Savanna Energy Services Corp. Announces Q4 2006 Results



    TSX - SVY

    CALGARY, March 15 /CNW/ -

    Savanna Energy Services Corp. ("Savanna" or the "Company") has closed    
out an eventful six months for the Company. Over that time period, Savanna has
completed three key transactions that have turned the Company into a powerful
North American drilling and well servicing force, and set the stage for future
expansion.

    
    1.  Savanna and Western Lakota Energy Services Inc. ("Western Lakota")
        closed their merger effective August 25, 2006. This merger created a
        new oilfield services powerhouse capable of accessing over 90% of the
        wells drilled in Canada, and is well positioned to keep growing their
        core drilling and well servicing businesses, in addition to expanding
        into other strategically aligned services lines.

    2.  Savanna disposed of its wireline services division in a cash
        transaction for $208 Million, plus working capital adjustments,
        effective January 31, 2007. This transaction represented a tremendous
        financial metric on this division's asset and profitability base, and
        eliminated Savanna's debt.

    3.  On February 16, 2007, Savanna acquired an additional 20 service rigs
        and associated assets from a private Alberta company for an aggregate
        purchase price of $68 Million in combined cash and Savanna common
        shares, replacing over 60% of the EBITDA given up on the wireline
        sale for less than one-third of the cost.
    

    These three transactions leave Savanna well positioned to continue
enhancing its presence in the North American marketplace. In addition to its
strong Canadian operations, the Company now has five drilling rigs, including
one hybrid drilling rig, operating in the United States, and will be
monitoring results in this market to assess potential expansion opportunities.

    Despite the recent downturn in activity, Savanna remains committed to
expanding its North American presence in all of its business lines, and given
its now larger size and scale, in assessing potential opportunities outside
North America as well.

    Financial Highlights

    Savanna is pleased to announce its financial and operating results for
the three and twelve months ended December 31, 2006, with comparatives from
the same periods of last year. The merger between Savanna and Western Lakota,
completed on August 25, 2006, accounts for a substantial portion of the
increase in revenues for the three months ended December 31, 2006, compared to
the same period in 2005, with the expansion of Savanna's pre-existing fleet
accounting for the remainder. Operating results include those of Savanna for
the three and twelve months ending December 31, 2006 and of Western Lakota
from the date of acquisition, August 25, 2006, to December 31, 2006.
    The operating results for Ultraline Services Corporation, the Company's
wireline division, have been excluded from the Company's results from
continuing operations for 2006 and 2005 as a result of the sale of all of the
outstanding shares of Ultraline in January, 2007. Accordingly, Ultraline's
results have been shown as discontinued operations for both 2006 and 2005.
    Operations in 2006 were influenced by a decrease in overall industry
operating activity compared to 2005; however, a substantially larger equipment
fleet and more favorable pricing allowed revenue and net earnings to increase
substantially for both the three months and twelve months ending December 31,
2006.

    
    Key performance data is outlined below:

    (Stated in thousands of dollars, except per share amounts)
    -------------------------------------------------------------------------
                             Three months ended      Twelve months ended
                                December 31              December 31
    -------------------------------------------------------------------------
                                 Unaudited
    -------------------------------------------------------------------------
                                              %                          %
                           2006      2005   Change    2006      2005   Change
    -------------------------------------------------------------------------
    Revenue              $ 93,875  $ 45,951  104%   $247,082  $132,794   86%

    Earnings from
     continuing
     operations
     before stock
     compensation
     expense(1)          $ 27,642  $ 14,180   95%   $ 69,768  $ 33,545  108%
      Per share: basic   $   0.48  $   0.49   (2%)  $   1.77  $   1.17   51%
      Per share: diluted $   0.48  $   0.47    2%   $   1.75  $   1.14   54%

    Net earnings from
     continuing
     operations          $ 18,138  $  7,453  143%   $ 41,610  $ 17,345  140%
      Per share: basic   $   0.31  $   0.26   19%   $   1.06  $   0.60   77%
      Per share: diluted $   0.31  $   0.25   24%   $   1.05  $   0.59   78%

    Net earnings         $ 19,812  $ 13,138   51%   $ 54,598  $ 31,727   72%
      Per share: basic   $   0.34  $   0.45  (24%)  $   1.39  $   1.10   26%
      Per share: diluted $   0.34  $   0.44  (23%)  $   1.37  $   1.08   27%

    Capital assets                                  $590,132  $188,942  212%

    (1) Earnings from continuing operations before stock compensation expense
        is defined as earnings before interest, other income, income taxes
        and stock compensation expense.

    Operational Highlights

    -   The Company completed a merger with Western Lakota to create one of
        the largest oilfield service companies in Canada.

    -   Drilling fleet grew from 30 rigs to 83 rigs.

    -   Revenue increased by 86% to $247 Million and net earnings from
        continuing operations increased by 140% to $41.6 Million for the
        twelve months ending December 31, 2006.
    

    Lower natural gas prices reduced overall activity during the year
relative to 2005. As a result, the well servicing division experienced a
reduction in utilization rates in 2006 as compared to the prior year. However,
this decrease was offset by a 20% increase in the well servicing hourly rates
over 2005 levels. The net result was a 16% increase in revenues for the well
servicing division in 2006 and an increase in the average number of rigs in
service from 18 to 22.
    In the drilling division, utilization rates remained consistent with 2005
levels; however, based on Canadian Association of Oilwell Drilling Contractors
("CAODC") criteria, compared to industry average, our deeper rigs achieved
higher than average utilization rates but our shallow drilling rigs achieved
lower than average utilization rates, resulting in an overall utilization rate
5% below industry average. The Company's shallow drilling activity was
hampered in 2006 by a considerable amount of wet weather relative to the prior
year, which has a much greater impact on shallow rig utilization because the
rigs move frequently, and in periods of continuous wet weather they are unable
to move from job to job. In comparison, our deeper drilling rigs move less
frequently and are therefore able to continue operating on a location for a
longer period of time, mitigating the negative effects of weather on the
ability to move rigs to a new location. Although drilling utilization rates
were the same as 2005, this division was able to more than double aggregate
revenue and operating margins relative to 2005 due to an increase in drilling
day rates and an increase in fleet size. Although shallow drilling activity
was muted, Savanna's share of the shallow drilling market actually increased
in the third and fourth quarters of 2006 versus 2005, reinforcing the
operating advantages of the hybrid drilling technology.

    Quarterly Results

    The quarterly results of Savanna are markedly affected by weather
patterns throughout our operating area in Canada. Historically, the first
quarter of the calendar year is very active followed by a much slower second
quarter. Because the timing of the slower period is directly dependent on
weather, the timing of the slow period could fall partially in the first or
second quarter, or be completely contained within either of these quarters
each year. 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.
    With respect to the third and fourth quarters of the year, weather is
also a factor; however, the demand for our services is generally much more
consistent in these quarters and is much more dependent on the deployment of
capital budgets of our customers. Outlined below are the results of our
quarterly activities in 2006 and 2005.

    
    (Stated in thousands of dollars, except per share data)
    (Unaudited)
    -------------------------------------------------------------------------
                                                                         %
                                                      2006      2005   Change
    -------------------------------------------------------------------------
    Revenue from continuing operations
      Q1                                              63,099    35,697   77%
      Q2                                              20,067    17,831   13%
      Q3                                              70,041    33,316  110%
      Q4                                              93,875    45,951  104%

    Net earnings from continuing operations
      Q1                                              12,021     4,706  155%
      Q2                                              (1,015)      492 (306%)
      Q3                                              12,466     4,694  166%
      Q4                                              18,138     7,453  143%

    Net earnings from continuing operations
     per share diluted
      Q1                                                0.40      0.16  150%
      Q2                                               (0.03)     0.02 (250%)
      Q3                                                0.30      0.16   88%
      Q4                                                0.31      0.25   24%

    Net earnings
      Q1                                              19,959     9,806  104%
      Q2                                                   2     1,107 (100%)
      Q3                                              14,825     7,676   93%
      Q4                                              19,812    13,138   51%

    Net earnings per share diluted
      Q1                                                0.67      0.33  103%
      Q2                                                0.00      0.04 (100%)
      Q3                                                0.36      0.26   38%
      Q4                                                0.34      0.44  (23%)
    

    Revenue and net earnings from continuing operations for the fourth
quarter showed a strong increase from the same period in 2005 as a result of a
larger equipment base through construction and through the Western Lakota
merger.
    Net earnings per share during the fourth quarter decreased largely due to
a significant reduction in activity in the wireline division which was sold
subsequent to year end and reported as discontinued operations for both 2006
and 2005. Revenue in that division decreased to $12.1 Million in the quarter,
from $18.0 Million in 2005, a reduction of 33% from the same period last year
and net earnings per share from this discontinued operation decreased to
$0.03 per share from $0.19 per share from the same period last year. Net
earnings per share for the quarter was also impacted by the 27.9 Million
shares issued on the Western Lakota transaction, which significantly increased
the weighted average number of shares outstanding during 2006 as compared to
2005. In addition, the decrease in net earnings per share for the fourth
quarter of 2006 was also negatively impacted by a general decrease in oilfield
service activity during the quarter, as evidenced by a decrease in industry
average utilization in drilling from 71% in 2005 to 47% in 2006.

    
    Quarterly Statistics
    (Stated in thousands of dollars, except revenue per operating day
     or per hour)
    (Unaudited)
    -------------------------------------------------------------------------
                                                  For the Three Months
                                                    Ended December 31
    -------------------------------------------------------------------------
                                                                         %
                                                      2006      2005   Change
    -------------------------------------------------------------------------
    Contract Drilling
    Revenue                                       $   80,319  $ 35,906  124%
    Operating expenses                            $   46,439  $ 21,724  114%
    Operating margin(1)                           $   33,880  $ 14,182  139%
    Number of operating days(2)                        3,631     1,944   87%
    Revenue per operating day                     $   22,120  $ 18,470   20%
    Number of spud to release days(2)(3)               3,086     1,522  103%
    Wells drilled                                      1,414     1,044   35%
    Total meters drilled                           1,168,300   777,958   50%
    Utilization(3)                                       49%       57%  (14%)
    Industry average utilization(4)                      47%       71%  (34%)

    Rig Sales
    Revenue                                       $    3,452         -
    Operating expenses                            $    2,206         -
    Operating margin(1)                           $    1,246         -

    Well Servicing
    Revenue                                       $   10,104  $ 10,045    1%
    Operating expenses                            $    6,240  $  5,590   12%
    Operating margin(1)                           $    3,864  $  4,455  (13%)
    Number of hours                                   12,295    13,370   (8%)
    Revenue per hour                              $      822  $    751    9%
    Utilization(5)                                       56%       81%  (31%)

    (1) Operating margin is defined as revenue less operating expenses.

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

    (3) Savanna reports its rig utilization based on the spud to release time
        for the rigs and excludes moving and rig up and tear down time, even
        though revenue is earned during this time. Savanna's rig utilization
        and spud to release days excludes Akuna drilling rigs as the
        operating environment is not comparable to Trailblazer's and Western
        Lakota's rigs.

    (4) Source of industry figures: Canadian Association of Oilwell Drilling
        Contractors (CAODC).

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

    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 Inc. ("Akuna").

    
    Drilling Services
    (Stated in thousands of dollars, except revenue per operating day)
    -------------------------------------------------------------------------
                                                                         %
                                                    2006        2005   Change
    -------------------------------------------------------------------------
    Revenue                                     $  204,498  $  101,005  102%
    Operating expenses                          $  123,466  $   64,318   92%
    Operating margin(1)                         $   81,032  $   36,687  121%
    Number of operating days(2)                      9,764       5,822   68%
    Revenue per operating day                   $   20,944  $   17,349   21%
    Number of spud to release days(2)(3)             8,373       4,479   87%
    Wells drilled                                    4,706       3,563   32%
    Total meters drilled                         3,550,741   2,389,995   49%
    Utilization(3)                                     50%         50%    0%
    Industry average utilization(4)                    55%         59%   (7%)

    (1) Operating margin is defined as revenue less operating expenses.

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

    (3) Savanna reports its rig utilization based on the spud to release time
        for the rigs and excludes moving and rig up and tear down time, even
        though revenue is earned during this time. Savanna's rig utilization
        and spud to release days excludes Akuna drilling rigs as the
        operating environment is not comparable to Trailblazer's and Western
        Lakota's rigs. The Akuna rigs have been included in the total fleet
        however.

    (4) Source of industry figures: Canadian Association of Oilwell Drilling
        Contractors (CAODC).
    

    Although utilization remained stable year over year, the drilling
division was able to more than double its revenue and operating margin as a
result of its increase in fleet size during 2006, as compared to the prior
year. The drilling division had a lower utilization than industry average in
2006 which is in part because of reduced activity in shallow drilling plus wet
weather conditions in central and northern operating areas. These factors have
a large impact on our hybrid drilling rigs, which typically drill shallower
wells. Because these hybrid rigs are highly efficient, they move daily, and
are therefore much more affected by wet weather, resulting in lower than
average utilization rates using standard industry measures.
    During the year, Savanna (including Western Lakota from August 25, 2006)
averaged a deployed fleet of 42 net rigs (2005 - 25). Savanna exited 2006 with
an operating fleet of 78.5 net rigs.

    
    Rig Sales
    (Stated in thousands of dollars)
    -------------------------------------------------------------------

                                                      2006      2005
    -------------------------------------------------------------------
    Revenue                                         $  5,703  $      -
    Cost of sales                                   $  3,848  $      -
    Operating margin(1)                             $  1,855  $      -

    (1) Operating margin is defined as revenue less operating expenses.
    

    Western Lakota has historically been a leader in the establishment and
maintenance of relationships and partnerships with First Nation and Métis
communities throughout Alberta, which has provided it with many business
opportunities. Savanna has carried on this program since the merger. As part
of these relationships, Savanna sells an interest in a drilling rig or rigs to
a community and operates the rig through an equally owned limited partnership.
A monthly fee is charged by Savanna to operate and manage the rigs on behalf
of the partnership. Subsequent to Savanna's merger with Western Lakota, the
sale of a 50% interest in two 3,600 metre telescoping double drilling rigs was
completed with two First Nation communities. These rigs will be operated
through 50/50 limited partnerships. Proceeds of the sales were $10.5 Million
which was paid with cash of $4.5 Million and two promissory notes totaling
$6.0 Million. The promissory notes bear interest of prime plus 10% and will be
repaid through partnership distributions to the First Nation communities. The
cash received and a proportionate share of the cost of sales has been
recognized immediately. The remaining revenue and cost of sales has been
recorded as deferred net revenue and will be recorded as revenue as the
promissory notes are collected.

    Well Servicing

    Savanna provides well servicing through Great Plains Well Servicing Corp.
("Great Plains") which operates double and single well service rigs and
Command Coil Services Inc. ("Command") which operates coil service units,
throughout Western Canada.

    
    (Stated in thousands of dollars, except revenue per hour)
    -------------------------------------------------------------------------
                                                                         %
                                                      2006      2005   Change
    -------------------------------------------------------------------------
    Revenue                                         $ 36,881  $ 31,789   16%
    Operating expenses                              $ 21,373  $ 19,629    9%
    Operating margin(1)                             $ 15,508  $ 12,160   28%
    Number of hours                                   46,702    48,195   (3%)
    Revenue per hour                                $    790  $    660   20%
    Utilization(2)                                       60%       73%  (18%)

    (1) Operating margin is defined as revenue less operating expenses.

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

    Although the number of hours and the utilization rate for 2006 were both
lower than 2005, they were more than offset by an increase in day rates,
causing revenue and operating margin to increase year over year. The current
year reductions in utilization rate and number of hours were a result of wet
weather causing an inability to access well locations as well as a general
slowdown in the market late in the third quarter which extended through the
fourth quarter.
    During 2006, the well servicing division operated an average of 22
service rigs (2005 -18), 6 coil service trucks (2005 - Nil) and 12 boilers
(2005 - 12).

    Discontinued Operations

    Effective January 31, 2007, the Company sold of all of the shares of its
wireline division, Ultraline Services Corporation ("Ultraline"), a 100% owned
subsidiary of Savanna, for $208 Million in cash. Included as part of the sale
were specific real estate assets and office equipment owned by Savanna.
    Since the decision to sell this division was made in December, 2006, as
evidenced by a formal letter of intent, all activity relating to this division
has been considered as held for sale for the year ending December 31, 2006.
For comparative purposes, the amounts shown in the financial statements for
2005, have been restated.
    Subsequent to December 31, 2006, but prior to January 31, 2007, Ultraline
declared and paid dividends aggregating $5.5 Million to Savanna in cash in
accordance with the terms of the sale.
    Revenue from discontinued operations for the year ended December 31, 2006
was $58.2 Million (2005 - $58.9 Million). The carrying amounts of the
remaining net assets held for disposal are as follows:

    
    (Stated in thousands of dollars)
    -------------------------------------------------------------------------
                                                            2006      2005
                                                              $         $
    -------------------------------------------------------------------------

    Working capital                                         12,783     8,728
    Capital assets                                          32,341    28,968
    Goodwill                                                 1,398     1,398
    Obligations under capital leases                        (1,249)   (1,181)
    Future income tax liability                             (4,125)   (3,930)
    -------------------------------------------------------------------------
                                                            41,148    33,983
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Non-GAAP Measures

    Net earnings from continuing operations before stock compensation expense
    and operating margin are not recognized measures under Canadian generally
accepted accounting principles (GAAP), and are unlikely to be comparable to
similar measures presented by other companies. 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 also announces that Mark Altwasser, Vice President Corporate
Development, has resigned his position effective at the end of this month. Mr.
Altwasser will be pursuing other personal opportunities at this time. Mark has
played an integral role in the growth that Savanna has achieved to-date and is
leaving with a high level of mutual respect. Savanna wishes Mark well in his
future endeavours.

    Savanna will host a conference call for analysts, investors and
interested parties on Friday, March 16, 2007 at 9 a.m. Mountain Time (11 a.m.
Eastern Time) to discuss the Company's 2006 fourth quarter and year end
results. The call will be hosted by Ken Mullen, Savanna's 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 23, 2007 by dialing
1-800-937-6305 and entering passcode 752760.

    -------------------------------------------------------------------------
    This Report contains forward looking statements which reflect
management's expectations regarding the Company's future growth, results of
operations, performance and business prospects and opportunities. Wherever
possible, words such as "believe", "expect" and similar expressions have been
used to identify these forward looking statements. The statements reflect
management's current beliefs and are based on information currently available
to management. Forward looking statements involve significant risk,
uncertainties and assumptions. A number of factors could cause actual results,
performance or achievements to differ materially from the results discussed or
implied in the forward looking statements. Although the forward looking
statements contained in this Report are based upon what management believes to
be reasonable assumptions, the Company cannot assure readers that actual
results will be consistent with these forward looking statements. These
forward looking statements are made as of the date hereof and the Company
assumes no obligation to update or revise them to reflect new events or
circumstances.


    
    Consolidated Statement of Earnings and Retained Earnings
    Three Months Ended December 31, 2006 and 2005
    (In thousands of dollars, except per share data)(Unaudited)
    -------------------------------------------------------------------------
                                                            2006      2005
                                                              $         $
    -------------------------------------------------------------------------

    REVENUE
    Sales and services                                      93,875    45,951
    -------------------------------------------------------------------------

    EXPENSES
      Operating                                             54,885    27,314
      General and administrative                             4,276     1,558
      Stock-based compensation                               1,535       559
      Depreciation and amortization                          7,072     2,900
    -------------------------------------------------------------------------
                                                            67,768    32,331
    -------------------------------------------------------------------------

    EARNINGS FROM CONTINUING OPERATIONS                     26,107    13,620
    -------------------------------------------------------------------------

    Interest on long-term debt and capital leases           (2,249)     (767)
    Other expenses                                             (13)      (21)
    -------------------------------------------------------------------------
                                                            (2,262)     (788)
    -------------------------------------------------------------------------

    EARNINGS FROM CONTINUING OPERATIONS BEFORE
     INCOME TAXES                                           23,845    12,832

    INCOME TAXES, CONTINUING OPERATIONS
      Current                                                1,689     1,248
      Future                                                 4,292     4,131
    -------------------------------------------------------------------------
                                                             5,981     5,379
    -------------------------------------------------------------------------

    NET EARNINGS FROM CONTINUING OPERATIONS BEFORE
     NON-CONTROLLING INTEREST                               17,864     7,453

    Non-controlling interest                                   274         -
    -------------------------------------------------------------------------

    NET EARNINGS FROM CONTINUING OPERATIONS                 18,138     7,453

    NET EARNINGS FROM DISCONTINUED OPERATIONS,
     NET OF TAX OF $627 (2005 - $2,315)                      1,674     5,685
    -------------------------------------------------------------------------

    NET EARNINGS                                            19,812    13,138

    RETAINED EARNINGS, BEGINNING OF PERIOD                  94,953    47,029
    -------------------------------------------------------------------------

    RETAINED EARNINGS, END OF PERIOD                       114,765    60,167
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EARNINGS PER SHARE
      Basic earnings per share from continuing
       operations                                             0.31      0.26
      Diluted earnings per share from continuing
       operations                                             0.31      0.25
      Basic earnings per share from discontinued
       operations                                             0.03      0.19
      Diluted earnings per share from discontinued
       operations                                             0.03      0.19
      Basic earnings per share - net income                   0.34      0.45
      Diluted earnings per share - net income                 0.34      0.44
      Basic weighted average shares outstanding             57,849    29,008
      Diluted weighted average shares outstanding           58,082    29,853



    Consolidated Statement of Earnings and Retained Earnings
    Years Ended December 31, 2006 and 2005
    (In thousands of dollars, except per share data)(Unaudited)
    -------------------------------------------------------------------------
                                                            2006      2005
                                                              $         $
    -------------------------------------------------------------------------

    REVENUE
    Sales and services                                     247,082   132,794
    -------------------------------------------------------------------------

    EXPENSES
      Operating                                            148,687    84,026
      General and administrative                            11,141     6,177
      Stock-based compensation                               4,233     1,599
      Depreciation and amortization                         17,486     9,046
    -------------------------------------------------------------------------
                                                           181,547   100,848
    -------------------------------------------------------------------------

    EARNINGS FROM CONTINUING OPERATIONS                     65,535    31,946
    -------------------------------------------------------------------------

    Interest on long-term debt and capital leases           (5,197)   (2,348)
    Interest and other income (expense)                        (48)       17
    -------------------------------------------------------------------------
                                                            (5,245)   (2,331)
    -------------------------------------------------------------------------

    EARNINGS FROM CONTINUING OPERATIONS BEFORE
     INCOME TAXES                                           60,290    29,615

    INCOME TAXES, CONTINUING OPERATIONS
      Current                                                6,064       940
      Future                                                12,942    11,330
    -------------------------------------------------------------------------
                                                            19,006    12,270
    -------------------------------------------------------------------------

    NET EARNINGS FROM CONTINUING OPERATIONS BEFORE
     NON-CONTROLLING INTEREST                               41,284    17,345

    Non-controlling interest                                   326         -
    -------------------------------------------------------------------------

    NET EARNINGS FROM CONTINUING OPERATIONS                 41,610    17,345

    NET EARNINGS FROM DISCONTINUED OPERATIONS,
     NET OF TAX OF $5,059 (2005 - $5,771)                   12,988    14,382
    -------------------------------------------------------------------------

    NET EARNINGS                                            54,598    31,727

    RETAINED EARNINGS, BEGINNING OF YEAR                    60,167    28,440
    -------------------------------------------------------------------------

    RETAINED EARNINGS, END OF YEAR                         114,765    60,167
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EARNINGS PER SHARE
      Basic earnings per share from continuing
       operations                                             1.06      0.60
      Diluted earnings per share from continuing
       operations                                             1.05      0.59
      Basic earnings per share from discontinued
       operations                                             0.33      0.50
      Diluted earnings per share from discontinued
       operations                                             0.32      0.49
      Basic earnings per share - net income                   1.39      1.10
      Diluted earnings per share - net income                 1.37      1.08
      Basic weighted average shares outstanding             39,320    28,749
      Diluted weighted average shares outstanding           39,776    29,491


    Consolidated Balance Sheet
    December 31, 2006 and 2005
    (In thousands of dollars)(Unaudited)
    -------------------------------------------------------------------------
                                                            2006      2005
                                                              $         $
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash                                                   8,259         -
      Accounts receivable                                   88,856    33,013
      Inventory                                              4,783     1,984
      Prepaid expenses and deposits                          1,766       631
      Current portion of notes receivable                    2,250         -
      Current assets held for sale                          18,720    19,394
    -------------------------------------------------------------------------
                                                           124,634    55,022
    Notes receivable                                         6,575         -
    Capital assets                                         590,132   188,942
    Goodwill                                               424,003     2,677
    Intangibles and other assets                            26,856       322
    Non-current assets held for sale                        33,739    30,366
    -------------------------------------------------------------------------
                                                         1,205,939   277,329
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    CURRENT
      Bank indebtedness                                     25,260     7,114
      Operating loans                                          337         -
      Accounts payable and accrued liabilities              50,970    17,264
      Income taxes payable                                   5,599       407
      Current portion of deferred drilling advance           1,127         -
      Current portion of obligations under capital leases    3,156       639
      Current portion of long-term debt                     15,615     6,835
      Current liabilities held for sale                      5,937    10,666
    -------------------------------------------------------------------------
                                                           108,001    42,925
    Deferred drilling advance                                3,333         -
    Deferred net revenue                                     1,647         -
    Obligations under capital leases                         5,330       666
    Long-term debt                                         130,951    41,365
    Future income taxes                                     55,995    21,976
    Non-current liabilities held for sale                    5,374     5,111
    -------------------------------------------------------------------------
                                                           310,631   112,043
    -------------------------------------------------------------------------

    Non-controlling interest                                 3,214         -
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
      Share capital                                        771,495   103,049
      Contributed surplus                                    5,834     2,070
      Retained earnings                                    114,765    60,167
    -------------------------------------------------------------------------
                                                           892,094   165,286
    -------------------------------------------------------------------------
                                                         1,205,939   277,329
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    



    Savanna Energy Services Corp. is a leading North American contract  
drilling and oilfield services company providing a broad range of drilling,
well servicing and related services with a focus on fit for purpose
technologies for the North American market and industry-leading Aboriginal
relationships. Savanna operates 87 drilling rigs, 44 well servicing rigs and 8
coil service units in Canada and the United States.

    %SEDAR: 00019742E




For further information:

For further information: Ken Mullen, President and Chief Executive
Officer, Telephone: (403) 267-6726, Fax: (403) 267-6749; or Darcy Draudson,
Chief Financial Officer, Telephone: (403) 267-6727, Fax: (403) 267-6749

Organization Profile

Savanna Energy Services Corp.

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