Ensign Energy Services Inc. Reports 2011 Third Quarter Results

CALGARY, Nov. 7, 2011 /CNW/ -

Overview

Strong continuing demand for oilfield services in the third quarter and first nine months of 2011 when compared with similar periods in the prior year resulted in improved operating and financial results from the Company's Canadian and United States operations.  As expected, improved field conditions in Canada allowed operators to address the pent up demand for oilfield services after a particularly wet second quarter through much of the Western Canadian Sedimentary Basin.  The Company's international operations continued the trend established in the first half of the year in improving financial contributions in 2011 versus those in 2010.

The Company recorded revenue of $475.7 million in the three months ended September 30, 2011, an increase of 39 percent from revenue of $341.3 million recorded in the third quarter of the prior year.  The Company recorded revenue of $1,312.4 million for the nine months ended September 30, 2011, a 38 percent increase over revenue of $951.7 million for the nine months ended September 30, 2010.  EBITDA (defined as earnings before interest, taxes, depreciation, amortization, and share-based compensation expense) totaled $111.5 million ($0.73 per common share) in the third quarter of 2011, 38 percent higher than EBITDA of $80.6 million ($0.53 per common share) in the third quarter of 2010.  EBITDA for the nine months ended September 30, 2011 totaled $346.9 million ($2.27 per common share), an increase of 57 percent from EBITDA of $221.6 million ($1.45 per common share) recorded in the first nine 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 $52.1 million ($0.34 per common share) in the third quarter of 2011, 61 percent higher than Adjusted net income of $32.4 million ($0.21 per common share) in the third quarter of 2010.  Adjusted net income for the nine months ended September 30, 2011 totaled $158.7 million ($1.04 per common share), an increase of 96 percent over Adjusted net income of $81.1 million ($0.53 per common share) recorded in the first nine months of 2010.  Net income for the third quarter of 2011 increased 98 percent over the comparable prior year period to $64.0 million ($0.42 per common share) compared with net income of $32.3 million ($0.21 per common share) for the third quarter of 2010.  Net income for the nine months ended September 30, 2011 totaled $159.8 million ($1.05 per common share), an increase of 83 percent from net income of $87.2 million ($0.57 per common share) recorded in the first nine months of 2010.  Funds from operations increased 49 percent to $114.2 million ($0.75 per common share) in the third quarter of 2011 from $76.7 million ($0.50 per common share) in the third quarter of the prior year.  Funds from operations for the first nine months of 2011 increased 60 percent to $335.1 million ($2.19 per common share) from $209.4 million ($1.37 per common share) recorded in the corresponding period in 2010.

The acquisition of the land drilling division of Rowan Companies, Inc. ("Rowan Land Drilling") on September 1, 2011, the Company's largest acquisition in its history, has significantly expanded the Company's presence in the southern United States land-based drilling market. Rowan Land Drilling owns and operates 30 deeper capacity electric land drilling rigs in the southern United States. The purchase price of USD $510 million was funded through the Company's existing working capital, available lines of credit and a new 18-month term facility of USD $400 million. Although the financing of the acquisition resulted in long-term debt and negative working capital on the Company's balance sheet as at September 30, 2011, current and future credit facilities, together with growing funds from operations, are expected to be sufficient in supporting the Company's growth initiatives, including the current new build program, which upon completion will deliver an additional 15 new state-of-the-art drilling rigs and nine well servicing rigs over the next nine months.

FINANCIAL AND OPERATING HIGHLIGHTS
($ thousands, except per share data and operating information)
Three months ended September 30   Nine months ended September 30
2011   2010   % Change   2011   2010   % Change
Revenue   475,749   341,274   39   1,312,405   951,691   38
EBITDA 1 111,458   80,641   38   346,864   221,572   57
EBITDA per share 1
Basic   $0.73   $0.53   38  $2.27   $1.45   57
Diluted   $0.73   $0.53   38   $2.26   $1.45   56
Adjusted net income 2 52,087   32,434   61   158,728   81,077   96
Adjusted net income per share 2
Basic   $0.34   $0.21   62   $1.04   $0.53   96
Diluted   $0.34   $0.21   62   $1.04   $0.53   96
Net income   63,989   32,343   98   159,753   87,190   83
Net income per share
Basic   $0.42   $0.21   100   $1.05   $0.57   84
Diluted   $0.42   $0.21   100   $1.04   $0.57   82
Funds from operations 3 114,186   76,658   49   335,122   209,417   60
Funds from operations per share 3
Basic   $0.75    $0.50    50    $2.19
   $1.37
   60
Diluted   $0.74   $0.50   48   $2.19   $1.37   60
Weighted average shares - basic (000s)   152,778   152,814   -   152,872   152,869   -
Weighted average shares - diluted (000s)   153,603   153,134   -   153,322   153,201   -
Drilling
Number of marketed rigs
Canada
Conventional   130   146   (11)   130   146   (11)
Oil sands coring/coal bed methane   38   28   36   38   28   36
United States   116   80   45   116   80  45
International 4 59   59   -   59   59   -
Operating days
Canada5 6,443   4,891   32   16,750   12,998   29
United States    5,478    4,003    37
   14,156
   11,025
   28
International   2,781   2,590   7   8,050   7,298   10
Well Servicing
Number of marketed rigs
Canada   103   112   (8)   103   112   (8)
United States   34   23   48   34   23   48
Operating hours
Canada   38,076   29,698   28   106,557   93,482   14
United States   20,537   14,028   46   56,894   37,573   51

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 ServicesExpense
Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Revenue
Canada   192,699   126,757   52  561,005   372,434   51
United States   189,204   130,941  44 490,857   350,531   40
International   93,846   83,576   12   260,543   228,726   14
475,749   341,274   39   1,312,405  951,691   38
Oilfield services expense   327,006  254,430   29   911,886   693,949   31
148,743   86,844   71   400,519 257,742  55
Gross margin   31.3%   25.4%  30.5%   27.1%

Revenue recorded in the third quarter of 2011 totaled $475.7 million, an increase of 39 percent over $341.3 million recorded in the third quarter of 2010.  Revenue was $1,312.4 million for the nine months ended September 30, 2011, a 38 percent increase from $951.7 million for the nine months ended September 30, 2010.  As a percentage of revenue, gross margin for the third quarter of 2011 increased to 31.3 percent (2010 - 25.4 percent) and 30.5 percent for the nine months ended September 30, 2011 (2010 - 27.1 percent).

The Company continues to capitalize on increased demand for oilfield services in the North American market leading to increased revenues in both the three and nine months ended September 30, 2011 as a result of higher activity levels and improvements in day rates.  Revenues from the Company's international operations also improved over the prior year as the Company's Latin American operations continue to see higher activity levels as a result of improved demand for oilfield services and the operations in Australia started to recover from temporary weather setbacks present in the first half of 2011.

Gross margin increased to $148.7 million (31.3 percent of revenue) for the third quarter of 2011 compared with $86.8 million (25.4 percent of revenue) for the third quarter of 2010.  Similarly, gross margin increased to $400.5 million (30.5 percent of revenue) in the first nine months of 2011 compared to $257.7 million (27.1 percent of revenue) for the corresponding period in 2010.  Higher demand for oilfield services in 2011 compared to the prior year resulted in improved margins, particularly in the Canadian and United States segments.  Major maintenance costs partially offset the increases to gross margin in the three and nine months ended September 30, 2011 due to higher costs being incurred in 2011 compared to 2010 as a result of the additional costs incurred on the equipment fleet to meet the higher activity levels.

Canadian Oilfield Services

Revenue generated in Canada increased 52 percent to $192.7 million for the three months ended September 30, 2011, from $126.8 million for the three months ended September 30, 2010.  For the nine months ended September 30, 2011, revenue increased 51 percent to $561.0 million compared to $372.4 million for the same period in 2010.  In the third quarter of 2011, Canadian revenues accounted for 40 percent of total revenue (2010 - 37 percent), and during the nine months ended September 30, 2011, Canadian revenues were 43 percent of total revenue (2010 - 39 percent).  Increased revenues are a result of higher demand for oilfield services which led to higher equipment utilization and improvements to revenue rates.

Drilling days recorded by the Company's Canadian operations in the third quarter of 2011 increased 32 percent from the comparable quarter in the prior year.  During the nine months ended September 30, 2011, drilling days increased 29 percent from the same period of the prior year.  Similarly, Canadian well servicing hours increased by 28 percent in the third quarter of 2011 and by 14 percent in the nine months ended September 30, 2011 compared to the corresponding periods in the prior year.

United States Oilfield Services

The Company's United States operations recorded revenue of $189.2 million in the third quarter of 2011, a 44 percent increase from the $130.9 million recorded in the corresponding period of the prior year.  During the nine months ended September 30, 2011, revenue of $490.9 million was recorded, an increase of 40 percent from the $350.5 million recorded in the nine months ended September 30, 2010.

Although the United States dollar strengthened briefly towards the end of the period against the Canadian dollar, it weakened during the three and nine month periods ended September 30, 2011 compared to the same periods in 2010, negatively impacting the operating results of the Company's United States operations upon translation to Canadian dollars.  The United States dollar decreased approximately six percent relative to the Canadian dollar in the third quarter of 2011 compared to the third quarter of 2010.  The United States operations accounted for 40 percent of the Company's revenue in the third quarter of 2011 (2010 - 38 percent) and 37 percent of total revenue in the nine months ended September 30, 2011 (2010 - 37 percent).

The number of drilling days recorded by the Company's United States operations in the third quarter of 2011 increased 37 percent from the same period of the prior year.  Drilling days for the nine months ended September 30, 2011 increased 28 percent from the comparable period in the prior year.  United States well servicing hours in the third quarter of 2011 were up 46 percent compared to the prior year and well servicing hours for the first nine months of 2011 were up 51 percent compared to the first nine months of 2010.

The third quarter of 2011 saw the expansion of the Company's United States operations with the September 1, 2011 acquisition of Rowan Land Drilling and its fleet of 30 drilling rigs.  This acquisition, combined with seven new drilling rigs and 10 additional well servicing rigs added from the Company's new build program, led to higher operating activity and improved operating and financial results in the United States segment.  Subsequent to the closing of the acquisition, Rowan Land Drilling changed its name to Ensign US Southern Drilling LLC.

International Oilfield Services

The Company's international operations recorded revenue of $93.9 million in the third quarter of 2011, a 12 percent increase from $83.6 million recorded in the corresponding period of the prior year.  International revenue for the nine months ended September 30, 2011 increased by 14 percent to $260.5 million from $228.7 million recorded for the nine months ended September 30, 2010.  International operations contributed 20 percent of the Company's revenue in the third quarter of 2011 (2010 - 25 percent) and 20 percent in the first nine months of 2011 (2010 - 24 percent).

International drilling days for the three months ended September 30, 2011 increased seven percent over the comparable prior year period.  International drilling days for the nine months ended September 30, 2011 increased 10 percent over the same period of last year.  The Company's international operations improved over the comparable prior year periods as a result of higher activity levels in the Company's Latin American and eastern hemisphere operations as Australia began to recover from temporary weather setbacks in the first half of 2011.  Challenges in the Middle East and North Africa continue to occur as a result of regional geopolitical issues, however the Company is hopeful operations may restart in the near future.  Consistent with the Company's United States operations, the weakening of the United States dollar relative to the Canadian dollar negatively impacted the operating results of the Company's international operations upon translation into Canadian dollars.

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 significant impairment has occurred.  If on further physical inspection of the assets a deterioration of the equipment has occurred, a write down may be required.

Depreciation

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Depreciation   44,528   34,511   29   120,387   97,868   23

The Company uses the unit of production method of calculating depreciation for the majority of its property and equipment.  Depreciation expense totaled $44.5 million for the third quarter of 2011 compared with $34.5 million for the third quarter of 2010.  Depreciation expense for the first nine months of 2011 was $120.4 million, an increase of 23 percent over the $97.9 million recorded in the first nine months of 2010.  The increase in depreciation expense is mainly due to the increase in operating activity levels during the three and nine months ended September 30, 2011 compared to the operating activity levels in the corresponding periods of 2010.

General and Administrative Expense

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011 2010   % Change
General and administrative   21,174   14,679   44  49,380  42,466   16
% of revenue   4.5%   4.3%  3.8%   4.5%

General and administrative expense increased 44 percent to $21.2 million (4.5 percent of revenue) for the third quarter of 2011 compared with $14.7 million (4.3 percent of revenue) for the third quarter of 2010.  For the nine months ended September 30, 2011, general and administrative expense totaled $49.4 million (3.8 percent of revenue) compared with $42.5 million (4.5 percent of revenue) recorded in the nine months ended September 30, 2010, an increase of 16 percent.  The increase in general and administrative expense reflects the expansion of the Company's operations in all regions in which the Company is active and includes some one-time costs associated with the acquisition and integration of Rowan Land Drilling.

Share-Based Compensation (Recovery) Expense

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Share-based compensation   (18,311)   140  (13,179)   (1,577)   (9,405)   (83)

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

For the three months ended September 30, 2011, share-based compensation recovery was $18.3 million compared with an expense of $0.1 million recorded in the third quarter of 2010.  For the nine months ended September 30, 2011, share-based compensation recovery was $1.6 million compared with $9.4 million for the nine months ended September 30, 2010.  The change in share-based compensation (recovery) expense in the three and nine months ended September 30, 2011 arises from the fair value accounting under IFRS and the change in the price of the Company's common shares during these periods.  The closing price of the Company's common shares was $13.75 at September 30, 2011 ($12.63 at September 30, 2010), compared with $19.12 at June 30, 2011 ($12.52 at June 30, 2010), $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 September 30  Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010  % Change
Interest expense   1,755   417  321   2,515  1,721   46
Interest income   (216)   (176)   23   (511)   (392)   30
1,539   241   539  2,004   1,329   51

Interest is incurred on the Company's global revolving credit facility, that was increased by $50.0 million in the third quarter to a total of $250.0 million, the $10.0 million Canadian-based revolving credit facility and the Company's new USD $400.0 million 18-month term loan, incurred to partially fund the acquisition of Rowan Land Drilling.  Transaction fees related to the Company's recent debt financing and renewal are also included in interest expense in the third quarter of 2011.

Foreign Exchange and Other ((Gain)/Loss)

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Foreign exchange and other   16,111   (8,476)   (290)   4,275   (6,296)   (168)

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

Income Taxes

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Current income tax   (2,258)   4,913   (146)   13,897   13,550   3
Deferred income tax   21,971   8,493   159   52,400   31,040   69
19,713   13,406   47   66,297   44,590   49
23.6%   29.3%     29.3%   33.8%

The effective income tax rate for the three months ended September 30, 2011 was 23.6 percent compared with 29.3 percent for the three months ended September 30, 2010.  The effective income tax rate for the nine months ended September 30, 2011 was 29.3 percent compared with 33.8 percent for the nine months ended September 30, 2010.  The decrease in the effective income tax rate in the three and nine months ended September 30, 2011 is primarily due to a larger proportion of taxable income generated in Canada, in combination with reduced taxable income from higher rate jurisdictions.

Financial Position

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

($ thousands)    Change  Explanation 
Cash and cash equivalents    (83,066) See consolidated statements of cash flows. 
Accounts receivable    89,935 Increase is consistent with increased operating activity in the third quarter of 2011 compared to the fourth quarter of 2010.
Income taxes recoverable    9,607 Increase due to the current income tax provision for the period, net of tax instalments and refunds.
Inventories and other    (617) Decrease due to normal course use of consumables offset by additional inventory and other.
Property and equipment    721,065 Increase due to the addition of 30 drilling rigs to the Company's United States fleet through the acquisition of Rowan Land Drilling as well as the current new build construction program and the impact of foreign exchange fluctuations on the consolidation of the Company's foreign subsidiaries, offset by depreciation.
Note receivable    105 Increase due to revaluation of the note to fair value offset by partial collection of the note receivable.
Accounts payable and accruals   36,547 Increase is consistent with increased operating activity in the third quarter of 2011 compared to the fourth quarter of 2010.
Operating lines of credit   78,007 Increase is due to additional draws of the expanded operating lines of credit to partially finance the acquisition of Rowan Land Drilling and the ongoing new build construction program offset by repayments during the period.
Share-based compensation    (1,827) Decrease due to decrease in the price of the Company's common shares as at September 30, 2011 compared with December 31, 2010.
Dividends payable    8 Dividends payable is consistent with prior period.
Long-term debt    413,785 Increase is due to partial financing of the acquisition of Rowan Land Drilling, completed in the third quarter of 2011.
Deferred income taxes    54,466 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   156,043  Increase due to the net income for the period and the impact of foreign exchange rate fluctuations on net assets of foreign subsidiaries, offset by the amount of dividends declared in the period.

Funds from Operations and Working Capital

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Funds from operations   114,186   76,658   49   335,122   209,417   60
Funds from operations per share  $ 0.75  $0.50    50  $2.19   $ 1.37   60
Working capital 1 (12,684)   84,516  (115)   (12,684)   84,516   (115)

1 Comparative figure as of December 31, 2010.

During the three months ended September 30, 2011, the Company generated funds from operations of $114.2 million ($0.75 per common share) compared with $76.7 million ($0.50 per common share) for the three months ended September 30, 2010, an increase of 49 percent.  For the nine months ended September 30, 2011, the Company generated funds from operations of $335.1 million ($2.19 per common share), an increase of 60 percent over $209.4 million ($1.37 per common share) generated in the first nine months of 2010.  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 nine months ended September 30, 2011 over the comparable periods of 2010 as well as the expansion of the Company's fleet as a result of the acquisition of Rowan Land Drilling and completions under the new build program. 

At September 30, 2011, the Company's working capital was negative $12.7 million, compared to a positive working capital of $84.5 million at December 31, 2010, a decrease of 115 percent. Financing of the acquisition of Rowan Land Drilling during the latter half of the third quarter of 2011 resulted in long-term debt and temporary negative working capital on the Company's statement of financial position as at September 30, 2011.  Despite this recent shift in capital structure, current and future credit facilities, together with funds from operations, are expected to be sufficient in supporting the Company's current operating and capital requirements.

Investing Activities

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Purchase of property and equipment   (71,615)   (61,001)  17   (252,624)   (152,368)   66
Acquisition   (497,352)   -   -   (497,352)  -   -
Net change in non-cash working capital   42,704   (5,068)   (943)   46,402   (25,655)   (281)
Cash used in investing activities   (526,263)   (66,069)   697   (703,574)  (178,023)   295

Effective September 1, 2011 the Company acquired Rowan Land Drilling for USD $510.0 million.  Rowan Land Drilling is comprised of 30 deeper capacity electric land drilling rigs in the southern United States. The purchase was funded with existing cash balances and expanded credit facilities, including a new 18-month term loan of USD $400.0 million.

Purchases of property and equipment during the third quarter of 2011 totaled $71.6 million (2010 - $61.0 million).  For the nine months ended September 30, 2011, purchases of property and equipment totaled $252.6 million (2010 - $152.4 million).  The purchases of property and equipment relates predominantly to expenditures made pursuant to the Company's ongoing new build program.

Financing Activities

Three months ended September 30   Nine months ended September 30
($ thousands)   2011   2010   % Change   2011   2010   % Change
Net increase (decrease) 70,877   (14,007)   (606)   66,997   (28,181)   (338)
Increase in long-term debt   390,080   -   -   390,080   -   -
Purchase of shares held in trust   (617)   (588)   5   (5,528)   (1,668)   231
Purchase of common shares under Normal
Course Issuer Bid   -   (2,330)   (100)   -   (2,330)   (100)
Deferred financing costs    (2,078)   -   -   (2,078)   -   -
Dividends   (14,555)   (13,390)   9   (43,665)   (40,205)   9
Net change in non-cash working capital   (65)   (17)   282   (97)   279   (135)
Cash from (used) in financing activities   443,642   (30,332)   (1,563)   405,709   (72,105)   (663)

The Company's global revolving credit facility (the "Global Facility") was increased by $50.0 million during the third quarter to a new limit of $250.0 million.  Additionally, the Company has available 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 $250.0 million Canadian dollars. The amount available under the Canadian Facility is $10.0 million or the equivalent United States dollars.

Net draws of the operating lines of credit were the result of the acquisition of Rowan Land Drilling which was completed on September 1, 2011.  As of September 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.

In connection with the purchase of Rowan Land Drilling, the Company entered into an unsecured term loan of USD $400,000. There are no mandatory principal repayments and the debt matures on February 28, 2013.  The Company incurred financing costs associated with the term loan that are being deferred and amortized using the effective interest method.

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 September 30, 2011, no common shares have been purchased and cancelled pursuant to the Bid.

New Builds

During the first nine months of 2011, the Company commissioned seven new ADRTM style drilling rigs and 10 new well servicing rigs in the United States and one new ADR TM style drilling rig and four well servicing rigs in Canada.

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

Estimated Delivery Date 
Q4-2011   Q1-2012   Q2-2012   Total
ADR's
Canada    2   3   2  7
United States    3   2  1   6
International    -   1   1   2
Total    5   6   4   15
Well servicing
Canada    -  -   -   -
United States    5   4   -   9
Total    5   4   -   9

Outlook

Equity markets and oil and natural gas commodity prices weakened during the third quarter over growing concerns of the possibility of global recessionary conditions that could be triggered by worsening Eurozone debt issues.  While it may be too soon to call a return to recessionary economic conditions or an end to the latest debt crisis, at best there appears to be a softening in global economic activity/growth.  Amid this backdrop of rising concern over weakening global economic health, oilfield service activity levels generally remained strong in the third quarter of 2011.  Only time will tell whether the recent weakness in the equity markets is but a temporary blip in reaction to another potential financial crisis or if it is a precursor to weaker global energy demand that will lead to a significant decrease in future demand for oilfield services.

As expected, third quarter oilfield services activity in Canada picked up substantially from the seasonally low activity levels of the second quarter of 2011.  Improved field conditions allowed operators to address the pent up demand for oilfield services after a particularly wet second quarter through much of the Western Canadian Sedimentary Basin.  Activity levels for the fourth quarter of 2011 and first quarter of 2012, the Canadian winter drilling season, are expected to remain strong and, subject to favorable weather and field conditions, should be improved over the prior year for most rig classes.  The only area of weakness right now appears to be with respect to shallow drilling rigs where demand is not as strong as for other rig classes. As these rigs are generally targeting shallow natural gas plays, the Company believes the demand will not improve until natural gas prices move meaningfully higher.

The United States oilfield services activity levels remained strong as the industry active rig count remained close to 2,000 active drilling rigs for the third quarter and has remained at that level for the start for the fourth quarter.  The demand for oilfield services equipment to address oil and liquids rich natural gas resource plays remain strong at current crude oil price levels.  The Company's recent acquisition of Rowan Land Drilling addresses the equipment requirements of many such resource plays in the southern United States.  The transaction closed on September 1, 2011, and 90% of the 30 drilling rigs acquired are scheduled to be active through the next several quarters.  As with Canada, the demand for oilfield services in the United States is directly related to the prices of crude oil and natural gas.

The outlook for the Company's international segment improved in the third quarter as the operations in Australia returned to normal after having endured the impact of flood conditions in the first half of 2011; and certain areas of the Middle East and North Africa appeared to be moving closer to resolving the civil unrest that has negatively impacted operations since the first quarter of this year.  The Company does not expect to resume operations in certain suspended areas until security has been established and it is safe for personnel to return. The other areas in the international segment are expected to remain steady as the longer term approach to international energy investment means that oilfield service activity levels should continue at current levels in the face of short-term uncertainty with respect to crude oil prices.

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 third quarter 2011 results at 2:00 p.m. MDT (4:00 p.m. EDT) on Monday, November 7, 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 November 14, 2011 by dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside Toronto) and entering the reservation number 15906624.  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   Sep 30  Dec 31
2011  2010
(Unaudited, in thousands of Canadian dollars)   
Assets
Current Assets
Cash and cash equivalents  $ 6,454  $   89,520
Accounts receivable   421,072    331,137
Income taxes recoverable       3,809 -
Inventories and other      67,234    67,851
498,569    488,508
Property and equipment 2,451,454    1,730,389
Note receivable 6,696    6,591
$ 2,956,719  $   2,225,488
Liabilities
Current Liabilities
Accounts payable and accruals  $ 249,631  $   213,084
Operating lines of credit  237,342    159,335
Income taxes payable       -    5,798
Dividends payable  14,555   14,547
Share-based compensation      9,725    11,228
511,253   403,992
Long-term debt 413,785  -
Share-based compensation 3,911    4,235 
Deferred income taxes  323,572    269,106
1,252,521    677,333
Shareholders' Equity
Share capital 167,538    168,206
Contributed surplus  2,185    2,929
Foreign currency translation reserve 18,950   (22,417)
Retained earnings  1,515,525    1,399,437
1,704,198    1,548,155
$ 2,956,719 $   2,225,488
Ensign Energy Services Inc.
Consolidated Statements of Income
For the three and nine months ended September 30
(Unaudited, in thousands of Canadian dollars - except per share data)
Three months ended    Nine months ended
Sep 30 Sep 30  Sep 30 Sep 30
2011  2010 2011   2010
Revenue $   475,749  $   341,274 $ 1,312,405  $   951,691
Expenses
Oilfield services     327,006   254,430  911,886  693,949
Depreciation   44,528    34,511  120,387   97,868
General and administrative    21,174    14,679  49,380  42,466
Share-based compensation     (18,311)   140  (1,577)   (9,405)
Foreign exchange and other    16,111  (8,476)  4,275   (6,296)
390,508   295,284  1,084,351 818,582
Income before interest and income taxes 85,241  45,990 228,054   133,109
Interest income    216    176  511  392
Interest expense     (1,755)  (417)  (2,515)  (1,721)
Income before income taxes 83,702   45,749  226,050   131,780 
Income taxes
Current tax    (2,258)   4,913 13,897  13,550
Deferred tax     21,971  8,493 52,400  31,040
19,713  13,406 66,297 44,590
Net income $ 63,989 $   32,343 $  159,753 $  87,190
Net income per share
Basic   $ 0.42  $    0.21 $  1.05 $   0.57
Diluted   $ 0.42 $  0.21 $  1.04 $   0.57
Ensign Energy Services Inc.
Consolidated Statements of Cash Flows
For the three and nine months ended September 30
(Unaudited, in thousands of Canadian dollars)
Three months ended    Nine months ended
Sep 30   Sep 30 Sep 30   Sep 30
2011   2010  2011  2010
Cash provided by (used in)
Operating activities
Net income  $ 63,989  $   32,343 $  159,753 $  87,190
Items not affecting cash
Depreciation     44,528 34,511  120,387   97,868
Share-based compensation, net of cash paid   (16,605)    1,311 2,279   (6,681)
Accretion on long-term debt     303   - 303   - 
Deferred income tax    21,971    8,493  52,400    31,040
Net change in non-cash working capital    (112,758)   (46,080)  (97,460)    (11,220)
1,428   30,578  237,662    198,197
Investing activities
Purchase of property and equipment    (71,615)   (61,001)  (252,624)   (152,368)
Acquisition (497,352) - (497,352) -
Net change in non-cash working capital   42,704    (5,068)  46,402    (25,655)
(526,263)   (66,069)  (703,574)    (178,023)
Financing activities
Net increase (decrease) 70,877    (14,007)  66,997   (28,181)
Increase in long-term debt    390,080   - 390,080    -
Purchase of shares held in trust     (617)   (588) (5,528)    (1,668)
Purchase of common shares under Normal
Course Issuer Bid -  (2,330) -   (2,330)
Deferred financing costs (2,078)    -   (2,078)    -
Dividends   (14,555)    (13,390) (43,665)    (40,205)
Net change in non-cash working capital   (65)   (17)  (97)    279
443,642    (30,332)  405,709    (72,105)
Net decrease in cash and cash equivalents (81,193)    (65,823)  (60,203)    (51,931)
Effects of foreign exchange on cash and cash equivalents (22,560) (2,722)   (22,863)    (1,289)
Cash and cash equivalents
Beginning of period  110,207    150,478  89,520    135,153
End of period $ 6,454 $   81,933 $  6,454  $   81,933
Supplemental information
Interest paid  $   1,337 $   386  $  2,130 $   1,716
Income taxes paid  $   8,279 $   6,727  $  23,504 $   10,469

For further information:

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