Tesco Corporation Reports Earnings for Q3 2007



    Trading Symbol:
    "TESO" on NASDAQ
    "TEO" on TSX

    HOUSTON, Nov. 6 /CNW/ - Tesco Corporation ("TESCO" or the "Company")
today reported net income for the quarter ended September 30, 2007 of
$8.8 million, or $0.24 per diluted share. This compares to net income of
$8.5 million, or $0.23 per diluted share, for the third quarter of 2006, and
net income of $3.9 million or $0.10 per diluted share for the second quarter
of 2007. Revenue was $113.9 million for the quarterly period ended
September 30, 2007 compared to revenue of $101.5 million for the comparable
period in 2006 and $109.8 million in the second quarter of 2007.
    Net income for Q3 2007 includes a $4.2 million after-tax benefit
($0.11 per diluted share) for adjustments related to two separate tax matters.
First, we recognized a $2.1 million after-tax benefit related to favorable
adjustments realized on our 2006 Canadian income tax return filed in
June 2007. In addition, the Company recorded an additional benefit of
$2.1 million after-tax due to the recovery of previously deposited funds with
respect to contingent matters related to our Mexico tax litigation. A more
detailed discussion of the Mexico tax matters will be more fully described
with our Form 10-Q to be filed with the SEC later this week.

    
                             Summary of Results
      (in millions of U.S. $, except per share amounts and percentages)
                            U.S. GAAP - Unaudited

                   ----------------------------------------------------------
                          Quarter 3        Quarter 2     Nine Months Ended
                          ---------        ---------     -----------------
                   ----------------------------------------------------------
                      2007        2006        2007     9/30/2007   9/30/2006
                      ----        ----        ----     ---------   ---------
                   ----------------------------------------------------------
    Revenues       $   113.9   $   101.5   $   109.8   $   338.0   $   271.8
                   ----------------------------------------------------------

                   ----------------------------------------------------------
    Operating
     Income              8.6        14.6         7.6        35.2        41.6
                   ----------------------------------------------------------

                   ----------------------------------------------------------
    Net Income           8.8         8.5         3.9        23.7        20.1
                   ----------------------------------------------------------

                   ----------------------------------------------------------
    EPS (diluted)  $    0.24   $    0.23   $    0.10   $    0.64   $    0.55
                   ----------------------------------------------------------

                   ----------------------------------------------------------
    Adjusted
     EBITDA(*)
     (as defined)  $    18.1   $    22.7   $    15.6   $    60.2   $    58.9
                   ----------------------------------------------------------

    (*) See explanation of Non-GAAP measure below
    


    Commentary

    Julio Quintana, TESCO's Chief Executive Officer, commented,
"Operationally our Quarter 3 results improved slightly from Quarter 2. We
continue to work through the issues that negatively impacted us in the second
quarter. Some of the issues mentioned in our Quarter 2 earnings press release
continue to impact us, such as the relative weakness of the U.S. dollar versus
the Canadian dollar, higher labor costs in our North American tubular services
business, and manufacturing disruptions. However, we believe that our
operating results will improve further in Quarter 4 as a result of changes we
implemented in Quarter 3. On the Casing Services front, we continue to move
the business forward with new customers in both Tubular Services and CASING
DRILLING(R). Going forward, we continue to experience strong demand for our
Top Drive rental business. As such, we have begun a campaign to increase the
size of our rental fleet outside of North America. Furthermore, CASING
DRILLING(R) revenues increased incrementally from Q2 of 2007 over 60%."

    
                             Segment Information
                           (in millions of U.S. $)
                                  Unaudited

                   ----------------------------------------------------------
                          Quarter 3        Quarter 2     Nine Months Ended
                          ---------        ---------     -----------------
                   ----------------------------------------------------------
                      2007        2006        2007     9/30/2007   9/30/2006
                      ----        ----        ----     ---------   ---------
                   ----------------------------------------------------------
    Revenues:
    ---------
                   ----------------------------------------------------------
      Top Drives:
                   ----------------------------------------------------------
        Sales and
         after-
         market    $    43.9   $    32.9   $    44.0   $   133.7   $    78.4
                   ----------------------------------------------------------
        Rental          29.2        25.6        25.2        81.3        74.0
                   ----------  ----------  ----------  ----------  ----------
                   ----------------------------------------------------------
                        73.1        58.5        69.2       215.0       152.4
                   ----------------------------------------------------------
      Casing
       Services:        40.8        43.0        40.6       123.0       119.4
                   ----------  ----------  ----------  ----------  ----------
                   ----------------------------------------------------------
    Total
     Revenues      $   113.9   $   101.5   $   109.8   $   338.0   $   271.8
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------
                   ----------------------------------------------------------

                   ----------------------------------------------------------
    Operating
    ---------
     Income:
     -------
      Top Drives   $    15.7   $    17.1   $    14.8   $    53.3   $    42.1
                   ----------------------------------------------------------
      Casing
       Services          2.4         6.3         3.4        13.3        20.7
                   ----------------------------------------------------------
    Research and
     Engineering        (3.6)       (1.2)       (2.3)       (8.6)       (3.8)
                   ----------------------------------------------------------
    Corporate/
     Unallocated        (5.9)       (7.6)       (8.3)      (22.8)      (17.4)
                   ----------  ----------  ----------  ----------  ----------
                   ----------------------------------------------------------
    Total
     Operating
      Income       $     8.6   $    14.6   $     7.6   $    35.2   $    41.6
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------
                   ----------------------------------------------------------


                     Financial and Operating Highlights

    Top Drives Segment
    ------------------
    -   Top Drive sales for Q3 2007 were 25 units (23 new and 2 from the
        rental fleet). This compares to 31 units sold in Q2 2007 (27 new and
        4 from the rental fleet) and 26 units sold in Q3 2006 (all new
        units). Our third quarter unit sales were lower primarily because of
        two factors: 1) the composition of our order base has changed to
        larger, more complex Top Drive models and 2) we are devoting more
        manufacturing capacity to building rental units for our fleet in
        response to strong market demand for this business. However, even
        though fewer new units were sold, the actual dollar value of new Top
        Drive sales was the same in Q3 of 2007 as Q2 of 2007.

    -   At September 30, 2007, Top Drive backlog totaled 30 units, with a
        value of $39 million, versus 41 units at June 30, 2007, with a value
        of $42.5 million. In addition to the 30 new units in backlog, we have
        firm orders for another 2 units to be sold from our rental fleet. The
        composition of our backlog has changed with a greater portion of the
        backlog now comprised of international orders for our higher
        horsepower, larger units.

    -   Operating days for the Top Drive rental fleet increased to 6,138 days
        in Q3 2007 compared to 5,380 operating days in Q2 2007 and
        5,982 operating days for Q3 2006. The increase in operating days in
        Q3 2007 compared to Q2 2007 was primarily due to having fewer units
        undergoing routine maintenance, the deployment of units into the
        Mexican market as well as continuing high market activity. The rental
        market continues to be strong resulting in our decision to build more
        units for the rental fleet. We are planning to add approximately
        20 more units to the rental fleet in the next few quarters.

    -   Our operating rental fleet today stands at 104 units, net of rental
        units committed for sale, compared to 103 units at the end of June.
        As previously announced, the Company has secured new contracts to
        provide Top Drive rental services for Pemex and another operator in
        Mexico. At the end of Q3, we had moved 11 units into Mexico.

    -   Our Top Drive margins increased $0.9 million in Q3 2007 compared to
        Q2 2007 primarily due to increased rental activity partially offset
        by the fewer number of units sold.

    Casing Services Segment
    -----------------------
    -   Revenues in our Casing Services segment increased $0.2 million in
        Q3 2007 from Q2 2007, mainly due to increased project activity
        associated with CASING DRILLING(R) and increased tubular services
        business related to the acquisitions completed during Q3 2007 (The
        acquired businesses contributed $2.3 million in revenues in Q3 2007;
        see the "Acquisitions" section of this press release below) offset by
        lower casing running revenues associated with our base business. Our
        proprietary casing running business reported 9% lower revenues than
        the record previous quarter primarily due to overall weakness in the
        Canadian market.

    -   Margins in our Casing Services segment decreased $1.0 million in
        Q3 2007 compared to Q2 2007 primarily driven by increased labor costs
        in our tubular services business resulting from competitive pressures
        in the industry and costs associated with the build-up of resources
        to deliver CASING DRILLING(R) throughout the world. We continue to
        make adjustments to our cost structure in our tubular services
        business and believe that these efforts will result in improved
        tubular services operating performance in the coming quarters.

    -   The Company has recently completed a successful casing running job
        for OXY-Qatar utilizing our proprietary Casing Drive System(TM). We
        believe that the successful completion of this project will have
        important ramifications in our efforts to develop our proprietary
        casing running business in the Middle East as well as opening up
        further opportunities for CASING DRILLING(R) in this region.

    -   Revenues for our CASING DRILLING(R) technology increased over 60% as
        compared to Q2 2007 primarily due to proprietary retrievable CASING
        DRILLING(R) projects in the Rockies. We are currently gearing up for
        an important retrievable CASING DRILLING(R) project in Indonesia and
        are moving equipment back to Norway as we expect to see follow up
        activity in 2008 associated with the successful offshore rotary
        steerable project we announced earlier this year. We have also
        completed key projects in Latin America.

    Financial Review
    -----------------
    -   At September 30, 2007 cash and cash equivalents decreased from
        $7.5 million to $7.2 million while debt increased from $39.0 million
        to $65.0 million at September 30, 2007. This represents a net debt to
        book capitalization of 17%(1). The increase in debt is primarily due
        to the Tubular Services acquisitions completed during Q3 2007, higher
        working capital requirements at September 30, 2007 associated with
        our plans to expand our rental fleet and expansion costs for our Top
        Drive after-market support business.

    -   Total capital expenditures in Q3 2007 were $14.6 million and
        $37.7 million for the first nine months of 2007. We have budgeted
        capital expenditures in 2007 of approximately $55 million, although
        this amount may increase as capital is added for new projects.

    -   Selling, General and Administrative (SG&A) costs for Q3 2007 amounted
        to $9.8 million, compared to $12.3 million for Q2 2007. The decrease
        relates primarily to lower employee benefit costs and incentive
        accruals.

    -   Research and Engineering (R&E) costs for Q3 2007 totaled $3.6 million
        which compares to $2.3 million for Q2 2007. This increase was due to
        increased R&E costs related to the design, development and testing of
        a new generation of Top Drive units which were introduced to the
        market during this past summer and field trials of our tubular
        services and CASING DRILLING(R) technologies. The Company estimates
        R&E spending for the remainder of 2007 will be approximately similar
        to the average quarterly levels incurred during the first nine months
        of 2007.

    -------------------
    (1) This ratio is calculated by dividing financial debt, less cash by the
        sum of financial debt, net of cash plus shareholders' equity.
    


    Acquisitions

    As a continuation of TESCO's strategy to expand our Casing Services
"footprint," during Q3 2007, the Company acquired three tubular services
businesses (two of which were previously announced) that provide conventional
casing running and tubular services in North America. The total purchase price
for these acquisitions was $19.6 million. These acquisitions were funded by
the Company's Revolving Credit Facility. All of these assets and operating
results are included in the Casing Services business segment as they provide
expansion opportunities for our proprietary Casing Drive System(TM) for casing
running as well as further opportunities to expand our CASING DRILLING(R)
offering.

    Material Weaknesses Previously Disclosed

    As discussed in our 2006 Annual Report on Form 10-K, we did not maintain
effective controls as of December 31, 2006, involving (1) the corporate
financial reporting organization's monitoring and oversight role of the
Company's U.S. Casing Services Business Unit, and (2) the overall financial
reporting of our U.S. Casing Services Business Unit, including the complement
of personnel, review and approval of manual journal entries, timely
reconciliations of databases and bank account reconciliations and the
existence, accuracy and completeness of fixed asset records. The remedial
actions implemented in the first nine months of 2007 related to these material
weaknesses will be described in TESCO's Quarterly Report (Form 10-Q) filed
with the SEC later this month.

    Conference Call

    The Company will conduct a conference call to discuss its results for the
third quarter of 2007 tomorrow (Wednesday, November 7, 2007) at 10:00 a.m.
CST. Individuals who wish to participate in the conference call should dial
US/Canada (866) 433-0163 or International (706) 679-3976 approximately ten
minutes prior to the scheduled start of the call. The conference ID for this
call is 22683376. The conference call will also be webcast live and available
for replay at the Company's web site, www.tescocorp.com. Listeners may access
the call through the "Conference Calls" link in the Investor Relations section
of the site. The conference call and all questions and answers will be
recorded and made available until December 7, 2007. To listen to the
recording, call (800) 642-1687 or (706) 645-9291 and enter conference ID
22683376.

    Tesco Corporation is a global leader in the design, manufacture and
service of technology based solutions for the upstream energy industry. The
Company's strategy is to change the way people drill wells by delivering safer
and more efficient solutions that add real value by reducing the costs of
drilling for and producing oil and gas.



    
           Non-GAAP Measures - Adjusted EBITDA (as defined below)

                   ----------------------------------------------------------
    (in millions
     of U.S. $)           Quarter 3        Quarter 2     Nine Months Ended
     ----------           ---------        ---------     -----------------
                   ----------------------------------------------------------
                      2007        2006        2007     9/30/2007   9/30/2006
                      ----        ----        ----     ---------   ---------
                   ----------------------------------------------------------
    Net Income     $     8.8   $     8.5   $     3.9   $    23.7   $    20.1
                   ----------------------------------------------------------
    Income Taxes           -         5.2         2.7         9.9        15.2
                   ----------------------------------------------------------
    Depreciation and
     Amortization        7.3         6.5         6.7        20.1        17.3
                   ----------------------------------------------------------
    Net Interest
     expense             0.4         0.8         0.8         1.7         2.3
                   ----------------------------------------------------------
    Stock
     Compensation
     Expense -
     non-cash            1.6         1.7         1.5         4.8         4.2
                   ----------------------------------------------------------
    Cumulative
     Change in
     accounting
     method                -           -           -           -        (0.2)
                   ----------------------------------------------------------
    Adjusted
     EBITDA        $    18.1   $    22.7   $    15.6   $    60.2   $    58.9
                   ----------------------------------------------------------
    

    Our management evaluates Company performance based on non-GAAP measures,
of which a primary performance measure is EBITDA. EBITDA consists of earnings
(net income or loss) available to common stockholders before interest expense,
income tax expense, non-cash stock compensation, non-cash impairments,
depreciation and amortization and other non-cash items. This measure may not
be comparable to similarly titled measures employed by other companies and is
not a measure of performance calculated in accordance with GAAP. They should
not be considered in isolation or as substitutes for operating income, net
income or loss, cash flows provided by operating, investing and financing
activities, or other income or cash flow statement data prepared in accordance
with GAAP.
    We believe EBITDA is useful to an investor in evaluating our operating
performance because:

    
    -   it is widely used by investors in our industry to measure a company's
        operating performance without regard to items such as net interest
        expense, depreciation and amortization, which can vary substantially
        from company to company depending upon accounting methods and book
        value of assets, financing methods, capital structure and the method
        by which assets were acquired;

    -   it helps investors more meaningfully evaluate and compare the results
        of our operations from period to period by removing the impact of our
        capital structure (primarily interest) and asset base (primarily
        depreciation and amortization) and actions that do not affect
        liquidity (stock compensation expense) from our operating results;
        and

    -   it helps investors identify items that are within our operational
        control. Depreciation and amortization charges, while a component of
        operating income, are fixed at the time of the asset purchase in
        accordance with the depreciable lives of the related asset and as
        such are not a directly controllable period operating charge.

     Our management uses EBITDA:

    -   as a measure of operating performance because it assists us in
        comparing our performance on a consistent basis as it removes the
        impact of our capital structure and asset base from our operating
        results;

    -   as one method we use to evaluate potential acquisitions;

    -   in presentations to our Board of Directors to enable them to have the
        same consistent measurement basis of operating performance used by
        management;

    -   to assess compliance with financial ratios and covenants included in
        our credit agreements; and

    -   in communications with investors, analysts, lenders, and others
        concerning our financial performance.
    

    Caution Regarding Forward-Looking Information; Risk Factors

    This press release contains forward-looking statements within the meaning
of Canadian and United States securities laws, including the United States
Private Securities Litigation Reform Act of 1995. From time to time, our
public filings, press releases and other communications (such as conference
calls and presentations) will contain forward-looking statements.
Forward-looking information is often, but not always identified by the use of
words such as "anticipate", "believe", "expect", "plan", "intend", "forecast",
"target", "project", "may", "will", "should", "could", "estimate", "predict"
or similar words suggesting future outcomes or language suggesting an outlook.
Forward-looking statements in this press release include, but are not limited
to, statements with respect to expectations of our prospects, future revenues,
earnings, activities and technical results.
    Forward-looking statements and information are based on current beliefs
as well as assumptions made by, and information currently available to, us
concerning anticipated financial performance, business prospects, strategies
and regulatory developments. Although management considers these assumptions
to be reasonable based on information currently available to it, they may
prove to be incorrect. The forward-looking statements in this press release
are made as of the date it was issued and we do not undertake any obligation
to update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by applicable law.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, and risks that outcomes implied
by forward-looking statements will not be achieved. We caution readers not to
place undue reliance on these statements as a number of important factors
could cause the actual results to differ materially from the beliefs, plans,
objectives, expectations and anticipations, estimates and intentions expressed
in such forward-looking statements.
    These risks and uncertainties include, but are not limited to, the impact
of changes in oil and natural gas prices and worldwide and domestic economic
conditions on drilling activity and demand for and pricing of our products and
services, other risks inherent in the drilling services industry (e.g.
operational risks, potential delays or changes in customers' exploration or
development projects or capital expenditures, the uncertainty of estimates and
projections relating to levels of rental activities, uncertainty of estimates
and projections of costs and expenses, risks in conducting foreign operations,
the consolidation of our customers, and intense competition in our industry),
and risks associated with our intellectual property and with the performance
of our technology. These risks and uncertainties may cause our actual results,
levels of activity, performance or achievements to be materially different
from those expressed or implied by any forward-looking statements. When
relying on our forward-looking statements to make decisions, investors and
others should carefully consider the foregoing factors and other uncertainties
and potential events.
    Copies of our Canadian public filings are available at www.tescocorp.com
and on SEDAR at www.sedar.com. Our U.S. public filings are available at
www.sec.gov and at www.tescocorp.com.
    The risks included here are not exhaustive. Refer to "Part I, Item 1A -
Risk Factors" in our annual report on Form 10-K for the year ended
December 31, 2006, for further discussion regarding our exposure to risks.
Additionally, new risk factors emerge from time to time and it is not possible
for us to predict all such factors, nor to assess the impact such factors
might have on our business or the extent to which any factor or combination of
factors may cause actual results to differ materially from those contained in
any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction
of actual results.

    
                              TESCO CORPORATION
     (Millions of U.S. Dollars, except share and per share information)

           COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                For the Three Months    For the Nine Months
                                 Ended September 30,     Ended September 30,
                              ----------------------- -----------------------
                                  2007        2006        2007        2006
                              ----------- ----------- ----------- -----------
                                               (unaudited)

    REVENUE                   $    113.9  $    101.5  $    338.0  $    271.8

    OPERATING EXPENSES
    Cost of Sales and Services      91.9        76.4       261.0       202.5
    Selling, General and
     Administrative                  9.8         9.3        33.2        24.0
    Research and Engineering         3.6         1.2         8.6         3.7
                              ----------- ----------- ----------- -----------
                                   105.3        86.9       302.8       230.2
                              ----------- ----------- ----------- -----------
      OPERATING INCOME               8.6        14.6        35.2        41.6
    Interest Expense, net            0.4         0.8         1.7         2.3
    Other (Income) Expense, net     (0.6)        0.1        (0.1)        4.3
                              ----------- ----------- ----------- -----------
      INCOME BEFORE INCOME
       TAXES                         8.8        13.7        33.6        35.0
    Income taxes                       -         5.2         9.9        15.2
                              ----------- ----------- ----------- -----------
      NET INCOME BEFORE
       CUMULATIVE EFFECT OF
       ACCOUNTING CHANGE             8.8         8.5        23.7        19.8
    Cumulative Effect of
     Accounting Change, net            -           -           -         0.3
                              ----------- ----------- ----------- -----------
      NET INCOME              $      8.8  $      8.5  $     23.7  $     20.1
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Earnings per share:
      Basic                   $     0.24  $     0.24  $     0.65  $     0.56
      Diluted                 $     0.24  $     0.23  $     0.64  $     0.55
    Weighted average number
     of shares:
      Basic                   36,777,049  35,948,779  36,370,033  35,797,903
      Diluted                 37,597,550  36,618,152  37,225,200  36,609,274



              COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                       September    December
                                                        30, 2007    31, 2006
                                                      ----------- -----------
                                                            (unaudited)
    ASSETS
      Cash and Cash Equivalents                       $      7.2  $     14.9
      Accounts Receivables, net                             82.3        80.4
      Inventories                                          118.2        85.4
      Other Current Assets                                  27.0        18.2
                                                      ----------- -----------
        Current Assets                                     234.7       198.9
      Property, Plant and Equipment, net                   150.5       132.3
      Goodwill                                              28.5        16.6
      Other Assets                                          28.4        24.4
                                                      ----------- -----------
                                                      $    442.1  $    372.2
                                                      ----------- -----------
                                                      ----------- -----------
    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current Maturities of Long Term Debt            $     10.0  $     10.0
      Accounts Payable                                      38.0        27.8
      Accrued and Other Current Liabilities                 36.5        49.3
                                                      ----------- -----------
        Current Liabilities                                 84.5        87.1
      Long Term Debt                                        55.0        34.5
      Deferred Income Taxes                                 10.9        11.2
      Shareholders' Equity                                 291.7       239.4
                                                      ----------- -----------
                                                       $   442.1  $    372.2
                                                      ----------- -----------
                                                      ----------- -----------
    

    %SEDAR: 00002774E




For further information:

For further information: Julio Quintana, (713) 359-7000, Anthony
Tripodo, (713) 359-7000, Tesco Corporation

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Tesco Corporation

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