News

The following should be read in conjunction with the Corporation’s consolidated financial statements and the notes thereto for the year ended December 31, 2020 , related management’s discussion and analysis and annual information form, which are available on SEDAR at www.sedar.com .

All amounts or dollar figures are denominated in thousands of Canadian dollars except for per share amounts, number of drilling rigs, and operating days, or unless otherwise noted.

Estimates and forward-looking information are based on assumptions of future events and actual results may vary from these estimates. See “Forward-Looking Information” in this press release for additional details.

FINANCIAL SUMMARY

FIRST QUARTER 2021 OPERATIONAL OVERVIEW

A record quarter for the Corporation in activity, adjusted EBITDA and net income.

During the three months ended March 31, 2021 , the Corporation recorded net income of $2,408 , up 112% from $1,135 and adjusted EBITDA of $3,917 , up 52% from $2,584 as compared to the 2020 corresponding period. The increase in net income and adjusted EBITDA were directly related to the Corporations strongest ever recorded quarterly utilization rate. During Q1 2021 the Corporation was able to put 10 out of its 11 rigs to work achieving a 68% utilization rate, 152% higher than the CAODC industry average for Q1 2021 of 27%.

The Corporation maintained a strong emphasis on safety during this very busy quarter and is very pleased with the results being achieved. With the increased utilization, the Corporation continued to proactively respond to the safety challenges associated with the COVID–19 pandemic and remains committed to ensuring the health and safety of all of its personnel and the safe and reliable operations at each of its drilling sites.

The Corporation continued its cost cutting measures from March 2020 into Q1 2021. For the three months ended March 31, 2021 , salary and benefit expenses were down 42% as compared to the corresponding 2020 period. The decrease in employee expenses was related to the following:

• 18% to 36% reduction to executive cash compensation,
• Employee salary reductions, modified work schedules, job sharing and temporary layoffs, and
• Elimination of cash compensation for the Board of Directors

During Q1 2021, the Corporation qualified for the Canadian Federal Government’s Canadian Emergency Wage Subsidy program (“CEWS”) which was used to reduce employee related salary expenses and help minimize reduction in headcount. For the three months ended March 31, 2021 , the Corporation recorded $869 against cost of sales and $63 against salaries and benefit expenses.

OUTLOOK

The prospects of a successful vaccine deployment, the introduction of rapid COVID-19 testing to facilitate early detection, and continuing strengthening of commodity prices, are combining to provide a reasonable degree of optimism in the industry for the remainder of 2021. The optimism is tempered however by the current COVID-19 lockdowns and COVID-19 variants which have put pressure on the short term oil demand.

The Corporation’s customer base indicates a modest increase in capital spending in 2021 due to the strengthening of the commodity prices. The M&A activity on the customer side has resulted in stronger but fewer participants requiring our services. The Corporation’s performance and safety record bode well for industry leading activity to continue during the balance of 2021.

RESULTS FROM OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2021

• Revenue for the three month period ended March 31, 2021 was $11,861 , up $971 (9%) compared to $10,890 for the corresponding 2020 period. The increase was as a result of increased drilling activity as the Corporation had all 10 of its marketable rigs working during the 2021 period. The increase in revenue was partially offset by a lower revenue per day in Q1 2021. The lower revenue per day was due to increased market pricing pressures.
• The Corporation had a total of 607 operating days in the first three month of 2021, an increase of 76 operating days (14%) from the 531 operating days in the corresponding 2020 period. The drilling rig utilization for the first three months of 2021 was 68%, which was 41% higher then the first three month CAODC industry average utilization rate of 27% for 2021.
• Gross margin for the three month period ended March 31, 2021 was 39%, up 22% from 32% as compared to the corresponding 2020 period. The increase in 2021 gross margin was primarily due to the $869 of CEWS funding the Corporation qualified for in Q1 2021 which was recorded against cost of sales. The increase of gross margin was partially offset by the lower revenue per day.
• For the three month ended March 31, 2021 , general and administrative expenses were $997 down $145 (13%) from $1,142 as compared to the corresponding 2020 period. The 2020 decrease in general and administrative expenses was as a result of the Corporations cost cutting initiatives implemented in March 2020 . Cost cutting initiatives included reduced headcount, salary roll backs and elimination of all discretionary spending. The decrease in general and administrative expenses was partially offset by higher share based payments during Q1 2021 due to a stock option grant in March 2021 .
• As a result of the increased 2021 operating days, corresponding revenue and increase in gross margin, Adjusted EBITDA and net income for the three month ended March 31, 2021 were $3,917 and $2,408 , respectively. Adjusted EBITDA was up 1,333 (52%) from 2,584, and net income was up $1,273 (112%) from $1,135 from the 2020 corresponding period.

NON-GAAP MEASURES

This MD&A contains references to (i) Adjusted EBITDA and (ii) Gross margin. These financial measures are not measures that have any standardized meaning prescribed by IFRS and are therefore referred to as non-GAAP (Generally Accepted Accounting Principles) measures. The non-GAAP measures used by the Corporation may not be comparable to similar measures used by other companies.

FORWARD-LOOKING INFORMATION

Certain statements contained in this News Release constitute forward-looking statements or forward-looking information (collectively, “forward-looking information”). Forward-looking information relates to future events or the Corporation’s future performance. All information other than statements of historical fact is forward-looking information. The use of any of the words “anticipate”, “plan”, “contemplate”, “continue”, “estimate”, “expect”, “intend”, “propose”, “might”, “may”, “will”, “could”, “should”, “believe”, “predict”, and “forecast” are intended to identify forward-looking information.

This News Release contains forward-looking information pertaining to, among other things: expectations associated with the Corporation’s outlook, including among other things, the impacts of COVID-19 and expectations and responses related thereto, anticipated commodity pricing and related expectations, demand for oil, expected capital spending of the Corporation’s customers, the impacts of mergers and acquisitions in the industry, and the Corporation’s performance and safety record and expectations related thereto, among others.

Forward-looking information is presented in this News Release for the purpose of assisting investors and others in understanding certain key elements of the Corporation’s financial results and business plan, as well as the objectives, strategic priorities and business outlook of the Corporation, and in obtaining a better understanding of the Corporation’s anticipated operating environment. Readers are cautioned that such forward-looking information may not be appropriate for other purposes.

Forward-looking information, by its very nature, is subject to inherent risks and uncertainties and is based on many assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from the expectations of the Corporation expressed in or implied by such forward-looking information and that the Corporation’s business outlook, objectives, plans and strategic priorities may not be achieved. Macro-economic conditions, including public health concerns (including the impact of the COVID-19 pandemic) and other geopolitical risks, the condition of the global economy and, specifically, the condition of the crude oil and natural gas industry, and the ongoing significant volatility in world markets may adversely impact drilling and completions programs, which could materially adversely impact the Corporation. In addition to other factors and assumptions which may be identified in this News Release, assumptions have been made regarding, among other things: the condition of the global economy, including trade, public health (including the impact of the COVID-19 pandemic) and other geopolitical risks; the stability of the economic and political environment in which the Corporation operates; the effect the stabilization of global crude prices will have on drilling and completion activities in Western Canada ; the success of the measures implemented by the Corporation to protect its field and office employees and the ability to ensure business continuity at the same time; the creditworthiness of the Corporation’s customers; the effectiveness of the Corporation’s financial risk management policies at ensuring all payables are paid within the pre-agreed credit terms; the ability of the Corporation to retain qualified staff; the ability of the Corporation to obtain financing on acceptable terms; the impact of increasing competition; the ability to protect and maintain the Corporation’s intellectual property; currency, exchange and interest rates; the regulatory framework regarding taxes and environmental matters in the jurisdictions in which the Corporation operates; and the ability of the Corporation to successfully implement key cost and discretionary spending plan adjustments. Actual results and future events could differ materially from those expected or estimated in such forward-looking information. As a result, the Corporation cannot guarantee that any forward-looking information will materialize and we caution you against relying on any of this forward-looking information. Accordingly, readers should not place undue reliance on forward-looking information.

Additional information on these and other factors are disclosed in the Corporation’s management’s discussion and analysis and annual information form each dated March 24, 2021 , the Corporation’s management’s discussion and analysis dated May 12, 2021 , and in other reports filed with the securities regulatory authorities in Canada from time to time and available on SEDAR (sedar.com).

Statements, including forward-looking information, are made as of the date of this News Release and the Corporation does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. The forward-looking information contained in this News Release is expressly qualified by this cautionary statement.