Tesco Corporation Reports Record Net Income for Q2 2008



    Trading Symbol:
    "TESO" on NASDAQ

    HOUSTON, Aug. 7 /CNW/ - Tesco Corporation ("TESCO" or the "Company")
today reported net income for the quarter ended June 30, 2008 of
$12.7 million, or $0.34 per diluted share. This compares to net income of
$3.9 million, or $0.10 per diluted share, for the second quarter of 2007, and
net income of $10.7 million, or $0.29 per diluted share, for the first quarter
of 2008.
    Revenue was $126.2 million for the quarter ended June 30, 2008 compared
to revenue of $109.8 million for the comparable period in 2007 and
$129.4 million in the first quarter of 2008.

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

                           Quarter 2       Quarter 1      Six Months Ended
                           ---------       ---------      ----------------
                      2008        2007        2008      06/30/08    06/30/07
                   ----------  ----------  ----------  ----------  ----------
    Revenues       $   126.2   $   109.8   $   129.4   $   255.5   $   224.1

    Operating
     Income             17.0         7.6        16.4        33.4        26.6

    Net Income          12.7         3.9        10.7        23.4        14.9

    EPS (diluted)  $    0.34   $    0.10   $    0.29   $    0.62   $    0.40

    Adjusted
     EBITDA(*)
     (as defined)  $    28.2   $    15.6   $    24.2   $    52.3   $    42.2

    (*) See explanation of Non-GAAP measure below
    

    Commentary

    Julio Quintana, TESCO's Chief Executive Officer, commented "Quarter 2 was
a solid quarter for the Company and represented a quarterly net income record
for TESCO. We built a total of 36 new Top Drives during the quarter, a company
record. Revenues declined slightly during the quarter as a result of our
increased emphasis on margin improvement and, in fact, we controlled our costs
and were able to improve our operating income and grow earnings. The costs we
incurred in Q1 to reduce headcount and realign our business are beginning to
pay off. In addition, CASING DRILLING(TM) revenue set another quarterly record
for the Company. Top Drive sales remain strong and we continue to demonstrate
momentum and increasing market acceptance for our proprietary tubular running
services and CASING DRILLING(TM)."


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

                           Quarter 2       Quarter 1      Six Months Ended
                           ---------       ---------      ----------------
                      2008        2007        2008      06/30/08    06/30/07
                   ----------  ----------  ----------  ----------  ----------
    Revenues:
    ------------
    Top Drives:
      Sales        $    36.6   $    29.9   $    38.5   $    75.1    $   64.5
      Aftermarket
       Support          16.7        13.1        15.5        32.2        22.7
      Rental            26.8        25.2        27.7        54.4        52.2
                   ----------  ----------  ----------  ----------  ----------
                        80.1        68.2        81.7       161.7       139.4
                   ----------  ----------  ----------  ----------  ----------
    Casing Services:
      Conventional      20.1        20.0        23.6        43.7        43.5
      Proprietary(*)    18.2        19.6        17.7        35.9        36.6
      CASING
       DRILLING(TM)      7.8         2.0         6.4        14.2         4.6
                   ----------  ----------  ----------  ----------  ----------
                        46.1        41.6        47.7        93.8        84.7
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------
    Total
     Revenues      $   126.2   $   109.8   $   129.4   $   255.5   $   224.1
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------

    Operating
     Income(xx):
    ------------
      Top Drives   $    26.8   $    17.6   $    24.1   $    50.9   $    41.3
      Casing
       Services         (0.4)        0.6         3.1         2.7         7.2
      Research and
       Engineering      (2.8)       (2.3)       (2.8)       (5.6)       (5.0)
      Corporate
       /Other           (6.6)       (8.3)       (8.0)      (14.6)      (16.9)
                   ----------  ----------  ----------  ----------  ----------
    Total
     Operating
     Income        $    17.0   $     7.6   $    16.4   $    33.4   $    26.6
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------

    (*) Proprietary revenues now include activities associated with our
    Multiple Control Line Running System(TM) and we have recast prior periods
    for conventional and proprietary casing services to reflect this change.

    (xx)The operating income amounts in the table above for both the Top
    Drives and Casing Services segments shown above reflect a change in
    methodology used to allocate indirect costs. This change in methodology
    will be more fully described in Note 7 of the Form 10-Q to be filed for
    the quarter ended June 30, 2008.


                 Q2 2008 Financial and Operating Highlights

    Top Drives Segment
    ------------------

    -   Top Drive sales for Q2 2008 were 30 units (24 new and 6 from the
        rental fleet). This compares to 31 units sold in Q1 2008 (25 new and
        6 from the rental fleet) and 31 units sold in Q2 2007 (27 new and
        4 from the rental fleet).

    -   During Q2 2008 we built and delivered 12 units to our rental fleet
        (in addition to the 24 third party units). Our fleet now stands at
        118 units as of June 30, 2008 compared to 112 units at the end of
        March 2008 and 110 units at December 31, 2007. We are working to
        increase our rental fleet to approximately 120 units by the end of
        the year. Additionally, we expect to continue to revitalize our Top
        Drive rental fleet by selling certain used units and replacing them
        with newer models.

    -   At June 30, 2008, Top Drive backlog amounted to 52 units, with a
        total value of $51 million, versus 39 units at March 31, 2008, with a
        total value of $41 million. This compares to backlog of 41 units at
        June 30, 2007 with a total value of $42.5 million. In addition to the
        52 new units in backlog at June 30, 2008, we have firm orders for
        another 5 units to be sold from our rental fleet. Operating days for
        the Top Drive rental fleet decreased slightly to 5,660 for Q2 2008
        compared to 5,689 in Q1 2008 but were up from 5,380 in Q2 2007. The
        increase in Q2 2008 compared to Q2 2007 was primarily due to the
        number of units available in the rental fleet.

    -   Our Top Drive operating margins increased in Q2 2008 compared to
        Q1 2008 primarily as a result of better margins in our after-market
        sales and service business.

    Casing Services Segment
    -----------------------

    -   Revenues from the Casing Services segment for Q2 2008 were
        $46.1 million, a decrease of $1.6 million from Q1 2008 primarily
        related to decreased activity in our conventional casing running
        activities. We remain focused on converting the market to running
        casing utilizing our proprietary CDS(TM) technology.

    -   CASING DRILLING(TM) revenue in Q2 2008 was $7.8 million, an increase
        of $1.4 million compared to Q1 2008, and is a new record for the
        Company.

    -   We performed a total of 443 proprietary casing running jobs in
        Q2 2008 compared to 462 in Q1 2008 and 398 in Q2 2007. The sequential
        drop in job count was mainly associated with the Canadian spring
        breakup and associated activity drop.

    -   Operating Income in our Casing Services segment for Q2 2008 was a
        loss of $0.4 million, compared to income of $3.1 million in Q1 2008.
        Q2's operating loss was negatively affected by the decreased revenues
        discussed above, $1.3 million of project-specific start-up costs in
        the Asia Pacific region and Mexico, and increased depreciation
        expense due to assets placed in service over the last year.

    Other Segments and Expenses
    ---------------------------

    -   Corporate costs for Q2 2008 were $6.6 million, compared to
        $8.0 million for Q1 2008. This decrease was primarily due to higher
        professional fees and bonus accruals in Q1. Total Selling, General
        and Administrative costs in Q2 2008 amounted to $11.0 million
        compared to $13.4 million in Q1 2008. This decrease is due to the
        higher professional fees, salaries and bonus expenses and bad debt
        expense recorded in Q1, offset by trade show costs incurred in Q2.

    -   Research and Engineering costs for Q2 2008 were consistent with Q1 at
        $2.8 million. However, in Q2, we invested $0.6 million in a prototype
        for a new Top Drive model. We believe these expenses will be
        recaptured in the future when we sell the prototype unit to a third
        party.

    -   Other Income and Expense, excluding net interest expense, for Q2 2008
        totaled income of $1.3 million, compared to expense of $1.7 million
        for Q1 2008. Other Income for Q2 2008 included a gain of $1.4 million
        related to foreign exchange gains, while Other Expense for Q1 2008
        included a loss of $1.7 million related to foreign exchange losses.

    Financial Condition
    -------------------

    -   At June 30, 2008 cash and cash equivalents decreased from
        $23.1 million at December 31, 2007 to $12.6 million while debt
        decreased during the same period from $80.8 million at December 31,
        2007 to $77.0 million at June 30, 2008. This represents a net debt to
        book capitalization of 16%(1) at June 30, 2008. Net debt(2) at
        June 30, 2008 was $64.4 million compared to $57.7 million at
        December 31, 2007.

    -   Total capital expenditures were $23.0 million in Q2 2008. We project
        our capital expenditures for 2008 to be approximately $80 to
        $90 million. The planned increase is directly related to our strategy
        to increase the size of our rental fleet to 120 or more units by the
        end of 2008 and replace rental units expected to be sold from the
        fleet.

    ----------------------------
    (1) Net debt to book capitalization is calculated by dividing financial
        debt less cash, by the sum of financial debt less cash plus
        shareholders' equity.

    (2) Net debt is calculated by subtracting cash and cash equivalents from
        total financial debt.
    

    Conference Call

    The Company will conduct a conference call to discuss its results for the
second quarter of 2008 tomorrow (Friday, August 8, 2008) at 10:00 a.m. CDT.
Individuals who wish to participate in the conference call should dial
US/Canada (866) 433-0163 or International (706) 679-3976 approximately five to
ten minutes prior to the scheduled start time of the call. The conference ID
for this call is 57326793. The conference call and all questions and answers
will be recorded and made available until September 9, 2008. To listen to the
recording call (800) 642-1687 or (706) 645-9291 and enter conference ID
57326793. The conference call will be webcast live as well as for on-demand
listening 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.
    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 2       Quarter 1      Six Months Ended
    --------------         ---------       ---------      ----------------
                      2008        2007        2008      06/30/08    06/30/07
                   ----------  ----------  ----------  ----------  ----------
    Net Income     $    12.7   $     3.9   $    10.7   $    23.4   $    14.9
    Income Taxes         4.5         2.7         3.0         7.5         9.9
    Depreciation
     and
     Amortization        8.3         6.7         7.8        16.0        12.9
    Net Interest
     expense             1.1         0.8         1.1         2.2         1.3
    Stock
     Compensation
     Expense-
     non-cash            1.6         1.5         1.6         3.2         3.2
    Adjusted
     EBITDA        $    28.2   $    15.6   $    24.2   $    52.3   $    42.2
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------
    

    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. EBITDA 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),
risks, including litigation, 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, 2007, 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 Six Months
                                    Ended June 30,          Ended June 30,
                              ----------------------- -----------------------
                                  2008        2007        2008        2007
                              ----------- ----------- ----------- -----------
                                                (unaudited)

    REVENUE                   $    126.2  $    109.8  $    255.5  $    224.1

    OPERATING EXPENSES
    Cost of Sales and Services      95.4        87.6       192.2       169.1
    Selling, General and
     Administrative                 11.0        12.3        24.3        23.4
    Research and Engineering         2.8         2.3         5.6         5.0
                              ----------- ----------- ----------- -----------
                                   109.2       102.2       222.1       197.5
                              ----------- ----------- ----------- -----------
      OPERATING INCOME              17.0         7.6        33.4        26.6
    Interest Expense, net            1.1         0.8         2.2         1.3
    Other (Income) Expense,
     net                            (1.3)        0.2         0.3         0.5
                              ----------- ----------- ----------- -----------
      INCOME BEFORE INCOME
       TAXES                        17.2         6.5        30.9        24.8
    Income taxes                     4.5         2.6         7.5         9.9
                              ----------- ----------- ----------- -----------

                              ----------- ----------- ----------- -----------
      NET INCOME              $     12.7  $      3.9  $     23.4  $     14.9
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Earnings per share:
      Basic                   $     0.34  $     0.11  $     0.63  $     0.41
      Diluted                 $     0.34  $     0.10  $     0.62  $     0.40
    Weighted average number
     of shares:
      Basic                   37,057,557  36,625,529  36,951,722  36,379,771
      Diluted                 37,723,930  37,569,250  37,586,809  37,252,271



              COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                       June 30,  December 31,
                                                         2008        2007
                                                      ----------- -----------
                                                           (unaudited)
    ASSETS
      Cash and Cash Equivalents                       $     12.6  $     23.1
      Accounts Receivables, net                            101.7        87.9
      Inventories                                          110.1       117.4
      Other Current Assets                                  30.0        24.8
                                                      ----------- -----------
        Current Assets                                     254.4       253.2
      Property, Plant and Equipment, net                   194.7       169.8
      Goodwill                                              29.7        29.8
      Other Assets                                          22.5        23.9
                                                      ----------- -----------
                                                      $    501.3  $    476.7
                                                      ----------- -----------
                                                      ----------- -----------
    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current Maturities of Long Term Debt            $     10.0  $     10.0
      Accounts Payable                                      38.8        49.7
      Accrued and Other Current Liabilities                 37.8        31.1
                                                      ----------- -----------
        Current Liabilities                                 86.6        90.8
      Long Term Debt                                        67.0        70.8
      Deferred Income Taxes                                  8.8        10.2
      Shareholders' Equity                                 338.9       304.9
                                                      ----------- -----------
                                                      $    501.3  $    476.7
                                                      ----------- -----------
                                                      ----------- -----------
    

    %SEDAR: 00002774E




For further information:

For further information: Julio Quintana, (713) 359-7000; Robert Kayl,
(713) 359-7000, Tesco Corporation

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