Savanna Energy Services Corp. Announces 2007 Year-End Results



    TSX - SVY

    CALGARY, March 11 /CNW/ - Savanna Energy Services Corp. ("Savanna" or the
"Company") is an oilfield services company operating primarily in Western
Canada and the U.S. The Company's overall business is conducted through two
major segments: contract drilling and well servicing.
    The quarter was marked by an increase in market share in Savanna's
drilling division despite the continuation of depressed industry activity
levels, the continued expansion of our well servicing fleet and Aboriginal
partnership model, and a determination that the Company's goodwill and
intangible asset values had become permanently impaired, resulting in a
reduction in the carrying value of both of these items.


    
    Financial Highlights

    (Stated in thousands of dollars, except per share amounts) (Unaudited)
    -------------------------------------------------------------------------
                                Three Months Ended       Twelve Months Ended
                                       December 31               December 31
    -------------------------------------------------------------------------
                              2007      2006 Change     2007      2006 Change
                                 $         $               $         $
    -------------------------------------------------------------------------
    Operating results
    Revenue(1)             101,804    93,875    8%   373,452   247,082   51%
    Operating expenses(1)   68,156    54,885   24%   232,937   148,687   57%
    Operating margin(2)     33,648    38,990  (14%)  140,515    98,395   43%
    Net earnings (loss)   (125,639)   19,812 (734%)   55,784    54,598    2%
      Per share: basic       (2.11)     0.34 (721%)     0.94      1.39  (32%)
      Per share: diluted     (2.11)     0.34 (721%)     0.94      1.37  (31%)
    -------------------------------------------------------------------------


    (Stated in thousands of dollars, except per share amounts) (Unaudited)
    -------------------------------------------------------------------------
                                Three Months Ended       Twelve Months Ended
                                       December 31               December 31
    -------------------------------------------------------------------------
                              2007      2006 Change     2007      2006 Change
                                 $         $               $         $
    -------------------------------------------------------------------------
    Cash Flows

    Operating cashflows
     from continuing
     operations before
     changes in working
     capital(2)             29,184    30,821   (5%)  111,488    76,348   46%
      Per diluted share       0.50      0.53   (6%)     1.88      1.92   (2%)
    Capital expenditures
     from continuing
     operations            (34,246)  (42,056) (19%) (128,212) (128,145)   0%
    Dividends paid          (2,974)        -     -    (2,974)        -     -
    -------------------------------------------------------------------------


    (Stated in thousands of dollars, except per share amounts) (Unaudited)
    -------------------------------------------------------------------------
                                                                 December 31
    -------------------------------------------------------------------------
                                                  2007       2006     Change
                                                     $          $
    -------------------------------------------------------------------------
    Financial Position

    Working capital(2)                          25,971     35,163       (26%
    Capital assets                             746,063    590,132        26%
    Total assets                             1,180,092  1,205,939        (2%)
    Long-term debt                              58,218    155,052       (62%)
    -------------------------------------------------------------------------
    

    The merger between Savanna and Western Lakota, completed on August 25,
2006, and the acquisitions of Accell Well Services ("Accell") and Bear Steam
Ltd. ("Bear Steam") on February 16, 2007 account for a substantial portion of
the increase in revenue for the year ended December 31, 2007 compared to the
same period in 2006, with the expansion of Savanna's fleet through
construction accounting for the remainder. Earnings for the current period
include the results of operations for Accell and Bear Steam from the date of
acquisition.
    Earnings for Ultraline Services Corporation ("Ultraline") for the one
month ending January 31, 2007, have been included in net earnings from
discontinued operations in the consolidated statement of earnings. For
comparative purposes, the results for 2006 reflect the discontinuation of this
division and the assets and liabilities relating to Ultraline at December 31,
2006 have been shown as assets and liabilities held for sale.
    In the fourth quarter of 2007, the Company experienced an increase in
revenues compared to Q4, 2006 due to an expanded capital base, but reduced
demand, increasing operating costs, and reduced revenues per operating day and
per hour resulted in an overall reduction of 14% in operating margins.
    On an annual basis, the Company experienced an overall increase in
revenue and operating margins compared to the prior year due to acquisitions
and equipment constructed during the year. The annual results include not only
the goodwill and intangible asset write-downs and the future tax recoveries
discussed previously, but also earnings and a gain on sale of discontinued
operations totaling $140.8 million, net of tax, ($2.38 per diluted share) on
the sale of Ultraline.
    The conditions that led to the impairment of goodwill and intangibles
include external factors such as depressed natural gas pricing, new government
regulations regarding oil and gas royalties announced in the fourth quarter,
and currency exchange rates, all of which negatively impacted industry
activity levels and utilization rates. In addition, it is important to
consider the transaction that created the initial goodwill and intangible
asset balances. When Savanna merged with Western Lakota Energy Services Inc.
("Western Lakota") in August 2006, under existing accounting rules, Savanna
was required to reflect goodwill to the extent of the excess purchase price,
as determined based on the share exchange ratio, utilizing the then share
price of Savanna of $23.49. Despite the merger of two companies equal in size,
and although no cash was paid as part of the purchase price, the transaction
resulted in goodwill of $421.3 million and intangible assets of $27.3 million.
Based on impairment tests performed at December 31, 2007, the value of
goodwill was written-down by $128.6 million and intangibles were written down
by $22.8 million to their fair values at the end of the year. Both the initial
recording and the subsequent write-down of goodwill and intangible assets were
non-cash transactions.
    The quarter also includes future income recoveries relating to income tax
rate reductions enacted in December 2007, and a recovery relating to the
write-down of the intangible assets described above. The net result of these
factors is a reduction in future income taxes of approximately $11.0 million
for the quarter ending December 31, 2007.

    
    Operational Highlights

    -   Savanna drilled 4,712 wells in 2007, the most drilled by any
        contractor in Canada, which represents a 25.5% market share based on
        wells drilled.  The Company also ranked third in metres drilled for
        the year.(*)

    -   The Company's drilling fleet had the highest utilization rate among
        the top five contractors operating in Canada.(*)

    -   During 2007, Savanna introduced two hybrid drilling rigs to the
        United States market, and expanded its U.S. drilling fleet to 7 rigs
        by the end of the year.

    -   During 2007, Savanna concluded its first Aboriginal partnerships with
        respect to well servicing, exiting 2007 with 4 service rigs in 50/50
        partnerships.

    (*) Source of Industry Figures: Canadian Association of Oilwell Drilling
        Contractors (CAODC)
    

    Quarterly Results

    The quarterly results of Savanna are markedly affected by weather
patterns throughout the Company's operating area in Canada. Historically, the
first quarter of the calendar year is very active, followed by a much slower
second quarter. As a result of this, the variation on a quarterly basis,
particularly in the first and second quarters, can be dramatic year-over-year,
independent of other demand factors. The following is a summary of selected
financial information of the Company for the last eight completed quarters.
All prior period amounts have been restated to reflect the discontinuation of
Ultraline operations.

    
    SUMMARY OF QUARTERLY RESULTS

    (Stated in thousands of dollars, except per share data) (Unaudited)
    -------------------------------------------------------------------------
                                                  2007       2006     Change
                                                     $          $
    -------------------------------------------------------------------------
    Revenue from continuing operations
      Q1(1)                                    138,817     63,099       120%
      Q2                                        39,097     20,067        95%
      Q3                                        93,735     70,041        34%
      Q4(1)                                    101,804     93,875         8%
    Net earnings from continuing operations
      Q1                                        31,580     12,021       163%
      Q2                                        (3,493)    (1,015)     (244%)
      Q3                                        12,581     12,466         1%
      Q4                                      (125,639)    18,138      (793%)
    Net earnings from continuing operations
     per share diluted
      Q1                                          0.54       0.40        35%
      Q2                                         (0.06)     (0.03)     (100%)
      Q3                                          0.21       0.30       (30%)
      Q4                                         (2.11)      0.31      (781%)
    Net earnings
      Q1                                       172,492     19,959       764%
      Q2                                        (3,650)         2          -
      Q3                                        12,581     14,825       (15%)
      Q4                                      (125,639)    19,812      (734%)
    Net earnings per share diluted
      Q1                                          2.94       0.67       339%
      Q2                                         (0.06)      0.00          -
      Q3                                          0.21       0.36       (42%)
      Q4                                         (2.11)      0.34      (721%)
    -------------------------------------------------------------------------
    

    Revenue for the fourth quarter showed a slight increase from the same
period in 2006 as a result of a larger equipment base through construction and
through acquisitions, which was offset by weaker market conditions. The large
decrease in net earnings from continuing operations year-over-year is a result
of the $151.4 million impairment loss on goodwill and intangibles discussed
previously.

    CONTRACT DRILLING

    Savanna provides proprietary hybrid drilling rigs, telescoping double
drilling rigs, a pipe arm single drilling rig and coring delineation rigs
through Trailblazer Drilling Corp. ("Trailblazer"), Western Lakota and Akuna
Drilling ("Akuna").

    
    DRILLING SERVICES

    (Dollar amounts stated in thousands, except revenue per operating day)
    (Unaudited)
    -------------------------------------------------------------------------
                                Three Months Ended       Twelve Months Ended
                                       December 31               December 31
    -------------------------------------------------------------------------
                              2007      2006 Change     2007      2006 Change
    -------------------------------------------------------------------------
    Revenue(1)            $ 84,340  $ 80,319    5%  $309,395  $204,498   51%
    Operating expenses(1) $ 57,498  $ 46,439   24%  $193,481  $123,466   57%
    Operating margin(2)   $ 26,842  $ 33,880  (21%) $115,914  $ 81,032   43%
    Number of operating
     days(*)                 4,195     3,631   16%    14,533     9,764   49%
    Revenue per
     operating day        $ 20,105  $ 22,120   (9%) $ 21,289  $ 20,944    2%
    Number of spud to
     release days(*)(xx)     3,537     3,086   15%    12,180     8,373   45%
    Wells drilled(xx)        1,637     1,414   16%     4,929     4,706    5%
    Total meters
     drilled(xx)         1,228,822 1,168,300    5% 4,442,027 3,350,741   33%
    Utilization(xx)            50%       49%    2%       46%       50%   (8%)
    Industry average
     utilization(+/-)          37%       47%  (21%)      37%       55%  (33%)
    -------------------------------------------------------------------------

    (*)    The number of operating days and number of spud to release days
           are all on a net basis, which means only Savanna's proportionate
           share of any rigs held in limited partnerships have been included.

    (xx)   Savanna reports its rig utilization based on spud to release time
           for the rigs and excludes moving, rig up and tear down time, even
           though revenue is earned during this time. Savanna's rig
           utilization, spud to release days, wells drilled and total meters
           drilled exclude Akuna drilling rigs as the operating environment
           is not comparable to Trailblazer and Western Lakota rigs. However,
           the Akuna rigs are included in total fleet numbers.

    (+/-)  Source of industry figures: Canadian Association of Oilwell
           Drilling Contractors (CAODC).
    

    In the fourth quarter, revenue from contract drilling increased by 5%
relative to the prior year; however, operating expenses increased
substantially from the prior year as a result of rising labour and fuel
expenses, causing operating margins to decrease by 21%. In addition, the
Company experienced decreased revenue per operating day as demand and activity
in the oil and gas industry weakened relative to the same period in the prior
year. Despite the slow-down in the overall industry, the Company's drilling
division was able to increase its share of the market as evidenced by a 13%
higher utilization rate than industry in the fourth quarter.
    On an annual basis, the decrease in per rig utilization experienced by
the drilling division was offset by the effect of a larger fleet and increased
revenue per operating day, creating an overall increase in aggregate revenues
and operating margin for the year ending December 31, 2007, as compared to
2006. The drilling division was able to increase its share of the market as
evidenced by a significantly higher than industry average utilization rate for
the year ending December 31, 2007. Operating margins for the year did not
increase at the same ratio as revenue due to increasing operating costs,
specifically direct labour. The Company was able to achieve an increase in
revenue per operating day from 2006 levels, despite a slow-down in the market
in the latter part of 2007, due to the inclusion of Western Lakota results for
a full twelve months, more rigs working in the U.S., and the value placed on
its equipment by customers relative to competitors.
    During 2007, Savanna averaged a deployed fleet of 83 net rigs (2006 - 42)
and exited the year operating a fleet of 91.5 net rigs (2006 - 78.5 net rigs).

    WELL SERVICING

    Savanna provides well servicing throughout Western Canada through Great
Plains Well Servicing Corp. ("Great Plains") and Accell, operating double and
single well servicing rigs, and through Command Coil Services ("Command"),
operating coiled tubing service units.

    
    (Dollar amounts stated in thousands, except revenue per hour) (Unaudited)
    -------------------------------------------------------------------------
                                Three Months Ended       Twelve Months Ended
                                       December 31               December 31
    -------------------------------------------------------------------------
                              2007      2006 Change     2007      2006 Change
    -------------------------------------------------------------------------
    Revenue               $ 17,409  $ 10,104   72%  $ 60,931  $ 36,881   65%
    Operating expenses    $ 10,658  $  6,240   71%  $ 39,456  $ 21,373   85%
    Operating margin(2)   $  6,751  $  3,864   75%  $ 21,475  $ 15,508   38%
    Number of hours         22,860    12,295   86%    76,132    46,702   63%
    Revenue per hour      $    762  $    822   (7%) $    800  $    790    1%
    Utilization(*)(xx)         49%       56%  (13%)      47%       60%  (22%)
    -------------------------------------------------------------------------

    (*)    Utilization is based on standard hours of 3,650 per rig per year.
           Industry average utilization figures, specific to well servicing,
           are not available.

    (xx)   The utilization rate excludes the coiled tubing service units
           operated through Command since these units are not comparable in
           size or operations to the division's service rigs.
    

    The well servicing division experienced an increase in revenue and
operating margin compared to the same quarter in the prior year due to an
increase in equipment as a result of the Accell acquisition early in 2007.
This division was negatively impacted by reduced demand in the fourth quarter
of 2007, as evidenced by decreased hourly and utilization rates from 2006
levels.
    On an annual basis, the increase in revenue and operating margin was also
a result of an expanded fleet. Operating margin for the year did not increase
at the same ratio as revenue due to increasing operating costs, specifically
direct labour. Although this division achieved consistent revenue per hour
rates with the prior year, the Company's increase in available equipment
coupled with the significant reduction in demand in the oil and gas market
resulted in a 22% decrease in utilization rates from the prior year.
    During 2007, the well servicing division operated an average of 43
service rigs, 6.5 coiled tubing service units and 34 boilers, compared to the
same period in 2006 where the division operated an average of 22 service rigs,
3.5 (net) coiled tubing service units, and 12 boilers.
    The well servicing division exited the current year with 56 service rigs,
8 coiled tubing service units, and 34 boilers.

    DISCONTINUED OPERATIONS

    Effective January 31, 2007, the Company closed the sale of its wireline
division, Ultraline Services Corporation, for net proceeds of $208.0 million
plus a working capital adjustment of $1.1 million.
    Immediately prior to the sale, Ultraline declared and paid a dividend of
$5.5 million to Savanna, as contemplated under the purchase and sale
agreement, which has been eliminated upon consolidation of the financial
statements for the current period. Also included in the sale were specific
real estate assets and office equipment owned by Savanna.

    
    (Stated in thousands of dollars) (Unaudited)
    -------------------------------------------------------------------------
                                    Three Months Ended   Twelve Months Ended
                                           December 31           December 31
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
                                          $          $          $          $
    -------------------------------------------------------------------------
    From discontinued operations:
      Revenue                             -     12,103      6,011     58,243
      Net earnings                        -      1,674        330     12,988
      Gain on sale, net of tax            -          -    140,425          -
    -------------------------------------------------------------------------
    

    The decrease in revenue and net earnings from discontinued operations in
2006 is due to the fact that the 2007 results only include one month of
Ultraline earnings, whereas 2006 includes twelve months of operations based on
the effective closing date of January 31, 2007.
    Stock compensation expense of $0.7 million (2006 - $0.6 million) has been
included in net earnings from discontinued operations for the year ended
December 31, 2007 and relates primarily to the remaining unamortized portion
of stock compensation relating to options held by Ultraline employees.
    The gain on sale of discontinued operations was based on net proceeds of
$209.1 million net of $0.1 million in legal and property tax expenses. The net
book value of Savanna's interest in Ultraline and the related assets that were
sold on January 31, 2007 was $36.7 million, resulting in a gain of
$172.4 million ($140.4 million net of tax).

    Non-GAAP Measures

    Operating margin, operating cash flows from continuing operations before
changes in non-cash working capital, and working capital are not recognized
measures under Canadian generally accepted accounting principles (GAAP), and
are unlikely to be comparable to similar measures presented by other
companies.(2) Management believes that in addition to net earnings, the
measures described above are useful as they provide an indication of the
results generated by the Company's principal business activities prior to
consideration of how those activities are financed and how the results are
taxed in various jurisdictions.

    Other

    Savanna will host a conference call for analysts, investors and
interested parties on Wednesday, March 12, 2008 at 8 a.m. Mountain Time
(10 a.m. Eastern Time) to discuss the Company's 2007 fourth quarter and
year-end results. The call will be hosted by Ken Mullen, President and Chief
Executive Officer and Darcy Draudson, Chief Financial Officer.
    If you wish to participate in this conference call, please call
1-888-892-3255 (for participants in North America). Please call at least 10
minutes ahead of time. A replay of the call will be available until March 19,
2008 by dialing 1-800-937-6305 and entering in pass-code 110765.

    
    Notes:

    (1) Revenues and operating expenses have both been affected by a change
        in accounting policies with respect to revenue recognition and cost
        recoveries billed to customers. As a result, revenue and operating
        expenses for the twelve months ended December 30, 2007 include an
        increase of $3.2 million to account for expenditures recovered during
        the three months ended March 31, 2007 that were netted against
        operating expenses in previously reported amounts. There was no
        effect on operating margin as a result of this change. The change
        was applied retroactively, resulting in an increase in revenue and
        operating expenses of $3.5 million for the year ending
        December 31, 2006.

    (2) Operating margin is defined as revenue less operating expenses.
        Operating cash flows from continuing operations before changes in
        working capital is defined as cash flows from continuing operating
        activities before changes in non-cash working capital. Working
        capital is defined as total current assets less total current
        liabilities excluding the current portions of long-term debt and
        deferred drilling advances.


    Consolidated Statement of Earnings and Comprehensive Income

    For the Periods Ended December 31, 2007 and 2006
    (Stated in thousands of dollars, except per share amounts) (Unaudited)

                                    Three Months Ended   Twelve Months Ended
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
                                          $          $          $          $
    -------------------------------------------------------------------------
    Revenue
    Sales and services              101,804     93,875    373,452    247,082
    -------------------------------------------------------------------------
    Expenses
      Operating                      68,156     54,885    232,937    148,687
      General and administrative      4,439      4,276     16,442     11,141
      Stock-based compensation        1,781      1,535      6,137      4,233
      Depreciation and amortization   9,370      7,072     33,868     17,486
      Interest on long-term debt      1,194      2,249      3,969      5,197
      Foreign exchange loss and
       other expenses                   643         13      2,146         48
      Impairment loss on goodwill
       and intangible assets        151,400          -    151,400          -
    -------------------------------------------------------------------------
                                    236,983     70,030    446,899    186,792
    -------------------------------------------------------------------------

    Earnings (loss) from
     continuing operations
     before income taxes           (135,179)    23,845    (73,447)    60,290
    -------------------------------------------------------------------------

    Income taxes (recovery)
      Current                          (343)     1,689      5,746      6,064
      Future                         (9,197)     4,292      5,126     12,942
    -------------------------------------------------------------------------
                                     (9,540)     5,981     10,872     19,006
    -------------------------------------------------------------------------

    Net earnings (loss) from
     continuing operations before
     non-controlling interest      (125,639)    17,864    (84,319)    41,284

    Non-controlling interest              -        274       (652)       326
    -------------------------------------------------------------------------

    Net earnings (loss) from
     continuing operations         (125,639)    18,138    (84,971)    41,610

    Net earnings from discontinued
     operations, net of tax               -      1,674    140,755     12,988
    -------------------------------------------------------------------------

    Net earnings (loss) and
     comprehensive income          (125,639)    19,812     55,784     54,598
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share
      Basic - net earnings (loss)
       from continuing operations     (2.11)      0.31      (1.44)      1.06
      Diluted - net earnings (loss)
       from continuing operations     (2.11)      0.31      (1.44)      1.05
      Basic - net earnings from
       discontinued operations            -       0.03       2.38       0.33
      Diluted - net earnings from
       discontinued operations            -       0.03       2.38       0.32
      Basic - net earnings (loss)     (2.11)      0.34       0.94       1.39
      Diluted - net earnings (loss)   (2.11)      0.34       0.94       1.37

      Basic weighted average
       shares outstanding            59,503     57,849     59,092     39,320
      Diluted weighted average
       shares outstanding            59,562     58,082     59,199     39,776


    Consolidated Statement of Retained Earnings

    For the Periods Ended December 31, 2007 and 2006
    (Stated in thousands of dollars) (Unaudited)

                                    Three Months Ended   Twelve Months Ended
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
                                          $          $          $          $
    -------------------------------------------------------------------------
    Retained earnings,
     beginning of period            294,703     94,953    114,765     60,167
    Dividends                        (1,489)         -     (2,974)         -
    Net earnings                   (125,639)    19,812     55,784     54,598
    -------------------------------------------------------------------------
    Retained earnings, end of
     period                         167,575    114,765    167,575    114,765
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Balance Sheets

    December 31, 2007 and 2006
    (Stated in thousands of dollars) (Unaudited)

                                                             2007       2006
                                                                $          $
    -------------------------------------------------------------------------
    ASSETS
    Current
      Cash                                                  3,094      8,259
      Accounts receivable                                  95,386     88,856
      Inventory                                             8,529      4,783
      Prepaid expenses and deposits                         1,032      1,525
      Current portion of notes receivable                       -      2,250
      Current assets held for sale                              -     18,720
    -------------------------------------------------------------------------
                                                          108,041    124,393
    Notes receivable                                        6,000      6,575
    Property and equipment                                746,063    590,132
    Goodwill                                              309,625    424,003
    Intangibles and other assets                           10,363     27,097
    Non-current assets held for sale                            -     33,739
    -------------------------------------------------------------------------
                                                        1,180,092  1,205,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Bank indebtedness                                    10,713     25,260
      Operating loans                                         313        337
      Accounts payable and accrued liabilities             44,465     50,970
      Dividends payable                                     1,488          -
      Income taxes payable                                 25,091      5,599
      Current portion of deferred drilling advance              -      1,127
      Current portion of long-term debt                    15,168     18,771
      Current liabilities held for sale                         -      5,937
    -------------------------------------------------------------------------
                                                           97,238    108,001
    Deferred drilling advance                                   -      3,333
    Deferred net revenue                                    1,647      1,647
    Long-term debt                                         43,050    136,281
    Future income taxes                                    62,180     55,995
    Non-current liabilities held for sale                       -      5,374
    -------------------------------------------------------------------------
                                                          204,115    310,631
    -------------------------------------------------------------------------
    Non-controlling interest                                    -      3,214
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital                                         797,156    771,495
    Contributed surplus                                    11,246      5,834
    Retained earnings                                     167,575    114,765
    Accumulated other comprehensive income                      -          -
    -------------------------------------------------------------------------
                                                          975,977    892,094
    -------------------------------------------------------------------------
                                                        1,180,092  1,205,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statement of Cash Flows

    For the Periods Ended December 31, 2007 and 2006
    (Stated in thousands of dollars) (Unaudited)

                                      For Three Months     For Twelve Months
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
                                          $          $          $          $
    -------------------------------------------------------------------------
    Cash flows from operating
     activities
      Net earnings (loss) from
       continuing operations       (125,639)    18,138    (84,971)    41,610
      Items not affecting cash:
        Stock-based compensation      1,781      1,535      6,137      4,233
        Depreciation and
         amortization                 9,370      7,072     33,868     17,788
        Impairment loss on goodwill
         and intangible assets      151,400          -    151,400          -
        Future income taxes          (9,197)     4,292      5,126     12,942
        Non-controlling interest          -       (274)       652       (326)
        Settlement of deferred
         drilling advances                -          -     (2,197)         -
        Amortization of other
         assets                         477         73        477         73
        Loss (gain) on disposal
         of assets                      992        (15)       996         28
    -------------------------------------------------------------------------
                                     29,184     30,821    111,488     76,348
      Change in non-cash working
       capital from continuing
       operations                    (1,831)       322    (24,158)     4,607
    -------------------------------------------------------------------------
      Cash flows from continuing
       operations                    27,353     31,143     87,330     80,955
    -------------------------------------------------------------------------
      Net earnings from
       discontinued operations            -      1,674    140,755     12,988
      Items not affecting cash:
        Depreciation                      -      1,145         42      4,407
        Future income taxes               -        (38)       588         50
        Stock-based compensation          -        166        665        572
        Gain on disposal of assets        -        (19)  (140,425)      (130)
    -------------------------------------------------------------------------
                                          -      2,928      1,625     17,887
      Change in non-cash working
       capital from discontinued
       operations                         -      6,725      4,630       (477)
    -------------------------------------------------------------------------
      Cash flows from discontinued
       operations                         -      9,653      6,255     17,410
    -------------------------------------------------------------------------
      Total cash flows from
       operating activities          27,353     40,796     93,585     98,365
    -------------------------------------------------------------------------
    Cash flows from financing
     activities
      Shares issued on exercise of
       stock options                    533      1,036      2,947      4,896
      Cash distribution in
       subsidiary                         -        (68)         -        (68)
      Deferred financing costs
       incurred                           -        (75)         -        (75)
      Advances on operating loans,
       net of repayments                 70    (17,441)       (24)   (15,763)
      Repayment of deferred
       drilling advance                   -          -     (2,264)         -
      Issuance of long-term debt     15,000     60,000     42,250    123,000
      Repayment of long-term debt    (3,101)   (31,683)  (142,778)   (73,709)
      Dividends paid                 (2,974)         -     (2,974)         -
      Change in working capital
       related to financing
       activities                     1,488        631      1,488          -
    -------------------------------------------------------------------------
      Cash flows from continuing
       financing activities          11,016     12,400   (101,355)    38,281
    -------------------------------------------------------------------------
      Repayment of long-term debt         -       (336)         -     (1,372)
      Cash paid on acquisition and
       cancellation of options            -          -       (520)         -
    -------------------------------------------------------------------------
      Cash flows from discontinued
       financing activities               -       (336)      (520)    (1,372)
    -------------------------------------------------------------------------
      Total cash flows from
       financing activities          11,016     12,064   (101,875)    36,909
    -------------------------------------------------------------------------
    Cash flows from investing
     activities
      Purchase of property and
       equipment                    (34,246)   (42,056)  (128,212)  (128,145)
      Proceeds on disposal of
       assets                           902        127      1,285        206
      Cash paid on acquisitions,
       net of cash acquired            (100)      (688)   (55,737)    (2,240)
      Change in working capital
       related to investing
       activities                      (474)    (7,159)    (5,347)    (5,862)
      Purchase of other assets       (3,185)      (239)    (3,185)      (314)
    -------------------------------------------------------------------------
      Cash flows from continuing
       investing activities         (37,103)   (50,015)  (191,196)  (136,355)
    -------------------------------------------------------------------------
      Purchase of property and
       equipment                          -     (1,965)      (149)    (5,800)
      Proceeds on disposal of
       assets                             -         96          -        603
      Cash received on sale of
       discontinued operations,
       net of costs                   1,118          -    209,017          -
      Change in cash held for
       disposal                           -        722          -     (3,609)
    -------------------------------------------------------------------------
      Cash flows from discontinued
       investing activities           1,118     (1,147)   208,868     (8,806)
    -------------------------------------------------------------------------
      Total cash flows from
       investing activities         (35,985)   (51,162)    17,672   (145,161)
    -------------------------------------------------------------------------
    Increase (decrease) in cash,
     net of bank indebtedness         2,384      1,698      9,382     (9,887)
    Cash, net of bank indebtedness,
     beginning of period            (10,003)   (18,699)   (17,001)    (7,114)
    -------------------------------------------------------------------------
    Cash, net of bank indebtedness,
     end of period                   (7,619)   (17,001)    (7,619)   (17,001)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Cautionary Statement Regarding Forward-Looking Information and Statements

    Certain statements and information contained in this press release may
constitute "forward-looking information" within the meaning of applicable
Canadian securities legislation and "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995.
    The Company's guidance herein is preliminary. These statements are based
on certain assumptions and analysis made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments, including the finalization of audited results
for the 2007 fiscal year, as well as other factors it believes are appropriate
in the circumstances. However, whether actual results, performance or
achievements will conform to the Company's expectations and predictions is
subject to a number of known and unknown risk and uncertainties which could
cause actual results to differ materially from the Company's expectations.
    Consequently, all of the forward-looking information and statements made
in this press release are qualified by this cautionary statement and there can
be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will
have the expected consequences to or effects on the Company or its business or
operations. Except as may be required by law, the Company assumes no
obligation to update publicly any such forward-looking information and
statements, whether as a result of new information, future events, or
otherwise.

    %SEDAR: 00019742E




For further information:

For further information: Savanna Energy Services Corp., Ken Mullen,
President and CEO, Tel: (403) 503-9990, Fax: (403) 267-6749,
kmullen@savannaenergy.com, www.savannaenergy.com; Darcy Draudson, Chief
Financial Officer, Tel: (403) 503-9990, Fax: (403) 267-6749,
ddraudson@savannaenergy.com, www.savannaenergy.com

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Savanna Energy Services Corp.

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