Mr. Michael Gray reports

ENSIGN ENERGY SERVICES INC. REPORTS 2023 THIRD QUARTER RESULTS

Ensign Energy Services Inc. has released its financial results for the third quarter of 2023.

Third quarter highlights:

• Revenue for the third quarter of 2023 was $444.4-million, a 3-per-cent increase from the third quarter of 2022 revenue of $432.6-million.
• Revenue by geographic area:
  • Canada -- $108.3-million, 24 per cent of total;
  • United States -- $257.7-million, 58 per cent of total;
  • International -- $78.4-million, 18 per cent of total.
• Canadian drilling recorded 3,262 operating days in the third quarter of 2023, a 19-per-cent decrease from 4,009 operating days in the third quarter of 2022. Canadian well servicing recorded 10,624 operating hours in the third quarter of 2023, a 17-per-cent decrease from 12,857 operating hours in the third quarter of 2022.
• United States drilling recorded 3,581 operating days in the third quarter of 2023, a 27-per-cent decrease from 4,937 operating days in the third quarter of 2022. United States well servicing recorded 32,397 operating hours in the third quarter of 2023, consistent with 32,877 operating hours in the third quarter of 2022.
• International drilling recorded 1,265 operating days in the third quarter of 2023, a 27-per-cent increase from 996 operating days recorded in the third quarter of 2022.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter of 2023 was $117.3-million, an 11-per-cent increase from adjusted EBITDA of $105.4-million for the third quarter of 2022.
• Funds flow from operations for the third quarter of 2023 increased 16 per cent to $119.6-million from $103.3-million in the third quarter of the prior year.
• General and administrative expense increased 9 per cent and totalled $13.9-million (3.1 per cent of revenue) in the second quarter of 2023, compared with $12.8-million (2.9 per cent of revenue) in the third quarter of 2022.
• Total debt, net of cash, has been reduced by $143.7-million since Dec. 31, 2022. The company's debt reduction for 2023 is targeted to be approximately $200-million. Its targeted debt reduction for the period beginning 2023 to the end of 2025 is approximately $600-million. If industry conditions change, these targets could be increased or decreased.
• Capital expenditures for the third quarter of 2023 were $37.9-million, consisting of $1.9-million in upgrade capital and $36-million in maintenance capital. During the third quarter of 2023, the company received sale proceeds of $8.9-million, resulting in net capital expenditures of $29-million. Capital expenditures for the 2023 year are targeted to be in line with prior guidance of approximately $157-million related to maintenance capital and $18.3-million in customer financed upgrade capital projects.
• Following Sept. 30, 2023, the company agreed on a three-year $369-million term credit facility agreement with its syndicate of lenders. Concurrently with the new term facility agreement, the company has also amended and extended the existing $900-million credit facility. The maturity date of the credit facility has been extended for three years to October, 2026. The company now expects the blended interest rate between the term facility and credit facility for the fiscal year 2024 to be approximately 8 per cent. The credit facility was classified as a current liability during the third quarter and will be reclassified to long term, as well as a portion of the term facility in the fourth quarter. The senior notes will be redeemed during the fourth quarter of 2023.
• The company is pleased to announce the appointment of Karl Ruud to the company's board of directors, effective Nov. 1, 2023, as part of the company's continuing board succession planning. Mr. Ruud most recently served as president and chief executive officer of a Calgary-based energy service company until his retirement in 2021.

Overview

Revenue for the third quarter of 2023 was $444.4-million, a 3-per-cent increase from $432.6-million in revenue for the third quarter of 2022. Revenue for the nine months ended Sept. 30, 2023, was $1,361.2-million, an increase of 23 per cent from revenue for the nine months ended Sept. 30, 2022, of $1,109.3-million.

Adjusted EBITDA totalled $117.3-million (63 cents per common share) in the third quarter of 2023, 11 per cent higher than adjusted EBITDA of $105.4-million (54 cents per common share) in the third quarter of 2022. For the first nine months ended Sept. 30, 2023, adjusted EBITDA totalled $361.2-million ($1.96 per common share), 48 per cent higher than adjusted EBITDA of $243.7-million ($1.37 per common share) in the first nine months ended Sept. 30, 2022.

Net loss attributable to common shareholders for the third quarter of 2023 was $5.2-million (three cents per common share) compared with a net income attributable to common shareholders of $17.8-million (11 cents per common share) for the third quarter of 2022. Net income attributable to common shareholders for the nine months ended Sept. 30, 2023, was $9.3-million (five cents per common share), compared with a net loss attributable to common shareholders of $3.8-million (two cents per common share) for the nine months ended Sept. 30, 2022.

Funds flow from operations increased 16 per cent to $119.6-million (65 cents per common share) in the third quarter of 2023 compared with $103.3-million (53 cents per common share) in the third quarter of the prior year. Funds flow from operations increased 36 per cent to $354.7-million ($1.93 per common share) for the nine months ended Sept. 30, 2023, compared with $261.6-million ($1.47 per common share) for the nine months ended Sept. 30, 2022.

The outlook for oil field services continues to be constructive despite the recent volatility in global crude oil and natural gas commodity prices and uncertain global economic and geopolitical conditions. Global inflationary pressures, recession risk, moderated economic growth and geopolitical tensions have continued to impact global commodity prices, reinforce producer and contractor capital discipline, and add uncertainty to the macroeconomic outlook over the short term. Furthermore, the recent decline in the United States rig count has contributed to activity uncertainty and rig rate fluctuations over the short term. However, despite these short-term headwinds, global demand for crude oil continues to increase year over year and OPEC-plus nations continue to maintain moderated supply in response to market conditions.

Over the near term, there remains uncertainty regarding several factors that may impact the future demand for crude oil, natural gas, commodity prices and the demand for oil field services, including but not limited to, the impacts of continuing hostilities in Ukraine on the global economy, the impact of recent geopolitical developments in the Middle East on global crude oil markets, overall global economic health and recessionary pressures in certain environments.

The company's operating days declined in the three months ended Sept. 30, 2023, and in the nine months ended Sept. 30, 2023, when compared with the same periods in 2022. Operating activity was negatively impacted in the third quarter of 2023 due to volatile commodity prices, customer capital discipline, and acquisition and merger activity between oil and natural gas producers in both Canada and the United States operating regions.

The average United States-dollar exchange rate was $1.35 for the nine months ended Sept. 30, 2023 (2022 -- $1.28), versus the Canadian dollar, an increase of 5 per cent compared with the same period of 2022.

The company's working capital at Sept. 30, 2023, was a deficit of $1,165.1-million, compared with a deficit of $707.8-million at Dec. 31, 2022. The deficit increase was largely due to the company's revolving credit facility and unsecured senior notes being reclassified as current. Subsequent to Sept. 30, 2023, the company agreed to a three-year $369-million term credit facility with its syndicate of lenders. Concurrently, the company also amended and extended the existing $900-million credit facility. The maturity date of the credit facility has been extended for three years to October, 2026.

The company's available liquidity, consisting of cash and available borrowings under its $900-million the credit facility, was $219.3-million at Sept. 30, 2023.

Conference call

A conference call will be held to discuss the company's third quarter 2023 results at 10 a.m. MDT/12 p.m. EDT on Friday, Nov. 3, 2023. The conference call number is 1-416-764-8659 (in Toronto) or 1-888-664-6392 (outside Toronto). The conference call reservation number is 62449975. A taped recording of the conference call will be available until Nov. 10, 2023, by dialling 1-416-764-8677 (in Toronto) or 1-888-390-0541 (outside Toronto) and entering the reservation number 449975, followed by the number sign. A live broadcast may be accessed through the company's website.

About Ensign Energy Services Inc.

Ensign Energy Services is an international oil field services contractor and is listed on the Toronto Stock Exchange under the trading symbol ESI.

We seek Safe Harbor.