ENSIGN ENERGY SERVICES INC.
2017 ANNUAL REPORT
drilling | directional drilling | testing | well servicing
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................... 1
MANAGEMENT’S REPORT ............................................................................................................ 20
INDEPENDENT AUDITOR’S REPORT .............................................................................................. 21
CONSOLIDATED FINANCIAL STATEMENTS .................................................................................... 23
SHARE TRADING SUMMARY ......................................................................................................... 47
10 YEAR FINANCIAL INFORMATION .............................................................................................. 48
CORPORATE INFORMATION ......................................................................................................... 50
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) for Ensign Energy Services Inc. and all of its subsidiaries and
partnerships (“Ensign” or the “Company”) should be read in conjunction with the audited consolidated financial statements
and notes thereto for the year ended December 31, 2017, which are available on SEDAR at www.sedar.com.
This MD&A and the audited consolidated financial statements and comparative information have been prepared in
accordance with International Financial Reporting Standards (“IFRS”). All financial measures presented in this MD&A
are expressed in Canadian dollars unless otherwise indicated and are stated in thousands, except for: per share amounts,
number of drilling rigs and operating days. This MD&A is dated March 1, 2018. Additional information, including the
Company's Annual Information Form for the year ended December 31, 2016, is available on SEDAR at www.sedar.com.
The Company's Annual Information Form for the year ended December 31, 2017 is expected to be filed on SEDAR prior
to March 31, 2018.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document constitute forward-looking statements or information (collectively referred to herein
as “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements can
be identified by the words “believe”, “anticipate”, “expect”, “plan”, “estimate”, “target”, “continue”, “could”, “intend”, “may”,
“potential”, “predict”, “should”, “will”, “objective”, “project”, “forecast”, “goal”, “guidance”, “outlook”, “effort”, “seeks”,
“schedule” or other expressions of a similar nature suggesting future outcome or statements regarding an outlook.
Disclosure related to expected future energy commodity pricing or trends, revenue rates, equipment utilization or
operating activity levels, operating costs, capital expenditures and other future guidance provided throughout this MD&A,
including, but not limited to, information provided in the “Funds Flow From Operations and Working Capital” section
regarding the Company’s expectation that funds generated by operations combined with current and future credit facilities
will support current operating and capital requirements, information provided in the “New Builds and Major Retrofits”
section regarding the new build program, information provided in the "Financial Instruments" section regarding Venezuela
and information provided in the “Outlook” section regarding the general outlook for 2017, constitute forward-looking
statements. These statements are not guarantees of future performance and are subject to certain risks. The reader
should not place undue reliance on these forward-looking statements as there can be no assurance that the plans,
initiatives or expectations upon which they are based will occur.
The forward-looking statements are based on current expectations, estimates and projections about the Company and
the industry in which the Company operates, which speak only as of the date such statements were made or as of the
date of the report or document in which they are contained, and are subject to known and unknown risks, uncertainties
and other factors that could cause the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others: general economic and business conditions which will, among other things, impact
demand for and market prices of the Company’s services and the ability of the Company’s customers to pay accounts
receivable balances; volatility of and assumptions regarding oil and natural gas prices; fluctuations in currency and
interest rates; economic conditions in the countries and regions in which the Company conducts business; political
uncertainty and civil unrest; ability of the Company to implement its business strategy; impact of competition; the
Company’s defense of lawsuits; availability and cost of labor and other equipment, supplies and services; ability of the
Company and its subsidiaries to complete their capital programs; operating hazards and other difficulties inherent in the
operation of the Company’s oilfield services equipment; availability and cost of financing; timing and success of integrating
the business and operations of acquired companies; actions by governmental authorities; government regulations and
the expenditures required to comply with them (including safety and environmental laws and regulations and the impact
of climate change initiatives on capital and operating costs); the adequacy of the Company’s provision for taxes; and
other circumstances that may affect revenues and expenses.
The Company’s operations and levels of demand for its services have been, and at times in the future may be, affected
by political developments and by national, regional and local laws and regulations such as changes in taxes, royalties
and other amounts payable to governments or governmental agencies and environmental protection regulations. Should
one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect,
actual results may vary in material respects from those projected in the forward-looking statements. The impact of any
one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent
upon other factors, and the Company’s course of action may depend upon its assessment of the future considering all
information then available.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
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For additional information refer to the “Risks and Uncertainties” section of this MD&A. Readers are cautioned that the
foregoing list of important factors is not exhaustive. Unpredictable or unknown factors not discussed in this report could
also have material adverse effects on forward-looking statements or results of operations. Although the Company believes
that the expectations conveyed by the forward-looking statements are reasonable based on information available to it
on the date such forward-looking statements are made, no assurances can be given as to future results, levels of activity
and achievements. Except as required by law, the Company assumes no obligation to update forward-looking statements
should circumstances or the Company’s estimates or opinions change.
NON-GAAP MEASURES
This MD&A contains references to Adjusted EBITDA, Adjusted EBITDA per share, Funds flow from operations, Funds
flow from operations per share and Revenue net of third party. These measures do not have any standardized meaning
prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies. The non-
GAAP measures included in this MD&A should not be considered as an alternative to, or more meaningful than, the
IFRS measure from which they are derived or to which they are compared. The definition and method of calculation of
the non-GAAP measures included in this MD&A are included in the "Overview and Selected Annual Information" section.
OVERVIEW AND SELECTED ANNUAL INFORMATION
(in thousands of Canadian dollars, except per share data and operating information)
2017
2016
Change
% change
2015
Change
% change
Revenue
Revenue, net of third party 1
Adjusted EBITDA 2
Adjusted EBITDA per share 2
1,000,650
873,864
201,784
859,702
755,857
185,173
Basic
Diluted
Net loss
Net loss per share
Basic
Diluted
Cash provided by operating
activities
Funds flow from operations 3
Funds flow from operations per
share 3
Basic
Diluted
Total assets
$
$
$
$
$
$
1.29
1.29
$
$
1.21
1.21
(37,644)
(150,522)
(0.24)
(0.24)
$
$
(0.99)
(0.98)
135,147
141,438
165,336
170,651
0.90
0.90
$
$
1.12
1.11
140,948
118,007
16,611
0.08
0.08
112,878
0.75
0.74
(30,189)
(29,213)
(0.22)
(0.21)
$
$
$
$
$
$
Long-term financial liabilities
739,933
717,459
22,474
2,958,465
3,214,395
(255,930)
16
16
9
7
7
75
76
76
(18)
(17)
(20)
(19)
(8)
3
1,390,978
(531,276)
1,234,775
(478,918)
329,010
(143,837)
$
$
$
$
$
$
2.16
2.16
(104,049)
(0.68)
(0.68)
412,224
296,273
1.94
1.94
$
$
$
$
$
$
(0.95)
(0.95)
(46,473)
(0.31)
(0.30)
(246,888)
(125,622)
(0.82)
(0.83)
3,598,140
(383,745)
794,109
(76,650)
(38)
(39)
(44)
(44)
(44)
nm
46
44
(60)
(42)
(42)
(43)
(11)
(10)
—
Dividends per share
$
0.48
$
0.48
—
— $
0.48
$
—
nm - calculation not meaningful
1 Revenue, net of third party is defined as "gross revenue less third party reimbursable items". Management believes
that, in addition to revenue, Revenue, net of third party is a useful supplemental measure to indicate the Company's
operating activity levels.
2 Adjusted EBITDA is defined as “(loss) income before interest, income taxes, depreciation, asset decommissioning
and write-downs, share-based compensation and foreign exchange and other”. Management believes that, in addition
to net (loss) income, Adjusted EBITDA is a useful supplemental measure as it provides an indication of the results
generated by the Company’s principal business activities prior to consideration of how these activities are financed,
how the results are taxed in various jurisdictions, how the results are impacted by foreign exchange or how the results
are impacted by the accounting standards associated with the Company’s share-based compensation plans.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
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($ thousands)
Loss before income taxes
Interest expense
Interest income
Depreciation
Asset decommissioning and write-downs
Share-based compensation
Foreign exchange and other
Adjusted EBITDA
2017
(187,796)
41,491
(281)
325,811
—
656
21,903
201,784
2016
(204,545)
30,838
(367)
349,947
—
10,287
(987)
185,173
2015
(129,754)
25,333
(420)
335,513
28,281
7,952
62,105
329,010
3 Funds flow from operations are defined as “cash provided by operating activities before the change in non-cash
working capital”. Management believes that, in addition to net loss, Funds flow from operations constitute a measure
that provides additional information regarding the Company’s liquidity and its ability to generate funds to finance its
operations. Management utilizes this measure to assess the Company’s ability to finance operating activities and
capital expenditures.
($ thousands)
Net loss
Items not affecting cash
Depreciation
Asset decommissioning and write-downs
Share-based compensation, net of cash paid
Unrealized foreign exchange and other
Accretion on long-term debt
Deferred income tax
Funds flow from operations
NATURE OF OPERATIONS:
2017
(37,644)
325,811
—
145
(918)
1,843
(147,799)
141,438
2016
(150,522)
349,947
—
10,287
(6,864)
316
(32,513)
170,651
2015
(104,049)
335,513
28,281
7,237
54,742
407
(25,858)
296,273
The Company is in the business of providing oilfield services to the oil and natural gas industry in Canada, the United
States and internationally. Oilfield services provided by the Company include drilling and well servicing, oil sands coring,
directional drilling, underbalanced and managed pressure drilling, equipment rentals, transportation, wireline services
and production testing services.
The Company’s Canadian operations span the four western provinces of British Columbia, Alberta, Saskatchewan and
Manitoba and include the Northwest Territories and the Yukon. In the United States, the Company operates predominantly
in the Rocky Mountain and southern regions as well as the states of California, New Mexico, North Dakota, Pennsylvania
and South Dakota. Internationally, the Company currently operates in Australia, Argentina, Kurdistan, Oman and
Venezuela. In addition to these international locations, the Company has operated in several other countries in the past
and may relocate equipment to other regions in the future depending on bidding opportunities and anticipated levels of
future demand.
2017 COMPARED WITH 2016
Revenue for the year ended December 31, 2017 was $1,000.7 million, an increase of 16 percent from 2016 revenue of
$859.7 million. Revenue, net of third party, for the year ended December 31, 2017 was $873.9 million, an increase of
16 percent from Revenue, net of third party, for the year ended December 31, 2016 of $755.9 million. Adjusted EBITDA
for 2017, totaled $201.8 million ($1.29 per common share), 9 percent higher than Adjusted EBITDA of $185.2 million
($1.21 per common share) for 2016.
Net loss for the year ended December 31, 2017 was $37.6 million ($0.24 per common share), compared to net loss of
$150.5 million ($0.99 per common share) for the year ended December 31, 2016. Funds flow from operations decreased
17 percent to $141.4 million ($0.90 per common share) in 2017 compared to $170.7 million ($1.12 per common share)
in the prior year.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
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The Company's increased operating and financial results for 2017 resulted from increased demand for oilfield services
caused by modest price recovery of crude oil and natural gas commodity prices. Volatile energy commodity prices
significantly impact the current and future cash flows of the Company’s customers and, as a result, the expected levels
of future demand for oilfield services, particularly in North America. Financial results from the Company’s United States
and international operations were adversely impacted by translation to Canadian dollars due to the weakening of the
United States dollar relative to the Canadian dollar. During 2017, a two percent decrease in the Canadian/United States
dollar exchange rate negatively impacted revenues and margins generated outside Canada.
In 2017 the Company added three new-build ADR® drilling rigs to its drilling rig fleet in the Canada and United States
markets, which have been committed to long-term contracts. The Company also added one new-build well servicing rig
in the United States.
The Company declared total dividends of $0.48 per common share in 2017.
The Company exited 2017 with a working capital deficit of $342.2 million, compared to a working capital deficit of $11.2
million as at December 31, 2016. The decrease in working capital year-over-year was largely due to the Company's
Global Bank Facility ($488.8 million due October 3, 2018) maturing within the next 12 months. The Company’s bank
credit facilities provide unused and available borrowings of $11.2 million at December 31, 2017, compared to $184.4
million at December 31, 2016, down by $173.2 million because of a reduction in the available credit under the current
global facility arrangement and the repayment of Tranche A of the senior unsecured notes in February of 2017.
2016 COMPARED WITH 2015
The Company's decreased operating and financial results for the 2016 fiscal year resulted from the slow recovery of oil
and natural gas prices. Continued low energy commodity prices adversely impacted cash flows of the Company’s
customers and, as a result, the expected levels of future demand for oilfield services, particularly in North America.
Financial results from the Company’s United States and international operations improved on translation to Canadian
dollars due to the strengthening of the United States dollar relative to the Canadian dollar. For the year ended December
31, 2016, a four percent increase in the Canadian/United States dollar exchange rate positively impacted revenues and
margins generated outside Canada.
REVENUE AND OILFIELD SERVICES EXPENSE
($ thousands)
Revenue
Canada
United States
International
Total revenue
Revenue, net of third party
Oilfield services expense
Gross margin
2017
2016
Change
% change
262,793
459,496
278,361
1,000,650
222,804
337,950
298,948
859,702
39,989
121,546
(20,587)
140,948
873,864
755,857
118,007
759,700
240,950
622,026
237,676
137,674
3,274
18
36
(7)
16
16
22
1
Gross margin as a percentage of Revenue, net of third party
27.6
31.4
(3.8)
(12.1)
Revenue for the year ended December 31, 2017 totaled $1,000.7 million, a 16 percent increase from the year ended
December 31, 2016 of $859.7 million. The increase in revenue was a direct result of the increased demand for oilfield
services resulting in higher equipment utilization rates which was offset by lower revenue rates.
Revenue, net of third party, for the year ended December 31, 2017 totaled $873.9 million, an increase of 16 percent
from the previous year of $755.9 million. As a percentage of Revenue, net of third party, gross margin for the year ended
December 31, 2017 was 27.6 percent (2016 - 31.4 percent). As a result of slow recovery of energy prices, the Company
has reduced its revenue rate and operating cost structure and made changes to reduce the cost of its administrative
and supervisory structure.
The cautious optimism regarding oil and natural gas commodity prices increased demand for oilfield services during
2017, which resulted in higher equipment utilization rates; however, revenue rates declined during prior years and have
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
4
yet to increase with demand. Financial results from the Company's United States and international operations were
negatively impacted on translation, as the weaker United States dollar relative to the Canadian dollar in 2017 compared
to the prior year further increased the impact of certain of the revenue rate declines experienced during the year.
CANADIAN OILFIELD SERVICES
Revenue ($ thousands)
Drilling rigs1
Opening balance
Additions
Transfers, net
Decommissions/Disposals
Ending balance
Drilling operating days1,
Drilling rig utilization (%)1
Well servicing rigs
Opening balance
Decommissions/Disposals
Ending balance
Well servicing operating hours
Well servicing utilization (%)
1Excludes coring rig fleet.
2017
2016
$
262,793
$
222,804
$
Change
39,989
% change
18
69
2
—
(1)
70
6,860
26.8
65
—
65
70,556
29.7
83
—
(2)
(12)
69
4,587
15.2
72
(7)
65
61,635
23.8
1
2,273
11.6
—
8,921
5.9
1
50
76
—
14
25
The Company recorded revenue of $262.8 million in Canada for the year ended December 31, 2017, an increase of 18
percent from $222.8 million recorded for the year ended December 31, 2016. During the year ended December 31,
2017, Canadian revenues were 26 percent of the Company's revenue, consistent with the prior year. During 2017 the
Company received $1.3 million in shortfall and termination revenue in Canada compared to $17.1 million in 2016.
For the year ended December 31, 2017, the Company recorded 6,860 drilling days in Canada, compared to 4,587 drilling
days for the year ended December 31, 2016, an increase of 50 percent. Well servicing hours increased by 14 percent
to 70,556 operating hours compared with 61,635 operating hours for the year ended December 31, 2016.
Demand for the Company’s Canadian oilfield services was higher compared to 2016 due largely to a modest increase
in oil and natural gas commodity prices. The increase in demand was offset by lower revenue rates and lower short fall
revenue earned in 2017 compared to 2016.
During 2017, the Company added two new-build ADR® drilling rigs to the Canadian fleet and decommissioned one drilling
rig.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
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UNITED STATES OILFIELD SERVICES
Revenue ($ thousands)
Drilling rigs
Opening balance
Additions
Decommissions/Disposals
Ending balance
Drilling operating days
Drilling rig utilization (%)
Well servicing rigs
Opening balance
Additions
Ending balance
Well servicing operating hours
Well servicing utilization (%)
2017
2016
Change
% change
$
459,496
$
337,950
$
121,546
36
84
1
—
85
10,944
35.6
44
1
45
90,281
55.6
89
1
(6)
84
7,152
21.8
44
—
44
66,211
41.2
1
3,792
13.8
1
24,070
14.4
1
53
63
2
36
35
For the year ended December 31, 2017, revenue of $459.5 million was recorded in the United States, an increase of
36 percent from the $338.0 million recorded in the prior year. The Company's United States operations accounted for
46 percent of the Company's revenue in 2017 fiscal year (2016 - 39 percent) and were the largest contributor to the
Company's consolidated revenues in 2017, consistent with the prior year.
In the United States, drilling operating days increased by 53 percent from 7,152 operating days in 2016 to 10,944
operating days in 2017. For the year ended December 31, 2017 well servicing activity increased 36 percent to 90,281
operating hours from 66,211 operating hours in 2016.
Overall operating and financial results for the Company’s United States operations were positively impacted by a
significant increase in demand for oilfield services due primarily to renewed optimism regarding oil and natural gas
commodity prices. The increased activity and associated operating financial results increase were partially offset by a
weakening of the United States dollar, which decreased by two percent versus the Canadian dollar when compared to
2016.
During 2017, the Company added one new-build ADR® drilling rig and one new-build well servicing rig to the United
States fleet.
INTERNATIONAL OILFIELD SERVICES
Revenue ($ thousands)
Drilling and workover rigs
Opening balance
Transfers
Decommissions
Ending balance
Drilling operating days
Drilling rig utilization (%)
2017
278,361
2016
298,948
Change
(20,587)
% change
(7)
46
—
—
46
6,106
36.4
50
2
(6)
46
6,545
36.0
—
(439)
0.4
—
(7)
1
The Company's international revenues for the year ended December 31, 2017, decreased seven percent to $278.4
million from $298.9 million recorded in the year ended December 31, 2016. The Company's international operations
contributed 28 percent of the Company's revenue in 2017 (2016 - 35 percent).
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
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International operating days totaled 6,106 compared to 6,545 drilling days for the year ended December 31, 2017, a
decrease of seven percent compared to the year prior.
Similar to the Company’s United States operations, international operations were negatively impacted by the weakening
United States dollar year-over-year in 2017, versus the Canadian dollar, on translation into Canadian dollars for reporting
purposes compared to 2016. International operations incurred a decrease in activity as certain drilling rigs on long-term
contracts completed their term and were not renewed. Moreover, the decline in crude oil prices over the past several
years has been particularly challenging for Venezuela due to the heavy economic reliance on energy revenues in that
country. The possible impact to the Company of the challenges in Venezuela are discussed further in the “Financial
Instruments” section of this MD&A under Credit Risk and also in the “Risks and Uncertainties – Foreign Operations”
section of this MD&A.
DEPRECIATION
($ thousands)
Depreciation
2017
325,811
2016
349,947
Change
(24,136)
% change
(7)
Depreciation expense for the year decreased by seven percent to $325.8 million compared with $349.9 million for the
year ended 2016. Depreciation expense was lower in the year ended December 31, 2017 when compared to the year
ended December 31, 2016, due to certain operating assets having become fully depreciated in which case no further
depreciation expense is required. Furthermore, the impacts of a weaker United States dollar compared to the Canadian
dollar on non-Canadian domiciled fixed assets decreased the expense.
As a result of certain external impairment indicators existing in the market, the Company completed impairment tests in
all its cash generating units (each a "CGU"). The Company did not note any impairments for any CGUs based on the
following key assumptions: weighted average pre-tax discount rate of 10 percent to 14 percent based on cost of capital
and debt, asset and country risk, together with past experience; annual inflationary growth after five years and limited
to the assets' lives; and cash flow projections consistent with market conditions and estimated rig salvage values of 10
percent. A 1.6 percent change in the discount rate, an eight percent change in cash flow projections, or a changing in
the terminal growth rate to zero, independent of each other, would not have resulted in any impairments.
GENERAL AND ADMINISTRATIVE EXPENSE
($ thousands)
General and administrative
% of revenue
2017
39,166
3.9
2016
52,503
6.1
Change
(13,337)
% change
(25)
For the year ended December 31, 2017, general and administrative expense totaled $39.2 million (3.9 percent of revenue)
compared to $52.5 million (6.1 percent of revenue) for the year ended December 31, 2016, a decrease of 25 percent.
The year over year decrease in general and administrative expense reflect the Company's initiatives to reduce costs in
reaction to the oil service industry decline and lower oil and natural gas commodity prices, which began in 2015 and are
ongoing.
SHARE-BASED COMPENSATION
($ thousands)
Share-based compensation
nm - calculation not meaningful
2017
656
2016
10,287
Change
(9,631)
% change
(94)
Share-based compensation expense arises from the Black-Scholes valuation associated with the Company’s share-
based compensation plans, whereby the liability associated with share-based compensation is adjusted for the effect
of granting and vesting of employee stock options and changes in the underlying market price of the Company’s common
shares.
For the year ended December 31, 2017, share-based compensation was an expense of $0.7 million compared with an
expense of $10.3 million for the year ended December 31, 2016. The share-based compensation expense for the year
ended December 31, 2017 was a result of changes in the fair value of the share-based compensation liability and was
impacted by the amortization of stock options which was offset by additional expenses in 2017 related to Performance
Share Units (PSUs) issued under a long-term incentive plan implemented in 2017.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
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The fair value of share-based compensation is impacted by both the input assumptions used to estimate the fair value
and the price of the Company’s common shares during the period. The closing price of the Company's common shares
was $6.47 at December 31, 2017, compared with $9.38 at December 31, 2016.
During 2017 the Company granted PSUs to certain officers and employees of the Company to participate in the growth
and development of the Company and to promote further alignment of interests between employees and the shareholders.
PSUs are subject to the Company's pre-established performance metrics with a three year performance period. Each
PSU granted permits the holder to receive a cash payment equal to the fair market value of a share as of the maturity
date, adjusted for a performance multiplier. PSU holders are entitled to share in dividends which are credited as additional
PSUs at the dividend record date.
Included in net earnings for the year ended December 31, 2017 is an expense of $1.1 million (2016 - $nil). This was
calculated using the trailing ten day volume weighted average share price of the Company's underlying common shares,
as the PSUs have no exercise price, are adjusted for performance factors and are subject to a two percent cap relative
to Adjusted EBITDA in the final year of their three year term based on certain financial performance metrics.
INTEREST EXPENSE
($ thousands)
Interest expense
Interest income
2017
41,491
(281)
41,210
2016
30,838
(367)
30,471
Change
10,653
86
10,739
% change
35
(23)
35
Interest is incurred on the Company's $500.0 million global revolving credit facility (the “Global Bank Facility”) and the
United States dollar $200.0 million senior unsecured notes (the “Notes”) issued in February 2012. The amortization of
deferred financing costs associated with the issuance of the Notes is included in interest expense.
Due to payment delays for work performed in Venezuela, the Company recognized a discount on its receivable in the
amount of $4.6 million within interest expense. The receivable is discounted at 15 percent and assumes nominal
collections in the first year with even collections thereafter over a five year period.
Interest expense increased by 35 percent for the year ended December 31, 2017 compared to the same period in 2016
as a result of borrowings of an additional $42.2 million on the bank credit facilities in fiscal 2017, an increase in the
interest rate and a discount applied on the Venezuela receivable.
FOREIGN EXCHANGE AND OTHER
($ thousands)
Foreign exchange and other
nm - calculation not meaningful
2017
21,903
2016
(987)
Change
22,890
% change
nm
Included in this amount is the impact of foreign currency fluctuations in the Company’s subsidiaries that have functional
currencies other than the Canadian dollar.
INCOME TAXES
($ thousands)
Current income tax
Deferred income tax
Total income tax
Effective income tax rate (%)
nm - calculation not meaningful
2017
(2,353)
(147,799)
(150,152)
80.0
2016
(21,510)
(32,513)
(54,023)
26.4
Change
19,157
(115,286)
(96,129)
% change
(89)
nm
nm
The effective income tax rate for the year ended December 31, 2017 was 80.0 percent compared with 26.4 percent for
the year ended December 31, 2016. The United States passed comprehensive tax reform under the Tax Cut and Jobs
Act (“Tax Act”) on December 22, 2017. The Federal corporate income tax rate will drop from 35% to 21% beginning
January 1, 2018. Due to these changes, the Company has revalued its deferred tax liability as at December 31, 2017
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
8
and the result of this revaluation was a deferred tax recovery for the year ended December 31, 2017 of $109.3 million
to reduce the deferred tax liability balance.
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands, except per share data)
Funds flow from operations
Funds flow from operations per share
Working capital
nm - calculation not meaningful
2017
141,438
$0.90
2016
170,651
$1.12
Change
(29,213)
(0.22)
(342,199)
(11,153)
(331,046)
% change
(17)
(20)
nm
For the year ended December 31, 2017, the Company generated Funds flow from operations of $141.4 million ($0.90
per common share) a decrease of 17 percent from $170.7 million ($1.12 per common share) for the year ended
December 31, 2016. The decrease in Funds flow from operations in 2017 compared to 2016 is due to the impact of
foreign exchange. The significant factors that may impact the Company's ability to generate Funds flow from operations
in future periods are outlined in the "Risks and Uncertainties" section of this MD&A.
As at December 31, 2017, the Company’s working capital was a deficit of $342.2 million, compared to a working capital
deficit of $11.2 million at December 31, 2016. The decrease in working capital in 2017 was mainly related to the financial
statement reclassification of the portion of long-term debt ($488.8 million of the Global Bank Facility, due October 3,
2018) maturing within the next 12 months to current liabilities. The Company expects funds generated by operations,
combined with current and future credit facilities, to fully support current operating and capital requirements. Existing
revolving credit facilities provide for total borrowings of $500.0 million, of which $11.2 million was undrawn and available
at December 31, 2017. In addition, the Company has a $50 million accordion to be included in the existing revolving
global facilities but not yet exercised.
INVESTING ACTIVITIES
($ thousands)
Purchase of property and equipment
Proceeds from disposals of property and equipment
Net change in non-cash working capital
Cash used in investing activities
nm - calculation not meaningful
2017
(123,763)
6,051
(2,667)
(120,379)
2016
(43,394)
14,274
(23,627)
(52,747)
Change
(80,369)
(8,223)
20,960
(67,632)
% change
nm
(58)
(89)
nm
Net purchases of property and equipment during the fiscal year ending 2017 totaled $117.7 million (2016 - $29.1 million).
The purchase of property and equipment relates predominantly to expenditures made pursuant to the Company’s new
build and major retrofit program, and for maintenance capital costs incurred during the year. The Company completed
a total of three new-build ADR® drilling rigs for the Canadian and United States fleets that commenced work under long
term contracts and one new-build well servicing rig for the United States.
FINANCING ACTIVITIES
($ thousands)
Net increase (decrease) in bank credit facilities
Purchase of shares held in trust
Dividends
Net change in non-cash working capital
Cash used in financing activities
nm - calculation not meaningful
2017
42,189
(1,103)
(52,577)
(482)
(11,973)
2016
(48,995)
(2,035)
(66,440)
(1,887)
Change
91,184
932
13,863
1,405
(119,357)
107,384
% change
nm
(46)
(21)
(74)
(90)
The Global Bank Facility is available to the Company and certain of its wholly-owned subsidiaries, and may be drawn
in Canadian, United States or Australian dollars, up to the equivalent value of $500.0 million Canadian dollars. The
Global Facility matures in early October 2018.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
9
In addition, the Company has a $20.0 million uncommitted facility, solely for issuing letters of credit, primarily used for
bidding on contracts in the normal course of business.
The Company has a $50 million accordion included in the existing Global Facility, but this has not yet been exercised.
The Company also finalized a waiver with its lenders that allows the Company to maintain Global Facility unsecured.
The Company made a net withdrawal on the Global Facility of $42.2 million during the year ended December 31, 2017,
increasing the outstanding long-term debt balance. As of December 31, 2017, the Global Facility is primarily being used
to fund capital expenditures.
During the year ended December 31, 2017, the Board of Directors of the Company cancelled a Dividend Reinvestment
Plan (the “DRIP”). The DRIP provided eligible holders of common shares with an option to elect to reinvest their dividends
in common shares of the Company at a discount of up to five percent of the average market price on each dividend
payment date.
Subsequent to December 31, 2017, the Company declared a dividend for the first quarter of 2017. A quarterly dividend
of $0.12 per common share is payable April 5, 2018 to all Common Shareholders of record as of March 23, 2018. The
dividend is pursuant to the quarterly dividend policy adopted by the Company. Pursuant to subsection 89(1) of the
Canadian Income Tax Act (“ITA”), the dividend being paid is designated as an eligible dividend, as defined in subsection
89(1) of the ITA.
CONTRACTUAL OBLIGATIONS
In the normal course of business, the Company enters into various commitments that will have an impact on future
operations. These commitments relate primarily to credit facilities, senior unsecured notes and facility leases.
A summary of the Company’s total contractual obligations as of December 31, 2017, is as follows:
($ thousands)
Senior unsecured notes
Drawings on bank and credit facilities
Capital Leases
Facility leases
Less than 1 Year
1-3 Years
4-5 Years
After 5 Years
11,045
509,741
408
4,104
148,198
130,626
—
1,017
6,936
—
11
6
525,298
156,151
130,643
—
—
—
448
448
Total
289,869
509,741
1,436
11,494
812,540
FINANCIAL INSTRUMENTS
The classification and measurement of financial instruments the Company has recognized is presented below:
Cash and cash equivalents and accounts receivable are classified as financial assets at amortized cost.
Accounts payable and accruals, operating lines of credit, dividends payable and long-term debt are classified as financial
liabilities at amortized cost.
Credit Risk
The Company is subject to credit risk on accounts receivable balances, which at December 31, 2017 totaled $232.2
million, an increase of $26.8 million from $205.3 million as at December 31, 2016. Reduced levels of oil and natural gas
commodity prices negatively impact the cash flow of the Company's customers and, consequently, increases the
collection risk of accounts receivable balances.
The Company assesses the credit worthiness of its customers on an ongoing basis and establishes credit limits for each
customer based on external credit reports and other publicly available information, internal analysis and historical
experience with the customer. Credit limits are approved by senior management and are reviewed on a regular basis
or when changing economic circumstances dictate. The Company manages credit risk through dedicated credit
resources, ongoing monitoring and follow up of balances owing, well liens, and tightening or restriction of credit terms
as required. The Company also monitors the amount and age of accounts receivable balances on an ongoing basis.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
10
As at December 31, 2017, the Company had trade receivables of $25.8 million (2016 - $30 million) with multiple customers
that were greater than 90 days old for which an allowance for doubtful accounts of $4.2 million (2016 - $5.8 million) has
been recorded to provide for balances which, in management’s best estimate, are deemed uncollectible as at
December 31, 2017. The allowance for doubtful accounts is an estimate requiring significant judgment and may differ
materially from actual results.
As part of the Company’s international operations, it provides oilfield services in Venezuela pursuant to contractual
arrangements. As at December 31, 2017, the Company had accounts receivable of approximately $28.6 million for work
performed in Venezuela, of which certain account receivables were discounted at 15 percent and assumed nominal
collections in the first year with even collections thereafter over a five year period (2016 - $24.8 million). Though the
Company has a history of collecting accounts receivable in Venezuela, due to the recent decline in the price of oil and
continuing political unrest in the country there can be no assurance that the Company will be successful in collecting all
of such accounts receivable outstanding.
Liquidity Risk
The Company is subject to liquidity risk on its financial liabilities, which at December 31, 2017 totaled $948.9 million, an
increase of $59.2 million from $889.7 million as at December 31, 2016.
The Company manages liquidity by forecasting cash flows on an annual basis and secures sufficient credit facilities to
meet financing requirements that exceed anticipated internally generated funds. As at December 31, 2017, the remaining
contractual maturities of accounts payable and accruals and dividends payable are less than one year. Maturity
information regarding the Company’s bank credit facilities and long-term debt is described in the "Contractual Obligations"
section of this MD&A.
As at December 31, 2017, the Company had undrawn and available bank credit facilities of $11.2 million (2016 – $184.4
million). The Company was in compliance with all debt covenants as of December 31, 2017.
NEW BUILDS AND MAJOR RETROFITS
During the year ended December 31, 2017, the Company added two new-build ADR® drilling rigs in Canada and one
new-build ADR® drilling rig in the United States. The additions to the drilling fleet have been contracted on long-term
contracts. One new-build well servicing rig was added in the United States. The Company continues to selectively add
new ADR® drilling rigs to meet the increasing technical demands of its customers.
SUMMARY QUARTERLY RESULTS
($ thousands, except per share data)
Q4-2017 Q3-2017 Q2-2017 Q1-2017 Q4-2016 Q3-2016 Q2-2016 Q1-2016
Revenue
Revenue, net of third party 1
Adjusted EBITDA 1
Adjusted EBITDA per share 1
Basic
Diluted
270,013
247,121
232,232
251,284
234,001
191,313
175,924
258,464
241,987
211,299
211,687
208,891
204,474
168,098
156,423
226,862
54,820
52,600
44,276
50,088
51,665
42,456
31,485
59,567
$0.34
$0.35
$0.34
$0.33
$0.29
$0.29
$0.32
$0.32
$0.33
$0.33
$0.28
$0.28
$0.21
$0.21
$0.39
$0.39
Net (loss) income
46,488
(36,526)
(33,814)
(13,792)
(61,905)
(33,727)
(39,979)
(14,911)
Net (loss) income per share
Basic
Diluted
Cash provided by operating activities
Funds flow from operations 1
Funds flow from operations per share 1
$0.30
$0.30
38,124
12,244
$(0.23)
$(0.22)
$(0.09)
$(0.41)
$(0.22)
$(0.26)
$(0.10)
$(0.23)
$(0.22)
$(0.09)
$(0.40)
$(0.22)
$(0.26)
$(0.10)
32,791
39,616
44,687
44,769
19,545
44,809
8,089
48,862
25,315
30,281
66,854
36,328
65,079
55,180
Basic
Diluted
$0.07
$0.07
$0.25
$0.25
$0.29
$0.29
$0.29
$0.29
$0.32
$0.31
$0.20
$0.20
$0.24
$0.24
$0.36
$0.36
Total debt, net of cash
707,559
700,011
714,357
709,062
687,662
669,618
664,560
688,405
1 See definition of "Non-GAAP Measures" in the "Overview and Selected Annual Information" section of this MD&A.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
11
Variability in the Company’s quarterly results is driven primarily by the seasonal operating environment in Canada and
fluctuations in oil and natural gas commodity prices. Financial and operating results for the Company’s Canadian oilfield
services division are generally strongest during the first and fourth quarters when the Company’s customers conduct
the majority of their drilling programs. Utilization rates typically decline during the second quarter as spring break-up
weather conditions hinder mobility of the Company’s equipment in Canada. Oil and natural gas commodity prices
ultimately drive the level of exploration and development activities carried out by the Company’s customers and the
resultant demand for the oilfield services provided by the Company.
The quarterly results may also be impacted by the Black-Scholes valuation accounting associated with the Company’s
share-based compensation and Performance Share Unit plans respectively, which can fluctuate significantly from quarter
to quarter as a result of changes in the valuation inputs, as well as changes in foreign currencies against the functional
currencies of the Company’s operating entities.
In addition to the seasonality noted above, the variability noted in the Company’s quarterly results reflect continued
varying levels of demand for oilfield services in the 2017 and 2016 fiscal years compared to prior years. Such demand
for oilfield services was positively influenced by more favorable oil and natural gas commodity prices for 2017.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
12
FOURTH QUARTER ANALYSIS
(in thousands of Canadian dollars, except per share data and
operating information)
Revenue
Revenue, net of third party 1
Adjusted EBITDA 1
Adjusted EBITDA per share 1
Basic
Diluted
Net (loss) income
Net (loss) income per share
Basic
Diluted
Cash provided by operating activities
Funds flow from operations 1
Funds flow from operations per share 1
Basic
Diluted
Weighted average shares - basic (000s)
Weighted average shares - diluted (000s)
Drilling
Operating days
Canada 2
United States
International 3
Drilling rig utilization (%)
Canada 2
United States
International 3
Well Servicing
Operating hours
Canada
United States
Well servicing rig utilization rate (%)
Canada
United States
2017
270,013
241,987
54,820
$0.34
$0.35
46,488
$0.30
$0.30
38,124
12,244
$0.07
$0.07
156,794
156,976
2017
1,649
3,066
1,547
25.3
39.4
36.4
2017
16,947
23,644
28.3
57.1
Three months ended December 31
Change
2016
% change
234,001
204,474
51,665
$0.33
$0.33
36,012
37,513
3,155
$0.01
$0.02
(61,905)
108,393
$(0.41)
$(0.41)
8,088
48,862
$0.32
$0.32
153,579
154,093
$0.71
$0.71
30,036
(36,618)
$(0.25)
$(0.25)
3,215
2,883
15
18
6
3
6
nm
nm
nm
nm
(75)
(78)
(78)
2
2
2016
Change
% change
1,271
2,067
1,690
17.1
25.0
37.5
2016
18,967
18,976
29.0
46.9
378
999
(143)
8.2
14.4
(1.1)
(2,020)
4,668
(0.7)
10.2
30
48
(8)
48
58
(3)
% change
(11)
25
(2)
22
nm - calculation not meaningful
1
See definition of "Non-GAAP Measures" in the "Overview and Selected Annual Information" section of this MD&A. Certain prior period amounts have
been restated to reflect current year presentation.
2 Excludes coring rigs.
3Includes workover rigs.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
13
REVENUE AND OILFIELD SERVICES EXPENSE
($ thousands)
Revenue
Canada
United States
International
Total revenue
Revenue, net of third party
Oilfield services expense
Gross margin
2017
2016
Change
% change
64,260
129,188
76,565
270,013
241,987
206,750
63,263
61,137
91,881
80,983
234,001
204,474
170,267
63,734
3,123
37,307
(4,418)
36,012
37,513
36,483
(471)
5
41
(5)
15
18
21
(1)
Gross margin as a percentage of Revenue, net of third
party
26.1
31.2
The Company recorded revenue of $270.0 million for the three months ended December 31, 2017, a 15 percent increase
from the $234.0 million recorded in the three months ended December 31, 2016. Drilling operating days for the fourth
quarter of 2017 totaled 6,262 days, a 25 percent increase from the prior year of 5,028 drilling operating days. The modest
recovery of oil and natural gas commodity prices in 2017 positively impacted the demand for oilfield services. Increased
North American demand was offset by the negative translational impact of the strengthening of the United States dollar
versus the Canadian dollar compared to the prior year.
As a percentage of revenue, net of third party, gross margin decreased for the fourth quarter of 2017 to 26.1 percent
from 31.2 percent for the fourth quarter of 2016. The reduction in gross margin in the fourth quarter of 2017 compared
to the prior year is due to revenue rate pressures in reaction to reduced levels of demand for oilfield services in a lower
commodity price environment and shortfall payments earned in the prior year not earned in 2017.
Depreciation expense totaled $91.7 million for the fourth quarter of 2017 compared with $90.1 million for the fourth
quarter of 2016. The decrease was due to the negative impact of a two percent year-over-year increase in the United
States dollar exchange rate against the Canadian dollar.
General and administrative expense decreased 30 percent to $8.4 million (3.1 percent of revenue) for the fourth quarter
of 2017 compared with $12.1 million (5.2 percent of revenue) for the fourth quarter of 2016. The decrease in general
and administrative expense in the fourth quarter of 2017 compared to the prior year is primarily due to the Company's
initiatives to reduce fixed costs in reaction to lower oil and natural gas commodity prices.
OUTSTANDING SHARE DATA
The following common shares and stock options were outstanding as of March 1, 2018:
Common shares
Stock options
OUTLOOK
Industry Overview
Number
156,792,521
$
Outstanding
6,477,500
Amount ($)
206,055
Exercisable
2,862,300
Signs of a modest recovery for the industry started to show in 2017. In the first half of 2017 activity picked up substantially
compared to 2016 before leveling off in the latter half 2017. Oil prices continued to be volatile, with the price of WTI
fluctuating between the low $40’s and mid $60’s throughout the year and early 2018.
The rebalancing of the oil markets continues to date in 2018 with the expectation that world GDP and oil demand will
increase in the current year and beyond, and that OPEC and non-OPEC members, led by Russia, remain supportive
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
14
of the oil production cuts. This optimism is overshadowed by the expected increase in oil production from the United
States. Until the market overall can gain a proper understanding of the United States production capability and
sustainability, there appears to be a ceiling on oil prices as additional production could impact oil supply and pricing.
In 2018 it is generally expected that oil and natural gas producers will focus more on financial returns. This will impact
where and when capital investments are deployed. Areas like the United States expected to continue to see capital
deployment in contrast to Canada where ongoing uncertainty of provincial and federal government policies and market
pricing are expected to continue impacting the oil and natural gas industry. In addition, companies will continue to seek
at contractors that capable of providing drilling and operational efficiencies that will help reduce total well costs. The
challenge for oil and natural gas drilling contractors will be how to share in the financial gains that they are creating from
these efficiencies.
Canadian Activity
The AECO natural gas price, oil price differentials and takeaway capacity will likely continue to dominate the headlines
in 2018 and will likely continue to cast a shadow over industry activity. Absent any major announcements or volatility in
commodity pricing, 2018 drilling activity, is expected to be similar to late 2017. With the corporate tax law changes in
the USA that became effective in 2018, there is a possibility for customers with assets in the North America will focus
on United States activity before deploying capital in Canada.
United States Activity
In comparison to the Canada, the United States market is much more optimistic for 2018. Analysts are expecting the rig
count to continue to grow in 2018, with some expecting between 50 to 100 additional drilling rigs being activated in 2018
with additional rig deployments into 2019. The tightness and continued expected tightness in the AC 1500 horse power
drilling rig category is expected to place upward pressure on rates for that class of assets that could trickle down to lower
specification drilling rigs. At the current pricing levels there is minimal expectation that new builds will be introduced into
the market during 2018, which may allow for pricing to begin to normalize and lower spec assets to be activated. In
2017, the market experienced upgrades and modifications to drilling rigs. The magnitude of such upgrades is expected
to decline in 2018 as the assets that readily could be upgraded have been completed already and the remaining rigs
that can be upgraded will involve a substantial capital expenditure, which will require increased pricing and/or longer
contract terms to be economical.
The reduced corporate tax rate and changes to tax regulations in the United States have and are likely to continue
creating incentives for capital to be allocated to the United States. It is expected that 2018 operating activity and pricing
in the United States in this market is expected to be higher than 2017.
International Activity
The Company’s expectation for its International segment is contemplates some growth and continued reduction in costs.
The Australian operations appear to have bottomed in 2017 with activity looking to increase in 2018, especially the latter
half of 2018. Activity in the Middle East is expected to remain relatively steady with the potential for some rig activations
toward the latter half of 2018 as well. There is increased potential that Argentina may add additional drilling rigs and the
Company is expected to participate in certain tenders for work in 2018 and beyond. Venezuela as a country continues
to have significant social, economical and political challenges and those challenges are expected to continue for some
time. The Company is closely monitoring business activities in Venezuela and will react as deemed appropriate. The
Company continues to operate in Venezuela and is expected to do so into 2018 and beyond.
General Activity
The Company expects the overall market to be lower for longer. The modest recovery to date has been slow and steady
as expected. The Company continues to review capital projects with returns on the forefront and only plans to proceed
with projects that are expected to provide the appropriate returns for shareholders. The cost control and organizational
changes that the Company has implemented during the past three years have resulted in reduced general and
administrative costs that will be scalable into the future. The Company will continue to look at ways to reduce costs or
increase revenue and will be focused on returns for its shareholders.
CRITICAL ACCOUNTING ESTIMATES
Management is required to make judgments, assumptions and estimates in applying its accounting policies and practices,
which have a significant impact on the financial results of the Company. These significant accounting policies involve
critical accounting estimates due to complex judgments and assumptions. These estimates, judgments and assumptions
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
15
are based on the circumstances that exist at the reporting date and may affect the reported amounts of income and
expenses during the reporting periods and the carrying amounts of assets, liabilities, accruals, provisions, contingent
liabilities, other financial obligations, as well as the determination of fair values.
Property and Equipment
The estimated useful life, residual value and depreciation methods selected are the Company’s best estimate of such
and are based on industry practice, historical experience and other applicable factors. These assumptions and estimates
are subject to change as more experience is obtained or as general market conditions change, both of which could
impact the operations of the Company’s property and equipment.
Impairment
For impairment testing, the assessment of facts and circumstances is a subjective process that often involves a number
of estimates and is subject to interpretation. An impairment is recognized if the carrying value exceeds the recoverable
amount for a CGU. Property and equipment are aggregated into CGUs based on their ability to generate separately
identifiable and largely independent cash flows. The testing of assets or CGUs for impairment, as well as the assessment
of potential impairment reversals, requires that the Company estimate an asset’s or CGU’s recoverable amount. The
estimate of a recoverable amount requires a number of assumptions and estimates, including expected market prices,
market supply and demand, margins and discount rates. These assumptions and estimates are subject to change as
new information becomes available and changes in any of the assumptions could result in an impairment of an asset’s
or CGU’s carrying value.
Share-based Compensation
Measurement inputs include share price on measurement date, exercise price, expected volatility, expected life, expected
dividends and the risk-free interest rate. Significant estimates and assumptions are used in determining the expected
volatility based on weighted average historic volatility adjusted for changes expected due to publicly available information,
weighted average expected life and expected forfeitures, based on historical experience and general option holder
behavior. Changes to the input assumptions could have a significant impact on the share-based compensation liability
and expense.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income taxes
are recorded for the effect of any temporary difference between the accounting and income tax basis of an asset or
liability, using the substantively enacted income tax rates. Current income taxes for the current and prior periods are
measured at the amount expected to be recoverable from or payable to the taxation authorities based on the income
tax rates enacted or substantively enacted at the end of the reporting period. The deferred income tax assets and liabilities
are adjusted to reflect changes in enacted or substantively enacted income tax rates that are expected to apply, with
the corresponding adjustment recognized in net income or in shareholders’ equity depending on the item to which the
adjustment relates.
Tax interpretations, regulations and legislation in the various jurisdictions in which the Company and its subsidiaries
operate are subject to change. As such, income taxes are subject to measurement uncertainty and the interpretations
can impact net income through the income tax expense arising from the changes in deferred income tax assets or
liabilities.
Allowance for Doubtful Accounts
The Company is subject to credit risk on accounts receivable balances and assesses the recoverability of accounts
receivable balances on an ongoing basis. The Company establishes an allowance for estimated losses for uncollectible
accounts as circumstances warrant. The allowance is determined based on customer credit-worthiness, current economic
trends and past experience. Assessing accounts receivable balances for recoverability involves significant judgment
and uncertainty, including estimates of future events. Changes in circumstances underlying these estimates may result
in adjustments to the allowance for doubtful accounts in future periods.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
16
Functional Currency
The Company determines functional currency based on the primary economic environment in which the entity operates.
This includes a number of factors that must be considered by the Company in using its judgment to determine the
appropriate functional currency for each entity.
RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 2018, IFRS 15 Revenue from Contracts with Customers came into effect, replacing IAS 18 Revenue,
IAS 11 Construction Contracts and any associated interpretations. The standard is required to be adopted either
retrospectively or using a modified transition method, with early adoption permitted. The Company has completed its
initial assessment of IFRS 15 Revenue from Contracts with Customers has adopted as of January 1, 2018. This will not
have a material impact on the recognition of revenue, however, it will have an impact on the associated disclosures.
As of January 1, 2018, IFRS 9 Financial Instruments, came into effect, superseding earlier versions of IFRS 9 and
replacing IAS 39 Financial Instruments: Recognition and Measurement. The Company is currently in the process of
completing its assessment of the standard and its expected impact on the consolidated financial statements ahead of
year end.
On January 13, 2016 the IASB issued IFRS 16 - Leases ("IFRS 16") which has not yet been adopted by the Company.
IFRS 16 replaces the accounting requirements under IAS 17 - Leases and is effective for annual periods beginning on
or after January 1, 2019 with early adoption permitted. IFRS 16 requires all leases to be reported on the Company's
balance sheet as assets and liabilities. The Company is in the process of assessing the impact that the amendments
will have on its financial statements or whether to early adopt.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
As of December 31, 2017, the Corporation’s management evaluated the effectiveness of its disclosure controls and
procedures as defined in the rules of the Canadian Securities Administrators. This evaluation is performed under the
supervision of, and with the participation of, the President and Chief Operating Officer and the Chief Financial Officer.
The President and Chief Operating Officer and the Chief Financial Officer have concluded that the Corporation’s
Disclosure Controls and Procedures are effective as of December 31, 2017.
The President and Chief Operating Officer and Chief Financial Officer do not expect that the Corporation’s disclosure
controls and procedures will prevent or detect all errors, misstatements and fraud but they are designed to provide
reasonable assurance of achieving these objectives. A control system, no matter how well designed or operated, can
only provide reasonable, not absolute, assurance that the corresponding objectives are met.
As of December 31, 2017, the management of the Corporation evaluated the Corporation's effectiveness of internal
controls over financial reporting, as defined in the rules of the Canadian Securities Administrators. This evaluation is
performed under the supervision of, and with the participation of, the President and Chief Operating Officer and Chief
Financial Officer. The President and Chief Operating Officer and Chief Financial Officer concluded that the Corporation's
internal control over financial reporting was effective as of December 31, 2017.
Internal control over financial reporting, no matter how well designed, has inherent limitations and can provide only
reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements.
RISKS AND UNCERTAINTIES
Oil and Natural Gas Prices
The most significant factors affecting the business of the Company are oil and natural gas commodity prices. Commodity
price levels affect the capital programs of energy exploration and production companies, as the price they receive for
the oil and natural gas they produce has a direct impact on the cash flow available to them and the subsequent demand
for oilfield services provided by the Company. Oil and natural gas prices have been volatile in recent years and may
continue to be so as supply/demand fundamentals, weather conditions, government regulations, political and economic
environments, pipeline capacity, storage levels and other factors outside of the Company’s control continue to influence
commodity prices. Demand for the Company’s services in the future will continue to be influenced by oil and natural gas
commodity prices and the resultant impact on the cash flow of its customers, and may not be reflective of historical
activity levels.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
17
Competition and Industry Conditions
The oilfield services industry is, and will continue to be, highly competitive. Contract drilling companies compete primarily
on a regional basis and competition may vary significantly from region to region at any particular time. Most drilling and
workover contracts are awarded on the basis of competitive bids, which result in price competition. Many drilling, workover
and well servicing rigs can be moved from one region to another in response to changes in levels of activity, which can
result in an oversupply of rigs in an area. In many markets in which the Company operates, the supply of rigs exceeds
the demand for rigs, resulting in further price competition. Certain competitors are present in more than one of the regions
in which the Company operates, although no one competitor operates in all of these areas. In Canada, the Company
competes with several firms of varying size. In the United States there are many competitors with national, regional or
local rig operations. Internationally, there are several competitors in each country where the Company operates and
some of those international competitors may be better positioned in certain markets, allowing them to compete more
effectively. There is no assurance that the Company will be able to continue to compete successfully or that the level of
competition and pressure on pricing will not affect the Company’s margins.
Access to Credit Facilities and Debt Capital Markets
The Company and its customers require reasonable access to credit facilities and debt capital markets as an important
source of liquidity. Global economic events, outside the control of the Company or its customers, may restrict or reduce
the access to credit facilities and debt capital markets. Tightening credit markets may reduce the funds available to the
Company’s customers for paying accounts receivable balances and may also result in reduced levels of demand for the
Company’s services. Additionally, the Company relies on access to credit facilities, along with its reserves of cash and
cash flow from operating activities, to meet its obligations and finance operating activities. The Company believes it has
adequate bank credit facilities to provide liquidity.
Changes in Laws and Regulations
The Company and its customers are subject to numerous laws and regulations governing its operations and the
exploration and development of oil and natural gas, including environmental regulations. Existing and expected
environmental legislation and regulations may increase the costs associated with providing oilfield services, as the
Company may be required to incur additional operating costs or capital expenditures in order to comply with any new
regulations. The costs of complying with increased environmental and other regulatory changes in the future, such as
royalty regime changes, may also have an adverse effect on the cash flows of the Company’s customers and may
dampen demand for oilfield services provided by the Company.
Foreign Operations
The Company provides oilfield services throughout much of North America and internationally in a number of onshore
drilling areas. The Canadian, United States, and Australian regulatory regimes are generally stable and, typically,
supportive of energy industry activity. Internationally, the Company's operations are subject to regulations in various
jurisdictions and support for the oil and natural gas industry can vary in these jurisdictions. There are risks inherent in
foreign operations such as unstable government regimes, civil and/or labor unrest, strikes, terrorist threats, regulatory
uncertainty and complex commercial arrangements. Risks to the Company's operations include, but are not limited to,
loss of revenue, expropriation and nationalization, restrictions on repatriation of income or capital, currency exchange
restrictions, contract deprivation, force majeure events and the potential for trade and economic sanctions or other
restrictions to be imposed by the Canadian government or other governments or organizations. To mitigate these risks,
the Company seeks to negotiate long-term service contracts for drilling services that ideally include early termination
provisions and other clauses for the Company's protection. However, there is, and there can be, no assurance that the
Company will be fully effective in mitigating foreign operation risks. Such risks could have material adverse impacts on
the Company's financial condition and operating results.
Foreign Exchange Exposure
The Company’s consolidated financial statements are presented in Canadian dollars. Operations in countries outside
of Canada result in foreign exchange risk to the Company. The principal foreign exchange risk relates to the conversion
of United States dollar-denominated activity to Canadian dollars. The United States/Canadian dollar exchange rate at
December 31, 2017 was approximately 1.26 compared with 1.34 at December 31, 2016 and 1.38 at December 31, 2015.
In addition, the Company has foreign exchange risk in relation to the conversion of United States dollar-denominated
debt to Australian dollars. The United States/Australian dollar exchange rate at December 31, 2017 was approximately
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
18
1.28, compared with 1.38 at December 31, 2016 and 1.37 at December 31, 2015. Fluctuations in the future period's
exchange rates will impact the Canadian dollar equivalent of the results reported by foreign subsidiaries.
Litigation and Legal Proceedings
From time to time, the Company is subject to litigation and legal proceedings that may include employment, tort,
commercial and class action suits. Amounts claimed in such suits or actions may be material and accordingly decisions
against the Company could have an adverse effect on the Company’s financial condition or results of operations.
Operating Risks and Insurance
The Company’s operations are subject to risks inherent in the oilfield services industry. Where available and cost-
effective, the Company carries insurance to cover the risk to its equipment and people, and each year the Company
reviews the level of insurance for adequacy. Although the Company believes its level of insurance coverage to be
adequate, there can be no assurance that the level of insurance carried by the Company will be sufficient to cover all
potential liabilities.
Technology
As a result of growing technical demands of resource plays, the Company’s ability to meet customer demands is
dependent on continuous improvement to the performance and efficiency of existing oilfield services equipment. There
can be no assurance that competitors will not achieve technological advantages over the Company.
Reliance on Key Management Personnel
The success and growth of the Company is dependent upon its key management personnel. The loss of services of
such persons could have a material adverse effect on the business and operations of the Company. No assurance can
be provided that the Company will be able to retain key management members.
Workforce
The Company’s operations are dependent on attracting, developing and maintaining a skilled workforce. During periods
of peak activity levels, the Company may be faced with a lack of personnel to operate its equipment. The Company is
also faced with the challenge of retaining its most experienced employees during periods of low utilization, while
maintaining a cost structure that varies with activity levels. To mitigate these risks, the Company has developed an
employee recruitment and training program, and continues to focus on creating a work environment that is safe for its
employees.
Seasonality and Weather
The Company’s Canadian oilfield services operations are impacted by weather conditions that hinder the Company’s
ability to move heavy equipment. The timing and duration of “spring break-up”, during which time the Company is
prohibited from moving heavy equipment on secondary roads, restricts movement of equipment in and out of certain
areas, thereby negatively impacting equipment utilization levels. Further, the Company’s activities in certain areas in
northern Canada are restricted to winter months when the ground is frozen solid enough to support the Company’s
equipment. This seasonality is reflected in the Company’s operating results, as rig utilization is normally at its lowest
during the second and third quarters of the year. The Company continues to mitigate the impact of Canadian weather
conditions through expansion into markets not subject to the same seasonality and by working with customers in planning
the timing of their drilling programs. In addition, volatility in the weather across all areas of the Company’s operations
can create additional risk and unpredictability in equipment utilization rates and operating results.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
19
MANAGEMENT'S REPORT
The consolidated financial statements and other information contained in the annual report are the responsibility of the
management of the Company. The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards consistently applied, using management’s best estimates and judgments,
where appropriate.
Preparation of financial statements is an integral part of management’s broader responsibilities for the ongoing operations
of the Company. Management maintains a system of internal accounting controls to ensure that properly approved
transactions are accurately recorded on a timely basis and result in reliable financial statements. The Company’s external
auditors are appointed by the shareholders. They independently perform the necessary tests of the Company’s accounting
records and procedures to enable them to express an opinion as to the fairness of the consolidated financial statements,
in conformity with International Financial Reporting Standards.
The Audit Committee, which is comprised of independent directors, meets with management and the Company’s external
auditors to review the consolidated financial statements and reports on them to the Board of Directors. The consolidated
financial statements have been approved by the Board of Directors.
"Signed"
Robert H. Geddes
President and Chief Operating Officer
"Signed"
Michael Gray
Chief Financial Officer
March 1, 2018
President and Chief Operating Officer
"Signed"
Michael Gray
Chief Financial Officer
March 1, 2018
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
20
March 1, 2018
Independent Auditor’s Report
To the Shareholders of
Ensign Energy Services Inc.
We have audited the accompanying consolidated financial statements of Ensign Energy Services Inc. and
its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2017
and December 31, 2016 and the consolidated statements of loss and comprehensive loss, changes in
shareholders’ equity and cash flows for the years then ended, and the related notes, which comprise a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
PricewaterhouseCoopers LLP
Suite 3100, 111 – 5th Avenue SW, Calgary, Alberta, Canada, T2P 5L3
T: +1 403 509 7500 F: +1 403 781 1825
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
21
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Ensign Energy Services Inc. and its subsidiaries as at December 31, 2017 and December 31,
2016 and their financial performance and their cash flows for the years then ended in accordance with
International Financial Reporting Standards.
Chartered Professional Accountants
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
22
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at
(in thousands of Canadian dollars)
Assets
Current Assets
Cash and cash equivalents (Note 16)
Accounts receivable
Inventories, investments and other
Income taxes receivable
Total current assets
Property and equipment (Note 5)
Total assets
Liabilities
Current Liabilities
Accounts payable and accruals (Note 6)
Dividends payable
Share-based compensation (Note 11)
Income taxes payable
Current portion of long-term debt (Note 7)
Total current liabilities
Long-term debt (Note 7)
Share-based compensation (Note 11)
Deferred income taxes (Note 8)
Total liabilities
Shareholders' Equity
Share capital (Note 9)
Contributed surplus
Foreign currency translation reserve
Retained earnings
Total shareholders' equity
December 31
2017
December 31
2016
$
32,374
$
29,837
232,155
92,424
3,546
360,499
205,347
48,850
17,208
301,242
2,597,966
2,913,153
$
2,958,465
$
3,214,395
$
190,152
$
153,385
18,849
3,021
3,419
487,257
702,698
252,676
2,708
311,007
18,877
5,943
—
134,190
312,395
583,269
2,539
483,703
1,269,089
1,381,906
206,042
1,126
237,885
1,244,323
1,689,376
180,666
1,524
292,547
1,357,752
1,832,489
Total liabilities and shareholders' equity
$
2,958,465
$
3,214,395
Contingencies and commitments (Note 19)
See accompanying notes to the consolidated financial statements.
Approved by the Board of Directors:
"Signed"
John Schroeder
"Signed"
James B. Howe
Chairman of the Audit Committee and Director
Director
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
23
CONSOLIDATED STATEMENTS OF LOSS
For the years ended December 31
(in thousands of Canadian dollars, except per share data)
Revenue
Expenses
Oilfield services
Depreciation (Note 5)
General and administrative
Share-based compensation (Note 11)
Foreign exchange and other
Total expenses
Loss before interest and income taxes
Interest income
Interest expense
Loss before income taxes
Income taxes (Note 8)
Current tax
Deferred tax
Total income taxes
Net loss
Net loss per share (Note 10)
Basic
Diluted
See accompanying notes to the consolidated financial statements.
2017
2016
$
1,000,650
$
859,702
759,700
325,811
39,166
656
21,903
622,026
349,947
52,503
10,287
(987)
1,147,236
1,033,776
(146,586)
(174,074)
(281)
41,491
(367)
30,838
(187,796)
(204,545)
(2,353)
(147,799)
(150,152)
(21,510)
(32,513)
(54,023)
(37,644)
$
(150,522)
(0.24)
(0.24)
$
$
(0.99)
(0.98)
$
$
$
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
24
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended December 31
(in thousands of Canadian dollars)
Net loss
Other comprehensive (loss) income
Item that may be subsequently reclassified to profit or loss
Foreign currency translation adjustment
Comprehensive loss
See accompanying notes to the consolidated financial statements.
2017
2016
$
(37,644)
$
(150,522)
(54,662)
(39,683)
$
(92,306)
$
(190,205)
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
25
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share
Capital
Contributed
Surplus
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
(in thousands of Canadian dollars)
Balance January 1, 2017
$
180,666 $
1,524 $
292,547 $
1,357,752 $
1,832,489
Net loss
Other comprehensive loss
Total comprehensive loss
Dividends
Share-based compensation
Shares vested previously held in trust
Purchase of shares held in trust
Balance December 31, 2017
Balance January 1, 2016
Net loss
Other comprehensive loss
Total comprehensive loss
Dividends
Share-based compensation
Shares vested previously held in trust
Purchase of shares held in trust
—
—
—
23,208
—
3,271
(1,103)
—
—
—
—
2,873
(3,271)
—
—
(37,644)
(54,662)
(54,662)
—
(37,644)
(37,644)
(54,662)
(92,306)
—
—
—
—
(75,785)
(52,577)
—
—
—
2,873
—
(1,103)
$
$
206,042 $
1,126 $
237,885 $
1,244,323 $
1,689,376
169,171 $
2,538 $
332,230 $
1,582,657 $
2,086,596
—
—
—
7,943
—
5,587
(2,035)
—
—
—
—
4,573
(5,587)
—
—
(150,522)
(150,522)
(39,683)
(39,683)
—
(39,683)
(150,522)
(190,205)
—
—
—
—
(74,383)
(66,440)
—
—
—
4,573
—
(2,035)
Balance December 31, 2016
$
180,666 $
1,524 $
292,547 $
1,357,752 $
1,832,489
See accompanying notes to the consolidated financial statements.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
26
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(in thousands of Canadian dollars)
Cash provided by (used in)
Operating activities
Net loss
Items not affecting cash
Depreciation
Share-based compensation, net of cash paid
Unrealized foreign exchange and other
Accretion on long-term debt
Deferred income tax
Funds flow from operations
Net change in non-cash working capital (Note 16)
Cash provided by operating activities
Investing activities
Purchase of property and equipment
Proceeds from disposals of property and equipment
Net change in non-cash working capital (Note 16)
Cash used in investing activities
Financing activities
Net increase (decrease) in bank credit facilities
Purchase of shares held in trust (Note 9)
Dividends (Note 9)
Net change in non-cash working capital (Note 16)
Cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Effects of foreign exchange on cash and cash equivalents
Cash and cash equivalents
Beginning of year
End of year
Supplemental information
Interest paid
Income taxes recovered
See accompanying notes to the consolidated financial statements.
2017
2016
$
(37,644)
$
(150,522)
325,811
349,947
145
(918)
1,843
(147,799)
141,438
(6,291)
135,147
(123,763)
6,051
(2,667)
(120,379)
42,189
(1,103)
(52,577)
(482)
10,287
(6,864)
316
(32,513)
170,651
(5,315)
165,336
(43,394)
14,274
(23,627)
(52,747)
(48,995)
(2,035)
(66,440)
(1,887)
(11,973)
(119,357)
2,795
(258)
29,837
32,374
37,161
(19,688)
$
$
$
$
$
$
(6,768)
(3,781)
40,386
29,837
30,851
(9,249)
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
(in thousands of Canadian dollars, except share and per share data)
1. NATURE OF BUSINESS
Ensign Energy Services Inc. is incorporated under the laws of the Province of Alberta, Canada. The address of its
registered office is 1000, 400 – 5th Avenue S.W., Calgary, Alberta, Canada, T2P 0L6. Ensign Energy Services Inc.
and its subsidiaries and partnerships (the “Company”) provide oilfield services to the oil and natural gas industry
in Canada, the United States and internationally.
2. BASIS OF PRESENTATION
The consolidated financial statements of the Company have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements were approved by the Company’s Board of Directors on March 1, 2018,
after review by the Company’s Audit Committee.
3.
SIGNIFICANT ACCOUNTING POLICIES
(a) Measurement basis
These consolidated financial statements have been prepared on an historical cost basis, except as discussed
in the significant accounting policies below.
(b) Basis of consolidation
These consolidated financial statements include the accounts of Ensign Energy Services Inc. and its subsidiaries
and partnerships, substantially all of which are wholly owned, which it controls. The Company controls an entity
when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. Intercompany balances and transactions, including
unrealized gains or losses between subsidiaries and partnerships are eliminated on consolidation.
(c) Cash and cash equivalents
Cash and cash equivalents consists of cash and cash equivalents with maturities of three months or less or
convertible to cash on demand without penalty.
(d) Inventories
Inventories, comprised of spare equipment parts and consumables, are recorded at the lower of cost and net
realizable value. Cost is determined on a specific item basis.
(e) Property and equipment
Property and equipment is initially recorded at cost. Costs associated with equipment upgrades that result in
increased capabilities or performance enhancements of property and equipment are capitalized. Costs incurred
to repair or maintain property and equipment are expensed as incurred. Property and equipment is subsequently
carried at cost less accumulated depreciation and write-downs and is derecognized on disposal or when there
is no future economic benefit expected from its use or disposal. Gains or losses on derecognition of property
and equipment are recognized in net income.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
28
Depreciation is based on the estimated useful lives of the assets as follows:
Asset Class
Expected Life
Method
Residual
Oilfield services equipment
Drilling rigs and related
2,500 - 5,000 operating days
Unit-of-production
Well servicing rigs
24,000 operating hours
Unit-of-production
Oil sands coring rigs
680 - 1,370 operating days
Unit-of-production
Heavy oilfield service equipment
3 - 15 years
Straight-line
Drill pipe
1,500 operating days
Unit-of-production
Drilling rig spare equipment
1 - 10 years
Buildings
Automotive equipment
20 years
3 years
Office furniture and shop equipment
5 - 15 years
Straight-line
Straight-line
Straight-line
Straight-line
10%
10%
10%
10%
—
—
—
15%
—
The calculation of depreciation includes assumptions related to useful lives and residual values. The
assumptions are based on experience with similar assets and are subject to change as new information becomes
available. During the year the Company recorded additional depreciation for assets that have been inactive for
a period of time.
Property and equipment is reviewed for impairment when events or changes in circumstances indicate that its
carrying value may not be recoverable. The Company’s operations and business environment are routinely
monitored, and judgment and assessments are made to determine if an event has occurred that indicates
possible impairment.
If indicators of impairment exist, the recoverable amount of the asset or cash-generating unit (“CGU”) is
estimated. If the carrying value of the asset or CGU exceeds the recoverable amount, the asset or CGU is
written down to its recoverable amount. The recoverable amount of an asset or CGU is the greater of its fair
value less costs to dispose and value-in-use. Value-in-use is determined as the amount of estimated risk-
adjusted discounted future cash flows.
(f) Business combinations
The acquisition method of accounting is used to account for the acquisition of subsidiaries and businesses by
the Company at the date control of the business is obtained. The cost of the business combination is measured
as the aggregate of the fair value at the date of exchange of assets given, liabilities incurred or assumed, and
equity instruments issued by the Company in exchange for control of the acquiree. Acquisition-related costs
are expensed as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition are recognized at their fair values at the acquisition date.
(g) Revenue recognition
Revenue from oilfield services is generally earned based upon service orders or contracts with a customer that
include fixed or determinable prices based upon daily, hourly or job rates. Revenue is recognized when services
are performed and only when collectability is reasonably assured. Customer contract terms do not include
provisions for significant post-service delivery obligations.
The Company also provides services under turnkey contracts whereby oilfield services are performed for a
fixed price, regardless of the time required or the problems encountered performing the service. Revenue from
such contracts is recognized using the percentage-of-completion method based upon costs incurred to date
and estimated total contract costs. Anticipated losses, if any, on uncompleted contracts are recorded at the
time the estimated costs exceed the contract revenue.
For contracts that are terminated prior to the specified term, early termination payments received by the Company
are recognized as revenue when all contractual requirements are met.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
29
(h) Foreign currency translation
The consolidated financial statements are presented in Canadian dollars which is the Company’s functional
currency. Financial statements of the Company’s United States and international subsidiaries have a functional
currency different from Canadian dollars and are translated to Canadian dollars using the exchange rate in
effect at the year-end date for all assets and liabilities, and at average rates of exchange during the year for
revenues and expenses. All changes resulting from these translation adjustments are recognized in other
comprehensive (loss) income.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in currencies other than an operation’s functional currency are recognized in the consolidated
statement of (loss) income.
(i) Borrowing costs
Interest and borrowing costs that are directly attributable to the acquisition, construction or production of
qualifying assets are capitalized as part of the cost of those assets. Qualifying assets are those which take a
substantial period of time to prepare for their intended use. Capitalization ceases when substantially all activities
necessary to prepare the qualifying asset for its intended use are complete. All other interest is recognized in
the consolidated statement of (loss) income in the period in which it is incurred.
(j)
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, income tax liabilities
and assets are recognized for the estimated tax consequences attributable to differences between the amounts
reported in the consolidated financial statements and their respective tax bases, using enacted or substantively
enacted income tax rates. The effect of a change in income tax rates on deferred income tax liabilities and
assets is recognized in income in the period in which the change is substantively enacted.
Deferred tax assets are recognized to the extent that future taxable income will be available against which
temporary differences can be utilized.
(k) Share-based compensation
The Company has an employee share option plan or equivalent that provides all option holders the right to
elect to receive either common shares or a direct cash payment in exchange for the options exercised. These
options are accounted for as a compound financial instrument, which requires the fair value of the liability
component to be determined first and the residual value, if any, allocated to the equity component. The fair
value of the settlement option under cash and shares is the same; therefore these options are accounted for
as cash-settled awards.
The Company has other cash-settled share-based compensation plans. Cash-settled share-based
compensation plans are recognized as compensation expense over the vesting period using fair values with a
corresponding increase or decrease in liabilities. The liability is remeasured at each reporting date and at the
settlement date. Any changes in the fair value of the liability are recognized as share-based compensation
expense in the statement of income. The fair value is determined using the Black-Scholes option pricing model.
The Company has established Performance Share Units (PSU) incentive plan measured at the fair value when
granted using the volume weighted average of the Company's stock price for the ten day period preceding the
reporting date, as well as certain performance factors assessed by management and subject to a two percent
cap based on certain financial performance metrics. The fair value is re-measured at each reporting date.
The Company has share savings and share bonus plans for employees, as well as a program whereby a portion
of the retainer paid to Directors is in the form of common shares of the Company. In all cases, any common
shares acquired for such plans are purchased in the open market and administered through trusts until the
shares are vested. The share purchase price is considered the fair value.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
30
(l) Financial instruments
All financial instruments are measured at fair value upon initial recognition of the transaction. Measurement in
subsequent periods is dependent on whether the instrument is classified as a “financial asset or financial liability
at fair value through profit or loss”, “available-for-sale financial assets”, “held-to-maturity investments”, “loans
and receivables”, or “other financial liabilities”. The Company derecognizes a financial asset when the
contractual right to the cash flows from the asset expires, or it transfers the right to receive the contractual cash
flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the
financial asset are transferred. The Company derecognizes a financial liability when its contractual obligations
are discharged, cancelled or expired. Financial assets and liabilities are offset and the net amount presented
in the balance sheet when the Company has a legal right to offset the amounts and intends either to settle on
a net basis or to realize the asset and settle the liability simultaneously.
The Company has the following non-derivative financial assets:
(i) Financial assets at fair value through profit or loss:
Cash and cash equivalents are held for trading within the fair value through profit or loss category. Financial
assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in
net income.
(ii) Loans and receivables:
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognized initially at fair value, adjusted for any directly attributable transaction costs.
Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective
interest method, less any impairment losses. The Company’s trade and other receivables are categorized as
loans and receivables.
(iii) Available for sale:
From time to time, the Company may have certain equity investments in certain entities and the fair value is
determined using Level 1 of the three-level hierarchy. Investments that have a quoted price in an active market
are measured at fair value with changes in fair value recognized in other comprehensive income. When the
investment is ultimately sold, any gains or losses are recognized in net income and any unrealized gains or
losses previously recognized in other comprehensive income are reversed.
The Company has the following non-derivative financial liabilities:
(i) Other financial liabilities:
Trade and other payables, finance lease obligations, senior unsecured notes and bank credit facilities are
classified as “other financial liabilities”. Other financial liabilities are recognized initially at fair value, net of
any directly attributable transaction costs. Other financial liabilities, including the Senior Notes, are
subsequently measured at amortized cost using the effective interest method. Transaction costs incurred
with respect to the credit facilities are deferred and amortized using the straight-line method over the term
of the facility. The asset is recognized in other assets on the balance sheet while the amortization is included
in finance costs within net income.
(ii) Equity instruments:
Common shares are classified as equity. Incremental costs directly attributable to the issue of common
shares are recognized as a deduction from equity, net of any tax effects.
(m) Critical judgments and accounting estimates
Preparation of the Company’s consolidated financial statements in accordance with IFRS requires management
to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, income
and expenses. Actual results could differ from those estimates. Estimates, judgments and assumptions are
continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
31
The following are the most critical estimates and assumptions used in determining the value of assets and
liabilities:
Allowance for doubtful accounts
The Company establishes an allowance for estimated losses for uncollectible accounts. The allowance is
determined based on customer credit-worthiness, current economic trends and past experience. Information
regarding the allowance for doubtful accounts is included in Note 18.
Property and equipment
The calculation of depreciation includes assumptions related to useful lives and residual values. Assumptions
are based on experience with similar assets and is subject to change as new information becomes available.
In addition, assessing for impairment requires estimates and assumptions.
Assets are grouped into CGUs based on separately identifiable and largely independent cash inflows and are
used for impairment testing. Estimates of future cash flows used in the evaluation of impairment of assets are
made using management’s forecasts of market prices, market supply and demand, margins, and discount rates.
Information regarding property and equipment is included in Note 5.
Share-based compensation
Measurement inputs include share price on measurement date, exercise price, expected volatility, weighted
average expected life, expected dividends, and risk-free interest rate. Significant estimates and assumptions
are used in determining the expected volatility based on weighted average historic volatility adjusted for changes
expected due to publicly available information, weighted average expected life and expected forfeitures, based
on historical experience and general option-holder behavior. Changes to input assumptions will impact share-
based compensation liability and expense. Information regarding share-based compensation is included in
Note 11.
Income taxes
The Company is subject to income taxes in a number of tax jurisdictions. The amount expected to be settled
and the actual outcome and tax rates can change over time, depending on the facts and circumstances. Changes
to these assumptions will impact income tax and the deferred tax provision. Information regarding income taxes
is included in Note 8.
Critical judgments in applying accounting policies that have the most significant effect on the amounts recognized
in the consolidated financial statements are as follows:
Functional currency
The Company determines functional currency based on the primary economic environment in which the entity
operates. This includes a number of factors that must be considered by the Company in using its judgment to
determine the appropriate functional currency for each entity. These factors include currency of revenue
contracts and currency that mainly influences operating, financing and investing activities. Information regarding
the specific functional currencies by Subsidiaries and Partnerships is included in Note 15.
Impairments
Assessing for indicators of possible impairment requires judgment in the assessment of facts and circumstances
and is a subjective process that often involves a number of estimates and is subject to interpretation. Information
regarding impairment is included in Note 5.
Deferred income tax assets
The recognition of deferred tax assets is based on judgments about future taxable profits.
(n) Recent accounting pronouncements
As of 1 January, 2018, IFRS 15 Revenue from Contracts with Customers will come in effect, replacing IAS 18
Revenue, IAS 11 Construction Contracts and any associated interpretations. The standard is required to be
adopted either retrospectively or using a modified transition method, with early adoption permitted. The
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
32
Company has completed its initial assessment of IFRS 15 Revenue from Contracts with Customers and
determined that it will be adopted as of 1 January, 2018 and that it will not have a material impact on the
recognition of revenue, however, it will have an impact on the associated disclosures.
As of 1 January, 2018, IFRS 9 Financial Instruments, will come into effect, superseding earlier versions of IFRS
9 and replacing IAS 39 Financial Instruments: Recognition and Measurement. The Company is currently in the
process of completing its assessment of the standard and its expected impact on the consolidated financial
statements ahead of year end.
On January 13, 2016 the IASB issued IFRS 16 - Leases ("IFRS 16") which has not yet been adopted by the
Company. IFRS 16 replaces the accounting requirements under IAS 17 - Leases and is effective for annual
periods beginning on or after January 1, 2019 with early adoption permitted. IFRS 16 requires all leases to be
reported on the Company's balance sheet as assets and liabilities. The Company is in the process of assessing
the impact that the amendments will have on its financial statements or whether to early adopt.
4. FOREIGN OPERATIONS
The Company provides oilfield services throughout much of North America and internationally in a number of
onshore drilling areas. The Company’s foreign operations, with the general exception of operations in the United
States and Australia, are subject to a number of risks and uncertainties such as unstable government regimes,
civil and/or labor unrest, strikes, terrorist threats, regulatory uncertainty and complex commercial arrangements.
The Company’s operations in Venezuela and Argentina are subject to certain restrictions with respect to the transfer
of funds into or out of such countries; however, such restrictions are not considered significant to the Company at
this time due to the relatively small size of the operations and certain contractual provisions that have been put in
place designed to protect the Company.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
33
5.
PROPERTY AND EQUIPMENT
Cost:
Balance at December 31, 2015
$
5,148,188 $
146,693 $
73,831 $
5,368,712
Rig and related
equipment
Automotive and
other equipment
Land and
buildings
Total
Additions
Disposals
Asset decommissioning and write-downs
Effects of foreign exchange
Balance at December 31, 2016
Additions
Disposals
Asset decommissioning
Effects of foreign exchange
Balance at December 31, 2017
Accumulated depreciation and write-downs
Balance at December 31, 2015
Depreciation
Disposals
Asset decommissioning and write-downs
Effects of foreign exchange
Balance at December 31, 2016
Depreciation
Disposals
Asset decommissioning
Effects of foreign exchange
Balance at December 31, 2017
Net book value:
At December 31, 2016
At December 31, 2017
$
$
$
$
$
39,096
(81,424)
(61,191)
(72,856)
4,971,813
112,790
(50,268)
—
3,199
(23,147)
—
(4,042)
122,703
10,031
443
—
1,099
(1,860)
—
(1,025)
72,045
942
(823)
—
43,394
(106,431)
(61,191)
(77,923)
5,166,561
123,763
(50,648)
—
(131,816)
(4,319)
(2,697)
(138,832)
4,902,519 $
128,858 $
69,467 $
5,100,844
(1,979,677) $
(103,407) $
(20,048) $
(2,103,132)
(332,740)
80,865
61,191
33,192
(2,137,169)
(308,869)
39,286
—
34,720
(13,093)
20,497
—
1,925
(94,078)
(13,559)
(1,934)
—
3,970
(3,036)
(348,869)
695
—
228
102,057
61,191
35,345
(22,161)
(2,253,408)
(3,994)
(326,422)
231
—
679
37,583
—
39,369
(2,372,032) $
(105,601) $
(25,245) $
(2,502,878)
2,834,644 $
2,530,487 $
28,625 $
23,257 $
49,884 $
2,913,153
44,222 $
2,597,966
Property and equipment includes equipment under construction of $34,980 (2016 - $106,881) that has not yet
been subject to depreciation. During the year, the Company decommissioned 1 drilling rig that had been fully
depreciated.
The adverse economic effects arising from the sustained low oil and natural gas prices are considered indicators
of possible impairment of the Company's assets, and accordingly an asset impairment test was performed by
Management. The Company completed impairment tests in each of its CGU's using five year cash flow projections
with a terminal value and concluded that no impairment charges were required for any CGU's as at December 31,
2017. The impairment tests were based on the following key assumptions:
• a weighted average pre-tax discount rate of 10% to 14% based on the cost of the Company's capital and
debt, asset and country risk, together with past experience;
• cash flow projections based on the assumption that activity levels will return to 85% of 2014 EBITDA in the
year 2022; and
• a terminal growth rate of 2%.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
34
The Company performed a sensitivity analysis and noted no material impact in any CGU under any of the following
situations:
• discount rates 2.3% higher or lower;
• cash flows 24% higher or lower; and
• a terminal growth rate 2% higher or lower.
6. ACCOUNTS PAYABLE AND ACCRUALS
Trade payables
Accrued liabilities
Accrued payroll
Interest payable
Deferred revenue
Other liabilities
7. BANK CREDIT FACILITIES AND LONG-TERM DEBT
Drawings on the Global Bank Facility
Senior unsecured notes
Tranche A, due February 22, 2017, 3.43%
Tranche B, due February 22, 2019, 3.97%
Tranche C, due February 22, 2022, 4.54%
Capital Lease Commitments
Unamortized deferred financing costs
Total
Less: current portion
Total long-term debt
Bank credit facilities:
December 31
2017
December 31
2016
$
110,789
$
8,302
47,582
892
14,579
8,008
58,705
30,329
37,321
1,362
23,808
1,860
$
190,152
$
153,385
December 31
2017
December 31
2016
$
488,677
$
316,701
-
125,730
125,730
1,436
(1,640)
$
$
739,933
(487,257)
252,676
$
$
134,270
134,270
134,270
-
(2,052)
717,459
(134,190)
583,269
As at December 31, 2017, the Company’s available bank credit facilities consists of a $500,000 (2016 - $500,000)
global revolving credit facility (the “Global Bank Facility”). The Global Bank Facility is available to the Company
and certain of its wholly-owned subsidiaries, and may be drawn in Canadian, United States or Australian dollars,
up to the equivalent value of $500,000 Canadian dollars. The Company finalized a $50.0 million accordion in the
second quarter of 2017, it is to be included in the existing revolving global facilities but not yet exercised.
Interest is incurred on the utilized balance of the Global Bank Facility based on election of one of the following
options when funds are drawn:
a. The bank's Canadian prime lending rate plus 0.20% to 2.50%
b. The US base rate plus 0.20% to 2.50%
c. The BBSY rate plus 1.20% to 3.50%
d. The BA rate plus 1.20% to 3.50%
e. The LIBOR rate plus 1.20% to 3.50%
The Global Bank Facility matures October 3, 2018, unless extended and is unsecured. No principal payments are
due until then. At December 31, 2017 the Company had $23 thousands outstanding in letters of credit and bank
guarantees (2016 - $9,250). Included in the drawings on the Global Bank Facility balance is an Australian
denominated portion of $152,300 (2016 - USD $90,000, AUD $140,800).
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
35
The Global Bank Facility has the following covenant requirements:
• The Consolidated Senior Debt (being the Company's bank debt and outstanding senior unsecured notes) to
Consolidated EBITDA Ratio shall not exceed 3.75:1.00 as at the end of the Fiscal Quarter ending on December
31, 2017, and 3.50:1.00 at any time thereafter;
• The Consolidated Debt to Consolidated EBITDA Ratio shall not exceed 4.75:1.00 as at the end of the Fiscal
Quarter ending on December 31, 2017, and 4.25:1.00 at any time thereafter;
• The Consolidated Debt to Consolidated Capitalization Ratio as at the end of any Fiscal Quarter shall not exceed
45%; and
• The Consolidated EBITDA to Consolidated Interest Expense as at the end of any Fiscal Quarter shall not be
less than 3.00:1.00.
Consolidated EBITDA is defined under the Agreement as net income from continuing operations for the 12 month
period then ended determined in accordance with IFRS before interest expense, depreciation, amortization and
accretion expenses, all provisions for taxes, all non-cash expenses and non-cash income, the amount of any stock-
based compensation; and extraordinary gains and losses.
During the first quarter of 2014, the Company secured a $20,000 uncommitted facility, solely for issuing letters of
credit, primarily used for bidding on contracts in the normal course of business. As at December 31, 2017, the
Company had $10,530 (2016 - $3,406) outstanding in letters of credit under the facility.
Senior unsecured notes:
On February 22, 2012, the Company completed the private placement of USD $300.0 million of senior unsecured
notes (the “Notes”) with the terms noted above. Interest on the Notes is payable semi-annually on May 31st and
November 30th each year with final interest payments due on expiry of the Notes. These Notes are unsecured,
rank equally with the Company’s Global Bank Facility and have been guaranteed by the Parent company and
certain of the Company’s subsidiaries located in Canada, the United States and Australia.
Interest accrued on the Notes at December 31, 2017 was $892 (2016 - $1,362) and has been included in accounts
payable and accruals on the consolidated statement of financial position. The Company incurred financing costs
associated with the Notes that are being deferred and amortized using the effective interest method.
During the year ended December 31, 2017, the Company extinguished Tranche A of the senior unsecured notes
using the Global Bank Facility.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
36
8.
INCOME TAXES
Analysis of deferred tax liability:
Property and equipment
Share-based compensation
Non-capital losses
Other
Net deferred tax liability
Deferred Tax:
Deferred tax asset recovered within 12 months
Deferred tax asset recovered after 12 months
Deferred tax liability recovered within 12 months
Deferred tax liability recovered after 12 months
December 31
2017
December 31
2016
$
427,893
$
614,965
$
$
(803)
(1,497)
(109,808)
(120,644)
(6,275)
(9,121)
311,007
$
483,703
(11,291)
$
(9,720)
(109,808)
(133,019)
4,213
427,893
4,375
622,067
Net deferred tax liability
$
311,007
$
483,703
The provision for income taxes is different from the expected provision for income taxes using combined Canadian
federal and provincial income tax rates for the following reasons:
For the years ended
Income (loss) before income taxes
Income tax rate
Expected income tax expense
Increase (decrease) from:
December 31
2017
December 31
2016
$
(187,796)
$
(204,545)
26.9%
26.9%
(50,517)
(55,023)
Higher effective tax rate on foreign operations
(9,848)
(10,462)
Non-deductible expenses
Adjustments from prior years
Functional currency translation adjustment and other
Rate change impact on deferred taxes
Income tax expense
3,624
7,442
7,107
(107,960)
3,116
4,050
(704)
5,000
$
(150,152)
$
(54,023)
The statutory rate for 2017 increased slightly over that of 2016 due to the increase in the Alberta tax rate, effective
July 1, 2015. The United States passed comprehensive tax reform under the Tax Cut and Jobs Act (“Tax Act”) on
December 22, 2017. The Federal corporate income tax rate will drop from 35% to 21% beginning January 1, 2018.
Due to these changes, the Company has revalued its deferred tax liability as at December 31, 2017 and the result
of this revaluation was a deferred tax recovery for the year ended December 31, 2017 of $109.3 to reduce the
deferred tax liability balance.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
37
9. SHARE CAPITAL
(a) Authorized
Unlimited common shares, no par value
Unlimited preferred shares, no par value, issuable in series
(b) Issued, fully paid and outstanding
Opening balance – January 1
Shares issue as part of the dividend reinvestment plan
Changes in unvested shares held in trust
Number of
Common
Shares
153,594,857 $
2,933,708
224,644
2017
Amount
180,666
23,208
2,168
Number of
Common
Shares
152,302,273 $
1,080,777
211,807
2016
Amount
169,171
7,943
3,552
Closing balance - December 31
156,753,209 $
206,042
153,594,857 $
180,666
The total number of unvested shares held in trust for share-based compensation plans as at December 31, 2017
was 321,272 (December 31, 2016 – 545,916).
(c) Dividends
During the year ended December 31, 2017, the Company declared dividends of $75,785 (2016 - $74,383), being
$0.48 per common share (2016 - $0.48 per common share). Subsequent to December 31 2017, the Company
declared a dividend for the first quarter of 2018 of $0.12 per common share or approximately $18,877. The dividend
has not been provided for and is pursuant to the quarterly dividend policy adopted by the Company. Pursuant to
subsection 89(1) of the Canadian Income Tax Act (“ITA”), the dividend being paid is designated as an eligible
dividend, as defined in subsection 89(1) of the ITA.
10. NET LOSS PER SHARE
Basic net loss per share is calculated by dividing net loss by the weighted average number of common shares
outstanding during the period.
Diluted net loss per share is calculated by dividing net loss by the weighted average number of common shares
outstanding during the period adjusted for conversion of all potentially dilutive common shares. Diluted net loss is
calculated using the treasury share method, which assumes that all outstanding share options are exercised, if
dilutive, and the assumed proceeds are used to purchase the Company’s common shares at the average market
price during the period.
Net loss attributable to common shareholders:
Basic and diluted
Weighted average number of common shares outstanding:
Basic
Potentially dilutive share-based compensation plans
Diluted
December 31
2017
December 31
2016
$
(37,644)
$
(150,522)
156,545,624
152,759,973
182,153
424,359
156,727,777
153,184,332
Share options of 4,890,600 (2016 – 5,037,000) were excluded from the calculation of diluted weighted average
number of common shares outstanding as they were anti-dilutive.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
38
11. SHARE-BASED COMPENSATION
Share option plan
The Company has an employee share option plan that provides all option holders the right to elect to receive either
common shares or a direct cash payment in exchange for the options exercised. The Company may grant options
to its employees for up to 14,886,400 (2016 - 14,885,900) common shares. The options’ exercise price equals the
market price of the Company’s common shares on the date of grant. Share options granted vest evenly over a
period of five years.
The total intrinsic value of the liability for vested benefits at December 31, 2017 was $2,278 (2016 - $2,817).
A summary of the Company’s share option plan as of December 31, 2017 and 2016 and the changes during the
years then ended, is presented below:
Outstanding – January 1
Granted
Exercised for cash
Forfeited
Expired
Outstanding - December 31
Exercisable - December 31
Number of
Share Options
5,037,700
$
2,064,750
(2,100)
(342,850)
(32,600)
6,724,900
3,032,400
$
$
2017
Weighted
Average
Exercise Price
10.74
7.18
7.30
9.88
15.51
9.67
11.35
Number of
Share Options
7,404,000
$
—
(32,200)
(991,100)
(1,343,000)
5,037,700
1,938,600
$
$
2016
Weighted
Average
Exercise Price
12.04
—
7.30
12.08
17.00
10.74
12.24
The weighted average share price at the date of exercise of options in 2017 was $7.30 per common share (2016 -
$9.10).
The following table lists the options outstanding at December 31, 2017:
Exercise Price
$6.02 to $9.00
$9.01 to $12.00
$12.01 to $16.13
Outstanding
Options
Average Vesting
Remaining (in
years)
Weighted
Average
Exercise Price
Options
Exercisable
Weighted
Average
Exercise Price
3,825,200
1,625,700
1,274,000
6,724,900
3.75
$
2.00
1.00
2.80
$
7.22
10.37
16.13
9.67
1,001,400
$
1,007,100
1,023,900
3,032,400
$
7.46
10.37
16.13
11.35
The assumptions used to estimate the fair value of employee share options as at December 31, were:
Remaining expected life (years)
Volatility (percent)
Forfeiture rate (percent)
Risk-free interest rate (percent)
Expected dividend (percent)
December 31
2017
December 31
2016
2.6
40.0
6.6
1.7
7.4
3.0
40.0
6.6
0.9
5.1
The expected volatility is determined based on weighted average historic prices for the Company’s common shares.
The forfeiture rate is estimated based on historical experience and general option holder behavior.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
39
Share Appreciation Rights (SARs)
The Company has granted share appreciation rights (“SARs”) to certain employees that entitle the employees to a
cash payment. The amount of the cash payment is determined based on the increase in the share price of the
Company between grant date and exercise date. Grants under the plan vest evenly over a period of five years.
A summary of the Company’s SARs plan as of December 31, 2017 and 2016 and the changes during the years
ended, is presented below:
Outstanding – January 1, 2016
Granted
Exercised
Forfeited
Expired
Outstanding - December 31, 2017
Exercisable - December 31, 2017
2017
Weighted
Average
Exercise Price
10.97
6.97
—
10.83
15.51
9.39
11.58
Number of
SARs
477,100
$
241,000
—
(101,400)
(4,000)
612,700
242,600
$
$
2016
Weighted
Average
Exercise Price
12.70
—
7.30
13.83
17.20
10.97
12.52
Number of
SARs
895,100
$
—
(2,300)
(307,200)
(108,500)
477,100
189,900
$
$
No SARs were exercised in 2017. The weighted average share price at the date of exercise of SARs in 2016 was
$8.51 per common share.
The following table lists the SARs outstanding at December 31, 2017:
Exercise Price
$6.02 to $9.00
$9.01 to $12.00
$12.01 to $16.13
SARs
Outstanding
Average Vesting
Remaining (in
years)
Weighted
Average
Exercise Price
SARs
Exercisable
Weighted
Average
Exercise Price
382,700
115,000
115,000
612,700
3.92
$
2.00
1.00
3.07
$
7.08
10.37
16.13
9.39
81,600
$
69,000
92,000
242,600
$
7.47
10.37
16.13
11.58
Performance Share Units (PSUs)
During the third quarter of 2017 the Company granted Performance Share Units (PSUs) to certain officers and
employees of the Company to participate in the growth and development of the Company and to promote further
alignment of interests between employees and the shareholders. PSUs are subject to the Company's performance
metrics assessed by management with a three year performance period. Each PSU granted permits the holder to
receive a cash payment equal to the fair market value of a share as of the maturity date, adjusted for a performance
multiplier.
A summary of the activity under this share based incentive plan is presented below:
Outstanding – January 1, 2017
Granted
Granted through dividend payment
Forfeited
Outstanding - December 31, 2017
Outstanding
—
714,253
34,332
(53,602)
694,983
Included in net earnings for the year ended December 31, 2017 is an expense of $1.1 million (2016 - $nil). This
was calculated using the trailing ten day volume weighted average share price of the Company's underlying common
shares, as the PSUs have no exercise price, adjusted for performance factors and subject to a two percent cap
based on certain financial performance metrics.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
40
12. SEGMENTED INFORMATION
The Company determines its operating segments based on internal information regularly reviewed by management
to allocate resources and assess performance. Oilfield services are provided in Canada, the United States and
internationally. The amounts related to each geographic area are as follows:
As at and for the year ended December 31, 2017
Canada
United States
International
Total
Revenue
Depreciation and amortization
(Loss) income before interest and income taxes
Total assets
Total liabilities
Purchase of property & equipment, net
As at and for the year ended December 31, 2016
Revenue
Depreciation and amortization
(Loss) income before interest and income taxes
Total assets
Total liabilities
Purchase of property & equipment, net
262,793
110,808
(78,377)
980,476
561,809
21,459
Canada
222,804
121,141
(76,303)
1,036,806
725,434
5,864
278,361
1,000,650
459,496
158,157
(61,818)
1,326,988
486,653
83,158
56,846
(6,391)
651,001
220,627
13,095
United States
International
337,950
164,306
(80,151)
1,456,516
444,713
(1,442)
298,948
64,500
(17,620)
721,073
211,759
24,698
325,811
(146,586)
2,958,465
1,269,089
117,712
Total
859,702
349,947
(174,074)
3,214,395
1,381,906
29,120
There are no material differences in the basis of accounting or the measurement of (loss) income, assets and
liabilities between the Corporation and reported segment information, except that certain inter-company liabilities
and equity are offset with the assets of the appropriate related segment. Revenues and expenses are attributed to
geographical areas based on the location in which the services are rendered. The segment presentation of assets
and liabilities is based on the geographical location of the assets.
During the year ended December 31, 2017 the Company had one customers that represented 10.0 percent of the
Company's revenue. During the year ended December 31, 2016, the Company had no customers that represented
more than 10 percent of the Company's revenue.
13. EXPENSES BY NATURE
Salaries, wages and benefits
Share-based compensation
Total employee costs
Depreciation
Purchased materials, supplies and services
Foreign exchange and other
December 31
2017
December 31
2016
524,291
$
371,986
656
524,947
325,811
274,575
21,903
10,287
382,273
349,947
302,543
(987)
Total expenses before interest and income taxes
$
1,147,236
$
1,033,776
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
41
14. KEY MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS
Key management personnel comprises of the Company’s directors and named executive officers. Compensation
for key management personnel consists of the following:
Short-term compensation
Share-based compensation
Total management compensation
December 31
2017
December 31
2016
$
$
2,349
1,407
3,756
$
$
2,923
539
3,462
During the fourth quarter of 2017, a corporation controlled by the Chairman of the Board of the Company provided
a short-term guarantee for amounts owing by the Company to a third party. The guarantee had an annual fee of
1% and was terminated in January of 2018.
15. SIGNIFICANT SUBSIDIARIES AND PARTNERSHIPS
The following table lists the Company’s principal operating partnerships and subsidiaries, the functional currency,
the jurisdiction of formation, incorporation or continuance of such partnerships and subsidiaries and the percentage
of shares owned, directly or indirectly, by the Company as of December 31, 2017:
Name of Subsidiary
Ensign Drilling Inc.
Ensign Well Servicing Inc.
Ensign Argentina S.A.
Ensign de Venezuela C.A.
Ensign Energy Services PTY Limited
Ensign Australia Pty Limited
Ensign International Energy Services LLC
Ensign Testing Services Inc.
Tristate (Barbados) Holdings Inc.
Ensign Testing Services (U.S.A) Inc.
Ensign United States Drilling Inc.
Ensign United States Drilling (California) Inc.
Ensign US Financial (Delaware) LP
Ensign US Southern Drilling LLC
OFS Canada Inc.
OFS Global Inc.
Functional
Currency
Jurisdiction of
Formation
Incorporation or
Continuance
Percentage Ownership of Shares
Beneficially Owned or Controlled
Directly or Indirectly by the Company
2017
2016
CAD
CAD
USD
USD
USD
AUD
USD
CAD
USD
USD
USD
USD
USD
USD
CAD
USD
Alberta
Alberta
Argentina
Venezuela
Australia
Australia
Oman
Alberta
Barbados
Montana
Colorado
California
Delaware
Delaware
Alberta
Nevada
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
42
16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(a) Non-cash working capital
Net change in non-cash working capital
Accounts receivable
Inventories, investments and other
Accounts payable and accruals
Income taxes receivable
Dividends payable
Relating to:
Operating activities
Investing activities
Financing activities
(b) Cash and cash equivalents
Cash
Cash equivalents and held in trust
Total cash and cash equivalents
17. CAPITAL MANAGEMENT STRATEGY
December 31
2017
December 31
2016
$
(21,623)
$
(40,403)
(43,900)
39,483
17,042
(442)
30,015
(10,154)
(10,723)
436
(9,440)
$
(30,829)
(6,291)
$
(5,315)
(2,667)
(482)
(23,627)
(1,886.925)
(9,440)
$
(30,829)
$
$
$
December 31
2017
December 31
2016
$
$
32,374
—
32,374
$
$
24,500
5,337
29,837
The Company’s objectives when managing capital are to exercise financial discipline, and to deliver positive returns
and stable dividend streams to its shareholders. The Company continues to be cognizant of the challenges
associated with operating in a cyclical, commodity-based industry and may make future adjustments to its capital
management strategy in light of changing economic conditions.
The Company considers its capital structure to include shareholders’ equity, bank credit facilities and senior
unsecured notes. In order to maintain or adjust its capital structure, the Company may from time to time adjust
its capital spending or dividend policy to manage the level of its borrowings, or may revise the terms of its bank
credit facilities to support future growth initiatives. The Company may consider additional long-term borrowings
or equity financing if deemed necessary. As at December 31, 2017, the bank credit facilities' drawings totaled
$488,677 (2016 - $316,701), senior unsecured notes totaled $249,820 (2016 - $400,758) and shareholders’ equity
totaled $1,689,376 (2016 - $1,832,489).
The Company is subject to externally imposed capital requirements associated with its bank credit facilities and
senior unsecured notes, including financial covenants that incorporate shareholders’ equity, earnings, consolidated
interest expense and level of indebtedness. The Company monitors its compliance with these requirements on an
ongoing basis and projects future operating cash flows, capital expenditure levels and dividend payments to assess
how these activities may impact compliance in future periods. As at December 31, 2017, the Company was in
compliance with all debt covenants.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
43
18. FINANCIAL INSTRUMENTS
Categories of financial instruments
The classification and measurement of financial instruments is presented below:
Cash and cash equivalents and accounts receivable are classified as financial assets at amortized cost.
Accounts payable and accruals, dividends payable and long-term debt are classified as financial liabilities at
amortized cost.
Fair values
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accruals and dividends
payable approximates their carrying value due to the short-term maturity of these financial instruments. The fair
value of the drawings on the bank credit facilities approximates its carrying value.
The estimated fair value of the senior unsecured notes has been determined based on available market information
and appropriate valuation methods, including the use of discounted future cash flows using current rates for similar
instruments with similar risks and maturities. The estimated fair value of the senior unsecured notes approximates
its carrying value.
Financial assets and liabilities recorded or disclosed at fair value in the consolidated statement of financial position
are categorized using a three-level hierarchy that reflects the level of judgment associated with the inputs used to
measure their fair value. The fair values of financial assets and liabilities included in Level 1 are determined by
reference to unadjusted quoted prices in active markets for identical assets and liabilities. Fair values of financial
assets and liabilities in Level 2 are based on inputs other than Level 1 quoted prices that are observable for the
asset or liability either directly (as prices) or indirectly (derived from prices). The fair values in Level 3 financial
assets and liabilities are not based on observable market data.
The estimated fair value of senior unsecured notes was based on Level 2 inputs and was estimated using the risk
free interest rates on government debt instruments of similar maturities, adjusted for estimated credit risk and
market risk premiums.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails
to meet its contractual obligations. Credit risk arises principally from the Company’s accounts receivable balances
owing from customers operating primarily in the oil and natural gas industry in Canada, the United States and
internationally. The carrying amount of accounts receivable represents the maximum credit exposure as at
December 31, 2017.
The Company assesses the credit worthiness of its customers on an ongoing basis and establishes credit limits
for each customer based on external credit reports and other publicly available information, internal analysis and
historical experience with the customer. Credit limits are approved by senior management and are reviewed on a
regular basis or when changing economic circumstances dictate. The Company manages credit risk through
dedicated credit resources, ongoing monitoring and follow up of balances owing, well liens, and tightening or
restriction of credit terms as required. The Company also monitors the amount and age of accounts receivable
balances on an ongoing basis. As at December 31, 2017, the Company had trade receivables of $25,775 (2016
- $30,011) with multiple customers that were greater than 90 days old for which an allowance for doubtful accounts
of $4,165 (2016 - $5,802) has been recorded to provide for balances which, in management’s best estimate, are
deemed uncollectible as at December 31, 2017. The allowance for doubtful accounts is an estimate requiring
significant judgment and may differ materially from actual results.
As part of the Company’s international operations, it provides oilfield services in Venezuela pursuant to contractual
arrangements. As at December 31, 2017, the Company had accounts receivable of approximately $28.6 million
for work performed in Venezuela, of which certain account receivables were discounted at 15 percent and assumed
nominal collections in the first year with even collections of the balance thereafter over a five year period. (2016 -
$24.8 million). However, due to the recent decline in the price of oil and continuing political unrest within Venezuela
there can be no assurance that the Company will be successful in collecting all of such outstanding balance.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
44
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The
Company manages liquidity by forecasting cash flows on an annual basis and secures sufficient credit facilities to
meet financing requirements that exceed anticipated internally generated funds. As at December 31, 2017, the
remaining contractual maturities of accounts payable and accruals and dividends payable are less than one year.
Maturity information regarding the principal and interest on the Company’s long-term debt are as follows:
As at December 31
Senior unsecured notes
Bank credit facilities1
Total
Less than 1 Year
1-3 Years
4-5 Years
$
$
11,045
$
148,198
$
130,626
$
509,741
—
—
520,786
$
148,198
$
130,626
$
Total
289,869
509,741
799,610
1 Interest on the bank credit facilities is calculated based on the amount drawn at December 31, 2017 and the applicable bankers’ acceptance/
LIBOR interest rates outstanding as at December 31, 2017. USD denominated balances are converted using the foreign exchange rate as of
December 31, 2017.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect
the Company’s net income or the value of its financial instruments.
Interest rate risk
The Company is exposed to interest rate risk with respect to its bank credit facilities which bear interest at floating
market rates. For the year ended December 31, 2017, if interest rates applicable to its bank credit facilities had
been 0.25 percent higher or lower, with all other variables held constant, income before income taxes would have
been $1,222 lower or higher.
Foreign currency exchange rate risk
The Company operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the United States dollar. The principal foreign exchange risk relates to the
translation of the Company’s foreign subsidiaries from their functional currencies to Canadian dollars. At
December 31, 2017, had the Canadian dollar weakened or strengthened by $0.01 against the United States dollar,
with all other variables held constant, the Company’s income before income taxes would have been $1,156 higher
or lower.
In addition, the Company has foreign exchange risk in relation to the conversion of Australian dollar denominated
debt to Canadian dollars. At December 31, 2017, had the Australian dollar strengthened or weakened by $0.01
against the Canadian dollar, with all other variables held constant, the Company’s income before income taxes
would have been $1,524 higher or lower.
The above sensitivities are limited to the impact of changes in the specified variable applied to the items noted
above and do not represent the impact of a change in the variable on the operating results of the Company taken
as a whole.
19. CONTINGENCIES AND COMMITMENTS
The Company has provided insurance bonds to certain government agencies in respect of the temporary importation
of equipment into that country. It is not anticipated that any material liabilities will arise from these insurance bonds.
The Company has commitments for facility leases, with future minimum payments as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
$
4,104
6,942
448
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
45
The Company leases a number of facilities under operating leases. The leases typically run for a period of two to
ten years, with an option to renew the lease after that date. Lease payments are increased throughout the lease
term to reflect market rates.
For the year ended December 31, 2017, lease payments of $4,888 (2016 - $7,459) were recognized as an expense.
The Company is a party to various disputes and lawsuits in the normal course of its business and believes the
ultimate liability arising from these matters will have no material impact on its consolidated financial statements.
20. SUBSEQUENT EVENTS
Subsequent to December 31, 2017, the Company secured a loan of $19,000 outside of the bank credit facilities.
The term of the loan is indefinite and bears an interest rate of Canadian prime lending rate plus 1.5% per annum
and is secured by certain assets of a subsidiary of the Company.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
46
Share Trading Summary
For the three months ended (Unaudited)
High ($)
Low ($)
Close ($)
Volume
Value ($)
2017
March 31
June 30
September 30
December 31
Total
9.81
8.26
7.56
6.98
7.43
6.27
6.09
5.95
7.97
6.93
7.05
6.47
24,600,100
216,304,588
22,972,300
165,293,284
11,395,900
75,766,121
11,341,600
71,825,426
70,309,900
529,189,419
For the three months ended (Unaudited)
High ($)
Low ($)
Close ($)
Volume
Value ($)
2016
March 31
June 30
September 30
December 31
Total
7.87
8.37
8.02
10.41
4.72
5.83
6.81
7.36
5.98
7.25
7.50
9.38
26,405,400
156,908,091
14,017,900
101,023,677
8,995,800
67,376,904
15,125,200
137,422,931
64,544,300
462,731,603
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
47
10 Year Financial information
(Unaudited - $ thousands, except per share data)
2017
2016
2015
2014
2013
Revenue
Gross margin
1,000,650
859,702
1,390,978
2,321,765
2,098,011
240,950
237,676
395,953
635,370
573,838
Gross margin % of revenue
24.1 %
27.6 %
28.5 %
27.4%
27.4%
Adjusted EBITDA
Depreciation
Net income (loss)
Net income (loss) per share
Basic
Diluted
201,784
325,811
185,173
349,947
329,010
335,513
(37,644)
(150,522)
(104,049)
(0.24)
(0.24)
$(0.99)
$(0.98)
$(0.68)
$(0.68)
$
$
$
542,262
298,854
71,120
$0.47
$0.46
485,712
248,026
128,865
$0.84
$0.84
Funds from operations
141,438
170,651
296,273
491,886
435,611
Funds from operations per share
Basic
Diluted
Net capital expenditures, excluding
acquisitions
Acquisitions
Working capital (deficit)
Long-term debt, net of current portion
$0.90
$0.90
$1.12
$1.11
$1.94
$1.94
$3.22
$3.21
117,712
29,120
159,033
582,999
—
(342,199)
252,676
—
(11,153)
583,269
—
144,239
794,109
—
189,698
786,327
$2.85
$2.84
342,225
76,408
(71,146)
317,407
Shareholders' equity
1,689,376
1,832,489
2,086,596
2,045,237
1,962,569
Return on average shareholders' equity
Long-term debt to equity
Weighted avg. common shares outstanding -
basic
(2.2)%
0.15:1
(8.2)%
0.32:1
(5.0)%
0.38:1
3.5%
0.38:1
6.7%
0.16:1
156,545,624
152,759,973
152,476,615
152,710,636
152,693,280
Closing share price - December 31
$6.47
$9.38
$7.38
$10.20
$16.73
*Restated under IFRS
**Not restated for IFRS
All per share data and the weighted average common shares outstanding have been restated to reflect the 3-for-1 stock split effective May 2001 and
the 2-for-1 stock split effective May 2006.
Certain prior year amounts have been restated to reflect current year presentation.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
48
10 Year Financial information
(Unaudited - $ thousands, except per share data)
2012
2011
2010*
2009**
2008**
Revenue
Gross margin
2,197,321
1,890,372
1,355,683
1,137,575
1,705,579
641,812
567,446
370,860
356,554
559,695
Gross margin % of revenue
29.2%
30.0%
27.4%
31.3%
32.8%
Adjusted EBITDA
Depreciation
Net income (loss)
Net income (loss) per share
Basic
Diluted
560,975
220,227
217,522
$1.42
$1.42
497,188
177,927
212,393
$1.39
$1.39
310,011
132,980
119,308
$0.78
$0.78
305,670
111,015
125,436
$0.82
$0.82
498,139
125,809
259,959
$1.70
$1.68
Funds from operations
506,355
473,099
288,513
259,239
402,407
Funds from operations per share
Basic
Diluted
Net capital expenditures, excluding
acquisitions
Acquisitions
Working capital (deficit)
Long-term debt, net of current portion
$3.32
$3.31
$3.09
$3.09
$1.89
$1.88
$1.69
$1.69
$2.63
$2.61
306,689
386,833
255,463
132,573
274,323
—
497,352
—
52,573
13,861
296,589
(10,233)
405,953
84,516
107,894
—
—
—
107,024
20,000
Shareholders' equity
1,857,958
1,723,422
1,548,155
1,530,797
1,551,151
Return on average shareholders' equity
Long-term debt to equity
Weighted avg. common shares outstanding -
basic
12.1%
0.16:1
13.0%
0.24:1
7.7%
NA
8.1%
NA
18.6%
0.01:1
152,664,447
152,865,133
152,834,798
153,154,557
153,094,863
Closing share price - December 31
$15.37
$16.25
$15.03
$15.00
$13.22
*Restated under IFRS
**Not restated for IFRS
All per share data and the weighted average common shares outstanding have been restated to reflect the 3-for-1 stock split effective May 2001 and
the 2-for-1 stock split effective May 2006.
Certain prior year amounts have been restated to reflect current year presentation.
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
49
CORPORATE INFORMATION
BOARD OF DIRECTORS
CORPORATE MANAGEMENT
HEAD OFFICE
N. MURRAY EDWARDS
N. MURRAY EDWARDS
400 - 5th Avenue S.W., Suite 1000
Calgary, Alberta T2P 0L6
Telephone: (403)-262-1361
Facsimile: (403)-262-8215
Email: info@ensignenergy.com
Website: www.ensignenergy.com
BANKERS
HSBC Bank Canada
STOCK EXCHANGE LISTING
Toronto Stock Exchange
Symbol: ESI
AUDITORS
PricewaterhouseCoopers LLP
TRANSFER AGENT
Computershare Trust Company
of Canada
Corporate Director and Investor
Chairman
ROBERT H. GEDDES
President and COO,
ROBERT H. GEDDES
President and Chief Operating
Ensign Energy Services Inc.
Officer
GARY CASSWELL (2,4)
Independent Businessman
MICHAEL GRAY
Chief Financial Officer
JAMES B. HOWE (1,3)
President, Bragg Creek Financial
ED KAUTZ
President United States
Consultants Ltd.
Operations
LEN KANGAS (2,4)
Independent Businessman
CARY A. MOOMJIAN, JR (2,3)
President,
TOM CONNORS
Executive Vice President - Canada/
International East Operations
MICHAEL NUSS
CAM OilServ Advisors LLC
Executive Vice President,
JOHN SCHROEDER (1,3)
Independent Businessman
KENNETH J. SKIRKA (2,4)
Independent Businessman
GAIL SURKAN (2,3)
Independent Businesswoman
BARTH WHITHAM (1,4)
President and CEO,
U.S. & Latin America Operations
TREVOR RUSSELL
Vice President, Finance
AHMED IQBAL
Corporate Controller
ROBERT RAIMONDO
Vice President, Health, Safety
and Environment
Enduring Resources LLC
CATHY ROBINSON
Vice President, Global Human
Resources
SUZANNE DAVIES
Vice President Legal and Corporate
Secretary
COMMITTEE MEMBERS
1 Audit
2 Corporate Governance, Nominations and Risk
3 Compensation
4 Health, Safety and Environment
ENSIGN ENERGY SERVICES INC. | 2017 ANNUAL REPORT
50
www.ensignenergy.com