IROC Energy Services Corp. announces increased net income and filing of third quarter 2011 financial statements

CALGARY, Nov. 22, 2011 /CNW/ - IROC Energy Services Corp. ("IROC" or the "Corporation") (TSXV: ISC) is pleased to present a summary of its operating and financial results for the three and nine months ended September 30, 2011.  For a complete copy of IROC's interim financial statements and management's discussion and analysis ("MD&A") please visit www.sedar.com.

Basis of Presentation

Throughout this news release amounts are presented on a continuing operations basis to more accurately reflect the way in which IROC intends to operate on a continuing basis.

Highlights for the three months ended September 30, 2011:

  • Total revenue increased 63% to $22.9 million for the three months ended September 30, 2011 as compared to $14.0 million in the comparable period of the prior year.

  • Gross margin increased 116% to $10.5 million for the three months ended September 30, 2011 as compared to $4.9 million in the comparable period of the prior year.

  • EBITDAS increased 150% to $8.2 million for the three months ended September 30, 2011 as compared to $3.3 million in the comparable period of the prior year.

  • Net income from continuing operations increased 305% to $4.3 million for the three months ended September 30, 2011 as compared to $1.1 million in the comparable period of the prior year.

Highlights for the nine months ended September 30, 2011:

  • Total revenue increased 68% to $59.0 million for the nine months ended September 30, 2011 as compared to $35.1 million in the comparable period of the prior year.

  • Gross margin increased 113% to $24.4 million for the nine months ended September 30, 2011 as compared to $11.5 million in the comparable period of the prior year.

  • EBITDAS increased 174% to $18.3 million for the nine months ended September 30, 2011 as compared to $6.7 million in the comparable period of the prior year.

  • Net income from continuing operations increased 1,811% to $8.6 million for the nine months ended September 30, 2011 as compared to net income of $0.5 million in the comparable period of the prior year.

Operations

IROC's operations are reported in three segments; the Drilling and Production Services segment, the Rental Services segment and Corporate Services and Other.  The following is a discussion of the reporting segments in which IROC operates.

Drilling and Production Services

The Drilling and Production Services segment provides services to oil and gas exploration, development and production companies with most of our customers and operations being located in western Canada, in the provinces of Alberta and Saskatchewan.

The Drilling and Production Services segment consists of two divisions:

Eagle Well Servicing ("Eagle") contracts service rigs to oil and gas companies to perform various completion, work-over and maintenance services on oil and natural gas wells.  Eagle has offices and equipment in Red Deer, Grande Prairie and Lloydminster in Alberta and an office and equipment in Estevan, Saskatchewan with equipment being used in those geographic areas.

Helix Coil Services ("Helix") contracts coil tubing units to oil and gas companies to perform various completion, work-over and maintenance services on oil and natural gas wells.  Helix is based in Red Deer, Alberta with equipment generally being used in Alberta and Saskatchewan, Canada.

                               
        Three months ended
        September 30,
2011
      June 30,
2011
      March 31,
2011
    December 31,
2010
Eagle Well Servicing:                              
  Number of service rigs (end of period)       38       36       36     35
  Service rig utilization       69%       42%       78%     66%
                               
Commodity prices:                              
  NYMEX crude oil $US/bbl       89.76       102.60       94.08     85.17
  AECO Monthly index natural gas $CAD/GJ       3.53       3.54       3.58     3.39
                                 
                               
          Three months ended
        September 30,
2010
      June 30,
2010
      March 31,
2010
    December 31,
2009
Eagle Well Servicing:                              
  Number of service rigs (end of period)       35       35       36     36
  Service rig utilization       57%       33%       55%     49%
                               
Commodity prices:                              
  NYMEX crude oil $US/bbl       76.20       78.03       78.72     76.19
  AECO Monthly index natural gas $CAD/GJ       3.52       3.66       5.08     4.01

As at September 30, 2011, Eagle had a fleet of 38 service rigs. Utilization, as measured by IROC's internal methodology, during the quarter was 69 per cent. Eagle's service rig fleet and equipment are among the newest in the industry.  All Eagle's service rigs are internally guyed with no requirement for external anchors.  This reduces set up time and corresponding costs when compared to anchored rigs.  Since September, the Corporation has deployed one additional rig, for a total service rig fleet of 39 rigs currently crewed and operated.  In addition, three new service rigs are currently being built, with expected delivery in 2011. As part of these deliveries, Eagle's first two slant rigs are being delivered in November allowing the Corporation to address opportunities in the heavy oil and SAGD markets. Management expects that the Corporation's full 2011 capital expenditure budget of $27.6-million will be expended by year-end.

Additionally, the Corporation has budgeted $12.5 million and secured five new build slots for its 2012 capital program. The five additional rigs are expected to be deployed between December, 2011, and June, 2012, meaning that Eagle Well Servicing expects to have 43 rigs operational by year-end and 47 rigs operational by the end of the second quarter of 2012. Orders for the 2012 service rigs were placed to ensure increasing lead times for delivery of certain service rig components do not delay delivery of the new rigs from the company's anticipated time schedule. The Corporation's full 2012 capital budget is expected to be released prior to year-end.

The trend toward increased oil-related activity continues to provide benefit for the Corporation's service rig division. Current activity levels are estimated to be approaching 80 per cent levered to oil, with completion, workover and abandonment activity all providing continued strong demand for the Corporation's services in the foreseeable future.

Eagle Well Servicing has been able to fully crew its assets through the third quarter of 2011, despite a very tight labour market across the service industry.

Commodity prices are the main activity driver as the Corporation's customers' exploration and development programs are directly impacted by oil and natural gas prices.  Oil and gas producers spend capital on new wells and service operations when they are economic within the context of current and forecasted commodity prices.  Year over year, crude oil prices are stronger now than in the prior year and have generally been on an increasing trend for over two years since they bottomed in the first quarter of 2009 during the financial crisis.  For the past six quarters, natural gas prices have remained within a $3.00 to $4.00 range which is relatively weak in comparison to historic price levels over the preceding five years.  At recent price levels, natural gas development has been focused on resource type development projects and liquids rich reservoirs as much conventional shallow gas has not been economic.  Should there be a return to higher natural gas prices, as is starting to be predicted by some industry participants, the level of activity and demand for the Corporation's services is expected to increase across all business lines.

Service rig utilization, as measured by IROC's internal methodology, increased in the quarter to 69%, as compared to 57% in the comparative period of last year.  Our utilization percentage increased by 27% as compared to the second quarter as activity levels ramped up following spring break-up.  The seasonality of spring break-up, forest fires in Northern Alberta, and wet weather conditions all contributed to reduced activity levels during the second quarter.  With all of those factors diminishing during the third quarter, activity levels picked up again.  Seasonality is a significant activity driver for all of our businesses as certain areas are only accessible by service rigs and other heavy equipment during winter when the ground is frozen.  Service rig activity for the nine month period continued to be driven by horizontal drilling which has contributed to the increased utilization as exploration and production companies target oil production. The complexity of horizontal wells typically makes completion operations more time consuming and is starting to impact utilization percentages. Continuing high levels of activity in the heavy oil operations in the Lloydminster area also contributed to increased utilization during the quarter.

Helix Coil Services began operations in July 2011 with the deployment of two truck mounted units, each with 2" capabilities placing the equipment in the intermediate size range. Subsequent to quarter end, one trailer unit with 2" capabilities has been added along with pumping and crane support equipment.

Rental Services

The Rental Services segment consists of the Aero Rental Services ("Aero") division.  Aero provides rental equipment for surface pressure control in drilling and workover operations and tubular handling equipment used for the work over, re-entry and completion operations.  Aero has an office in Red Deer, Alberta with equipment being rented for use primarily in Alberta.

                               
        Three months ended
        September 30,
2011
      June 30,
2011
      March 31,
2011
    December 31,
2010
Aero Rental Services:                              
  Gross margin $000's       2,379       791       2,704     1,715
  Book value of rental equipment $000's       12,887       11,799       11,249     10,121
                                 
                               
        Three months ended
        September 30,
2010
      June 30,
2010
      March 31,
2010
    December 31,
2009
Aero Rental Services:                              
  Gross margin $000's       762       250       505     455 (1)
  Book value of rental equipment $000's       8,802       7,477       7,112     6,977

(1) Calculated in accordance with GAAP, see Accounting Policy Changes

Aero Rental Services continues to have strong absolute margin growth on a seasonality adjusted year over year basis.  The increase in gross margin is driven by three primary factors.  Firstly, higher oil prices have increased demand and utilization of certain types of equipment; secondly, the increased rental asset base in the current year as compared to the prior year; and thirdly, the decreasing percentage of fixed costs to total costs in the business as we start to more fully utilize the excess capacity which was available in our shop location's yard and buildings.

Corporate Services and Other

IROC's non-operating segment, Corporate Services and Other, captures general and administrative expenses associated with supporting each of the reporting segments operations noted above, plus costs associated with being a public company.  Also included in Corporate Services is interest expense for debt servicing and income tax expense and other amounts not relating to the two main operating segments.

Comparison of results from the three and nine month periods ended September 30, 2011 to the same periods last year

REVENUE

                                       
            Three months ended                    
$ 000's           September 30,
2011
    September 30,
2010
        Change
$
        Change
%
Revenue:                                      
  Drilling and production services           19,042     12,241         6,801         56%
  Rental services ("Aero")           3,874     1,801         2,073         115%
Total revenue           22,916     14,042         8,874         63%
                                       
                                       
            Nine months ended                     
$ 000's           September 30,
2011
    September 30,
2010
        Change
$
        Change
%
Revenue:                                      
  Drilling and production services           48,272     30,614         17,658         58%
  Rental services ("Aero")           10,744     4,471         6,273         140%
Total revenue           59,016     35,085         23,931         68%

OPERATING COSTS AND GROSS MARGIN

                                       
            Three months ended                    
$ 000's           September 30,
2011
    September 30,
2010
        Change
$
        Change
%
Operating costs:                                      
  Drilling and production services           10,944     8,148         2,796         34%
  Rental services           1,496     1,039         457         44%
Total operating costs           12,440     9,187         3,253         35%
                                       
Gross margin:(1)                                      
  Drilling and production services           8,098     4,093         4,005         98%
  Rental services           2,378     762         1,616         212%
Total gross margin           10,476     4,855         5,621         116%
                                       
Gross margin %(1):                                      
  Drilling and production services           43%     33%                   10%
  Rental services           61%     42%                   19%
Total gross margin %           46%     35%                   11%
(1)See Non-GAAP Measures                                      
                                       
                                       
            Nine months ended                    
$ 000's           September 30,
2011
    September 30,
2010
        Change
$
        Change
%
Operating costs:                                      
  Drilling and production services           29,698     20,670         9,028         44%
  Rental services           4,871     2,954         1,917         65%
Total operating costs           34,569     23,624         10,945         46%
                                       
Gross margin:(1)                                      
  Drilling and production services           18,574     9,944         8,630         87%
  Rental services           5,873     1,517         4,356         287%
Total gross margin           24,447     11,461         12,986         113%
                                       
Gross margin %(1):                                      
  Drilling and production services           38%     32%                   6%
  Rental services           55%     34%                   21%
Total gross margin %           41%     33%                   8%
(1)See Non-GAAP Measures                                  

EBITDAS

                                       
            Three months ended                    
$ 000's except per share amounts           September 30,
2011
    September 30,
2010
        Change
$
        Change
%
EBITDAS(1):                                      
  Drilling and production services           7,085     3,494         3,591         103%
  Rental services           2,080     552         1,528         277%
  Corporate and other           (933)     (749)         (184)         25%
Total EBITDAS           8,232     3,297         4,935         150%
                                       
EBITDAS per common share(1)                                      
  - Basic           $ 0.164     $  0.076         $ 0.088         116%
  - Diluted           $ 0.160     $  0.076         $ 0.084         111%
(1) See Non-GAAP Measures                                      
                                       
            Nine months ended                    
$ 000's except per share amounts           September 30,
2011
    September 30,
2010
        Change
$
        Change
%
EBITDAS(1):                                      
  Drilling and production services           16,047     8,306         7,741         93%
  Rental services           5,039     1,032         4,007         388%
  Corporate and other           (2,815)     (2,674)         (141)         5%
Total EBITDAS           18,271     6,664         11,607         174%
                                       
EBITDAS per common share(1)                                      
  - Basic           $ 0.386     $  0.153         $ 0.233         152%
  - Diluted           $ 0.378     $  0.153         $ 0.225         147%
(1) See Non-GAAP Measures

Net Income (loss)

                                   
          Three months ended                      
$ 000's except share and per share amounts       September 30,
2011
    September 30,
2010
        Change $
or number
        Change
%
                                   
Net income from continuing operations        4,330     1,068         3,262         305%
                                   
Net income (loss) from discontinued operations       (968)     (364)         (604)         166%
                                   
Net income and comprehensive income        3,362     704         2,658         378%
                                   
Earnings per share from continuing operations:                                  
  - Basic       $0.09     $0.03         $0.06         200%
  - Diluted       $0.08     $0.03         $0.05         167%
                                   
Weighted average common shares outstanding:                                  
  - Basic       50,187,484     43,502,346         6,685,138         15%
  - Diluted       51,292,379     43,632,200         7,660,179         18%
                                   
                                   
        Nine months ended                      
$ 000's except share and per share amounts       September 30,
2011
    September 30,
2010
        Change $
or number
        Change
%
                                   
Net income from continuing operations        8,601     450         8,151         1,811%
                                   
Net income (loss) from discontinued operations       (1,184)     136         (1,320)         (971)%
                                   
Net income and comprehensive income        7,417     586         6,831         1,166%
                                   
Earnings per share from continuing operations:                                  
  - Basic       $0.19     $0.01         $0.18         1,780%
  - Diluted       $0.18     $0.01         $0.17         1,720%
                                   
Weighted average common shares outstanding:                                  
  - Basic       47,323,554     43,561,134         3,762,420         9%
  - Diluted       48,338,268     43,645,575         4,692,693         11%

Discontinued Operations

On July 14, 2011 IROC sold the business assets of its Canada Tech division ("Canada Tech").  The assets sold consisted of inventory, prepaid expenses and deposits, intangible assets, and property and equipment.  Proceeds of sale consisted of cash consideration of approximately $4.8 million.  The sale included the complete Canada Tech division with all existing division employees being offered continued employment by the purchaser.  The net book value of the assets disposed on July 14, 2011 was $6.3 million and the loss on sale of $1.6 million is included in net income (loss) from discontinued operations.  The Corporation does not expect the sale of the Canada Tech division to have any impact on current or future operations.

Outlook

IROC Energy Services continued to deliver solid results in the third quarter of 2011 as strong oil prices and the continued focus on oil based activity benefited each of our business lines.  In fact, this past quarter was a record third quarter for the Corporation.  Year over year, we have continued to increase revenues, margins, net income, and EBITDAS for both the three and nine month periods ended September 30, 2011.  As we look forward, we have many reasons to be optimistic about the continued prospects for our businesses.

While the operating environment has changed substantially, the increased levels of activity for IROC's businesses is indicative of how we have positioned our assets to benefit our shareholders, employees and customers in both the short and longer term.  Eagle Well Servicing has developed solid relationships with active oil and gas operators across Western Canada by providing the newest equipment available, trained personnel and a skilled group of managers that combine to provide value to our customers both in superior customer service and efficient operations.  Eagle Well Servicing continues to effectively crew our rigs, a tribute to the efforts of our managers at the field level, and a reflection of workers' preference to work on relatively new and well maintained equipment. However, skilled labour is in tight supply and as activity increases through the winter season, and the number of rigs in our fleet increases, we expect to be stretched to the limit in terms of personnel through the next two quarters.

Our optimism is reflected in our commitment to grow the business. To that end, during the quarter we took delivery of the third of seven new service rigs planned for deployment during 2011. This brings Eagle's current active service rig count to 39 service rigs.  The remaining three rigs are scheduled to be delivered before year end. Additionally, we have secured five new build slots and will be taking delivery of our first rig from our 2012 Capital Expenditure budget in December of 2011. The four additional rigs are expected to be deployed in the first half of 2012, meaning that Eagle Well Servicing expects to have 43 rigs operational by year end and 47 by the end of the second quarter of 2012.

Our capital program will make the newest fleet of service rig equipment in Western Canada newer, and management expects to be able to continue to work this aspect of our fleet to our advantage in attracting experienced, competent personnel to operate the equipment. Management expects that revenues will be positively affected by these capital additions in the coming quarters, but more so during 2012, when the full year effect of the additional equipment will be achieved.

Aero Rental Services continues to be the fastest growing segment of our business with opportunities being created by the expansion of horizontal drilling and increasing needs in the SAGD market which have resulted in an increased demand for our core competencies, which is our experience in the pressure control rental market.  With capital expenditures of $1.6 million during the current quarter and $4.0 million year to date, the increased equipment inventory has been instrumental in moving our revenues higher and increasing our margins.  As we identify new opportunities for this division we will continue to invest in this area of our business with expectation of a solid return on our invested capital.  The demand for equipment that we provide through Aero remains strong and is expected to continue into 2012.

Helix Coil Services began operations in July 2011 with the deployment of two truck mounted units, each with 2" capabilities placing the equipment in the intermediate size range. Subsequent to quarter end, one trailer unit with 2" capabilities has been added, along with pumping and crane support equipment. Helix generated revenues of $1.7 million and provided positive operating cash flow in its first quarter of operations.  Management believes the coil operation is very complementary to our other service lines and, as expansion opportunities present themselves, we will not hesitate to act upon them.  There is currently strong demand for this equipment and it is expected to remain in tight supply during the short and medium term, driven by the additional drilling and fracturing capacity being added into the WCSB.  As with our service rig operation, our ability to attract and retain competent personnel for this division will be a determining factor for the level of success that we can achieve.

It is an exciting time in our industry as our capacity to respond to the demands of our customers is being stretched.  Based on a continuation of the current historically high oil pricing, and the expanding applications for horizontal drilling and multi stage fracturing technology into an increasing number of areas, we expect the demand for our services and personnel will remain strong through the winter and well into 2012.

Conference call and webcast

IROC will conduct a conference call on Wednesday, November 23, 2011 at 2:30 p.m. MST (4:30 p.m. EST). Thomas Alford, President and CEO, and Ryan Michaluk, CFO, will both be presenting during the call.

To access the conference call, contact the conference call operator at 1-888-231-8191 (North America) and 647-427-7450 (Toronto and outside North America) approximately 10 minutes prior to the call and request the "IROC Energy Services Corp 3rd Quarter 2011 results conference call". The call will be open to all analysts, investors and other interested parties.

The conference call will also be available via webcast by visiting http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3749900 in your web browser.

Accounting policy changes

IROC prepares its financial statements in accordance with Canadian generally accepted accounting principles as set out in the Handbook of the Canadian Institute of Chartered Accountants ("CICA" and "CICA Handbook").  In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards ("IFRS") and require public companies to apply such standards effective for years beginning on or after January 1, 2011.

On January 1, 2011, IROC adopted International Financial Reporting Standards ("IFRS") for purposes of financial reporting, using a transition date of January 1, 2010.  Accordingly, the condensed consolidated financial statements for the three and six months ended June 30, 2011 and the comparative information for the three and six months ended June 30, 2010, have been prepared in accordance with International Financial Reporting Standard 1, "First-time Adoption of International Financial Reporting Standards", and with International Accounting Standard 34, "Interim Financial Reporting", as issued by the International Accounting Standards Board ("IASB").

In this news release, the term "GAAP" or "Canadian GAAP" refers to Canadian generally accepted accounting principles before the adoption of IFRS.  Certain tables which incorporate a combination of GAAP and IFRS amounts have column headings which indicate which set of accounting principles were used in the preparation of the amounts in such column.  In the absence of any such designation, amounts included in this news release are prepared in accordance with IFRS.

The adoption of IFRS has not had an impact on the Company's operations or strategic decisions.  Further information on the effect of adopting IFRS is outlined in the Changes in Accounting Pronouncements including Initial Adoption section of the interim MD&A.

About IROC Energy Services Corporation

IROC Energy Services Corp. is an Alberta oilfield services company that, through the IROC Energy Services Partnership, provides a diverse range of products, services and equipment to the oil and gas industry that are among the newest and most innovative in the WCSB.  IROC Energy Services Partnership operates under the business names of Eagle Well Servicing, Aero Rental Services and Helix Coil Services.  IROC combines cutting-edge technology with depth of experience to deliver a product and services offering in the following core areas: well servicing & equipment, rental services and coil tubing services. For more information on IROC Energy Services Corp., visit our website at www.iroccorp.com.

Cautionary Statement Regarding Forward Looking Information and Statements

Certain information contained in this news release, including information related to the completion and timing of the construction of IROC's new service rigs and new coiled tubing units, the Corporation's planned capital expenditures and growth opportunities, outlook for future oil and gas prices, cyclical industry fundamentals, drilling, completion, work over and abandonment activity levels, the Corporation's ability to fund future obligations and capital expenditures, and information or statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "likely", "estimate", "predict", "potential", "continue", "maintain", "retain", "grow", and similar expressions and statements relating to matters that are not historical facts, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation.  This information or these statements are based on certain assumptions and analysis made by the Corporation in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. In particular, the Corporation's expectation of uncertain demand and prices for oil and natural gas and the resulting future industry activity, is premised on the Corporation's understanding of customers' capital budgets and their ability to access capital, the focus of its customers on deeper and horizontal drilling opportunities in the current natural gas pricing environment, and the continuing impact of the recent global financial crisis and the current economic recovery all of which affects the demand for oil and gas. Whether actual results, performance or achievements will conform to the Corporation's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Corporation's expectations.  Such risks and uncertainties include, but are not limited to: fluctuations in the price and demand for oil and natural gas; fluctuations in the level of oil and natural gas exploration and development activities; fluctuations in the demand for well servicing; the effects of weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing; general economic, market or business conditions; changes in laws or regulations, including taxation, environmental and currency regulations; the lack of availability of qualified personnel or management; the other risk factors set forth under the heading "Risks" in the annual MD&A for the year ended December 31, 2010 and other unforeseen conditions which could impact on the use of services supplied by the Corporation.

Consequently, all of the forward-looking information and statements made in this news release are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by the Corporation will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Corporation or its business or operations. Except as may be required by law, the Corporation assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.

This press release is not for dissemination in United States or to any United States news services.  The Common Shares of IROC have not and will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the United States or to any US person except in certain transactions exempt from the registration requirements of the United States Securities Act and applicable state securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Non-GAAP Measures

The financial statements have been prepared in accordance with IFRS.  Certain supplementary information and measures not recognized under IFRS are provided where Management believes they assist the reader in understanding IROC's results.  These measures include:

  1. EBITDAS and EBITDAS per share- EBITDAS is defined as earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, foreign exchange gains and losses, goodwill impairment, note receivable impairment, and gains or losses on disposal of property and equipment.  EBITDAS and EBITDAS per share are not recognized measures under GAAP or IFRS.  The Corporation believes that EBITDAS is provided as a measure of operating performance without reference to financing decisions, income tax impacts and non-cash expenses, which are not controlled at the operating management level.  Accordingly, the Corporation believes EBITDAS is a useful measure for prospective investors in evaluating the financial performance of the Corporation, and specifically, the ability of the Corporation to service the interest on its indebtedness.  Investors should be cautioned that EBITDAS should not be construed as an alternative to net income determined in accordance with GAAP or IFRS as an indicator of the Corporation's performance.  IROC's method of calculating EBITDAS may differ from those of other companies, and accordingly, EBITDAS may not be directly comparable to measures used by other companies. EBITDAS % is calculated as EBITDAS divided by revenue.

  2. Gross margin is defined as revenue less operating expenses.  Gross margin % is defined as gross margin divided by revenue.  The Company believes that gross margin and gross margin % are useful measures which provide an indicator of the Corporation's fundamental ability to make money on the products and services it sells.  The Corporation believes the relationship between revenues and costs expressed by the gross margin % is a useful measure when compared between different financial periods as it demonstrates the trending relationship between revenues, costs and margins.  Gross margin and gross margin % are not recognized measures of GAAP or IFRS and do not have any standardized meaning prescribed by GAAP or IFRS.  IROC's method of calculating gross margin and gross margin % may differ from those of other companies, and accordingly, may not be directly comparable to measures used by other companies.  Gross margin is reconciled to revenue - continuing operations in the Financial results and selected financial information table.

The following is a reconciliation of EBITDAS and EBITDAS per share to net income from continuing operations:

                                   
      Nine
months
ended
            Three months ended      
$ 000's except number of shares and per
share amounts
    September
30, 2011
IFRS(1)
    September
30, 2011
IFRS(1)
      June 30,
2011
IFRS(1)
      March 31,
2011
IFRS(1)
    December 31,
2010
IFRS(1)
Net income (loss) from continuing operations     8,601     4,330       (331)       4,602     2,703
                                   
Depreciation and amortization     5,285     1,920       1,715       1,650     1,857
Loss on foreign exchange     31     23       8       -     -
Stock based compensation expense     437     169       115       153     105
Loss (gain) on disposal of equipment     (11)     7       7       (25)     (17)
Interest and financing costs     640     164       190       286     305
Note receivable recovery     -     -       -       -     -
Income taxes:                                  
  Current     -     -       -       -     -
  Future     3,288     1,619       (62)       1,731     367
                                   
EBITDAS - continuing operations     18,271     8,232       1,642       8,397     5,318
                                   
EBITDAS per share - continuing operations                                  
  Basic     $0.39     $0.16       $0.03       $0.20     $0.12
  Diluted     $0.38     $0.16       $0.03       $0.19     $0.12
                                   
                                   
      Nine
months
ended
            Three months ended      
$ 000's except number of shares and per
share amounts
    September
30, 2010
IFRS(1)
    September
30, 2010
IFRS(1)
      June 30,
2010
IFRS(1)
      March 31,
2010
IFRS(1)
    December 31,
2009
GAAP(1)
Net income (loss) from continuing operations     450     1,068       (1,307)       689     260
                                   
Depreciation and amortization     4,856     1,755       1,553       1,548     2,082
Loss on foreign exchange     (5)     (2)       (3)       -     -
Stock based compensation expense     353     82       119       152     60
Loss (gain) on disposal of equipment     (28)     (24)       1       (5)     28
Interest and financing costs     951     304       275       372     446
Note receivable impairment     (300)     (300)       -       -     -
Income taxes:                                  
  Current     -     -       -       -     -
  Future     387     414       (308)       281     (416)
                                   
EBITDAS - continuing operations            6,664     3,297       330       3,037     2,460
                                   
EBITDAS per share - continuing operations                                  
  Basic     $0.15     $0.08       $0.01       $0.07     $0.06
  Diluted     $0.15     $0.08       $0.01       $0.07     $0.06
(1) See Accounting policy changes

SOURCE IROC Energy Services Corp.

For further information:

IROC Energy Services Corp.
Mr. Thomas M. Alford, President and CEO,

or

Mr. Ryan A. Michaluk, Chief Financial Officer
Telephone: (403) 263-1110
Email: investorrelations@iroccorp.com

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