Ensign Energy Services Inc. Reports 2011 Second Quarter Results

CALGARY, Aug. 4, 2011 /CNW/ –

Overview

Ensign Energy Services Inc. (“Ensign” or the “Company”) recorded revenue of $334.4 million in the three months ended June 30, 2011, an increase of 30 percent from revenue of $257.6 million recorded in the second quarter of the prior year.  The Company recorded revenue of $836.7 million for the six months ended June 30, 2011, a 37 percent increase from revenue of $610.4 million for the six months ended June 30, 2010.  EBITDA (defined as earnings before interest, taxes, depreciation, amortization, and share-based compensation expense) totaled $65.1 million ($0.43 per common share) in the second quarter of 2011, 38 percent higher than EBITDA of $47.2 million ($0.31 per common share) in the second quarter of 2010.  EBITDA for the six months ended June 30, 2011 totaled $235.4 million ($1.54 per common share), an increase of 67 percent from EBITDA of $140.9 million ($0.92 per common share) recorded in the first six months of 2010.  Adjusted net income (defined as net income before share-based compensation expense tax-effected using an income tax rate of 35%) totaled $18.9 million ($0.12 per common share) in the second quarter of 2011, 89 percent higher than Adjusted net income of $10.0 million ($0.07 per common share) in the second quarter of 2010.  Adjusted net income for the six months ended June 30, 2011 totaled $106.6 million ($0.70 per common share), an increase of 119 percent from Adjusted net income of $48.6 million ($0.32 per common share) recorded in the first six months of 2010.  Net income for the second quarter of 2011 increased slightly over the comparable prior year period to $16.1 million ($0.11 per common share) compared to net income of $16.0 million ($0.10 per common share) for the second quarter of 2010.  Net income for the six months ended June 30, 2011 totaled $95.8 million ($0.63 per common share), an increase of 75 percent from net income of $54.8 million ($0.36 per common share) recorded in the first six months of 2010.  Funds from operations increased 44 percent to $66.4 million ($0.43 per common share) in the second quarter of 2011 from $46.0 million ($0.30 per common share) in the second quarter of the prior year.  Funds from operations for the first six months of 2011 increased 66 percent to $220.9 million ($1.44 per common share) from $132.8 million ($0.87 per common share) recorded in the same period in 2010.

Increased demand for oilfield services in the second quarter and first half of 2011 compared to similar periods in the prior year resulted in improved operating and financial results from the Company’s Canadian and United States operations.  This was in spite of the “spring break up” and wet weather setbacks experienced by the Company’s Canadian segment during the second quarter of 2011.  The Company’s international financial contributions in the first half of 2011 also improved slightly from the prior year despite the negative translational impact from a weakening United States dollar.

Working capital at June 30, 2011 was $83.1 million compared to $84.5 million at December 31, 2010.  A continuing focus on maintaining strong liquidity and selective use of debt, combined with improved levels of funds generated from operations, helps to support the Company’s growth initiatives, including the new build program, which upon completion will deliver an additional 19 new state-of-the-art drilling rigs and 12 well servicing rigs over the next 12 to 15 months.

FINANCIAL AND OPERATING HIGHLIGHTS

($ thousands, except per share data and operating information)

											Three months ended June 30						Six months ended June 30
											2011		2010		% Change		2011		2010		% Change
Revenue											334,445		257,578		30		836,656		610,417		37
EBITDA 1											65,143		47,186		38		235,406		140,931		67
EBITDA per share 1
	Basic										$0.43		$0.31		39		$1.54		$0.92		67
	Diluted										$0.43		$0.31		39		$1.54		$0.92		67
Adjusted net income 2											18,941		10,029		89		106,641		48,643		119
Adjusted net income per share 2
	Basic										$0.12		$0.07		71		$0.70		$0.32		119
	Diluted										$0.12		$0.07		71		$0.70		$0.32		119
Net income											16,073		16,001		–		95,764		54,847		75
Net income per share
	Basic										$0.11		$0.10		10		$0.63		$0.36		75
	Diluted										$0.11		$0.10		10		$0.63		$0.36		75
Funds from operations 3											66,395		46,027		44		220,936		132,759		66
Funds from operations per share 3
	Basic										$0.43		$0.30		43		$1.44		$0.87		66
	Diluted										$0.43		$0.30		43		$1.44		$0.87		66
Weighted average shares – basic (000s)											152,891		152,877		–		152,920		152,897		–
Weighted average shares – diluted (000s)											152,954		153,278		–		152,934		153,365		–
Drilling
	Number of marketed rigs
				Canada
					Conventional						128		146		(12)		128		146		(12)
					Oil sands coring/coal bed methane						38		28		36		38		28		36
				United States							85		80		6		85		80		6
				International 4							59		58		2		59		58		2
Operating days
	Canada 5										2,380		2,036		17		10,307		8,107		27
	United States										4,412		3,760		17		8,678		7,022		24
	International										2,604		2,480		5		5,269		4,708		12
Well Servicing
	Number of marketed rigs
				Canada							101		112		(10)		101		112		(10)
				United States							31		20		55		31		20		55
	Operating hours
				Canada							28,960		25,504		14		68,481		63,784		7
				United States							18,907		12,041		57		36,357		23,545		54

1. EBITDA is defined as “income before interest expense, income taxes, depreciation and share-based compensation (recovery)/expense”.  Management believes that in addition to net income, EBITDA and 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 or how the results are impacted by the accounting standards associated with the Company’s share-based compensation plans.  EBITDA and 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 (recovery)/expense, tax-effected using an income tax rate of 35%”.  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 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 provides additional information regarding the Company’s liquidity and its ability to generate funds to finance its operations.  Management utilizes these measures to assess the Company’s ability to finance operating activities and capital expenditures.  Funds from operations and funds from operations per share are not measures that have any standardized meaning prescribed by International Financial Reporting Standards and accordingly may not be comparable to similar measures used by other companies.
4. Includes workover rigs.
5. Excludes coring rig operating days.

Revenue and Oilfield Services Expense

			Three months ended June 30						Six months ended June 30
($ thousands)			2011		2010		% Change		2011		2010		% Change
Revenue
	Canada		93,093		66,799		39		368,306		245,677		50
	United States		153,189		115,635		32		301,653		219,590		37
	International		88,163		75,144		17		166,697		145,150		15
			334,445		257,578		30		836,656		610,417		37
Oilfield services expense			254,560		196,237		30		584,880		439,519		33
			79,885		61,341		30		251,776		170,898		47
Gross margin			23.9%		23.8%				30.1%		28.0%

Revenue recorded in the second quarter of 2011 totaled $334.4 million, an increase of 30 percent over the second quarter of 2010.  Revenue was $836.7 million for the six months ended June 30, 2011, a 37 percent increase from $610.4 million for the six months ended June 30, 2010.  As a percentage of revenue, gross margin for the second quarter of 2011 increased slightly to 23.9 percent (2010 – 23.8 percent) and 30.1 percent for the six months ended June 30, 2011 (2010 – 28.0 percent).

Higher activity levels in the North American market led to increases in revenues in both the three and six months ended June 30, 2011.  Increased demand allowed for improvements in day rates in 2011 as pricing pressures arising from the excess supply of oilfield services equipment experienced over the past two years subsided in the first half of 2011.  Despite challenges in the Company’s international segment, revenues were up slightly for the three and six months ended June 30, 2011 compared to similar periods in the prior year.  The Company’s Latin American operations continue to improve as demand for oilfield services increases, while operations in the eastern hemisphere continue to be held back by temporary weather setbacks in Australia and ongoing geopolitical issues in parts of the Middle East and North Africa.

Gross margin increased to $79.9 million (23.9 percent of revenue) for the second quarter of 2011 compared with gross margin of $61.3 million (23.8 percent of revenue) for the second quarter of 2010.  Similarly, gross margin increased to $251.8 million (30.1 percent of revenue) in the first six months of 2011 compared to $170.9 million (28.0 percent of revenue) for the same period in 2010.  Improved margins are a result of the increased demand for oilfield services in 2011.  Partially offsetting the improved level of spot prices in the second quarter is the impact of major maintenance expenditures, particularly in Canada, as the Company continues to expense such costs as incurred. Such expenditures are often incurred during the “spring break up” period in anticipation of higher levels of demand for oilfield services through the remainder of the year.

Canadian Oilfield Services

Canadian operating and financial results are affected by seasonality in the second quarter; when “spring break-up” and wet weather conditions hinder the Company’s ability to move heavy equipment and access Canadian drilling locations.  In 2011, a longer than normal wet weather season hindered operating activity levels in this segment, however, the impact on operating results was offset by improvements in day rates.  Revenue increased 39 percent to $93.1 million for the three months ended June 30, 2011, from $66.8 million for the three months ended June 30, 2010.  For the six months ended June 30, 2011, revenue increased 50 percent to $368.3 million compared to $245.7 million for the same period in 2010.  In the second quarter of 2011, Canadian revenues accounted for 28 percent of total revenue (2010 – 26 percent), and during the six months ended June 30, 2011, Canadian revenues were 44 percent of total revenue (2010 – 40 percent).

Drilling days recorded by the Company’s Canadian operations in the second quarter of 2011 increased 17 percent from the comparable quarter in the prior year.  During the six months ended June 30, 2011, drilling days increased 27 percent from the same period of the prior year.  Similarly, Canadian well servicing hours increased by 14 percent in the second quarter of 2011 and by seven percent in the six months ended June 30, 2011 compared to the corresponding periods in the prior year.

United States Oilfield Services

The Company’s United States operations recorded revenue of $153.2 million in the second quarter of 2011, a 32 percent increase from the $115.6 million recorded in the corresponding period of the prior year.  During the six months ended June 30, 2011, revenue of $301.7 million was recorded, an increase of 37 percent from the $219.6 million recorded in the six months ended June 30, 2010.  The increases in revenue in the three and six months ended June 30, 2011 were negatively impacted on translation by the weakening of the United States dollar, which decreased approximately six percent relative to the Canadian dollar in the second quarter of 2011 compared to the second quarter of 2010.  The United States operations accounted for 46 percent of the Company’s revenue in the second quarter of 2011 (2010 – 45 percent) and 36 percent of total revenue in the six months ended June 30, 2011 (2010 – 36 percent).

Higher activity levels were the main driver of increased revenue in the three and six months ended June 30, 2011 as compared to the same periods in 2010.  The number of drilling days recorded by the Company’s United States operations in the second quarter of 2011 increased 17 percent from the same period of the prior year.  Drilling days for the first six months of 2011 increased 24 percent from the comparable period in the prior year.  United States well servicing hours in the second quarter of 2011 were up 57 percent compared to the prior year and well servicing hours for the first half of 2011 were up 54 percent compared to the first half of 2010.

The increase in United States operating activity experienced by the Company is mainly due to stronger demand for oilfield services as well as additional oilfield services equipment being added to the Company’s United States fleet in connection with the Company’s new build program.  The Company mobilized three additional drilling rigs and five additional well servicing rigs during the second quarter of 2011, bringing the total to five drilling rigs and seven well servicing rigs added to the United States fleet during the first half of 2011.

International Oilfield Services

The Company’s international operations recorded revenue of $88.2 million in the second quarter of 2011, a 17 percent increase from $75.1 million recorded in the corresponding period of the prior year.  International revenues for the six months ended June 30, 2011 increased by 15 percent to $166.7 million from $145.1 million recorded for the six months ended June 30, 2010.  International operations contributed 26 percent of the Company’s revenue in the second quarter of 2011 (2010 – 29 percent) and 20 percent of the Company’s revenue in the first half of 2011 (2010 – 24 percent).

International operating days for the three months ended June 30, 2011 totaled 2,604 days compared with 2,480 days in the second quarter of 2010, an increase of five percent.  For the six months ended June 30, 2011 international operating days totaled 5,269 days compared with 4,708 days in the same period in 2010, an increase of 12 percent.  Increases in the Company’s Latin American operations were offset by challenges in the eastern hemisphere as the Company continued to see the impacts of temporary weather setbacks in Australia and regional geopolitical issues in parts of the Middle East and North Africa.  In addition, the weakening of the United States dollar relative to the Canadian dollar negatively impacted operating results on translation.

Certain of the Company’s assets located in areas of the Middle East and North Africa that are subject to civil unrest have not worked since early 2011.  Based on recent physical inspections, the assets remain intact; however, there is uncertainty as to when operations may resume.  The carrying value of these assets is approximately $40.0 million and at this time, the Company does not believe that any impairment has occurred.

Depreciation

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Depreciation	35,081		29,853		18		75,859		63,357		20

The Company uses the unit of production method of calculating depreciation for the majority of its property and equipment.  Depreciation expense totaled $35.1 million for the second quarter of 2011 compared with $29.9 million for the second quarter of 2010.  Depreciation expense for the first six months of 2011 was $75.9 million, an increase of 20 percent over the $63.4 million recorded in the first six months of 2010.  The increase in depreciation expense is consistent with the increase in the operating activity levels during the three and six months ended June 30, 2011 compared to the operating activity levels in the same periods of 2010.

General and Administrative Expense

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
General and administrative	13,190		14,842		(11)		28,206		27,787		2
% of revenue	3.9%		5.8%				3.4%		4.6%

General and administrative expense decreased 11 percent to $13.2 million (3.9 percent of revenue) for the second quarter of 2011 compared with $14.8 million (5.8 percent of revenue) for the second quarter of 2010.  For the six months ended June 30, 2011, general and administrative expense totaled $28.2 million (3.4 percent of revenue) compared with $27.8 million (4.6 percent of revenue) recorded in the six months ended June 30, 2010, an increase of two percent.

Share-Based Compensation Expense (Recovery)

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Share-based compensation	4,412		(9,187)		(148)		16,734		(9,545)		(275)

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, 2011, share-based compensation expense was $4.4 million compared with a recovery of $9.2 million recorded in the second quarter of 2010.  For the six months ended June 30, 2011, share-based compensation expense was $16.7 million compared with a recovery of $9.5 million for the six months ended June 30, 2010.  The increase in share-based compensation expense in the three and six months ended June 30, 2011 arises from the fair value accounting under International Financial Reporting Standards and an increase in the price of the Company’s common shares during these periods.  The closing price of the Company’s common shares was $19.12 at June 30, 2011 ($12.52 at June 30, 2010), compared with $18.26 at March 31, 2011 ($14.70 at March 31, 2010) and $15.03 at December 31, 2010 ($15.00 at December 31, 2009).

Interest Expense

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Interest expense	341		563		(39)		760		1,304		(42)
Interest income	(160)		(118)		36		(295)		(216)		37
	181		445		(59)		465		1,088		(57)

Interest is incurred on the Company’s $200.0 million global revolving credit facility at prime interest rates or bankers’ acceptance rates/LIBOR plus 0.75 percent.

Foreign Exchange and Other

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Foreign exchange and other	1,552		(687)		(326)		(11,836)		2,180		(643)

Included in this amount is a foreign exchange gain on the conversion of the Australian operations from Australian dollars to United States dollars.  The Australian currency strengthened against the United States dollar during the three and six months ended June 30, 2011, but weakened during the first half of 2010.

Income Taxes

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Current income tax	(105)		1,673		(106)		16,155		8,637		87
Deferred income tax	9,501		8,401		13		30,429		22,547		35
	9,396		10,074		(7)		46,584		31,184		49
	36.9%		38.6%				32.7%		36.2%

The effective income tax rate for the three months ended June 30, 2011 was 36.9 percent compared with 38.6 percent for the three months ended June 30, 2010.  The effective income tax rate for the six months ended June 30, 2011 was 32.7 percent compared with 36.2 percent for the six months ended June 30, 2010.  The slight decrease in the effective income tax rate in the current quarter is due to a higher proportion of taxable income earned in Canada, compared with the prior comparative quarter. The effective income tax rate for the first six months of 2010 was higher than the first six months of 2011, due to the tax effects of the currency devaluation in Venezuela in early January 2010 and a greater proportion of taxable income that had been generated in higher tax rate jurisdictions during that period.

Financial Position

The following chart outlines significant changes in the consolidated statements of financial position from December 31, 2010 to June 30, 2011:

($ thousands)		Change		Explanation
Cash and cash equivalents		20,687		See consolidated statements of cash flows.
Accounts receivable		(50,523)		Decrease is due to reduced operating activity in Canada in the second quarter of 2011 compared to the fourth quarter of 2010 as a result of “spring break-up” and wet weather.
Inventories and other		9,066		Increase due to additional inventory and other, offset by normal course use of consumables.
Property and equipment		80,134		Increase due to the new build construction program offset by the impact of foreign exchange fluctuations on the consolidation of the Company’s foreign subsidiaries and depreciation.
Note receivable		40		Increase due to revaluation of the note to fair value offset by partial collection of the note receivable.
Accounts payable and accruals		(21,573)		Decrease is due to reduced operating activity in Canada in the second quarter of 2011 compared to the fourth quarter of 2010.
Operating lines of credit		(8,681)		Decrease due to net repayments of the operating lines of credit.
Share-based compensation		16,593		Increase due to increase in the price of the Company’s common shares as at June 30, 2011 compared with December 31, 2010.
Income taxes payable		930		Increase due to the current income tax provision for the period, net of tax instalments.
Dividends payable		8		Dividends payable is consistent with prior period.
Deferred income taxes		29,818		Increase primarily due to accelerated tax depreciation of assets added in the United States during the current year and partnership timing differences in Canada.
Shareholders’ equity		42,309		Increase due to the net income for the period offset by the impact of foreign exchange rate fluctuations on net assets of foreign subsidiaries, and the amount of dividends declared in the period.

Funds from Operations and Working Capital

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Funds from operations	66,395		46,027		44		220,936		132,759		66
Funds from operations per share	$ 0.43		$ 0.30		43		$1.44		$ 0.87		66
Working capital 1	83,131		84,516		(2)		83,131		84,516		(2)

1. Comparative figure as of December 31, 2010.

During the three months ended June 30, 2011, the Company generated funds from operations of $66.4 million ($0.43 per common share) compared with funds from operations of $46.0 million ($0.30 per common share) for the three months ended June 30, 2010, an increase of 44 percent.  For the six months ended June 30, 2011, the Company generated funds from operations of $220.9 million ($1.44 per common share), an increase of 66 percent over funds from operations of $132.8 million ($0.87 per common share) generated in the first half of 2010.  At June 30, 2011, the Company’s working capital totaled $83.1 million, compared to $84.5 million at December 31, 2010, a decrease of two percent. The increases in funds generated from operations are a direct result of the increased demand for oilfield services, primarily in North America, in the three and six months ended June 30, 2011 over the comparable periods of 2010 as well as the expansion of the Company’s fleet as a result of the new build program.

The Company currently has no long-term debt and continues to have strong liquidity as a result of positive working capital.  The strong working capital position, combined with future and currently available credit facilities are expected to provide sufficient support for the Company’s capital expansion initiatives and future operations.

Investing Activities

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Purchase of property and equipment	(114,326)		(64,644)		77		(181,009)		(91,367)		98
Net change in non-cash working capital	14,380		(10,373)		(239)		3,698		(20,587)		(118)
Cash used in investing activities	(99,946)		(75,017)		33		(177,311)		(111,954)		58

Purchases of property and equipment during the second quarter of 2011 totaled $114.3 million (2010 – $64.6 million).  For the six months ended June 30, 2011, purchases of property and equipment totaled $181.0 million (2010 – $91.4 million).  The purchases of property and equipment relates predominantly to expenditures made pursuant to the Company’s ongoing new build program, as well as other capital expenditures.

Financing Activities

	Three months ended June 30						Six months ended June 30
($ thousands)	2011		2010		% Change		2011		2010		% Change
Net increase (decrease) in operating lines of credit	10,614		(9,554)		(211)		(3,880)		(14,174)		(73)
Purchase of shares held in trust	(4,247)		(454)		835		(4,911)		(1,080)		355
Dividends	(14,555)		(13,408)		9		(29,110)		(26,815)		9
Net change in non-cash working capital	(65)		198		(133)		(32)		296		(111)
Cash used in financing activities	(8,253)		(23,218)		(64)		(37,933)		(41,773)		(9)

The Company’s available operating lines of credit consist of a $200.0 million global revolving credit facility (the “Global Facility”) and a $10.0 million Canadian based revolving credit facility (the “Canadian Facility”). The Global Facility is available to the Company and any of its wholly-owned subsidiaries, and may be drawn in Canadian, United States or Australian dollars, up to the equivalent value of $200.0 million Canadian dollars. The amount available under the Canadian Facility is $10.0 million or the equivalent United States dollars.

Net repayments of the operating lines of credit were the result of operating cash flows generated by the Company’s United States and international divisions in excess of capital expenditure requirements.  As of June 30, 2011, the operating lines of credit are primarily being used to fund the completion of the most recent new build program and to support international operations.

On May 18, 2011, the Company announced its intent to file with the Toronto Stock Exchange a Normal Course Issuer Bid (the “Bid”) to acquire for cancellation up to five percent of the Company’s issued and outstanding common shares. On June 3, 2011, the Company received approval from the Toronto Stock Exchange to purchase up to 7,660,512 common shares for cancellation.  The Bid commenced on June 7, 2011 and will terminate on June 6, 2012 or such earlier time as the Bid is completed or terminated at the option of the Company.  As at June 30, 2011, no common shares have been purchased and cancelled pursuant to the Bid.

The Company previously had a Bid that commenced on June 1, 2010 and terminated on May 31, 2011, under which the Company purchased and cancelled 200,000 common shares.

The Board of Directors of the Company has declared a third quarter dividend of $0.095 per common share to be payable October 5, 2011 to all Common Shareholders of record as of September 20, 2011.  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.

Subsequent Event

On July 20, 2011 the Company announced that it had entered into a definitive agreement to acquire the land drilling division of Rowan Companies, Inc. (“Rowan Land Drilling”), for a purchase price of USD $510 million plus working capital, subject to certain closing adjustments, payable in cash on closing.  The transaction is expected to close following the receipt of all necessary regulatory approvals.  Rowan Land Drilling owns and operates 30 deeper capacity electric land drilling rigs in the southern United States.  The purchase price will be funded through the Company’s existing working capital, available lines of credit and a new term facility of up to USD $400 million.

The acquisition of Rowan Land Drilling will provide the Company with a substantial presence in the southern United States, complementing the Company’s existing operations in the Rocky Mountain region and California.  The addition of Rowan Land Drilling enhances the Company’s ability to capitalize on strengthening industry fundamentals in the United States and to access a diverse customer base in the increasingly important oil and natural gas resource plays in the southern United States.

New Builds

During the first half of 2011, the Company commissioned five new ADR^TM style drilling rigs and seven well servicing rigs in the United States and two well servicing rigs in Canada.

The remaining new build estimated delivery schedule, by geographic area, is as follows:

		Estimated Delivery Date
		Q3-2011		Q4-2011		Q1-2012		Q2-2012		Q3-2012		Total
ADR’s
	Canada	1		5		3		–		1		10
	United States	4		2		2		–		–		8
	International	1		–		–		–		–		1
Total		6		7		5		–		1		19
Well servicing
	Canada	2		–		–		–		–		2
	United States	6		2		2		–		–		10
Total		8		2		2		–		–		12

Outlook

The general outlook for oilfield services remains cautiously positive in spite of potential negative pressures from a slow-down in the economic recovery, particularly in the United States, and continuing concerns over United States and Eurozone debt issues.  While these factors weigh on overall levels of demand for energy, the market appears to be focused on the supply side of the equation.  Continuing unrest in key energy producing regions of Africa and the Middle East has resulted in robust prices for crude oil.  This favorable pricing has increased demand for oilfield services in many of the areas serviced by the Company that have less geopolitical risk than certain other energy exporting countries.

In early June, the Canadian Association of Oilwell Drilling Contractors (“CAODC”) revised its forecast of drilling operating days for 2011 to 154,300, an increase of 20 percent over its earlier forecast from October 2010. The CAODC now expects 13,128 wells to be completed in 2011, an increase of 11 percent from its previous estimate. Despite normal seasonal restrictions to road access for the Company’s equipment and unusually wet weather conditions during the “spring break-up” quarter, the Company’s Canadian operations generated 17 percent more drilling days during the second quarter in comparison to the number of drilling days generated in the comparative quarter last year.  Third quarter activity levels are expected to reflect pent up demand for oilfield services due to the negative impact of wet weather conditions in the second quarter.

The Company’s United States operations also surpassed last year’s second quarter drilling days by 17 percent, attributable to strong activity levels in crude oil and liquids-rich resource plays. NYMEX natural gas prices have increased slightly over those in the first quarter of 2011 and similarly against the second quarter of 2010, but continue to disappoint. The positive driver for activity continues to be strong crude oil prices and positive economics in liquids-rich natural gas plays, as well as those activities which retain land holdings for future development. The net result has been continued growth in the number of rigs drilling for crude oil, while the number of rigs drilling for natural gas has been relatively flat since early March 2011.  Going forward, the Company expects more of the same from its soon to be expanded United States operations.

The Company’s international operations continue to experience challenges in certain regions due to weather and geopolitical issues. Overall, the Company’s international operations had a five percent increase in operating days in the current quarter, when compared to the comparative quarter last year.  While there continues to be challenges with international operations in certain areas of Africa and Latin America, the Company remains hopeful that such matters will come to a positive resolution and in the interim continues to focus on its core international markets.

The recently disclosed definitive agreement to acquire Rowan Land Drilling and its fleet of 30 deeper capacity electric drilling rigs represents an important entry into the southern United States market for the Company.  The Rowan Land Drilling division is active in many of the key resource plays and, upon closing of the transaction (expected within the next 60 days upon receipt of regulatory approvals), will fill a gap in the Company’s access to such plays.  This proposed transaction transforms the Company from being considered a regional oilfield service provider to being a national player in the United States market with a marketed fleet of 115 drilling rigs.  The operational excellence of the Rowan Land Drilling employees will provide instant expertise in some key resource plays in a very important energy producing region of the United States.  The Company is very excited about this acquisition and is keen to welcome the Rowan Land Drilling employees to the Ensign team.

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 and the ability of oil and natural gas companies to 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 2011 results at 11:00 a.m. MDT (1:00 p.m. EDT) on Friday, August 5, 2011.  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 12, 2011 by dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside Toronto) and entering the reservation number 82249979.  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
			2011			2010
(Unaudited, in thousands of Canadian dollars)
Assets
Current Assets
	Cash and cash equivalents	$	110,207		$	89,520
	Accounts receivable		280,614			331,137
	Inventories and other		76,917			67,851
			467,738			488,508
Property and equipment			1,810,523			1,730,389
Note receivable			6,631			6,591
		$	2,284,892		$	2,225,488
Liabilities
Current Liabilities
	Accounts payable and accruals	$	191,511		$	213,084
	Operating lines of credit		150,654			159,335
	Income taxes payable		6,728			5,798
	Dividends payable		14,555			14,547
	Share-based compensation		21,159			11,228
			384,607			403,992
Share-based compensation			10,897			4,235
Deferred income taxes			298,924			269,106
			694,428			677,333
Shareholders’ Equity
	Share capital		165,438			168,206
	Contributed surplus		3,076			2,929
	Foreign currency translation reserve		(44,141)			(22,417)
	Retained earnings		1,466,091			1,399,437
			1,590,464			1,548,155
		$	2,284,892		$	2,225,488

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
				2011			2010			2011			2010
Revenue			$	334,445		$	257,578		$	836,656		$	610,417
Expenses
	Oilfield services			254,560			196,237			584,880			439,519
	Depreciation			35,081			29,853			75,859			63,357
	General and administrative			13,190			14,842			28,206			27,787
	Share-based compensation			4,412			(9,187)			16,734			(9,545)
	Foreign exchange and other			1,552			(687)			(11,836)			2,180
				308,795			231,058			693,843			523,298
Income before interest and income taxes				25,650			26,520			142,813			87,119
Interest income				160			118			295			216
Interest expense				(341)			(563)			(760)			(1,304)
Income before income taxes				25,469			26,075			142,348			86,031
Income taxes
	Current tax			(105)			1,673			16,155			8,637
	Deferred tax			9,501			8,401			30,429			22,547
				9,396			10,074			46,584			31,184
Net income			$	16,073		$	16,001		$	95,764		$	54,847
Net income per share
	Basic		$	0.11		$	0.10		$	0.63		$	0.36
	Diluted		$	0.11		$	0.10		$	0.63		$	0.36

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
				2011			2010			2011			2010
Cash provided by (used in)
Operating activities
Net income			$	16,073		$	16,001		$	95,764		$	54,847
Items not affecting cash
	Depreciation			35,081			29,853			75,859			63,357
	Share-based compensation, net of cash paid			5,740			(8,228)			18,884			(7,992)
	Deferred income tax			9,501			8,401			30,429			22,547
Net change in non-cash working capital				109,572			91,199			15,298			34,860
				175,967			137,226			236,234			167,619
Investing activities
Purchase of property and equipment				(114,326)			(64,644)			(181,009)			(91,367)
Net change in non-cash working capital				14,380			(10,373)			3,698			(20,587)
				(99,946)			(75,017)			(177,311)			(111,954)
Financing activities
Net increase (decrease) in operating lines of credit				10,614			(9,554)			(3,880)			(14,174)
Purchase of shares held in trust				(4,247)			(454)			(4,911)			(1,080)
Dividends				(14,555)			(13,408)			(29,110)			(26,815)
Net change in non-cash working capital				(65)			198			(32)			296
				(8,253)			(23,218)			(37,933)			(41,773)
Net increase in cash and cash equivalents				67,768			38,991			20,990			13,892
	Effects of foreign exchange on cash and cash equivalents			2,268			2,587			(303)			1,433
Cash and cash equivalents
	Beginning of period			40,171			108,900			89,520			135,153
	End of period		$	110,207		$	150,478		$	110,207		$	150,478
Supplemental information
	Interest paid		$	365		$	710		$	793		$	1,330
	Income taxes paid		$	9,162		$	2,613		$	15,225		$	3,742