Savanna Profits From Continuing Operations Slightly Lower

A bigger fleet in both its drilling and service rig divisions allowed Savanna Energy Services Corp. to report a seven per cent increase in revenues for the first quarter of 2008 but its profits plunged 85% to $25.92 million from $172.49 million a year earlier which included a $140.9 million boost from the sale of its wireline division to Halliburton Corporation.

Profits from continuing operations amounted to $25.92 million this year versus $31.58 million in the first three months of 2007.

Savanna’s drilling division increased the number of operating days by 13% in the first quarter of 2008 relative to 2007 due to an increase in the average number of net rigs deployed during the quarter from 79 to 93.

Despite lower utilization rates than in the first quarter of 2007, Savanna’s well servicing division achieved a 22% increase in revenues in the first quarter of 2008 as a result of a 53% increase in average fleet size from the same period in 2007. The well servicing division increased the average number of rigs in service from 34 in the last year’s first quarter to 56 (53.5 net) this year.

In March 2008, Savanna opened a Houston, Texas office to accelerate its expansion in the U.S. and to provide a platform for entering other international markets.

The company initiated the expansion of its well servicing division into the U.S. with a commitment to manufacture six service rigs that will operate in North Dakota. The first of these rigs is targeted for operation by July.

The drilling division secured long-term contracts in Texas for five conventional double rigs which will bring Savanna's total drilling fleet in the U.S. to 10 by fall 2008 (currently at seven drilling rigs).

Savanna's equipment fleet has expanded from the prior period through internal growth and acquisitions.

At March 31, 2008, the company has committed to construct six service rigs.

In its contract drilling division, Savanna provides proprietary hybrid drilling rigs, telescoping double drilling rigs, a pipe arm single drilling rig and coring delineation rigs through Trailblazer, Western Lakota and Akuna. Revenues for the first quarter climbed to $122.3 million from $117.66 million last year. While the number of operating days rose 13% to 5,629 this year, metres drilled were unchanged from the 2007 quarter and revenue per operating day declined eight per cent to $21,728. The division’s operating margin fell 17% to $43.61 million.

The drilling division was able to increase revenue, operating days and wells drilled in the first quarter of 2008 compared to the same period in the prior year due to increasing the average number of rigs deployed by 14 net rigs. However, the division was negatively impacted by a decrease in activity levels in the oil and gas industry, as evidenced by an eight per cent reduction in day rates and a three per cent decrease in utilization compared to the first quarter of 2007.

In addition to pricing pressure, increasing operating costs also contributed to the reduction in operating margin for the quarter relative to the quarter ended March 31, 2007.

Despite all of these factors, Savanna noted its drilling division consistently achieves higher than industry average utilization rates and the first quarter of 2008 was no exception as the division operated five per cent above industry utilization levels.

During the first quarter of 2008, Savanna averaged a deployed fleet of 93 net rigs (2007 - 79) and exited the quarter operating a fleet of 95 net rigs (2007 - 82.5 net rigs).

Savanna provides well servicing throughout Western Canada through Great Plains and Accell, operating double and single well servicing rigs, and through Command, operating coiled tubing service units.

The well servicing division achieved an increase in revenue to $24.92 million from $20.46 million in 2007 while the division’s operating margin rose 12% to $10.02 million and the number of hours in the first quarter of 2008 climbed 30% to 30,535 compared to the same period in the prior year due to an increase in average fleet size (an increase of 19 rigs). This increase in the average number of rigs is a result of the acquisition of Accell mid-way through the first quarter of 2007. However, the company's increase in available equipment was more than offset by the significant reduction in demand in the oil and gas market generally, as evidenced by a 14% lower utilization rate from the same quarter in the prior year.

During the quarter ended March 31, 2008, the well servicing division operated an average of 56 (53.5 net) service rigs, eight coiled tubing service units and 34 boilers, compared to the same period in 2007 where the division operated an average of 34 service rigs, eight (5.5 net) coiled tubing service units, and 23 boilers. The well servicing division exited the quarter with 56 (53.5 net) service rigs, eight coiled tubing service units, and 34 boilers.

Year      *Profit    Profit/       *Cash      C.F./     *Revenue     *Capital
                     Share          Flow      Share                Expenditures
First Quarter
2008       $25.92     $0.44        $48.01     $0.82       $149.16        $16.82
2007      $172.49     $2.94        $49.08     $0.84       $135.61       $111.09
2006       $19.96     $0.67        $30.47     $1.02        $88.10        $25.65
2005        $9.81     $0.33        $16.95     $0.57        $53.99        $13.42

* Millions of Dollars