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Savanna Energy Services Corp. Announces Q4 and Year-End 2010 Results

CALGARY, ALBERTA--(Marketwire - March 10, 2011) -

Savanna Energy Services Corp. ("Savanna" or "the Company") (TSX:SVY) is an oilfield services company operating in Canada, the United States and Australia. The Company's overall business is conducted through two major divisions: contract drilling and oilfield services.

FINANCIAL HIGHLIGHTS

The following is a summary of selected financial information of the Company:

(Stated in thousands of dollars, except per share amounts)

 Three Months Ended Twelve Months Ended
December 31 2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
OPERATING RESULTS
Revenue 135,678 85,430 59% 438,396 256,619 71%
Operating
 expenses 98,485 61,611 60% 331,405 199,007 67%
Operating
 margin(1) 37,193 23,819 56% 106,991 57,612 86%
Net earnings 5,247 (18,055) (i) 8,313 (27,893) (i)
 Per share: basic 0.07 (0.23) (i) 0.11 (0.40) (i)
 Per share:
 diluted 0.07 (0.23) (i) 0.11 (0.40) (i)
 ----------------------------------------------------------
 ----------------------------------------------------------
CASH FLOWS
Operating cash
 flows(1) 34,810 24,157 44% 81,961 41,072 100%
 Per diluted share 0.44 0.31 1.04 0.58
Cash paid on the
 purchase of
 capital
 assets(1) (28,953) (8,815) 228% (104,607) (66,224) 58%
Dividends paid - (1,977) (100%) (1,977) (6,902) (71%)

 ----------------------------------------------------------
 ----------------------------------------------------------
FINANCIAL POSITION AT DECEMBER 31 2010 2009 Change
----------------------------------------------------------------------------
 $ $
----------------------------------------------------------------------------
Working
 capital(1) 78,873 51,016 55%
Capital assets(1) 898,287 869,411 3%
Total assets 1,052,368 977,159 8%
Long-term debt 112,802 70,107 61%
 ------------------------------
 ------------------------------
(i) Calculation not meaningful

OPERATIONAL HIGHLIGHTS

The year over year improvements in the North American oil and gas industry in 2010 continued to have a positive effect on the Company's operations in Q4. The increase in demand for oilfield services led to an increase in operating days and hours in both the drilling and oilfield services divisions compared to Q4 2009.

The drilling division had nearly 50% more operating days in the fourth quarter of 2010 versus the same period in 2009 with virtually the same drilling rig fleet. Coupled with a 10% increase in average day rates, the drilling division increased operating margins by $12 million in Q4 2010 from Q4 2009. The increase in activity overall in 2010, increased annual operating margins by more than $42 million, doubling the operating margins achieved in the drilling division in 2009.

Operating hours and operating margins also increased in the oilfield services division in the fourth quarter of 2010 relative to 2009 with virtually the same average fleet size from Q4 2009. On an annual basis, operating hours increased by more than 50% which resulted in an increase of $8 million in operating margins.

Two new service rigs were commissioned and began operations in Australia in Q4 2010. These were the first Savanna rigs to begin work in that country. However, extreme rainfall halted operations soon after they commenced, resulting in lower than expected utilization.

EQUIPMENT FLEET 

The following table outlines the Company's drilling and service rig fleet 
 by type of rig:

At December 31 2010 2009 Change
----------------------------------------------------------------------------
 DRILLING RIGS
 Heavy and ultra-heavy telescoping
 doubles 49 49 -
 North American hybrid 42 46 (4)
 International hybrid 2 - 2 
TDS-3000TM 2 - 2
 Triples 2 2 -
 Pipe-arm single 1 1 -
 Surface/ coring 5 9 (4)
 -----------------------------------
 Total drilling rigs (gross) 103 107 (4)
 Total drilling rigs (net)(1) 99 103 (4)
 -----------------------------------
 -----------------------------------

SERVICE RIGS
 Service rigs 68 66 2
 Coil tubing service units - 8 (8)
 -----------------------------------
 Total service rigs (gross) 68 74 (6)
 Total service rigs (net) (1) 66 72 (6)
 -----------------------------------
 -----------------------------------

(1) Eight drilling rigs and four service rigs were owned in 50/50 limited
 partnerships at December 31, 2010 and 2009. 

The Company also has a substantial inventory of drilling and well servicing-related rental assets and support equipment.

During the first and second quarters of 2010, the Company sold its entire fleet of eight coil tubing service units and related equipment for gross proceeds of $3.7 million which resulted in a loss of $1.7 million. This was a non-core business unit that was added as a result of the 2006 merger with Western Lakota Energy Services Inc. and had been under-utilized through most of 2009, which in turn led to impairment losses in Q4 2009.

In the third and fourth quarters, the Company also disposed of four surface-setting rigs for aggregate proceeds of $3.6 million, reducing the surface/coring fleet to five rigs. Similar to the coil tubing service units, these rigs were part of a non-core business unit that was added as a result of the 2006 merger with Western Lakota Energy Services Inc. The surface/coring fleet had also been under-utilized through most of 2008 and 2009. The disposition of these four surface-setting rigs resulted in a loss of $0.4 million.

Throughout 2010, Savanna rationalized other redundant assets which resulted in a loss of $0.3 million on gross proceeds of $2.2 million.

Subsequent to the end of the year, the Company sold its machining and pipe inspection facility and a majority of the related assets for gross proceeds of $3.2 million. The assets sold were purchased with and operated as a non-core part of Savanna's rental business in the oilfield services segment. At December 31, 2010, the carrying amount of the assets was $3.7 million; these assets were reclassified from property and equipment to current assets on the balance sheet. The remaining $0.5 million of assets continue to be held for sale and are measured at fair value, which is the amount the Company expects to receive on their ultimate disposition; any resulting gain or loss in 2011 is not expected to be material.

The following outlines the Company's deployment of its drilling and service rig fleet by geographic location and excludes the Company's five coring rigs (2009 - nine coring rigs and eight coil tubing service units) located in Canada:

At December 31 2010 2009 Change
----------------------------------------------------------------------------
 DRILLING RIGS
 Canada 74 77 (3)
 United States 22 17 5
 International 2 4 (2)
 -----------------------------------
 Total drilling rigs 98 98 -
 -----------------------------------
 -----------------------------------

 SERVICE RIGS
 Canada 57 58 (1)
 United States 9 8 1
 International 2 - 2
 -----------------------------------
 Total service rigs 68 66 2
 -----------------------------------
 -----------------------------------

In 2010, three drilling rigs and one service rig were moved to the U.S. from Canada; two of the double drilling rigs were retrofitted as part of the Company's capital program and deployed to the Permian Basin in Texas and the other moved into the Marcellus shale play in Pennsylvania. The service rig moved into the Company's North Dakota operations base. In Q3 2010, a CT-2200 hybrid drilling rig was moved from the U.S. to Canada to meet contract commitments in Canada.

In addition, during Q3 2010, the Company's customer in Mexico released all four of Savanna's drilling rigs as a result of a suspension in drilling under the contract pursuant to which Savanna's customer had been operating. The rigs were moved from location in Mexico to Texas at the Mexico customer's expense. From Texas, one of the high specification conventional double drilling rigs moved to Canada, another moved into the Marcellus shale play in Pennsylvania and the other two have moved to the Permian Basin in Texas. The four rigs are all under term contracts and the mobilization costs were paid for by the new customers.

In Q4 2010, two new service rigs were commissioned and began operations near Toowoomba, Queensland. These were the first Savanna rigs to begin work under the five-year contract in Australia. Extreme rainfall halted operations soon after they commenced, resulting in lower than expected utilization. The situation worsened as the service rigs were caught in a primary flood zone and both rigs suffered extensive damage in January 2011. Repairs to both rigs have begun and they are expected to be operational once lease roads have dried enough to allow for movement of heavy equipment and its customer's locations are ready to recommence operations; likely in late March or early April 2011. The total cost for restoration and repairs to the rigs is expected to be covered by Savanna's insurance program, subject to the payment of a deductible of $0.5 million, which was accrued in 2010. The Company does not carry business interruption insurance.

Subsequent to the end of the year, the first of the two hybrid drilling rigs retrofitted for operations in Australia was rigged up and commissioned in Savanna's yard in Toowoomba and is awaiting conditions in the field drying sufficiently to initiate operations. The Company expects this rig to begin operations in late March or early April 2011. The second retrofitted hybrid drilling rig is expected to arrive in Australia shortly and should start work in late Q2 or early Q3 2011. The retrofit of two additional hybrid drilling rigs is also nearing completion, as is the construction of a third service rig for Australia. These three rigs are expected to be available for the Australian market in Q3 2011. The delay in the commencement of operations in Australia, compared to what was originally anticipated, allowed Savanna to put some of the crews identified to operate the Australian rigs to work in Canada for Q1 2011, partially alleviating the shortage of manpower that Savanna is facing in that region.

The delay in operations and rig damage caused by the flooding does not negatively affect the terms of Savanna's existing take-or-pay contract supporting its Australian operations. Savanna remains committed to building a strong core area in Australia and the Company has been setting up infrastructure to not only accommodate the four drilling rigs and three service rigs described above but also future anticipated expansion. The ramp up of Savanna's Australian operations began in Q3 2010 and includes an office in Brisbane and an office, shop and yard in Toowoomba. The related startup costs included in the Company's 2010 results amount to $1.9 million associated with the negotiation of the contracts and the set up of infrastructure in Australia; $0.8 million (Q4 2010 - $0.2 million) is included in operating expenses and $1.1 million (Q4 2010 - $0.6 million) is included in general and administrative expenses. All startup costs were substantially incurred by December 31, 2010. The crews retained in Australia subsequent to the flooding have continued to earn their wages in 2011 and have been working on both the clean up and restoration of Savanna's equipment and on the clean up and restoration of the community in which Savanna's operations are located. Subsequent to the end of the quarter, the Company was advised that its tender to supply well servicing equipment for an Australian customer was unsuccessful. The tender for drilling rigs under the same contract expired, and to the best of the Company?s knowledge was not fully awarded as the customer is still reviewing its drilling requirements.

The Company's 2010 and 2011 capital commitments are focused on sustaining the existing fleet and adding to its capabilities through rig upgrades and new rig additions. Under Savanna's 2010 capital program, the following initiatives were undertaken and completed during the year:

-- construction of two new service rigs for deployment in Australia; 
-- retrofit of two hybrid drilling rigs for deployment in Australia; 
-- retrofit of two hybrid drilling rigs as TDS-3000TM drilling rigs; 
-- retrofit of two conventional double drilling rigs for deployment in the
 United States; 
-- retrofit of one service rig for deployment in the United States; 
-- purchase of four new portable top drives; and 
-- expansion of the rental fleet. 

Subsequent to their construction or retrofit, all of the equipment above, except for the two hybrid rigs which were in transit to Australia, operated in 2010. Based on Savanna's previously announced 2011 capital program and carry-over of outstanding projects from the Company's 2010 capital program, Savanna anticipates expending $113 million in 2011 on the following:

-- construction of one new service rig for deployment in Australia, 
 expected completion of Q2 2011; 
-- retrofit of two hybrid drilling rigs for deployment in Australia,
 expected completion of Q2 2011; 
-- retrofit of six hybrid drilling rigs as TDS-3000TMdrilling rigs,
 expected completion Q3 2011; 
-- completion of construction of two new high specification deep double
 drilling rigs, initiated in 2010, for deployment in the United States,
 expected completion Q3 2011; 
-- purchase of four new portable top drives, expected completion of Q2 
 2011; and 
-- completion of construction of one new flush-by service rig, initiated in
 2010, expected completion Q2 2011. 

The two new high specification deep double drilling rigs and the first four TDS-3000^TM rigs to be retrofitted in 2011 have already been contracted. There is also significant interest in the other two TDS-3000^TM rigs being retrofitted in 2011and Savanna expects to have all of these rigs under contract before they are field ready.

CONTRACT DRILLING

(Stated in thousands of dollars, except revenue per day)

 Three Months Ended Twelve Months Ended
----------------------------------------------------------------------------
December 31 2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Revenue $ 107,633 $ 68,478 57% $ 349,074 $ 199,177 75%
Operating
 expenses $ 77,305 $ 50,316 54% $ 265,545 $ 156,980 69%
Operating
 margin(1) $ 30,328 $ 18,162 67% $ 83,529 $ 42,197 98%
Operating
 margin %(1) 28% 27% 24% 21%
Operating
 days(a) 5,313 3,704 43% 18,373 10,337 78%
Revenue per
 operating day $ 20,258 $ 18,488 10% $ 18,999 $ 19,268 (1%)
Spud to release
 days(a)(b) 4,676 3,096 51% 15,918 8,823 80%
Wells drilled(b) 852 502 70% 2,424 1,788 36%
Total meters
 drilled(b) 1,115,888 721,824 55% 3,396,277 2,188,274 55%
Utilization -
 Canada (b) 47% 31% 52% 39% 22% 77%
Utilization -
 International(b) 79% 56% 41% 70% 48% 46%
Canadian industry
 average 
 utilization (c) 49% 31% 58% 40% 24% 67%
 ------------------------------------------------------------
 ------------------------------------------------------------
(a) The number of operating days and number of spud to release days are all
 on a net basis which means only Savanna's proportionate share of any
 rigs held in 50/50 limited partnerships have been included.

(b) Savanna reports its rig utilization based on spud to release time for
 the rigs and excludes moving, rig up and tear down time, even though
 revenue may be earned during this time. Savanna's rig utilization,
 spud to release days, wells drilled and total meters drilled exclude
 coring rigs as the operating environment is not comparable to the
 Company's other drilling rigs, nor to industry utilization drivers.
 However, these rigs are included in total fleet numbers.

(c) Source of industry figures: Canadian Association of Oilwell Drilling
 Contractors ("CAODC").

Fourth Quarter Results

In the fourth quarter of 2010, Savanna's drilling division achieved higher revenue, operating margins and operating margin percentages compared to any of the last seven preceding quarters. The fourth quarter results were driven by continuing overall improvements in the North American oil and gas industry in 2010 and resulted in a significant increase in operating days, day rates, revenue and operating margins in both Canada and the U.S. this quarter compared to Q4 2009. Of Savanna's average deployed fleet of 100 net rigs in Q4 2010, 78 operated in Canada and 22 operated in the U.S.; in Q4 2009, 82 rigs were located in Canada, 16 rigs were in the U.S. and four were in Mexico.

Increases in operating days and revenue were achieved by both hybrid and conventional drilling rigs; however, the conventional drilling rigs, in particular, showed the most significant increases in Q4 2010 compared to the same period in 2009. Conventional drilling rigs, which account for approximately half of Savanna's total drilling rig fleet, achieved 73% of the operating days and contributed 82% of the overall operating margin in Q4 2010. In Q4 2009, conventional drilling rigs accounted for 78% of the operating days and 83% of operating margin. Also during the fourth quarter, Savanna's first two TDS-3000^TM rigs began operations and the results were encouraging based on customer feedback, operating results and financial results.

Variable operating costs per operating day were higher in the fourth quarter of 2010 compared to the same period in 2009 as a result of a 5% increase in labour rates which went into effect on October 1, 2010; Savanna was able to pass these increases on to its customers. Despite this increase in per day labour costs, overall operating costs were lower as a percentage of revenue in Q4 2010 compared to Q4 2009. The primary reason for the improvement in operating margin was the fixed portion of operating costs was distributed over a greater number of operating days in Q4 2010 compared to Q4 2009 when activity levels were lower.

Annual Results

Improvements in industry activity levels resulted in a significant increase in operating days and revenue in all areas in which Savanna operated in 2010, which doubled operating margins compared to 2009. As with the quarter ended December 31, 2010, throughout the year, Savanna's conventional drilling rigs, in particular, have showed the most significant increases in operating days, revenue and operating margins. In 2010, conventional drilling rigs achieved 75% of the operating days (2009 - 69%) and 80% of the overall operating margin (2009 - 77%). The increases in conventional drilling results are due to increased demand for deeper drilling compared to shallow drilling and is further evidenced by the increase in the number of days and meters per well drilled in 2010.

Operating costs per operating day were lower in 2010 compared to 2009. The improvement is due primarily to the fixed portion of operating costs being distributed over a greater number of operating days in 2010. Going forward, this reduction will be muted as a result of the wage increases introduced effective October 1, 2010. Additionally, extra rig personnel were retained in Q3 2010, primarily on the hybrid drilling rigs, in anticipation of a busy winter drilling season. The oilfield services industry is currently experiencing a shortage of qualified rig personnel and the Company felt it was necessary to attempt to retain key rig personnel during a lower utilization period in Q3 2010 in order to take advantage of the expected increases in activity this winter. Benefits of these retention costs were already realized in Q4 2010 and the Company expects to realize further benefits in Q1 2011.

Also included in operating expenses for the year ended December 31, 2010, are the costs associated with deploying drilling rigs into different geographical areas. A portion of these costs are recovered from our customers and are included in revenue, however, these costs have had a negative effect on operating margins overall in 2010. The following approximates the effect Savanna's fleet repositioning costs have had on operating margins:

(Stated in thousands of dollars) Repositioning costs and
 recoveries
 2010
----------------------------------------------------------------------------
 $
----------------------------------------------------------------------------
Revenue 1,526
Operating expenses 2,587
Operating margin(1) (1,061)
 --------------------------
 --------------------------

The ultimate contributions of these re-deployed assets have and are expected to continue to outweigh the repositioning costs and many of the contracts reflect a specific recovery of these costs through higher day rates.

OILFIELD SERVICES

(Stated in thousands of dollars, except revenue per hour)

 Three Months Ended Twelve Months Ended
----------------------------------------------------------------------------
December 31 2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Revenue $ 28,231 $ 17,447 62% $ 91,359 $ 59,551 53%
Operating
 expenses $ 21,531 $ 11,928 81% $ 68,518 $ 44,697 53%
Operating
 margin(1) $ 6,700 $ 5,519 21% $ 22,841 $ 14,854 54%
Operating
 margin %(1) 24% 32% 25% 25%
Operating
 hours(a) 34,354 24,011 43% 116,274 75,807 53%
Revenue per
 hour $ 687 $ 629 9% $ 655 $ 657 0%
Utilization -
 Canada(b) 56% 37% 51% 46% 29% 59%
Utilization -
 International(b) 70% 59% 19% 69% 57% 21%
 -------------------------------------------------------------

(a) The number of operating hours is on a net basis which means only 
 Savanna's proportionate share of any rigs held in 50/50 limited 
 partnerships has been included. 

(b) Utilization is based on standard hours of 3,650 per rig per year. The
 utilization rate excludes the coiled tubing service units since these
 units are not comparable in size or operations to the division's service
 rigs. Reliable industry average utilization figures, specific to well 
 servicing, are not available. 

Fourth Quarter Results

Continued improvements in the North American oil and gas industry in Q4 2010 resulted in an increase in operating hours, pricing, revenue and operating margin in the quarter compared to Q4 2009. The increases were achieved in both Canada and the U.S. in both well servicing and oilfield rentals. Savanna's first revenues from its Australia operations were also earned in Q4 2010 as the first two well servicing rigs began working there in December; however extreme rainfall limited operations in 2010 resulting in lower than expected revenues and negative operating margins.

Included in revenue for Q4 2010, was $4.6 million from oilfield rentals, nearly double the $2.4 million oilfield rentals revenue in Q4 2009. The increase in oilfield rentals revenue is due to the increase in overall industry activity. Of the Q4 2010 rental revenue, $0.4 million (2009 - $0.6 million) is eliminated on overall consolidation as inter-segment revenue. Oilfield rentals revenue is excluded from the per hour revenue calculations above.

The decrease in margin percentages is due primarily to the costs relating to the start up of well servicing operations in Australia and the effect the extreme rainfall had on those operations. Ignoring the negative margins realized on the commencement of Savanna's Australian operations, operating margin percentages were 28% in Q4 2010. In addition, the fleet in Canada required more repairs in 2010 after a much busier operating year. Savanna's activity levels in Canada had been depressed through most of 2009. During this time costs were incurred to keep the fleet in good working order for the eventual return to more favourable operating conditions. As a result, as operating activity increased in Q4 2009, fewer repairs were necessary, however after a year of increased operations, further repairs and maintenance were required. Labour rates also increased by approximately 4% in Q4 2010; however Savanna was able to recover the higher labour costs through increased hourly rates.

Annual Results

Improvements in industry activity levels in 2010 also resulted in significant increases in operating hours, revenue and operating margin overall for the year. Again the increases were achieved in both Canada and the U.S. Additionally, the Company's efforts to reduce operating costs in the latter part of 2009, including a 6% reduction in wages for all rig personnel, and the effect of spreading fixed operating costs over higher activity levels in 2010, lowered per hour operating costs for the first three quarters of 2010 compared to 2009. However, wage increases, increases in repairs and maintenance and the effect of start-up costs and low utilization in Savanna's Australian operations in Q4 2010 negatively affected operating costs in Q4 2010 and as a result operating margin percentages remained flat year over year. Furthermore, with the current shortage of qualified rig personnel in the oilfield services industry, the Company felt it was necessary to retain extra rig personnel in late summer and fall in anticipation of a busy winter season. As a result, additional labour costs were incurred in the third quarter of 2010, however, the Company was able to get more equipment to work than it otherwise would have in Q4 2010 and the Company expects to benefit from this strategy in 2011.

Included in revenue for the year ended December 31, 2010, was $15.3 million from oilfield rentals (2009 - $9.8 million). As with the quarter ended December 31, 2010, the increase in oilfield rentals revenue for the year is due to the increase in overall industry activity and an expanded fleet of rental assets. Of the 2010 rental revenue, $2.7 million (2009 - $2.7 million) is eliminated on overall consolidation as inter-segment revenue. Oilfield rentals revenue is excluded from the per hour revenue calculations above.

OTHER FINANCIAL INFORMATION

(Stated in thousands of dollars)


 Three Months Twelve Months
 Ended Ended
December 31 2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
General and
 administrative
 expenses 11,713 5,459 115% 31,563 20,517 54%
 as a % of revenue 8.6% 6.4% 7.2% 8.0%
Impairment loss - 27,370 (100%) - 27,370 (100%)
Income tax
 expense
 (recovery) 1,252 (5,519) (i) 3,566 (8,198) (i)
Effective income
 tax rate 20% 23% 30% 23%
 ---------------------------------------------------
 ---------------------------------------------------
(i) Calculation not meaningful

The overall increase in general and administrative expenses for the quarter and year ended December 31, 2010, compared with the same periods in 2009 reflects Savanna's expansion into new markets over the last twelve months, including startup operations in Australia, significant sales and marketing efforts in 2010 and the effect of the reversal of salary and wage roll backs in 2010 that were in place from April to December 2009. Together with the startup costs for Australia, in Q4 2010, the Company incurred one time expenses, including insurance deductibles, severance and other adjustments, aggregating $2.6 million. Overall, general and administrative expenses decreased as a percentage of revenue in 2010 compared to 2009 due to the increase in revenues year over year. Ignoring the one time costs described above general and administrative expenses are consistent as a percentage of revenue for both the quarter and year ended December 31, 2010.

In the fourth quarter of 2009 the Company determined that indications of impairment existed on its under utilized surface/coring drilling rigs and coil tubing service units acquired through the 2006 merger with Western Lakota Energy Services Inc. Through most of 2009 the oil and gas industry was negatively affected by depressed oil and natural gas demand and pricing leading to lower industry activity levels and utilization rates. More specifically, the market for these types of equipment was uncertain and prospects for improvement were questionable. As a result, an impairment loss of $25.8 million was included in the consolidated statement of net loss. As described under "Equipment Fleet" in this press release, all of the coil tubing service units and almost half of the surface/coring drilling rig fleet were sold in 2010. Additionally, at December 31, 2009 impairment tests were performed on intangible assets. As a result, a loss of $1.5 million relating to intangible asset impairment was included in the consolidated statement of net loss. The amount of these impairment losses were a result of management's best estimates of expected revenues, expenses and cash flows and were based on information that was available at December 31, 2009. No indicators of impairment were identified in 2010 and impairment tests preformed at December 31, 2010 indicated that the fair value of the Company's capital assets exceeded their carrying amounts; as a result no impairment losses were recognized in 2010.

The increase in income tax expense is primarily a result of the increase in activity levels and the resulting higher pre-tax earnings in 2010 compared to 2009. In addition, the reductions in the Canadian tax rate for 2010 and future years have been more than offset by the higher U.S. and international tax rates the Company expects to experience due to its increasing operations in jurisdictions outside of Canada, resulting in a higher effective income tax rate in 2010 compared to 2009. The 2010 current income tax recovery results from applying 2010 tax losses in certain subsidiaries against taxable income in prior years; this recovery is offset by higher future tax expenses. The Company's operations are complex and computation of the provision for income taxes involves tax interpretations, regulations and legislation that are continually changing. There are matters that have not yet been confirmed by taxation authorities; however, management believes the provision for income taxes is adequate.

FINANCIAL CONDITION AND LIQUIDITY

Savanna's net debt(1) position at December 31, 2010, was $33.9 million and the amount owing on its term revolving credit facility was $112.8 million. As of the date of this release, $128.9 million was drawn on Savanna's term revolving credit facility.

QUARTERLY RESULTS

In addition to other market factors, quarterly results of Savanna are markedly affected by weather patterns throughout its operating areas in Canada, which still constitute the majority of Savanna's operations. Historically, the first quarter of the calendar year is very active, followed by a much slower second quarter. As a result of this, the variation in activity levels on a quarterly basis, particularly in the first and second quarters, can be dramatic year-over-year independent of other demand factors. As the Company continues to expand outside of Canada, the relative impact of Canadian seasonality will be reduced. The following is a summary of selected financial information of the Company for the last eight completed quarters.

Summary of Quarterly Results

(Stated in thousands of dollars, except per share amounts)


Three Months Ended Dec-31 Sep-30 Jun-30 Mar-31
 2010 2010 2010 2010
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
Revenue 135,678 104,787 67,862 130,069
Operating expenses 98,485 80,516 57,672 94,732
Operating margin(1) 37,193 24,271 10,190 35,337
Operating margin %(1) 27% 23% 15% 27%
Impairment loss - - - -
 Per share: basic - - - -
 Per share: diluted - - - -
Net earnings (loss) 5,247 1,211 (7,742) 9,597
 Per share: basic 0.07 0.02 (0.10) 0.12
 Per share: diluted 0.07 0.02 (0.10) 0.12
Total assets 1,052,368 1,019,149 996,765 1,020,981
Long-term debt 112,802 93,601 84,696 98,386
 ----------------------------------------------
 ----------------------------------------------

Three Months Ended Dec-31 Sep-30 Jun-30 Mar-31
 2009 2009 2009 2009
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
Revenue 85,430 50,350 27,045 93,794
Operating expenses 61,611 40,208 26,627 70,561
Operating margin(1) 23,819 10,142 418 23,233
Operating margin %(1) 28% 20% 2% 25%
Impairment loss (27,370) - - -
 Per share: basic (0.35) - - -
 Per share: diluted (0.35) - - -
Net earnings (loss) (18,055) (4,548) (8,899) 3,609
 Per share: basic (0.23) (0.06) (0.14) 0.06
 Per share: diluted (0.23) (0.06) (0.14) 0.06
Total assets 977,159 983,783 974,192 1,019,841
Long-term debt 70,107 57,263 50,872 176,501
 ----------------------------------------------
 ----------------------------------------------


Summary of Quarterly Results - Contract Drilling

(Stated in thousands of dollars, except revenue per day)


Three Months Ended Dec-31 Sep-30 Jun-30 Mar-31
 2010 2010 2010 2010
----------------------------------------------------------------------------
Revenue $107,633 $ 81,969 $52,008 $107,464
Operating expenses $ 77,305 $ 64,511 $44,842 $ 78,887
Operating margin(1) $ 30,328 $ 17,458 $ 7,166 $ 28,577
Operating margin %(1) 28% 21% 14% 27%
Operating days(a) 5,313 4,674 2,869 5,517
Revenue per
 operating day $ 20,258 $ 17,537 $18,128 $ 19,479
Spud to release days(a)(b) 4,676 4,047 2,471 4,724
Wells drilled(b) 852 578 186 808
Total meters drilled(b) 1,115,888 862,711 471,695 945,983
Utilization(b)
 Canada 47% 39% 17% 54%
 International 79% 72% 66% 63%
 Canadian industry
 average(c) 49% 40% 20% 52%
 ----------------------------------------------
 ----------------------------------------------

Three Months Ended Dec-31 Sep-30 Jun-30 Mar-31
 2009 2009 2009 2009
----------------------------------------------------------------------------
Revenue $ 68,478 $ 38,172 $ 17,943 $ 74,584
Operating expenses $ 50,316 $ 31,719 $ 18,708 $ 56,237
Operating margin(1) $ 18,162 $ 6,453 $ (765) $ 18,347
Operating margin %(1) 27% 17% (4%) 25%
Operating days(a) 3,704 2,245 974 3,414
Revenue per
 operating day $ 18,488 $ 17,003 $ 18,422 $ 21,847
Spud to release days(a)(b) 3,096 1,974 896 2,857
Wells drilled(b) 502 306 116 864
Total meters drilled(b) 721,824 468,602 202,671 795,177
Utilization(b)
 Canada 31% 19% 5% 31%
 International 56% 41% 37% 54%
 Canadian industry
 average(c) 31% 21% 11% 36%
 ----------------------------------------------
 ----------------------------------------------

(a) The number of operating days and number of spud to release days are all
 on a net basis which means only Savanna's proportionate share of any
 rigs held in 50/50 limited partnerships have been included.

(b) Savanna reports its rig utilization based on spud to release time for 
 the rigs and excludes moving, rig up and tear down time, even though
 revenue may be earned during this time. Savanna's rig utilization,
 spud to release days, wells drilled and total meters drilled exclude
 coring rigs as the operating environment is not comparable to the
 Company's other drilling rigs, nor to industry utilization drivers.
 However, these rigs are included in total fleet numbers.

(c) Source of industry figures: Canadian Association of Oilwell Drilling
 Contractors ("CAODC").


Summary of Quarterly Results - Oilfield Services

(Stated in thousands of dollars, except revenue per hour)

Three Months Ended Dec-31 Sep-30 Jun-30 Mar-31
 2010 2010 2010 2010
----------------------------------------------------------------------------
Revenue $ 28,231 $ 23,283 $ 16,104 $ 23,741
Operating expenses $ 21,531 $ 16,639 $ 13,227 $ 17,120
Operating margin(1) $ 6,700 $ 6,644 $ 2,877 $ 6,621
Operating margin %(1) 24% 29% 18% 28%
Operating hours(a) 34,354 29,650 21,992 30,278
Revenue per hour $ 687 $ 654 $ 624 $ 640
Utilization - Canada(b) 56% 47% 33% 49%
Utilization - International(b) 70% 75% 69% 60%
 ----------------------------------------------
 ----------------------------------------------

Three Months Ended Dec-31 Sep-30 Jun-30 Mar-31
 2009 2009 2009 2009
----------------------------------------------------------------------------
Revenue $ 17,447 $ 12,887 $ 9,369 $ 19,848
Operating expenses $ 11,928 $ 9,338 $ 8,329 $ 15,102
Operating margin(1) $ 5,519 $ 3,549 $ 1,040 $ 4,746
Operating margin %(1) 32% 28% 11% 24%
Operating hours(a) 24,011 17,345 11,470 22,981
Revenue per hour $ 629 $ 622 $ 639 $ 721
Utilization - Canada(b) 37% 26% 15% 37%
Utilization - International(b) 59% 58% 58% 53%
 ----------------------------------------------
 ----------------------------------------------

(a) The number of operating hours is on a net basis which means only
 Savanna's proportionate share of any rigs held in 50/50 limited 
 partnerships has been included.

(b) Utilization is based on standard hours of 3,650 per rig per year. The
 utilization rate excludes the coiled tubing service units since these
 units are not comparable in size or operations to the division's
 service rigs. Reliable industry average utilization figures, specific
 to well servicing, are not available.

UPDATE ON TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")

The following are the optional exemptions and mandatory exceptions from full retrospective application of IFRS allowed for under IFRS 1 that the Company expects to apply on conversion to IFRS from Canadian generally accepted accounting principles ("GAAP") that have changed from what was previously disclosed in the Company's Q3 2010 interim report:

Fair value or revaluation as deemed cost

This exemption allows the Company to use the fair value of a class of capital assets as the deemed cost of that asset on conversion. The Company will apply this exemption to a portion of its capital assets, including intangible assets, hybrid drilling rigs, surface/coring drilling rigs, coil tubing service units and spare equipment recorded in property and equipment; for the rest of Savanna's capital assets historical costs will be used. No change is expected to the fair value of intangible assets, surface/coring drilling rigs and coil tubing service units as determined under GAAP at December 31, 2009. The carrying amounts of the Company's hybrid drilling rigs and spare equipment are expected to be reduced by an aggregate of between $55 million and $65 million as of January 1, 2010, as a result of using the fair values of these assets as their deemed cost on the date of transition.

Cumulative translation differences

This exemption eliminates the requirement to retrospectively determine cumulative currency translation differences in accordance with IAS 21 from the date a subsidiary was formed and allows the cumulative translation balance to be reset to zero at transition. Accordingly, Savanna will elect to reset all cumulative translation balances to zero in opening retained earnings at January 1, 2010.

The following are the significant areas expected to change Savanna's current accounting policies on conversion to IFRS that have changed from what was previously disclosed in the Company's Q3 2010 interim report:

Stock-based compensation

There are no significant differences in how Savanna accounts for its stock options under GAAP and IFRS. Under GAAP, prior to January 1, 2010, forfeitures of awards were recognized as they occurred. Under IFRS an estimate is required of the number of awards expected to vest, which results in the use of an estimated forfeiture rate. The Company will adjust its opening balance sheet to reflect an estimated historical forfeiture rate of 10%. There are no differences with respect to stock-based compensation for the Company between GAAP and IFRS in 2010 as a forfeiture rate was used to estimate the fair value of 2010 grants, which was permissible under GAAP. Additionally, there are no differences in how the Company accounts for its deferred share units and performance share units.

Income taxes

Conceptually accounting for income taxes under IFRS follows the same basic principles as GAAP. Future taxes are called deferred taxes under IFRS, although the accounting is virtually the same as how future taxes are accounted for currently by Savanna. Based on changes to the opening balance sheet under IFRS, particularly in the carrying values of property and equipment, deferred taxes will need to be recalculated based on the changed carrying values. No changes to current income taxes are expected.

Joint ventures

Previously Savanna had made assessments regarding its jointly-controlled partnerships based on the current International Accounting Standards Board exposure draft on joint arrangements. Based on the changes contemplated in the current exposure draft the Company would no longer proportionately consolidate its jointly-controlled partnerships and would instead account for these joint ventures as equity investments. The exposure draft has not yet become an IFRS. As a result, Savanna has decided to continue to proportionately consolidate its joint ventures on transition to IFRS as the Company believes this is the most accurate representation of the substance of the relationship with its joint ventures. When the exposure draft is finalized as an IFRS, Savanna will reassess how it accounts for joint ventures.

The Company has substantially completed its January 1, 2010 opening balance sheet adjustments under IFRS and will continue to work with its auditors on finalizing these adjustments, including changes to the 2010 figures as reported under GAAP, prior to the release of its first IFRS financial statements for the period ending March 31, 2011. The most significant of these adjustments results from the application of the fair value as deemed cost exemption described above and the future tax effect thereof. Other adjustments to the opening balance sheet are not material and include: an adjustment pertaining to the componentization of property and equipment and the retrospective depreciation thereof; an adjustment pertaining to the retrospective calculation of stock-based compensation expense for unvested stock options at January 1, 2010 using a forfeiture rate; and an adjustment in the calculation of the future tax liability based on these changes.

OUTLOOK

Both the CAODC and the Petroleum Services Association of Canada anticipate stronger drilling activity in Canada in 2011 compared to 2010. With 84% of its well servicing fleet and 77% of its drilling fleet located in Canada, Savanna expects to benefit from any such increased activity.

Despite weather and flood delays in Q4 2010 and Q1 2011, Savanna anticipates having its Australian operations running at their intended capacity by the second half of 2011. The required infrastructure to support this operation is in place and Savanna expects to have the two service rigs repaired and the first two hybrid drilling rigs commissioned to start work once field conditions improve enough to allow for operations to recommence. By Q3 2011 the third service rig and the next two drilling rigs should also be ready to initiate operations in Australia. Savanna continues to pursue long-term customer commitments for additional drilling and well servicing equipment in Australia, both through existing and pending tenders, as well as directly to customers.

With the deployment of four hybrid drilling rigs to Australia and the committed conversion of eight hybrid rigs to TDS-3000^TM conventional singles, Savanna's strategic intent of reducing its domestic shallow drilling fleet exposure remains on track. The first two TDS-3000^TM rigs have shown good results and with four of the next six already contracted and significant customer interest in the remaining two TDS-3000^TM rigs, Savanna expects this strategy to begin paying off materially in 2011. In addition, the Company has identified several other prospective international areas attractive for the hybrid and is continuing to work towards improving the application and utilization of the hybrid fleet domestically through improved directional and horizontal capabilities for the rigs and increased application of the rigs to shallow oil drilling, specifically heavy oil areas.

While revitalization of the hybrid fleet is a priority, expansion of its deeper conventional fleet also remains a core growth driver for Savanna going forward. With the construction of two high specification conventional drilling rigs and the conversion of eight of its hybrid rigs to deeper-oriented conventional rigs either completed or under way, Savanna is committed to increasing the number of drilling rigs capable of drilling to depths greater than 3,000 meters.

Ultimately, despite much higher than historical oil-driven drilling demand, the level of activity in both Canada and the United States will not fully recover until a supply-demand balance for natural gas is achieved, and prices for the commodity recover. In the interim, Savanna will continue to monitor its cost structure and focus on best positioning itself to take advantage of the operating environment.

Savanna's vision is "Defining leadership in global energy services through people, innovation and technology - The path for others to follow." Defining leadership within an industry involves a commitment to re-examining strategies and practices regardless of success levels. As a service provider, anticipating future customer needs becomes equally important as meeting existing ones. Savanna is committed to the advancement of energy services for the benefit of all stakeholders - its shareholders; its employees; its customers; and the communities in which they live. Savanna's key initiatives over the next few years are as follows:

-- retrofit no less than twelve hybrid drilling rigs, subject to economics;
-- execute and expand Australia by a minimum of 2 drilling and 2 service
 rigs, subject to contract; 
-- continue to nurture international opportunities; 
-- establish technical services function to support technology development
 and cost effective construction and purchasing; 
-- execute on the strategy to grow the rental division domestically and
 internationally; 
-- improve staff development, training and safety execution; and 
-- maximize operational efficiencies. 

Savanna believes it has the high quality people, equipment, leading-edge technology and First Nations partnerships to execute on its strategy as a leader in the oilfield services industry.

Notes:

(1.) Operating margin, operating margin percent, operating cash flows,
 capital assets, working capital, and net debt are not recognized 
 measures under GAAP, and are unlikely to be comparable to similar 
 measures presented by other companies. Management believes that, in
 addition to net earnings, the measures described above are useful as 
 they provide an indication of the results generated by the Company's
 principal business activities prior to consideration of how those
 activities are financed and how the results are taxed in various 
 jurisdictions. 

-- Operating margin is defined as revenue less operating expenses. 
-- Operating margin percent is defined as revenue less operating expenses
 divided by revenue. 
-- Operating cash flows are defined as cash flows from operations less
 changes in non-cash working capital. 
-- Capital assets are defined as property and equipment, intangibles, and
 other assets. 
-- Working capital is defined as total current assets less total current
 liabilities excluding the current portions of long-term debt. 
-- Net debt is defined as long-term debt, including the current portions
 thereof, less working capital as defined above. 


CONSOLIDATED STATEMENTS OF For the periods ended
NET EARNINGS (LOSS) December 31 (Unaudited)
 (Stated in thousands of dollars,
 except per share amounts)


 Three months Twelve months
 ended ended
 2010 2009 2010 2009
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
REVENUE
 Sales and services 135,678 85,430 438,396 256,619
 ---------------------------------------

EXPENSES
 Operating 98,485 61,610 331,405 199,007
 General and administrative 11,713 5,459 31,563 20,517
 Stock-based compensation 1,300 838 4,952 4,450
 Depreciation and amortization 14,310 12,214 49,662 35,814
 Interest on long-term debt 1,477 1,290 6,070 5,119
 Other 1,894 223 2,865 433
 Impairment loss - 27,370 - 27,370
 ---------------------------------------
 129,179 109,004 426,517 292,710
 ---------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 6,499 (23,574) 11,879 (36,091)
 ---------------------------------------

INCOME TAXES
 Current (9,579) (6,724) (9,223) (7,034)
 Future 10,831 1,205 12,789 (1,164)
 ---------------------------------------
 1,252 (5,519) 3,566 (8,198)
 ---------------------------------------
NET EARNINGS (LOSS) 5,247 (18,055) 8,313 (27,893)
 ---------------------------------------
 ---------------------------------------

NET EARNINGS (LOSS) PER SHARE
 Basic - net earnings (loss) 0.07 (0.23) 0.11 (0.40)
 Diluted - net earnings (loss) 0.07 (0.23) 0.11 (0.40)
 Weighted average number of shares
 outstanding (000s) 79,078 79,078 79,078 70,532
 Diluted weighted average number of
 shares outstanding (000s) 79,078 79,078 79,078 70,532
 ---------------------------------------
 ---------------------------------------


CONSOLIDATED STATEMENTS OF DEFICIT For the periods ended
 December 31 (Unaudited)
 (Stated in thousands of dollars)


 Three months Twelve months
 ended ended
 2010 2009 2010 2009
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
Deficit, beginning of period (152,666) (133,723) (153,755) (118,960)
Dividends declared - (1,977) (1,977) (6,902)
Net earnings (loss) 5,247 (18,055) 8,313 (27,893)
 ---------------------------------------
Deficit, end of period (147,419) (153,755) (147,419) (153,755)
 ---------------------------------------
 ---------------------------------------

CONSOLIDATED BALANCE SHEETS (Stated in thousands of dollars)
 (Unaudited)


December 31 2010 2009
----------------------------------------------------------------------------
 $ $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current
 Cash 6,055 4,480
 Accounts receivable 117,213 78,409
 Income taxes receivable 9,896 9,065
 Inventory 3,713 4,195
 Prepaid expenses and deposits 2,554 1,969
 Assets held for sale 3,666 -
 ------------------------------
 143,097 98,118
Notes receivable 10,984 9,630
Property and equipment 891,528 862,251
Intangibles and other assets 6,759 7,160
 ------------------------------
 1,052,368 977,159
 ------------------------------
 ------------------------------

LIABILITIES
Current
 Bank indebtedness 15,429 11,228
 Accounts payable and accrued liabilities 48,795 35,874
 Current portion of long-term debt 10,761 7,512
 ------------------------------
 74,985 54,614
Deferred net revenue 1,647 1,647
Long-term debt 102,041 62,595
Future income taxes 90,388 77,287
 ------------------------------
 269,061 196,143
 ------------------------------
 ------------------------------
Commitments and contingencies

SHAREHOLDERS' EQUITY
Share capital 911,776 911,764
Contributed surplus 23,712 20,135
Deficit (147,419) (153,755)
 ------------------------------
 788,069 778,144
Accumulated other comprehensive income (loss) (4,762) 2,872
 ------------------------------
 783,307 781,016
 ------------------------------
 ------------------------------
 1,052,368 977,159
 ------------------------------
 ------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS For the periods ended
 December 31 (Unaudited)
 (Stated in thousands of dollars)



 Three months Twelve months
 ended ended
 2010 2009 2010 2009
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
 Net earnings (loss) 5,247 (18,055) 8,313 (27,893)
 Items not affecting cash:
 Stock-based compensation 1,300 838 4,952 4,450
 Depreciation and amortization 14,310 12,214 49,662 35,814
 Impairment loss - 27,370 - 27,370
 Amortization of other assets 906 637 3,148 2,326
 Future income taxes 10,831 1,205 12,789 (1,164)
 Loss on disposal of assets 2,214 (52) 3,097 169
 --------------------------------------
 34,808 24,157 81,961 41,072
Change in non-cash working capital (36,479) (27,343) (36,702) 22,207
 --------------------------------------
Cash flows from (used in) operations (1,671) (3,186) 45,259 63,279
 --------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
 Shares issued, net of share issue
 costs 9 - 9 120,031
 Issuance of long-term debt 20,000 15,000 60,000 25,000
 Repayment of long-term debt (536) (577) (17,039) (146,982)
 Dividends paid - (1,977) (1,977) (6,902)
 --------------------------------------
 Cash flows from (used in) financing
 activities 19,473 12,446 40,993 (8,853)
 --------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment (28,098) (8,328) (100,764) (64,471)
 Proceeds on disposal of assets 2,322 593 9,941 1,520
 Purchase of other assets (855) (487) (3,843) (1,753)
 Change in notes receivable 276 (138) (1,353) (210)
 Change in working capital related to
 investing activities 4,781 (805) 7,141 147

 --------------------------------------
 Cash flows used in investing 
 activities (21,574) (9,165) (88,878) (64,767)
 --------------------------------------

INCREASE (DECREASE) IN CASH, NET OF
 BANK INDEBTEDNESS (3,772) 95 (2,626) (10,341)
CASH, NET OF BANK INDEBTEDNESS,
 BEGINNING OF PERIOD (5,602) (6,843) (6,748) 3,593

 --------------------------------------
CASH, NET OF BANK INDEBTEDNESS, END
 OF PERIOD (9,374) (6,748) (9,374) (6,748)
 --------------------------------------
 --------------------------------------


CONSOLIDATED STATEMENTS OF For the periods ended
COMPREHENSIVE INCOME (LOSS) December 31 (Unaudited)
 (Stated in thousands of dollars)


 Three months Twelve months
 ended ended
 2010 2009 2010 2009
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
NET EARNINGS (LOSS) 1,211 (18,055) 8,313 (27,893)
 --------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS)
 Foreign currency translation
 adjustment (7,852) (9,737) (9,443) (29,220)
 Unrealized foreign exchange gain on
 net investment hedge, net of 
 tax of $270 1,225 3,381 1,809 10,782
 --------------------------------------
COMPREHENSIVE INCOME (LOSS) (5,416) (24,411) 679 (46,331)
 --------------------------------------
 --------------------------------------


CONSOLIDATED STATEMENTS OF ACCUMULATED For the periods ended
OTHER COMPREHENSIVE INCOME (LOSS) December 31 (Unaudited)
 (Stated in thousands of dollars)


 Three months Twelve months
 ended ended
 2010 2009 2010 2009
----------------------------------------------------------------------------
 $ $ $ $
----------------------------------------------------------------------------
Accumulated other comprehensive
 income, beginning of period 1,865 9,228 2,872 21,310
Other comprehensive loss (6,627) (6,356) (7,634) (18,438)
 --------------------------------------
Accumulated other comprehensive
 income (loss), end of period (4,762) 2,872 (4,762) 2,872
 --------------------------------------
 --------------------------------------

SEGMENTED INFORMATION

The Company's reportable operating segments, as determined by management, are strategic operating units that offer different products and services. The Company has three reportable operating segments: corporate, services, and drilling.

The corporate segment provides management and administrative services to all its subsidiaries and their respective operations.

The services segment provides well servicing services and rental equipment to the oil and gas industry.

The drilling segment provides primarily contract drilling services to the oil and gas industry through both conventional and hybrid drilling rigs.

Three months ended 
 December 31, 2010 Inter-segment
 Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
 $ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 28,231 107,633 (351) 135,513
Other - 25 140 - 165
 --------------------------------------------------------
 - 28,256 107,773 (351) 135,678
 --------------------------------------------------------
OPERATING COSTS
Oilfield services - 21,531 77,305 (351) 98,485
 --------------------------------------------------------
REVENUE LESS
 OPERATING COSTS - 6,725 30,468 - 37,193
 --------------------------------------------------------
Depreciation and
 amortization 575 3,504 10,231 - 14,310
Interest on
 long-term debt 1,426 9 42 - 1,477
Earnings (loss)
 before income taxes (14,376) 344 20,531 - 6,499
Total assets 38,698 186,546 827,124 - 1,052,368
Capital assets(i) 22,555 160,511 715,221 - 898,287
Capital
 expenditures(ii) - 6,427 22,526 - 28,953
 --------------------------------------------------------
 --------------------------------------------------------
Three months ended 
 December 31, 2009 Inter-segment
 Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
 $ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 17,447 68,477 (633) 85,291
Other - 30 109 - 139
 --------------------------------------------------------
 - 17,477 68,586 (633) 85,430
 --------------------------------------------------------
OPERATING COSTS
Oilfield services - 11,929 50,315 (633) 61,611
 --------------------------------------------------------
REVENUE LESS
 OPERATING COSTS - 5,548 18,271 - 23,819
 --------------------------------------------------------
Depreciation and
 amortization 530 2,814 8,870 - 12,214
Impairment loss - 5,279 22,091 27,370
Interest on
 long-term debt 1,222 21 47 - 1,290
Earnings (loss)
 before income taxes - (3,375) (13,319) - (16,694)
Total assets 34,937 177,179 765,043 - 977,159
Capital assets(i) 23,682 157,153 688,576 - 869,411
Capital
 expenditures(ii) 374 1,338 7,103 - 8,815
 --------------------------------------------------------
 --------------------------------------------------------

(i) Capital assets include property and equipment, intangibles, and other
 assets.

(ii) Capital expenditures include the purchase of property and equipment,
 intangibles, and other assets.


Twelve months ended 
 December 31, 2010 Inter-segment
 Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
 $ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 91,359 349,074 (2,658) 437,775
Other - 115 506 - 621
 --------------------------------------------------------
 - 91,474 349,580 (2,658) 438,396
 --------------------------------------------------------
OPERATING COSTS
Oilfield services - 68,518 265,545 (2,658) 331,405
 --------------------------------------------------------
REVENUE LESS
 OPERATING COSTS - 22,956 84,035 - 106,991
 --------------------------------------------------------
Depreciation and
 amortization 1,821 12,435 35,406 - 49,662
Interest on
 long-term debt 5,873 55 142 - 6,070
Earnings (loss)
 before income taxes (39,627) 4,446 47,060 - 11,879
Total assets 38,698 186,546 827,124 - 1,052,368
Capital assets(i) 22,555 160,511 715,221 - 898,287
Capital
 expenditures(ii) 1,513 27,383 75,711 - 104,607
 --------------------------------------------------------
 --------------------------------------------------------
Twelve months ended Inter-segment
 December 31, 2009
 Corporate Services Drilling Eliminations Total
----------------------------------------------------------------------------
 $ $ $ $ $
----------------------------------------------------------------------------
REVENUE
Oilfield services - 59,551 199,177 (2,670) 256,058
Other - 117 444 - 561
 --------------------------------------------------------
 - 59,668 199,621 (2,670) 256,619
 --------------------------------------------------------
OPERATING COSTS
Oilfield services - 44,697 156,980 (2,670) 199,007
 --------------------------------------------------------
REVENUE LESS
 OPERATING COSTS - 14,971 42,641 - 57,612
 --------------------------------------------------------
Depreciation and
 amortization 1,622 9,559 24,633 - 35,814
Impairment loss - 5,279 22,091 - 27,370
Interest on
 long-term debt 4,674 154 291 - 5,119
Earnings (loss)
 before income taxes (26,838) (1,813) (7,440) - (36,091)
Total assets 34,937 177,179 765,043 - 977,159
Capital assets(i) 23,682 157,153 688,576 - 869,411
Capital
 expenditures(ii) 3,128 6,457 56,639 - 66,224
 --------------------------------------------------------
 --------------------------------------------------------

(i) Capital assets include property and equipment, intangibles, and other
 assets.

(ii) Capital expenditures include the purchase of property and equipment,
 intangibles, and other assets.

The Company operates in two different geographical areas, the breakdown of 
which is as follows:

 Three
 months
 ended
 December
 31 
 International 2010 International 2009
 Canada (i) Total Canada (i) Total
----------------------------------------------------------------------------
 $ $ $ $ $ $
----------------------------------------------------------------------------
Revenue 98,898 36,780 135,678 61,477 23,953 85,430

Total
 assets 818,035 234,333 1,052,368 765,563 211,596 977,159

Capital
 assets(ii) 691,188 207,099 898,287 677,518 191,893 869,411
 ----------------------------------------------------------------

 Twelve
 months
 ended
 December
 31 
 International 2010 International 2009
 Canada (i) Total Canada (i) Total
----------------------------------------------------------------------------
 $ $ $ $ $ $
----------------------------------------------------------------------------
Revenue 306,957 131,439 438,396 182,560 74,059 256,619

Total
 assets 818,035 234,333 1,052,368 765,563 211,596 977,159

Capital
 assets(ii) 691,188 207,099 898,287 677,518 191,893 869,411
 ----------------------------------------------------------------

(i) Includes U.S., Australia and Mexico operations.

(ii) Capital assets include property and equipment, intangibles, and other
 assets.

Cautionary Statement Regarding Forward-Looking Information and Statements

Certain statements and information contained in this press release including statements related to the Company's 2011 capital expenditures, international and other long-term growth opportunities, the conversion of hybrid drilling rigs to TDS-3000^TM rigs and the future returns generated there from, the timing of rig deployment and commencement or recommencement of operations in Australia, the reimbursement through insurance of restoration and repair costs of rigs damaged by flooding in Australia, increased industry activity in Canada in 2011, ultimate recovery of rig repositioning costs, outlook for future oil and gas demand and prices, cyclical industry fundamentals, drilling and completion activity levels, the Company's ability to meet debt repayments and fund future obligations and capital expenditures, the Company's ability to renew its term revolving credit facility, the Company's IFRS changeover plan and statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "likely", "estimate", "predict", "potential", "continue", "maintain", "retain", "grow", and similar expressions and statements relating to matters that are not historical facts may constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995.

These statements are based on certain assumptions and analysis made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. In particular, the Company's expectations of increased industry activity in Canada in 2011, the ultimate recovery of wage rig repositioning costs incurred in 2010, and the conversion of hybrid drilling rigs to TDS-3000^TM rigs along with the future returns generated there from are premised on the Company's expectations for its customers' capital budgets and geographical areas of focus, the status of current negotiations with its customers, the focus of its customers on oil directed drilling opportunities in the current natural gas pricing environment in North America and the effect unconventional gas projects have had on supply and demand fundamentals for natural gas. Similarly, the Company's expectation of increased activity levels and growth opportunities in Australia is premised on the current level of tender activity in the Australian market which in turn is based on the general expectation that coal seam gas activity will increase in that country as plans for liquid natural gas plants move forward. The Company's expectation of the timing for the recommencement of operations in Australia is premised on rig repair activity undertaken to date and expectations of its customer's timing on having field locations available for work. The Company's expectation of being fully reimbursed for the restoration and repair costs of the two rigs damaged by flooding in Australia is premised on the Company's understanding of its insurance policy coverage and its current estimate for the total cost of the repairs.
The Company's expectation of funding future obligations and capital expenditures is premised on its expectation of renewing its revolving debt facility in 2011, realizing its working capital and generating cash flows at current levels or better which in turn is premised on the pricing of the Company's services remaining at or improving from present levels while maintaining its current cost structure. Whether actual results, performance or achievements will conform to the Company's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Company's expectations. Such risks and uncertainties include, but are not limited to: fluctuations in the price and demand for oil and natural gas; fluctuations in the level of oil and natural gas exploration and development activities; fluctuations in the demand for well servicing and contract drilling; the effects of weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing and contract drilling; general economic, market or business conditions; changes in laws or regulations, including taxation, environmental and currency regulations; the lack of availability of qualified personnel or management; the other risk factors set forth under the heading "Risks and Uncertainties" in the Company's Annual Report and under the heading "Risk Factors" in the Company's Annual Information Form; and other unforeseen conditions which could impact on the use of services supplied by the Company.

Consequently, all of the forward-looking information and statements made in this press release are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. Except as may be required by law, the Company assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.

OTHER

Savanna will host a conference call for analysts, investors and interested parties on Friday March 11, 2011, at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss the Company's fourth quarter and year-end results. The call will be hosted by Ken Mullen, Savanna's President and Chief Executive Officer and Darcy Draudson, Vice President, Finance and Chief Financial Officer.

If you wish to participate in this conference call, please call 1-888-892-3255 (for participants in North America). Please call 10 minutes ahead of time.

A replay of the call will be available until March 18, 2011 by dialing 1-800-937-6305 and entering passcode 366433.

Savanna is a Canadian-based drilling and well servicing provider with operations in Canada, the United States and Australia focused on providing fit for purpose equipment and technologies.