Ensign Energy Services Reports 2008 Second Quarter Results



    CALGARY, Aug. 11 /CNW/ -

    Overview

    Ensign Energy Services Inc. (the "Company") reports net income of
$32.3 million ($0.21 per common share) for the second quarter of 2008 compared
with $25.1 million ($0.16 per common share) for the second quarter of 2007, an
increase of 28 percent. For the six months ended June 30, 2008, net income
totaled $114.1 million ($0.75 per common share), a decrease of 11 percent from
net income of $127.5 million ($0.84 per common share) recorded in the first
six months of 2007. The comparability of net income on a period-over-period
basis is impacted by stock-based compensation expense, which increased
significantly in 2008 compared with 2007 due to increases in the price of the
Company's common shares. Adjusted net income, which eliminates the
tax-effected impact of stock-based compensation expense, increased 51 percent
in the second quarter of 2008 compared with the second quarter of 2007. For
the first six months of 2008, adjusted net income is on par with that recorded
in the first six months of 2007.
    Funds from operations for the three months ended June 30, 2008 totaled
$82.5 million ($0.54 per common share) and represents a record second quarter
for the Company and a 107 percent increase over funds from operations recorded
in the second quarter of 2007. For the six months ended June 30, 2008, funds
from operations totaled $206.8 million ($1.35 per common share), second only
to funds from operations recorded in the first half of fiscal 2006, which
remains the best year on record for the Company.
    The strong financial results and record cash flows delivered by the
Company in the second quarter of 2008 arise primarily from better than
expected financial results from the Canadian oilfield services division and
record contributions from the Company's United States operations. Recent
growth initiatives executed in the United States oilfield services segment,
which added 13 fit-for-purpose Automated Drill Rigs ("ADRs") under term
contracts to that market over the last year, were important contributors to
the improved results from the United States segment on a quarter-over-quarter
basis. The transfer of two ADRs from Canada to Australia and the deployment of
three additional drilling rigs in the Middle East and Africa markets in the
latter half of 2007 and early 2008 have further contributed to the revenue
growth achieved in the three months ended June 30, 2008 compared with the
corresponding period of 2007. Although results from the Canadian oilfield
services segment for the second quarter of 2008 lagged that of the second
quarter of 2007, improvement in natural gas prices and continued strength in
crude oil prices during the three months ended June 30, 2008 contributed to
equipment utilization levels that exceeded the Company's initial expectations
for the period. In fact, the Company was the most active driller in the
Western Canada Sedimentary Basin ("WCSB") in the second quarter of 2008,
recording more metres drilled in that region than any other contractor.


    
    -------------------------------------------------------------------------
    FINANCIAL AND OPERATING HIGHLIGHTS
    ($ thousands, except per share data and operating information)
    -------------------------------------------------------------------------
                        Three months ended               Six months ended
                              June 30                        June 30
    -------------------------------------------------------------------------
                     2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Revenue       337,774    296,539       14    809,958    806,024        -
    -------------------------------------------------------------------------
    EBITDA(1)      90,935     70,686       29    261,990    256,105        2
    EBITDA per
     share(1)
      Basic         $0.59      $0.46       28      $1.71      $1.68        2
      Diluted       $0.59      $0.45       31      $1.69      $1.65        2
    -------------------------------------------------------------------------
    Adjusted net
     income(2)     39,238     26,010       51    131,901    132,070        -
    Adjusted net
     income per
     share(2)
      Basic         $0.26      $0.17       53      $0.86      $0.87       (1)
      Diluted       $0.25      $0.17       47      $0.85      $0.85        -
    -------------------------------------------------------------------------
    Net income     32,262     25,135       28    114,058    127,456      (11)
    Net income per
     share
      Basic         $0.21      $0.16       31      $0.75      $0.84      (11)
      Diluted       $0.21      $0.16       31      $0.74      $0.82      (10)
    -------------------------------------------------------------------------
    Funds from
     operations(3) 82,526     39,879      107    206,767    157,486       31
    Funds from
     operations per
     share(3)
      Basic         $0.54      $0.26      108      $1.35      $1.03       31
      Diluted       $0.53      $0.26      104      $1.34      $1.01       33
    -------------------------------------------------------------------------
    Weighted average
     shares -
     basic (000s) 153,074    152,494        -    153,064    152,425        -
    Weighted
     average shares
     - diluted
     (000s)       155,161    155,796        -    154,669    155,557       (1)
    -------------------------------------------------------------------------
    Drilling
      Number of
       marketed
       rigs
        Canada
          Conven-
           tional     157        162       (3)       157        162       (3)
          Oil sands
           coring/
           coal-bed
           methane     28         31      (10)        28         31      (10)
        United
         States        76         71        7         76         71        7
        Inter-
         national(4)   48         49       (2)        48         49       (2)
    Operating days
      Canada        3,399      3,173        7     11,931     12,348       (3)
      United States 5,110      4,674        9     10,027      9,153       10
      International 2,596      2,294       13      4,963      4,655        7
    -------------------------------------------------------------------------
    Well Servicing
      Number of
       marketed
       rigs/units
        Canada        118        113        4        118        113        4
        United
         States        15         12       25         15         12       25
      Operating
       hours
        Canada     28,478     30,994       (8)    73,449     90,225      (19)
        United
         States     8,629      6,423       34     17,431     12,386       41
    -------------------------------------------------------------------------

    (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 plans. 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
        plans, 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)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Revenue
      Canada      108,378    110,544       (2)   368,828    423,158      (13)
      United
       States     152,825    130,884       17    292,140    267,631        9
      Inter-
       national    76,571     55,111       39    148,990    115,235       29
                -------------------------------------------------------------
                  337,774    296,539       14    809,958    806,024        -
    Oilfield
     services
     expense      232,715    213,057        9    520,179    522,881       (1)
                -------------------------------------------------------------
                  105,059     83,482       26    289,779    283,143        2
                -------------------------------------------------------------
    Gross margin    31.1%      28.2%               35.8%      35.1%
    -------------------------------------------------------------------------
    

    Canada
    ------
    The fundamentals of the Canadian oilfield services market improved
gradually throughout the first half of 2008 alongside the strengthening of
natural gas prices and the continued strength of crude oil prices. Operating
activity levels recorded in Canada in the second quarter of 2008 exceeded the
Company's initial estimates and surpassed the total operating days recorded in
the second quarter of 2007. Although there has been a positive shift in the
overall sentiment of the Canadian market and demand has improved somewhat from
earlier in the year, pricing for the second quarter of 2008 remained below
that of 2007, resulting in period-over-period declines in revenue. As well,
the realities of operating in the WCSB, where spring break-up and wet weather
conditions hinder the Company's ability to move heavy equipment and access
drilling locations, served to offset any meaningful increase in demand in the
second quarter of 2008. The year-to-date results for the Canadian oilfield
services division for 2008 reflect a weak first quarter. While there has been
an upward trend in demand in Canada in 2008, the majority of oilfield services
activity in the first quarter of 2008 was based on capital budgets set by
customers late in 2007, at which point the Canadian market was characterized
by an oversupply of equipment and a significant amount of concern surrounding
the sustainability of natural gas prices.
    Oilfield service activity in the WCSB is weighted most heavily to natural
gas exploration and development; however, crude oil exploration and
development remained active throughout 2008 supported by near record prices
for crude oil. The Company was well positioned to capture crude oil driven
activity in the first half of 2008, with a strong presence in the oil sands
coring market and in the predominantly crude oil based market in southeast
Saskatchewan. Subsequent to June 30, 2008, to further bolster its capabilities
in the oil sands coring market, the Company acquired 12 specialty drilling
rigs and related equipment. The specialty drilling rigs are primarily designed
for oil sands coring applications but also have the capability of drilling
coal bed methane and conventional wells. The Company will benefit from the
retention of the experienced personnel associated with this acquisition.

    United States
    -------------
    Revenue from the United States oilfield services segment totaled
$152.8 million for the second quarter of 2008, an increase of 17 percent over
the second quarter of 2007. Revenue growth was also achieved in the six months
ended June 30, 2008 with revenue surpassing the prior period by nine percent.
The growth and positive financial results achieved by the Company's United
States oilfield services segment are somewhat muted by the foreign exchange
rates in effect in the first half of 2008 compared with the first half of
2007. The average United States dollar exchange rate at which the results are
translated to Canadian dollars declined 11 percent in the first six months of
2008 compared with the first six months of 2007.
    Growth in this United States oilfield services segment is primarily
attributable to the significant expansion of the United States-based equipment
fleet which occurred in 2007, with 2008 being the first period to fully
reflect financial contributions from this additional equipment. The expansion
added 13 ADRs under term contracts and three well servicing rigs to the Rocky
Mountain region of the United States, driving a nine percent increase in
drilling operating activity and a 34 percent increase in well servicing hours
in the second quarter of 2008 compared with the second quarter of 2007.
Similarly, a 10 percent increase in drilling operating activity and a 41
percent increase in well servicing hours was achieved in the first half of
2008 compared with the first half of 2007. The expansion of the United States
ADR(TM) fleet has been timely in meeting the growing demand for specialty,
fit-for-purpose drilling rigs to support the exploration and development of
unconventional resource plays and technologically demanding drilling programs.
The introduction of newly constructed equipment under term contracts partially
mitigated fluctuations in equipment utilization levels arising on short-term
volatility in natural gas and crude oil prices. The near immediate impact of
the ADR(TM) expansion program to improved financial results demonstrates the
Company's ability to efficiently expand its existing operations in growing
markets, leveraging its established support infrastructure, training programs
and recruitment initiatives.
    Crediting the success of the 2007 ADR(TM) build program and in response
to additional demand for the Company's proprietary technology, the Company has
recently initiated construction of 20 additional ADRs for the United States
market. Of the 20 ADRs to be constructed, 14 ADRs are being constructed for
operations in the Rocky Mountain region and six ADRs are being constructed for
operations in California. In addition, the Company will add four newly built
well servicing rigs to its United States equipment fleet in the latter half of
2008.

    International
    -------------
    The Company's international operations delivered meaningful
period-over-period revenue growth in the three months and six months ended
June 30, 2008. Revenue for the international oilfield services segment totaled
$76.6 million for the second quarter of 2008, an increase of 39 percent over
the second quarter of 2007. For the six months ended June 30, 2008, revenue
generated by the international oilfield services segment totaled $149.0
million, an increase of 29 percent over the prior period. Over the past
several years, the Company has repositioned equipment to better capture crude
oil driven activity and more favorable contracts. The rewards associated with
these often long, complex and costly moves are reflected in the revenue growth
delivered by the international division in 2008. Recent equipment deployments
contributing to this success include the relocation of two ADRs from Canada to
Australia in the latter half of 2007, the deployment of one drilling rig to
the Middle East in the fourth quarter of 2007, as well as the completion of
two drilling rig construction projects in the Middle East and Africa in the
first quarter of 2008. Future growth for this important segment includes the
construction of six ADRs and one conventional triple drilling rig for the
Middle East and Africa markets, the operations of which are expected to
commence in early 2009.

    Gross Margin
    ------------
    Gross margin for the second quarter of 2008 was 31.1 percent compared
with 28.2 percent for the second quarter of 2007, while for the six months
ended June 30, 2008 gross margin was 35.8 percent compared with 35.1 percent
for the six months ended June 30, 2007. The maintenance of strong operating
margins on a period-over-period basis is the result of improved margins in the
United States and international oilfield services divisions, offset by slight
margin compression in the Canadian oilfield services segment. Gross margin in
the second quarter of each fiscal year will typically lag that recorded on a
year-to-date basis as the Company performs much of its annual maintenance in
Canada during the second quarter when utilization is lower due to spring
break-up conditions.

    
    Depreciation

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Depreciation   27,465     19,603       40     55,718     42,910       30
    -------------------------------------------------------------------------
    

    Depreciation expense totaled $27.5 million for the second quarter of 2008
compared with $19.6 million for the second quarter of 2007. Depreciation
expense increased to $55.7 million for the six months ended June 30, 2008
compared with $42.9 million for the six-month period ended June 30, 2007.
These increases are due to the introduction of higher valued equipment to the
drilling rig fleet following the completion of the 2007 rig building programs,
primarily in the United States, as well as a slight increase in consolidated
operating activity levels on a period-over-period basis. In addition,
effective January 1, 2008 the Company reduced the estimated useful life of oil
sands coring rigs and coiled tubing units, thereby accelerating the
depreciation of this equipment.

    
    General and Administrative Expense

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    General and
     admini-
     strative      14,124     12,796       10     27,789     27,038        3
    % of revenue     4.2%       4.3%                3.4%       3.4%
    -------------------------------------------------------------------------
    

    As a percentage of revenue, general and administrative expense was 4.2
percent for the second quarter of 2008 and 3.4 percent for the six months
ended June 30, 2008, both comparable to the corresponding periods of 2007. As
a percentage of revenue, general and administrative expense is typically
higher during the second quarter compared with other periods of the year, as
revenue levels decline significantly during this period as a result of spring
break-up conditions in Canada.

    
    Stock-Based Compensation Expense

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Stock-based
     compensation  10,734      1,346      697     27,450      7,098      287
    -------------------------------------------------------------------------
    

    Stock-based compensation expense arises from the fair value accounting
for the Company's stock option plan. For the quarter-ended June 30, 2008,
stock-based compensation expense is comprised of additional vesting of stock
options of $2.5 million and the impact of an increase in the Company's common
share price of $8.2 million. For the six months ended June 30, 2008,
stock-based compensation expense comprises $3.6 million for additional vesting
of stock options and $23.9 million associated with an increase in the price of
the Company's common shares. The price of the Company's common shares was
$22.22 at June 30, 2008 compared with $20.01 at March 31, 2008 and $15.25 at
December 31, 2007.

    
    Interest Expense

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Interest        2,007      1,962        2      3,944      2,905       36
    -------------------------------------------------------------------------
    

    Interest expense is incurred on the Company's operating lines of credit.
The variance in interest expense on a period-over-period basis is due to the
increase in the average balance outstanding of the Company's operating lines
of credit. The average utilized balance of the operating lines of credit
during the six months ended June 30, 2008 was $96.6 million compared with
$67.1 million for the same period in 2007.

    
    Income Taxes

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Current income
     tax            2,175     25,073      (91)    45,521     81,832      (44)
    Future income
     tax           16,292     (2,433)    (770)    15,299     (6,096)    (351)
                -------------------------------------------------------------
                   18,467     22,640      (18)    60,820     75,736      (20)
                -------------------------------------------------------------
    Effective
     income tax
     rate (%)       36.4%      47.4%               34.8%      37.3%
    -------------------------------------------------------------------------
    

    The effective income tax rate for the second quarter of 2008 was
36.4 percent compared with 47.4 percent in the second quarter of 2007. For the
six months ended June 30, 2008, the effective income tax rate was 34.8 percent
compared with 37.3 percent for the six months ended June 30, 2007. The
decrease in the effective income tax rate in the second quarter and six months
ended June 30, 2008 compared to the same periods of 2007 is partially the
result of $4.0 million of Omani tax assessments included in current income tax
expense for the three and six months ended June 30, 2007. Excluding the impact
of the Omani tax assessments, the effective income tax rate would have been
39.0 percent for the second quarter of 2007 and 35.3 percent for the six
months ended June 30, 2007.
    The decrease in the Company's effective income tax rate on a
quarter-over-quarter and year-to-date basis is also due to ongoing income tax
rate reductions in Canada. Income tax rate reductions previously announced by
the federal government will phase in income tax rate reductions each year
until 2012, at which point the federal corporate income tax rate in Canada
will reduce to 15.0 percent from its current level of 19.5 percent.

    Financial Position

    The following chart outlines significant changes in the consolidated
balance sheets from December 31, 2007 to June 30, 2008:

    
    ($ thousands)                  Change   Explanation
    -------------------------------------------------------------------------
    Cash and cash equivalents      31,790   See consolidated statement of
                                            cash flows.
    Accounts receivable           (18,224)  Decrease due to the reduction in
                                            operating activity in the second
                                            quarter of 2008 as a result of
                                            spring break-up in Canada.
    Inventory and other           (36,775)  Decrease due to the
                                            reclassification of drill pipe
                                            inventory to property and
                                            equipment as a result of a
                                            change in the estimated useful
                                            life.
    Property and equipment        106,345   Increase due to ongoing capital
                                            expenditures and the
                                            reclassification of drill pipe
                                            inventory, offset by depreciation
                                            in the period.
    Accounts payable and accrued  (15,127)  Decrease due to the reduction in
    liabilities                             operating activity in the second
                                            quarter of 2008 as a result of
                                            spring break-up in Canada.
    Operating lines of credit     (42,773)  Decrease due to net repayments in
                                            Canada during the period, net of
                                            increases in the utilized balance
                                            of the United States and
                                            Australian-based operating lines
                                            of credit.
    Stock-based compensation       21,414   Increase due to additional
                                            vesting of stock options and
                                            common share price increases,
                                            net of stock option exercises.
    Income taxes payable          (29,713)  Decrease due to income tax
                                            instalments, net of the current
                                            income tax provision for the
                                            period.
    Dividends payable                   6   Increase due to a slight
                                            increase in the number of
                                            outstanding common shares
                                            compared with the fourth quarter
                                            of 2007.
    Future income taxes            18,747   Increase due to the current
                                            period future income tax
                                            provision and changes in foreign
                                            exchange rates in the period.
    Shareholders' equity          130,582   Increase due to the aggregate
                                            impact of net income for the
                                            period, increase in capital
                                            stock due to exercises of
                                            employee stock options, impact
                                            of foreign exchange rate
                                            fluctuations on net assets of
                                            foreign self-sustaining
                                            subsidiaries, less dividends
                                            declared in the period.
    -------------------------------------------------------------------------


    Working Capital and Funds from Operations

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Funds from
     operations    82,526     39,879      107    206,767    157,486       31
    Funds from
     operations
     per share      $0.54      $0.26      108      $1.35      $1.03       31
    Working
     capital(1)   113,450     60,272       88    113,450     60,272       88
    -------------------------------------------------------------------------

    (1) Comparative figures as of December 31, 2007.
    

    During the three months ended June 30, 2008, the Company generated funds
from operations of $82.5 million ($0.54 per common share) compared with funds
from operations of $39.9 million ($0.26 per common share) for the three months
ended June 30, 2007, an increase of 107 percent. Funds from operations totaled
$206.8 million ($1.35 per common share) in the first six months of 2008, an
increase of 31 percent over funds from operations of $157.5 million ($1.03 per
common share) generated in the six months ended June 30, 2007. The increase in
funds from operations is predominantly due to increasing activity levels and
improved operating margins generated by the Company's United States and
international oilfield services divisions offset by a slight decline in
operating margins in Canada in both the second quarter of 2008 and the six
months ended June 30, 2008. Comparability of funds from operations on a
period-over-period basis is also impacted by the timing of cash flows
associated with the Company's stock-based compensation plan.
    At June 30, 2008, the Company had a positive working capital position of
$113.5 million compared with working capital of $60.3 million at December 31,
2007. The improvement in working capital in the first six months of 2008 is
attributable to positive cash flows generated by all of the Company's
operating segments. Although slightly lagging results recorded in the first
six months of 2007, the Company's Canadian oilfield services division
continued to generate strong cash flows in the first half of 2008 and reduced
the utilized balance of its operating line of credit from $56.1 million at
December 31, 2007 to nil at June 30, 2008. Offsetting the improvement in
working capital arising from strong operating margins, working capital was
reduced by the reclassification of drill pipe inventory to property and
equipment as a result of a change in the estimated useful lives of these
assets.
    As of June 30, 2008, 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)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Net purchase
     of property
     and
     equipment    (44,979)   (67,509)     (33)   (78,523)  (161,117)     (51)
    Net change in
     non-cash
     working
     capital       (2,006)   (22,138)     (91)    (5,255)   (26,401)     (80)
                -------------------------------------------------------------
    Cash used in
     investing
     activities   (46,985)   (89,647)     (48)   (83,778)  (187,518)     (55)
    -------------------------------------------------------------------------
    

    Net purchases of property and equipment during the second quarter of 2008
totaled $45.0 million compared with $67.5 million for the second quarter of
2007. Net purchases of property and equipment for the six months ended June
30, 2008 totaled $78.5 million compared with $161.1 million for the six months
ended June 30, 2007. Capital expenditures in the first half of 2008 relate to
ongoing drilling rig upgrade initiatives, as well as finalization of the 2007
international build programs, including the deployment of one drilling rig to
the Middle East and one drilling rig to north Africa in the first six months
of 2008. The Company also completed the construction of two well servicing
rigs for the Canadian market in the first half of 2008.
    Capital expenditure activity during the first six months of 2008 also
includes ongoing construction projects as the Company expands its fleet of
proprietary ADRs. Construction programs in progress at June 30, 2008 include
six ADRs and one conventional triple drilling rig destined for the Middle East
and African markets. In addition, the Company has commenced the early stages
of a new global build program that will add an additional 20 ADRs to its
United States fleet of equipment and nine well servicing rigs to the Canadian
and United States markets.
    Subsequent to June 30, 2008, the Company announced the purchase of
12 specialty drilling rigs and related equipment from Terracore Specialty
Drilling Ltd. ("Terracore"). The specialty rigs are newly constructed within
the last four years and are primarily designed for coring operations in the
oil sands industry. The specialty rigs are also capable of drilling
conventional oil and natural gas wells and coal bed methane drilling. The
acquisition of this specialty drilling equipment further expands the Company's
offering to its customers operating in the oil sands industry and brings the
Company's total fleet of oil sands coring/coal bed methane drilling rigs to
40. The acquisition was funded from existing working capital and available
credit facilities.

    
    Financing Activities

                    Three months ended June 30      Six months ended June 30
                -------------------------------------------------------------
    ($ thousands)    2008       2007 % change       2008       2007 % change
    -------------------------------------------------------------------------
    Net decrease
     in operating
     lines of
     credit       (50,449)   (45,112)      12    (42,773)    (5,868)     629
    Issue of
     capital
     stock            111        840      (87)       411      1,666      (75)
    Dividends     (12,629)   (12,201)       4    (25,257)   (24,389)       4
    Net change in
     non-cash
     working
     capital            1         13      (92)         6         46      (87)
                -------------------------------------------------------------
    Cash used in
     financing
     activities   (62,966)   (56,460)      12    (67,613)   (28,545)     137
    -------------------------------------------------------------------------
    

    The Company decreased the utilized balance of its operating lines of
credit during the three months and six months ended June 30, 2008. Net
repayments of the operating lines of credit were the result of strong
operating cash flows generated by the Company's Canadian and United States
oilfield services divisions in excess of capital expenditure requirements.
    During the second quarter of 2008, the Company restructured its operating
credit facilities to better support its global operations and international
growth initiatives. Effective June 26, 2008, the Company's available operating
lines of credit consist of a $200 million global revolving credit facility
(the "global facility") and a $50 million Canadian based revolving credit
facility (the "Canadian facility"). The global facility is available to the
Company and any of its wholly owned subsidiaries and may be drawn in Canadian,
United States or Australian dollars, up to the equivalent value of
$200 million Canadian dollars. The amount available under the Canadian
facility is $50 million or the equivalent United States dollars.
    Other financing activities during the second quarter of 2008 include the
receipt of $0.1 million on the exercise of employee stock options and the
payment of dividends in the amount of $12.6 million. Dividends were declared
at a quarterly dividend rate of $0.0825 per common share for the second
quarter of 2008, an increase of three percent over dividends of $0.08 per
common share declared in the second quarter of 2007. For the six months ended
June 30, 2008, cash received on employee stock option exercises totaled
$0.4 million and dividends totaled $25.3 million. During the first six months
of 2008, the Company declared year-to-date dividends totaling $0.165 per
common share compared with $0.16 per common share during the first six months
of 2007. All dividends paid by the Company subsequent to January 1, 2006
qualify as an eligible dividend, as defined by subsection 89(1) of the Income
Tax Act.

    New Builds

    The Company has commenced a world-wide drilling rig construction program
that will add 27 new drilling rigs, including 26 state-of-the-art ADR(TM)
drilling rigs and one conventional triple drilling rig, to the Company's
global fleet over the next 18 months. The majority of these new builds are
under long-term contracts. The construction program includes six ADRs destined
for the international market, as previously disclosed, representing the
largest expansion of the ADR(TM) fleet outside of North America to date.
    The ADR(TM) provides a unique, automated solution to reduce move time
between wells, increase penetration rates, reduce drill time and provide a
safer work environment for employees. The ADR(TM) is a scalable rig technology
solution for well depths of 1,000 to 18,000 feet. Building on the foundation
of the original ADR(TM)-100 design first introduced in Canada in 1995, the
Company now offers a suite of ADRs - the 100, 200, 250, 300, 350, 500 and 750
models - to meet the needs of its customers world wide. Of the 26 ADRs to be
constructed, two are ADR(TM)-250 models, six are ADR(TM)-300 models, four are
ADR(TM)-350 models, 11 are ADR(TM)-500 models and three are ADR(TM)-750
models, the latest and most powerful generation of ADR(TM). Upon completion of
this new build program the Company will have a total of 74 ADRs in its fleet.
    The Company is also bolstering its well servicing rig fleet in Canada and
the United States and will add a total of nine newly built well servicing rigs
to those markets over the remainder of 2008 and early 2009.
    The estimated new build delivery schedule, by geographic area, is as
follows:

    
                        Q3     Q4     Q1     Q2     Q3     Q4     Q1
                      2008   2008   2009   2009   2009   2009   2010   Total
    -------------------------------------------------------------------------
    ADRs
    United States        -      -      4      3      5      5      3      20
    International        -      -      5      1      -      -      -       6
                      -------------------------------------------------------
    Total                -      -      9      4      5      5      3      26
    -------------------------------------------------------------------------
    Conventional
     Drilling Rigs
    International        -      -      -      1      -      -      -       1
    -------------------------------------------------------------------------
    Well Servicing Rigs
    Canada               -      2      1      2      -      -      -       5
    United States        2      2      -      -      -      -      -       4
                      -------------------------------------------------------
    Total                2      4      1      2      -      -      -       9
    -------------------------------------------------------------------------
    

    Outlook

    The improved earnings in the second quarter of 2008 compared to the
second quarter of 2007 reflect better than expected operating conditions in
Canada, driven in large part by higher activity levels in the Province of
Saskatchewan, and the positive impact of Ensign's established global strategy.
Accordingly, the Company expects the positive outlook for the oilfield
services industry to enable it to generate cash flow that exceeds the
Company's original expectations for the 2008 fiscal year. To take advantage of
the investment opportunities for such higher levels of cash flow, the Company
has commenced the first phase of a new world-wide drilling rig construction
program that will add 26 new state-of-the-art ADR(TM) drilling rigs and one
conventional triple drilling rig to the Company's global drilling rig fleet
over the next 18 months. These new drilling rigs will add to the advancement
of the overall technical capabilities of the Company's equipment fleet and
further increase the geographic diversity of the Company, as the new rigs are
to be deployed outside of Canada. Additionally, the Company is building four
new well servicing rigs for the United States and five new well servicing rigs
for Canada.
    As previously mentioned, the demand for oilfield services in Canada
improved on a year-over-year basis as the Company's Canadian customers
experienced better than expected levels of cash flow due to improved commodity
prices throughout the second quarter. Activity levels for the third quarter
remain strong owing to continued favorable spot and forward prices for crude
oil and natural gas. Although activity levels for the third and fourth
quarters are expected to be somewhat muted, at this point the majority of the
Company's Canadian drilling rigs are "booked" for the upcoming 2008/09 winter
drilling season. The major challenge facing the industry will be to attract
and train personnel to handle the expected level of demand. The Company is
well down this path, having ramped up recruiting and training efforts earlier
this spring.
    The activity levels in the United States market have, as expected, held
steady, reflecting a market that is well-balanced. There remain opportunities
to build new equipment for select new projects and areas that require new
technology to improve the economics of development activities. In this regard,
20 new ADR(TM) drilling rigs and four new well servicing rigs, as discussed
above, are being constructed to meet customer demands for new technology
equipment. The outlook for demand for oilfield services in the United States
market remains strong for the foreseeable future based on favorable oil and
natural gas commodity prices.
    The international operations of the Company continue to move in a
positive direction, albeit at a rate slower than record crude oil prices would
suggest. That said, the Company has confidence in the potential of the
international market and continues to search for investment opportunities that
meet the Company's investment criteria. The previously announced construction
of six new ADRs and one conventional triple drilling rig for the Middle East
and African markets is well underway; the newly constructed drilling rigs will
begin to contribute to the Company's financial results starting in the 2009
fiscal year. Results from the international operations for the remainder of
2008 are expected to remain steady as existing contracts roll over and new
contracts commence. As always, the challenge will remain to reduce down time
between projects, an unfortunate reality in the international oilfield
services market.
    The Company's overall outlook has become more optimistic over the past
several months based on record levels of crude oil prices and continued
favorable levels of natural gas commodity prices. Tempering the optimism;
however, are concerns around the prospects of economic recessions or, at a
minimum, reduced levels of growth in North American, European and Asian
markets, and the impact on overall demand for energy supplies should such
negative events occur. Additionally, the energy industry must grapple with the
impact of the costs of increased environmental initiatives; and the intended
and unintended consequences of continued governmental focus, both domestically
and abroad, on royalty structures, pace of activity and other aspects of
energy development. In other words, this remains a cyclical industry and there
remains uncertainty with respect to the future level of demand for oilfield
services even in an environment of currently favorable commodity prices. The
Company's financial strength and the geographic diversity of its operations
make it well prepared for such challenges and opportunities, and it will
continue to manage in a way that will benefit Ensign's shareholders.

    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 11, 2008. The
conference call number is 1-800-590-1508. A taped recording will be available
until August 18, 2008 by dialing 1-877-289-8525 and entering reservation
number 21280391 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, 2008 and December 31, 2007
    (Unaudited, in thousands of dollars)

                                                        June 30  December 31
                                                           2008         2007
                                                    -------------------------
    Assets

    Current assets
    Cash and cash equivalents                       $    33,730  $     1,940
    Accounts receivable                                 283,497      301,721
    Inventory and other                                  52,977       89,752
    Future income taxes                                   7,042        2,367
                                                    -------------------------

                                                        377,246      395,780

    Property and equipment                            1,497,125    1,390,780
                                                    -------------------------

                                                    $ 1,874,371  $ 1,786,560
                                                    -------------------------
                                                    -------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities        $   162,468  $   177,595
    Operating lines of credit (note 4)                   75,196      117,969
    Current portion of stock-based compensation          23,951        8,056
    Income taxes payable                                (10,448)      19,265
    Dividends payable                                    12,629       12,623
                                                    -------------------------

                                                        263,796      335,508

    Stock-based compensation                             10,242        4,723

    Future income taxes                                 225,545      202,123
                                                    -------------------------

                                                        499,583      542,354
                                                    -------------------------

    Shareholders' Equity

    Capital stock (note 5)                              168,288      167,599
    Accumulated other comprehensive income              (56,496)     (97,588)
    Retained earnings                                 1,262,996    1,174,195
                                                    -------------------------

                                                      1,374,788    1,244,206
                                                    -------------------------

                                                    $ 1,874,371  $ 1,786,560
                                                    -------------------------
                                                    -------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

    For the three and six months ended June 30, 2008 and 2007
    (Unaudited - in thousands of dollars, except per share data)

                                 Three months ended         Six months ended
                                      June 30                   June 30
                                 2008         2007         2008         2007
                          ---------------------------------------------------
    Revenue
    Oilfield services     $   337,774  $   296,539  $   809,958  $   806,024

    Expenses
    Oilfield services         232,715      213,057      520,179      522,881
    Depreciation               27,465       19,603       55,718       42,910
    General and
     administrative            14,124       12,796       27,789       27,038
    Stock-based compensation   10,734        1,346       27,450        7,098
    Interest                    2,007        1,962        3,944        2,905
                          ---------------------------------------------------
                              287,045      248,764      635,080      602,832
                          ---------------------------------------------------

    Income before income
     taxes                     50,729       47,775      174,878      203,192
                          ---------------------------------------------------
    Income taxes
    Current                     2,175       25,073       45,521       81,832
    Future                     16,292       (2,433)      15,299       (6,096)
                          ---------------------------------------------------

                               18,467       22,640       60,820       75,736

    Net income for the period  32,262       25,135      114,058      127,456

    Retained earnings -
     beginning of period    1,243,363    1,063,777    1,174,195      973,644

    Dividends (note 5)        (12,629)     (12,201)     (25,257)     (24,389)
                          ---------------------------------------------------

    Retained earnings -
     end of period        $ 1,262,996  $ 1,076,711  $ 1,262,996  $ 1,076,711
                          ---------------------------------------------------
                          ---------------------------------------------------

    Net income per share
     (note 5)
      Basic               $      0.21  $      0.16  $      0.75  $      0.84
      Diluted             $      0.21  $      0.16  $      0.74  $      0.82
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the three and six months ended June 30, 2008 and 2007
    (Unaudited - in thousands of dollars)

                                 Three months ended        Six months ended
                                      June 30                   June 30
                                 2008         2007         2008         2007
                          ---------------------------------------------------

    Cash provided by (used in)

    Operating activities
    Net income for the
     period               $    32,262  $    25,135  $   114,058  $   127,456
    Items not affecting
     cash:
      Depreciation             27,465       19,603       55,718       42,910
      Stock-based
       compensation, net
       of cash paid             6,507       (2,426)      21,692       (6,784)
      Future income taxes      16,292       (2,433)      15,299       (6,096)
                          ---------------------------------------------------
    Cash provided by
     operating activities
     before the change
     in non-cash working
     capital                   82,526       39,879      206,767      157,486
    Net change in non-cash
     working capital (note 7)  47,295      101,654      (23,586)      53,938
                          ---------------------------------------------------

                              129,821      141,533      183,181      211,424
                          ---------------------------------------------------

    Investing activities
    Net purchase of property
     and equipment            (44,979)     (67,509)     (78,523)    (161,117)
    Net change in non-cash
     working capital (note 7)  (2,006)     (22,138)      (5,255)     (26,401)
                          ---------------------------------------------------

                              (46,985)     (89,647)     (83,778)    (187,518)
                          ---------------------------------------------------

    Financing activities
    Net decrease in operating
     lines of credit          (50,449)     (45,112)     (42,773)      (5,868)
    Issue of capital stock        111          840          411        1,666
    Dividends (note 5)        (12,629)     (12,201)     (25,257)     (24,389)
    Net change in non-cash
     working capital (note 7)       1           13            6           46
                          ---------------------------------------------------

                              (62,966)     (56,460)     (67,613)     (28,545)
                          ---------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents during
     the period                19,870       (4,574)      31,790       (4,639)

    Cash and cash
     equivalents - beginning
     of period                 13,860       14,505        1,940       14,570
                          ---------------------------------------------------

    Cash and cash equivalents
     - end of period      $    33,730  $     9,931  $    33,730  $     9,931
                          ---------------------------------------------------
                          ---------------------------------------------------

    Supplemental information
      Interest paid       $     2,081  $     1,366  $     4,064  $     2,327
      Income taxes paid   $    37,364  $    46,255  $    75,233  $   103,923
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    For the three and six months ended June 30, 2008 and 2007
    (Unaudited - in thousands of dollars)


                                Three months ended         Six months ended
                                      June 30                   June 30
                                 2008         2007         2008         2007
                          ---------------------------------------------------
    Net income for the
     period               $    32,262  $    25,135  $   114,058  $   127,456
    Other comprehensive
     income
      Foreign currency
       translation
       adjustment               6,380      (37,362)      41,092      (38,351)
                          ---------------------------------------------------
    Comprehensive income
     for the period       $    38,642  $   (12,227) $   155,150  $    89,105
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
    For the three and six months ended June 30, 2008 and 2007
    (Unaudited - in thousands of dollars)

                                Three months ended         Six months ended
                                      June 30                   June 30
                                 2008         2007         2008         2007
                          ---------------------------------------------------
    Accumulated other
     comprehensive income
      - beginning of
       period             $   (62,876) $   (21,152) $   (97,588) $   (20,163)
      Foreign currency
       translation
       adjustment               6,380      (37,362)      41,092      (38,351)
                          ---------------------------------------------------
    Accumulated other
     comprehensive income
      - end of period     $   (56,496) $   (58,514) $   (56,496) $   (58,514)
                          ---------------------------------------------------
                          ---------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

    For the three and six months ended June 30, 2008 and 2007
    (Unaudited, in thousands of 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, 2007, except as noted below. 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, 2007.

    1.  Adoption of new accounting standards

        Capital disclosures

        Effective January 1, 2008, the Company adopted the Canadian Institute
        of Chartered Accountants ("CICA") Handbook Section 1535 "Capital
        Disclosures". The new section requires an entity to disclose
        information about its capital and how it is managed. The Company's
        capital management strategy is outlined in note 8.

        Financial instruments

        Effective January 1, 2008, the Company adopted CICA Handbook Section
        3862 "Financial Instruments - Disclosures" and Section 3863
        "Financial Instruments - Presentation", which replaced Section 3861
        "Financial Instruments - Disclosure and Presentation". The new
        sections revise and enhance financial instruments disclosure
        requirements and place increased emphasis on disclosures about the
        nature and extent of risks arising from financial instruments and how
        the Company manages those risks.

        The Company has designated its financial instruments as follows:

        -  Cash and cash equivalents are classified as "held for trading" and
           any period change in fair value is recorded through net income;
        -  Accounts receivable are classified as "loans and receivables".
           After their initial fair value measurement, they are measured at
           amortized cost using the effective interest rate method. For the
           Company, the measured amount generally corresponds to historical
           cost; and
        -  Accounts payable and accrued liabilities, operating lines of
           credit, and dividends payable are classified as "other financial
           liabilities". After their initial fair value measurement, they are
           measured at amortized cost using the effective interest rate
           method. For the Company, the measured amount generally corresponds
           to historical cost.

        Inventories

        Effective January 1, 2008, the Company adopted CICA Handbook Section
        3031 "Inventories", which requires inventory to be valued on a
        'first-in, first out' or weighted average basis. The new standard
        also requires fixed and variable production overheads that are
        incurred in converting materials into finished goods to be allocated
        to the cost of inventory on a systematic basis. The adoption of this
        standard did not have a material impact on the Company's consolidated
        financial statements.

        Recent accounting pronouncements

        In January 2006, the CICA Accounting Standards Board ("AcSB") adopted
        a strategic plan for the direction of accounting standards in Canada.
        As part of that plan, the 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.

    2.  Change in accounting estimates

        Effective January 1, 2008 the Company revised the estimated useful
        life of drill pipe to 1,500 operating days, to be depreciated on a
        unit-of-production basis. The change in estimated useful life
        reflects the Company's recent experience with respect to the period
        over which future benefits are derived from drill pipe and the impact
        improved technologies have had on extending the useful lives of these
        assets. As a result of this change in accounting estimate, drill pipe
        of $39,000 previously classified as inventory and other on the
        consolidated balance sheet has been reclassified to property and
        equipment on the basis that its estimated useful life of 1,500
        operating days extends beyond the current period.

        Effective January 1, 2008 the Company revised the estimated useful
        life of oil sands coring rigs from 3,650 operating days to 1,000
        operating days. The oil sands coring rigs will continue to be
        depreciated on a unit-of-production basis with a 20% residual value.
        Further, the Company revised the estimated useful life of coiled
        tubing units from 24,000 operating hours to five years, to be
        depreciated on a straight-line basis.

        These changes in accounting estimates have been applied on a
        prospective basis and did not have a significant effect on
        consolidated net income for the six months ended June 30, 2008. It is
        impracticable to estimate the effect of these changes in accounting
        estimates on future periods as such an estimate would depend on a
        forecast of future operating activity levels.

    3.  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
        well sites in Canada is reduced.

    4.  Operating lines of credit

        During the period ended June 30, 2008, the Company restructured its
        operating credit facilities to better support its global operations.
        Effective June 26, 2008, the Company's available operating lines of
        credit consist of a $200,000 global revolving credit facility (the
        "global facility") and a $50,000 Canadian-based revolving credit
        facility (the "Canadian facility").

        The global facility is available to the Company and any of its wholly
        owned subsidiaries and may be drawn in Canadian, United States or
        Australian dollars, up to the equivalent value of $200,000 Canadian
        dollars. Interest is incurred on the utilized balance of the global
        facility at prime interest rates or bankers' acceptance rates/LIBOR
        plus 0.75%. The global facility is unsecured.

        The amount available under the Canadian facility is $50,000 or the
        equivalent United States dollars. Interest is incurred on the
        utilized balance of the Canadian facility at prime interest rates or
        bankers' acceptance rates/LIBOR plus 0.85%. The Canadian facility is
        unsecured.

    5.  Capital stock

        Authorized

        Unlimited common shares
        Unlimited preferred shares, issuable in series

        Outstanding

                                                      Number of
                                                         Common
                                                         Shares       Amount
        ---------------------------------------------------------------------
        Balance at January 1, 2008                  153,041,378  $   167,599
        Issued under employee stock option plan          35,200          689
                                                    -------------------------
        Balance at June 30, 2008                    153,076,578  $   168,288
        ---------------------------------------------------------------------

        Options

        A summary of the status of the Company's stock option plan as of June
        30, 2008, and the changes during the six-month period then ended, is
        presented below:

                                                                    Weighted
                                                                     Average
                                                      Number of     Exercise
                                                        Options        Price
        ---------------------------------------------------------------------
        Outstanding at January 1, 2008                9,655,450  $     16.55
        Granted                                       2,274,500        21.75
        Exercised for common shares                     (35,200)      (11.68)
        Exercised for cash                             (697,560)      (11.12)
        Forfeited                                       (49,900)      (16.74)
        ---------------------------------------------------------------------
        Outstanding at June 30, 2008                 11,147,290  $     17.96
        ---------------------------------------------------------------------
        Exercisable at June 30, 2008                  3,453,490  $     14.69
        ---------------------------------------------------------------------

                                  Options Outstanding     Options Exercisable
        ---------------------------------------------------------------------
                                      Average   Weighted            Weighted
                                      Vesting    Average    Options  Average
                            Options Remaining   Exercise      Exer- Exercise
        Exercise Price  Outstanding (in years)     Price    cisable    Price
        ---------------------------------------------------------------------
        $8.75 to $11.05   2,296,590      0.55    $ 10.44  1,623,590  $ 10.42
        $13.50 to $18.85  1,974,200      1.50      14.08    879,800    13.69
        $19.88 to $23.33  6,876,500      2.96      21.59    950,100    22.93
        	              -----------------------------------------------------
                         11,147,290      2.21    $ 17.96  3,453,490  $ 14.69
        ---------------------------------------------------------------------

        Common share dividends

        During the six months ended June 30, 2008, the Company declared
        dividends of $25,257 (2007 - $24,389), being $0.165 per common share
        (2007 - $0.160 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-
        month period ended June 30, 2008 and 2007 are as follows:

                                                           2008         2007
                                                    -------------------------
        Weighted average number of common shares
         outstanding - basic                        153,063,904  152,425,337
        Weighted average number of common shares
         outstanding - diluted                      154,669,014  155,557,069
                                                    -------------------------

        Stock options of 6,876,500 (2007 - 4,833,500) 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.

    6.  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, 2008
        ---------------------------------------------------------------------
                               Canada United States International      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
        ---------------------------------------------------------------------

        Three months ended June 30, 2007
        ---------------------------------------------------------------------
                               Canada United States International      Total
        ---------------------------------------------------------------------
        Revenue           $   110,544  $   130,884  $    55,111  $   296,539
        Property and
         equipment, net   $   771,102  $   324,942  $   277,369  $ 1,373,413
        Capital
         expenditures,
         net              $     5,727  $    45,568  $    16,214  $    67,509
        Depreciation      $     9,509  $     5,053  $     5,041  $    19,603
        ---------------------------------------------------------------------

        Six months ended June 30, 2008
        ---------------------------------------------------------------------
                               Canada United States International      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
        ---------------------------------------------------------------------

        Six months ended June 30, 2007
        ---------------------------------------------------------------------
                               Canada United States International      Total
        ---------------------------------------------------------------------
        Revenue           $   423,158  $   267,631  $   115,235  $   806,024
        Property and
         equipment, net   $   771,102  $   324,942  $   277,369  $ 1,373,413
        Capital
         expenditures,
         net              $    16,176  $   112,214  $    32,727  $   161,117
        Depreciation      $    22,855  $     9,692  $    10,363  $    42,910
        ---------------------------------------------------------------------

    7.  Supplemental disclosure of cash flow information

        The net change in non-cash working capital for the three and six
        months ended June 30, 2008 and 2007 is determined as follows:

                                 Three months ended        Six months ended
                                      June 30                   June 30
                          ---------------------------------------------------
                                 2008         2007         2008         2007
                          ---------------------------------------------------
        Net change in
         non-cash working
         capital
          Accounts
           receivable     $    98,435  $   160,670  $    18,224  $   122,330
          Inventory and
            other              (1,451)      (4,626)      (2,225)      (6,700)
          Accounts payable
           and accrued
           liabilities        (16,505)     (55,346)     (15,127)     (66,002)
          Income taxes
           payable            (35,190)     (21,182)     (29,713)     (22,091)
          Dividends payable         1           13            6           46
                          ---------------------------------------------------
                          $    45,290  $    79,529  $   (28,835) $    27,583
                          ---------------------------------------------------
        Relating to
          Operating
           activities     $    47,295  $   101,654  $   (23,586) $    53,938
          Investing
           activities          (2,006)     (22,138)      (5,255)     (26,401)
          Financing
           activities               1           13            6           46
                          ---------------------------------------------------
                          $    45,290  $    79,529  $   (28,835) $    27,583
                          ---------------------------------------------------
                          ---------------------------------------------------

    8.  Capital management strategy

        The Company's objectives when managing capital are to exercise
        financial discipline, and to deliver positive returns and stable
        dividend streams to its shareholders. The Company's capital
        management strategy remained unchanged during the six months ended
        June 30, 2008; however, the Company continues to be cognizant of the
        challenges associated with operating in a cyclical, commodity-based
        industry and may make future adjustments to its capital management
        strategy in light of changing economic conditions.

        The Company considers its capital structure to include shareholders'
        equity and operating lines of credit. In order to maintain or adjust
        its capital structure, the Company may from time to time adjust its
        capital spending or dividend policy to manage the level of its short-
        term borrowings, or may revise the terms of its operating lines of
        credit to support future growth initiatives. During the period ended
        June 30, 2008, the Company revised the terms of its operating lines
        of credit as described in note 4. As at June 30, 2008, operating
        lines of credit totalled $75,196 and shareholders' equity totalled
        $1,374,788.

        The Company is subject to externally imposed capital requirements
        associated with its operating lines of credit, including financial
        covenants that incorporate shareholders' equity and level of
        indebtedness. As at June 30, 2008, the Company is in compliance with
        these requirements.

    9.  Financial instruments

        Fair value

        The carrying value of cash and cash equivalents, accounts receivable,
        accounts payable and accrued liabilities, operating lines of credit
        and dividends payable approximate fair value due to the short-term
        nature of these instruments.

        Credit risk

        Credit risk is the risk of financial loss to the Company if a
        customer or counterparty to a financial instrument fails to meet its
        contractual obligations. Credit risk arises principally from the
        Company's accounts receivable balances owing from customers operating
        primarily in the oil and natural gas industry in Canada, the United
        States and internationally. The carrying amount of accounts
        receivable represents the maximum credit exposure as at June 30,
        2008.

        The Company assesses the credit worthiness of its customers on an
        ongoing basis and considers the credit risk on these amounts normal
        for the industry. The Company establishes credit limits for each
        customer based on external credit reports, internal analysis and
        historical experience with the customer. Credit limits are approved
        by senior management and are reviewed on a regular basis or when
        changing economic circumstances dictate. The Company also monitors
        the amount and age of accounts receivable balances on an ongoing
        basis. At June 30, 2008 the Company's allowance for doubtful accounts
        was $331, a decrease of $82 from the balance as at December 31, 2007.

        Liquidity risk

        Liquidity risk is the risk that the Company will not be able to meets
        its financial obligations as they are due. The Company manages
        liquidity by forecasting cash flows on an annual basis and secures
        sufficient credit facilities to meet financing requirements that
        exceed anticipated internally generated funds. As at June 30, 2008,
        the remaining contractual maturities of accounts payable and accrued
        liabilities, operating lines of credit and dividends payable are less
        than one year.

        Market risk

        Market risk is the risk that changes in market prices, such as
        foreign exchange rates and interest rates, will affect the Company's
        net income or the value of the financial statements.

        Interest rate risk
        ------------------
        The Company is exposed to interest rate risk with respect to its
        operating lines of credit that bear interest at floating market
        rates. For the six months ended June 30, 2008, if interest rates
        applicable to the operating lines of credit had been 1% higher or
        lower, with all other variables held constant, net income would have
        been $630 higher or lower.

        Foreign currency exchange rate risk
        -----------------------------------
        The Company operates internationally and is exposed to foreign
        exchange risk arising from various currency exposures, primarily with
        respect to the United States dollar and the Australian dollar. The
        principal foreign exchange risk relates to the conversion of the
        Company's self-sustaining subsidiaries from their functional
        currencies to Canadian dollars. At June 30, 2008, had the Canadian
        dollar weakened or strengthened by 1% against the United States
        dollar, with all other variables held constant, the Company's other
        comprehensive income would have been approximately $5,100 higher or
        lower. At June 30, 2008, had the Canadian dollar weakened or
        strengthened by 1% against the Australian dollar, with all other
        variables held constant, the Company's other comprehensive income
        would have been approximately $2,100 higher or lower.

    10. 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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