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Ensign Energy Services Plans Four New Rig Builds By End of Year

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Ensign Energy Services Inc. has reported 2015 Second Quarter Results

Highlights

• Canadian drilling (excluding coring) recorded 902 operating days in the second quarter of 2015, a 60% decrease from 2,235 operating days in the second quarter of 2014. 
• Canadian well servicing recorded 14,330 operating hours in the second quarter of 2015, a 50% decrease from 28,703 operating hours in the second quarter of 2014.
• United States drilling recorded 2,987 operating days in the second quarter of 2015, a 50% decrease from 5,990 operating days in the second quarter of 2014. 
• United States well servicing recorded 17,452 operating hours in the second quarter of 2015, a 43% decrease from 30,599 operating hours in the second quarter of 2014.
• International drilling recorded 2,206 operating days in the second quarter of 2015, a 22% decrease from 2,828 operating days recorded in the second quarter of 2014.
• One new Automated Drill Rig was added to the Company's drilling fleet and two major retrofits were completed in the second quarter of 2015 for the Company's United States fleet.
• The Company's construction in progress at June 30, 2015, includes three new ADR® drilling rigs and one major retrofit to an existing drilling rig.

Overview

• Operating days across the Company's fleet were lower in the second quarter of 2015 when compared to the second quarter of 2014 due to weaker demand for oilfield services caused by continued low oil and natural gas commodity prices.
• Working capital at June 30, 2015 was $133.4 million, compared to $189.7 million at December 31, 2014. The Company's bank credit facilities provide available borrowings of $205.9 million at June 30, 2015, compared to $161.5 million at December 31, 2014 as the Company has reduced its capital spending and focused on further strengthening of its balance sheet over the first six months of 2015.

New Builds and Major Retrofits

• During the three months ended June 30, 2015, the Company commissioned one new ADR® drilling rig and completed two major retrofits for the United States fleet.
• In addition, the Company decommissioned two rigs from the international fleet and removed one well servicing rig from the United States marketed fleet.
• The Company continues to build new ADR® drilling rigs and upgrade existing rigs to meet the increasing technical demands of its customers. The decline in oil and natural gas commodity prices during the latter half of 2014 resulted in the Company proactively and aggressively reducing the rig build program in late 2014. However, in response to customer demand in the current quarter, the Company reinstated the completion of one new build ADR® drilling rig that had been among the drilling rigs for which construction had been paused in late 2014. 
• The Company's new build program currently consists of plans to complete three new build ADR® drilling rigs and one major retrofit by the end of the year.

Outlook

• Canadian oilfield services activity hit a two-decade low during the second quarter of 2015. In mid-June, the 2015 forecast of drilling operating days by the Canadian Association of Oilwell Drilling Contractors (CAODC) was reduced by 13 percent from the forecast made less than five months earlier. Similarly, the CAODC revised its estimate for 2015 wells drilled from 6,612 to 5,531, down 51 percent from the number of wells drilled in 2014. 
• Prospects for second half of the year remain uncertain and highly restrained. In addition to lower price levels for oil and gas, the pending Royalty Review by the new provincial government contributes to Alberta activity level uncertainties. 
• Compared to industry levels, the Company's Canadian fleet fared somewhat better, due to deployment of deeper equipment. We continue to expect to maintain our activity and utilization levels relative to the industry.
• Over the past few months, the weekly decline in the number of active land-based drilling rigs in the United States appears to have bottomed after the very large reduction of operating rigs year-over-year. As of July 31, 2015, 836 land-based rigs were operating, down 54 percent from the 1,801 rigs operating one year earlier, but down only four percent in the last three months, when 868 rigs were operating.
• While utilization of the Company's United States equipment fleet has continued to compare favorably with industry utilization in the second quarter, demand and pricing pressures persist on the basis of the over-supply in oilfield services equipment.
• Similar to the overall industry, activity levels in the Company's international operations have remained relatively stable when compared to those in North America. Consistent with the first quarter, activity levels in the Company's international operations year-over-year were down 22 percent in the second quarter. This trend is expected to hold in the second half of 2015.