CanElson Announces Second Quarter Financial Results and Declares Second Quarter Dividend

CanElson Drilling Inc. (TSX:CDI) today announced the financial results for the
second quarter ending June 30, 2013. CanElson also declares a second quarter
dividend of $0.06 per share.


SECOND QUARTER 2013 SUMMARY (compared with a year earlier)



--  Services revenue $37.5 million, up 11% from $33.8 million 
--  EBITDA $9.0 million, consistent with $9.3 million 
--  United States ("US") segment revenue $30.1 million, up 35% from $22.3
    million, representing 80% of total service revenue for the quarter, up
    from 66% 
--  US utilization of 79%, up from 71% (spud to rig release days) 
--  Income attributable to shareholders of the Corporation $1.9 million,
    down 51% from $3.9 million 
--  EPS (diluted) $0.02, down 52% from $0.05 
--  Weighted average diluted shares outstanding 78.2 million, up 4% from
    75.2 million 
--  Declared second quarter dividend of $0.06 per share, up 20% from $0.05 
--  Sold 50% interest in one drilling rig at a fair value of $4.3 million
    and a before tax net gain of $1.0 million (not recognized under IFRSs in
    the statement of comprehensive income nor within EBITDA) 



FIRST HALF 2013 SUMMARY (compared with a year earlier)



--  Services revenue $109.8 million, up 14% from $96.4 million 
--  EBITDA $36.5 million, consistent with $36.8 million 
--  US segment revenue $59.1 million, up 32% from $44.7 million,
    representing 54% of total service revenue for the six months, up from
    46% 
--  US utilization of 82%, up from 72% (spud to rig release days) 
--  Income attributable to shareholders of the Corporation $15.2 million,
    down 22% from $19.5 million 
--  EPS (diluted) $0.20, down 23% from $0.26 
--  Weighted average diluted shares outstanding 77.7 million, up 4% from
    74.6 million 



Notably, CanElson's US utilization for the second quarter increased to 79% from
71% during the same period of 2012 even though the US rig count was down
approximately 10% at June 30, 2013 relative to June 30, 2012 (source: Baker
Hughes). CanElson's Canadian utilization rate in the second quarter of 2013 was
13% (2012: 26%), which trailed the industry average of 18%. At the date of this
press release, CanElson's Canadian utilization rate was 56%, which was 1.24
times the industry average of 45% (source: JuneWarren-Nickle's Group). Total
consolidated utilization was 41% during the second quarter of 2013 which was
comparable to second quarter 2012 levels of 42%.


For the first six months ended June 30, 2013, CanElson's US year-to-date
utilization was 82% (2012: 72%), even though the US rig count was down
approximately 10% for the six months ended June 30, 2013 relative to June 30,
2012 (source: Baker Hughes). CanElson's Canadian utilization rate was 44% (2012:
56%), or 1.10 times the industry average (2012: 1.33 times the industry
average). Total consolidated utilization for the first six months of 2013 was
similar to 2012 levels at 60%.


"During the quarter the benefits of the geographic diversity of our operations
became abundantly clear. Canada experienced a slow start up after breakup due to
wet weather and subdued customer intentions. The US Division however,
experienced 79% utilization and provided 80% of our total service revenue for
the quarter." stated Randy Hawkings, President and CEO of CanElson. "We expect
to broaden this geographical spread to provide future growth opportunities."


Fleet deployment (by rigs and jurisdiction)



                                      North    Mexico     Mexico            
                   Canada    Texas   Dakota  Drilling    Service       Total
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                  22 (net  12 (net             2 (net                       
At June 30, 2013    20.5)    10.5)        5      1.0)  2 (net 1) 43 (net 38)
At December 31,   23 (net  10 (net             1 (net                40 (net
 2012               22.5)     8.5)        4      0.5)  2 (net 1)       36.5)
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Change %              -4%      20%      25%      100%  Unchanged          8%
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Gross fleet deployment (by % and jurisdiction)                              
                                      North    Mexico     Mexico            
                   Canada    Texas   Dakota  Drilling    Service       Total
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At June 30, 2013      51%      28%      11%        5%         5%        100%
At December 31,                                                             
 2012                 57%      25%      10%        3%         5%        100%
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OUTLOOK

Drilling Services

During the second quarter of 2013, CanElson was able to maintain consolidated
activity levels, even as the Canadian and US drilling services markets
experienced continued subdued markets. We believe that our strategy has uniquely
positioned us to sustain relatively strong profitability during the full
drilling industry cycle. The key drivers for our relative industry strength,
profitability, and historically top quartile financial results are:




1.  Strategically diversified operations in oil-weighted regions within two
    balanced geographical segments, which provide diversity of earnings and
    less seasonality while maintaining focus and operational efficiency 
2.  Standardized deep, modern rigs (average age of approximately 4.7 years
    and average vertical rating of greater than 4,000 metres) allowing us to
    outperform peers when considering the total costs of safely drilling
    wells 
3.  A problem-solving culture as evidenced by our ability to service our
    customers with performance drilling and innovative cost saving
    initiatives such as our natural gas fuel and flare gas initiative with
    CanGas 
4.  A history of developing mutually-beneficial partnerships and strong
    client relationships with First Nations organizations, oil and gas
    operators and our joint venture which leverages the established
    footprint of Diavaz CanElson de Mexico S.A. de C.V. ("DCM") 
5.  Prudent financial management, which allows the company to be
    opportunistic at any point in the cycle 
6.  Operational excellence based on a culture of safety, as reflected by
    superior drilling industry safety performance relative to benchmarks
    from third party sources, such as provincial and state workers'
    compensation boards and private insurance providers 



Canada

Our customers in Canada are cautious with respect to their current capital
spending programs, but appear to be increasingly optimistic towards increased
spending levels for the latter part of 2013 and into 2014. Additionally, with
potentially large field developments as a result of proposed west coast LNG
terminals there could be significant incremental investment into the WCSB in
2014 and beyond. Through the third quarter, we expect to continue to see some
seasonal revenue rate pressure as less efficient competitor drilling contractors
try to obtain work with low revenue rates. We expect to maintain our competitive
edge and to continue to exceed average industry utilization levels due to our
strong relationships, modern drilling rig fleet, cost reduction initiatives and
longer term contracts with customers.


Texas

CanElson has 28% of its fleet focused on oil directed drilling in the Permian
Basin in Texas. During 2013 CanElson continued to expand its fully contracted
fleet in this basin even though the industry-wide rig count in this area has
recently declined due to commodity price volatility. We anticipate that the
current revenue rates for CanElson's Texas rigs will continue for the balance of
the year. We also expect to achieve capacity utilization in excess of 90% for
2013 with downtime caused only by rig move intervals and planned re-
certifications of some drilling equipment.


North Dakota

Our customers in North Dakota continue to look for efficiencies. There is an
expectation that the same number of wells will be drilled in 2013 compared to
2012 with fewer rigs required. Due to our customers demand for efficient
equipment, we do not anticipate our utilization levels to be impacted and in
fact we have recently re-deployed equipment to North Dakota to aid our customers
in meeting their efficiency demands.


Mexico

We have demonstrated our ability to successfully do business in Mexico. We
believe our performance in the region and our alignment with an experienced and
strong local partner (Grupo Diavaz, with 40 years of experience serving PEMEX)
provides an excellent opportunity for our joint venture DCM to expand its range
of services, including potentially expanding its drilling rig fleet beyond the
two recently refurbished rigs.


Rig Assembly

Based on customer contracts and those being finalized CanElson's 2013 investment
and deployment of new build tele-double's is expected to be as follows:




Rig #37: Expected to be delivered Q3 2013                                   
Rig #38: Expected to be delivered Q4 2013                                   
Rig #44: Expected to be delivered Q4 2013                                   
Rig #45: Long lead items will be procured in Q4 of 2013 and Q1 2014         



CanGas Solutions Inc.

During 2013, we expect to continue investment in our fleet of truck-hauled CNG
delivery trailers and to convert the primary diesel engines in our drilling rigs
to bi-fuel capacity based on customer requests. For more information about our
investment plan see Capital Availability and Capital Program below.


Capital Availability and Capital Investment Program

CanElson is well capitalized to take advantage of strategic opportunities with
net cash (cash less debt) at June 30, 2013 of $5 million combined with $120
million available on our existing credit facilities. Funds flow continues to be
strong and will fully support our quarterly dividend rate of $0.06 per share as
well as a majority of the expected 2013 capital investment program with the
remaining amount funded through undrawn loans and borrowings facilities.


CanElson's total 2013 capital investment program is expected to be as follows:



                                                                            
                                 Drilling Services                          
                      --------------------------------------                
                             Spare                                          
                        equipment,                                          
Capital Investment    facilities &    Upgrades &                            
 Program                  overhead   maintenance   Expansion  CanGas   Total
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  Six months ended                                                          
   June 30, 2013     $         2.3 $         9.2 $      18.4 $   5.8 $  35.7
  Anticipated costs                                                         
   to complete 2013                                                         
   capital projects            4.1           5.3        51.0     6.7    67.1
                      ------------------------------------------------------
Total approved costs                                                        
 for 2013 capital                                                           
 projects            $         6.4 $        14.5 $      69.4 $  12.5 $ 102.8
  Previously                                                                
   anticipated costs                                                        
   for 2013 capital                                                         
   projects (i)                6.4          13.2        50.0    12.5    82.1
                      ------------------------------------------------------
  Variance from                                                             
   previously                                                               
   anticipated 2013                                                         
   capital projects  $           - $         1.3 $      19.4 $     - $  20.7
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(i) Refer to the MD&A dated May 8, 2013 for previously reported capital     
 investment program.                                                        



Our modern standardized fleet allows us to minimize capital investment on
maintenance and spare equipment. The 2013 total expected capital investment
program of $102.8 million has been increased by $20.7 million from the
previously announced capital program of $82.1 million. The increase includes
expansion capital investment of $4.0 million for long lead items related to rig
assembly, $2.2 million for pump upgrades and a drilling pad moving system, and
$15.0 million for the purchase of three additional contracted and crewed
drilling rigs from Calmena Energy Services Inc., being one pad electric
tele-double and two single rigs with top drives, as well as land improved with a
field office, shop and storage yard. The remainder of the incremental capital
investment primarily relates to additional recertification costs and spare
equipment. Offsetting these capital investment program increases are favourable
variances on expansion capital primarily related to rig assemblies. During the
first half of 2013, our expansion capital investments were primarily related to
expenditures required for the completion and deployment of Rig #35 and Rig #36,
as well as long lead items for Rig #37 and Rig #38.


The remaining anticipated costs to complete 2013 capital projects are allocated
as follows:


Drilling Services 

$60.4 million capital investment allocated as follows:



1.  $31.3 million for the construction and completion of three tele-doubles
    with top drives (relating to rigs #37, #38, and #44), long lead items
    for one tele-double (rig #45) and $4.7 million of other growth capital; 
2.  $15.0 million for the acquisition of one pad tele-double and two single
    drilling rigs with integrated top drives, as well as land, buildings and
    some spare equipment; and 
3.  Approximately $9.4 million for spares, shop upgrades and maintenance
    capital. 



CanGas 

$6.7 million capital investment allocated as follows:



1.  Conversion of primary diesel engines on our drilling rigs to bi-fuel
    capability to enable operation on a mixture of natural gas and diesel
    fuel; 
2.  Expansion of our fleet of truck-hauled natural gas delivery trailers,
    compression and conditioning equipment to meet both current and
    anticipated demand; 
3.  Collection and leverage of operating data to facilitate greater diesel
    fuel displacement and better management of costs; and 
4.  Further research and development associated with our proprietary raw gas
    conditioning technology to employ portable small-scale field facilities
    to condition raw natural gas for use as fuel. 



2013 Primary Corporate Objectives

Looking to the end of 2013, CanElson's primary objective is to maintain and
strengthen its industry leading position by consistently providing operational
excellence and drilling efficiencies to its customers. With this focus we will
be well positioned to obtain strong customer commitments and capitalize on new
opportunities. Subject to obtaining customer commitments, we intend to carry out
the following activities that will enhance our competitive positioning:




--  Continue to expand our standard tele-double fleet 
--  Expand our service offering in Mexico 
--  Continue to form innovative long-term business relationships 



Achieving these objectives will present expanded opportunities for CanElson, its
customers and shareholders.


DIVIDEND

On July 31, 2013, the Board of Directors declared a first quarter dividend of
$0.06 per share for the three month period ended June 30, 2013, payable on
August 30, 2013 to shareholders of record at the close of business on August 21,
2013. The dividend is an eligible dividend for Canadian tax purposes.




FINANCIAL SUMMARY                                                           
                      For the three months ended  For the six months ended  
                               June 30,                   June 30,          
                         2013     2012  % change      2013     2012 % change
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Services revenue     $ 37,499 $ 33,848       11% $ 109,776 $ 96,358      14%
EBITDA (i)              9,036    9,288       -3%    36,491   36,761      -1%
Share of profit                                                             
 unconsolidated                                                             
 joint venture            476      459        4%       514      959     -46%
Net income                                                                  
 attributable to                                                            
 shareholders of the                                                        
 Corporation            1,870    3,875      -52%    15,205   19,484     -22%
Net income per share                                                        
 Basic                   0.02     0.05      -52%      0.20     0.26     -23%
 Diluted                 0.02     0.05      -60%      0.20     0.26     -23%
Funds flow (i)         11,418    9,234       24%    35,382   33,347       6%
Gross Margin                                                                
 (services) (i)        13,579   13,259        2%    45,976   44,267       4%
Weighted average                                                            
 diluted shares                                                             
 outstanding           78,254   75,176        4%    77,670   74,570       4%
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(Tabular amounts are stated in thousands of Canadian dollars, except per share
amounts and rig operating days)


FINANCIAL STATEMENTS AND MD&A

This is the Corporation's first fiscal year adopting IFRS 11 accounting for
Joint Arrangements. In accordance with IFRS 11 the transition date was January
1, 2013 with retroactive application to January 1, 2012 and, accordingly, the
comparative information for 2012 has been restated to conform to the
requirements of IFRS 11. The application of IFRS 11 has changed the
classification and subsequent accounting of the Corporation's investment in
Diavaz CanElson de Mexico S.A. de C.V. ("DCM"), which was classified as a
jointly controlled entity and previously accounted for using the proportionate
consolidation method. Applying IFRS 11 requires that the Corporation apply
equity accounting for its 50% interest in DCM. Additional information about the
adoption of this standard and the Corporation's IFRSs accounting policies is
discussed in the Accounting Policies and Critical Estimates section of this MD&A
as well as in the notes to the June 30, 2013 condensed consolidated financial
statements and the audited December 31, 2012 consolidated financial statements.


CanElson's complete unaudited interim financial results and Management's
Discussion and Analysis (MD&A) for the second quarter ended June 30, 2013 have
been filed on SEDAR and posted to the company's website at this link:
http://www.canelsondrilling.com/investor-relations/financial-reports


FORWARD-LOOKING INFORMATION

This press release contains certain statements or disclosures relating to
CanElson that are based on the expectations of CanElson as well as assumptions
made by and information currently available to CanElson which may constitute
forward-looking information under applicable securities laws. In particular,
this press release contains forward-looking information related to: our belief
that our strategy positions us to sustain financial returns during the full
drilling industry cycle; expected typical seasonal utilization and revenue rate
effects through the remainder of the year in Canada; expectation to exceed
average industry utilization levels in Canada and maintain existing utilization
rates in North Dakota; anticipation current revenue rates will continue in Texas
and achieve capacity utilization in excess of 90% for the remainder of 2013 in
Texas; our performance and partner relationship in Mexico provides an
opportunity for DCM to expand in the region; the construction and deployment of
additional rigs in 2013; our expectation to continue investment in the fleet of
truck-hauled CNG delivery trailers and to convert the primary diesel engines in
our drilling rigs to bi-fuel capacity; expectation that funds flow will support
our quarterly dividend and a majority of our capital program; expected 2013
capital programs and anticipated cost to complete 2013 capital projects; our
2013 primary corporate objectives. Such forward-looking information involves
material assumptions and known and unknown risks and uncertainties, certain of
which are beyond CanElson's control. Many factors could cause the performance or
achievement by CanElson to be materially different from any future results,
performance or achievements that may be expressed or implied by such
forward-looking information. CanElson's Annual Information Form and other
documents filed with securities regulatory authorities (accessible through the
SEDAR website at www.sedar.com) describe the risks, material assumptions and
other factors that could influence actual results and which are incorporated
herein by reference. CanElson disclaims any intention or obligation to publicly
update or revise any forward-looking information, whether as a result of new
information, future events or otherwise, except as may be expressly required by
applicable securities laws.


FOR FURTHER INFORMATION PLEASE CONTACT: 
CanElson Drilling Inc.
Randy Hawkings
President and CEO
[phone]


CanElson Drilling Inc.
Robert Skilnick
Chief Financial Officer
[phone]
www.canelsondrilling.com