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Press release from CNW Group

Major Drilling Announces Record Quarterly Results

Monday, December 05, 2011

Major Drilling Announces Record Quarterly Results16:00 EST Monday, December 05, 2011MONCTON, NB, Dec. 5, 2011 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) today reported results for its second quarter of fiscal year 2012, ended October 31, 2011.Highlights In millions of Canadian dollars(except earnings per share)Q2-12Q2-11YTD-12 YTD-11Revenue$213.9$127.8$378.0$237.3Gross profit74.135.1125.661.6 As percentage of sales34.6%27.5%33.2%26.0%Net earnings31.611.349.516.5Earnings per share0.430.160.680.23Cash flow from operations (*)55.424.892.240.1*before changes in non-cash operating working capital items, finance costs and income taxesMajor Drilling posted the highest quarterly revenue in its history at $213.9 million, up 67% from the $127.8 million recorded for the same quarter last year.Gross margin percentage for the quarter improved significantly to 34.6%, compared to 27.5% last year.Net earnings were $31.6 million or $0.43 per share ($0.42 per share diluted) for the quarter, compared to net earnings of $11.3 million or $0.16 per share ($0.16 per share diluted) for the prior year quarter. This represents the highest quarterly earnings in the Company's history.Effective September 30, 2011, the Company acquired Bradley Group Limited.  Revenue for the quarter from Bradley (one month) was $11 million."In this quarter, the Company achieved record quarterly revenue of $213.9 million, and record quarterly earnings of $31.6 million. Activity levels continued to be robust in every region and we continue to see inquiries from all categories of customers, although many customers are still in the process of finalizing their budgets," said Francis McGuire, President and CEO of Major Drilling Group International Inc. "Excluding the $11 million in revenue contributed by Bradley in the month of October, the Company still generated $203 million in revenue, well above the previous record of $191 million achieved in the second quarter of fiscal 2009.""Margins in this quarter improved significantly as ramp-up costs have normalized and as we get the full benefit of higher pricing in contracts that were signed or renewed in the previous quarter.  In addition, we experienced very few operational or weather issues during the quarter.  Our efforts on training and recruitment have allowed us to increase the number of shifts in the field, however the shortage of experienced drill crews will put added pressure on labour costs and productivity as we go forward, especially in our most active markets.  Other costs are expected to rise as well, slowing down margin progression.""It is important to note that we are now in our third quarter, seasonally the weakest quarter of our fiscal year, as mining and exploration companies shut down, often for extended periods over the holiday season.  Weather can also play an important role in affecting operations.  At this time, most senior and intermediate companies have yet to decide on post-holiday start-up dates, all of which impacts third quarter revenue.""Looking at the balance of fiscal 2012, assuming that customers continue with their stated plans, we should see continuing growth.  Our ongoing efforts on training and recruitment should allow our global utilization rates to continue to improve as each month goes by and as we add more drillers," noted Mr. McGuire.  "Despite the current economic environment, our industry has not shown any signs of a slowdown to this point.  Most commodity prices are still at relatively high levels while many of our customers, both seniors and juniors, are in much better financial position than three years ago. Our biggest operational challenge continues to be the shortage of labour.  We continue to aggressively and successfully invest in the recruitment and training of new drillers.""Capital expenditures for the quarter were $16.1 million as we purchased 16 rigs while retiring 11 rigs through our modernization program.  The Bradley acquisition also contributed to increasing our drill fleet by 124 rigs, with the Company's total now standing at 700.  During the quarter, we also added a significant number of support vehicles and other support equipment to meet changing patterns of demand and to ensure that we continue to meet the highest levels of safety standards.  These additions should improve rig utilization and reliability as we focus on increasing the earning power of each crew and each rig.  In fact, now 60% of our rigs are less than five years old in an industry where rigs tend to last 20 years.""Finally, effective September 30, 2011, we are very pleased to welcome the Bradley group and its employees into the Major Drilling group. The acquisition of Bradley Group is a unique opportunity to further Major Drilling's corporate strategy of focusing on specialized drilling, expanding our geographic footprint in areas of high growth and of maintaining a balance in our mix of drilling services. The operations of both companies are highly complimentary in terms of geography, personnel and strategies," said Francis McGuire.Second quarter ended October 31, 2011Total revenue for the quarter was $213.9 million, up 67% from the $127.8 million recorded in the same quarter last year. All of the Company's regions contributed to this growth, with the Bradley acquisition contributing $11 million to the total.Revenue for the quarter from Canada-U.S. drilling operations increased by $33.6 million or 66% to $84.2 million compared to the same period last year.  U.S. mineral drilling operations continued a strong recovery, particularly from its senior mining customers and our energy division recovered from the floods that occurred last quarter in North Dakota.  In Canada, increased activity levels, combined with the acquisition of Bradley, contributed to the growth of revenue.South and Central American revenue was up 62% to $68.1 million for the quarter, compared to the prior year quarter. The increase was primarily driven by strong growth in our Mexican, Argentinean and Chilean operations.Australian, Asian and African operations reported revenue of $61.6 million, up 75% from the same period last year.  Australia and Mongolia accounted for a significant portion of this growth as operations recovered from floods experienced last year in Queensland, and increased activity levels were seen in Mongolia.  Operations in South Africa also contributed to the strong growth as well as new operations in Mozambique and the DRC.The overall gross margin percentage for the quarter was 34.6%, up from 27.5% for the same period last year.  Ramp-up costs such as mobilization and up-front purchases have now normalized. Also, training and recruitment efforts allowed the Company to increase the number of shifts in the field during the quarter.  Finally, the contracts that were signed or renewed this quarter reflected the current stronger pricing environment.General and administrative costs were $13.1 million for the quarter compared to $10.0 million in the same period last year.  The increase was due to the acquisition of Bradley, the addition of new operations in Mozambique and the DRC and also increased costs to support the strong growth in activity levels.Other expenses for the quarter were $6.0 million, up from $2.4 million in the prior year quarter, due primarily to higher incentive compensation expenses given the Company's increased profitability and costs related to the Bradley acquisition.Some of the statements contained in this press release may be forward-looking statements, such as, but not limited to, those relating to worldwide demand for gold and base metals and overall commodity prices, the level of activity in the minerals and metals industry and the demand for the Company's services, the Canadian and international economic environments, the Company's ability to attract and retain customers and to manage its assets and operating costs, sources of funding for its clients, particularly for junior mining companies, competitive pressures, currency movements, which can affect the Company's revenue in Canadian dollars,  the geographic distribution of the Company's operations, the impact of operational changes, changes in jurisdictions in which the Company operates (including changes in regulation), failure by counterparties to fulfill contractual obligations, and other factors as may be set forth, as well as objectives or goals, and including words to the effect that the Company or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as, but not limited to, the factors set out in the discussion starting on pages 17 to 20 of the 2011 Annual Report entitled "General Risks and Uncertainties", and such other documents as available on SEDAR at www.sedar.com. All such factors should be considered carefully when making decisions with respect to the Company. The Company does not undertake to update any forward-looking statements, including those statements that are incorporated by reference herein, whether written or oral, that may be made from time to time by or on its behalf, except in accordance with applicable securities laws.Based in Moncton, New Brunswick, Major Drilling Group International Inc. is one of the world's largest metals and minerals contract drilling service companies. To support its customers' mining operations, mineral exploration and environmental activities, Major Drilling maintains operations in Canada, the United States, South and Central America, Australia, Asia, and Africa.Financial statements are attached.Major Drilling will provide a simultaneous webcast of its quarterly conference call on Tuesday, December 6, 2011 at 9:00 AM (EST).  To access the webcast please go to the investors/webcast section of Major Drilling's website at www.majordrilling.com and click the attached link, or go directly to the CNW Group website at www.newswire.ca  for directions.  Participants will require Windows MediaPlayer, which can be downloaded prior to accessing the call.  Please note that this is listen only mode. Major Drilling Group International Inc.Interim Condensed Consolidated Statements of Operations(in thousands of Canadian dollars, except per share information)(unaudited)  Three months ended  Six months ended October 31  October 31  2011 2010  2011  2010  TOTAL REVENUE$213,854 $127,818 $378,006 $237,298 DIRECT COSTS 139,799  92,717  252,452  175,665            GROSS PROFIT 74,055  35,101  125,554  61,633 OPERATING EXPENSES            General and administrative 13,116  9,969  25,434  19,522 Other expenses 6,045  2,360  8,648  4,432 Loss (gain) on disposal of property, plant and equipment 81  (706)  681  (818) Foreign exchange loss (gain) 44  (1,340)  365  (1,248) Finance costs 964  325  1,786  611 Depreciation and amortization (note 14) 9,366  7,547  17,946  14,694  29,616  18,155  54,860  37,193 EARNINGS BEFORE INCOME TAX 44,439  16,946  70,694  24,440 INCOME TAX - PROVISION (RECOVERY) (note 11)            Current 11,303  5,907  17,287  8,850 Deferred 1,576  (282)  3,955  (865)  12,879  5,625  21,242  7,985 NET EARNINGS (note 14)$31,560 $11,321 $49,452 $16,455  EARNINGS PER SHARE (note 12)           Basic  *$0.43 $0.16 $0.68 $0.23Diluted  **$0.42 $0.16 $0.67 $0.23 *Based on 74,245,811 and 71,152,401 daily weighted average sharesoutstanding for the quarter ended October 31, 2011 and 2010, respectivelyand on 73,143,093 and 71,387,919 daily weighted average shares outstandingfor the fiscal year to date 2012 and 2011, respectively.  The total numberof shares outstanding on October 31, 2011 was 78,910,376. ** Based on 74,908,335 and 72,077,265 daily weighted average sharesoutstanding for the quarter ended October 31, 2011 and 2010, respectively,and on 74,043,805 and 71,865,537 daily weighted average sharesoutstanding for the fiscal year to date 2012 and 2011, respectively.Major Drilling Group International Inc.Interim Condensed Consolidated Statements of Comprehensive Earnings(in thousands of Canadian dollars)(unaudited)  Three months ended  Six months ended October 31  October 31   2011  2010  2011  2010 NET EARNINGS$31,560 $11,321 $49,452 $16,455 OTHER COMPREHENSIVE EARNINGS            Unrealized gains on foreign currency translations (net of tax of $0) 5,765  2,958  7,574  8,595 COMPREHENSIVE EARNINGS$37,325 $14,279 $57,026 $25,050             Major Drilling Group International Inc.Interim Condensed Consolidated Statements of Changes in EquityFor the six months ended October 31, 2010 and 2011(in thousands of Canadian dollars)(unaudited)   Share capital Share basedpayments reserve Retainedearnings Foreign currencytranslation reserve Total BALANCE AS AT MAY 1, 2010 $144,919 $9,236 $153,358 $- $307,513  Exercise of stock options  1,879  (599)  -  -  1,280 Share based payments reserve  -  1,211  -  -  1,211 Dividends  -  -  (5,243)  -  (5,243)   146,798  9,848  148,115  -  304,761Comprehensive earnings:                Net earnings  -  -  16,455  -  16,455 Unrealized gains on foreign currency                translations  -  -  -  8,595  8,595Total comprehensive earnings  -  -  16,455  8,595  25,050 BALANCE AS AT OCTOBER 31, 2010 $146,798 $9,848 $164,570 $8,595 $329,811  BALANCE AS AT MAY 1, 2011 $150,642 $10,280 $170,425 $(3,662) $327,685  Exercise of stock options  743  (78)  -  -  665 Share issue (net of issue costs) (note 10)  76,439  -  -  -  76,439 Share based payments reserve  -  1,121  -  -  1,121 Dividends  -  -  (6,242)  -  (6,242)   227,824  11,323  164,183  (3,662)  399,668Comprehensive earnings:                Net earnings   -  -  49,452  -  49,452 Unrealized gains on foreign currency                translations  -  -  -  7,574  7,574Total comprehensive earnings  -  -  49,452  7,574  57,026 BALANCE AS AT OCTOBER 31, 2011 $227,824 $11,323 $213,635 $3,912 $456,694                                  Major Drilling Group International Inc.Interim Condensed Consolidated Statements of Cash Flows(in thousands of Canadian dollars)(unaudited)   Three months ended  Six months ended  October 31  October 31   2011  2010  2011  2010 OPERATING ACTIVITIES           Earnings before income tax$44,439 $16,946 $70,694 $24,440Operating items not involving cash            Depreciation and amortization (note 14) 9,366  7,547  17,946  14,694 Loss (gain) on disposal of property, plant and equipment 81  (706)  681  (818) Share based payments reserve 567  695  1,121  1,211Finance costs recognized in earnings before income tax 964  325  1,786  611  55,417  24,807  92,228  40,138Changes in non-cash operating working capital items (13,468)  (8,594)  (22,301)  (11,864)Finance costs paid (964)  (325)  (1,786)  (611)Income taxes paid (6,312)  (1,822)  (11,325)  (1,715)Cash flow from operating activities 34,673  14,066  56,816  25,948 FINANCING ACTIVITIES           Repayment of long-term debt (2,039)  (2,953)  (4,229)  (5,234)Proceeds from long-term debt 15,000  -  25,000  -Proceeds from short-term debt -  -  -  10,400Issuance of common shares 77,104  1,146  77,104  1,280Dividends paid -  -  (5,283)  (4,750)Cash flow from (used in) financing activities 90,065  (1,807)  92,592  1,696 INVESTING ACTIVITIES           Business acquisitions (net of cash acquired) (note 15) (66,519)  (185)  (66,519)  (2,537)Acquisition of property, plant and equipment (16,083)  (13,289)  (37,493)  (22,208)Proceeds from disposal of property, plant and equipment 863  2,817  1,547  3,357Cash flow used in investing activities (81,739)  (10,657)  (102,465)  (21,388) Effect of exchange rate changes (730)  (973)  (1,097)  (641) INCREASE IN CASH 42,269  629  45,846  5,615 CASH, BEGINNING OF THE PERIOD 19,792  35,218  16,215  30,232 CASH, END OF THE PERIOD$62,061 $35,847 $62,061 $35,847                          Major Drilling Group International Inc.Interim Condensed Consolidated Balance SheetsAs at October 31, 2011 and April 30, 2011(in thousands of Canadian dollars)(unaudited)    October 31, 2011  April 30, 2011ASSETS      CURRENT ASSETS      Cash$62,061 $16,215 Trade and other receivables 158,364  100,300 Income tax receivable 4,083  2,720 Inventories 90,831  69,864 Prepaid expenses 6,702  8,439  322,041  197,538      PROPERTY, PLANT AND EQUIPMENT (note 6) 302,674  235,473 DEFERRED INCOME TAX ASSETS 6,007  11,575 GOODWILL  (note 7) 60,502  28,316 INTANGIBLE ASSETS (note 8) 1,126  1,235  $692,350 $474,137  LIABILITIES      CURRENT LIABILITIES      Trade and other payables$124,128 $88,599 Income tax payable 12,895  4,297 Short-term debt 12,788  7,919 Current portion of long-term debt (note 9) 8,884  8,402  158,695  109,217 CONTINGENT CONSIDERATIONS 2,740  2,612 LONG-TERM DEBT  (note 9) 55,538  16,630 DEFERRED INCOME TAX LIABILITIES 18,683  17,993  235,656  146,452 SHAREHOLDERS' EQUITY      Share capital  (note 10) 227,824  150,642 Share based payments reserve 11,323  10,280 Retained earnings 213,635  170,425 Foreign currency translation reserve 3,912  (3,662)  456,694  327,685  $692,350 $474,137              1. NATURE OF ACTIVITIESMajor Drilling Group International Inc. ("the Company") is incorporated under the Canada Business Corporations Act and has its head office at 111 St. George Street, Suite 100, Moncton, NB, Canada. The Company's common shares are listed on the Toronto Stock Exchange ("TSX").  The principal source of revenue consists of contract drilling for companies primarily involved in mining and mineral exploration. The Company has operations in Canada, the United States, South and Central America, Australia, Asia and Africa.2. BASIS OF PRESENTATIONStatement of complianceInternational Financial Reporting Standards ("IFRS") require entities that adopt IFRS to make an explicit and unreserved statement, in their first annual IFRS financial statements, of compliance with IFRS. The Company will make this statement when it issues its financial statements for the year ending April 30, 2012. These financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB") and using the accounting policies the Company expects to adopt in its consolidated financial statements for the year ending April 30, 2012.Basis of consolidationThe Interim Condensed Consolidated Financial Statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of operations from the effective date of acquisition or up to the effective date of disposal, as appropriate.Intra-group transactions, balances, income and expenses are eliminated on consolidation, where appropriate.Basis of preparationThe Interim Condensed Consolidated Financial Statements have been prepared based on the accounting policies presented in the first quarter Notes to Interim Condensed Consolidated Financial Statements for the three months ended July 31, 2011.3. FUTURE ACCOUNTING CHANGESThe Company has not applied the following new and revised IFRSs that have been issued but are not yet effective: IFRS 9 (as amended in 2010) Financial InstrumentsIFRS 10 Consolidated Financial StatementsIFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IAS 1 Presentation of Financial Statements IAS 12 (amended) Income Taxes - recovery of underlying assets IAS 19 Employee Benefits IAS 27 (reissued) Separate Financial Statements IAS 28 (reissued) Investments in Associates and Joint Ventures The Company is currently evaluating the impact of applying these standards to its Consolidated Financial Statements.4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTSThe preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Significant areas requiring the use of management estimates relate to the useful lives of property, plant and equipment for amortization purposes, property, plant and equipment and inventory valuation, determination of income and other taxes, assumptions used in compilation of share based payments, fair value of assets acquired and liabilities assumed in business acquisitions, amounts recorded as accrued liabilities, and impairment testing of goodwill and intangible assets.The Company applied judgment in determining the functional currency of the Company and its subsidiaries, determination of cash generating units ("CGUs"), the degree of componentization of property, plant and equipment, and the recognition of provisions and accrued liabilities.5. FIRST TIME ADOPTION OF IFRSFor the overall impact of IFRS on the opening balance sheet as at transition date, including a discussion of the optional exemptions taken and the applicable mandatory exceptions, refer to Note 6 in the first quarter Notes to Interim Condensed Consolidated Financial Statements for the three months ended July 31, 2011.The following reconciliations present the adjustments made to the Company's previous GAAP financial results of operations and financial position to comply with IFRS 1 First-time Adoption of International Financial Reporting Standards ("IFRS 1").  A discussion of transitional adjustments follows the reconciliations.  IFRS Consolidated Balance Sheet                          As at October 31, 2010                                  (a)  (b)  (c)  (d)  (e)  (f)   ASSETSPreviousGAAP OpeningIFRSrestatements  *AdjustmentsShare based paymentsreserveDeferredshare units  Contingent consideration  Fair value asdeemed cost  Buildingcomponentization  IFRS CURRENT ASSETS                           Cash$35,847 $- $- $- $- $- $- $- $35,847 Trade and other receivables 85,563  -  -  -  -  -  -  -  85,563 Income tax receivable 6,575  -  -  -  -  -  -  -  6,575 Inventories 64,447  -  -  -  -  -  -  -  64,447 Prepaid expenses 6,689  -  -  -  -  -  -  -  6,689  199,121  -  -  -  -  -  -  -  199,121 PROPERTY, PLANT AND EQUIPMENT 223,646  (11,877)  -  -  -  -  363  57  212,189 DEFERRED INCOME TAX ASSETS 9,683  469  -  -  -  -  (77)  (8)  10,067 GOODWILL 26,321  2,011  -  -  -  794  -  -  29,126 INTANGIBLE ASSETS 1,052 -  -  -  -  -  -  -  1,052                             $459,823 $(9,397) $- $- $- $794 $286 $49 $451,555  LIABILITIES                           CURRENT LIABILITIES                           Trade and other payables$65,956 $(35) $- $- $20 $- $- $- $65,941 Income tax payable 6,486  -  -  -  -  -  -  -  6,486 Short-term debt 11,148  -  -  -  -  -  -  -  11,148 Current portion of long-term debt 7,048  -  -  -  -  -  -  -  7,048  90,638  (35)  -  -  20  -  -  -  90,623 CONTINGENT CONSIDERATION -  2,011  -  -  -  794  -  -  2,805 LONG-TERM DEBT 11,741  -  -  -  -  -  -  -  11,741 DEFERRED INCOME TAX LIABILITIES 17,163  (617)  -  -  -  -  17  12  16,575                             119,542  1,359  -  -  20  794  17  12  121,744 SHAREHOLDERS' EQUITY                           Share capital  143,715  2,484  599  -  -  -  -  -  146,798 Share based payments reserve 12,049  (1,906)  (599)  304  -  -  -  -  9,848 Retained earnings 220,255  (55,667)  -  (304)  (20)  -  269  37  164,570 Foreign currency translation reserve (35,738)  44,333  -  -  -  -  -  -  8,595  340,281  (10,756)  -  -  (20)  -  269  37  329,811  $459,823 $(9,397) $- $- $-$ 794 $286 $49 $451,555* total of May 1, 2010 transitional adjustments to re-state previous GAAP to IFRS                    IFRS Consolidated Statement of Operations                 For the three months ended October 31, 2010    (b)  (c)  (e)  (f)   Previous GAAP  Share based payments  Deferred share units  Fair valueas deemed cost  Buildingcomponentization IFRS TOTAL REVENUE$127,818 $- $- $- $- $127,818 DIRECT COSTS 92,717  -  -  -  -  92,717                  GROSS PROFIT 35,101  -  -  -  -  35,101 OPERATING EXPENSES                  General and administrative 9,946  -  23  -  -  9,969 Other expenses 2,125  235  -  -  -  2,360 Gain on disposal of property, plant and equipment (706)  -  -  -  -  (706) Foreign exchange gain (1,340)  -  -  -  -  (1,340) Finance costs 325  -  -  -  -  325 Depreciation and amortization 7,759  -  -  (182)  (30)  7,547  18,109  235  23  (182)  (30)  18,155 EARNINGS (LOSS) BEFORE INCOME TAX  16,992  (235)  (23)  182  30  16,946 INCOME TAX - PROVISION (RECOVERY)                 Current 5,907  -  -  -  -  5,907 Deferred (335)  -  -  47  6  (282)  5,572  -  -  47  6  5,625 NET EARNINGS (LOSS) $11,420 $(235) $(23) $135 $24 $11,321  IFRS Consolidated Statement of Operations                 For the six months ended October 31, 2010    (b)  (c)  (e)  (f)   Previous GAAP  Share based payments  Deferred share units  Fair valueas deemed cost  Buildingcomponentization IFRS TOTAL REVENUE$237,298 $- $- $- $- $237,298 DIRECT COSTS 175,665  -  -  -  -  175,665                  GROSS PROFIT 61,633  -  -  -  -  61,633 OPERATING EXPENSES                  General and administrative 19,502  -  20  -  -  19,522 Other expenses  4,128  304  -  -  -  4,432 Gain on disposal of property, plant and equipment (818)  -  -  -  -  (818) Foreign exchange gain (1,248)  -  -  -  -  (1,248) Finance costs 611  -  -  -  -  611 Depreciation and amortization 15,114  -  -  (363)  (57)  14,694  37,289  304  20  (363)  (57)  37,193 EARNINGS (LOSS) BEFORE INCOME TAX 24,344  (304)  (20)  363  57  24,440 INCOME TAX - PROVISION (RECOVERY)                  Current 8,850  -  -  -  -  8,850 Deferred (979)  -  -  94  20  (865)  7,871  -  -  94  20  7,985 NET EARNINGS (LOSS) $16,473 $(304) $(20) $269 $37 $16,455                                                                        IFRS Consolidated Statement of Comprehensive Earnings (Loss)                 For the three months ended October 31, 2010                      (b)  (c)  (e)  (f)   Previous GAAPShare based payments reserveDeferred share unitsFair valueas deemed costBuildingcomponentizationIFRS NET EARNINGS (LOSS) $11,420 $(235) $(23) $135 $24 $11,321 OTHER COMPREHENSIVE EARNINGS                   Unrealized gain on foreign currency translation                  (net of tax of $0) 2,958  -  -  -  -  2,958 COMPREHENSIVE EARNINGS (LOSS) $14,378 $(235) $(23) $135 $24 $14,279  IFRS Consolidated Statement of Comprehensive Earnings (Loss)                 For the six months ended October 31, 2010                      (b)  (c)  (e)  (f)     Previous GAAP  Share based payments reserve  Deferred share units  Fair valueas deemed cost  Buildingcomponentization  IFRS NET EARNINGS (LOSS) $16,473 $(304) $(20) $269 $37 $16,455 OTHER COMPREHENSIVE EARNINGS                  Unrealized gain on foreign currency translation                  (net of tax of $0) 8,595  -  -  -  -  8,595 COMPREHENSIVE EARNINGS (LOSS) $25,068 $(304) $(20) $269 $37 $25,050 Adjustments required to transition to IFRS:a) Adjustments - Subsequent to the release of the April 30, 2011 annual consolidated financial statements, management identified adjustments required for a component of deferred tax and classification of a component of stock based payments in the Company's April 30, 2010, July 31, 2010 and April 30, 2011 historical annual and interim consolidated financial statements.   b) Share based payments - The Company's policy under Canadian GAAP was to use the straight-line method to account for options that vest in installments over time. Under IFRS, each installment is accounted for as a separate share option grant with its own distinct vesting period, hence the fair value of each tranche differs. In addition, Canadian GAAP permits companies to either estimate the forfeitures at the grant date or record the entire expense as if all share based payments vest and then record forfeitures as they occur. IFRS requires that forfeitures be estimated at the time of grant to eliminate distortion of remuneration expense recognized during the vesting period. The estimate is revised if subsequent information indicates that actual forfeitures are likely to differ from previous estimates   c) Deferred Share Units ("DSUs") - The Company's policy under Canadian GAAP was to value the DSUs using the intrinsic value at each reporting date.  Under IFRS we use the fair value, which is affected by changes in underlying volatility of the stock as well as changes in the stock price.   d)  Contingent consideration - Under Canadian GAAP, contingent consideration is recognized as part of the purchase cost when it can be reasonably estimated at the acquisition date and the outcome of the contingency can be determined beyond reasonable doubt. Under IFRS, contingent consideration, regardless of probability considerations, is recognized at fair value at the acquisition date. The Company has booked contingent considerations for the SMD Services and the North Star Drilling acquisitions.   e) Fair value as deemed cost - The Company has applied the IFRS 1 exemption as described in the "exceptions and exemptions applied" section presented in the first quarter Notes to Interim Condensed Consolidated Financial Statements for the three months ended July 31, 2011.   f) Building componentization - Under Canadian GAAP, costs incurred for property, plant and equipment on initial recognition are allocated to significant components when practicable. Under IFRS, costs incurred for plant and equipment on initial recognition are allocated to significant components, capitalized and depreciated separately over the estimated useful lives of each component. Practicability of allocating costs to significant components is not considered under IFRS. Costs incurred subsequent to the initial purchase of property, plant and equipment are capitalized when it is probable that future economic benefits will flow to the Company and the costs can be measured reliably. Upon capitalization, the carrying amount of components replaced, if any, are written off.  The Company has componentized buildings.6. PROPERTY, PLANT AND EQUIPMENTChanges in the property, plant and equipment balance were as follows for the periods:Cost                    Land  Buildings  Drills  Auto  Other  Total  Balance as at April 30, 2011$1,375 $11,201 $257,838 $91,977 $25,501 $387,892 Additions -  117  26,321  9,101  2,101  37,640 Disposals -  -  (4,890)  (1,747)  (27)  (6,664) Business acquisitions 367  12,468  41,274  14,627  2,170  70,906 Effect of exchange rate changes and other 31  25  (16,693)  4,136  (205)  (12,706)  Balance as at October 31, 2011$1,773 $23,811 $303,850 $118,094 $29,540 $477,068  Accumulated Depreciation                    Land  Buildings  Drills  Auto  Other  Total  Balance as at April 30, 2011$- $(2,791) $(84,421) $(48,095) $(17,112) $(152,419) Disposals -  -  3,183  1,234  19  4,436 Depreciation -  (344)  (9,874)  (6,540)  (709)  (17,467) Business acquisitions -  (3,086)  (12,676)  (10,153)  (1,769)  (27,684) Effect of exchange rate changes and other -  23  18,679  716  (678)  18,740  Balance as at October 31, 2011$- $(6,198) $(85,109) $(62,838) $(20,249) $(174,394)   Net book value April 30, 2011$1,375 $8,410 $173,417 $43,882 $8,389 $235,473 Net book value October 31, 2011$1,773 $17,613 $218,741 $55,256 $9,291 $302,674 There were no impairments recorded as at October 31, 2011, April 30, 2011 or October 31, 2010. The Company has assessed whether there is any indication that an impairment loss recognized in prior periods for property, plant and equipment may no longer exist or may have decreased. There were no impairments requiring reversal as at October 31, 2011, April 30, 2011 or October 31, 2010.Capital expenditures were $16,230 and $13,289 for the three months ended October 31, 2011 and 2010 respectively, and $37,640 and $22,258 for the six months ended October 31, 2011 and 2010, respectively.  The Company obtained direct financing of $147 for the three and six months ended October 31, 2011 (three months ended October 31, 2010 - nil; six months ended October 31, 2010 - $50).7. GOODWILL Changes in the goodwill balance were as follows:Balance as at April 30, 2011 $28,316Goodwill on acquisition (note 15)  32,387Effect of movement in exchange rates  (201)Balance as at October 31, 2011 $60,502 For a full discussion on allocation of goodwill to CGUs, refer to Note 8 in the first quarter Notes to Interim Condensed Consolidated Financial Statements for the three months ended July 31, 2011.8. INTANGIBLE ASSETSChanges in the intangible assets balance were as follows:Balance as at April 30, 2011 $1,235Intangible assets on acquisition (note 15)  342Amortization  (479)Effect of movement in exchange rates  28Balance as at October 31, 2011 $1,126 9. LONG-TERM DEBT   October 31, 2011  April 30, 2011Revolving equipment and acquisition loan (authorized $50,000), bearing interestat either the bank's prime rate plus 0.75% or the bankers' acceptance rate plus2.25% for Canadian dollar draws, and either the bank's U.S. dollar base rate inCanada plus 0.75% or the bank's LIBOR plus 2.25% for U.S. dollar draws, interestonly payments required until maturity, maturing in September 2016, secured bycorporate guarantees of companies within the group. $21,224 $- Non-revolving term loan, bearing interest at either the bank's prime rate plus 0.75%or the bankers' acceptance rate plus 2.25% for Canadian dollar draws, and either thebank's U.S. dollar base rate in Canada plus 0.75% or the bank's LIBOR plus 2.25% forU.S. dollar draws, payable in monthly installments of $417, maturing in September 2016,secured by corporate guarantees of companies within the group.  24,583 -Revolving/non-revolving equipment and acquisition loan (authorized $45,000),bearing interest at either the bank's prime rate plus 1.0% or the bankers' acceptancerate plus 2.5% for Canadian dollar draws, and either the bank's U.S. dollar base ratein Canada plus 1.0% or the bank's LIBOR plus 2.5% for U.S. dollar draws, secured bycorporate guarantees of companies within the group.  This facility was refinanced in September 2011. - 24,552 Term loan bearing interest at 5.9%, payable in monthly installments of $84, unsecured,maturing in August 2021.  9,833  - Term loans bearing interest at rates ranging from 0% to 6.99%, payable in monthly installmentsof $35, secured by certain equipment, maturing through 2016.  782 480 Note payable bearing interest at 4%, repayable over three years, maturing in September 2014.  8,000  -          64,422  25,032 Current portion  8,884  8,402  $55,538 $16,630The required annual principal repayments per remaining fiscal years on long-term debt are as follows: 2012 $3,204 2013  8,770 2014  8,635 2015  9,088 2016  5,648 2017 and beyond  29,077   $64,422Under the terms of certain of the Company's debt agreements, the Company must satisfy certain financial covenants. Such agreements also limit, among other things, the Company's ability to incur additional indebtedness, create liens, engage in mergers or acquisitions and make dividend and other payments. The Company, at all times, was in compliance with all covenants and other conditions imposed by its debt agreements.10. SHARE CAPITALOn March 9, 2011, the Company announced a stock split for the issued and outstanding common shares on a three for one basis.  The record date for the stock split was March 23, 2011.  All share and stock option numbers have been retroactively adjusted to reflect the stock split to provide more comparable information.On September 28, 2011, the Company issued a total of 5,900,000 Subscription Receipts at a price of $11.90 per Subscription Receipt for aggregate gross proceeds of $70,210.  These Subscription Receipts were subsequently converted to 5,900,000 common shares in the Company upon the closing of the acquisition by the Company of Bradley Group Limited on September 30, 2011. The Company used the net proceeds of the offering to fund a portion of the purchase price in connection with the acquisition.  On October 25, 2011, the Company issued a further 885,000 common shares for further aggregate gross proceeds of $10,531 as a result of the exercise by the underwriters of an over allotment option to purchase an additional 885,000 common shares of the Company for $11.90 per share. The Company will use the net proceeds from the over allotment exercise for general corporate purposes. AuthorizedUnlimited number of fully paid common shares, without nominal or par value, carry one vote per share and carry a right to dividends.The movement in the Company's issued and outstanding share capital during the period is as follows: Number of Share shares (000's) capital    Balance as at April 30, 201172,040 $ 150,642Exercise of stock options85 743Share issue (net of issue costs)*6,785 76,439Balance as at October 31, 201178,910 $ 227,824 *share issue costs total $4,302 11. INCOME TAXESThe income tax expense for the period can be reconciled to accounting profit as follows:  2012 Q2  2011 Q2  2012 YTD  2011 YTD  Earnings before income tax$44,439 $16,946 $70,694 $24,440          Statutory Canadian corporate income tax rate 29%  30%  29%  30%  Expected income tax expense based on statutory            rate$12,887 $5,084 $20,501 $7,332 Non-recognition of tax benefits related to losses 265  31  313  253 Other foreign taxes paid 236  154  287  209 Rate variances in foreign jurisdictions (190)  (342)  (488)  (948) Other (319)  698  629  1,139  $12,879 $5,625 $21,242 $7,985  12. EARNINGS PER SHARE All of the Company's earnings are attributable to common shares therefore net earnings are used in determining earnings per share.  2012 Q2  2011 Q2  2012 YTD  2011 YTD Net earnings for the period$31,560 $11,321 $49,452 $16,455 Weighted average shares outstanding - basic (000's) 74,246  71,152  73,143  71,388 Net effect of dilutive securities:           Stock options 662  925  901  478Weighted average number of shares - diluted (000's) 74,908  72,077  74,044  71,866 Earnings per share:           Basic$0.43 $0.16 $0.68 $0.23Diluted$0.42 $0.16 $0.67 $0.23The calculation of the diluted earnings per share for the three months ended October 31, 2011 and 2010 exclude the effect of 313,502 options and 899,205 options, respectively, and the six months ended October 31, 2011 and 2010 exclude the effect of 93,304 options and 1,019,205 options, respectively, as they are anti-dilutive.13. SEGMENTED INFORMATIONThe Company's operations are divided into three geographic segments corresponding to its management structure, Canada - U.S., South and Central America, and Australia, Asia and Africa. The services provided in each of the reportable drilling segments are essentially the same. The accounting policies of the segments are the same as those described in Note 4 presented in the first quarter Notes to Interim Condensed Consolidated Financial Statements for the three months ended July 31, 2011. Management evaluates performance based on earnings from operations in these three geographic segments before finance costs and income tax.  Data relating to each of the Company's reportable segments is presented as follows:   2012 Q2  2011 Q2  2012 YTD  2011 YTD Revenue            Canada - U.S.$84,151 $50,569 $145,589 $91,020 South and Central America 68,062  42,043  119,354  82,060 Australia, Asia and Africa 61,641  35,206  113,063  64,218 $213,854 $127,818 $378,006 $237,298 Earnings from operations            Canada - U.S.$18,929 $9,541 $28,915 $15,146 South and Central America 16,591  4,614  27,190  9,135 Australia, Asia and Africa 13,811  6,449  24,869  7,612  49,331  20,604  80,974  31,893Eliminations (59)  (234)  (84)  (465)  49,272  20,370  80,890  31,428Finance costs 964  325  1,786  611General corporate expenses * 3,869  3,099  8,410  6,377Income tax 12,879  5,625  21,242  7,985Net earnings$31,560 $11,321 $49,452 $16,455 *General corporate expenses include expenses for corporate offices and stock options Depreciation and amortization           Canada - U.S.$4,054 $2,274 $7,395 $4,566 South and Central America 2,484  2,133  4,755  4,034 Australia, Asia and Africa 2,391  2,571  5,055  5,280Unallocated and corporate assets 437  569  741  814 $9,366 $7,547 $17,946 $14,694      October 31, 2011 April 30,2011   Identifiable assets            Canada - U.S.   $239,691 $134,666    South and Central America    218,660  189,083    Australia, Asia and Afirca    169,851  130,071        628,202  453,820   Eliminations    (1,185)  439   Unallocated and corporate assets    65,333  19,878       $692,350 $474,137  14. NET EARNINGS FOR THE YEAR Net earnings for the year have been arrived at after charging various employee benefit expenses as follows.  Direct costs include salaries and wages of $47,750 for the quarter ending October 31, 2011 ($31,383 for the quarter ending October 31, 2010) and other employee benefits of $9,314 for the quarter ending October 31, 2011 ($5,712 for the quarter ending October 31, 2010); general and administrative expense includes salaries and wages of $5,524 for the quarter ending October 31, 2011 ($4,249 for the quarter ending October 31, 2010) and other employee benefits of $890 for the quarter ending October 31, 2011 ($642 for the quarter ending October 31, 2010); other expenses include share based payments of $439 for the quarter ending October 31, 2011 ($619 for the quarter ending October 31, 2010).Direct costs include salaries and wages of $87,080 for the six months ending October 31, 2011 ($59,993 for the six months ending October 31, 2010) and other employee benefits of $16,842 for the six months ending October 31, 2011 ($11,236 for the six months ending October 31, 2010); general and administrative expense includes salaries and wages of $10,705 for the six months ending October 31, 2011 ($8,250 for the six months ending October 31, 2010) and other employee benefits of $1,801 for the six months ending October 31, 2011 ($1,382 for the six months ending October 31, 2010); other expenses include share based payments of $862 for the six months ending October 31, 2011 ($1,092 for the six months ending October 31, 2010).Amortization expense for intangible assets has been included in the line item "Depreciation and amortization" in the Interim Condensed Consolidated Statements of Operations with breakdown as follows:  2012 Q2 2011 Q2 2012 YTD 2011 YTD Depreciation of property, plant and equipment$9,078 $7,415 $17,467 $14,430Amortization of intangible assets288 132 479 264 $9,366 $7,547 $17,946 $14,69415. BUSINESS ACQUISITIONSBradley Group Limited Effective September 30,2011, the Company acquired all the issued and outstanding shares of Bradley Group Limited ("Bradley"), which provides a unique opportunity to further the Company's corporate strategy of focusing on specialized drilling, expanding its geographic footprint in areas of high growth and of maintaining a balance in the mix of drilling services.  The acquisition was accounted for using the acquisition method and the results of this operation were included in the statement of operations as of the closing date. The acquired business includes the assets acquired indicated below, contracts and personnel.  The purchase price for the transaction was CAD $78,035, including customary working capital adjustments and net of cash acquired, financed with cash and debt.The Company is in the process of finalizing the valuation of assets. As at October 31, 2011, the values allocated to net tangible and intangible assets are preliminary and are subject to adjustments as additional information is obtained.The estimated net assets acquired at fair market value at acquisition are as follows:Assets acquired    Trade and other receivables (net) $24,224Inventories  15,346Prepaid expenses  540Property, plant and equipment  45,755Deferred income tax assets  350Goodwill (not tax deductible)  30,363Trade and other payables  (19,628)Income tax payable  (1,313)Short-term debt  (5,101)Current portion of long-term debt  (125)Long-term debt  (10,329)Deferred income tax liability  (2,047)Total assets $78,035 Consideration   Cash $72,000Long-term debt (holdback)  8,000Trade and other payable  6,254Less: Cash acquired  (8,219)  $78,035The Corporation incurred acquisition-related costs of $544 relating to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in the other expense line of the Interim Condensed Consolidated Statements of Operations.The revenue for the three months ended October 31, 2011 attributable to the additional business generated by Bradley was $11,434. It is impracticable to estimate the revenue and net income of the combined entity for the year as though the acquisition date was May 1, 2011.Resource DrillingEffective March 24, 2011, the Company acquired the assets of Resource Drilling, which provides contract drilling services in Mozambique, where Major Drilling did not previously have a presence. The acquisition was accounted for using the acquisition method and the results of this operation were included in the statement of operations as of the closing date. The acquired business includes drilling equipment, inventory, contracts and personnel.  The purchase price for the transaction was USD $9,563 (CAD $9,345), including customary working capital adjustments, financed with cash.The net assets acquired at fair market value at acquisition are as follows:Assets acquired    Inventories $946Prepaid expenses  23Property, plant and equipment  6,010Goodwill (not tax deductible)  2,024Intangible assets  342Total assets $9,345 Consideration   Cash $3,947Trade and other payables  5,398  $9,345North Star DrillingEffective June 30, 2010, the Company acquired the assets of North Star Drilling, which provides contract drilling services to the fresh water and geothermal markets in certain mid-western states in the US, and operates from its head office in Little Falls, Minnesota, as well as from satellite offices in Brainerd and Bemidji, Minnesota. The acquisition was accounted for using the acquisition method and the results of this operation were included in the statement of operations as of the closing date. The acquired business includes working capital, drilling equipment, contracts and personnel.  The purchase price for the transaction, excluding contingent consideration, was USD $2,449 (CAD $2,567), including customary working capital adjustments of CAD $215, financed with cash.  The contingent consideration of USD $750 to the purchase price is based on future earnings. The acquiree is expected to meet target earnings, with payments to be made over the next five years.The net assets acquired at fair market value at acquisition are as follows:Assets acquired and liabilities assumed   Trade receivables (net) $776Inventories  382Prepaid expenses  18Property, plant and equipment  1,078Goodwill (not tax deductible)  1,083Intangible assets  763Trade and other payables  (779)Net assets $3,321 Consideration   Cash $2,567Contingent consideration  754  $3,32116. DIVIDENDSThe Company declared a dividend of $0.08 per common share paid on November 1, 2011 to shareholders of record as of October 10, 2011.The Company declared two dividends during the previous year. The first dividend of $0.07333 per common share was paid on November 1, 2010 to shareholders of record as of October 8, 2010.  The second dividend of $0.07333 per common share was paid on May 2, 2011 to shareholders of record as of April 8, 2011.17. FINANCIAL INSTRUMENTSThere are no significant changes to financial instruments compared to the Company's 2011 annual financial statements prepared under previous GAAP except for the following:Fair valueThe carrying values of cash, trade and other receivables, demand credit facility and trade and other payables approximate their fair value due to the relatively short period to maturity of the instruments.  The following table shows carrying values of short and long-term debt and contingent considerations and approximates their fair value, as most debts carry variable interest rates and the remaining fixed rate debts have been acquired recently and their carrying value continues to reflect fair value. October 31, 2011 April 30, 2011 Short-term debt$12,788 $7,919Contingent considerations 2,740  2,612Long-term debt 64,422  25,032      Credit riskAs at October 31, 2011, 84.8% of the Company's trade receivables were aged as current and 0.3%of the trade receivables were impaired.The movement in the allowance for impairment of trade receivables during the period was as follows:Balance as at April 30, 2011 $982Increase in impairment allowance  376Write-off charged against allowance  (526)Recovery of amounts previously written off  (357)Foreign exchange translation differences  17Balance as at October 31, 2011 $492    Foreign currency riskThe most significant carrying amounts of net monetary assets that: (1) are denominated in currencies other than the functional currency of the respective Company subsidiary; (2) cause foreign exchange rate exposure; and (3) may include intercompany balances with other subsidiaries, at the reporting dates are as follows:  October 31, 2011 April 30, 2011U.S. Dollars $35,388 $14,605If the Canadian dollar moved by plus or minus 10% at October 31, 2011, the unrealized foreign exchange gain or loss would move by approximately $3,539 (April 30, 2011 - $1,460).Liquidity riskThe following table details the Company's contractual maturities for its financial liabilities. 1 year 2-3 years 4-5 years thereafter Total Trade and other payables$124,128 $- $- $- $124,128Short-term debt 12,788  -  -  -  12,788Contingent considerations 996  1,744  -  -  2,740Long-term debt 8,884  17,770  32,936  4,832  64,422 $146,796 $19,514 $32,936 $4,832 $204,078  For further information: Denis Larocque, Chief Financial Officer   Tel: (506) 857-8636 Fax: (506) 857-9211ir@majordrilling.com