Ensign Energy Services Inc. Reports 2021 Third Quarter Results

05 Nov Ensign Energy Services Inc. Reports 2021 Third Quarter Results

TORONTO, Nov. 5, 2021 /CNW/ –

THIRD QUARTER HIGHLIGHTS

• Revenue for the third quarter of 2021 was $268.6 million, a 71 percent increase from the third quarter of 2020 revenue of $156.9 million.
• Revenue by geographic area:
• Canada – $74.5 million, 28 percent of total;
• United States – $140.3 million, 52 percent of total; and
• International – $53.8 million, 20 percent of total.
• Canadian drilling recorded 2,846 operating days in the third quarter of 2021, an increase of 2,160 drilling days from 686 operating days in the third quarter of 2020. Canadian well servicing recorded 9,316 operating hours in the third quarter of 2021, a 68 percent increase from 5,556 operating hours in the third quarter of 2020.
• United States drilling recorded 3,074 operating days in the third quarter of 2021, an increase of 1,637 operating days from 1,437 operating days in the third quarter of 2020. United States well servicing recorded 32,452 operating hours in the third quarter of 2021, a 50 percent increase from 21,682 operating hours in the third quarter of 2020.
• International drilling recorded 929 operating days in the third quarter of 2021, an 18 percent increase from 790 operating days recorded in the third quarter of 2020.
• Adjusted EBITDA for the third quarter of 2021 was $59.8 million, a 51 percent increase from Adjusted EBITDA of $39.5 million for the third quarter of 2020.
• Funds flow from operations for the third quarter of 2021 increased 89 percent to $56.2 million from $29.8 million in the third quarter of the prior year.
• During the third quarter of 2021, the Company received a $5.3 million Canada Emergency Wage Subsidy ("CEWS") payment from the Government of Canada. The wage subsidy received contributed to the increase in Adjusted EBITDA and offset the decrease in net loss attributable to common shareholders.
• Net capital purchases for the third quarter of 2021 were $134.3 million. During the third quarter of 2021, the Company acquired a fleet of 35 land-based drilling rigs located in Canada, as well as related equipment and certain real property, for $117.9 million. The remaining purchases consist of $9.5 million in upgrade capital, $8.5 million in maintenance capital, offset by proceeds of $1.7 million from equipment disposals. Planned capital expenditures for the 2021 year are expected to be between $60.0 million to $65.0 million, of which approximately $20.0 million will be related to upgrade capital.
• During the third quarter of 2021, the Company recognized $3.3 million of standby revenue and $5.3 million of contract cancellation or early termination fees.

OVERVIEW

Revenue for the third quarter of 2021 was $268.6 million, an increase of 71 percent from revenue for the third quarter of 2020 of $156.9 million. Revenue for the nine months ended September 30, 2021 was $699.4 million, a decrease of five percent from revenue for the nine months ended September 30, 2020 of $735.6 million.

Adjusted EBITDA totaled $59.8 million ($0.37 per common share) in the third quarter of 2021, 51 percent higher than Adjusted EBITDA of $39.5 million  ($0.24 per common share) in the third quarter of 2020. For the first nine months ended September 30, 2021, Adjusted EBITDA totaled $155.3 million ($0.96 per common share), 18 percent lower than Adjusted EBITDA of $188.8 million ($1.16 per common share) in the first nine months ended September 30, 2020.

Net loss attributable to common shareholders for the third quarter of 2021 was $34.4 million ($0.21 per common share) compared to a net loss attributable to common shareholders of $36.1 million ($0.23 per common share) for the third quarter of 2020. Net loss attributable to common shareholders for the nine months ended September 30, 2021 was $130.2 million ($0.80 per common share), compared to a net loss attributable to common shareholders of $82.4 million ($0.51 per common share) for the nine months ended September 30, 2020.

During the third quarter of 2021, the Company acquired a fleet of 35 land-based drilling rigs located in Canada, as well as related equipment and certain real property, for $117.9 million. The Company funded the purchase price with cash on hand and available Credit Facilities.

During the first three and nine months ended September 30, 2021, the Company received $5.3 million and $15.1 million of the Canada Emergency Wage Subsidy ("CEWS") from the Government of Canada respectively. The wage subsidies received partially offset the decrease in Adjusted EBITDA and net loss attributable to common shareholders.

Funds flow from operations increased 89 percent to $56.2 million ($0.35 per common share) in the third quarter of 2021 compared to $29.8 million ($0.18 per common share) in the third quarter of the prior year. Funds flow from operations increased two percent to $144.1 million ($0.89 per common share) for the nine months ended September 30, 2021 compared to $140.6 million ($0.86 per common share) for the nine months ended September 30, 2020.

Through the third quarter of 2021, macro-economic conditions impacting the oil and natural gas industry continued its effort to recover from the significant fall out of the novel coronavirus ("COVID-19") pandemic.  Rising vaccination rates continue to support the easing of travel and social restrictions, increasing global economic activity and mobility. While still below pre-COVID-19 pandemic levels, the easing of restrictions in combination with rising global economic growth has resulted in a recovering of demand for crude oil and natural gas. Tight crude oil and natural gas supply in combination with rising demand has resulted in increased global commodity prices for oil and natural gas producers, driving oilfield services activity improvements year-over-year in the third quarter of 2021.

While activity continued to improve from 2020 lows during the third quarter of 2021, industry operating conditions are still recovering from the impacts of the COVID-19 pandemic. Over the short term, a degree of uncertainty remains regarding the macro-economic conditions that will impact our business including the resolution of the COVID-19 pandemic, setbacks to COVID-19 vaccine efficacy, virus mutations, and other factors that may impact the demand for crude oil and natural gas, commodity prices, and the demand for oilfield services.

The Company’s operating days were higher in the three and nine months ended September 30, 2021, when compared to the same periods in 2020 as a result of global activity improvements and the Company’s acquisition of 35 land based drilling rigs in Canada. The weakening year-over-year of the United States dollar against the Canadian dollar partially offset the United States and international financial results on translation to Canadian dollars. The average United States dollar exchange rate was $1.25 for the nine months ended September 30, 2021 (2020 – $1.35) versus the Canadian dollar, a decrease of seven percent, compared to the same period of 2020.  

Working capital at September 30, 2021 was a surplus of $73.9 million, compared to a surplus of $98.6 million at December 31, 2020. The Company’s available liquidity, consisting of cash and available borrowings under its $900.0 million revolving credit facility (the "Credit Facility"), was $27.7 million at September 30, 2021. 

This news release contains "forward-looking information and statements" within the meaning of applicable securities legislation. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Advisory Regarding Forward-Looking Statements" later in this news release. This news release contains references to Adjusted EBITDA and Adjusted EBITDA per common share. These measures do not have any standardized meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies. The non-GAAP measures included in this news release should not be considered as an alternative to, or more meaningful than, the IFRS measure from which they are derived or to which they are compared. See "Non-GAAP Measures" later in this news release.

 

 

Revenue for the three months ended September 30, 2021 totaled $268.6 million, an increase of 71 percent from the third quarter of 2020 of $156.9 million. Revenue for the nine months ended September 30, 2021 totaled $699.4 million, a five percent decrease from the nine months ended September 30, 2020.

The increase in total revenue during the third quarter of 2021 was primarily due to the global economic recovery, improving industry fundamentals, and the Company’s acquisition of 35 land based drilling rigs in Canada. The increases in financial results from the Company’s global operations were offset by the negative impact of currency translation, as the United States dollar weakened relative to the Canadian dollar for the first nine months ended September 30, 2021. 

CANADIAN OILFIELD SERVICES

Revenue increased by $52.7 million to $74.5 million for the three months ended September 30, 2021 from $21.8 million for the three months ended September 30, 2020. The Company recorded revenue of $159.4 million in Canada for the nine months ended September 30, 2021, an increase of 17 percent from $136.0 million recorded for the nine months ended September 30, 2020.

Canadian revenue accounted for 28 percent of the Company’s total revenue in the third quarter of 2021 (2020 – 14 percent) and 23 percent (2020 – 18 percent) for the first nine months of 2021. The Company recognized $0.9 million of standby revenue and $4.8 million of early termination revenue in the third quarter of 2021 (2020 – $1.1 million and $nil respectively). During the first nine months of 2021, the Company recognized $3.3 million of standby revenue and $4.8 million of early termination revenue (2020 – $1.6 million and $nil respectively).  

The Company’s Canadian drilling operations recorded 2,846 operating days in the third quarter of 2021, compared to 686 operating days for the third quarter of 2020, an increase of 2,160 operating days. For the nine months ended September 30, 2021, the Company recorded 5,750 operating days compared to 4,165 drilling days for the nine months ended September 30, 2020, an increase of 38 percent. Canadian well servicing hours increased by 3,760 operating hours to 9,316 operating hours in the third quarter of 2021 compared to 5,556 operating hours in the corresponding period of 2020. For the nine months ended September 30, 2021, well servicing hours increased by 24 percent to 26,433 operating hours compared with 21,383 operating hours for the nine months ended September 30, 2020.

The operating and financial results for the Company’s Canadian operations for the first nine months of 2021, were positively impacted by improved industry fundamentals and increasing operational activity that primarily resulted from the Company’s acquisition of 35 land based drilling rigs during the third quarter.  

In addition to the July 29, 2021 acquisition of a fleet of 35 drilling rigs in Canada, the Company moved nine under-utilized drilling rigs into its Canadian operations reserve fleet during the first nine months of 2021.

UNITED STATES OILFIELD SERVICES

The Company’s United States operations recorded revenue of $140.3 million in the third quarter of 2021, an increase of 69 percent from the $83.3 million recorded in the corresponding period of the prior year. During the nine months ended September 30, 2021, revenue of $386.5 million was recorded, a decrease of nine percent from the $426.4 million recorded in the corresponding period of the prior year.

The Company’s United States operations accounted for 52 percent of the Company’s revenue in the third quarter of 2021 (2020 – 53 percent) and 55 percent of the Company’s revenue in the first nine months of 2021 (2020 – 58 percent). In the United States, the Company recognized US $2.0 million of standby revenue and US $0.4 million of contract early termination or cancellation fees in the third quarter of 2021 (2020 – US $2.9 million and US $6.4 million, respectively). The Company recognized US $9.1 million of standby revenue and US $3.5 million of contract cancellation fees in the first nine months of 2021 (2020 – US $7.0 million and US $19.6 million respectively).

Drilling rig operating days increased to 3,074 operating days in the third quarter of 2021 from 1,437 operating days in the third quarter of 2020, and 8,554 operating days in the first nine months of 2021 from 8,791 operating days in the first nine months of 2020. United States well servicing hours, increased by 50 percent in the third quarter of 2021 to 32,452 operating hours from 21,682 operating hours in the third quarter of 2020. For the first nine of 2021, well servicing activity increased 32 percent to 95,497 operating hours from 72,252 operating hours in the first nine months of 2020.

Overall operating and financial results for the Company’s United States operations for the first nine months of 2021 were negatively impacted by the significant effects of the global COVID-19 pandemic, resulting in a decrease in global oil demand and oversupply of oil and natural gas seen in 2020 and earlier this year. Quarter over quarter in 2021, the Company’s United States operation continue to see an increase of activity due to the economic recovery, post the COVID-19 pandemic severity peak. The financial results from the Company’s United States operations were further negatively impacted on the currency translation, as the United States dollar weakened relative to the Canadian dollar for the first nine months of 2021.

During the first nine months of 2021, the Company acquired one well servicing rig and moved 29 under-utilized drilling rigs into its United States reserve fleet.

INTERNATIONAL OILFIELD SERVICES

The Company’s international operations recorded revenue of $53.8 million in the third quarter of 2021, a four percent increase from the  $51.8 million recorded in the corresponding period of the prior year. International revenues for the nine months ended September 30, 2021, decreased 11 percent to $153.5 million from $173.2 million recorded in the nine months ended September 30, 2020. 

The Company’s international operations contributed 20 percent of the total revenue in the third quarter of 2021 (2020 – 33 percent) and 22 percent of the Company’s revenue in the first nine months of 2021 (2020 – 24 percent). There were no standby or contract cancellation fees in the Company’s international operating region in the third quarter of 2021 (2020 – US $0.4 million). The Company recognized US $0.6 million of standby revenue during the first nine months of 2021 (2020 – US $7.5 million).

International operating days for the three months ended September 30, 2021, totaled 929 operating days compared to 790 operating days in the same period of 2020, an increase of 18 percent. For the nine months ended September 30, 2021, international operating days totaled 2,632 operating days compared to 2,922 operating days for the nine months ended September 30, 2020, a decrease of 10 percent. 

Similar to the Company’s United States operations, for the first nine months of 2021, international operating and financial results were also negatively impacted by the COVID-19 pandemic. The financial results from the Company’s international operations were further negatively impacted on the currency translation, as the United States dollar weakened relative to the Canadian dollar for the first nine months of 2021.

During the first nine months of 2021, the Company moved six under-utilized drilling rigs into its international operations reserve fleet.

Depreciation expense totaled $73.3 million for the third quarter of 2021 compared with $96.4 million for the third quarter of 2020, a decrease of 24 percent. Depreciation expense for the first nine months of 2021 decreased by 23 percent, to $214.0 million compared with $278.4 million in the first nine months of 2020. The decrease in depreciation is due to certain operating assets having become fully depreciated whereafter no further depreciation expense is incurred on such assets. Furthermore, the positive translational impact of United States dollar-denominated assets also decreased the depreciation expense. Offsetting the decease is depreciation on the additional 35 drilling rigs acquired in Canada during the third quarter of 2021.

General and administrative expense increased nine percent to $10.0 million (3.7 percent of revenue) for the third quarter of 2021 compared to $9.2 million (5.9 percent of revenue) for the third quarter of 2020. For the nine months ended September 30, 2021, general and administrative expense totaled $28.1 million (4.0 percent of revenue) compared to $31.8 million (4.3 percent of revenue) for the nine months ended September 30, 2020. General and administrative expense decreased as a result of cost saving initiatives implemented in response to the COVID-19 pandemic, the wage subsidy received from the Government of Canada, reductions in personnel, and organizational restructuring.

For the nine months ended September 30, 2021, restructuring costs were $4.2 million (2020 – $11.6 million). Restructuring expense consists of costs relating to the organizational restructuring of the Company due to the significant decline in oilfield services activity as a result of the COVID-19 pandemic.

Included in this amount is the impact of foreign currency fluctuations in the Company’s subsidiaries that have functional currencies other than the Canadian dollar.

There were no repurchases of unsecured Senior Notes ("Senior Notes") in the open market during the third quarter of 2021 (2020 – US $51.2 million).

For nine months ended September 30, 2021, the Company repurchased US $25.7 million (2020 – US $126.0 million) of face value Senior Notes, in the open market, for cancellation and recorded a gain on repurchase of $7.4 million (US $5.9 million) (2020 – $103.6 million).

Interest expense was incurred on the Company’s $900.0 million Credit Facility, US $417.5 million Senior Notes, $37.0 million subordinate convertible debentures (the "Convertible Debentures"), and capital lease obligations. Included in interest expense for the first nine months of 2021, is $0.5 million of accrued interest relating to the Senior Notes, paid in cash as part of the repurchase of the Senior Notes (2020 – $4.4 million).   

Interest expense increased by five percent for the third quarter of 2021 in relation to the 35 newly acquired drilling rigs and related equipment compared to the third quarter of 2020. Interest expense decreased by $10.6 million for the first nine months of 2021 compared to the same period of 2020. The decrease for the first nine months of 2021 is the result of a reduction in overall borrowing. The positive translational impact on United States dollar-denominated debt further decreased interest expense for the quarter.

The Company’s blended interest rate on its outstanding debt for the 2021 year will be approximately seven percent. The current capital structure primarily consisting of the Credit Facility and the Senior Notes allows the Company to utilize funds flow generated to reduce debt in the near term with greater flexibility than a more non-callable weighted capital structure.

The effective income tax rate for the three months ended September 30, 2021 was 16.7 percent compared to 20.6 percent for the three months ended September 30, 2020. The effective income tax rate for the nine months ended September 30, 2021 was 17.6 percent compared to 19.6 percent for the nine months ended September 30, 2020. The effective income tax rate in the first nine months of the current year was lower than the effective income tax rate in the same period of 2020 due to activity levels in foreign tax jurisdictions. 

During the three months ended September 30, 2021, the Company generated funds flow from operations of $56.2 million ($0.35 per common share) compared to funds flow from operations of $29.8 million ($0.18 per common share) for the three months ended September 30, 2020, an increase of 89 percent. For the nine months ended September 30, 2021, the Company generated funds flow from operations of $144.1 million ($0.89 per common share) an increase of two percent from $140.6 million ($0.86 per common share) for the nine months ended September 30, 2020. The increase in funds flow from operations for nine months ended September 30, 2021 compared to the same period of 2020 is due primarily to increased activity as a result of the global economic recovery and improving industry fundamentals.

At September 30, 2021, the Company’s working capital was a surplus of $73.9 million, compared to a working capital surplus of $98.6 million at December 31, 2020. The Company currently expects funds generated by operations, combined with current and future credit facilities, to fully support the Company’s current operating and capital requirements. The Company’s Credit Facility provides for total borrowings of $900.0 million, of which $3.4 million was undrawn and available at September 30, 2021.

 

Net purchases of property and equipment for the third quarter of 2021 totaled $134.3 million (2020  – $3.2 million). Net purchases of property and equipment during the first nine months of 2021 totaled $155.6 million (2020 – $21.8 million). During the third quarter of 2021, the Company acquired a fleet of 35 land-based drilling rigs located in Canada, as well as related equipment and certain real property for $117.9 million. The remaining purchase of property and equipment for the first nine months of 2021 consists of $17.1 million in upgrade capital and $25.2 million in maintenance capital.

The Company’s available bank facilities consist of a $900.0 million Credit Facility, of which $3.4 million was available and undrawn as of September 30, 2021. In addition, the Company has available US $50.0 million secured letter of credit facility, of which US $8.0 million was available as of September 30, 2021.

On March 29, 2021, the Company has amended the terms of the Convertible Debentures to:

1. extend the Maturity Date from January 31, 2022 to May 1, 2023;
2. increase the interest rate from 7.00% to 7.75% per annum; and
3. reduce the Conversion Price from $7.00 to $1.75.

The Company may at any time and from time to time acquire Senior Notes for cancellation by means of open market repurchases or negotiated transactions. The Company is limited in the acquisition and cancellation of the Senior Notes up to $25.0 million under applicable covenants. Senior Notes may be repurchased for redemption in excess of $25.0 million if certain criteria are met. During the nine months ended September 30, 2021, the Company purchased US $25.7 million of face value Senior Notes for cancellation, in the open market for US $19.8 million.

Covenants

The following is a list of the Company’s currently applicable covenants and the calculations as at September 30, 2021:

As at September 30, 2021, the Company was in compliance with all covenants related to the Credit Facility.

The Credit Facility

The Credit Facility agreement, available on SEDAR including amendments, requires that the Company comply with certain covenants including minimum Consolidated EBITDA requirements, Consolidated EBITDA to Consolidated Interest Expense ratio and a Consolidated Senior Debt to Consolidated EBITDA ratio as detailed above.

The Credit Facility also contains certain covenants that place restrictions on the Company’s ability to repurchase or redeem Senior Notes and Convertible Debentures, to create, incur or assume additional indebtedness; change the Company’s primary business; enter into mergers or amalgamations; and dispose of property. In the most recent amendment to the Credit Facility, dated December 31, 2020, the permitted encumbrances including Senior Note repurchases were reduced from $75.0 million to $25.0 million.

The Senior Notes 

The indenture governing the Senior Notes, available on SEDAR, contains certain restrictions and exemptions on the Company’s ability to pay dividends, purchase and redeem shares and subordinated debt of the Company, and make certain restricted investments. Limitations on these restrictions are tempered by the existence of a number of exceptions to the general prohibition, including baskets allowing for restricted payments.

The indenture also restricts the ability to incur additional indebtedness if the Fixed Charge Coverage Ratio determined on a pro forma basis for the most recently ended four fiscal quarter period for which internal financial statements are available is not at least 2.0 to 1.0.  As of September 30, 2021, the Company has not incurred additional indebtedness that would require the Fixed Charge Coverage Ratio to be calculated. As is the case with restricted payments, there are a number of exceptions to this prohibition on the incurrence of indebtedness, including the incurrence of debt under credit facilities up to the greater of $900.0 million or 22.5 percent of the Company’s consolidated tangible assets and of additional secured debt subordinated to the credit facilities up to the greater of US $125.0 million or 4.0 percent of the Company’s consolidated tangible assets.

NEW BUILDS AND MAJOR RETROFITS

During the first nine months of 2021, the Company acquired a fleet of 35 land-based drilling rigs located in Canada as well as related equipment and certain real property for $117.9 million. Furthermore, the Company added one well servicing rig to the United States fleet and moved nine, 29 and six under-utilized drilling rigs to its Canadian, the United States, and international operations reserve fleets respectively.

The Company is currently directing capital expenditures primarily to maintenance capital items and selective upgrades.

OUTLOOK

Industry Overview 

The outlook for oilfield services continues to improve as the crude oil and natural gas industry continues to recover from the adverse impact of the COVID-19 pandemic. Rising vaccination rates globally have aided economic growth and mobility, which has hastened the recovery of crude oil demand. Over the short term, the tight supply of coal and natural gas in certain nations has driven further oil demand growth. Strengthening oil demand coupled with moderated oil supply has resulted in relatively strong global commodity prices over the third quarter of 2021, with the benchmark price of West Texas Intermediate ("WTI") averaging a low of US $68/bbl in August 2021 to an average high of US $82/bbl in October 2021.

We expect vaccine progress and oil demand recovery coupled with a sustained commodity price environment will likely continue to drive oilfield services activity improvements through the remainder of 2021 and into 2022. However, we continue to expect oilfield activity to be moderated by oil and natural gas producers as producers remain committed to conserving capital expenditures, maintaining current production levels and directing cash to balance sheets or shareholder returns. We expect activity may increase in 2022 as producers revisit maintenance production programs and evaluate decline rates and per-well productivity.

Moreover, short-term uncertainty remains regarding the macroeconomic conditions, including commodity price fluctuations, potential setbacks in COVID-19 vaccine deployment or vaccine efficacy, demand for hydrocarbons and OPEC+ production and supply decisions that may impact the short-term demand for oilfield services.

On July 29, 2021, the Company acquired a fleet of 35 land-based drilling rigs located in Canada, as well as related equipment and certain real property for $117.9 million. The Company funded the purchase price with cash on hand and its available Credit Facility. The Company views this acquisition as a strategic and opportunistic transaction, given the asset value, exposure to key and active basins in Canada, enhanced customer mix, and current contract book. 

The Company remains committed to strategic capital allocation and debt retirement. With the aforementioned acquisition of 35 drilling rigs and the ongoing demand for customer supported rig enhancements, the guidance for the Company’s 2021 capital expenditures is estimated to be in the range of $60.0 million to $65.0 million, of which $20.0 million is identified as upgrade and growth capital, that is anticipated to generate incremental adjusted EBITDA.

Canadian Activity   

Canadian activity, representing 23 percent of total revenue year to date, increased over the third quarter due to improving industry conditions and the above-mentioned 35 drilling rig acquisition. We expect activity to improve in the fourth quarter of 2021 and into the first quarter of 2022 as operations enter the winter drilling season with improving industry conditions.

As of November 4, 2021, of our 127 marketed Canadian drilling rigs, approximately 37 percent are engaged under term contracts of various durations. Approximately 47 percent of our contracted rigs have a remaining term of six months or longer, although they may be subject to early termination. 

United States Activity

United States activity, representing 55 percent of total revenue year to date, modestly improved over the third quarter. We expect US activity to remain steady and continue to improve throughout the fourth quarter of 2021 into the first quarter of 2022. 

As of November 4, 2021, of our 93 marketed United States drilling rigs, approximately 49 percent are engaged under term contracts of various durations. Approximately 13 percent of our contracted rigs have a remaining term of six months or longer, although they may be subject to early termination.

International Activity   

International activity, representing 22 percent of total revenue year to date, modestly improved over the third quarter due to timing of the former TDI joint venture acquisition on July 16, 2020. Australia is expected to remain steady to slightly up for the remainder of the year. Operations in Argentina are expected to remain flat at current levels with one rig active. In the Middle East, our operations are expected to remain steady through the fourth quarter with four rigs active.  

As of November 4, 2021, of our 42 marketed international drilling rigs, approximately 31 percent are engaged under term contracts of various durations. Approximately 62 percent of our contracted rigs have a remaining term of six months or longer, although they may be subject to early termination.  

RISK 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, the impact of the COVID-19 virus, the efficacy of the preventative vaccinations, virus mutations, the potential reinstatement COVID-19 mitigation strategies, such as stay-at-home orders and lockdown related restrictions, economic and market conditions, crude oil and natural gas prices, political events, foreign currency fluctuations, weather conditions, the Company’s defense of lawsuits and other claims, and the ability of oil and natural gas companies to pay accounts receivable balances and raise capital or other unforeseen conditions which could ongoing impact on the use of the services supplied by the Company. For a more detailed description of the risk factors and uncertainties that face the Company and the industry in which it operates, refer to the "Risks and Uncertainties" section of our current Management’s Discussion & Analysis ("MD&A") and the section titled "Risk Factors" in our current Annual Information Form.

CONFERENCE CALL

A conference call will be held to discuss the Company’s third quarter 2021 results at 10:00 a.m. MDT (12:00 p.m. EDT) on Friday, November 5, 2021. The conference call number is 1-416-764-8659 (in Toronto) or 1-888-664-6392 (outside Toronto). A taped recording will be available until November 12, 2021 by dialing 1-416-764-8677 (in Toronto) or 1-888-390-0541 (outside Toronto) and entering the reservation number 256948#. A live broadcast may be accessed through the Company’s website at www.ensignenergy.com/presentations.

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

Ensign Energy Services Inc.
Consolidated Statements of Loss

Ensign Energy Services Inc.
Consolidated Statements of Cash Flows

Ensign Energy Services Inc.

Non-GAAP Measures

Adjusted EBITDA, Adjusted EBITDA per common share and Consolidated EBITDA. These measures do not have any standardized meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies. The non-GAAP measures included in this press release should not be considered as an alternative to, or more meaningful than, the IFRS measure from which they are derived or to which they are compared.

Adjusted EBITDA is used by management and investors to analyze the Company’s profitability based on the Company’s principle business activities prior to how these activities are financed, how assets are depreciated, amortized and how the results are taxed in various jurisdictions. Additionally, in order to focus on the core business alone, amounts are removed related to foreign exchange, share-based compensation expense, the sale of assets, restructuring costs, gain on repurchase of unsecured Senior Notes and fair value adjustments on financial assets and liabilities, as the Company does not deem these to relate to its core drilling and well services business. Adjusted EBITDA is not intended to represent net loss as calculated in accordance with IFRS.

Consolidated EBITDA 

Consolidated EBITDA, as defined in the Company’s Credit Facility agreement, is used in determining the Company’s compliance with its covenants. The Consolidated EBITDA is substantially similar to Adjusted EBITDA. Consolidated EBITDA is calculated on a rolling twelve-month basis. 

Working Capital

Working capital is defined as current assets less current liabilities as reported on the consolidated statements of financial position.

ADVISORY REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute forward-looking statements or information (collectively referred to herein as "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements generally can be identified by the words "believe", "anticipate", "expect", "plan", "estimate", "target", "continue", "could", "intend", "may", "potential", "predict", "should", "will", "objective", "project", "forecast", "goal", "guidance", "outlook", "effort", "seeks", "schedule" or other expressions of a similar nature suggesting future outcome or statements regarding an outlook.

Disclosure related to expected future commodity pricing or trends, revenue rates, equipment utilization or operating activity levels, operating costs, capital expenditures and other prospective guidance provided throughout this document, including, but not limited to, information provided in the "Funds Flow from Operations and Working Capital" section regarding the Company’s expectation that funds generated by operations combined with current and future credit facilities will support current operating and capital requirements, information provided in the "New Builds and Major Retrofits" section, information provided in the "Financial Instruments" section regarding Venezuela and information provided in the "Outlook" section regarding the general outlook for the remainder of 2021, are examples of forward-looking statements. These statements are not representations or guarantees of future performance and are subject to certain risks and unforeseen results. The reader should not place undue reliance on forward-looking statements as there can be no assurance that the plans, initiatives, projections, anticipations or expectations upon which they are based will occur.

The forward-looking statements are based on current assumptions, expectations, estimates and projections about the Company and the industries and environments in which the Company operates, which speak only as of the date such statements were made or as of the date of the report or document in which they are contained. These assumptions include, among other things: the fluctuation in oil prices may pressure customers to modify their drilling budgets; the status of current negotiations with the Company’s customers and vendors; customer focus on safety performance; existing term contracts that may not be renewed or are terminated prematurely; the Company’s ability to provide services on a timely basis; successful integration of acquisitions; and the general stability of the economic and political environments in the jurisdictions where we operate.

The forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risk factors include, among others: general economic and business conditions which will, among other things, impact demand for and market prices of the Company’s services and the ability of the Company’s customers to pay accounts receivable balances; volatility of and assumptions regarding crude oil and natural gas commodity prices; fluctuations in currency and interest rates; economic conditions in the countries and regions in which the Company conducts business; political uncertainty and civil unrest; the Company’s ability to implement its business strategy; impact of competition and industry conditions; determinations by OPEC and other countries regarding production levels; changes to laws and regulations; the Company’s defence of lawsuits; availability and cost of labour and other equipment, supplies and services; the Company’s ability to complete its capital programs; operating hazards and other difficulties inherent in the operation of the Company’s oilfield services equipment; availability and cost of financing and insurance; access to credit facilities and debt capital markets; the Company’s ability to amend covenants under the Credit Facility with its Credit Facility syndicate, timing and success of integrating the business and operations of acquired companies; actions by governmental authorities; government regulations and the expenditures required to comply with them (including safety and environmental laws and regulations and the impact of climate change initiatives on capital and operating costs); the adequacy of the Company’s provision for taxes; the impact of, and the Company’s response to, the global COVID-19 pandemic and the success of vaccinations for COVID-19; foreign operations; foreign exchange exposure and interest rate changes; workforce and reliance on key management; technology; seasonality and weather; ability to successfully integrate acquisitions; and the impact thereof upon the business environments in which the Company is or may become engaged; and other circumstances affecting the Company’s business, revenues and expenses.

The Company’s operations and levels of demand for its services have been, and at times in the future may be, affected by political risks and developments, such as expropriation, nationalization, or regime change, and by national, regional and local laws and regulations such as changes in taxes, royalties and other amounts payable to governments or governmental agencies, environmental protection regulations, the global COVID-19 pandemic, the potential reinstatement or removal of COVID-19 mitigation strategies, such as stay-at-home orders and lockdown related restrictions, and the impact thereof upon the Company, its customers and its business. Should one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results from operations may vary in material respects from those expressed or implied by the forward-looking statements. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent upon other factors, and the Company’s course of action would depend upon its assessment of the future considering all information then available. For additional information, refer to the "Risk and Uncertainties" section of our current MD&A.

Although the Company believes the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date such forward-looking statements are made, no assurances can be given as to future results, levels of activity and achievements. Readers are cautioned that the lists of important factors contained herein are not exhaustive. Unpredictable or unknown factors not discussed in this MD&A could also have material adverse effects on forward-looking statements and the Company’s results from operations. Further additional information on the risk factors that could affect the Company’s business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to the Company’s Annual Information Form for the year ended December 31, 2020, which may be accessed on SEDAR at www.sedar.com.

The forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained herein are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by law.     

SOURCE Ensign Energy Services Inc.

Michael Gray, Chief Financial Officer, (403) 262-1361; Nicole Romanow, Investor Relations, (403) 267-6234