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Press release from CNW Group

Ensign Energy Services Inc. - Record Revenue Drives Strong 2011 Financial Results

Monday, March 19, 2012

Ensign Energy Services Inc. - Record Revenue Drives Strong 2011 Financial Results05:00 EDT Monday, March 19, 2012CALGARY, March 19, 2012 /CNW/ -OverviewEnsign Energy Services Inc. ("Ensign" or the "Company") generated record revenue for the year ended December 31, 2011, increasing 39 percent over the prior year to $1,890.4 million.  Net income for the year ended December 31, 2011 was $212.4 million ($1.39 per common share), a 78 percent increase from $119.3 million ($0.78 per common share) recorded in 2010.  Operating earnings, expressed as EBITDA (defined as earnings before interest, income taxes, depreciation, and share-based compensation expense (recovery)), for 2011 were $502.0 million ($3.28 per common share), a 54 percent increase from EBITDA of $325.6 million ($2.13 per common share) for the year ended December 31, 2010.  Funds from operations increased 59 percent to $475.6 million ($3.11 per common share) in 2011, a record high for the Company, from $299.9 million ($1.96 per common share) in the prior year.During the fourth quarter of 2011, the Company generated the highest fourth quarter revenue in its history, increasing 43 percent over 2010 to $578.0 million.  Net income increased 64 percent to $52.6 million ($0.34 per common share) compared to $32.1 million ($0.21 per common share) recorded in 2010.  EBITDA was $155.2 million ($1.02 per common share) for the fourth quarter of 2011, an increase of 49 percent over EBITDA of $104.0 million ($0.68 per common share) recorded in the fourth quarter of 2010.  Funds from operations were $140.5 million ($0.92 per common share) for the fourth quarter of 2011, a 55 percent increase from $90.5 million ($0.59 per common share) recorded in the fourth quarter of 2010.The improved financial results in the fourth quarter and year ended December 31, 2011 reflect the continued recovery in demand for oilfield services and generally higher revenue rates for oilfield services as pricing, particularly in Canada, improved in line with the increased level of operating activity.  Improvements to operating results in the Company's United States and international operations were somewhat reduced by the translational impact of a weakening United States dollar against the Canadian dollar.  Although the United States dollar strengthened towards the end of the 2011 fiscal year compared to 2010, overall the United States dollar weakened approximately four percent during 2011 compared to 2010.  Improved operating results were also dampened in the Company's international operations by challenges in the Middle East and North Africa as a result of regional geopolitical issues and weather setbacks in Australia during the first half of 2011.In the third quarter of 2011, the Company completed the acquisition of the land drilling division of Rowan Companies, Inc. ("Rowan Land Drilling"), the largest acquisition in the Company's history, adding 30 deeper capacity electric land drilling rigs to the Company's existing United States fleet.  Subsequent to the acquisition, Rowan Land Drilling was renamed Ensign US Southern Drilling LLC ("Ensign US Southern").  In addition to this acquisition, the Company added 10 new Automated Drill Rigs ("ADR®") and 16 new well servicing rigs to its equipment fleet in 2011 as part of its most recent new build program, which had been expanded throughout the year in response to customer demand for additional oilfield services equipment.  The Company's total assets grew 37 percent in 2011 to $3,048.1 million from $2,225.5 million as at December 31, 2010.The Company increased its dividend in 2011 with the dividend declared in the fourth quarter of 2011 increasing 10.5 percent to $0.1050 per common share from the previous dividend rate of $0.0950 per common share.  During the year ended December 31, 2011, the Company declared dividends of $0.3900 per common share, an increase of nine percent over dividends of $0.3575 per common share declared in 2010.  The dividend increase represents an 18 percent compound annual growth rate since the Company first paid a dividend in 1995.The Company added long-term debt to its capital structure in the 2011 fiscal year as it entered into USD $400.0 million of term financing to partially fund the acquisition of Rowan Land Drilling.  As a result, long-term debt as at December 31, 2011 totaled $406.0 million.  In February of 2012, the Company issued USD $300.0 million of senior unsecured notes and applied the proceeds to partially repay the USD $400.0 million term loan.  The senior unsecured notes consist of: USD $100.0 million in five year notes with an interest rate of 3.43 percent; USD $100.0 million in seven year notes with an interest rate of 3.97 percent; and USD $100.0 million in ten year notes with an interest rate of 4.54 percent.  The remaining USD $100.0 million balance of the term loan is due in February 2013.FINANCIAL AND OPERATING HIGHLIGHTS($ thousands, except per share data and operating information)           Three months ended December 31   Year ended December 31           2011    2010    % change     2011    2010    % change                            Revenue            577,967    403,992    43     1,890,372    1,355,683    39                            EBITDA 1            155,167    104,045    49     502,031    325,617    54EBITDA per share 1                            Basic            $1.02   $0.68    50     $3.28    $2.13    54 Diluted            $1.01    $0.68   49     $3.28    $2.13    54Adjusted net income 2            57,926    36,330   59     216,654   117,406   85Adjusted net income per share 2                            Basic            $0.38  $0.24   58     $1.42    $0.77    84 Diluted            $0.38    $0.24    58     $1.42    $0.77    84Net income            52,640    32,118    64     212,393    119,308    78Net income per share                            Basic            $0.34    $0.21    62     $1.39    $0.78   78 Diluted            $0.34    $0.21    62     $1.39    $0.78    78Funds from operations 3            140,465    90,505    55     475,587   299,922    59Funds from operations per share 3                            Basic            $0.92    $0.59    56     $3.11    $1.96    59 Diluted            $0.92    $0.59    56    $3.11    $1.96    59Weighted average shares - basic (000s)            152,844   152,733    -     152,865   152,835    -Weighted average shares - diluted (000s)            152,994    153,076    -     153,062    153,179    -                            Drilling                            Number of marketed rigs                             Canada                              Conventional            131    136    (4)     131    136    (4)   Oil sands coring/coal bed methane            37    38    (3)     37    38    (3)  United States            117    80    46     117   80    46  International 4            59    59   -     59    59    -Operating days                            Canada 5            6,000    5,789    4     22,750    18,787    21 United States  6,671  4,229  58  20,827 15,254  37 International            2,698    2,716    (1)     10,748    10,014    7Well Servicing                            Number of marketed rigs                             Canada            103    99    4     103    99   4  United States            36    24    50     36   24    50 Operating hours                            Canada  38,663  36,082  7  145,220  129,564 12  United States            25,559    16,045    59     82,453    53,618    541   EBITDA is defined as "income before interest, income taxes, depreciation and share-based compensation expense (recovery)".  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 expense (recovery), tax-effected using an income tax rate of 35 percent".  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 provide 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 Services Expense           Three months ended December 31    Year ended December 31($ thousands)            2011    2010    % change     2011    2010    % changeRevenue                            Canada            225,153    173,815    30     786,158    546,249    44 United States            236,821   142,460    66     727,678    492,991    48 International            115,993    87,717    32    376,536    316,443    19                                       577,967    403,992    43     1,890,372    1,355,683    39Oilfield services expense            411,040    290,874    41     1,322,926    984,823    34                            Gross margin            166,927    113,118    48     567,446    370,860  53                            Gross margin %            28.9    28.0         30.0   27.4   Revenue recorded in the year ended December 31, 2011 totaled $1,890.4 million, an increase of 39 percent over the prior year.  Revenue recorded in the fourth quarter of 2011 totaled $578.0 million, an increase of 43 percent over $404.0 million recorded in the fourth quarter of 2010.  Higher activity levels and improved revenue rates led to the revenue growth in 2011 over 2010.  In addition, the third quarter acquisition of Rowan Land Drilling, adding 30 drillings rigs to the Company's fleet, as well as an active new build program which added 10 new drilling rigs and 16 new well servicing rigs throughout the year, contributed to the year-over-year increase in revenue generated by the Company.  Partially offsetting these improvements from the Company's North American operations were certain challenges that developed in the international segment during the 2011 fiscal year. The Company's international results were negatively impacted by the disruption of operations in Libya resulting from civil unrest that commenced in the first quarter of 2011 and the temporary halting of operations in parts of Australia due to regional flooding conditions in the first half of the year.Gross margin increased to $567.4 million (30.0 percent of revenue) in the year ended December 31, 2011 compared to $370.9 million (27.4 percent of revenue) for the corresponding period in 2010.  Similarly, gross margin increased to $166.9 million (28.9 percent of revenue) for the fourth quarter of 2011 compared with $113.1 million (28.0 percent of revenue) for the fourth quarter of 2010.  The improvement in gross margin was a result of higher revenue rates in 2011 over 2010 as prices for oilfield services generally improved in line with the higher levels of demand.  Higher major maintenance costs in 2011 compared to 2010 partially offset the increases to margins from better pricing as the Company continued to maintain and upgrade its equipment fleet during the year.  These major maintenance costs were incurred as a result of the Company preparing portions of its fleet for higher anticipated activity levels in the second half of 2011 and a busy Canadian winter drilling season in the first quarter of 2012; and are generally expensed as incurred.Canadian Oilfield Services           Three months ended     Year ended           December 31     December 31           2011    2010    % change     2011    2010    % changeConventional drilling and coring rigs                            Opening balance            168    174         174    182     Additions            1    -         2    -     Transfers            -   -         1    -     Decommissions / Disposals            (1)    -        (9)    (8)    Ending balance            168    174    (3)     168    174   (3)Drilling operating days1            6,000    5,789    4     22,750    18,787    21Drilling rig utilization %            50.0   46.3    8     48.3   37.9    27Well servicing rigs                            Opening balance            103    112          99    112     Additions            -    1         4    1     Decommissions / Disposals            -    (14)         -    (14)     Ending balance            103    99    4     103    99   4Well servicing operating hours            38,663    36,082    7    145,220    129,564    12Well servicing utilization %            40.8     40.9    -     39.5    37.0    71   Excludes coring rig operating days.Revenue generated in Canada increased 30 percent to $225.2 million for the three months ended December 31, 2011, from $173.8 million for the three months ended December 31, 2010.  The Company recorded revenue of $786.2 million in Canada for the year ended December 31, 2011, a 44 percent increase from $546.3 million recorded in the year ended December 31, 2010.  In the fourth quarter of 2011, Canadian revenues accounted for 39 percent of total revenue (2010 - 43 percent), and during the year ended December 31, 2011, Canadian revenues were 42 percent of total revenue (2010 - 40 percent).The Company's Canadian operations benefited in 2011 from improved levels of demand and pricing for Canadian oilfield services, as crude oil prices remained at attractive levels.  Despite weakness in the price for natural gas, crude oil prices for 2011 averaged USD $100 per barrel and continued to drive development in crude oil and liquids-rich natural gas resource plays, such as the Montney, Bakken, Cardium and heavy oil resource plays.Drilling days recorded by the Company's Canadian operations in the fourth quarter of 2011 increased four percent from the comparable quarter in the prior year.  During the year ended December 31, 2011, drilling days increased 21 percent from the same period of the prior year.  Similarly, Canadian well servicing hours increased by seven percent in the fourth quarter of 2011 and by 12 percent in the year ended December 31, 2011 compared to the corresponding periods in the prior year.The Company decommissioned or disposed of nine inactive drilling rigs during 2011 and added three drilling rigs, two of which are new build ADRs, and four new well servicing rigs to its Canadian equipment fleet in 2011.  As previously indicated, the Canadian operations incurred higher major maintenance costs in 2011 compared to 2010, negatively impacting margins as these costs are expensed as incurred.  The equipment additions and additional major maintenance costs were incurred to take advantage of rising customer demand for oilfield services in 2011 and into 2012.United States Oilfield Services           Three months ended    Year ended           December 31     December 31           2011    2010   % change     2011    2010   % changeConventional drilling rigs                            Opening balance            116    80        80    82     Additions            1    -         38    2     Transfers            -   -        (1)    (1)     Decommissions / Disposals            -    -         -    (3)    Ending balance           117    80    46    117    80    46Drilling operating days            6,671    4,229   58     20,827    15,254    37Drilling rig utilization %            62.5    57.5    9     60.7    52.5    16Well servicing rigs                            Opening balance            34    23        24    18     Additions            2    1         12    6    Ending balance            36    24    50     36    24   50Well servicing operating hours            25,559    16,045    59     82,453    53,618    54Well servicing utilization %            78.6     74.7    5    73.4   71.9    2The Company's United States operations recorded revenue of $236.8 million in the fourth quarter of 2011, a 66 percent increase from the $142.5 million recorded in the corresponding period of the prior year.  During the year ended December 31, 2011, revenue of $727.7 million was recorded, an increase of 48 percent from the $493.0 million recorded in the year ended December 31, 2010.  The United States segment accounted for 41 percent of the Company's revenue in the fourth quarter of 2011 (2010 - 35 percent); and 38 percent of the Company's revenue in the current year (2010 - 37 percent).The number of drilling days recorded by the Company's United States operations in the fourth quarter of 2011 was 6,671, an increase of 58 percent over 4,229 drilling days recorded for the same period of the prior year.  Drilling days for the year ended December 31, 2011 increased 37 percent from the comparable period in the prior year to 20,827 from 15,254 drilling days in 2010.  United States well servicing hours in the fourth quarter of 2011 were up 59 percent compared to the prior year and well servicing hours for 2011 were up 54 percent compared to 2010.The Company's United States operations experienced substantial growth in 2011, primarily a result of the third quarter acquisition of Rowan Land Drilling and its fleet of 30 ADR® style drilling rigs.  This acquisition significantly expanded the Company's operations into many of the resource plays of the southern United States.  In addition, eight new ADR® drilling rigs and 12 new well servicing rigs were added to the United States equipment fleet in 2011 as part of the Company's ongoing new build program, combining to produce strong revenue growth in this segment.Although operating results for the United States segment were improved overall, the weakening United States dollar in 2011 compared to the prior year negatively impacted the translation to Canadian dollars of the United States division earnings.  Despite the United States dollar strengthening against the Canadian dollar towards the end of the year, the average exchange rate weakened during the twelve months ended December 31, 2011, compared to the same period in the prior year.  The average Canadian/United States dollar exchange rate at which the Company's United States results were translated to Canadian dollars for presentation purposes was 0.99 for 2011 compared to 1.03 for 2010, a four percent decline.International Oilfield Services           Three months ended     Year ended           December 31    December 31           2011    2010    % change     2011    2010    % changeConventional drilling and workover rigs                            Opening balance            59    59         59    58     Transfers            -    -         -    1    Ending balance            59    59    -     59    59    -Drilling operating days            2,698    2,716    (1)    10,748    10,014    7Drilling rig utilization %            49.7   50.9    (2)     49.9    47.3    6The Company's international operations recorded revenue of $116.0 million in the fourth quarter of 2011, a 32 percent increase from $87.7 million recorded in the corresponding period of the prior year.  International revenue for the year ended December 31, 2011 increased by 19 percent to $376.5 million from $316.4 million recorded for the year ended December 31, 2010.  International operations contributed 20 percent of the Company's revenue in the fourth quarter of 2011 (2010 - 22 percent) and 20 percent in the year ended December 31, 2011 (2010 - 23 percent).International drilling days for the three months ended December 31, 2011 decreased one percent over the comparable prior year period to 2,698 drilling days compared to 2,716 drilling days in the fourth quarter of 2010.  The Company's international operations recorded 10,748 drilling days in 2011, a seven percent increase from 10,014 drilling days recorded in 2010.Increased operating activity in the Company's Latin America operations drove the improvement in revenue and activity in 2011 compared with 2010.  Other regions experienced challenges outside of the Company's control, including disruptions of operations resulting from severe flooding in Australia and political unrest in parts of the Middle East and North Africa.  Australian operations recovered in the second half of 2011; however, the Company continues to focus on addressing challenges with respect to its Libyan operations that remain suspended since the civil unrest that started in the first quarter of 2011.Consistent with the translation of results from the Company's United States operations, the operating results from the Company's international operations were negatively impacted on translation into Canadian dollars by the weakening of the United States dollar relative to the Canadian dollar in 2011 when compared to the prior year.Depreciation           Three months ended December 31     Year ended December 31($ thousands)            2011    2010    % change     2011    2010    % changeDepreciation            57,540    35,112    64     177,927    132,980    34The Company uses the unit of production method of calculating depreciation for the majority of its property and equipment.  Depreciation expense totaled $57.5 million for the fourth quarter of 2011 compared with $35.1 million for the fourth quarter of 2010.  Depreciation expense increased 34 percent to $177.9 million for the year ended December 31, 2011 compared with $133.0 million for the year ended December 31, 2010.  Higher depreciation expense in 2011 over 2010 is attributable to additional operating days, including the expansion of the Company's fleet through the acquisition of Rowan Land Drilling and equipment additions during the year from the Company's new build program, adding several higher-valued drilling and well servicing rigs to the equipment fleet throughout the year.  Depreciation charges for 2011 also include additional amounts of $9.2 million (2010 - $12.1 million) in respect of equipment that has been inactive for a period of 12 consecutive months or more with a limited near term outlook for future work.General and Administrative Expense           Three months ended December 31     Year ended December 31($ thousands)            2011    2010    % change     2011    2010    % changeGeneral and administrative            20,878    18,383    14     70,258   60,849    15                            % of revenue            3.6    4.6         3.7    4.5   General and administrative expense increased 14 percent to $20.9 million (3.6 percent of revenue) for the fourth quarter of 2011 compared with $18.4 million (4.6 percent of revenue) for the fourth quarter of 2010.  General and administrative expense totaled $70.3 million (3.7 percent of revenue) for the year ended December 31, 2011 compared with $60.8 million (4.5 percent of revenue) for the year ended December 31, 2010, an increase of 15 percent.   The overall increase in general and administrative expense was to support the increased operating activity, the addition of Ensign US Southern in the third quarter of 2011 and higher incentive compensation costs compared to 2010.  The decrease in general and administrative expense as a percentage of revenue reflects the revenue growth in 2011 compared to 2010 as well as the Company's ongoing efforts to control fixed costs and the translational impact of a weaker United states dollar on United States and international administrative expenses.Share-Based Compensation Expense (Recovery)           Three months ended December 31     Year ended December 31($ thousands)            2011    2010    % change     2011    2010    % changeShare-based compensation            8,132    6,479    26     6,555    (2,926)    (324)Share-based compensation expense (recovery) 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 December 31, 2011, share-based compensation expense was $8.1 million compared with an expense of $6.5 million recorded in the fourth quarter of 2010.  For 2011, share-based compensation was an expense of $6.6 million compared with a recovery of $2.9 million for the year ended December 31, 2010.  The increase in share-based compensation expense for the year ended December 31, 2011 arises from the change in the fair value of share-based compensation liability primarily due to an increase in the price of the Company's common shares during the year.  The closing price of the Company's common shares was $16.25 at December 31, 2011, compared with $15.03 at December 31, 2010.Interest Expense           Three months ended December 31     Year ended December 31($ thousands)            2011    2010    % change     2011   2010    % changeInterest expense            4,071    352    1,057     6,586    2,073    218Interest income            (136)    (402)    (66)     (647)   (794)    (19)                                       3,935    (50)    (7,970)     5,939    1,279    364Interest is incurred on the Company's $10.0 million Canadian-based revolving credit facility, the global revolving credit facility, which was increased by $50.0 million in the third quarter of 2011 to a total of $250.0 million, and the Company's new USD $400.0 million 18-month term loan, incurred to partially fund the acquisition of Rowan Land Drilling.  Transaction costs related to the Company's term loan financing and revolving credit facility renewal are included in interest expense in 2011.Foreign Exchange and Other           Three months ended December 31    Year ended December 31($ thousands)           2011    2010    % change     2011    2010   % changeForeign exchange and other           (9,118)    (9,310)    (2)    (4,843)    (15,606)    (69)The reduction in foreign exchange gain in 2011, when compared to 2010, is primarily attributable to the impact of converting the Australian operations from Australian dollars to United States dollars.  The Australian currency weakened slightly against the United States dollar during the year ended December 31, 2011, but had strengthened during the year ended December 31, 2010.Income Taxes           Three months ended December 31   Year ended December 31($ thousands)          2011  2010  % change   2011  2010  % changeCurrent income tax          12,985  11,885  9   26,882  25,435  6Deferred income tax          19,935  18,501  8   72,335  49,541  46                                         32,920  30,386  8   99,217  74,976  32Effective income tax rate %          38.5  48.6       31.8  38.6      The effective income tax rate for the three months ended December 31, 2011 was 38.5 percent compared with 48.6 percent for the three months ended December 31, 2010.  The effective income tax rate for the year ended December 31, 2011 was 31.8 percent compared with 38.6 percent for the year ended December 31, 2010.  The decrease in the effective income tax rate in the three and twelve months ended December 31, 2011 is due to a greater proportion of taxable income being generated in Canada and a reduced proportion of income generated in certain international jurisdictions with higher income tax rates, including jurisdictions where income taxes are based on "deemed profits" or withholding taxes on gross revenue. Consistent with 2010, the lower than expected proportion of current income tax in 2011 arises primarily from an extension of the bonus depreciation regime in the United States which results in accelerated tax deductions in relation to new qualified capital assets placed into service during the current year.Financial PositionThe following chart outlines significant changes in the consolidated statement of financial position from December 31, 2010 to December 31, 2011:($ thousands)      Change   Explanation Cash and cash equivalents      (86,907)   See consolidated statements of cash flows.         Accounts receivable      146,006   Increase is consistent with increased operating activity in the fourth quarter of 2011 compared to the fourth quarter of 2010.         Inventories and other     14,127   Increase is due to additional inventory and other, offset by normal course use of consumables.         Property and equipment      749,229   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      170   Increase is due to accretion of interest income during the year.         Accounts payable and accruals      76,457   Increase is consistent with increased operating activity in the fourth quarter of 2011 compared to the fourth quarter of 2010.         Operating lines of credit      79,105   Increase is due to additional draws of the expanded operating lines of credit to partially finance the acquisition of Rowan Land Drilling, completed in the third quarter of 2011, the ongoing new build construction program, and increased operating activity offset by repayments during the year.Share-based compensation      6,246   Increase is due to increase in the price of the Company's common shares as at December 31, 2011 compared with December 31, 2010.         Income taxes payable      5,696   Increase due to the current income tax provision for the period, net of tax instalments.         Dividends payable      1,540   Increase is due to a 10.5 percent increase in the quarterly dividend rate for the fourth quarter of 2011 compared to the fourth quarter dividend of 2010.         Long-term debt      405,953   Increase is due to the term loan obtained as partial financing of the acquisition of Rowan Land Drilling in the third quarter of 2011.         Deferred income taxes      72,361   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      175,267   Increase due to net income for the year and the impact of foreign exchange rate fluctuations on net assets of foreign subsidiaries, offset by the amount of dividends declared in the year.Funds from Operations and Working Capital            Three months ended December 31   Year ended December 31($ thousands)          2011  2010  % change   2011  2010  % changeFunds from operations          140,465  90,505  55   475,587  299,922  59Funds from operations per share          $0.92  $0.59  56    $3.11  $1.96  59Working capital           (10,233)  84,516  (112)   (10,233)  84,516  (112)During the three months ended December 31, 2011, the Company generated funds from operations of $140.5 million ($0.92 per common share) compared with $90.5 million ($0.59 per common share) for the three months ended December 31, 2010, an increase of 55 percent.  For the year ended December 31, 2011, the Company generated funds from operations of $475.6 million ($3.11 per common share), an increase of 59 percent over $299.9 million ($1.96 per common share) generated in the year of 2010.  The increase in funds from operations in 2011 compared to 2010 is due to higher activity levels, particularly in North America, as a result of increased demand for oilfield services equipment and the expansion of the Company's fleet through the acquisition of Rowan Land Drilling and the ongoing new build program.At December 31, 2011, the Company's working capital totaled negative $10.2 million compared to positive working capital of $84.5 million at December 31, 2010, a decrease of 112 percent.  The Company utilized its cash resources in 2011 to partially fund the acquisition of Rowan Land Drilling, which was completed in the third quarter.  This resulted in a temporary negative working capital balance on the Company's statement of financial position as at December 31, 2011; however, the Company expects the growth in operating results combined with current and future credit facilities to fully support current operating and capital requirements.  Existing revolving credit facilities provide for total borrowings of $260.0 million, of which $10.1 million was available as at December 31, 2011.Investing Activities           Three months ended December 31   Year ended December 31($ thousands)          2011  2010  % change   2011  2010  % changePurchase of property and equipment          (134,209)  (103,095)  30   (386,833)  (255,463)  51Acquisition          -  -  -   (497,352)  -  -Net change in non-cash working capital          (14,892)  29,248  (151)   31,510  3,593  777                            Cash used in investing activities          (149,101)   (73,847)   102   (852,675)  (251,870)  239 Effective September 1, 2011 the Company acquired Rowan Land Drilling for USD $510.0 million plus working capital of USD $5.5 million.  Rowan Land Drilling was 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.  The Company did not complete any significant acquisitions in 2010.Purchases of property and equipment during the fourth quarter of 2011 totaled $134.2 million (2010 - $103.1 million).  For the year ended December 31, 2011, purchases of property and equipment totaled $386.8 million (2010 - $255.5 million).  The purchases of property and equipment relate primarily to expenditures made pursuant to the Company's ongoing new build program.  Significant additions as a result of the new build program included:Completion of eight new ADR® drilling rigs in the United States (two in the first quarter, three in the second quarter, two in the third quarter and one in the fourth quarter);Construction of 12 new well servicing rigs in the United States (two in the first quarter, five in the second quarter, three in the third quarter and two in the fourth quarter);Completion of two new ADR® drilling rigs in Canada (one in the third quarter and one in the fourth quarter); andConstruction of four new well servicing rigs in Canada (two in the second quarter and two in the third quarter).Financing Activities           Three months ended December 31   Year ended December 31($ thousands)          2011  2010  % change   2011  2010  % changeNet increase (decrease) in operating lines of credit          6,604  27,560  (76)   73,601  (621)  (11,952)Increase in long-term debt          -  -  -   390,080  -  -Issue of capital stock           -  2,458  (100)   -  2,458  (100)Purchase of shares held in trust          (674)  (642)  5   (6,202)  (2,310)  168Purchase of common shares under Normal                            Course Issuer Bid          -  -  -   -  (2,330)  (100)Deferred financing costs           -  -  -   (2,078)  -  -Dividends          (16,087)  (14,546)  11   (59,752)  (54,751)  9Net change in non-cash working capital          1,468  1,881  (22)   1,371  2,160  (37)                             Cash (used in) from financing activities          (8,689)  16,711  (152)   397,020  (55,394)  (817) The Company's global revolving credit facility (the "Global Facility") was increased by $50.0 million during 2011 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 certain 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 for the fourth quarter of 2011 were due to capital expenditures made pursuant to the Company's ongoing new build program.  New draws of the operating lines of credit for the year ended December 31, 2011 were the result of the acquisition of Rowan Land Drilling which was completed on September 1, 2011, as well as funding for the continuing new build program which is anticipated to deliver an additional 16 new ADR® drilling rigs and 12 new well servicing rigs throughout 2012.  As of December 31, 2011, the operating lines of credit are primarily being used to fund the completion of the new build rigs and to support international operations.In connection with the purchase of Rowan Land Drilling, the Company entered into an unsecured term loan of USD $400.0 million. There are no mandatory principal repayments and the debt matures on February 28, 2013.  The Company incurred financing fees associated with the term loan that are being deferred and amortized using the effective interest method.  Subsequent to December 31, 2011, the Company completed the placement of USD $300.0 million of senior unsecured notes with the proceeds from the issuance being used to repay a portion of the term loan.  The senior unsecured notes consist of: USD $100.0 million in five year notes with an interest rate of 3.43 percent and a maturity date of February 22, 2017; USD $100.0 million in seven year notes with an interest rate of 3.97 percent and a maturity date of February 22, 2019; and USD $100.0 million in ten year notes with an interest rate of 4.54 percent and a maturity date of February 22, 2022.  The notes rank equally with the Company's Global Facility.On June 3, 2011, the Company received approval from the Toronto Stock Exchange to acquire for cancellation up to five percent of the Company's issued and outstanding common shares under a Normal Course Issuer Bid (the "Bid").  The Company may 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 December 31, 2011, no common shares have been purchased and cancelled pursuant to the Bid.  In 2010, 200,000 common shares were purchased and cancelled under a previous bid the Company held that was terminated on May 31, 2011.In the fourth quarter of 2011, the Company increased its quarterly dividend rate to $0.1050 per common share, a 10.5 percent increase over the dividend of $0.0950 per common share declared in the fourth quarter of 2010.  During the year ended December 31, 2011, the Company declared dividends of $0.3900 per common share, an increase of nine percent over dividends of $0.3575 per common share declared in 2010.  The Company did not issue any common shares in connection with the employee stock option program in 2011 compared to the receipt of $2.5 million in the fourth quarter of 2010 on the exercise of employee stock options for common shares in the Company.Subsequent to December 31, 2011, the Company declared a dividend for the first quarter of 2012. A quarterly dividend of $0.1050 per common share is payable April 5, 2012 to all Common Shareholders of record as of March 27, 2012.  The dividend is pursuant to the quarterly dividend policy adopted by the Company.  Pursuant to subsection 89(1) of the Canadian Income Tax Act ("ITA"), the dividend being paid is designated as an eligible dividend, as defined in subsection 89(1) of the ITA.New BuildsDuring the year ended December 31, 2011, the Company commissioned eight new ADR® drilling rigs and 12 new well servicing rigs in the United States; and two new ADR ® drilling rigs and four new well servicing rigs in Canada.The remaining new build estimated delivery schedule, by geographic area, is as follows:           Estimated Delivery Date           Q1-2012  Q2-2012  Q3-2012  Q4-2012  TotalADRs                          Canada          4  2  -  -  6 United States          5  1  -  2  8 International          1  1  -  -  2                          Total          10  4  -   2  16Well Servicing                          Canada          -  -  -  4  4 United States          4  4  -  -  8 International          -  -  -  -  -                        Total          4  4  -  4  12 OutlookGeneral global economic conditions seem to be improving at a moderate rate as programs of quantitative easing appear to be attaining the goal of containing downside risk to the global economy.  A slightly stronger than expected North American economy has improved demand for crude oil; and continuing tensions in the Middle East have resulted in escalating concerns with respect to potential supply disruptions, particularly in the event of a disruption in crude oil supplies flowing through the Strait of Hormuz.  Improved levels of demand and concern over supply have combined to elevate crude oil prices for West Texas Intermediate (Cushing) above USD $100 per barrel.   Conversely, North American natural gas has not fared well, as supply continues to outstrip demand for this continental commodity.  Natural gas prices have declined over 40 percent in the last seven months and have recently hovered around the USD $2.50 per mmbtu level owing to an oversupply of natural gas resulting from increased production associated with many developing resource plays, particularly in the southern United States.   It is no surprise that operators have finally started to reduce the amount of drilling for natural gas and have refocused on crude oil and liquids-rich natural gas projects.  Against this backdrop, the Company currently estimates that approximately 80 percent of its drilling rigs are being utilized in crude oil and liquids-rich natural gas exploration and development programs.The Canadian operations experienced a very good start to the 2011 fiscal year with the favorable weather conditions enjoyed in the first quarter of 2011.  The second quarter softened due to a prolonged break-up period and activity levels and operating margins recovered nicely in the last half of the year. The first quarter of 2012 also started quite strong, but it would be difficult to expect Canadian field conditions to be as good as the prior year as the weather to date has generally been warmer than the first quarter of the prior year.  Accordingly, an earlier spring break-up is expected.  While first quarter Canadian operating days will likely be down on a year-over-year basis, improved operating margins should compensate for the reduction in drilling days compared to the prior year.  It remains to be seen what the impact of the current level of natural gas prices will be on the cash flows of the operators and their projects for the remainder of 2012; however, the outlook for oilfield services generally appears positive in the Canadian market due to the expected favorable crude oil prices driving demand for crude oil and liquids-rich natural gas drilling projects.  The Company added three new ADRs and four new well servicing rigs in Canada during 2011 in order to meet customer demand for specific types of equipment.  Earnings capabilities will continue to expand in Canada with six new ADRs to be delivered under term contracts in the 2012 fiscal year.United States activity levels continued to increase through 2011 as the Company experienced strong levels of demand for oilfield services with respect to the development of crude oil and liquids-rich resource plays.  Natural gas related drilling activity started to decline towards the end of the year as operators reacted to poor supply and demand fundamentals for the commodity.  The Company expects that dry gas drilling will reduce even further in 2012 as favorable hedges continue to run out and supply levels exceed the prior year owing to a relatively mild winter in North America.  So far the Company has successfully redeployed drilling rigs from natural gas projects to crude oil and liquids-rich natural gas projects as demand remains strong for commodities tied to the current price of crude oil.  The Company added eight new ADRs and 12 new well servicing rigs to its United States equipment fleet in 2011.  An additional eight ADRs and eight well servicing rigs will be added to the fleet in 2012.  All of the new build ADRs are backed by term contracts and are being delivered into key resource plays.  The Company expanded its capabilities in many of the key resource plays in the southern United States with the September 2011 acquisition of Rowan Land Drilling and its quality fleet of 30 ADR® style drilling rigs.  This acquisition was the largest in the history of the Company and filled in a crucial gap in the Company's coverage of the United States market.  The Company is now the fourth largest land-based drilling contractor in the United States.  As with Canada, the prospects for the Company's United States operations look good in 2012 for crude oil and liquids-rich natural gas projects, tempered by the direct and indirect consequences of the continuing decline in the demand and supply fundamentals for natural gas.There were two main events that negatively impacted the Company's international operations in the 2011 fiscal year.  The first was the disruption of operations in Libya in February 2011 due to civil unrest owing to the so-called "Arab Spring" and the second was the disruption in activity levels in Australia resulting from extreme flooding conditions that occurred in parts of the country during the first half of 2011.  Neither of these events could have been predicted.  Operations resumed in Australia in the second half of 2011; and Libyan operations could possibly resume before the end of 2012, provided that the country remains stable and security concerns can be addressed.  All other international areas serviced by the Company are expected to remain steady in 2012 compared to 2011 owing to the high level of long-term contracts associated with international operations.  The Company's international operations will be expanded with the delivery of two new ADRs under term contracts into the Australian market in 2012.As previously stated, the Company completed its largest acquisition to date with the successful acquisition of Rowan Land Drilling in September 2011.  In connection with this acquisition, the Company entered into an unsecured term loan of USD $400.0 million.  In February 2012, the Company repaid USD $300.0 million of this term facility using funds received from a private placement of USD $300.0 million in senior unsecured notes.  This private placement was a first for the Company and changes the capital structure in such a way as to add some leverage in the form of long-term debt, while still affording the Company the flexibility to look at additional growth opportunities in the future.Risks and UncertaintiesThis 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 CallA conference call will be held to discuss the Company's year-end 2011 results at 2:00 p.m. MDT (4:00 p.m. EDT) on Monday, March 19, 2012.  The conference call number is (647) 427-7450 (in Toronto) or 1-888-231-8191 (outside Toronto).  A taped recording will be available until March 26, 2012 by dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside Toronto) and entering the reservation number 43360133.  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 December 31    2011 2010     (Unaudited, in thousands of Canadian dollars)          Assets    Current Assets     Cash and cash equivalents    $ 2,613$89,520 Accounts receivable  477,143 331,137 Inventories and other  81,978 67,851       561,734 488,508     Property and equipment 2,479,618 1,730,389Note receivable 6,761 6,591      $ 3,048,113$2,225,488     Liabilities    Current Liabilities     Accounts payable and accruals $289,541$213,084 Operating lines of credit  238,440 159,335 Income taxes payable  11,494 5,798 Dividends payable  16,087 14,547 Share-based compensation  16,405 11,228       571,967 403,992     Long-term debt 405,953 -Share-based compensation 5,304 4,235Deferred income taxes 341,467 269,106       1,324,691 677,333Shareholders' Equity     Share capital  166,864 168,206 Contributed surplus     3,448 2,929 Foreign currency translation reserve  1,032 (22,417) Retained earnings  1,552,078 1,399,437       1,723,422 1,548,155      $3,048,113$2,225,488             Ensign Energy Services Inc.        Consolidated Statements of Income         For the three months and Year ended December 31                 (Unaudited, in thousands of Canadian dollars - except per share data)                   Three months ended Year ended    December31 December 31  December 31 December 31  2011 2010 2011 2010 Revenue$577,967$403,992$1,890,372$1,355,683 Expenses Oilfield services  411,040 290,874 1,322,926 984,823 Depreciation  57,540 35,112 177,927 132,980 General and administrative  20,878 18,383 70,258 60,849 Share-based compensation  8,132 6,479 6,555 (2,926) Foreign exchange and other  (9,118) (9,310) (4,843) (15,606)           488,472 341,538 1,572,823 1,160,120 Income before interest and income taxes 89,495 62,454 317,549 195,563         Interest income  136 402 647 794Interest expense  (4,071) (352) (6,586) (2,073)         Income before income taxes 85,560 62,504 311,610 194,284 Income taxes Current tax  12,985 11,885 26,882 25,435 Deferred tax  19,935 18,501 72,335 49,541           32,920 30,386 99,217 74,976 Net income$52,640$32,118$212,393$119,308           Net income per share  Basic $0.34$0.21$1.39$0.78 Diluted $0.34$0.21$1.39$0.78           Ensign Energy Services Inc.Consolidated Statements of Cash FlowsFor the three months and Year ended December 31        (Unaudited, in thousands of Canadian dollars)       Three months ended Year ended  December 31 December 31 December 31 December 31  2011 2010 2011 2010Cash provided by (used in) Operating activitiesNet income $52,640$32,118$212,393$119,308         Items not affecting cash Depreciation  57,540 35,112 177,927 132,980 Share-based compensation, net of cash paid  9,499 4,774 11,778 (1,907) Accretion on long-term debt  851 - 1,154 - Deferred income tax  19,935 18,501 72,335 49,541Net change in non-cash working capital  (7,641) (22,552) (105,101) (33,772)           132,824 67,953 370,486 266,150  Investing activitiesPurchase of property and equipment  (134,209) (103,095) (386,833) (255,463)Acquisition - - (497,352) -Net change in non-cash working capital  (14,892) 29,248 31,510 3,593           (149,101) (73,847) (852,675) (251,870)  Financing activitiesNet increase (decrease) in operating lines of credit  6,604 27,560 73,601 (621)Increase in long-term debt  - - 390,080 -Issue of capital stock  - 2,458 - 2,458Purchase of shares held in trust  (674) (642) (6,202) (2,310)Purchase of common shares under Normal Course Issuer Bid -  - - (2,330)Deferred financing costs -  - (2,078) -Dividends  (16,087) (14,546) (59,752) (54,751)Net change in non-cash working capital  1,468 1,881 1,371 2,160           (8,689) 16,711 397,020 (55,394)         Net (decrease) increase in cash and cash equivalents (24,966) 10,817 (85,169) (41,114)           Effects of foreign exchange on cash and cash equivalents 21,125 (3,230) (1,738) (4,519) Cash and cash equivalents           Beginning of period 6,454 81,933 89,520 135,153  End of period$2,613$89,520$2,613$89,520           Supplemental information Interest paid$3,295$489$5,425$2,205 Income taxes (received) paid$(2,318)$2,742$21,186$13,211              For further information: Glenn Dagenais, Executive Vice President Finance and Chief Financial Officer, (403) 262-1361.