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Savanna to Deploy More Hybrid Rigs Onshore Australia

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Savanna Energy Services Corp. has entered into a long term drilling rig contract to deploy an additional hybrid drilling rig to Queensland, Australia.

Savanna will provide ancillary equipment and services to coincide with the drilling services. The contract is based on a 365 day (24 hour) take or pay basis for a term of three years. Savanna has also entered into a similar three year contract to supply an additional workover rig to the same customer. These equipment additions will bring Savanna's fleet in Australia to 10 rigs, 5 drilling and 5 workover.

The drilling rig will be a newly built proprietary international hybrid drilling rig. This rig is capable of drilling with coiled tubing or conventional drill pipe utilizing an integrated top drive based on the hybrid platform pioneered by Savanna. The rig is targeted to commence operations in Australia in December 2013. The workover rig is expected to begin operations in Q2, 2014.

Savanna's proprietary hybrid platform has proven itself to be highly efficient drilling vehicle and is demonstrating its ability to improve the economics of drilling in Australia. The Australian coal seam gas (CSG) drilling and workover market is continuing to mature and expand, and Savanna expects activity levels to continue increasing for the next several years.

Savanna is currently operating four of its hybrid drilling rigs in Australia along with four specialized workover rigs and other ancillary equipment. The latest rig additions were awarded outside of the common tendering process in Australia, which Savanna believes is reflective of the growing acceptance of Savanna's capabilities and relationships in the market.

Capital Update

In light of the contract award Savanna is also updating its capital program for 2013. Savanna previously outlined a capital program for 2013, including capital maintenance and long-lead items for future rig builds, of $107 million. Below is an update on this budget, increasing the 2013 capital budget to $118 million:

1. Represents estimated engineering and retrofit costs to transfer up to 8 workover rigs to North Dakota and to upgrade depth capacity of 1 Canadian drilling rig.
2. Represents incremental capital to manufacture and deliver 1 international hybrid drilling rig, 1 high-specification workover rig and associated spare, ancillary and trucking assets to Australia.
3. Represents deferral of long-lead spend based on expected timing of award of tenders Savanna is currently participating in.
4. Represents reduction in estimated capital expansion in rental assets in 2013 relative to previous estimates.
5. Represents down payment on land for future Leduc, Alberta drilling and workover facility and corporate capital additions.
6. Total 2013 approved capital budget to date = $118,000.

Operations Update

A heavy snowpack and ongoing wet weather in many of Savanna's core operating areas in Canada have constrained the re-start of activity post-spring break-up. In the United States, however, activity levels have remained much more consistent, with minimal reduction in overall activity in our core markets. Australian activity has continued to accelerate through the quarter.

Activity in North America in the second half of 2013 remains uncertain but has become increasingly more positive as 2013 unfolds in all Savanna markets. Savanna's relatively strong contract position in the United States and Australia should ensure stable activity in those markets. In Canada activity levels will have a greater impact on Savanna performance due to a lower contract status on our fleet. Savanna has participated in numerous drilling rig tenders for Canada and the United States over the past few months and will further update our capital program based on the results of these tenders, if, as or when they are announced. In addition, several rig tenders, both drilling and workover, for Australia remain active which could also result in an expansion of Savanna's authorized capital for 2013. It is our expectation that awarding of most of these tenders is likely to be deferred until 2014.

While Savanna operates a fleet very well suited to current and projected high activity sectors of all markets it serves, the Company is also committed to increasing its drilling rig depth and operating capacity in order to continue expanding the Company's product offering for its customers. The Company will design, commission and operate equipment aligned to our position as a sustainable, profitable oilfield service provider. In the context of an uncertain North American market for drilling and workover services, we have approved a capital budget providing for growth and expansion in our key markets, recognizing the potential risks to activity levels in the near term. Our capital plans also reflect Savanna's commitment to sustain and grow our current monthly dividend. The Board of Directors reviews our dividend policy quarterly, and is satisfied with current dividend levels.