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)

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:
• Canada – 22 percent;
• United States – 48 percent; and
• 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

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

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

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)

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

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)

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

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:

Funds from Operations and Working Capital

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

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

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:

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.

SOURCE Ensign Energy Services Inc.

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