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Press release from Marketwire

Tuscany International Drilling Inc. Announces Third Quarter 2012 Results and Corporate Credit Ratings

Thursday, November 08, 2012

Tuscany International Drilling Inc. Announces Third Quarter 2012 Results and Corporate Credit Ratings09:00 EST Thursday, November 08, 2012CALGARY, ALBERTA--(Marketwire - Nov. 8, 2012) -NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.Tuscany International Drilling Inc. ("Tuscany" or the "Company") (TSX:TID) (COLOMBIA:TIDC) is pleased to announce third quarter 2012 results. The condensed interim consolidated financial statements of the Company for the third quarter ended September 30, 2012 and the related management's discussion and analysis will be filed under the Company's profile on the SEDAR website at www.sedar.com. The financial information described below should be read in conjunction therewith. Unless otherwise stated, the financial information included herein has been presented in thousands of United States dollars. Q3 2012 Highlights The Company recorded revenue of $74.2 million during the third quarter compared to $44.4 million during the same period last year, an increase of 67%. Revenue during the second quarter of 2012 was $85.2 million. Gross margin(1) was $22.2 million during the third quarter compared to $15.3 million during the same period last year, an increase of 45%. Gross margin was $26.1 million during the second quarter 2012. Adjusted EBITDA1 was $14.7 million during the third quarter compared to adjusted EBITDA of $9.7 million during the same period in 2011, an increase of 51%. Adjusted EBITDA for the second quarter 2012 was $17.0 million. Funds from operations1 were $7.3 million during the third quarter compared to funds from operations of ($1.2) million during the same period in 2011, an increase of 710%. Funds from operations during the second quarter 2012 were $11.6 million. Net loss was $680 during the third quarter compared to a net loss of $15.1 million during the same period in 2011, a decrease of 96%. Net income during the second quarter 2012 was $1.3 million. General and administrative expenses were $8.3 million (including stock-based compensation of $840), or 11.2% of revenue during the third quarter compared to $6.3 million (including stock-based compensation of $755), or 14.2% of revenue during the same period in 2011. General and administrative expenses were $10.1 million (including stock-based compensation of $981), or 11.8% of revenue in the second quarter of 2012. Utilization of the Company's fleet was 62.7% during the third quarter as compared to 77.5% during the same period in 2011. Utilization was 78.7% for the second quarter of 2012. The following is a brief table illustrating the current status of our fleet. (1) Refer to Non-IFRS Measures CountryWorking/ MobilizingNot WorkingOut of Service for RefurbishmentTotalColombia95115Brazil63312Ecuador41-5Gabon4--4Tanzania-2-2Uganda1--1Republic of Congo1--1Trinidad-1-12512441 CORPORATE CREDIT RATING Tuscany International Drilling Inc. is pleased to announce that it has secured a Corporate Credit Rating of B+ from Fitch Rating Services and a B flat rating from Standard and Poor's. FINANCIAL AND OPERATING HIGHLIGHTSThree months ended September 30, 2012Nine months ended September 30, 2012$ thousands, except per share data and operating information20122011% change20122011% changeRevenue74,16344,44267%253,67493,555171%Gross margin(2)22,16515,29745%79,66331,421154%Gross margin percentage29.9%34.4%(13)%31.4%33.6%(7)%Adjusted EBITDA(1)14,7219,74251%51,91818,330183%Adjusted EBITDA per share (basic and diluted)$0.04$0.0333%$0.15$0.0888%Net income (loss) for the period(680)(15,140)96%864(22,032)104%Net income (loss) per share (basic and diluted)$0.00$(0.05)100%$0.00$(0.09)100%Funds from operations17,334(1,203)710%32,66727511,779%Funds from operations per share (basic and diluted)$0.02$0.00100%$0.09$0.00100%Cash from (used in) operating activities8,6917,03823%6,072(1,505)503%Cash from (used in) operating activities per share (basic and diluted)$0.03$0.030%$0.02$(0.01)300%General and administrative expenses8,2846,31031%30,67916,08891%General and administrative expenses as a % of revenue11.2%14.2%(21)%12.1%17.2%(30)%Total assets660,691627,0935%660,691627,0935%Total long-term liabilities200,405186,9817%200,405186,9817%Operating informationNumber of available rigs37(2)356%372356%Revenue days2,1071,55436%7,7373,406127%Utilization62.7%77.5%(19)%77.0%68.4%13%(1) Refer to "Non-IFRS Measures" (2) Total fleet is 41 rigs at September 30, 2012, of which four are undergoing refurbishment Non-IFRS MeasuresThis press release contains references to adjusted EBITDA, adjusted EBITDA per share, funds from operations, funds from operations per share, and gross margin. Adjusted EBITDA is defined as "income before income taxes, net finance costs, equity income/loss, foreign exchange gain/loss, depreciation, stock-based compensation expense and acquisition costs". Management believes that in addition to net income, adjusted EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company's principal business activities prior to the consideration of how these activities are financed, how the results are taxed in various jurisdictions and how the results are impacted by accounting standards associated with the Company's share-based compensation plan and corporate development activities. Per share amounts are calculated using the weighted average number of outstanding shares for the period under review.Three months ended September 30Nine months ended September 30$ thousands2012201120122011Net income (loss) before income taxes1,508(10,486)6,043(13,810)Net finance costs6,2829,97720,09514,060Foreign exchange contracts(299)-203-Equity income33(387)(1,268)(563)Foreign exchange loss7256811,0021,186Acquisition costs-3,909-4,473Depreciation5,6325,29322,8959,987Gain on sale of property and equipment--(44)-Loss on sale of investment--58-Stock-based compensation8407552,9342,997Adjusted EBITDA14,7219,74251,91818,330Funds from operations is defined as "cash flow provided by/used in operating activities before the change in non-cash working capital". Funds from operations is a measure that provides shareholders and potential investors additional information regarding the Company's liquidity and its ability to generate funds to finance its operations. Management will use this measure to assess the Company's ability to finance operating activities, capital expenditures and corporate development initiatives. Per share amounts are calculated using the weighted average number of outstanding shares for the period under review.Three months ended September 30Nine months ended September 30$ thousands2012201120122011Cash flow provided by (used) in operating activities8,6917,0386,072(1,505)Changes in non-cash working capital(1,357)(8,241)26,5951,780Funds from operations7,334(1,203)32,667275Gross margin is defined as "oilfield services revenue less oilfield services expenses". Gross margin is a measure that provides shareholders and potential investors additional information regarding the profitability of the Company's rig operations and is used by management to help assess operational performance. Three months ended September 30Nine months ended September 30$ thousands2012201120122011Oilfield services revenue74,16344,442253,67493,555Oilfield services expenses(51,998)(29,145)(174,011)(62,134)Gross margin22,16515,29779,66331,421Adjusted EBITDA, adjusted EBITDA per share, funds from operations, funds from operations per share, and gross margin are not measures that have any standard meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies.Overview During the three months ended September 30, 2012, the Company recorded a net loss of $680 ($0.00 per common share) compared to a net loss of $15,140 ($0.05 per common share) for the three months ended September 30, 2011. During the nine months ended September 30, 2012, the Company recorded net income of $864 ($0.00 per common share) compared to a net loss of $22,032 ($0.09 per common share) for the nine months ended September 30, 2011. During the three months ended September 30, 2012, the Company recorded oilfield services revenue of $74,163, adjusted EBITDA(4) of $14,721 and gross margin1 from rig operations of $22,165 compared to revenue of $44,442, adjusted EBITDA of $9,742 and gross margin from rig operations of $15,297 during the three months ended September 30, 2011. During the nine months ended September 30, 2012, the Company recorded oilfield services revenue of $253,674, adjusted EBITDA of $51,918 and gross margin from rig operations of $79,663, compared to revenue of $93,555, adjusted EBITDA of $18,330 and gross margin from rig operations of $31,421 during the nine months ended September 30, 2011.The increases in revenue, adjusted EBITDA and gross margin for the third quarter of 2012 compared to the third quarter of 2011 reflect the increase in rig count and operating activity during the three months ended September 30, 2012 compared to the three months ended September 30, 2011. During the second quarter of 2011 the Company acquired Perfurações do Brasil Ltda ("Drillfor"), a Brazilian drilling and workover company, together with eight drilling and workover rigs. Four of these rigs were contracted during the second quarter of 2012. During the third quarter of 2011, the Company completed the acquisition of Caroil SAS ("Caroil"), a Paris based drilling and workover company with operations in Colombia and Central Africa, and a fleet of fourteen drilling and workover rigs. Eleven of these rigs were operational during the third quarter of 2012. These two acquisitions increased the Company's fleet by 22 rigs (of which 19 are now available for use) in the second and third quarters of 2011, and is the primary reason for the significant increases in revenue, adjusted EBITDA1 and gross margin1 for the third quarter of 2012 compared to the third quarter of 2011. For the three months ended September 30, 2012, the Company had 2,107 revenue days from rig operations compared to 1,554 revenue days from rig operations during the three months ended September 30, 2011. Gross margin1 for the three months ended September 30, 2012, was offset by general and administrative expenses of $8,284 (2011 - $6,310), net finance costs of $6,282 (2011 - $9,977), foreign exchange contract recovery of $299 (2011 - $Nil) and depreciation of $5,632 (2011 - $5,293). For the three months ended September 30, 2012, the Company also recorded current income tax expense of $3,491 (2011 - $2,666), deferred income tax recovery of $1,303 (2011 - $(1,988)), foreign exchange loss of $725 (2011 - $681) and an equity loss of $33 (2011 - $(387)). The large increase in general and administrative expense during the three months ended September 30, 2012 compared to the three months ended September 30, 2011, reflect the significant increases in the Company's rig fleet, operating days and administrative staff associated with the two corporate acquisitions undertaken by the Company during 2011. The increases in revenue, adjusted EBITDA1 and gross margin for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, also reflects the increase in rig count and operating activity during the nine months ended September 30, 2012 compared to the nine months end September 30, 2011. For the nine months ended September 30, 2012, the Company had 7,737 revenue days from rig operations compared to 3,406 revenue days from rig operations during the nine months ended September 30, 2011. Gross margin for the nine months ended September 30, 2012, was offset by general and administrative expenses of $30,679 (2011 - $16,088), net finance costs of $20,095 (2011 - $14,060), foreign exchange contract expense of $203 (2011 - $Nil) and depreciation of $22,895 (2011 - $9,987). For the nine months ended September 30, 2012, the Company also recorded current income tax expense of $8,144 (2011 - $6,234), deferred income tax recovery of $2,965 (2011 - $(1,988)), foreign exchange gains of $1,002 (2011 - $1,186) and equity income of $1,268 (2011 - $563). The large increases in depreciation expense and general and administrative expense during the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, reflect the significant increases in the Company's rig fleet, operating days and administrative staff associated with the two corporate acquisitions undertaken by the Company during 2011. During the nine months ended September 30, 2012, Tuscany spent $22,934 on investing activities, which includes $23,745 of capital expenditures comprised primarily of rig refurbishment activity, offset by proceeds from sale of property and equipment of $588 and a $223 reduction in restricted cash. During the three months ended September 30, 2012, Tuscany spent $5,114 related to the amendment of its existing credit facility. During the nine months ended September 30, 2012, Tuscany drew an additional $15,000 on its credit facility. (1) Refer to "Non-IFRS" MeasuresReview of Condensed Interim Consolidated Statement of Financial Position($ thousands)Change ($)(1 ) ExplanationCash and cash equivalents(8,527)See consolidated statement of cash flows.Restricted cash(223)Restricted cash results from the requirement to maintain a debt service reserve account pursuant to the Company's credit facility. In September 2012, debt interest was paid from this reserve account, bringing the balance of the account to $Nil. Subsequent to the interest payment, deposits of $1,277 were made.Accounts receivable12,395Increase is a result of an increase in operating activity during the first three quarters of 2012 as well as an increase in the aging of accounts receivable balances.Prepaid expenses and deposits6,150Increase is due to additional advances to suppliers and prepaid expenses, primarily insurance, for the calendar year incurred in the first three quarters of 2012.Inventory4,720Increase is due to an increase in purchases partially offset by usage of existing inventories.Foreign VAT recoverable (current and non-current)7Increase is due to VAT applicable to payments to suppliers in Africa offset by the recovery of amounts paid on prior importation of rigs into South America during the period.Long-term investments64Increase is due to equity income of Warrior Rig Ltd. ("Warrior") for the period, offset by a foreign exchange loss resulting from the translation of this investment and the sale of 6.13% of this investment.Property and equipment306Increase is due to costs capitalized related to the refurbishment and enhancement of rigs, offset by depreciation expense.Accounts payable and accrued liabilities(8,760)Decrease reflects the decrease in the aging of accounts payable balances and a decrease in activity in Q3, 2012.Income taxes payable2,551Increase due to the increases in taxable income and taxable net assets in 2012.Long-term debt (current and long-term)12,214Increase is due to the Company renegotiating and increasing the amount of its credit facility, as well as the amortization of financing costs included in long-term debt offset by fees incurred during the period.Derivative contracts4,005Increase is due to the change in fair value of hedging contracts entered into during the first quarter of 2012.Net deferred taxes2,965Increase is due to revaluation of tax assets due to the change in foreign exchange rates and the recognition of previously unrecorded tax losses.Contributed surplus2,934Increase relates to stock-based compensation expense recorded during the first three quarters of 2012.(1) Reflects the movement in accounts from December 31, 2011 to September 30, 2012. Review of Condensed Interim Consolidated Statement of Comprehensive Income and Loss($ thousands)Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeOilfield services revenue74,16344,44267%253,67493,555171%Oilfield services expenses(51,998)(29,145)(78)%(174,011)(62,134)(180)%Gross margin(1)22,16515,29745%79,66331,421154%Gross margin %29.9%34.4%(13)%31.4%33.6%(7)%(1) Refer to "Non-IFRS" Measures Oilfield services revenue was $74,163 for the three months ended September 30, 2012, compared to $44,442 for the three months ended September 30, 2011, an increase of 67%. The increase in revenue is a result of a significantly increased fleet size in the third quarter of 2012 compared to the third quarter of 2011, and the associated increases in the number of revenue days and average revenue per day. During the three months ended September 30, 2012, the Company had 2,107 revenue days (62.7% utilization) compared to 1,554 revenue days (77.5% utilization) in the three months ended September 30, 2011. Revenue days increased in the three months ended September 30, 2012, as a result of the additional rigs acquired through the Company's 2011 corporate acquisitions being contracted during the third quarter of 2012 compared to the third quarter of 2011. For the three months ended September 30, 2012, average revenue per day increased to $35.20 from $28.60 for the three months ended September 30, 2011. Average revenue per day increased in the third quarter of 2012 compared to the third quarter of 2011 primarily as a result of higher rates for the Caroil rigs, which are larger horsepower rigs and therefore command higher day rates. Thirty-one of the Company's 37 available drilling and heavy-duty workover rigs earned revenue from drilling operations during the three months ended September 31, 2012. During the three months ended September 30, 2011, the Company earned revenues from 30 rigs.Oilfield services revenue was $253,674 for the nine months ended September 30, 2012, compared with $93,555 for the nine months ended September 30, 2011, an increase of 171%. The increase in revenue is a result of a significantly increased fleet size in the first nine months of 2012 compared to the first nine months of 2011 and the associated increases in the number of revenue days and average revenue per day in the nine months ended September 30, 2012, compared to the nine months ended September 30, 2011. During the nine months ended September 30, 2012, the Company had 7,737 revenue days (77.0% utilization) compared to 3,406 revenue days (68.4% utilization) in the nine months ended September 30, 2011. Revenue days increased in the nine months ended September 30, 2012, as a result of additional rigs acquired through the Company's 2011 corporate acquisitions being contracted during the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011. For the nine months ended September 30, 2012, average revenue per day increased to $32.79 from $27.47 for the nine months ended September 30, 2011. Average revenue per day increased in the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 primarily as a result of higher rates for the Caroil rigs, which are larger horsepower rigs and therefore command higher day rates. All thirty-seven of the Company's available drilling and heavy-duty workover rigs earned revenue from drilling operations during the nine months ended September 30, 2012. During the nine months ended September 30, 2011, the Company earned revenues from 30 rigs. For the three months ended September 30, 2012, gross margin was $22,165, or 29.9%, compared with a gross margin of $15,297, or 34.4%, for the three months ended September 30, 2011. For the nine months ended September 30, 2012, gross margin was $79,663, or 31.4%, compared with a gross margin of $31,421, or 33.6%, for the nine months ended September 30, 2011. The decrease in gross margin percentage for the three and nine months ended September 30, 2012, compared to the gross margin percentage for the three and nine months ended September 30, 2011, reflects continuing rig personnel costs and other operating costs associated with rigs coming off contract during the three months ended September 30, 2012.Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeDepreciation5,6325,2936%22,8959,987129%Depreciation expense totaled $5,632 for the three months ended September 30, 2012, compared with $5,293 for the three months ended September 30, 2011. Depreciation expense totaled $22,895 for the nine months ended September 30, 2012, compared with $9,987 for the nine months ended September 30, 2011. Under the Company's depreciation policy, depreciation of rigs and related equipment is based on the number of days in operation. The increase in depreciation expense for the three and nine months ended September 30, 2012, compared to the three and nine months ended September 30, 2011, is a result of an increase in the size of the Company's fleet and related operating days in the three and nine months ended September 30, 2012, compared to the corresponding periods of 2011. During the nine months ended September 30, 2012, the Company recorded depreciation on 37 rigs.Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeGeneral and administrative8,2846,31031%30,67916,08891%General and administrative expense was $8,284 (11.1% of revenue) for the three months ended September 30, 2012, compared to $6,310 (14.2% of revenue) for the three months ended September 30, 2011. General and administrative expense was $30,679 (12.1% of revenue) for the nine months ended September 30, 2012, compared to $16,088 (17.2% of revenue) for the nine months ended September 30, 2011. During the second quarter of 2011 the Company acquired Drillfor, and during the third quarter of 2011 the Company acquired Caroil, which added to the Company's general and administrative expenses for the three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011. As a percentage of revenue, general and administrative expense decreased from the three and nine months ended September 30, 2011 to the three and nine months ended September 30, 2012, which reflects the critical mass and larger revenue base associated with increasing the Company's operations in Brazil and Colombia subsequent to the first three quarters of 2011, and management's efforts to realize efficiencies associated with these acquisitions.Included in general and administrative expense for the three and nine months ended September 30, 2012, is $840 and $2,934, respectively, of stock-based compensation compared to $755 and $2,997, respectively, for the three months and nine months ended September 30, 2011. Stock-based compensation expense represents the value, calculated using the Black-Scholes option pricing model, related to the granting of stock options. Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeNet finance costs6,2829,977(37)%20,09514,06043%For the three and nine months ended September 30, 2012, net finance costs includes interest and amortization of costs associated with the Company's credit facility and the change in value on the Company's interest rate hedges, net of interest income. For the three and nine months ended September 30, 2011, net finance costs include interest and amortization of costs associated with the Company's credit facility, interest on short term advances from shareholders and interest related to the Company's convertible debenture, net of interest income. Net finance costs decreased to $6,282 for the three months ended September 30, 2012, from $9,977 for the three months ended September 30, 2011. Net finance costs increased to $20,095 for the nine months ended September 30, 2012, from $14,060 for the nine months ended September 30, 2011. In August 2010, the Company entered into a $125,000 credit facility. During the third quarter of 2011 this credit facility was amended. The amendment consisted primarily of an increase in the credit facility to $220,000, including a $25,000 revolving line of credit, and was negotiated in conjunction with the Company's acquisition of Caroil. Fees associated with the credit facility have been presented as a direct reduction to the face value of the long-term debt. The effective interest rate method has been applied and results in the amortization of the debt discount over the life of the loan. As a result, amortization of financing fees related to the credit facility of $1,112 and $3,280 have been included in net finance costs for the three months and nine months ended September 30, 2012, respectively, compared to $8,276 and $9,592 for the three and nine months ended September 30, 2011. In addition to the financing fees associated with this facility, the Company incurs interest expense on the amount drawn under the credit facility at three-month LIBOR plus 6.5% per annum. During the three and nine months ended September 30, 2012, the Company recorded $4,662 and $13,277, respectively, of interest related to the credit facility compared to $1,739 and $4,669, respectively, for the three and nine months ended September 30, 2011.During 2010, the Company received $5,875 of short-term advances from Perfco Investments Ltd, a corporation owned by the Company's Executive Chairman. The short-term advances incurred interest at 10% per annum and were settled in April 2011. During the three and nine months ended September 30, 2011, the Company recorded $Nil and $197 respectively, of interest expense related to these advances. During the nine months ended September 30, 2012, the Company entered into two separate agreements to hedge the interest rate on a total of $100,000 of the $195,000 term loan. The Company has entered into floating for fixed swap agreements on three-month LIBOR to maturity of the term loan under the Company's credit facility. The fair value of these interest rate contract liabilities increased by $696 and $3,803 for the three and nine months ended September 30, 2012, respectively (2011 - $Nil).The above finance costs incurred are partially offset by interest earned of $188 and $265 in the three and nine months ended September 30, 2012, respectively, and interest earned of $38 and $201 in the three and nine months ended September 30, 2011, respectively. Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeForeign exchange contracts(299)-N/A202-N/ADuring the nine month period ended September 30, 2012, the Company entered into a Euro/United States dollar cross costless collar on a total of 19,200 Euro. The contract consists of 24 contracts with notional amounts of 800 Euro per contract. The contract has a two year term and the fair value of this foreign exchange contract liability decreased $299 in the three months ended September 30, 2012 (2011 - Nil) and increased $202 in the nine months ended September 30, 2012 (2011 - $Nil).Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeForeign exchange loss7256816%1,0021,186(16)%In addition to incurring operating expenses and capital expenditures in the Company's functional currency (United States dollars), the Company also incurs operating expenses and capital expenditures in Colombian pesos (COP), Canadian dollars (CDN $), Brazilian real (BRL), African francs (CFA), Trinidad and Tobago dollars (TTD), Euro and Guyanese Dollars (GYD). Foreign exchange gains and losses arise primarily on the settlement of accounts payable invoices that are denominated in currencies other than the United States dollar. Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeEquity income (loss)(33)387(109)%1,268563125%In the second quarter of 2010, the Company closed a transaction in which it acquired a 40% interest in Warrior, a private oilfield services company involved in the development and manufacture of oilfield services equipment. The carrying value of this investment is adjusted to include the pro-rata share of the investee's earnings, less dividends received. Equity loss totaled $33 for the three months ended September 30, 2012, compared with an equity income of $387 for the three months ended September 30, 2011. Equity income totaled $1,268 for the nine months ended September 30, 2012, compared with an equity income of $563 for the nine months ended September 30, 2011. Equity income for the nine months ended September 30, 2012, has increased as a result of increased activity in Warrior in the first three quarters of 2012 compared to the first three quarters of 2011. In June of 2012, the Company reduced its investment in Warrior from 40% to 33.87%.Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeAcquisition costs-3,909(100)%-4,473(100)%In the second quarter of 2011, the Company acquired all of the issued shares of Drillfor, together with six drilling rigs and two workover rigs. In the third quarter of 2011, the company acquired Caroil, adding fourteen drilling rigs. The acquisition costs in the three and nine months ended September 30, 2011, represent the costs associated with the acquisition of these two entities.Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeCurrent income taxes3,4912,66631%8,1446,23431%For the nine months ended September 30, 2012, Tuscany recorded current income tax expense of $8,144. Comprising current income tax for the nine months ended September 30, 2012, are $1,535 in Ecuador, $2,616 in Colombia, $910 in Trinidad $2,693 in Gabon, and $195 in each of Congo and Luxembourg. Relative to pre-tax income, Tuscany has a high effective rate of current tax because in Colombia, Tuscany is subject to alternative minimum and equity taxes. In Colombia the Company is not taxable on an earnings basis as a result of tax loss carry forwards available to the Company. Three months ended September 30Nine months ended September 3020122011% Change20122011% ChangeDeferred income taxes (recovery)(1,303)1,988(166)%(2,965)1,988(249)%During the nine months ended September 30, 2012, the Company recorded additional deferred tax assets in Colombia, as existing deferred tax assets were revalued for changes in foreign exchange rates. In addition, during the third quarter of 2012 Tuscany recorded additional tax benefit of previously unrecognized tax losses in Colombia. Tuscany's operations in Colombia are expected to become taxable on an earnings basis (as opposed to an equity and alternative minimum tax basis) in a reasonable amount of time. As a result the Company continues to monitor the taxable status of its Colombian operations and recognize the tax benefit of existing tax losses as the likelihood of recovery becomes more certain. For the nine months ended September 30, 2012, Tuscany has recorded a tax benefit in Colombia of $5,596 related to previously unrecognized tax losses. In addition, a recovery of $109 was recorded in Trinidad. These recoveries were partially offset by deferred income taxes of $70 in Ecuador, $1,639 in Brazil, $458 in Uganda and $573 in Tanzania. Tuscany International Drilling Inc.Condensed Interim Consolidated Statement of Financial Position (Unaudited) (expressed in thousands of US dollars) September 30 2012December 31 2011AssetsCurrent AssetsCash and cash equivalents4,62913,156Restricted cash1,2771,500Accounts receivable97,22784,832Prepaid expenses and deposits7,7941,644Inventory20,02815,308Foreign VAT recoverable2,8772,994133,832119,434Foreign VAT recoverable10,0649,940Deferred tax asset8,7185,225Long-term investment5,8845,820Property and equipment502,193501,887660,691642,306LiabilitiesCurrent LiabilitiesBank indebtedness24,19320,000Accounts payable and accrued liabilities55,50764,267Current portion of long-term debt4,00010,000Income taxes payable12,0219,47095,721103,737Long-term debt191,207172,993Derivative contracts4,005-Deferred tax liability5,1934,665296,126281,395Shareholders' EquityShare capital366,300366,300Contributed surplus21,04018,106Warrants25,70425,704Accumulated other comprehensive loss(395)(251)Deficit(48,084)(48,948)364,565360,911660,691642,306Tuscany International Drilling Inc.Condensed Interim Consolidated Statement of Comprehensive Income and Loss (Unaudited) For the three and nine months ended September 30, 2012 and 2011(expressed in thousands of US dollars, except per share data) Three months endedNine months endedSeptember 30 2012September 30 2011September 30 2012September 30 2011RevenueOilfield services74,16344,442253,67493,555ExpensesOilfield services51,99829,145174,01162,134Depreciation5,6325,29322,8959,987General and administrative8,2846,31030,67916,088Foreign exchange loss7256811,0021,186Equity (income) loss33(387)(1,268)(563)Acquisition costs-3,909-4,47366,67244,951227,31993,305Net finance costs6,2829,97720,09514,060Gain on sale of property & equipment--(44)-Loss on sale of investment--58-Foreign exchange contract(299)-203-Income (loss) before income taxes1,508(10,486)6,043(13,810)Current income taxes3,4912,6668,1446,234Deferred income taxes(1,303)1,988(2,965)1,988Net income (loss) for the period(680)(15,140)864(22,032)Other comprehensive income (loss)Foreign currency translation69(198)(144)(395)Total comprehensive income (loss)(611)(15,338)720(22,427)Net income (loss) per share, basic and diluted (0.00) (0.05) 0.00 (0.09)Tuscany International Drilling Inc.Condensed Interim Consolidated Statement of Changes in Equity (Unaudited)(expressed in thousands of US dollars)Attributable to equity owners of the CompanyShare CapitalContributed surplusWarrantsAccumulated other comprehensive income (loss)DeficitTotal equityBalance - January 1, 2012366,30018,10625,704(251)(48,948)360,911Net income for the period----864864Cumulative foreign currency translation adjustment - - - (144) - (144)Comprehensive income (loss) for the period---(144)864720Stock-based compensation-2,934---2,934Balance - September 30, 2012366,30021,04025,704(395)(48,084)364,565Balance - January 1, 2011190,7012,70714,392294(22,831)185,263Net loss for the period----(22,032)(22,032)Cumulative translation adjustment - - - (395) - (395)Comprehensive loss for the period---(395)(22,032)(22,427)Stock-based compensation-2,997---2,997Loan conversion6,168----6,168Subscription receipt issuance102,321----102,321Issuance of shares71,844----71,844Share issuance costs(5,760)----(5,760)Issuance of warrants--23,128--23,128Expiration of warrants-680(680)---Exercise of warrants1,026-(1,026)---Balance - September 30, 2011366,3006,38435,814(101)(44,863)363,534Tuscany International Drilling Inc.Interim Condensed Consolidated Statement of Cash Flows (Unaudited)For the three and nine months ended September 30, 2012 and 2011(expressed in thousands of US dollars)Three months endedNine months endedSeptember 30 2012September 30 2011September 30 2012September 30 2011Cash flow provided by (used in):Operating ActivitiesNet income (loss) for the period(680)(15,140)864(22,032)Items not affecting cashDepreciation5,6325,29322,8959,987Unrealized foreign exchange (gain) loss---294Gain on sale of property and equipment--(44)-Equity (income) loss33(387)(1,267)(563)Amortization of financing fees1,1128,2763,2809,592Change in fair value of derivative contracts397-4,005-Stock based compensation8407552,9342,997Changes in non-cash working capital1,3578,241(26,595)(1,780)8,6917,0386,072(1,505)Investing ActivitiesAcquisition of property and equipment(12,938)(15,818)(23,745)(68,279)Proceeds from sale of property and equipment--588-Acquisition of Drillfor---(55,945)Acquisition of Caroil-(112,249)-(112,249)Restricted cash(1,003)(1,993)223(49)(13,941)(130,060)(22,934)(236,522)Financing ActivitiesProceeds from issuance of share capital, net-(23)-99,861Proceeds from long term debt-101,91115,000101,679Payment of financing fees(5,114)-(6,066)-Change in non-cash working capital(599)-(599)-(5,713)101,8888,335201,540Decrease in cash and cash equivalents(10,963)(21,134)(8,527)(36,487)Cash and cash equivalents, beginning of period15,59232,61213,15647,965Cash and cash equivalents, end of period4,62911,4784,62911,478Cash Flow Supplementary InformationInterest received18838265201Interest paid4,1401,83512,2032,996Income taxes paid1,8055765,5941,622READER ADVISORYStatements in this press release contain forward-looking information. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Tuscany. These risks include, but are not limited to: the timely construction and deployment of drilling rigs, the successful negotiation of drilling contracts, the oil and gas industry, commodity prices and exchange rate changes, regulatory changes, successful exploitation and integration of technology, customer acceptance of technology, changes in drilling activity and general global economic, political and business conditions. Industry related risks could include, but are not limited to: operational risks, delays or changes in rig construction and deployment, plans, health and safety risks and the uncertainty of estimates and projections of costs and expenses and access to capital. The risks outlined above should not be construed as exhaustive. The reader is cautioned not to place undue reliance on this forward-looking information. Tuscany does not undertake any obligation to update or revise any forward-looking statements except as expressly required by applicable securities laws.The listing of Tuscany's common shares on the Colombian Stock Exchange does not imply a certification by the BVC of the value or the solvency of Tuscany.FOR FURTHER INFORMATION PLEASE CONTACT: The Toronto Stock Exchange has not reviewed, nor does it accept responsibility for the adequacy or accuracy of this release. Contact Information: Tuscany International Drilling Inc.Walter DawsonExecutive Chairman(403) 265-8258(403) 265-8793 (FAX)Tuscany International Drilling Inc.Reg GreensladePresident & CEO(403) 265-8258(403) 265-8793 (FAX)Tuscany International Drilling Inc.Matt MoormanCFO(403) 265-8258(403) 265-8793 (FAX)Tuscany International Drilling Inc.1950, 140-4th Avenue S.W.Calgary, Albertawww.tuscanydrilling.com