Savanna Energy Services Corp.
TSX : SVY

Savanna Energy Services Corp.

November 12, 2009 20:00 ET

Savanna Energy Releases Q3 2009 Results

CALGARY, ALBERTA--(Marketwire - Nov. 12, 2009) - Savanna Energy Services Corp. ("Savanna" or "the Company") (TSX:SVY) is an oilfield services company operating primarily in Canada and the United States. The Company's overall business is conducted through two major divisions: contract drilling and oilfield services.

FINANCIAL HIGHLIGHTS



(Stated in thousands of dollars, except per share amounts)
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
OPERATING RESULTS
Revenue 50,350 122,205 (59%) 171,189 320,355 (47%)
Operating expenses 40,208 84,207 (52%) 137,397 222,669 (38%)
Operating margin(1) 10,142 37,998 (73%) 33,792 97,686 (65%)
Net earnings(2) (4,548) 11,285 (140%) (9,839) 30,320 (132%)
Per share: basic(2) (0.06) 0.19 (132%) (0.15) 0.51 (129%)
Per share: diluted(2 (0.06) 0.19 (132%) (0.15) 0.51 (129%)

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CASH FLOWS
Operating cash flows
before changes in
working capital(1) 4,588 31,065 (85%) 16,914 78,458 (78%)
Cash paid on
acquisitions and on
the purchase of
property, equipment,
intangibles and
other assets (18,809) (44,887) (58%) (57,409) (142,675) (60%)
Dividends paid (1,977) (1,486) 33% (4,924) (5,940) (17%)

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Sep-30 Dec-31 Change
FINANCIAL POSITION AT 2009 2008
----------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------
Working capital(1) 25,653 87,680 (71%)
Property and equipment(2) 901,384 889,158 1%
Total assets(2) 983,783 1,038,231 (5%)
Long-term debt 57,263 202,274 (72%)
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OPERATIONAL HIGHLIGHTS

The downturn in the North American oil and gas industry continued to have a negative effect on the Company's operations in Q3 2009. The decrease in demand for oilfield services led to a decrease in operating days, hours and rates in the drilling and oilfield services divisions respectively compared to Q3 2008.

During Q3 2009 Savanna commenced operations in Mexico by deploying 4 rigs into the Chicontepec region. These rigs achieved 112 operating days which represents a utilization rate of nearly 100% for each rig from the time it commenced field operations. This represents the first expansion of Savanna's operations beyond Canada and the United States, however it is anticipated that the Company will continue to expand its international presence moving forward.

In Q3 2009 a drilling rig was moved from Alberta to Pennsylvania under a term contract resulting in a deployed U.S. fleet of 15 drilling rigs, after deducting 2 rigs which were transferred to the Mexican operations. This represents the Company's first contracted entry into the growing Marcellus shale play.

Savanna also moved 2 service rigs from its Canadian operations to the Company's North Dakota base in Q3 2009, increasing the total U.S. well servicing fleet to 8 rigs.

EQUIPMENT FLEET

The following table outlines the Company's drilling and service rig fleet by type of rig:



----------------------------------------------------------------------------
As at September 30, 2009 2008 Change
----------------------------------------------------------------------------
DRILLING RIGS
Heavy and ultra-heavy telescoping doubles 48 45 3
Hybrid drilling 46 46 -
Triples 2 2 -
Pipe-arm single 1 1 -
Surface/coring 9 9 -
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Total drilling rigs (gross) 106 103 3
Total drilling rigs (net)(i) 102 99 3
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SERVICE RIGS
Service rigs 66 62 4
Coil tubing service units 8 8 -
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Total service rigs (gross) 74 70 4
Total service rigs (net)(i) 72 67.5 4.5
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(i) 8 drilling rigs and 4 service rigs (2008 - 8 drilling rigs and 5 service
rigs) were owned in 50/50 limited partnerships at September 30, 2009.

The following outlines the Company's deployment of its drilling and service
rig fleet by geographic location:

----------------------------------------------------------------------------
As at September 30, 2009 2008 Change
----------------------------------------------------------------------------
DRILLING RIGS
Canada 87 88 (1)
United States 15 15 -
Mexico 4 - 4
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Total Drilling Rigs 106 103 3
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SERVICE RIGS
Canada 66 64 2
United States 8 6 2
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Total service rigs 74 70 4
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Excluded from the tables above is 1 additional heavy-duty double drilling rig Savanna has committed to construct; it will be completed in Q4 2009 and is contracted to begin working in Canada shortly after that. This drilling rig represents the 4th rig of a 4 rig build program that the Company undertook in 2008 and continued into 2009. Of the other 3 heavy-duty double drilling rigs that were completed in Q3 2009 one remained in Canada and 2 moved to work in Mexico, all under contract.

The Company also has a substantial inventory of drilling and well servicing-related rental assets and support equipment, as well as a machining and pipe-inspection facility.



CONTRACT DRILLING
(Stated in thousands of dollars, except revenue per hour)
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $ 38,172 $ 98,687 (61%) $ 130,737 $ 258,236 (49%)
Operating expenses $ 31,719 $ 68,759 (54%) $ 106,666 $ 181,604 (41%)
Operating margin(1) $ 6,453 $ 29,928 (78%) $ 24,071 $ 76,632 (69%)
Number of operating
days(i) 2,245 5,059 (56%) 6,633 12,502 (47%)
Revenue per operating
day $ 17,003 $ 19,507 (13%) $ 19,710 $ 20,656 (5%)
Number of spud to
release days(i)(ii) 1,974 4,529 (56%) 5,726 10,624 (46%)
Wells drilled(ii) 306 1,132 (73%) 1,285 2,871 (55%)
Total meters
drilled(ii) 468,602 1,215,949 (61%) 1,466,449 2,873,746 (49%)
Utilization -
Canada(ii) 19% 49% (61%) 19% 41% (54%)
Utilization -
International(ii) 41% 85% (52%) 44% 78% (44%)
Canadian industry
average
utilization(iii) 21% 48% (56%) 22% 41% (46%)
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(i) The number of operating days and number of spud to release days are
all on a net basis which means only Savanna's proportionate share of
any rigs held in 50/50 limited partnerships have been included.
(ii) Savanna reports its rig utilization based on spud to release time for
the rigs and excludes moving, rig up and tear down time, even though
revenue may be earned during this time. Savanna's rig utilization,
spud to release days, wells drilled and total meters drilled exclude
coring rigs as the operating environment is not comparable to the
Company's other drilling rigs, nor to industry utilization drivers.
However, these rigs are included in total fleet numbers.
(iii) Source of industry figures: Canadian Association of Oilwell Drilling
Contractors.


The continued downturn in the North American oil and gas industry led to a decrease in the number of operating days and day rates in the third quarter of 2009 compared to the same period in 2008 lowering overall revenue quarter over quarter despite the Company having a larger and more geographically diverse fleet. In Q3 2009 Savanna averaged a deployed fleet of 100 net rigs and exited the quarter with 102 net rigs compared to Q3 2008 when the Company operated an average fleet of 99 net rigs and exited quarter with the same.

Ignoring the effect of decreased day rates, variable operating costs per day as a percentage of revenue are consistent with Q3 2008; however the fixed portion of operating costs at current lower activity levels has had a greater impact on overall operating costs in Q3 2009 which has negatively affected operating margins. These costs are more difficult to reduce while maintaining the Company's core operating capacity; however these costs are lower on a dollar basis in Q3 2009 compared to the same period in 2008. The primary reasons for the improvement were the internal salary and wage roll backs of 2% to 26% for all non-rig related employees implemented on April 1, 2009 and the decreased wage levels recommended by the CAODC for the rig related employees which became effective on May 1, 2009. However, the decrease in activity and day rates more than offset the improvements in operating costs, lowering overall margins quarter over quarter.

On a year to date basis, downward pricing pressure and decreased industry activity coupled with relatively high operating costs in the first quarter of 2009 reduced operating margins compared to the nine months ended September 30, 2008. Since Q1 2009 Savanna has taken measures to reduce operating costs to more closely align these costs with the decreased operating activity and will continue to address operating costs in the face of anticipated activity levels going forward.



OILFIELD SERVICES
(Stated in thousands of dollars, except revenue per hour)
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $ 12,887 $ 22,984 (44%) $ 42,094 $ 59,337 (29%)
Operating expenses $ 9,338 $ 15,448 (40%) $ 32,769 $ 39,565 (17%)
Operating margin(1) $ 3,549 $ 7,536 (53%) $ 9,325 $ 19,772 (53%)
Number of operating
hours(i) 17,345 31,162 (44%) 51,795 77,757 (33%)
Revenue per hour $ 622 $ 721 (14%) $ 670 $ 756 (11%)
Utilization -
Canada(ii) 26% 56% (54%) 26% 51% (49%)
Utilization -
U.S.(ii) 58% 71% (18%) 56% 65% (14%)
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(i) The number of operating hours is on a net basis which means only
Savanna's proportionate share of any rigs held in 50/50 limited
partnerships has been included.

(ii) Utilization is based on standard hours of 3,650 per rig per year. The
utilization rate excludes the coiled tubing service units since these
units are not comparable in size or operations to the division's
service rigs. Industry average utilization figures, specific to well
servicing, are not available.


Included in the revenue for the three months ended September 30, 2009 is $2.1 million related to the rental assets acquired late in Q3 2008. Year to date rental asset revenue is $7.4 million compared to $0.5 million in Q3 2008. Of this revenue $0.8 million for the three months ended September 30, 2009 and $2.0 million for the nine months then ended is eliminated on overall consolidation as inter-segment revenue. Rental asset revenue is excluded from the per hour revenue calculations above.

The downturn in North American oil and gas industry activity resulted in a decrease in the oilfield services division's revenue and operating hours for Q3 2009 compared to the same period in 2008. The decrease in demand for oilfield services is reflected in the lower number of hours and lower hourly rate compared to Q3 2008.

For the oilfield services division, ignoring the effect of decreased hourly rates, variable operating costs per hour are lower in Q3 2009 compared to Q3 2008. The primary reason for the reduction quarter over quarter was the internal salary and wage roll backs of 2% to 26% for all non-rig related employees implemented on April 1, 2009 and a reduction in wages for all rig personnel of approximately 6% compared to Q3 2008. However as with the drilling division the fixed portion of operating costs at current lower activity levels has had a greater impact on overall operating costs in Q3 2009. These costs are more difficult to reduce while maintaining the Company's core operating capacity. Overall the decrease in activity and rates more than offset the improvements in operating costs, lowering overall margins in Q3 2009 compared to Q3 2008.

In Q3 2009 the oilfield services division's fleet size averaged 66 (64 net) service rigs, 8 coiled tubing service units and 34 boilers, compared to Q3 2008 when the division operated an average of 59 (56.5 net) service rigs, 8 coiled tubing service units, and 34 boilers. The oilfield services division exited the quarter with 66 (64 net) service rigs, 8 coiled tubing service units, and 34 boilers.

As with the drilling division, on a year to date basis downward pricing pressure and decreased industry activity have negatively affected the division's operating results. Since Q1 2009 Savanna has taken measures to reduce operating costs to more closely align these costs with the decreased operating activity and will continue to address operating costs in the face of anticipated activity levels going forward.



OTHER FINANCIAL INFORMATION
(Stated in thousands of dollars)
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
General and
administrative
expenses $ 4,785 $ 5,412 (12%) $ 15,059 $ 14,336 5%

as a % of revenue 9.5% 4.4% 116% 8.8% 4.5% 96%

Depreciation and
amortization(2) $ 8,118 $ 12,481 (35%) $ 23,600 $ 30,924 (24%)
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The decrease in general and administrative expenses in Q3 2009 compared with Q3 2008 is primarily a result of the salary and wage roll backs of 2% to 26% for all non-rig related employees implemented on April 1, 2009. The increase as a percentage of revenue in the second quarter of 2009 compared to the same period in 2008 is due to the decrease in revenues quarter over quarter. On a year to date basis, the increase reflects Savanna's expansion into new markets over the last twelve months as well as the timing of the salary roll backs being April 1, 2009.

Effective January 1, 2009, depreciation of well servicing rigs was changed to reflect an estimated useful life of 24,000 operating hours and a 20% salvage value. These rigs were previously depreciated on a straight-line basis over 10 to 15 years with a 20% salvage value. The change, while not material, has been accounted for on a retrospective basis and more closely aligns the depreciation policies with those of the Company's drilling rigs which are depreciated based on operating days. The effect of the change on individual financial line items is detailed in Note 2 at the end of this MD&A. Therefore, the overall decrease in depreciation and amortization for the three and nine months ended September 30, 2009 compared to the same periods in 2008 is primarily a result of the decrease in activity, as a large portion of the Company's assets are depreciated based on operating days or hours.

FINANCIAL CONDITION AND LIQUIDITY

Savanna's net debt(1) position at September 30, 2009 was $31.6 million. As of the date of this release, there was approximately $62.0 million drawn on the Company's committed revolving debt facility.

QUARTERLY RESULTS

In addition to other market factors, quarterly results of Savanna are markedly affected by weather patterns throughout its operating area in Canada. Historically, the first quarter of the calendar year is very active, followed by a much slower second quarter. As a result of this, the variation on a quarterly basis, particularly in the first and second quarters, can be dramatic year-over-year independent of other demand factors. The following is a summary of selected financial information of the Company for the last eight completed quarters.



Summary of Quarterly Results
(Stated in thousands of dollars, except per share amounts)

----------------------------------------------------------------------------
Three Months Ended Sep-30 Jun-30 Mar-31 Dec-31
2009 2009 2009 2008
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
Revenue 50,350 27,045 93,794 139,746
Operating expenses 40,208 26,627 70,561 98,152
Operating margin(1) 10,142 418 23,233 41,594
Operating margin %(1) 20% 2% 25% 30%
Net earnings (loss)(2) (4,548) (8,899) 3,609 (310,980)
Per share: basic(2) (0.06) (0.14) 0.06 (5.26)
Per share: diluted(2) (0.06) (0.14) 0.06 (5.26)
Total assets(2) 983,783 974,192 1,019,841 1,038,231
Long-term debt 57,263 50,872 176,501 202,274
----------------------------------------------------------------------------


----------------------------------------------------------------------------
Three Months Ended Sep-30 Jun-30 Mar-31 Dec-31
2008 2008 2008 2007
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
Revenue 122,205 48,990 149,160 101,804
Operating expenses 84,207 43,365 95,097 68,156
Operating margin (1) 37,998 5,625 54,063 33,648
Operating margin %(1) 31% 11% 36% 33%
Net earnings (loss)(2) 11,285 (6,550) 25,585 (125,637)
Per share: basic(2) 0.19 (0.11) 0.43 (2.11)
Per share: diluted(2) 0.19 (0.11) 0.43 (2.11)
Total assets(2) 1,306,339 1,234,481 1,243,159 1,180,166
Long-term debt 183,301 125,423 119,428 58,218
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OUTLOOK

There remains significant uncertainty with respect to the demand for and prices of oil and gas for the remainder of 2009, and Savanna is certainly not immune to pricing or utilization pressures caused by the oilfield services industry slow-down. However, Savanna believes it is well positioned with its high quality people and equipment, leading-edge technology and First Nations partnerships to manage the variable conditions facing the oilfield services industry. In addition Savanna has taken measures to reduce operating costs to more closely align these costs with the decreased operating activity and is continuing to address operating costs in the face of activity levels going forward which should help improve margins in a depressed market.

In Q3 2009 the Company began its first expansion of its operations beyond Canada and the United States by beginning work under an 18 month contract in Mexico. Savanna also deployed its first rig to the Marcellus shale play in Pennsylvania from Canada to work under a term contract. It is Savanna's intention to continue to expand both its U.S. and international operations going forward and the Company has allocated key personnel and resources to this undertaking.



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

-- Operating margin is defined as revenue less operating expenses.
-- Operating margin percent is defined as revenue less operating
expenses divided by revenue.
-- Operating cash flows before changes in working capital is defined as
cash flows from operating activities before changes in non-cash
working capital.
-- Working capital is defined as total current assets less total
current liabilities excluding the current portions of long-term
debt.
-- Net debt is defined as long-term debt, including the current
portions thereof, less working capital

(2) Effective January 1, 2009, depreciation of well servicing rigs was
changed to reflect an estimated useful life of 24,000 operating hours
and a 20% salvage value. These rigs were previously depreciated on a
straight-line basis over 10 to 15 years with a 20% salvage value. The
change in methodology was made to provide more relevant information by
depreciating the assets based on usage rather than straight-line over a
set number of years as such a depreciation policy did not properly match
the economic usage of the well servicing rigs. The change, while not
material, has been accounted for on a retrospective basis and more
closely aligns the depreciation policies with those of the Company's
drilling rigs which are depreciated based on operating days. As a result
of the change, the following increases (decreases) to financial
statement line items occurred:

(Stated in thousands of dollars, except per share amounts)
----------------------------------------------------------------------------
Three months Nine Months Prior
ended ended to As at As at
Sep-30 Sep-30 Sep-30 Sep-30 Jan-1 Sep-30 Dec-31
2009 2008 2009 2008 2008 2009 2008
----------------------------------------------------------------------------
$ $ $ $ $ $ $
---------------------------------------------------------------------------
Depreciation and
amortization
expense (923) 43 (2,803) (199) (74) - -
Future income
tax expense 258 (13) 785 61 23 - -
Net earnings 665 (30) 2,018 138 51 - -
Per share: basic 0.01 - 0.03 - - - -
Per diluted share 0.01 - 0.03 - - - -
Comprehensive
income 665 (30) 2,018 138 51 - -
Retained earnings
(deficit) - - - - - 2,477 459
Property and
equipment - - - - - 3,452 649
Future income tax
liability - - - - - (975) (190)
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Unaudited - Stated in thousands of dollars, except per share amounts)

----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, 2009 2008 2009 2008
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
REVENUE
Sales and services 50,350 122,205 171,189 320,355
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EXPENSES
Operating 40,208 84,207 137,397 222,669
General and administrative 4,785 5,412 15,059 14,336
Stock-based compensation 1,470 807 3,611 2,774
Depreciation and amortization(2) 8,118 12,481 23,600 30,924
Interest on long-term debt 855 1,672 3,829 4,637
Other income 609 165 211 82
----------------------------------------------------------------------------
56,045 104,744 183,707 275,422
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EARNINGS (LOSS) BEFORE INCOME TAXES(2) (5,695) 17,461 (12,518) 44,933
----------------------------------------------------------------------------

INCOME TAXES
Current (23) 623 (310) 1,512
Future(2) (1,124) 5,553 (2,369) 13,101
----------------------------------------------------------------------------
(1,147) 6,176 (2,679) 14,613
----------------------------------------------------------------------------

NET EARNINGS (LOSS)(2) (4,548) 11,285 (9,839) 30,320
----------------------------------------------------------------------------

NET EARNINGS (LOSS) PER SHARE
Basic - net earnings (loss)(2) (0.06) 0.19 (0.15) 0.51
Diluted - net earnings (loss)(2) (0.06) 0.19 (0.15) 0.51
Weighted average number of shares
outstanding (000s) 79,078 59,423 67,694 59,405
Diluted weighted average number of
shares outstanding (000s) 79,078 59,483 67,694 59,418
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
(Unaudited - Stated in thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, 2009 2008 2009 2008
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
Retained earnings (deficit),
beginning of period(2) (127,198) 183,695 (118,960) 167,626
Dividends (1,977) (1,486) (4,924) (4,452)
Net earnings (loss)(2) (4,548) 11,285 (9,839) 30,320
----------------------------------------------------------------------------
Retained earnings (deficit), end
of period(2) (133,723) 193,494 (133,723) 193,494
----------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
(Unaudited - Stated in thousands of dollars)

----------------------------------------------------------------------------
Sep-30 Dec-31
2009 2008
----------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------
ASSETS
Current
Cash 4,919 4,178
Accounts receivable 54,578 113,325
Income taxes receivable 1,878 7,420
Inventory 4,449 6,032
Prepaid expenses and deposits 1,483 1,877
----------------------------------------------------------------------------
67,307 132,832
Notes receivable 7,180 7,350
Property and equipment(2) 901,384 889,158
Intangibles and other assets 7,912 8,891
----------------------------------------------------------------------------
983,783 1,038,231
----------------------------------------------------------------------------

LIABILITIES
Current
Bank indebtedness 11,762 585
Accounts payable and accrued liabilities 29,892 44,567
Current portion of long-term debt 2,043 18,056
----------------------------------------------------------------------------
43,697 63,208
Deferred net revenue 1,647 1,647
Long-term debt 55,220 184,218
Future income taxes(2) 76,507 80,484
----------------------------------------------------------------------------
177,071 329,557
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital 911,764 789,841
Contributed surplus 19,443 16,483
Deficit(2) (133,723) (118,960)
----------------------------------------------------------------------------
797,484 687,364
Accumulated other comprehensive income 9,228 21,310
----------------------------------------------------------------------------
806,712 708,674
----------------------------------------------------------------------------
983,783 1,038,231
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Stated in thousands of dollars)

----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, 2009 2008 2009 2008
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings (loss)(2) (4,548) 11,285 (9,839) 30,320
Items not affecting cash:
Stock-based compensation 1,470 807 3,611 2,774
Depreciation and amortization(2) 8,118 12,481 23,600 30,924
Amortization of other assets 594 315 1,690 754
Future income taxes(2) (1,124) 5,553 (2,369) 13,101
Unrealized foreign exchange gain - - - (254)
Loss on disposal of assets 78 624 221 839
----------------------------------------------------------------------------
4,588 31,065 16,914 78,458
Change in non-cash working capital (17,045) (31,783) 49,310 (49,665)
----------------------------------------------------------------------------
Cash flows from operations (12,457) (718) 66,224 28,793
----------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Shares issued, net of share issue
costs (192) 688 120,031 2,552
Shares repurchased - - - (4,137)
Issuance of long-term debt 10,000 60,000 10,000 190,351
Repayment of long-term debt (813) (3,277) (146,406) (66,170)
Dividends paid (1,977) (1,486) (4,924) (5,940)
Collection of notes receivable 170 - 170 -
Change in working capital related
to financing activities - 3 - 1,488
----------------------------------------------------------------------------
Cash flows from (used in) financing
activities 7,188 55,928 (21,129) 118,144
----------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (18,569) (44,175) (56,143)(130,899)
Proceeds on disposal of assets 81 915 927 1,903
Cash paid on acquisitions, net of
cash acquired - - - (3,504)
Purchase of intangibles and other
assets (240) (712) (1,266) (8,272)
Change in working capital related
to investing activities 2,701 (1,803) 951 (733)
----------------------------------------------------------------------------
Cash flows used in investing
activities (16,027) (45,775) (55,531)(141,505)
----------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH, NET OF
BANK INDEBTEDNESS (21,296) 9,435 (10,436) 5,432
CASH, NET OF BANK INDEBTEDNESS,
BEGINNING OF PERIOD 14,453 (11,935) 3,593 (7,932)
----------------------------------------------------------------------------

CASH, NET OF BANK INDEBTEDNESS,
END OF PERIOD (6,843) (2,500) (6,843) (2,500)
----------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited - Stated in thousands of dollars)

----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, 2009 2008 2009 2008
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------

NET EARNINGS (LOSS)(2) (4,548) 11,285 (9,839) 30,320

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation
adjustment (9,883) 678 (19,483) 678
Unrealized foreign exchange gain on
net investment hedge, net of tax
of $1,205 2,404 (1,156) 7,401 (1,156)
----------------------------------------------------------------------------

COMPREHENSIVE INCOME (LOSS)(2) (12,027) 10,807 (21,921) 29,842
----------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited - Stated in thousands of dollars)

----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, 2009 2008 2009 2008
----------------------------------------------------------------------------
$ $ $ $
----------------------------------------------------------------------------
Accumulated other comprehensive
income, beginning of period 16,707 - 21,310 -
Other comprehensive loss (7,479) (478) (12,082) (478)
----------------------------------------------------------------------------

Accumulated other comprehensive
income (loss), end of period 9,228 (478) 9,228 (478)
----------------------------------------------------------------------------


SEGMENTED INFORMATION

(Unaudited - Stated in thousands of dollars)

The Company's reportable operating segments, as determined by management, are strategic operating units that offer different products and services. The Company has three reportable operating segments: corporate, services, and drilling. The corporate segment provides management and administrative services to all its subsidiaries and their respective operations. The services segment provides well servicing services and rental equipment to the oil and gas industry. The drilling segment provides primarily contract drilling services to the oil and gas industry through both conventional and hybrid drilling rigs.



----------------------------------------------------------------------------
For the three months Inter-segment 2009
ended September 30, Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
$ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 12,887 38,172 (849) 50,210
Other - 31 109 - 140
----------------------------------------------------------------------------
- 12,918 38,281 (849) 50,350
----------------------------------------------------------------------------
OPERATING COSTS
Oilfield services - 9,338 31,719 (849) 40,208
----------------------------------------------------------------------------
REVENUE LESS
OPERATING COSTS - 3,580 6,562 - 10,142
----------------------------------------------------------------------------
Depreciation and
amortization 370 2,422 5,326 - 8,118
Interest on
long-term debt 775 24 56 - 855
Earnings before
income taxes (6,202) 697 (190) - (5,695)
Total assets 290,709 123,022 570,052 - 983,783
Capital assets(i) 22,385 164,955 721,956 - 909,296
Capital
expenditures(ii) 133 2,731 15,945 - 18,809
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three months Inter-segment 2008
ended September 30, Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
$ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 22,984 98,687 - 121,671
Other - 23 511 - 534
----------------------------------------------------------------------------
- 23,007 99,198 - 122,205
----------------------------------------------------------------------------
OPERATING COSTS
Oilfield services - 15,448 68,759 - 84,207
----------------------------------------------------------------------------
REVENUE LESS
OPERATING COSTS - 7,559 30,439 - 37,998
----------------------------------------------------------------------------
Depreciation and
amortization(2) 225 2,737 9,519 - 12,481
Interest on
long-term debt 1,469 56 147 - 1,672
Earnings before
income taxes(2) (7,089) 4,451 20,099 - 17,461
Total assets(2) 259,184 132,478 914,677 - 1,306,339
Goodwill - 15,789 293,836 - 309,625
Capital assets(2),(i) 19,953 156,869 688,495 - 865,317
Capital
expenditures(ii) 1,533 23,833 19,969 - 45,335
----------------------------------------------------------------------------



SEGMENTED INFORMATION
(Unaudited - Stated in thousands of dollars)
----------------------------------------------------------------------------
For the nine months Inter-segment 2009
ended September 30, Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
$ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 42,094 130,737 (2,038) 170,793
Other - 98 298 - 396
----------------------------------------------------------------------------
- 42,192 131,035 (2,038) 171,189
----------------------------------------------------------------------------
OPERATING COSTS
Oilfield services - 32,769 106,666 (2,038) 137,397
----------------------------------------------------------------------------
REVENUE LESS
OPERATING COSTS - 9,423 24,369 - 33,792
----------------------------------------------------------------------------
Depreciation and
amortization 1,093 6,744 15,763 - 23,600
Interest on long-term
debt 3,452 132 245 - 3,829
Earnings before
income taxes (19,634) 1,237 5,879 - (12,518)
Total assets 290,709 123,022 570,052 - 983,783
Capital assets(i) 22,385 164,955 721,956 - 909,296
Capital
expenditures(ii) 2,754 5,119 49,536 - 57,409
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the nine months Inter-segment 2008
ended September 30, Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
$ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 59,337 258,236 - 317,573
Rig sales - 1,600 - - 1,600
Other 10 60 1,112 - 1,182
----------------------------------------------------------------------------
10 60,997 259,348 - 320,355
----------------------------------------------------------------------------
OPERATING COSTS
Oilfield services - 39,565 181,604 - 221,169
Rig sales 1,500 - - 1,500
----------------------------------------------------------------------------
- 41,065 181,604 - 222,669
----------------------------------------------------------------------------
REVENUE LESS
OPERATING COSTS 10 19,932 77,744 - 97,686
----------------------------------------------------------------------------
Depreciation and
amortization(2) 620 7,282 23,022 - 30,924
Interest on long-term
debt 3,683 184 770 - 4,637
Earnings before
income taxes(2) (18,058) 10,896 52,095 - 44,933
Total assets(2) 259,184 132,478 914,677 - 1,306,339
Goodwill - 15,789 293,836 - 309,625
Capital assets(2),(i) 19,953 156,869 688,495 - 865,317
Capital
expenditures(ii) 4,117 35,714 103,679 - 143,510
----------------------------------------------------------------------------

(i) Capital assets include property and equipment, intangibles, and other
assets.
(ii) Capital expenditures include the purchase of capital assets and
capital assets acquired through business acquisitions in exchange for
cash.


The Company operates in two different geographical areas, the breakdown of which is as follows:



SEGMENTED INFORMATION
(Unaudited - Stated in thousands of dollars)
----------------------------------------------------------------------------
For the three months ended September 30, 2009
Canada International(i) Total
----------------------------------------------------------------------------
$ $ $
----------------------------------------------------------------------------
Revenue 33,411 16,939 50,350
Total assets 768,581 215,202 983,783
Goodwill - - -
Capital assets(ii) 709,912 199,384 909,296
----------------------------------------------------------------------------

----------------------------------------------------------------------------
For the three months ended September 30, 2008
Canada International(i) Total
----------------------------------------------------------------------------
$ $ $
----------------------------------------------------------------------------
Revenue 93,086 29,119 122,205
Total assets 1,126,106 180,233 1,306,339
Goodwill 309,625 - 309,625
Capital assets(ii) 707,816 157,501 865,317
----------------------------------------------------------------------------

(i) Includes U.S. and Mexico operations.

(ii) Capital assets include property and equipment, intangibles, and other
assets.

SEGMENTED INFORMATION
(Unaudited - Stated in thousands of dollars)
----------------------------------------------------------------------------
For the nine months ended September 30, 2009
Canada International(i) Total
----------------------------------------------------------------------------
$ $ $
----------------------------------------------------------------------------
Revenue 121,085 50,104 171,189
Total assets 768,581 215,202 983,783
Goodwill - - -
Capital assets(ii) 709,912 199,384 909,296
----------------------------------------------------------------------------

----------------------------------------------------------------------------
For the nine months ended September 30, 2008
Canada International(i) Total
----------------------------------------------------------------------------
$ $ $
----------------------------------------------------------------------------
Revenue 264,544 55,811 320,355
Total assets 1,126,106 180,233 1,306,339
Goodwill 309,625 - 309,625
Capital assets(ii) 707,816 157,501 865,317
----------------------------------------------------------------------------

(i) Includes U.S. and Mexico operations.

(ii) Capital assets include property and equipment, intangibles, and
other assets.


Cautionary Statement Regarding Forward-Looking Information and Statements

Certain statements and information contained in this press release including statements related to the Company's international and domestic growth opportunities, outlook for future oil and gas demand and prices and statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "likely", "estimate", "predict", "potential", "continue", "maintain", "retain", "grow", and similar expressions and statements relating to matters that are not historical facts may constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995.

These statements are based on certain assumptions and analysis made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. In particular, the Company's expectation of improving margins coupled with retaining adequate personnel for the eventual return of more favorable industry activity while aligning its cost structure with depressed industry activity, is premised on the pricing of the Company's services remaining at or improving from present levels in respect of improving margins and the lack of mobility of its personnel to other industries at this time in respect of the retention of personnel. Whether actual results, performance or achievements will conform to the Company's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Company's expectations. Such risks and uncertainties include, but are not limited to: fluctuations in the price and demand for oil and natural gas; fluctuations in the level of oil and natural gas exploration and development activities; fluctuations in the demand for well servicing and contract drilling; the effects of weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing and contract drilling; general economic, market or business conditions; changes in laws or regulations, including taxation, environmental and currency regulations; the lack of availability of qualified personnel or management; the other risk factors set forth under the heading "Risks and Uncertainties" in the Company's 2008 Annual Report and under the heading "Risk Factors" in the Company's 2008 Annual Information Form; and other unforeseen conditions which could impact on the use of services supplied by the Company.

Consequently, all of the forward-looking information and statements made in this press release are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. Except as may be required by law, the Company assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.

OTHER

Savanna will host a conference call for analysts, investors and interested parties on Friday, November 13, 2009 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss the Company's third quarter results. The call will be hosted by Ken Mullen, Savanna's President and Chief Executive Officer and Darcy Draudson, Vice President Finance and Chief Financial Officer.

If you wish to participate in this conference call, please call 1-888-892-3255 (for participants in North America). Please call at least 10 minutes ahead of time. A webcast of the conference call can be accessed on Savanna's website under investor relations.

A replay of the call will be available until November 20, 2009 by dialing 1-800-937-6305 and entering passcode 291488.

Savanna Energy Services Corp. is a leading North American contract drilling and oilfield services company providing a broad range of drilling, well servicing and related services with a focus on fit for purpose technologies and industry-leading aboriginal relationships.

Contact Information

  • Savanna Energy Services Corp.
    Ken Mullen
    President and Chief Executive Officer
    (403) 503-9990
    (403) 267-6729 (FAX)
    or
    Savanna Energy Services Corp.
    Darcy Draudson
    Vice President Finance and Chief Financial Officer
    (403) 503-9990
    (403) 267-6729 (FAX)
    www.savannaenergy.com