Saxon Energy Services Inc. delivers 118% increase in net earnings and announces the deployment of its first Advanced Technology Single ("ATS(TM)") drilling rig



    TSX Symbol: SES

    All amounts are expressed in U.S. dollars unless otherwise noted

    CALGARY, Aug. 2 /CNW/ - Exploration and development activity remained
strong during the second quarter throughout all of the markets that Saxon
Energy Services Inc. ("Saxon" or "the Corporation") operates in, with the
exception of Canada. Activity in the Western Canadian Sedimentary Basin slowed
considerably in the second quarter of 2007 due to protracted spring breakup
conditions, and a sharp decline in drilling activity to their lowest levels in
several years. However, Saxon and its stakeholders continue to realize the
benefits of the Corporation's strategy of deploying technologically advanced
equipment into multiple geographic markets combined with a balanced portfolio
of oil and natural gas drilling.
    This strategy enabled Saxon to overcome the weakness in the Canadian
marketplace as the Corporation recorded its twelfth quarter of sequential
revenue growth. The Corporation generated $56.6 million in revenue and
$8.3 million (15% of revenue) in operating earnings during the second quarter
of 2007, an increase of 52% and 14% respectively compared to the same period
in 2006. On a year-to-date basis, the Corporation generated $111.6 million in
revenue and $22.1 million (20% of revenue) in operating earnings, an increase
of 64% and 70% respectively compared to the same period in 2006. Net earnings
increased to $4.6 million ($0.05 per diluted share) in the second quarter of
2007 compared to net earnings of $2.1 million ($0.03 per diluted share) during
the same period in 2006. On a year-to-date basis, the Corporation generated
net earnings of $12.6 million ($0.15 per diluted share) in 2007 compared to
net earnings of $5.0 million ($0.06 per diluted share) during the same period
in 2006, an increase of 153%.
    Furthermore, Saxon is pleased to report that the first of five ATS(TM)
drilling rigs spudded its first well in July 2007. In addition, the first of
three drilling rigs mobilized in mid-July 2007 to a joint venture project in
Mexico announced previously on July 4, 2007. This drilling rig is expected to
commence drilling activity in August 2007. The remaining two rigs are
currently under construction but are expected to mobilize during the latter
part of the third quarter. These developments will further increase revenue
and profitability, building upon the momentum established by the Corporation
throughout the first six months of 2007.

    
    Highlights:
    -----------

    ($000's, except             Three months ended      Six months ended
     per share amounts                June 30                June 30
     and operating data)           2007     2006    %     2007     2006    %
                                ---------------------------------------------
    Revenue                      56,635   37,195   52  111,560   68,198   64
    Operating earnings(1)         8,284    7,283   14   22,103   13,012   70
    Net earnings                  4,601    2,114  118   12,618    4,993  153
    Earnings per share ($)
      Basic                        0.05     0.03   67     0.15     0.06  150
      Diluted                      0.05     0.03   67     0.15     0.06  150
                                ---------------------------------------------
    Cash flow from operations    16,371    4,747  245   30,772    7,094  334
    Funds from operations(2)      9,654    7,507   29   24,907   14,429   73
    Funds from operations
     per share ($)(2)
      Basic                        0.11     0.10   10     0.30     0.18   67
      Diluted                      0.11     0.09   22     0.29     0.18   61
                                ---------------------------------------------
    Weighted average shares
     (000's)
      Basic                      84,181   78,965    7   84,060   78,506    7
      Diluted                    85,554   79,764    7   84,866   79,449    7
                                ---------------------------------------------
    Utilization
      Operating days(3)           3,049    3,215   (5)   6,123    6,171   (1)
                                ---------------------------------------------
                                ---------------------------------------------
    

    Operating days recorded by the Corporation declined slightly during the
three and six month periods ended June 30, 2007 to 3,049 and 6,123 days
compared to 3,215 and 6,171 operating days for the same periods in 2006.
Utilization of the Corporation's fleet was 71% in the second quarter of 2007
compared to 91% in 2006. The Corporation's drilling rigs were 66% utilized
during the second quarter of 2007 (2006: 91%) while the workover rigs were 93%
utilized (2006: 91%). During the first six months of 2007, utilization of the
Corporation's fleet was 73% compared to 89% in 2006. The Corporation's
drilling rigs were 70% utilized during the first six months of 2007 (2006:
88%) while the workover rigs were 84% utilized (2006: 93%). The primary
drivers for the decline in operating days were: seven workover rigs in
Venezuela and three drilling rigs in the United States which operated under
dry-lease contracts during the first half of 2006 were stacked during the
first half of 2007; two drilling rigs which started new contracts in Colombia
partway through the second quarter of 2007 were active throughout the first
six months of 2006; and substantially lower workover activity in Ecuador as a
result of labour unrest and a government transition during the first quarter
of 2007. These developments were offset by the resumption of activity of a
drilling rig in Venezuela which was idle throughout all of 2006; full
utilization on 10 drilling rigs operating in the United States compared to
eight drilling rigs during the second quarter of 2006, four of which were
operated on a dry lease basis; and full utilization on seven rigs located in
Mexico. However, the Corporation's overall utilization percentage for the
three and six month periods ended June 30, 2007 was impacted by the sharp
decline in Canadian oilfield activity in the second quarter of 2007. The
Corporation's operations in Canada were negatively affected by an early and
protracted spring break-up and a significant decline in capital spending by
exploration and production companies during the second quarter. Consequently,
the eight rigs currently operated in Canada by the Corporation (excluding a
rig located, but not actively marketed in Canada) recorded utilization of 4%
and 33% during the three and six month periods ended June 30, 2007,
respectively.
    For the three months ended June 30, 2007, the Corporation's drilling
activity generated average revenue per operating day of $21,900 (2006:
$15,800) while workover activity generated average revenue per operating day
of $8,000 (2006: $4,800). Overall, average revenue per operating day increased
to $18,400 during the second quarter of 2007 from $11,600 in 2006. For the six
months ended June 30, 2007, the Corporation's drilling activity generated
average revenue per operating day of $21,100 (2006: $15,300) while workover
activity generated average revenue per operating day of $8,000 (2006: $4,600).
Overall, average revenue per operating day increased to $18,100 during the six
months ended June 30, 2007 from $11,100 in 2006.
    The increase in average revenue per operating day for drilling activity
is due to significantly higher contract day rates in the first half of 2007
compared to 2006 across all of the Corporation's operations, particularly in
Colombia and Mexico. Throughout the first half of 2006 average revenue per
operating day for drilling activity was lower because a higher proportion of
revenue was generated by four rigs operating under dry leases in the United
States, two Peru-based drilling rigs spent more time in either standby mode or
mobilizing at less than full day rates, operations in Mexico were subject to
below-market contracts, while in Venezuela a drilling rig which remained
stacked throughout 2006 resumed activity at strong day rates in the second
quarter of 2007. The increase in average revenue per operating day for
workover activity in the first half of 2007 compared to 2006 is due to the
Corporation's decision to stack seven light workover rigs in Venezuela which
were operating on a dry lease basis during the first half of 2006 combined
with day rate increases in Ecuador.
    Growth in the Corporation's North American segment continues to be the
primary driver of the increase in revenue and operating earnings in the
current year. The Corporation's North American segment generated $25.0 million
in revenue and $4.7 million (19% of revenue) in operating earnings during the
second quarter of 2007, compared to $12.0 million in revenue and $1.5 million
(12% of revenue) in operating earnings in 2006, an increase of 108% and 221%
respectively. On a year-to-date basis, the Corporation's North American
segment generated $57.3 million in revenue and $14.9 million (26% of revenue)
in operating earnings, compared to $22.2 million in revenue and $3.4 million
(15% of revenue) in operating earnings in 2006, an increase of 158% and 338%
respectively.
    Growth in revenue and operating earnings in the North American segment
during the three and six month periods ended June 30, 2007 compared to 2006 is
due primarily to rig fleet expansion and the related economies of scale in the
United States, as well as improved days rates in Mexico. Year-to-date revenue
and operating earnings in Canada were positively impacted by seven additional
rigs, which were acquired in July 2006, compared to just two rigs during the
first half of 2006. However, growth in the Canadian fleet exacerbated the
impact of spring breakup and the depressed market conditions experienced in
the second quarter of 2007.
    The Corporation's South American segment generated $31.2 million in
revenue and $5.6 million (18% of revenue) in operating earnings during the
second quarter of 2007, compared to $25.2 million in revenue and $7.5 million
(30% of revenue) in operating earnings in 2006, an increase of 24% and a
decline of 25% respectively. On a year-to-date basis, the Corporation's South
American segment generated $53.7 million in revenue and $11.0 million (21% of
revenue) in operating earnings in 2007, compared to $46.0 million in revenue
and $13.0 million (28% of revenue) in operating earnings in 2006, an increase
of 17% and a decline of 15% respectively.
    Operating earnings as a percentage of revenue in the Corporation's South
American segment was negatively impacted by the initial mobilization of three
rigs, two in Colombia and one in Venezuela, partway through the second quarter
of 2007 to new contracts. Initial land drilling rig mobilizations are
traditionally conducted at minimal margins. Excluding the impact of these
initial mobilizations, operating earnings as a percentage of revenue in the
South American segment would have been approximately 21% for both the three
and six month periods ended June 30, 2007, compared to 30% and 28% in 2006
respectively.
    The remaining variance in operating earnings as a percentage of revenue
between the second quarter of 2007 compared to 2006 is as a result of:

    
    -   a substantial appreciation in the value of the Colombian peso
        relative to the United States dollar at a cost of approximately
        $2.2 million in the second quarter of 2007;

    -   the Corporation's operations in Ecuador recovered in the second
        quarter of 2007 from the labour unrest and government transition
        experienced in the first quarter. However, utilization in this
        operation fell short of the nearly full utilization recorded in the
        second quarter of 2006;

    -   during the second quarter of 2006, the Corporation was operating
        seven workover rigs on a dry lease basis in Venezuela and recorded
        revenue of $772,000. A deterioration in the business climate
        associated with the light workover market in Venezuela caused the
        Corporation to exit this line of business in the third quarter of
        2006 and these rigs were stacked during the first half of 2007;

    -   a rig which was active in Venezuela throughout the second quarter of
        2006 was inactive throughout all of the first quarter and part of the
        second quarter of 2007 as it was relocated to Colombia; and

    -   this segment incurred costs in advance of three rigs starting new
        contracts in Colombia and Venezuela.

    These events were offset by:

    -   an improvement in profitability in Peru as the two Peru-based
        drilling rigs recorded full utilization at higher day rates compared
        to 2006 when these rigs spent more time in either standby mode or
        mobilizing at less than full day rate; and

    -   higher day rates in Colombia compared to 2006.
    

    On a sequential basis, revenue grew by 3% or $1.7 million to $56.6 in the
second quarter of 2007 compared to $54.9 million in the first quarter of 2007,
while operating earnings declined by 40%, or $5.5 million, to $8.3 million
(15% of revenue) from $13.8 million (25% of revenue) in the first quarter of
2007.
    For the three months ended June 30, 2007, the Corporation generated
average revenue per operating day of $18,400 compared to $17,900 per day
during the first quarter of 2007. The Corporation's drilling activity
generated average revenue per operating day of $21,900 compared to $20,300 per
day during the first quarter of 2007, while workover activity generated
average revenue per operating day of $8,000 compared to $8,100 per day during
the first quarter of 2007. The primary driver for the quarter-over-quarter
increase in average revenue per operating day for drilling activity was the
resumption of activity under new contracts on two rigs relocated to Colombia
during the first quarter of 2007. This was offset slightly by the switchover
of the Ecuador drilling rig into workover mode and by small day rate declines
in Canada.
    Utilization of the Corporation's rig fleet was 71% during the quarter
ended June 30, 2007, compared to 75% in the first quarter of 2007 as the
Corporation generated 3,049 operating days in the second quarter of 2007
compared to 3,074. Utilization in the Corporation's South American segment
improved to 95% in the second quarter of 2007 compared to 79% in the first
quarter of 2007. This improvement is due to nearly full utilization of the
Corporation's workover rigs located in Ecuador, the resumption of activity on
two drilling rigs which were relocated to Colombia during the first quarter of
2007, and the start of activity on a drilling rig in Venezuela which was idle
throughout the first quarter. Conversely, utilization in the Corporation's
North American segment declined to 53% in the second quarter of 2007 compared
to 72% in the first quarter of 2007. The Corporation recorded utilization of
71% and 100% on its drilling rigs located in the United States and Mexico,
respectively. However, utilization in these two countries was offset by very
low utilization in the Corporation's Canadian operation. Operations in Canada
recorded utilization of 4% (excluding a rig located, but not actively
marketed, in Canada) in the second quarter of 2007 compared to 70% in the
first quarter of 2007. The level of utilization realized by the Corporation's
Canadian operation was significantly less than in recent years due to the
lowest level of Canadian oilfield activity experienced in several years
compounded by an early and prolonged spring breakup. Using the Canadian
drilling industry utilization standard of spud to rig release, in the second
quarter of 2007 the Corporation's Canadian operation recorded utilization of
4% compared to industry drilling rig utilization of 16%(4). On a year-to-date
basis, the utilization realized by the Corporation's Canadian operation was
33% compared to industry drilling rig utilization of 37%(4). The Corporation's
Canadian rigs recorded lower utilization than the industry average as they
were operating in areas that are subject to longer spring-breakup conditions
and because the Corporation's client base in Canada is comprised primarily of
smaller exploration and production companies which have curtailed their
activities to a greater extent than larger corporations.
    The Corporation's North American segment generated $25.0 million in
revenue and $4.7 million (19% of revenue) in operating earnings during the
second quarter of 2007, compared to $32.4 million in revenue and $10.1 million
(31% of revenue) in operating earnings during the first quarter of 2007, a
decline of 23% and 53% respectively.
    The primary reasons for the decline in revenue and operating earnings in
this segment in the second quarter compared to the first quarter are:

    
    -   the significant decline in utilization in the Corporation's Canadian
        operation for the reasons discussed previously. The Corporation's
        Canadian operation accounted for $4.7 million of the $5.4 million
        variance in this segment's operating earnings in the second quarter
        compared to the first, as the low level of utilization combined with
        scheduled spring maintenance put this operation into a loss position
        for the quarter;

    -   some unusual and significant repairs and maintenance costs were
        incurred in the United States; and

    -   the operation in the United States continued to incur startup costs
        to develop its infrastructure in advance of the five ATS(TM) drilling
        rigs starting to deploy in the third quarter of 2007. These costs
        offset the positive second quarter contribution from two rigs
        deployed during the first quarter of 2007.
    

    The Corporation's South American segment generated $31.2 million in
revenue and $5.6 million (18% of revenue) in operating earnings during the
second quarter of 2007, compared to $22.5 million in revenue and $5.4 million
(24% of revenue) in operating earnings during the first quarter of 2007, an
increase of 38% and 4% respectively.
    Operating earnings as a percentage of revenue in the Corporation's South
American segment was negatively impacted by the initial mobilization of three
rigs, two in Colombia and one in Venezuela, to new contracts partway through
the second quarter of 2007. As stated previously, initial land drilling rig
mobilizations are traditionally conducted at minimal margins. Excluding the
impact of these initial mobilizations, operating earnings as a percentage of
revenue in the South American segment would have been approximately 21% in the
second quarter compared to 24% in the first quarter.
    The remaining variance in operating earnings as a percentage of revenue
between the second and first quarters of 2007 are as a result of:

    
    -   a substantial appreciation in the value of the Colombian peso
        relative to the United States dollar at a cost of approximately
        $1.5 million in the second quarter of 2007 compared to the first
        quarter; and

    -   this segment incurred costs in advance of three rigs starting new
        contracts in Colombia and Venezuela during the second quarter.

    These events were offset by:

    -   the recovery of activity in Ecuador in the second quarter of 2007
        from the labour unrest and government transition experienced in the
        first quarter; and

    -   the resumption of activity partway through the second quarter on
        three rigs which were mobilized to new contracts in Colombia and
        Venezuela.

    Operating Data for the Period:
    ------------------------------

                                                 Three months ended June 30
                                                2007     2006   Change     %
                                            ---------------------------------
    Revenue ($000's)
      South America                           31,160   25,176    5,984    24
      North America                           24,974   12,019   12,955   108
                                            ---------------------------------
                                              56,134   37,195   18,939    51
                                            ---------------------------------
      Corporate and Other                        501        -      501  NM(5)
                                            ---------------------------------
                                              56,635   37,195   19,440    52
                                            ---------------------------------
    Revenue per operating day ($000's)
      South America                             18.0     11.4      6.6    58
      North America                             19.0     11.9      7.1    60
                                            ---------------------------------
      Weighted Average                          18.4     11.6      6.8    59
                                            ---------------------------------
    Operating days(6)
      South America                            1,732    2,206     (474)  (21)
      North America                            1,317    1,009      308    31
                                            ---------------------------------
                                               3,049    3,215     (166)   (5)
                                            ---------------------------------
    Available rig days(6)
      South America                            1,827    2,457     (630)  (26)
      North America                            2,464    1,078    1,386   129
                                            ---------------------------------
                                               4,291    3,535      756    21
                                            ---------------------------------
    Utilization (%)                              71%      91%
                                            ------------------


                                                  Six months ended June 30
                                                2007     2006   Change     %
                                            ---------------------------------
    Revenue ($000's)
      South America                           53,725   46,012    7,713    17
      North America                           57,334   22,186   35,148   158
                                            ---------------------------------
                                             111,059   68,198   42,861    63
                                            ---------------------------------
      Corporate and Other                        501        -      501    NM
                                            ---------------------------------
                                             111,560   68,198   43,362    64
                                            ---------------------------------
    Revenue per operating day ($000's)
      South America                             17.3     10.7      6.6    62
      North America                             19.0     11.8      7.2    61
                                            ---------------------------------
      Weighted Average                          18.1     11.1      7.0    63
                                            ---------------------------------
    Operating days (6)
      South America                            3,108    4,294   (1,186)  (28)
      North America                            3,015    1,877    1,138    61
                                            ---------------------------------
                                               6,123    6,171      (48)   (1)
                                            ---------------------------------
    Available rig days (6)
      South America                            3,567    4,947   (1,380)  (28)
      North America                            4,838    2,020    2,818   140
                                            ---------------------------------
                                               8,405    6,967    1,438    21
                                            ---------------------------------
    Utilization (%)                              73%      89%
                                            ------------------
    

    Other Financial Information:
    ----------------------------

    Working Capital and Funds from Operations:

    The financial results achieved during the first six months of 2007
reflect the Corporation's aggressive capital expansion and resulting increase
in activity levels, as well as day rate improvements compared to 2006.
    The increase in Saxon's fleet size, the continuing evolution of the
Corporation's fleet towards drilling activity compared to 2006, and the
increase in average revenue per operating day from long-term contracts offset
the decline in utilization resulting in a 29% increase in funds generated from
operations during the second quarter of 2007 to $9.7 million ($0.11 per
diluted share) from $7.5 million ($0.09 per diluted share) in 2006. On a
year-to-date basis, funds generated from operations increased by 73% to
$24.9 million ($0.29 per diluted share) from $14.4 million ($0.18 per diluted
share).
    Working capital at June 30, 2007 was $31.2 million compared to
$12.1 million at December 31, 2006. This increase reflects the decline in the
combined current portion of the Corporation's revolving credit facility
("Revolver") and term debt facilities to $5.6 million at June 30, 2007,
compared to $22.6 million at December 31, 2006. The decline in the combined
current portion is due to the fact that on June 22, 2007, the Corporation
renegotiated the terms of the Revolver and Saxon's principal term debt
facility ("Term") including extending the term of the Revolver from 364 days
to two years along with a principal repayment holiday for the Term to May
2008, at which time Saxon will restart principal repayments in 11 quarterly
installments. Excluding the current portion of the Revolver, working capital
at December 31, 2006 was $19.9 million.
    The Corporation also increased the borrowing capacity of the Revolver
from $65.0 million to $100.0 million and upsized the capacity under the Term
by an additional $20.0 million. The Corporation has until August 21, 2007 to
draw the additional funds under the Term. Once drawn, the balance owed by
Saxon under the Term will be $68.1 million. The Corporation also has a $4.7
million line of credit with a Canadian chartered bank. No funds were drawn on
the facility at June 30, 2007.
    Cash on hand at June 30, 2007 was $16.1 million compared to $10.5 million
at December 31, 2006, an increase of $5.6 million.

    Financing Activities:

    During the three and six month periods ended June 30, 2007, the
Corporation made repayments on its term debt facilities of $3.7 million and
$7.4 million respectively, resulting in a balance owed under these facilities
of $52.8 million.
    During the three and six month periods ended June 30, 2007, the
Corporation made draws of $4.0 million and $14.0 million respectively under
its Revolver, for a balance owed of $45.0 million as at June 30, 2007
(December 31, 2006: $31.0 million). These draws were made primarily to finance
the ongoing construction of new drilling rigs for deployment under long-term
contracts.

    Investing Activities:

    During the three and six month periods ended June 30, 2007 the
Corporation invested $12.3 million and $28.9 million respectively in property
and equipment as follows:

    
    -   $10.0 million and $25.0 million respectively on the construction of
        new drilling rigs for deployment under long term contracts; and

    -   $2.3 million and $3.9 million respectively on various capital
        upgrades to the Corporation's existing asset base.
    

    For the twelve months ended December 31, 2007 and after taking account of
the recent new rig announcements plus the strength of the Colombian peso and
the Canadian dollar against the US dollar, the Corporation now expects its
capital investments to be between $65.0 million and $70.0 million.

    Outlook:
    --------

    The second quarter presented the Corporation with a number of challenges
some of which will persist over the months to come:

    
    -   the Canadian oilfield drilling market is anticipated to remain soft
        for the balance of 2007 due to a weak outlook for natural gas prices.
        While Saxon expects that activity levels will improve from those of
        the second quarter, it is clear that day rate compression will
        continue in this market;

    -   the sudden appreciation in the Colombian peso against the U.S. dollar
        damaged our results in Colombia due to the mismatch between the
        currency of our revenue and costs in that country. This issue will be
        dealt with over the coming months but in the mean time will continue
        to have an effect on the results of our Colombian operation if the
        peso continues with its current strength;

    -   the roll out of the remaining four ATS(TM) rigs will now be further
        delayed due primarily to the lack of qualified personnel available to
        work on the complex electrical and instrumentation programming phases
        of their construction. We now expect the second ATS(TM) rig to
        commence operations in September 2007 with the balance to follow at
        the rate of one per month thereafter; and

    -   political issues in Ecuador may continue to create obstacles to the
        efficient operations of our customers in that country.
    

    Despite these issues the Corporation still expects to exit 2007 with
revenues in the range of $230 million to $240 million. However the margins
associated with this revenue are likely to be lower.

    While it is a reality that these issues will impact the short term
outlook for the Corporation in the longer term the outlook still looks bright.
We will continue to build upon the momentum established over the past
18 months albeit at a slightly modified pace. In particular:

    
    -   revenue is expected to increase in Colombia in the third quarter of
        2007 as two rigs which commenced operations part way through the
        second quarter of 2007 are expected to operate well into 2008.
        Furthermore the rollover of contracts in Colombia will allow the
        Corporation to further mitigate its foreign currency risk in that
        country;

    -   the Joint Venture in Mexico continues to thrive and we expect to
        deploy the two remaining rigs for the recently announced expansion
        into that country in the latter part of the third quarter. Further
        growth opportunities will also be aggressively pursued;

    -   although the new ATS(TM) rigs in the U.S. are commencing operations
        later than planned this is merely a deferral of revenue and the
        Corporation expects to generate a full year of drilling activity in
        2008 and beyond from the newly deployed rigs;

    -   operations in Peru are expected to remain steady as both rigs in the
        country are anticipated to be fully utilized, as are Saxon's
        operations in Venezuela. In addition the Ecuador government seems
        determined to improve oil and gas production by eradicating the
        current bureaucratic delays; and

    -   in Canada, activity is expected to improve in early 2008 as lower
        operating costs will attract higher E&P investment. Although day
        rates may take some time to recover, the impact of this market will
        be mitigated by Saxon's increasing geographic diversity.
    

    Saxon remains focused on its strategy of deploying technologically
advanced equipment into a diverse number of geographic markets. Once the
remaining four ATS(TM) rigs and the three new rigs destined for Mexico are
deployed, the Corporation will have a total North American rig count of 38
(33 net), and a fleet of 21 rigs (20.5 net) in South America, comprised of 50
(44.5 net) drilling rigs and 9 workover rigs for a total of 59 (53.5 net). The
Corporation will also continue to actively pursue opportunities in its current
areas of operation as well as other markets as they arise and believes that it
has the financial capacity and expertise to take advantage of such
opportunities.

    
    Notes:
    ------

    1.  Operating earnings is not a recognized measure under Canadian
        Generally Accepted Accounting Principles ("GAAP"). Management
        believes that in addition to net earnings, operating earnings is a
        useful supplemental measure as it provides an indication of the
        results generated by the Corporation's principal business activities
        prior to consideration of how those activities are financed, how the
        results are taxed in various jurisdictions, or how the results are
        impacted by the accounting standards associated with the
        Corporation's stock-based compensation plans. Investors should be
        cautioned that operating earnings should not be construed as an
        alternative to net earnings determined in accordance with GAAP as an
        indicator of the Corporation's performance. The Corporation's method
        of calculating operating earnings may differ from other companies and
        accordingly may not be comparable to measures used by other
        companies. Operating earnings is calculated as earnings before income
        taxes plus or minus financial expense or income, plus stock-based
        compensation expense.
    2.  Neither funds from operations nor funds from operations per share are
        recognized measures under GAAP. Management believes that in addition
        to cash flow from operations, funds from operations is a useful
        supplemental measure as it provides an indication of the cash flow
        generated by the Corporation's principal business activities. Readers
        should be cautioned that funds from operations should not be
        construed as an alternative to cash flow from operations determined
        in accordance with GAAP as an indicator of the Corporation's
        performance. The Corporation's method of calculating funds from
        operations may differ from other companies and accordingly may not be
        comparable to measures used by other companies. Funds from operations
        is calculated as cashflow from operations before changes in non-cash
        working capital.
    3.  Operating days is not a recognized measure under GAAP. Management
        believes that in addition to net earnings, operating days is a useful
        supplemental measure as it provides an indication of the utilization
        of the Corporation's asset base. The Corporation's method of
        calculating operating days may differ from other companies and may
        not be comparable to measures used by other companies. Operating days
        is the total of all drilling, completion, workover, mobilization,
        standby and other revenue days in the period.
    4.  Source "CAODC."
    5.  Not measurable or meaningful.
    6.  Net to the Corporation.


    Consolidated Balance Sheets:
    ----------------------------

    (Unaudited - $000's)                               June 30,  December 31,
                                                          2007          2006
                                                     ------------------------
    Assets
    Current assets:
      Cash and cash equivalents                         16,130        10,455
      Accounts receivable                               54,160        57,001
      Prepaid expenses and other deposits                4,008         3,040
                                                     ------------------------
                                                        74,298        70,496
    Property and equipment                             321,931       298,727
    Other receivables                                    2,505             -
    Intangible assets                                    1,629           460
    Goodwill                                             2,919         2,219
    Deferred financing charges                               -         2,575
                                                     ------------------------
                                                       403,282       374,477
                                                     ------------------------
                                                     ------------------------
    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities          28,592        30,029
      Income and other taxes payable                     8,852         5,490
      Current portion of long-term debt                  5,558        22,643
      Current portion of capital lease obligations         101           192
                                                     ------------------------
                                                        43,103        58,354
    Long-term debt                                      90,176        68,639

    Capital lease obligations                               42             -
    Future income tax liability                            424           269
    Shareholders' equity:
      Share capital                                    216,482       213,950
      Share purchase warrants                            7,118         7,118
      Contributed surplus                               13,857        12,720
      Retained earnings                                 28,502        15,884
      Accumulated other comprehensive income (loss)      3,578        (2,457)
                                                     ------------------------
                                                        32,080        13,427
                                                     ------------------------
      Total shareholders' equity                       269,537       247,215
                                                     ------------------------
                                                       403,282       374,477
                                                     ------------------------
                                                     ------------------------



    Consolidated Statements of Operations and Retained Earnings:
    ------------------------------------------------------------

    (Unaudited - $000's except            Three months         Six months
     per share amounts)                   ended June 30       ended June 30
                                          2007      2006      2007      2006
                                      ---------------------------------------

    Revenue                             56,635    37,195   111,560    68,198
    Expenses:
      Direct operating                  36,958    23,522    67,692    42,037
      General and administrative         5,922     3,719    11,084     7,577
      Stock-based compensation           1,168     1,099     2,178     1,940
      Accelerated stock-based
       compensation                          -     1,285         -     1,285
      Depreciation and amortization      4,974     3,080    10,125     6,018
      Foreign exchange (gain)              710      (217)      872      (228)
      Financial expense                  1,554       949     3,174     1,647
      Gain on disposal of property
       and equipment                      (213)     (192)     (316)     (218)
                                      ---------------------------------------
                                        51,073    33,245    94,809    60,058
                                      ---------------------------------------

    Earnings before income taxes         5,562     3,950    16,751     8,140
    Income taxes
      Current                            2,056     1,863     4,265     2,969
      Future (reduction)                (1,095)      (27)     (132)      178
                                      ---------------------------------------
                                           961     1,836     4,133     3,147
                                      ---------------------------------------
    Net earnings                         4,601     2,114    12,618     4,993
    Retained earnings,
     beginning of period                23,901     3,110    15,884       231
                                      ---------------------------------------
    Retained earnings, end of period    28,502     5,224    28,502     5,224
                                      ---------------------------------------
                                      ---------------------------------------
    Net earnings per share:
      Basic                               0.05      0.03      0.15      0.06
      Diluted                             0.05      0.03      0.15      0.06
                                      ---------------------------------------
                                      ---------------------------------------


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (Unaudited - $000's)
                                          Three months         Six months
                                          ended June 30       ended June 30
                                          2007      2006      2007      2006
                                      ---------------------------------------
    Net earnings                         4,601     2,114    12,618     4,993
    Unrealized gains recorded on
     translation of assets and
     liabilities of self-sustaining
     operations denominated in
     foreign currency                    5,349       684     6,035       426
                                      ---------------------------------------
    Comprehensive income                 9,950     2,798    18,653     5,419
                                      ---------------------------------------
                                      ---------------------------------------



    Consolidated Statements of Cashflows:
    -------------------------------------

    (Unaudited - $000's)                  Three months         Six months
                                          ended June 30       ended June 30
                                          2007      2006      2007      2006
                                      ---------------------------------------

    Cash provided by (used in):
    Operating activities:
      Net earnings                       4,601     2,114    12,618     4,993
      Items not involving cash:
        Stock-based compensation         1,168     1,099     2,178     1,940
        Accelerated stock-based
         compensation                        -     1,285         -     1,285
        Depreciation and amortization    4,974     3,228    10,125     6,251
        Other                              219         -       434         -
        Future income tax (reduction)   (1,095)      (27)     (132)      178
        Gain on disposal of property
         and equipment                    (213)     (192)     (316)     (218)
                                      ---------------------------------------
                                         9,654     7,507    24,907    14,429
      Change in non-cash
       working capital                   6,717    (2,760)    5,865    (7,335)
                                      ---------------------------------------
                                        16,371     4,747    30,772     7,094

    Financing activities:
      Increase in long-term debt           275    29,734     6,572    46,797
      Issue of share capital             1,152    18,610     1,491    19,945
      Restricted cash                        -     3,452         -     1,922
      Deferred debt financing costs       (300)     (877)     (532)   (1,709)
      Intangible assets                   (763)        -      (763)        -
      Decrease in capital lease
       obligations                         (46)      (92)      (58)     (187)
      Change in non-cash working
       capital                               -         -         -      (171)
                                      ---------------------------------------
                                           318    50,827     6,710    66,597

    Investing activities:
      Restricted cash                        -   (55,186)        -   (55,186)
      Additions to property
       and equipment                   (12,304)  (18,386)  (28,896)  (35,292)
      Proceeds on disposal of
       property and equipment            1,107       947     1,256     1,482
      Change in non-cash
       working capital                  (5,449)   (1,332)   (4,167)   (1,818)
                                      ---------------------------------------
                                       (16,646)  (73,957)  (31,807)  (90,814)
                                      ---------------------------------------

    Change in cash position                 43   (18,383)    5,675   (17,123)
    Cash and cash equivalents,
     beginning of period                16,087    44,537    10,455    43,277
                                      ---------------------------------------
    Cash and cash equivalents,
     end of period                      16,130    26,154    16,130    26,154
                                      ---------------------------------------
                                      ---------------------------------------

    Interest paid                        2,296     1,281     4,226     1,923
    Interest received                       90       399       116       729
    Income taxes paid                    1,255        54     2,799        54
                                      ---------------------------------------
                                      ---------------------------------------
    


    The Corporation is an emerging international oilfield services company
    that operates an established oil and gas drilling and  workover business
    focusing on providing these services to major and intermediate oil and
    gas companies in North and South America. The common shares of the
    Corporation trade on the TSX under the symbol "SES".

    Forward-Looking Information
    ---------------------------
    Certain information contained in this press release, including
information and statements which may contain words such as "could", "plans",
"should", "anticipates", "expects", "believes", "will", "forecasts", "budget"
and similar expressions and statements relating to matters that are not
historical facts are forward-looking information including, but not limited
to, information as to: future revenue and capital expenditures, including the
amount and nature thereof; oilfield service activity levels; oil and gas
prices and demand; expansion and other development trends of the oil and gas
industry; improvement in day rates; business strategy; completion of rig and
equipment construction and deployment; and expansion and growth of the
Corporation's business and operations, including the Corporation's market
share, and other such matters.
    This forward-looking information is based on certain assumptions and
analyses made by the Corporation in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances. In
particular, our assessment as to the financial performance and capital
expenditures expected for the year ending December 31, 2007 and deployment of
rigs at projected times is based upon rigs presently under contract, the
current demand for the Corporation's services plus the general oil and gas
services industry projection that the current demand should continue through
2007, the Corporation's ability to complete its capital program at the
projected times which the Corporation believes is achievable based on the
Corporation's recent experience in constructing rigs and other equipment and
representations given by manufacturers as to completion times and the
Corporation's ability to manage its costs, including capital costs, at levels
consistent with the Corporation's internal assumptions and projections, which
the Corporation believes to be conservative relative to the present costs.
However, whether actual results, performance or achievements will conform with
the Corporation's expectations and predictions expressed or implied by the
forward looking information in this press release is subject to known and
unknown risks and uncertainties which could cause actual results to differ
materially from the Corporation's expectations and predictions expressed or
implied by the forward looking information in this press release, including:
fluctuations in the price and demand of oil and gas; fluctuations in the level
of oil and gas exploration and development activities; fluctuations in the
demand for the Corporation's services; the ability of the Corporation to raise
capital; the existence of credit risk inherent within the international oil
and gas services business; competitors; technological changes and developments
in the oil and gas industry; the effects of unpredictable weather conditions
on operations and facilities; the existence of operating risks inherent in the
Corporation's services; identifying and acquiring suitable acquisition targets
on reasonable terms and successful integration of such targets when acquired;
delays in developing and constructing rigs and equipment for the Corporation
including difficulties in sourcing the services and the raw materials and
parts at reasonable prices for such rigs and equipment; political and labour
unrest and economic conditions in countries in which the Corporation does
business; foreign currency exchange rate fluctuations; general economic,
market or business conditions, including stock market volatility; changes in
laws or regulations, including taxation and environmental regulations; the
lack of availability of qualified personnel or management; other unforeseen
conditions which could impact on the use of services supplied by the
Corporation and those risks and uncertainties described in the Corporation's
continuous disclosure filings, including those referred to in the
Corporation's Management's Discussion and Analysis for the most recently
completed financial year end and in the Corporation's most recent Annual
Information Form, all of which may be found on SEDAR at www.sedar.com.
    Consequently, all of the forward-looking information contained in this
press release are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the
Corporation expressed or implied by the forward looking information in this
press release will be realized or, even if substantially realized, that they
will have the expected consequences to or effects on the Corporation or its
business operations. The Corporation assumes no obligation, except as required
by law, to update publicly any such forward-looking information, whether as a
result of new information, future events or otherwise. Readers should not
place undue reliance on forward-looking information.

    %SEDAR: 00009478E




For further information:

For further information: Dale E. Tremblay, President and C.E.O., or
Michael J. McNulty, Senior V.P. Finance and C.F.O., Saxon Energy Services
Inc., Telephone: (403) 716-4150, Fax: (403) 716-4151, www.saxonservices.com

Organization Profile

SAXON ENERGY SERVICES INC.

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