Ensign Energy Services Inc. Reports 2009 Second Quarter Results



    CALGARY, Aug. 10 /CNW/ -

    Overview

    Ensign Energy Services Inc. (the "Company") recorded net income of $13.2
million ($0.09 per share) for the second quarter of 2009, a decline of 59
percent compared with net income of $32.3 million ($0.21 per share) recorded
for the second quarter of 2008. Net income for the six months ended June 30,
2009 totaled $85.9 million ($0.56 per share), a decrease of 25 percent from
net income of $114.1 million ($0.75 per share) recorded in the first six
months of 2008. The decline in the Company's operating and financial results
for the second quarter and first half of 2009 compared to the prior year
reflect reduced industry activity levels and recessionary global economic
conditions that have persisted through the first half of this year.
    Revenue for the second quarter of 2009 was $226.0 million, a 33 percent
decrease from the $337.8 million for the second quarter of the prior year. The
Company recorded revenue of $626.4 million for the six months ended June 30,
2009, a 23 percent decrease from revenue of $810.0 million for the six months
ended June 30, 2008. Results from the Company's Canadian and United States
oilfield services segments continued to deteriorate due to poor fundamentals
for natural gas. While the price for crude oil did recover somewhat in the
second quarter of 2009, it did not have a meaningful impact on operations in
these natural gas driven segments of the Company.
    Gross margin decreased slightly in the second quarter of 2009 to 31.0
percent compared to 31.1 percent recorded in the second quarter of 2008. While
utilization and revenue decreased during the six months ended June 30, 2009
relative to the same period in the prior year, the Company has preserved its
gross margin of 33.6 percent (2008 - 35.8 percent). This is attributable to
established contractual revenue rates realized on newer equipment working in
North America combined with a continued focus on carefully controlling costs.
Spot prices for un-contracted oilfield services equipment continued to
deteriorate in the quarter due to low demand and an oversupply of equipment in
Canada and the United States. The six new drilling rigs delivered by the
Company into the international market during the first half of 2009 also
contributed favorable margins thereby maintaining the average gross margin for
2009 at a rate higher than would otherwise be expected given current market
conditions.
    Adjusted net income for the second quarter of 2009 was $23.1 million
($0.15 per share), a decrease of 41 percent from adjusted net income of $39.2
million ($0.26 per share) for the second quarter of 2008. During the six
months ended June 30, 2009, adjusted net income decreased by 29 percent to
$93.2 million ($0.61 per share) from $131.9 million ($0.86 per share) recorded
for the corresponding period in 2008. Adjusted net income is defined as net
income before the tax-effected stock-based compensation expense. Stock-based
compensation expense for the second quarter of 2009 was $15.2 million (2008 -
$10.7 million); and for the first six months of 2009 was $11.3 million (2008 -
$27.5 million). The impact of the increase in the closing price for the
Company's common shares at June 30, 2009 compared to the closing price at
March 31, 2009, was significant in the context of the reduction in the net
income recorded by the Company for the second quarter of 2009.

    
    FINANCIAL AND OPERATING HIGHLIGHTS
    ($ thousands, except per share data and operating information)
    -------------------------------------------------------------------------
                        Three months ended              Six months ended
                              June 30                       June 30
    -------------------------------------------------------------------------
                      2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Revenue        226,010   337,774       (33)  626,430   809,958       (23)
    -------------------------------------------------------------------------
    EBITDA(1)       60,151    90,935       (34)  188,566   261,990       (28)
    EBITDA per
     share(1)
      Basic       $   0.39  $   0.59       (34) $   1.23  $   1.71       (28)
      Diluted     $   0.39  $   0.59       (34) $   1.23  $   1.69       (27)
    -------------------------------------------------------------------------
    Adjusted net
     income(2)      23,083    39,238       (41)   93,233   131,901       (29)
    Adjusted net
     income per
     share(2)
      Basic       $   0.15  $   0.26       (42) $   0.61  $   0.86       (29)
      Diluted     $   0.15  $   0.25       (40) $   0.61  $   0.85       (28)
    -------------------------------------------------------------------------
    Net income      13,212    32,262       (59)   85,898   114,058       (25)
    Net income
     per share
      Basic       $   0.09  $   0.21       (57) $   0.56  $   0.75       (25)
      Diluted     $   0.09  $   0.21       (57) $   0.56  $   0.74       (24)
    -------------------------------------------------------------------------
    Funds from
     operations(3)  61,924    82,526       (25)  143,929   206,767       (30)
    Funds from
     operations
     per share (3)
      Basic       $   0.40  $   0.54       (26) $   0.94  $   1.35       (30)
      Diluted     $   0.40  $   0.53       (25) $   0.94  $   1.34       (30)
    -------------------------------------------------------------------------
    Weighted average
     shares -
     basic (000s)  153,144   153,074         -   153,140   153,064         -
    Weighted average
     shares
     - diluted
     (000s)        153,707   155,161        (1)  153,383   154,669        (1)
    -------------------------------------------------------------------------
    Drilling
      Number of
       marketed
       rigs
        Canada
          Conven-
           tional      158       157         1       158       157         1
          Oil sands
           coring/
           coal-bed
           methane      28        28         -        28        28         -
        United
         States         77        76         1        77        76         1
        Inter-
         national(4)    48        48         -        48        48         -
      Operating days
        Canada       1,264     3,399       (63)    6,400    11,931       (46)
        United
         States      2,121     5,110       (59)    4,996    10,027       (50)
        Inter-
         national    1,856     2,596       (29)    3,824     4,963       (23)
    -------------------------------------------------------------------------
    Well Servicing
      Number of
       marketed
       rigs/units
        Canada         108       118        (8)      108       118        (8)
        United
         States         18        15        20        18        15        20
      Operating
       hours
        Canada      20,098    28,478       (29)   51,747    73,449       (30)
        United
         States      6,843     8,629       (21)   16,379    17,431        (6)
    -------------------------------------------------------------------------

    (1) EBITDA is defined as "income before interest expense, income taxes,
        depreciation and stock-based compensation expense". 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
        stock-based compensation plan. EBITDA and EBITDA per share as defined
        above are not recognized measures under Canadian generally accepted
        accounting principles and accordingly may not be comparable to
        measures used by other companies.
    (2) Adjusted net income is defined as "net income before stock-based
        compensation expense, tax-effected using an income tax rate of 35%".
        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 stock-based compensation
        plan, net of income taxes. Adjusted net income and adjusted net
        income per share as defined above are not recognized measures under
        Canadian generally accepted accounting principles 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 shareholders and potential investors with 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 Canadian generally accepted accounting
        principles and accordingly may not be comparable to similar measures
        used by other companies.
    (4) Includes workover rigs.


    Revenue and Oilfield Services Expense

                     Three months ended June 30     Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Revenue
      Canada        52,108   108,378       (52)  233,222   368,828       (37)
      United
       States       94,617   152,825       (38)  222,321   292,140       (24)
      Inter-
       national     79,285    76,571         4   170,887   148,990        15
                  -----------------------------------------------------------
                   226,010   337,774       (33)  626,430   809,958       (23)
    Oilfield
     services
     expense       155,993   232,715       (33)  415,790   520,179       (20)
                  -----------------------------------------------------------
                    70,017   105,059       (33)  210,640   289,779       (27)
                  -----------------------------------------------------------
    Gross margin     31.0%     31.1%               33.6%     35.8%
    -------------------------------------------------------------------------

    Canada
    ------
    
    The Company recorded revenue of $52.1 million in Canada in the second
quarter of 2009, a 52 percent decrease from $108.4 million recorded in the
second quarter of 2008. Canadian revenue was $233.2 million for the six months
ended June 30, 2009, a 37 percent decrease from $368.8 million recorded in the
six months ended June 30, 2008. Canada accounted for just 23 percent of the
Company's revenue in the second quarter of 2009 (2008 - 32 percent); and for
37 percent of the Company's revenue in the first six months of 2009 (2008 - 46
percent). Notwithstanding the seasonality of the second quarter, when spring
break-up and wet weather conditions hinder the Company's ability to move heavy
equipment and access Canadian drilling locations, the overall results for
Canada reflect a weak quarter. The Company experienced a decline in oilfield
services activity compared with the same period of the prior year when the
prospects for the oilfield services industry appeared much brighter. Customers
have significantly reduced demand for oilfield services as crude oil and
natural gas commodity prices dropped and credit markets tightened. Without a
meaningful increase in natural gas commodity prices leading to increased
demand for oilfield services, it will take some time to rebalance the oilfield
services market in Canada due to the over-supply of equipment.
    Drilling days recorded by the Canadian division in the second quarter of
2009 decreased by 63 percent from the comparable period of the prior year.
During the six months ended June 30, 2009, Canadian drilling days decreased 46
percent from the same period of the prior year. Similarly, Canadian well
servicing hours decreased by 29 percent in the second quarter of 2009 and by
30 percent in the six months ended June 30, 2009 with respect to the
corresponding periods in the prior year. In light of the current operating
environment and the reduced short term prospects for the Canadian industry,
the Company has pared back its Canadian operations to more effectively manage
the reduction in activity in Canada.

    
    United States
    -------------
    
    The Company's United States operations recorded revenue of $94.6 million
in the second quarter of 2009, a 38 percent decrease from the $152.8 million
recorded in the corresponding period of the prior year. United States revenue
was $222.3 million for the six months ended June 30, 2009, down 24 percent
from revenue of $292.1 million for the first six months of 2008. The United
States accounted for 42 percent of the Company's revenue in the second quarter
of 2009 (2008 - 45 percent); and for 36 percent of the Company's revenue in
the first six months of 2009, unchanged from the prior year. In relative
terms, the Company's United States results have fared better than Canada,
largely due to a greater contractual coverage of the United States oilfield
services equipment fleet compared to the Canadian fleet. Much of the Company's
construction program over the last couple of years has been directed at adding
new equipment to the United States market, and these high performing ADRTM
drilling rigs built for the United States market have been subject to
multi-year take-or-pay contracts. At June 30, 2009, a total of five contracted
ADRs were still under construction for delivery before year-end.
    The decline in activity levels in the Company's United States operations
compared to the prior year mirror the overall reduction in the United States
active rig count in 2009. The number of drilling days recorded by the United
States division in the second quarter of 2009 decreased 59 percent from the
same period of the prior year. United States drilling days for the first six
months of 2009 decreased 50 percent from the prior year. United States well
servicing hours in the second quarter of 2009 were down 21 percent compared to
the prior year and well servicing hours for the first half of 2009 were down 6
percent compared to the first half of 2008. Further reducing the 2009
contributions from the Company's United States operations is the translation
impact of the weakening in the United States dollar relative to the Canadian
dollar, the Company's reporting currency. The average Canadian/United States
dollar exchange rate at which the Company's United States dollar results were
translated to Canadian dollars for presentation purposes was 1.1671 for the
second quarter of 2009 compared to 1.2453 for the first quarter of 2009.

    
    International
    -------------
    
    The Company's international operations recorded revenue of $79.3 million
in the second quarter of 2009, a 4 percent increase from the $76.6 million
recorded in the second quarter of 2008. International revenue totaled $170.9
million for the six months ended June 30, 2009, an increase of 15 percent from
revenue of $149.0 million for the first six months of 2008. The international
division contributed 35 percent of the Company's revenue in the second quarter
of 2009 (2008 - 23 percent); and 27 percent of the Company's revenue in the
first six months of 2009 (2008 - 18 percent). The Company's established
geographical diversification strategy has offset some of the weakness from the
Company's North American operations.
    The international oilfield services market is not immune to the negative
pressures of the global economic recession. Drilling days recorded by the
Company's international operations in the quarter ended June 30, 2009
decreased 29 percent from the second quarter of 2008, while drilling days
recorded in the six months ended June 30, 2009 decreased 23 percent from the
same period in 2008. The Company's operations in Latin America and Africa have
experienced reductions in demand for oilfield services in the first half of
2009. Mitigating this regional weakness has been the successful deployment of
six new ADRTM drilling rigs in the first six months of the year. The
contributions from these new rigs should offset the expected weakness in
certain international regions serviced by the Company.

    
    Depreciation

                     Three months ended June 30     Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Depreciation    22,854    27,465       (17)   51,794    55,718        (7)
    -------------------------------------------------------------------------
    

    Depreciation expense totaled $22.9 million for the second quarter of 2009
compared with $27.5 million for the second quarter of 2008. Depreciation
expense decreased to $51.8 million for the six months ended June 30, 2009
compared with $55.7 million for the six months ended June 30, 2008. The change
in depreciation reflects decreased consolidated operating activity levels,
partially offset by increased depreciation on higher valued equipment added to
the Company's drilling rig fleet over the course of 2009. In addition,
effective July 1, 2008, the Company began applying a depreciation charge for
drilling and well servicing rigs that have not operated within the last 12
months based on the estimated useful life of such equipment, resulting in
additional depreciation expense in the three and six months ended June 30,
2009.

    
    General and Administrative Expense

                     Three months ended June 30     Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    General and
     administrative 13,375    13,936        (4)   27,317    29,143        (6)
    % of revenue      5.9%      4.1%                4.4%      3.6%
    -------------------------------------------------------------------------
    

    General and administrative expense totaled $13.4 million (5.9 percent of
revenue) for the second quarter of 2009 compared with $13.9 million (4.1
percent of revenue) for the second quarter of 2008, a decline of 4 percent.
General and administrative expense totaled $27.3 million (4.4 percent of
revenue) for the six months ended June 30, 2009 compared with $29.1 million
(3.6 percent of revenue) for the six months ended June 30, 2008, a decline of
6 percent. As a percentage of revenue, general and administrative expense was
comparable to the corresponding periods of 2008. The decline in general and
administrative expense reflects the Company's efforts to control costs during
periods of declining activity levels.

    
    Stock-Based Compensation Expense

                     Three months ended June 30     Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Stock-based
     compensation   15,186    10,734        41    11,284    27,450       (59)
    -------------------------------------------------------------------------
    

    Stock-based compensation expense arises from the intrinsic value
accounting associated with the Company's stock option plan, whereby the
liability associated with stock-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 quarter-ended June
30, 2009, the majority of the stock-based compensation expense consists of
$14.5 million due to an increase in the Company's common share price during
the quarter. For the six months ended June 30, 2009, stock-based compensation
expense consists of $0.7 million for the vesting of additional stock options
and $10.6 million associated with an increase in the price of the Company's
common shares. The price of the Company's common shares was $17.00 at June 30,
2009 compared with $10.92 at March 31, 2009 and $13.22 at December 31, 2008.

    
    Interest Expense

                     Three months ended June 30     Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Interest           197     2,007       (90)      926     3,944       (77)
    -------------------------------------------------------------------------
    

    Interest expense is incurred on the Company's operating lines of credit
and promissory note payable, and is shown net of interest income earned on the
Company's cash balances. The decrease in interest expense for the three and
six months ended June 30, 2009 compared to the prior year is due to the
decline in interest rates in the first 6 months of 2009 compared to the same
period in 2008. Further, the 2008 second quarter interest expense includes
upfront fees related to the new operating lines of credit that were negotiated
during that quarter. The Company's effective interest rate for the 6 months
ended June 30, 2009 was approximately 1.2% compared to approximately 8.2% for
the corresponding period of the prior year.

    
    Income Taxes

                     Three months ended June 30     Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Current income
     tax            (7,425)    2,175      (441)   38,253    45,521       (16)
    Future income
     tax            16,127    16,292        (1)      411    15,299       (97)
    -------------------------------------------------------------------------
                     8,702    18,467       (53)   38,664    60,820       (36)
    -------------------------------------------------------------------------
    Effective
     income tax
     rate (%)        39.7%     36.4%               31.0%     34.8%
    -------------------------------------------------------------------------
    

    The effective income tax rate for the second quarter of 2009 was 39.7
percent compared with 36.4 percent in the second quarter of 2008. For the six
months ended June 30, 2009, the effective income tax rate was 31.0 percent
compared with 34.8 percent for the six months ended June 30, 2008.
    The Company's effective income tax rate on a quarter-over-quarter basis
increased due to an increase in the proportion of taxable income being earned
in the United States, a higher tax rate jurisdiction. Current income tax
decreased due to a reduction in taxable income for the Canadian operations in
the second quarter of 2009. The decrease in the effective income tax rate for
the six months ended June 30, 2009 compared with the six months ended June 30,
2008 is due to future income tax recoveries in the Canadian partnerships and
increased levels of income being generated in international jurisdictions that
have lower income tax rates.

    Financial Position

    The following chart outlines significant changes in the consolidated
balance sheet from December 31, 2008 to June 30, 2009:


    
    ($ thousands)                  Change   Explanation
    -------------------------------------------------------------------------
    Cash and cash equivalents      69,081   See consolidated statement of
                                            cash flows.
    Accounts receivable          (169,504)  Decrease due to a decrease in
                                            operating activity levels in the
                                            second quarter of 2009 compared
                                            with the fourth quarter of 2008.
    Inventory and other              (838)  Decrease due to normal course
                                            consumption of operating supplies
                                            and spare parts.
    Property and equipment        (18,814)  Decrease due to increased
                                            depreciation on higher-value
                                            equipment.
    Accounts payable and accrued (101,895)  Decrease due to a decrease in
    liabilities                             operating activity levels in the
                                            second quarter of 2009 compared
                                            with the fourth quarter of 2008.
    Operating lines of credit     (39,263)  Decrease due to net repayments of
                                            the operating lines of credit.
    Promissory note payable       (20,000)  Decrease due to payment of the
                                            promissory note in June 2009.
    Stock-based compensation        5,746   Increase due to an increase in
                                            the price of the Company's common
                                            shares as at June 30, 2009
                                            compared with December 31, 2008.
    Income taxes payable           14,630   Increase due to the current
                                            income tax provision for the
                                            period, net of tax instalments.
    Dividends payable                   2   Increase due to a slight increase
                                            in the number of outstanding
                                            common shares compared with the
                                            fourth quarter of 2008.
    Future income taxes            (2,458)  Decrease due to the current
                                            period future income tax recovery
                                            arising from a decrease in
                                            partnership timing differences.
    Shareholders' equity           23,163   Increase due to the impact of net
                                            income for the period and the
                                            impact of foreign exchange rate
                                            fluctuations on net assets of
                                            foreign self-sustaining
                                            subsidiaries, net of dividends
                                            declared in the period.
    -------------------------------------------------------------------------


    Working Capital and Funds from Operations

                    Three months ended June 30      Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  % change
    -------------------------------------------------------------------------
    Funds from
     operations     61,924    82,526       (25)  143,929   206,767       (30)
    Funds from
     operations
     per share       $0.40     $0.54       (26)    $0.94     $1.35       (30)
    Working
     capital(1)    128,041   107,024        20   128,041   107,024        20
    -------------------------------------------------------------------------

    (1) Comparative figure as at December 31, 2008.
    

    During the three months ended June 30, 2009, the Company generated funds
from operations of $61.9 million ($0.40 per common share) compared with funds
from operations of $82.5 million ($0.54 per common share) for the three months
ended June 30, 2008, a decrease of 25 percent. Funds from operations totaled
$143.9 million ($0.94 per common share) in the first six months of 2009, a
decrease of 30 percent compared to $206.8 million of funds from operations
($1.35 per common share) generated in the six months ended June 30, 2008.
    The decrease in funds from operations in both the second quarter of 2009
and the six months ended June 30, 2009 compared to the same periods in 2008 is
due to the deterioration of oilfield services market conditions, primarily in
the Company's Canadian and United States divisions, resulting in lower
activity levels. The decline in operating activity is slightly offset by
contributions from the newly constructed ADRs placed in operation in the
United States and international markets under term contracts during the first
six months of 2009. The significant factors that may impact the Company's
ability to generate funds from operations in future periods are outlined in
the "Risks and Uncertainties" section of the Management's Discussion and
Analysis contained in the Company's 2008 Annual Report.
    During the second quarter of 2009, the Company increased its working
capital to $128.0 million, up $21.0 million from December 31, 2008, an
enviable achievement given the difficult economic environment and market
conditions present in the second quarter of 2009. As of June 30, 2009, the
Company continues to operate with no long-term debt and operates with
sufficient liquidity to meet its obligations as they come due.

    Investing Activities

    
                    Three months ended June 30      Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009       2008 % change      2009      2008  % change
    -------------------------------------------------------------------------
    Net purchase
     of property
     and equipment (26,688)  (44,979)      (41)  (72,782)  (78,523)       (7)
    Net change in
     non-cash
     working
     capital       (38,695)   (2,006)    1,829   (18,865)   (5,255)      259
                -------------------------------------------------------------
    Cash used in
     investing
     activities    (65,383)  (46,985)       39   (91,647)  (83,778)        9
    -------------------------------------------------------------------------
    

    Net purchases of property and equipment during the second quarter of 2009
totaled $26.7 million compared with $45.0 million for the second quarter of
2008. Net purchases of property and equipment for the six months ended June
30, 2009 totaled $72.8 million compared with $78.5 million for the six months
ended June 30, 2008. The net purchase of property and equipment relates
predominantly to the Company's new-build program as all other non-critical
capital expenditures were tightly controlled or suspended during the second
quarter of 2009. Additional details regarding the new-build program are
provided in the "New Builds" section below.

    Financing Activities

    
                    Three months ended June 30      Six months ended June 30
                  -----------------------------------------------------------
    ($ thousands)     2009      2008  % change      2009      2008  %  change
    -------------------------------------------------------------------------
    Net decrease
     in operating
     lines of
     credit         (2,761)  (50,449)      (95)  (39,263)  (42,773)       (8)
    Net decrease
     in promissory
     note payable  (20,000)        -      (100)  (20,000)        -      (100)
    Issue of
     capital stock     152       111        37       152       411       (63)
    Dividends      (13,018)  (12,629)        3   (26,034)  (25,257)        3
    Net change in
     non-cash
     working
     capital             2         1       100         2         6       (67)
                -------------------------------------------------------------
    Cash used in
     financing
     activities    (35,625)  (62,966)      (43)  (85,143)  (67,613)       26
    -------------------------------------------------------------------------
    

    Net repayments of the operating lines of credit were the result of
operating cash flows generated by the Company's Canadian and United States
oilfield services divisions in excess of capital expenditure requirements. As
of June 30, 2009, the operating lines of credit are primarily being used to
fund the new-build program and to support international operations. The $20
million promissory note due July 2011 was paid in full during the second
quarter of 2009. Currently, the Company has no long-term debt.
    Other financing activities during the second quarter of 2009 include the
receipt of $0.2 million on the exercise of employee stock options and the
payment of dividends in the amount of $13.0 million ($0.085 per share). For
the six months ended June 30, 2009, cash received on employee stock option
exercises totaled $0.2 million and dividends paid totaled $26.0 million.
During the first six months of 2009, the Company declared year-to-date
dividends totaling $0.170 per common share compared with $0.165 per common
share during the first six months of 2008. All dividends paid by the Company
subsequent to January 1, 2006 qualify as an eligible dividend, as defined by
subsection 89(1) of the Canadian Income Tax Act ("ITA").
    The Board of Directors of the Company has declared a third quarter
dividend of $0.085 per common share to be payable October 1, 2009 to all
Common Shareholders of record as of September 21, 2009. The dividend is
pursuant to the quarterly dividend policy adopted by the Company. Pursuant to
subsection 89(1) of the ITA, the dividend being paid is designated as an
eligible dividend, as defined in subsection 89(1) of the ITA.

    New Builds

    During the quarter ended June 30, 2009, two additional ADR(TM)-1500
models were added to the Company's world-wide rig construction program. As of
August 10, 2009, nine ADRs have been completed and five remain under
construction. Of the 14 ADRs included in the construction program, two are
ADR(TM)-250 models, two are ADR(TM)-300 models, four are ADR(TM)-350 models,
four are ADR(TM)-1000 models, and two are ADR(TM)-1500 models. Upon completion
of this new-build program, the Company will have a total of 62 ADRs in its
fleet. The well servicing rig new-build program consists of seven well
servicing rigs: four for the Canadian market, of which three have been
delivered during the first half of 2009, and three well servicing rigs for the
United States market, all of which have been completed.
    The new-build delivery schedule, by geographic area, is as follows:

    
    -------------------------------------------------------------------------
                              Actual                  Forecast
                   ----------------------------------------------------------
                   Q4 2008   Q1 2009   Q2 2009   Q3 2009   Q4 2009     Total
    -------------------------------------------------------------------------
    ADRs
      United States      1         1         1         2         3         8
      International      -         2         4         -         -         6
                   ----------------------------------------------------------
      Total              1         3         5         2         3        14
    -------------------------------------------------------------------------
    Well Servicing
     Rigs
      Canada             -         1         2         1         -         4
      United States      1         2         -         -         -         3
                   ----------------------------------------------------------
      Total              1         3         2         1         -         7
    -------------------------------------------------------------------------
    

    Outlook

    The outlook for the Company, and the oilfield services industry in
general, continues to be very weak as the global economy struggles to overcome
the recent recessionary trends. Weak economic conditions have led to reduced
levels of demand for energy commodities, thereby resulting in weak equipment
utilization levels and deteriorating margins for the Company. Additionally,
many of the Company's customers continue to struggle to address balance sheet
issues in this environment, adding further downward pressure on the Company's
operations. These are indeed difficult times that have placed the oilfield
services industry at a crossroads. Survival is dependent on financial strength
and the decisions made to adapt to a new operating environment.
    Our Canadian operations have now exited the "spring break-up" quarter,
but third quarter activity levels remain down in historical terms as operators
have reduced the demand for oilfield services, particularly in response to
natural gas price levels that have challenged the economics associated with
many projects. A recent improvement in crude oil commodity prices to the
USD$60 to $70 per barrel range has helped activity levels in certain
oil-producing regions somewhat, but not enough to overcome the overall
weakness owing to unfavorable natural gas commodity prices. Activity levels in
Canada are primarily driven by supply and demand fundamentals for natural gas.
Until there is a significant improvement in the commodity price for natural
gas, we do not expect demand for oilfield services in Canada to improve.
Additionally, there remains an oversupply of oilfield services equipment that
must be addressed before margins can improve. Clearly, the Canadian industry
has many challenges ahead of it. While there have been some encouraging signs
in the second quarter, such as the ability of exploration and production
companies to raise equity in the capital markets (much of which was utilized
to fix balance sheet issues) and interim measures from the Alberta government
to provide short-term royalty incentives, there has not been a meaningful
increase in demand for oilfield services.
    The United States oilfield services market has started to show signs that
it may have found a bottom. Recent rig count data has stabilized and even
shown a modest increase from the floor in 2009 due to additional activity
associated with the increase in crude oil prices. However, it is still too
early to turn optimistic with respect to the prospects for the United States
market. Fundamentals driving oilfield services activity will not improve until
economic conditions strengthen to levels that improve the demand for energy
commodities. It remains anybody's guess as to when this might occur. In the
meantime, the Company continues to enjoy good contract coverage in this market
segment and has the advantage of having a newer high tech drilling rig fleet
that meets the efficiency demands of today's resource plays.
    As expected, the international oilfield services market had begun to show
signs of weakness amid energy demand reductions resulting from recessionary
global economic conditions. Although mild by North American standards, the
Company's international operations have been negatively impacted by
deteriorating commodity prices. The recent improvement in crude oil prices
should help stabilize activities in key areas of the international market.
That said, there remain regional issues that must be managed to ensure the
continued profitability of certain areas for the Company. On a positive note,
the Company has completed the international portion of its new build program.
All six drilling rigs for the international market have been successfully
completed and mobilized in the first half of 2009. These new drilling rigs are
operating at or above design performance levels and will have a meaningful
impact on the Company's international results in succeeding quarters through
the completion of the multi-year contracts associated with such rigs. The
Company continues to search for new contracts and new opportunities to expand
its global footprint through the delivery of our industry-leading drilling
technology.
    While much of what is going on in the world falls outside of our control,
we continue to adapt the Company to the new realities challenging the oilfield
services industry. As we have said before, the strength of the Company's
balance sheet has never been more important than it is now. We believe that
our diversified operations, well-trained personnel, financial strength, focus
on cost control and opportunistic approach towards growth will help us to
emerge from this down cycle in a stronger position.

    Risks and Uncertainties

    This 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 Call

    A conference call will be held to discuss the Company's second quarter
results at 2:00 p.m. MDT (4:00 p.m. EDT) on Monday, August 10, 2009. The
conference call number is 1-800-732-9303. A taped recording will be available
until August 17, 2009 by dialing 1-877-289-8525 and entering reservation
number 21310936 followed by the number sign. 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.

    
    CONSOLIDATED BALANCE SHEETS
    As at June 30, 2009 and December 31, 2008
    (Unaudited, in thousands of Canadian dollars)

                                                       June 30   December 31
                                                          2009          2008
                                                   ------------ -------------
    Assets

    Current assets
    Cash and cash equivalents                     $    164,986  $     95,905
    Accounts receivable                                190,982       360,486
    Inventory and other                                 59,986        60,824
    Future income taxes                                  2,546         1,040
                                                   --------------------------

                                                       418,500       518,255

    Property and equipment                           1,691,767     1,710,581
                                                   --------------------------

                                                  $  2,110,267  $  2,228,836
                                                   --------------------------
                                                   --------------------------
    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities      $    134,189  $    236,084
    Operating lines of credit                          130,180       169,443
    Current portion of stock-based compensation          9,292         3,538
    Income taxes payable                                 3,780       (10,850)
    Dividends payable                                   13,018        13,016
                                                   --------------------------

                                                       290,459       411,231

    Promissory note payable                                  -        20,000

    Stock-based compensation                             1,095         1,103

    Future income taxes                                244,399       245,351
                                                   --------------------------

                                                       535,953       677,685
                                                   --------------------------

    Shareholders' Equity

    Capital stock (note 3)                             169,717       169,485
    Accumulated other comprehensive loss               (38,516)       (1,583)
    Retained earnings                                1,443,113     1,383,249
                                                   --------------------------

                                                     1,574,314     1,551,151
                                                   --------------------------

                                                  $  2,110,267  $  2,228,836
                                                   --------------------------
                                                   --------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
    For the three and six months ended June 30, 2009 and 2008
    (Unaudited, in thousands of Canadian dollars, except per share data)

                              Three months ended         Six months ended
                                   June 30                   June 30
                              2009         2008         2009         2008
                          ---------------------------------------------------

    Revenue
    Oilfield services     $   226,010  $   337,774  $   626,430  $   809,958

    Expenses
    Oilfield services         155,993      232,715      415,790      520,179
    Depreciation               22,854       27,465       51,794       55,718
    General and
     administrative            13,375       13,936       27,317       29,143
    Stock-based
     compensation              15,186       10,734       11,284       27,450
    Interest                      197        2,007          926        3,944
    Other                      (3,509)         188       (5,243)      (1,354)
                          ---------------------------------------------------
                              204,096      287,045      501,868      635,080
                          ---------------------------------------------------

    Income before income
     taxes                     21,914       50,729      124,562      174,878

    Income taxes
    Current                    (7,425)       2,175       38,253       45,521
    Future                     16,127       16,292          411       15,299
                          ---------------------------------------------------

                                8,702       18,467       38,664       60,820

                          ---------------------------------------------------
    Net income for the
     period                    13,212       32,262       85,898      114,058

    Retained earnings -
     beginning of period    1,442,919    1,243,363    1,383,249    1,174,195

    Dividends (note 3)        (13,018)     (12,629)     (26,034)     (25,257)
                          ---------------------------------------------------
    Retained earnings -
     end of period        $ 1,443,113  $ 1,262,996  $ 1,443,113  $ 1,262,996
                          ---------------------------------------------------
                          ---------------------------------------------------
    Net income per share
     (note 3)
      Basic               $      0.09  $      0.21  $      0.56  $      0.75
      Diluted             $      0.09  $      0.21  $      0.56  $      0.74
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the three and six months ended June 30, 2009 and 2008
    (Unaudited, in thousands of Canadian dollars)

                              Three months ended         Six months ended
                                   June 30                   June 30
                              2009         2008         2009         2008
                          ---------------------------------------------------
    Cash provided by
     (used in)

    Operating activities
    Net income for the
     period               $    13,212  $    32,262  $    85,898  $   114,058
    Items not affecting
     cash:
      Depreciation             22,854       27,465       51,794       55,718
      Stock-based
       compensation, net
       of cash paid             9,731        6,507        5,826       21,692
      Future income taxes      16,127       16,292          411       15,299
                          ---------------------------------------------------

    Cash provided by
     operating activities
     before the change
     in non-cash working
     capital                   61,924       82,526      143,929      206,767
    Net change in
     non-cash working
     capital (note 5)         104,008       47,295      101,942      (23,586)
                          ---------------------------------------------------

                              165,932      129,821      245,871      183,181
                          ---------------------------------------------------

    Investing activities
    Net purchase of
     property and equipment   (26,688)     (44,979)     (72,782)     (78,523)
    Net change in
     non-cash working
     capital (note 5)         (38,695)      (2,006)     (18,865)      (5,255)
                          ---------------------------------------------------

                              (65,383)     (46,985)     (91,647)     (83,778)
                          ---------------------------------------------------

    Financing activities
    Net decrease in
     operating lines
     of credit                 (2,761)     (50,449)     (39,263)     (42,773)
    Net decrease in
     promissory note
     payable                  (20,000)           -      (20,000)           -
    Issue of capital stock        152          111          152          411
    Dividends (note 3)        (13,018)     (12,629)     (26,034)     (25,257)
    Net change in
     non-cash working
     capital (note 5)               2            1            2            6
                          ---------------------------------------------------

                              (35,625)     (62,966)     (85,143)     (67,613)
                          ---------------------------------------------------
    Increase in cash and
     cash equivalents
     during the period         64,924       19,870       69,081       31,790

    Cash and cash
     equivalents -
     beginning of period      100,062       13,860       95,905        1,940
                          ---------------------------------------------------
    Cash and cash
     equivalents -
     end of period        $   164,986  $    33,730  $   164,986  $    33,730
                          ---------------------------------------------------
                          ---------------------------------------------------
    Supplemental
     information
      Interest paid       $       988  $     2,081  $     1,449  $     4,064
      Income taxes paid   $    15,517  $    37,364  $    23,623  $    75,233
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
    For the three and six months ended June 30, 2009 and 2008
    (Unaudited, in thousands of Canadian dollars)

                              Three months ended         Six months ended
                                   June 30                   June 30
                              2009         2008         2009         2008
                          ---------------------------------------------------

    Net income for the
     period               $    13,212  $    32,262  $    85,898  $   114,058
    Other comprehensive
     income (loss)
    Foreign currency
     translation adjustment   (62,471)       6,380      (36,933)      41,092
                          ---------------------------------------------------
    Comprehensive income
     (loss) for the
     period               $   (49,259) $    38,642  $    48,965  $   155,150
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
    For the three and six months ended June 30, 2009 and 2008
    (Unaudited, in thousands of Canadian dollars)

                              Three months ended         Six months ended
                                   June 30                   June 30
                              2009         2008         2009         2008
                          ---------------------------------------------------

    Accumulated other
     comprehensive loss -
     beginning of period  $    23,955  $   (62,876) $    (1,583) $   (97,588)
    Foreign currency
     translation adjustment   (62,471)       6,380      (36,933)      41,092
                          ---------------------------------------------------
    Accumulated other
     comprehensive loss -
     end of period        $   (38,516) $   (56,496) $   (38,516) $   (56,496)
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    For the three and six months ended June 30, 2009 and 2008
    (Unaudited, in thousands of Canadian dollars, except share and per share
    data)

    The interim consolidated financial statements have been prepared in
    accordance with Canadian generally accepted accounting principles
    ("Canadian GAAP"), and include the accounts of Ensign Energy Services
    Inc. and its subsidiaries and partnerships (the "Company"), substantially
    all of which are wholly-owned. The interim consolidated financial
    statements have been prepared following the same accounting policies and
    methods of computation as the consolidated financial statements for the
    year ended December 31, 2008. The disclosures provided below are
    incremental to those included with the annual consolidated financial
    statements. These interim consolidated financial statements should be
    read in conjunction with the consolidated financial statements and the
    notes thereto in the Company's annual report for the year ended
    December 31, 2008.

    1.  Recent accounting pronouncements

        The Canadian Institute of Chartered Accountants ("CICA") Accounting
        Standards Board ("AcSB") confirmed in February 2008 that
        International Financial Reporting Standards ("IFRS") will replace
        Canadian GAAP in 2011 for profit-oriented Canadian publicly
        accountable enterprises. As the Company will be required to report
        its results in accordance with IFRS starting in 2011, the Company is
        assessing the potential impacts of this changeover and developing its
        plan accordingly. When finalized, it will include project structure
        and governance, resourcing and training, and an analysis of key
        differences between IFRS and Canadian GAAP.

        As of January 1, 2011, the Company will be required to adopt the
        following CICA Handbook sections:

        (a) CICA Handbook Section 1582 "Business Combinations" will replace
            the existing business combinations standard. The new standard
            requires assets and liabilities acquired in a business
            combination and contingent consideration to be measured at fair
            value as at the date of the acquisition. Acquisition costs that
            are currently capitalized as part of the purchase price will be
            recognized in the consolidated statement of income. The adoption
            of this standard will impact the accounting treatment of future
            business combinations.

        (b) CICA Handbook Section 1601 "Consolidated Financial Statements"
            and Section 1602 "Non-controlling Interests" will replace the
            former consolidated financial statements standard. These
            standards establish the requirements for the preparation of
            consolidated financial statements and the accounting for a
            non-controlling interest (previously referred to as minority
            interest) in a subsidiary. The new standard requires
            non-controlling interest to be presented as a separate component
            of equity and requires net income and other comprehensive income
            to be attributed to both the parent and non-controlling interest.
            The adoption of this standard is not expected to have a material
            impact on the Company's consolidated financial statements.

    2.  Seasonality of operations

        The Company's Canadian oilfield services operations are seasonal in
        nature and are impacted by weather conditions that may hinder the
        Company's ability to access locations or move heavy equipment. The
        lowest activity levels are experienced during the second quarter of
        the year when road weight restrictions are in place and access to
        wellsites in Canada is reduced.

    3.  Capital Stock

        Authorized
        Unlimited common shares
        Unlimited preferred shares, issuable in series

        Outstanding
                                                     Number of
                                                 Common Shares        Amount
        ---------------------------------------------------------------------
        Balance at January 1, 2009                 153,135,006  $    169,485
        Issued under employee stock option plan         14,500           232
        ---------------------------------------------------------------------
        Balance at June 30, 2009                   153,149,506  $    169,717
        ---------------------------------------------------------------------

        Options

        A summary of the status of the Company's stock option plan as of
        June 30, 2009, and the changes during the six-month period then
        ended, is presented below:
                                                                    Weighted
                                                                     Average
                                                     Number of      Exercise
                                                       Options         Price
        ---------------------------------------------------------------------
        Outstanding at January 1, 2009              10,445,962  $      18.09
        Granted                                         11,000         11.33
        Exercised for shares                           (14,500)       (10.50)
        Exercised for cash                            (939,600)       (10.68)
        Forfeited                                     (117,600)       (21.45)
        ---------------------------------------------------------------------
        Outstanding at June 30, 2009                 9,385,262  $      18.79
        ---------------------------------------------------------------------
        Exercisable at June 30, 2009                 3,884,162  $      16.46
        ---------------------------------------------------------------------


                               Options Outstanding       Options Exercisable
        ---------------------------------------------------------------------
                                       Average  Weighted            Weighted
                                       Vesting   Average   Options   Average
                            Options  Remaining  Exercise   Exercis- Exercise
        Exercise Price  Outstanding  (in years)    Price      able     Price
        ---------------------------------------------------------------------
        $9.45 to $11.33   1,125,762      0.09  $  10.51  1,052,362  $  10.50
        $13.50 to $18.85  1,822,900      0.86     14.16  1,179,000     13.81
        $19.88 to $23.33  6,436,600      2.04     21.56  1,652,800     22.15
        ---------------------------------------------------------------------
                          9,385,262      1.58  $  18.79  3,884,162  $  16.46
        ---------------------------------------------------------------------

        Common share dividends

        During the six months ended June 30, 2009, the Company declared
        dividends of $26,034 (2008 - $25,257), being $0.170 per common share
        (2008 - $0.165 per common share).

        Net income per share

        Net income per share is calculated by dividing net income by the
        weighted average number of common shares outstanding during the
        period. Diluted net income per share is calculated using the treasury
        stock method, which assumes that all outstanding stock options are
        exercised, if dilutive, and the assumed proceeds are used to purchase
        the Company's common shares at the average market price during the
        period.

        The weighted average number of common shares outstanding for the six
        months ended June 30, 2009 and 2008 are as follows:

                                                      2009          2008
                                                  ------------- -------------
        Weighted average number of common shares
         outstanding - basic                       153,139,715   153,063,904
        Weighted average number of common shares
         outstanding - diluted                     153,383,401   154,669,014
                                                  ------------- -------------

        Stock options of 8,259,500 (2008 - 6,876,500) were excluded from the
        calculation of diluted weighted average number of common shares
        outstanding, as the options' exercise price was greater than the
        average market price of the common shares for the period.

    4.  Segmented information

        The Company operates in three geographic areas within one industry
        segment. Oilfield services are provided in Canada, the United States
        and internationally. The amounts related to each geographic area are
        as follows:

        Three months ended June 30, 2009
        ---------------------------------------------------------------------
                                            United       Inter-
                               Canada       States     national       Total
        ---------------------------------------------------------------------
        Revenue           $    52,108  $    94,617  $    79,285  $   226,010
        Property and
         equipment, net   $   811,296  $   518,001  $   362,470  $ 1,691,767
        Capital
         expenditures,
         net              $       164  $    24,126  $     2,398  $    26,688
        Depreciation      $     9,426  $     7,607  $     5,821  $    22,854
        ---------------------------------------------------------------------

        Three months ended June 30, 2008
        ---------------------------------------------------------------------
                                            United       Inter-
                               Canada       States     national       Total
        ---------------------------------------------------------------------
        Revenue           $   108,378  $   152,825  $    76,571  $   337,774
        Property and
         equipment, net   $   780,034  $   365,890  $   351,201  $ 1,497,125
        Capital
         expenditures,
         net              $     3,752  $    18,202  $    23,025  $    44,979
        Depreciation      $    12,854  $     7,270  $     7,341  $    27,465
        ---------------------------------------------------------------------

        Six months ended June 30, 2009
        ---------------------------------------------------------------------
                                            United       Inter-
                               Canada       States     national       Total
        ---------------------------------------------------------------------
        Revenue           $   233,222  $   222,321  $   170,887  $   626,430
        Property and
         equipment, net   $   811,296  $   518,001  $   362,470  $ 1,691,767
        Capital
         expenditures,
         net              $     1,211  $    46,029  $    25,542  $    72,782
        Depreciation      $    23,836  $    16,607  $    11,351  $    51,794
        ---------------------------------------------------------------------

        Six months ended June 30, 2008
        ---------------------------------------------------------------------
                                            United       Inter-
                               Canada       States     national       Total
        ---------------------------------------------------------------------
        Revenue           $   368,828  $   292,140  $   148,990  $   809,958
        Property and
         equipment, net   $   780,034  $   365,890  $   351,201  $ 1,497,125
        Capital
         expenditures,
         net              $     5,509  $    29,180  $    43,834  $    78,523
        Depreciation      $    27,828  $    13,926  $    13,964  $    55,718
        ---------------------------------------------------------------------

    5.  Supplemental disclosure of cash flow information

        The net change in non-cash working capital for the three and six
        months ended June 30, 2009 and 2008 is determined as follows:

                              Three months ended         Six months ended
                                   June 30                   June 30
                          ---------------------------------------------------
                              2009         2008         2009         2008
                          ---------------------------------------------------
        Net change in
         non-cash working
         capital
          Accounts
           receivable     $   145,533  $    98,435  $   169,504  $    18,224
          Inventory and
           other                  176       (1,451)         838       (2,225)
          Accounts payable
           and accrued
           liabilities        (57,454)     (16,505)    (101,895)     (15,127)
          Income taxes
           payable            (22,942)     (35,190)      14,630      (29,713)
          Dividends
           payable                  2            1            2            6
                          ---------------------------------------------------
                          $    65,315  $    45,290  $    83,079  $   (28,835)
                          ---------------------------------------------------
        Relating to
          Operating
           activities     $   104,008  $    47,295  $   101,942  $   (23,586)
          Investing
           activities         (38,695)      (2,006)     (18,865)      (5,255)
          Financing
           activities               2            1            2            6
                          ---------------------------------------------------
                          $    65,315  $    45,290  $    83,079  $   (28,835)
                          ---------------------------------------------------

    6.  Prior period amounts

        Certain prior period amounts have been reclassified to conform to the
        current period's presentation.
    


    %SEDAR: 00001999E




For further information:

For further information: Glenn Dagenais, Executive Vice President
Finance and Chief Financial Officer, (403) 262-1361


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