gross margin increased to $120.8 million (23.6 percent of revenue) for the 
second quarter of 2014 compared with gross margin of $109.3 million (25.0 
percent of revenue) for the second quarter of 2013.  For the six months ended 
June 30, 2014 gross margin increased to $303.0 million (26.7 percent of 
revenue) compared to $293.2 million (28.8 percent of revenue) for the six 
months ended June 30, 2013.  Margins were negatively impacted in the first 
half of 2014 by higher costs related to ongoing maintenance and start-up costs 
of additional equipment preparing for work later in 2014. 
Working capital at June 30, 2014 was a deficit of $145.3 million, compared to 
a deficit of $71.1 million at December 31, 2013.  During the second quarter of 
2014 the Company increased the amount available on its existing global 
revolving credit facility (the "Global Facility") from $400.0 million to 
$600.0 million.  The expanded Global Facility has a three year term and will 
support the Company's recently expanded new build and major retrofit program.  
Available borrowings at June 30, 2014 were $207.1 million compared to $70.7 
million at December 31, 2013.  Working capital resources were mainly utilized 
in the first half of 2014 to support dividend payments and the ongoing new 
build and major retrofit program that delivered three new ADR(®) drilling 
rigs and completed three major retrofits to existing drilling rigs during the 
first six months of 2014. 
FINANCIAL AND OPERATING HIGHLIGHTS
($ thousands, except per share data and operating information) 


                           Three months ended June 30         Six months ended June 30
                                                    %                                %
                            2014        2013   Change        2014        2013   Change
                                                                                      
    Revenue                511,581   437,874       17   1,135,775   1,019,016       11
                                                                                      
    Adjusted EBITDA 1       97,137    85,746       13     257,206     250,128        3
    Adjusted EBITDA per                                                        
    share 1                                                                           
      Basic                  $0.64     $0.56       14       $1.68       $1.64        2
      Diluted                $0.63     $0.56       13       $1.68       $1.63        3
                                                                                      
    Adjusted net income                                                        
    2                       14,352    14,484      (1)      68,310      81,101     (16)
    Adjusted net income                                                        
    per share 2                                                                       
      Basic                  $0.09     $0.09        -       $0.45       $0.53     (15)
      Diluted                $0.09     $0.09        -       $0.45       $0.53     (15)
                                                                                      
    Net income              15,242     3,284      364      75,653      68,271       11
    Net income per share                                                              
      Basic                  $0.10     $0.02      400       $0.50       $0.45       11
      Diluted                $0.10     $0.02      400       $0.49       $0.45        9
                                                                                      
    Funds from operations                                                      
    3                       90,431    88,677        2     227,442     228,479        -
    Funds from operations                                                      
    per share 3                                                                       
      Basic                  $0.59     $0.58        2       $1.49       $1.50      (1)
      Diluted                $0.59     $0.58        2       $1.48       $1.49      (1)
                                                                                      
    Weighted average
    shares - basic                                                             
    (000s)                 152,684   152,651        -     152,772     152,679        -
    Weighted average
    shares - diluted                                                           
    (000s)                 153,411   153,404        -     153,469     153,363        -
                                                                                      
    Drilling                                                                          
      Number of marketed rigs                                                         
             Canada 4          103       120     (14)         103         120     (14)
             United                                                                (5)
             States            111       117      (5)         111         117
             International                                                           9
             5                  58        53        9          58          53
             Rigs in                                                                 -
             transit 6           1         -        -           1           -
      Operating days                                                                  
             Canada 4        2,235     1,598       40       7,027       6,927        1
             United                                                                  4
             States          5,990     5,712        5      11,663      11,216
             International                                                           8
             5               2,828     2,805        1       5,980       5,517
                                                                                      
    Well Servicing                                                                    
      Number of marketed rigs                                                         
             Canada             91        92      (1)          91          92      (1)
             United                                                                  2
             States             45        44        2          45          44
      Operating hours                                                                 
             Canada         28,703    25,343       13      63,383      60,480        5
             United                                                                 25
             States         30,599    24,897       23      59,460      47,674
    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 rig being retrofitted and transferred to a new geographic
    market.

Second Quarter Highlights
        --  Revenue for the three months ended June 30, 2014 was $511.6
            million, up 17 percent from revenue for the three months ended
            June 30, 2013.  The increase in revenue was mainly due to
            increased demand and activity in Canada in the current year
            second quarter as the Company continues to transition its
            Canadian drilling fleet to deeper drilling rigs to meet
            increased customer demand.
        --  Second quarter revenue by segment:
      o Canada - 22 percent;
      o United States - 48 percent; and
      o International - 30 percent.
        --  Canadian drilling recorded 2,235 operating days in the second
            quarter of 2014, a 40 percent increase from 1,598 operating
            days in the second quarter of 2013.  Canadian well servicing
            hours increased by 13 percent in the second quarter of 2014
            compared to the second quarter of 2013.
        --  United States drilling recorded 5,990 operating days in the
            second quarter of 2014, a five percent increase from 5,712
            operating days in the second quarter of 2013.  United States
            well servicing hours increased by 23 percent in the second
            quarter of 2014 compared to the second quarter of 2013.
        --  International drilling recorded 2,828 operating days in the
            second quarter of 2014, a one percent increase from 2,805
            operating days recorded in the second quarter of 2013.
        --  Adjusted EBITDA for the second quarter of 2013 was $97.1
            million, a 13 percent increase from adjusted EBITDA of $85.7
            million for the second quarter of 2013.  Funds from operations
            for the second quarter of 2014 increased two percent to $90.4
            million from $88.7 million in the second quarter of the prior
            year.
        --  The Company declared a quarterly cash dividend on common shares
            of $0.1175 per common share payable October 3, 2014.
        --  During the second quarter, the Company amended its existing
            Global Facility, increasing the amount available from $400.0
            million to $600.0 million.  The expanded Global Facility will
            support the Company's recently expanded new build and major
            retrofit program.
        --  Two new ADR® drilling rigs were added to the Company's
            international drilling fleet in Australia in the second quarter
            of 2014.  The new build and major retrofit program also
            completed one major retrofit of a drilling rig transferred from
            Canada to Australia.
        --  Subsequent to the second quarter, the Company's Board of
            Director's approved 10 additional new build ADR® drilling rigs
            for the Canadian fleet to be delivered over the next 12
            months.  These drilling rigs will be designated as ADR® - 850
            ultra-deep tele-double drilling rigs and will deepen Ensign's
            Canadian drilling rig fleet significantly.  Concurrent with the
            delivery of the new ADR® - 850 drilling rigs, 10 existing
            Canadian drilling rigs will be decommissioned.  Including these
            10 additional new build drilling rigs, the Company's
            construction in progress at June 30, 2014 includes 34 new ADR®
            drilling rigs and nine drilling rigs under major retrofit. 

Revenue and Oilfield Services Expense
                       Three months ended June 30          Six months ended June 30
    ($ thousands)        2014       2013        %         2014        2013        %
                                           Change                            Change
                                                                                   
    Revenue                                                                        
      Canada          110,687     85,453       30      337,155     341,441      (1)
      United States   246,185    219,843       12      494,548     420,313       18
      International   154,709    132,578       17      304,072     257,262       18
                                                                            
                      511,581    437,874       17    1,135,775   1,019,016       11
    Oilfield services 390,742    328,570       19      832,762     725,771       15
    expense  
                                                                            
    Gross margin      120,839    109,304       11      303,013     293,245        3
                                                                
    Gross margin         23.6       25.0                  26.7        28.8
    percentage (%)  

Revenue for the three months ended June 30, 2014 increased 17 percent to 
$511.6 million compared to $437.9 million for the comparable period in 2013.  
Revenue for the six months ended June 30, 2014 increased 11 percent to 
$1,135.8 million from revenue of $1,019.0 million recorded for the six months 
ended June 30, 2013.  As a percentage of revenue, gross margin for the second 
quarter of 2014 decreased to 23.6 percent (2013 - 25.0 percent) and decreased 
to 26.7 percent for the six months ended June 30, 2014 (2013 - 28.8 percent).  
The gross margin decrease was attributable to increased repairs and 
maintenance costs incurred during the current year second quarter and start-up 
costs of additional equipment preparing for work later in 2014.

Revenue strengthened across all operating divisions for the three months ended 
June 30, 2014 compared to the three months ended June 30, 2013.  For the six 
months ended June 30, 2014 only Canadian revenue was down slightly with United 
States and international revenue increasing over the comparable period of the 
prior year.  Increased demand and upgrades to the Company's consolidated 
equipment fleet over the last few quarters helped to drive the increase in 
revenue in the current quarter compared to the prior year.  In addition, 
demand for Canadian oilfield services improved in the current quarter compared 
to the prior year second quarter as a result of the Company continuing to 
transition the fleet to deeper capacity drilling rigs to capitalize on 
increased levels of demand.  Year-to-date Canadian operating and financial 
results reflect the lower demand levels experienced by the Company in the 
first quarter of 2014 compared to the prior year.

Canadian Oilfield Services

Revenue increased 30 percent to $110.7 million for the three months ended June 
30, 2014, from $85.5 million for the three months ended June 30, 2013. For the 
six months ended June 30, 2014, revenue decreased one percent to $337.2 
million compared to $341.4 million for the same period in 2013. Canadian 
revenues accounted for 22 percent of the Company's total revenue in the second 
quarter of 2014, compared with 20 percent in the second quarter of 2013, and 
during the six months ended June 30, 2014, Canadian revenues were 30 percent 
of total revenue (2013 - 34 percent).

The Company's Canadian operations recorded 2,235 drilling days in the second 
quarter of 2014, compared to 1,598 drilling days for the second quarter of 
2013, an increase of 40 percent.  For the six months ended June 30, 2014, the 
Company recorded 7,027 drilling days compared to 6,927 drilling days for the 
six months ended June 30, 2013, an increase of one percent.  Canadian well 
servicing hours increased by 13 percent to 28,703 operating hours in the 
second quarter of 2014 compared with 25,343 operating hours in the 
corresponding period of 2013.  For the six months ended June 30, 2014, well 
servicing hours increased by five percent to 63,383 operating hours compared 
with 60,480 operating hours for the six months ended June 30, 2013.

Improved demand for Canadian oilfield services in the second quarter of 2014 
compared to the second quarter of 2013 helped to drive up second quarter 
revenue for this segment.  The industry has shifted towards deeper, longer 
reach drilling and the Company continues to transition its Canadian drilling 
fleet to deeper drilling rigs through the current new build and major retrofit 
program.  Demand levels were lower for the first three months of 2014 compared 
to the comparable prior year period, particularly for the oil sands coring 
division, bringing down year-to-date Canadian operating and financial results. 
 Consistent with prior years, Canadian operations were also negatively 
impacted in the second quarter of 2014 by the seasonal operating environment 
where spring break-up weather conditions hindered the mobility of the 
Company's equipment.

During the six months ended June 30, 2014, the Company added one retrofitted 
drilling rig transferred from the United States fleet to the Canadian fleet; 
decommissioned 14 inactive drilling rigs and four inactive well servicing 
rigs; and transferred two drilling rigs to the oil sands coring fleet and two 
retrofitted drilling rigs to Australia.  In addition one drilling rig has been 
removed from the Canadian fleet and is undergoing major retrofit for the 
Australian market.

United States Oilfield Services

The Company's United States operations recorded revenue of $246.2 million in 
the second quarter of 2014, a 12 percent increase from the $219.9 million 
recorded in the corresponding period of the prior year. During the six months 
ended June 30, 2014, revenue of $494.5 million was recorded, an increase of 18 
percent from the $420.3 million recorded for the six months ended June 30, 
2013. The Company's United States operations accounted for 48 percent of the 
Company's revenue in the second quarter of 2014 (2013 - 50 percent) and 43 
percent of total revenue in the six months ended June 30, 2014 (2013 - 41 
percent).  Drilling rig operating days increased by five percent to 5,990 
drilling days in the second quarter of 2014 from 5,712 drilling days in the 
second quarter of 2013.  For the six months ended June 30, 2014, drilling days 
increased by four percent to 11,663 drilling days from 11,216 drilling days in 
the six months ended June 30, 2013.  Well servicing activity increased by 23 
percent in the second quarter of 2014 to 30,599 operating hours from 24,897 
operating hours in the second quarter of 2013.  For the six months ended June 
30, 2014 well servicing activity increased 25 percent to 59,460 operating 
hours from 47,674 operating hours in the first six months of 2013.

Upgrades to the Company's United States equipment fleet throughout 2013 and 
the first three months of 2014 helped to strengthen revenue rates and this 
combined with an increase in demand levels helped to improve revenue in the 
three and six months ended June 30, 2014 compared to the three and six months 
ended June 30, 2013.  In addition, the United States dollar strengthened 
against the Canadian dollar in the first six months of 2014 compared to the 
first six months of 2013, having a positive impact on the translation of 
United States financial results to Canadian dollars.  In the first six months 
of 2014, the average United States dollar exchange rate increased by 
approximately eight percent to 1.10 when compared to the same period of the 
prior year.

An additional ADR(®) was added to the United States fleet 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 half of 
2014.  In 2013, the Company added three new build ADRs and one new well 
servicing rig to the United States fleet.

International Oilfield Services

The Company's international operations recorded revenue of $154.7 million in 
the second quarter of 2014, a 17 percent increase over the $132.6 million 
recorded in the corresponding period of the prior year. Similarly, 
international revenues for the six months ended June 30, 2014, increased by 18 
percent to $304.1 million from $257.3 million recorded for the six months 
ended June 30, 2013. International operations contributed 30 percent of the 
Company's revenue in the second quarter of 2014 (2013 - 30 percent) and 27 
percent of the Company's revenue in the first half of 2014 (2013 - 25 
percent). International operating days for the three months ended June 30, 
2014 totaled 2,828 drilling days compared with 2,805 drilling days in 2013, an 
increase of one percent.  For the six months ended June 30, 2014, 
international operating days totaled 5,980 drilling days compared with 5,517 
drilling days for the six months ended June 30, 2013, an increase of eight 
percent.

Additions and upgrades to the Company's international drilling rig fleet over 
the past 12 months helped to grow revenue for the three and six months ended 
June 30, 2014 when compared to the three and six months ended June 30, 2013.  
In the first six months of 2014, two retrofitted drilling rigs were 
transferred from the Canadian fleet to Australia and two new build ADRs were 
added in Australia.  Currently one retrofitted drilling rig is in transit from 
Canada to Australia and is expected to begin work in the third quarter of 
2014.  In the latter half of 2013, the Company added one drilling rig into 
Kurdistan, a region new to Ensign's operations, resumed operations with an 
additional drilling rig in Libya and added one retrofitted drilling rig to 
Australia from the United States fleet.

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

Subsequent to the second quarter of 2014, the Company suspended operations in 
Libya due to an escalation of civil unrest within the country and there is 
uncertainty as to when operations may resume.  The carrying value of assets 
located in Libya is approximately $41.4 million and at this time the Company 
does not believe that any impairment has occurred.

Depreciation
                    Three months ended June       Six months ended June 30
                                         30
    ($ thousands)    2014     2013        %      2014      2013   % Change
                                     Change
                                               
    Depreciation   69,219   55,419       25   142,528   112,609         27

Depreciation expense totaled $69.2 million for the second quarter of 2014 
compared with $55.4 million for the second quarter of 2013, an increase of 25 
percent.  Depreciation expense for the first six months of 2014 was $142.5 
million, an increase of 27 percent over the $112.6 million recorded for the 
first six months of 2013.  Increased depreciation reflects higher-valued 
equipment being utilized in the first half of 2014, new and retrofitted 
equipment being added to the Company's global fleet throughout the latter half 
of 2013 and into 2014 and the impact of the 2013 second quarter acquisitions 
of assets from EGOC Enviro Group of Companies Ltd. ("EGOC") and Departure 
Energy Services Inc. ("Departure").  In addition, an eight percent increase in 
the average United States dollar exchange rate against the Canadian dollar 
increased United States and international depreciation in the three and six 
months ended June 30, 2014 compared to the same periods of the prior year.

General and Administrative Expense
                    Three months ended June 30     Six months ended June 30
    ($ thousands)      2014     2013         %     2014     2013   % Change
                                        Change
                                                                           
    General and      23,702   23,558         1   45,807   43,117          6
    administrative 
                                                         
    % of revenue        4.6      5.4                4.0      4.2

General and administrative expense increased one percent to $23.7 million (4.6 
percent of revenue) for the second quarter of 2014 compared with $23.6 million 
(5.4 percent of revenue) for the second quarter of 2013. For the six months 
ended June 30, 2014, general and administrative expense totaled $45.8 million 
(4.0 percent of revenue) compared with $43.1 million (4.2 percent of revenue) 
recorded for the six months ended June 30, 2013, an increase of six 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 June 30   Six months ended June 30
    ($ thousands)  2014      2013    % Change    2014    2013   % Change
                                                                 
    Share-based     615   (4,570)       (113)   (298)   1,826      (116)
    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 June 30, 2014, share-based compensation expense 
(recovery) was an expense of $0.6 million compared with a recovery of $4.6 
million recorded in the second quarter of 2013. For the six months ended June 
30, 2014, share-based compensation was a recovery of $0.3 million compared 
with an expense of $1.8 million for the six months ended June 30, 2013.   The 
change in share-based compensation expense in the three and six months ended 
June 30, 2014, compared to the same periods of 2013 was a result of the change 
in the fair value of the 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 $16.57 at June 30, 2014 
($16.28 at June 30, 2013), compared with $16.34 at March 31, 2014 ($17.32 at 
March 31, 2013) and $16.73 at December 31, 2013 ($15.37 at December 31, 2012).

Interest Expense
                     Three months ended June 30    Six months ended June 30
    ($ thousands)      2014     2013   % Change     2014    2013   % Change
                                                                           
    Interest          5,462    4,538         20   10,888   8,659         26
    expense 
    Interest income   (123)    (543)       (77)    (459)   (711)       (35)
                                                                  
                      5,339    3,995         34   10,429   7,948         31

Interest is incurred on the Company's $10.0 million Canadian-based revolving 
credit facility (the "Canadian Facility"), the expanded $600.0 million 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 was included in interest 
expense in both quarters.

Interest expense in the three and six months ended June 30, 2014 increased 
over interest expense in the comparable periods of 2013 due to increased draws 
on the expanded Global Facility and the negative translational impact of a 
stronger United States dollar on United States and international interest 
expense in the current quarter.  During the current year second quarter, the 
Company amended its existing Global Facility, increasing the amount available 
to $600.0 million from $400.0 million.  The amended Global Facility has a term 
of three years.

Foreign Exchange and Other ((Gain)/Loss)
                  Three months ended June 30       Six months ended June 30
    ($              2014     2013   % Change       2014     2013   % Change
    thousands) 
                                                                  
    Foreign
    exchange and (1,984)   21,800      (109)   (10,999)   17,912      (161)
    other  

Included in this amount are foreign currency movements, mainly in the 
Company's subsidiaries that have functional currencies other than Canadian 
dollars.  During the three months ended June 30, 2014, the Australian dollar 
strengthened by approximately two 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.  During the six months ended 
June 30, 2014, the Australian dollar strengthened by approximately five 
percent.  In general the United States dollar was stronger when compared to 
other world currencies in the first half of 2014 compared to the first half of 
2013, but weakened slightly during the three months ended June 30, 2014.

Income Taxes
                    Three months ended June 30     Six months ended June 30
    ($ thousands)    2014      2013   % Change     2014     2013   % Change
                                                                           
    Current income  2,213     (679)      (426)   21,689   23,526        (8)
    tax 
    Deferred        6,493     6,497          -   18,204   18,036          1
    income tax  
                                                                    
                    8,706     5,818         50   39,893   41,562        (4)
                                                                           
    Effective
    income tax       36.4      63.9                34.5     37.8           
    rate (%)  

The effective income tax rate for the three months ended June 30, 2014 was 
36.4 percent compared with 63.9 percent for the three months ended June 30, 
2013. The effective income tax rate for the six months ended June 30, 2014 was 
34.5 percent compared with 37.8 percent for the six months ended June 30, 
2013.  The decrease in the effective income tax rate in the current quarter 
and first half of 2014 was due to a higher proportion of taxable income earned 
in lower tax rate jurisdictions, including Canada. The prior year tax rates 
had also been increased by the impact of foreign exchange translation losses 
for which the effective tax rate varies from statutory rates, however this was 
not a factor in the first half of 2014.

Financial Position

The following chart outlines significant changes in the consolidated statement 
of financial position from December 31, 2013 to June 30, 2014:
    ($ thousands)                    Change      Explanation 
    Cash and cash                    19,852      See consolidated
    equivalents                                  statements of cash flows. 
    Accounts receivable             (19,006)     Decrease was due to
                                                 reduced operating activity
                                                 in Canada as
                                                 a result of spring
                                                 break-up weather
                                                 conditions in the second
                                                 quarter of 2014 when
                                                 compared to the fourth
                                                 quarter of 2013.
    Inventories and other           (11,130)     Decrease was due to normal
                                                 course use of consumables
                                                 and
                                                 amortization of prepaid
                                                 expenses, offset by
                                                 additional
                                                 inventory.
    Property and equipment           135,742     Increase was due to
                                                 additions from the current
                                                 new build
                                                 and major retrofit
                                                 construction program and
                                                 the impact of a
                                                 slight increase in the
                                                 quarter-end foreign
                                                 exchange rate on the
                                                 consolidation of the
                                                 Company's foreign
                                                 subsidiaries, offset by
                                                 depreciation.
    Accounts payable and                 480     Accounts payable and
    accruals                                     accruals was mainly
                                                 consistent at June 30,
                                                 2014 when
                                                 compared to December 31,
                                                 2013.  Changes reflect a
                                                 small increase in the
                                                 quarter-end foreign
                                                 exchange rate 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                60,405     Increase was due to
    credit                                       additional draws during
                                                 the period on the
                                                 expanded 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           (859)     Decrease was due to the
                                                 decrease in the price of
                                                 the
                                                 Company's common shares as
                                                 at June 30, 2014
                                                 compared with December 31,
                                                 2013.
    Long-term debt                     1,364     Increase was due to
                                                 foreign exchange
                                                 fluctuations on the
                                                 United States dollar
                                                 denominated long-term
                                                 debt.
    Deferred income taxes             18,306     Increase was primarily due
                                                 to accelerated tax
                                                 depreciation of
                                                 assets added during the
                                                 current quarter.
    Shareholders' equity              41,070     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 half
                                                 of 2014.

Funds from Operations and Working Capital
                     Three months ended June 30        Six months ended June 30
    ($                 2014       2013        %        2014       2013        %
    thousands)                           Change                          Change
                                                                               
    Funds from       90,431     88,677        2     227,442    228,479        -
    operations  
    Funds from
    operations        $0.59      $0.58        2       $1.49      $1.50      (1)
    per share 
    Working                
    capital       (145,342)   (71,146)      104   (145,342)   (71,146)      104
    (deficit) 1 
    1 Comparative figure as of December 31, 2013.

During the three months ended June 30, 2014, the Company generated funds from 
operations of $90.4 million ($0.59 per common share) compared with funds from 
operations of $88.7 million ($0.58 per common share) for the three months 
ended June 30, 2013, an increase of two percent. For the six months ended June 
30, 2014, the Company generated funds from operations of $227.4 million ($1.49 
per common share), which was consistent with funds from operations of $228.5 
million ($1.50 per common share) generated in the first half of 2013. This 
increase in the current quarter compared to the prior year second quarter 
reflects improvements in demand throughout the Company's global operations 
whereas the decrease year-to-date was mainly a result of Canadian operations 
having lower activity in the first quarter of 2014 when compared to the prior 
year.  In addition, higher spending on continuing equipment maintenance that 
the Company generally expenses as incurred reduced both the three and six 
month funds from operations when compared to the same periods of the prior 
year.

At June 30, 2014, the Company had a working capital deficit of $145.3 million, 
compared to a deficit of $71.1 million at December 31, 2013.  The Company's 
working capital resources were used in the current quarter to fund the ongoing 
new build and major retrofits construction program that as at June 30, 2014 is 
anticipated to deliver an additional 34 new build ADR(®) drilling rigs and 
nine major retrofits to 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.  In addition, the 
Company may look to long-term financing to improve the current working capital 
position and expects future contributions from additions from the current new 
build and major retrofit program to help reduce the working capital deficit 
once the equipment starts working.  The newly expanded revolving credit 
facilities provide for total borrowing of $610.0 million, of which $207.1 
million was available at June 30, 2014.

Investing Activities
                        Three months ended June 30         Six months ended June 30
    ($ thousands)        2014        2013        %        2014        2013        %
                                            Change                           Change
                                                                                   
    Acquisitions            -    (76,408)                    -    (76,408)    (100)
                                             (100)
    Purchase of                                                           
    property and    (136,916)    (83,605)       64   (257,669)   (146,362)       76
    equipment
    Net change in
    non-cash          (7,625)     (4,974)       53     (2,134)     (4,489)     (52)
    working
    capital 
                                                                            
    Cash used in                                                          
    investing       (144,541)   (164,987)     (12)   (259,803)   (227,259)       14
    activities 

Purchases of property and equipment during the second quarter of 2014 totaled 
$136.9 million (2013 - $83.6 million).  Purchases of property and equipment 
during the first half of 2014 totaled $257.7 million (2013 - $146.4 million).  
The purchase of property and equipment relates predominantly to expenditures 
made pursuant to the Company's ongoing new build and major retrofit program.

During the second quarter of 2013 the Company acquired the rental assets of 
EGOC and the directional drilling assets of Departure.

Financing Activities
                   Three months ended June 30       Six months ended June 30
    ($               2014       2013        %       2014       2013        %
    thousands)                         Change                         Change
                                                                            
    Net increase
    in operating   42,765      5,646      657     60,807     78,199     (22)
    lines of
    credit  
    Issue of
    capital             -        256    (100)          -      1,494    (100)
    stock  
    Purchase of
    shares held   (4,259)    (4,848)     (12)    (4,748)    (5,358)     (11)
    in trust  
    Dividends    (18,018)                   7   (36,037)   (33,727)        7
                            (16,864)
    Net change
    in non-cash   (3,359)                   9      (135)      (119)       13
    working                  (3,076)
    capital  
                                                                     
    Cash
    provided by
    (used in)      17,129   (18,886)    (191)     19,887     40,489     (51)
    financing
    activities  

The Company's available operating lines of credit consist of an expanded 
$600.0 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 $600.0 million Canadian dollars.  The 
amount available under the Canadian Facility is $10.0 million or the 
equivalent in United States dollars.

During the second quarter the Company amended its existing Global Facility, 
increasing the amount available from $400.0 million to $600.0 million.  Net 
draws of the operating lines of credit for the three and six months ended June 
30, 2014 were mainly used to fund the ongoing new build and major retrofit 
program that added three new ADR(®) drilling rigs to the Company's global 
fleet in the first six months of 2014, one in the United States and two in 
Australia; as well as completed three major retrofits to existing drilling 
rigs, one in Canada and two in Australia.  As of June 30, 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. As at June 30, 2014, 
$19.0 million was drawn on the facility.

The Board of Directors of the Company has declared a third quarter dividend of 
$0.1175 per common share to be payable October 3, 2014 to all Common 
Shareholders of record as of September 19, 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 six months ended June 30, 2014, the Company commissioned one new 
ADR(®) drilling rig in the United States; retrofitted one drilling rig 
transferred from the United States to Canada; commissioned two new ADR(®) 
drilling rigs in Australia; and retrofitted two drilling rigs transferred from 
Canada to Australia.

In response to contracts and advanced bid activity for Ensign's higher 
technology drilling rigs, the Company has added an additional 10 new build 
4000m deep tele-doubles to its existing 24 new build ADRs.  The addition of 
these 10 new builds, specifically targeted for the Canadian fleet, will bring 
the total to 34 new build ADRs that Ensign will deliver into its fleet through 
to the end of 2015.  Concurrent with the delivery of these 10 new builds, 
designated as ADR(®) - 850 ultra-deep tele-double drilling rigs, 10 existing 
Canadian drilling rigs will be decommissioned.

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 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 34 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 June 30, 2014, and as approved 
by the Company's Board of Directors, is as follows:
                                             Estimated Delivery Date
                    Q3       Q4       Q1       Q2       Q3       Q4          
                  2014     2014     2015     2015     2015     2015     Total
    New Build        2        7        7        8        5        5        34
    ADRs
    Major            7        -        2        -        -        -         9
    Retrofits
                                                                         
                     9        7        9        8        5        5        43

Outlook

Oil and natural gas producers benefited from favorable oil and natural gas 
prices throughout much of the first half of 2014.  North American natural gas 
prices retreated in the second quarter from peak pricing levels in the first 
quarter that primarily resulted from a cold winter in many natural gas 
consuming regions of North America.  Crude oil prices were pushed to nine 
month highs in the second quarter due to geopolitical turmoil and tensions in 
Europe and the Middle East.  While crude oil prices have recently subsided 
slightly, the Company expects relatively steady prices to support continuing 
demand growth for energy services, particularly in North America.

Operating days and revenues recorded by our Canadian operations in the second 
quarter were up strongly when compared with the second quarter of 2013. 
Equipment had been repositioned and reconfigured to take advantage of 
increased levels of demand that occurred during this year's spring break-up 
quarter in Canada.  The Company expects the overall trend to higher 
utilization in our Canadian operations to continue through the second half of 
2014, as the equipment fleet continues to transition to deeper capacity.  
While Ensign is slightly more optimistic than in the past, sustained 
improvements in the demand for oilfield services in Canada will ultimately 
depend on positive developments with respect to improving crude oil and 
natural gas transportation infrastructure.

Second quarter operating days in the Company's United States operations were 
up slightly over the immediately preceding quarter, as land-based drilling 
activity continues to expand in certain of the large resource plays. The 
United States drilling industry continues to shift further into multiple well, 
pad drilling projects in such resource plays, where the Company's deeper, 
longer reach, self-moving high-tech ADR(®) drilling rigs meet stringent 
customer demands for horizontal and lateral drilling.  Consequently, the 
majority of our new ADRs being constructed over the next several years will 
likely end up in our United States fleet to service the demand of our growing 
customer base.

The second quarter results for Ensign's international operations were 
essentially flat on a year-over-year basis.  Challenges persist in some of the 
Company's international markets, such as in parts of Africa and the Middle 
East; however start-ups of recent new drilling rig deployments and 
repositioning transfers will contribute to improved operating and financial 
results in future quarters.

The Company expanded its credit arrangements in support of the current capital 
program during the second quarter.  The amended Global Facility will ensure 
that the Company has the funds it needs to complete the current new build and 
major retrofit program and finance future expanded operations.

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 second quarter 2014 
results at 2:00 p.m. MST (4:00 p.m. EST) on Monday, August 11, 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 August 18, 2014 
by dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside Toronto) and 
entering the reservation number 36067977.  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                                      June 30       December 31
                                                  2014              2013
                                                                        
    (Unaudited, in thousands of Canadian                                
    dollars)
                                                              
    Assets                                                              
    Current Assets                                                      
      Cash and cash equivalents            $    98,710     $      78,858
      Accounts receivable                      421,784           440,790
      Inventories and other                     55,717            66,847
      Income taxes receivable                    3,750             8,572
                                                              
                                               579,961           595,067
                                                              
    Property and equipment                   2,924,073         2,788,331
    Note receivable                              4,410             4,280
                                                              
                                           $ 3,508,444     $   3,387,678
    Liabilities                                                         
    Current Liabilities                                                 
      Accounts payable and accruals        $   307,627     $     307,147
      Operating lines of credit                386,930           326,525
      Dividends payable                         18,019            18,019
      Share-based compensation                  12,727            14,522
                                                              
                                               725,303           666,213
                                                              
    Long-term debt                             318,771           317,407
    Share-based compensation                     3,929             2,993
    Deferred income taxes                      456,802           438,496
                                                              
                                             1,504,805         1,425,109
    Shareholders' Equity                                                
      Share capital                            165,787           168,155
      Contributed surplus                        3,827             4,614
      Foreign currency translation reserve      29,674            25,065
      Retained earnings                      1,804,351         1,764,735
                                                              
                                             2,003,639         1,962,569
                                                              
                                           $ 3,508,444     $   3,387,678
                                                              
                                                              
                                                      
    Ensign Energy                                                           
    Services Inc.
    Consolidated                                                            
    Statements of Income
    For the three and six                                                   
    months ended June 30
                                                                            
    (Unaudited, in
    thousands of Canadian                                                   
    dollars, except per
    share data)
                              Three months ended            Six months ended
                             June 30     June 30       June 30       June 30
                                2014        2013          2014          2013
                                                                            
    Revenue                $ 511,581   $ 437,874   $ 1,135,775   $ 1,019,016
                                                                    
    Expenses                                                                
      Oilfield               390,742     328,570       832,762       725,771
      services     
      Depreciation            69,219      55,419       142,528       112,609
      General and             23,702      23,558        45,807        43,117
      administrative     
      Share-based                615     (4,570)         (298)        1,826 
      compensation     
      Foreign exchange       (1,984)      21,800      (10,999)        17,912
      and other    
                                                                    
                             482,294     424,777     1,009,800       901,235
                                                                    
    Income before
    interest and income       29,287      13,097       125,975       117,781
    taxes   
                                                                    
    Interest income              123         543           459           711
    Interest expense         (5,462)     (4,538)      (10,888)       (8,659)
                                                                    
    Income before income      23,948       9,102       115,546       109,833
    taxes   
                                                                    
    Income taxes                                                            
      Current tax              2,213       (679)        21,689        23,526
      Deferred tax             6,493       6,497        18,204        18,036
                                                                    
                               8,706       5,818        39,893        41,562
                                                                    
    Net income             $  15,242   $   3,284   $    75,653   $    68,271
                                                                    
                                                                    
    Net income per share                                                    
      Basic                $    0.10   $    0.02   $      0.50   $      0.45
      Diluted              $    0.10   $    0.02   $      0.49   $      0.45
                                                                    
                                                                    
                                                                             
    Ensign Energy                                
    Services Inc.                                                            
    Consolidated
    Statements of Cash                           
    Flows                                                                    
    For the three and
    six months ended                             
    June 30                                                                  
                                                                             
    (Unaudited, in
    thousands of                                 
    Canadian dollars)                                                        
                               Three months ended            Six months ended
                            June 30       June 30       June 30       June 30
                               2014          2013          2014          2013
    Cash provided by                                           
    (used in)                                                                
    Operating                                                  
    activities                                                               
    Net income          $    15,242   $     3,284   $    75,653   $    68,271
    Items not affecting                                        
    cash                                                                     
        Depreciation         69,219        55,419       142,528       112,609
        Share-based
        compensation,                                            
        net of cash
        paid                    789       (2,776)           607         4,060
        Unrealized
        foreign                                                  
        exchange and
        other               (1,399)        26,171       (9,725)        25,341
        Accretion on
        long-term                                                
        debt                     87            82           175           162
        Deferred income                                          
        tax                   6,493         6,497        18,204        18,036
    Net change in
    non-cash working         98,971        77,251        40,104
    capital                                                            44,293
                                                                             
                            189,402       165,928       267,546       272,772
    Investing                                                  
    activities                                                               
    Purchase of
    property and          (136,916)      (83,605)     (257,669)
    equipment                                                       (146,362)
    Acquisitions                  -      (76,408)             -      (76,408)
    Net change in
    non-cash working        (7,625)       (4,974)       (2,134)
    capital                                                           (4,489)
                                                                             
                          (144,541)     (164,987)     (259,803)     (227,259)
    Financing                                                  
    activities                                                               
    Net increase in
    operating lines of       42,765         5,646        60,807
    credit                                                             78,199
    Issue of capital              -           256             -
    stock                                                               1,494
    Purchase of shares      (4,259)       (4,848)       (4,748)
    held in trust                                                     (5,358)
    Dividends              (18,018)                    (36,037)
                                         (16,864)                    (33,727)
    Net change in
    non-cash working        (3,359)       (3,076)         (135)
    capital                                                             (119)
                                                                             
                             17,129      (18,886)        19,887        40,489
                                                                             
    Net increase
    (decrease) in cash       61,990      (17,945)        27,630
    and cash
    equivalents                                                        86,002
        Effects of
        foreign
        exchange on                                              
        cash and cash
        equivalents         (3,773)       (7,995)       (7,778)       (6,471)
    Cash and cash                                              
    equivalents                                                              
        Beginning of                                             
        period               40,493       138,679        78,858        33,208
        End of                                                   
        period          $    98,710   $   112,739   $    98,710   $   112,739
                                                                             
                                                                             
    Supplemental                                               
    information                                                              
        Interest                                                 
        paid            $     8,716   $     7,312   $     9,615   $     7,419
        Income taxes                                             
        paid            $     8,936   $     3,135   $    16,867   $    34,723
                                                                             
                                                                             



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/August2014/11/c9868.html 
CO: Ensign Energy Services Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- Aug/11/2014 09:00 GMT
 
 
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