Ensign Energy Services Inc.

Well, thank you operator. Good afternoon, everyone.

Well certainly a lot going on in the back half of 2018 as I am sure all of you on the call are aware Ensign successfully acquired Trinidad Drilling 141 rig worldwide high spec fleet. This is Ensign's largest and most transformational acquisition to-date.

The strategic acquisition catapults Ensign into the top three land drillers worldwide with one of the newest fleets. We also doubled our high spec fleet worldwide.

We tripled our presence in the Permian, makes Ensign the second largest in the U.S. and the largest in Canada and it doubles our Middle East operation.

The transaction brings together two performance driven cultures which will provide clients around the globe more access to the best rigs and the best cruise on the planet. With 80% of the combined fleet being high spec Tier 1 type rigs and having a diverse fleet including a 100 of the ADR 1500 AC class rigs, 18 of the 1000 horsepower AC, 17 of the 2000 and 3400 horsepower AC class rigs along with 54 high spec heavy teledouble Ensign has the right rigs in all the major areas around the world.

The transition and re-org plan has been executed on with both Ensign and Trinidad teams now harmonizing into one. We’re happy to have the Trinidad people onboard with over $40 million of annualized synergies already identified.

The new team has been moving tactically to act on realizing those synergies most of which should be fully utilized through 2019 and continuing into the future. In addition, the team has identified roughly $30 million of overlapping property, real estate, yards, facilities et cetera that are already on the market for sale.

Also as our Edge Control technology platform was purposely designed to be agnostic direct type we can easily layer on our Edge Controls platform onto the Trinidad fleet. Edge Controls as you recall is our well-side technology platform which tracks a $900 a day surcharge when installed.

Most importantly, the transition further derisk Ensign geopolitically. We now operate 50 rigs internationally in nine countries outside of the U.S.

and Canada. We can talk more on this in the Q&A.

In the meantime, I'll turn the call over to Mike Gray for a summary 2018.

Thanks Bob. My usual disclaimer our discussion may include forward looking statements, based upon current expectations and involve a number of business risks and certainties.

The factors that could cause results to differ materially, include but are not limited to, political, economic and market conditions, crude oil and natural gas prices, foreign currency fluctuations, weather conditions, the Company's defense of lawsuits, and the ability of customers to pay account receivable balances and raise capital or other unforeseen conditions which could impact the use of the services supplied by the company. During the fourth quarter of 2018, the company acquired 89.3% of Trinidad Drilling which added one month of operations from Trinidad to the company's fourth quarter results.

The price recovery of crude oil and natural gas from 2017 as well as the Trinidad acquisition resulted an increase demand for oilfield services in the fourth quarter of 2018 compared to the fourth quarter of 2017. Operating days were up in the fourth quarter of 2018 with Canadian operations expensing a 3% increase, United States operation a 54% increase, and international operations showing a 3% increase in operating days compared to fourth quarter of 2017.

For the year ended December 31st, 2018 overall operating days were up in the United States operations by 30% while the Canadian operations experienced a 13% decrease and international operations a 1% decrease compared to the year ended December 31st, 2017. Adjusted EBITDA for the fourth quarter of 2018 was 81.7 million, 18% higher than adjusted EBITDA of 69.3 million in the fourth quarter of 2017.

Adjusted EBITDA for the year ended December 31st, 2018 was 255.7 million a 27% increase compared to adjusted EBITDA of 201.8 million generated in the year ended December 31st, 2017. 2018 increase in adjusted EBITDA can be attributed to the increased demand for oilfield services caused by price recovery in crude oil and natural gas commodity compared to the same period of the prior year in addition to the Trinidad acquisition.

Excluding from Trinidad was 1.5 million related to transaction costs from the acquisition of Trinidad the majority of the cost related to this transaction relates to financing as had been recorded as such and will not impact EBITDA. The company generated revenue of 346.1 million in the fourth quarter of 2018 a 28% increase compared to revenue of 270 million generated in the fourth quarter of the prior year.

For the year ended December 31st, 2018 the company generated revenue of 1.2 billion a 16% increase compared to the revenue of 1 billion generated in the prior year. Gross margin increased to 94.2 million which is 30.5% of revenue net of third-party for the fourth quarter of 2018 compared to gross margin of 63.3 million was 26.1% of revenue net of third-party for the fourth quarter of 2017.

Gross margins increased to 300.5 million which is 29.4% revenue net of third-party for the year ended December 31st, 2018 compared to a gross margin of 241 million which is 27.6% of revenue net of third-party for the year ended December 31st, 2017. The increase in margins are related to the company's increasing revenue rates year-over-year along with maintaining effective cost controls.

Depreciation expense in the year was 415 million 27% higher than 325.8 million of the prior year. In the first quarter of 2018, the company changed to the straight-line method versus the unit of production and was applied respectively which increased depreciation expense for the year ended December 31st, 2018 when compared to the prior year.

Furthermore, the increase is also partially attributed to the acquisition of the Trinidad fixed asset base. G&A in the fourth quarter of 2018 was 67% higher than in the fourth quarter of 2017.

G&A expense for the year ended December 31st, 2018 was 19% higher than in the year ended December 31st, 2017. The increase in the year primary related to the Trinidad acquisition.

Net debt at December 31st, 2018 was 1.64 billion compared to 707 million at December 31st, 2017. The increase relates to the acquisition of Trinidad and the company expects to reduce debt by $100 million in 2019.

Net CapEx for the fourth quarter of 2018 totaled 16.9 million compared to net CapEx of 25.2 million in the corresponding period of 2017. Net CapEx totaled 73.3 million in which 9.1 million was funded by customers compared to net CapEx of 117.7 million in the corresponding period of 2017.

The company added three new well servicing rigs in 2018 to the U.S. market and expect the CapEx net CapEx budget for 2019 to be 102 million and will comprise mainly of maintenance capital only.

On that note, I'll turn it back to Bob.

Thanks Mike. So next looks like what area updates and outlook.

This is on the pro forma fleet now reflecting 302 drilling rigs and 102 well service rigs around the world. Starting with United States where we operate 134 drill rigs and 47 well service rigs in Northeastern California.

At any given day we run about 90 rigs in the U.S. running at approximately 66% utilization, 13 in California roughly 14 in the Rockies, and 61 in the Permian.

And to point out Ensign tripled its impact in the Permian with the Trinidad acquisition. Just to get a little bit insight into the current and forward, the big drop in fourth quarter receipts with the operators has of course pushed reduced activity in the first quarter and second quarter forecast with WTI back in the mid-50s and with most operators telling us mid 50s today is like mid 60s five years ago because of the efficiency gains.

We do expect the second half of 2019 to get back on pace. While it’s true the high spec rigs of today like the ADR 1500 AC drill wells five times faster than 10 years ago.

The question is always have we reached technical maturity on the manufacturing of the wellbore cycle. No question the curve is flattening and what our clients looking for now is reducing the beta between the best and the worst wells.

This is where the technology comes in reducing the beta from 20% to 5% will drive another 5% to 10% of cost out of well construction over the next few years. This will be achieved through the application of rig controls automation, directional guidance system like the Ensign Edge Control.

As I mentioned prior, the Trinidad fleet can accept the Ensign Edge Controls because so far the design application on top of the middleware control platform. Our forecast suggests, we may be off of a few rigs through the first half of 2019, but expect to be back on track on the back half of 2019 no question that rates will stop moving up and are under some pressure on spot pricing that would range between $500,000 to $100,000 a day.

We are able to counter the pressure to reduce rates by offering what we call performance-based contracts where the rig rate is tied to performance. The drive to reduce well cost does not always have to being reduced effective dayrates to the contractor.

We have about 10% of our Permian fleet now on these types of contracts and in our discussion for more of these with our Edge Control system installed in the rigs we do derisk these types of contracts more often than not are able to increase our effective dayrates all while reducing our operators well cost. Move to the Rockies, the Rockies is running at about 50% capacity with 14 rigs running in roughly 55% of the well service rigs also running.

We just moved one of our ADR 1500 to Canada to the Rockies on a full carried two year contract. Forward contracts will steady through to 2020 in the Rockies.

California, California remains strong for us with 65% utilization on drilling side and roughly 50% on the well servicing side. It's interesting that the heavier California crude is attracting at $5 premium in WTI as a result of the demand for heavier crudes led by the supply drop out of Venezuela.

On international front where we operate 50 rigs, Kuwait start with that both our 3400 horsepower rigs have landed in Kuwait and are on scheduled for June and July spuds in Kuwait. These will be starting five year plus one year extension contracts in both cases the two sister rigs to these two in Kuwait are back in Mexico and are being bid out obviously we like to target these to join the other two in Kuwait.

These are $60 million plus rigs a piece and attract roughly $60,000 a dayrates. We’re also in Bahrain in UAE we have two rigs in this area one is contracted, one is expecting to go back to work as well here in the next six months, Oman three rigs operating in the Mukhaizna field.

We're contracted out another year with those contracts. In Mexico as I mentioned we have two of the sister rigs to the Kuwait rigs in Mexico and two teledoubles in Mexico.

These rigs are currently down. In Australia we have 18 rigs and we operate one third of all the rigs in Australia with the newest fleet and drill roughly half the wells that are drilled in Australia.

We are the largest driller by far we are currently running nine of the 18 today and expect to ramp up 12 to 14 throughout the rest of the year. Argentina we have seven rigs in Argentina we run approximately 50% utilization continuously.

We have ADR 2000 down in the Neuquen area of the Vaca Muerta working for majors there. Venezuela we just have two rigs operating for majors who has a blockade sanction exemption till July.

Now let’s move to Canada, Canada where we now have 118 rigs the largest fleet in Canada. Canada as you know has had one of the toughest winters in a long time.

I'm sure it's not last than any one reasons why not only in the fourth quarter but the obvious geopolitical challenge with pipeline issues and now the delay in the Line 3 Enbridge. With the Trinidad acquisition Ensign shows up its fleet in the deeper capacity spectrum currently running 37 rigs today of one of the largest pad type fleets we expect to be running 24 to 25 rigs over break up.

The Canadian fleet is starting to see some effects on the consolidation and fleet retirements over the last two years. Needs to be 800 rigs and now it is 589 needs to be 45 contractors now it is 25.

20 of the 1500 horsepower class rigs in the market have left which is really tighten up the 1500 horsepower class rig in Canada. These are the rigs that drilled the Duvernay et cetera.

Rates have moved most recently from the high teens to low to mid-20s $3000 to $4000 a day pump on to two to three your contracts moving forward. We have eight of those types of rigs.

The utilization on the heavy teledouble will depend largely on the Montney Cardium activity which is expected to be static until latter half of 2019. With respect to well servicing running at about one-third capacity at the moment again expect tight summer and improving back half of 2019 in Canada.

So in summary on any given day we’re running plus or minus 150 to 160 drill rigs around the world 50 service rigs also testing directional drilling and rentals lines of business. This represents about 50% capacity on a fleet of 302 drill rigs and 102 well service rigs lot of full capacity there moving to the future.

And with that we’ll go to Q&A. Operator?

Bob just a clarification was the 30 million number that you referenced for the facility overlap based on your carrying value for that real estate or is that a reasonable expectation of what you can expect to get in the market right now?

There will be reasonable expectation what we can get in the market.

Is it fair to assume then if you were to transact on that we should also see the net synergy number annualized go up as well as you don't have to pay for taxes utilities all costs and all of that?

Yes, that is correct. So any of those synergies from those real estate are not included in that $40 million so that will be on top and there would be savings related to property tax and utilities.

Yes, and to point Jon the 40 has been already identified with great visibility. It looks like it's going to appear closer to some number that may have heard the other fellows mentioned in prior calls.

And typical Ensign style it always a conservative number. As we get to know Trinidad’s customer is better and have improved line of sight about what their forward demand is looking like across markets and they'll that in terms of what you know in terms of your own demand for your historical fleet.

Is incremental reshuffling of fleets across geographies a high likelihood at this point or you feel where assets are located is probably fair for where they are going to be over the next 12 months?

Yes, I think Jon that the right assets are in the right areas most generally. We see the - as I mentioned a couple of the Mexican 3400 horsepower new AC rigs are most likely to perhaps move from there.

I think that you are starting to see because of the supply pinch on 1500s in Canada because so many have exited Ensign itself has move four or five down so over the few last years. That I think we’re quite settled on where everything is sitting and certainly have no effort underway to move anything around at this point.

And we know these markets quite well - we’ll see but right now I’d say no we’re quite happy where we are at.

Mike just a point of clarification, the 200 million gain on purchased that you booked was that all hard asset upward revisions in the carrying values, was it tax pools or what drove the upward revision?

A large chunk o that are tax pools. There will be a slight revision in the PP&E but mainly related to pools.

In terms of Australia you talked about the momentum unfolding and maybe the potential to add three to five rigs. Is that momentum enough to cause a material change in price or its largely just activity momentum you are seeing right now?

Yes, we’re starting to get its price and activity what we seen is some upgrades required by operators which have been totally funded by the operator to keep close tight veil on the CapEx but I would say that we've been able to raise rates close to 10% to 15%. Keep in mind that in the last two and a half years, three years have certainly been tight in the Australian market waiting for the LNG trains to get moving along which they are.

Depletion is a little bit higher than they thought. All of a sudden everyone woke up at the back half of 2018 saying we need to start drilling again.

So we re-contracted probably a quarter of the fleet on two year contracts with the rate increases in the 15% range.

And are you seeing material wage rate inflation or labor availability challenges with that just given it is a small market and ultimately your peers seem to be experiencing the same thing?

Yes, no there was general - they run with a CVA process in Australia that we're well to begin with and it turned over here in the fall. We're in a renegotiation process for a few months and we timed it with our recontracting plans.

So, again knowing how to work well in Australia means knowing how to plan recontracting of rigs and your labor CVA turnover. So we’re tied in with a CVA and labor probably for the next three years that’s how they work.

May just one last from me, any incremental update you can give on Argentina in terms of forward bidding obviously it seems like there is some green shoots in that market as development plan seem to be ramping in the background?

Yes, I would agree with that. We are starting to see more interest in that area for sure.

Can you provide the term interest rate on the U.S. $700 million bridge facility or term loan?

Yes, it’s about five year term and the rates will be comparable to where our peers high-yield bonds are trading right now.

And Mike just to make sure I understand some of the accounting as we close up - as the transaction closes for Q1. Will there be any additional outflows for the purchase of Trinidad in Q1 or is that all reflected in the Q4 financials?

No, so there will be the additional purchase of the 10% of Trinidad in Q1. There will be minority interest in Q1 will be eliminated and I’ll be taking care over the purchase of the shares and squeeze out that happened at the end of January.

With respect to the DRIP that’s been implemented, I mean pretty clear on why it’s been implemented but can you maybe provide some goalpost with how much dilution you're willing to withstand until you perhaps turn it off or how you're thinking about keeping it turned on, is it just due to 100 million of debt this year could it stay longer than that so on and so forth?

Yes I think Ian we look at the world quarter by quarter so we’ll assess the situation next quarter and move from there. I think the math is quite easily backed into $100 million of debt reduction without needing to lean on that lever, but we if had to we would.

But this is something the Board looks at every quarter but I don't know that anyone’s has got a good visibility into the fog that far. So anything is possible.

We just have a few more levers and our conservative estimate on a $100 million is before any asset sales or anything like that. So I think we’re very comfortable with that.

Yes, certainly. And with respect to credit metrics, so are you able to provide some I guess goalpost for where you'd like to be there may be on a debt to cap basis or net debt to EBITDA basis over called to maybe the next three years as you just consolidate in Trinidad?

Yes, the next three years will be doubling laser focus on debt reduction. We could probably got to look at as a two times debt to EBITDA of probably around two times for sort of mid cycle on getting down to maybe one-time in a peak and then a three times in a trough.

So we know this is a very cyclical business and want to make sure our balance sheet in proper shape to whether an up or down. So, sort of that 3:1 is kind of really where we’re going to be targeting.

And operationally perhaps I misinterpreted what was in the press release, but for international activity absent the Trinidad JV rigs. Do you expect activity to be down in that segment or is it only for Venezuela that you expect to be down because all the other areas sounded a like there is some positive tailwinds?

Yes, Venezuela is the only area that’s down year-over-year for obvious reasons.

Thank you everyone, and thank you for joining us on the Friday afternoon. Exciting times indeed ahead for Ensign.

Again I’ll point out not all drilling companies are designed or managed to thrive through cycles, Ensign has proven that again. Look forward to a next call in three months.

Thank you very much.