485 0 Kommentare Savanna Energy Services Corp. Announces Fourth Quarter and Year-End 2014 Results

CALGARY, ALBERTA--(Marketwired - March 4, 2015) - Savanna Energy Services Corp. (TSX:SVY) -

Fourth Quarter Results

Savanna Energy Services Corp. ("Savanna" or "the Company") generated its highest fourth quarter revenue and operating margins in the Company's history in Q4 2014. Virtually all of its operating divisions achieved activity, revenue and operating margin increases relative to Q4 2013, despite industry headwinds. In addition, Savanna's first Velox™ triple drilling rig, two new-build Australian workover rigs and two new-build Australian flush-by units all commenced operations in the quarter.

Savanna generated EBITDAS of $41.8 million on $205 million of revenue in Q4 2014, an increase of 21% from EBITDAS of $34.6 million on $177 million of revenue in Q4 2013. The increases were primarily a result of higher activity levels in Canadian long-reach drilling, U.S. drilling and Australia well servicing. Sequentially, EBITDAS was in-line with the $42.3 million generated in Q3 2014 on slightly higher overall revenue.

An increase in Savanna's long-reach drilling utilization in Canada in Q4 2014 was the primary driver of the increase in operating margins for the geographic segment compared to Q4 2013. Savanna generated $32.9 million in operating margins on $114.4 million of revenue in Canada in Q4 2014, compared to $30.1 million in operating margins on $105.8 million of revenue in Q4 2013. Nearly all of the $2.8 million increase in operating margins in Canada relative to Q4 2013 was achieved by the long-reach drilling rig fleet. Savanna's shallow drilling, well servicing, and rentals fleets in Canada also realized revenue increases in Q4 2014 compared to Q4 2013; however, year-over-year operating margins remained relatively flat for these business units compared to Q4 2013. Sequentially, operating margins decreased from the $36 million generated in Canada in Q3 2014, based on 10% and 5% decreases in activity in Canadian long-reach drilling and Canadian well servicing respectively.

In Australia, operating an additional two workover rigs and two flush-by units resulted in operating margin increases in the quarter relative to Q4 2013. Overall operating margins from Australia totaled $7.9 million in Q4 2014, up 17% from the $6.8 million generated in Q3 2014, and 46% higher than the $5.4 million in operating margins in Q4 2013. These increases were achieved despite lower utilization in Q4 2014 relative to both Q3 2014 and Q4 2013. The decrease in utilization occurred as a major Australian customer placed certain rigs on stand-by for part of the quarter. Stand-by revenue was received on these rigs. The stand-by rates are lower than operating rates; however, Savanna was also able to adjust its variable costs which limited the decrease in operating margins on these rigs.

In the U.S., operating margins increased by $5.1 million, or 46%, in Q4 2014 on 28% higher revenue compared to Q4 2013. The revenue and operating margin increases were a result of an increase in utilization and with lower per day costs in U.S. drilling, the retrofit and transfer of idle service rigs from Canada to the U.S. throughout 2014, and an appreciation in the value of the U.S. dollar relative to the Canadian dollar. Sequentially, higher utilization and lower per day costs in U.S. drilling drove the overall operating margin increases compared to Q3 2014. Savanna generated $16.4 million in operating margins on $54.4 million of revenue in the U.S. in Q4 2014, compared to $14.5 million in operating margins on $51 million of revenue in Q3 2014, and $11.2 million in operating margins on $42.7 million of revenue in Q4 2013.

Savanna's Q4 2014 net earnings decreased significantly compared to Q4 2013. The decrease in earnings occurred despite the overall increase in EBITDAS as a result of higher depreciation, based on a combination of higher activity levels and an increase in the value of assets depreciated on a straight-line basis, and $350.6 million of impairment losses ($248.3 million net of taxes). In Q3 2014, there were $43.3 million ($33.6 million net of taxes) of impairment losses. The Q4 2014 net loss attributable to the shareholders of the Company was $231.3 million, or $2.57 per share, compared to net earnings attributable to the shareholders of the Company of $4.4 million, or $0.05 per share, in Q4 2013. The Q3 2014 net loss attributable to the shareholders of the Company was $24.4 million, or $0.27 per share. The increase in impairment losses was also the primary driver for the decrease in earnings relative to Q3 2014.

The Q4 2014 impairment losses were a result of both asset retirements and impairment tests conducted as of December 31, 2014, on a higher of fair value less cost to sell, and value-in-use basis. Absent the impairment losses, Savanna's net earnings attributable to shareholders of the Company would have been $9.7 million, or $0.11 per diluted share in Q4 2014, and $9.2 million, or $0.10 per diluted share in Q3 2014.

Year-to-Date Results

2014 was a record year for Savanna in terms of revenue, operating margins and EBITDAS. The capital and operating initiatives of the last several years diversified and enhanced the Company's service offerings and expanded its geographic reach. This allowed Savanna to generate higher revenue, operating margins and EBITDAS than ever before. Savanna also just finalized its largest organic capital expansion in its history and the capital outlaid toward this expansion over the last 18 months began to generate returns in Q4 2014.

Increases in Savanna's long-reach drilling utilization in Canada in 2014 resulted in a $45.7 million increase in revenue and a $14.7 million increase in operating margin relative to 2013. The utilization increases were in part a result of the capital spent on increasing the operating and depth capacity of the fleet over the last several years. The 17% increase in operating margin more than offset revenue and operating margin decreases in Canadian shallow drilling, well servicing and rentals, caused by lower activity and rates. As a result, overall operating margin in Canada increased by $7.3 million, or 6%, compared to 2013.

The scale of Savanna's Australian operations increased in 2014 relative to 2013. Savanna operated an additional drilling rig throughout 2014, and commenced operations on half of the eight new-build rigs deployed to the region's well servicing division in the last few months of the year. The additional drilling and service rigs resulted in a $27.1 million, or 24%, increase in revenue and a $5.6 million, or 27%, increase in operating margin from Australia in 2014 compared to 2013.

In Savanna's U.S. well servicing division, operating hours and revenue increased based on Savanna's strategy of redeploying idle Canadian service rigs to the U.S. An increase in active rigs relative to 2013, combined with higher year-over-year pricing, resulted in an $8.7 million, or 45%, increase in revenue and a $4.2 million, or 51%, increase in operating margin in 2014. Conversely, in U.S. drilling, lower base day rates combined with higher per day operating costs resulted in a 7% decrease in operating margin relative to 2013. Despite the decrease in operating margin compared to last year, the U.S. drilling operation did show considerable improvements in the second half of 2014, based on cost control initiatives. U.S. drilling operating margins were $5.9 million, or 25%, lower in the first half of 2014 than in the first half of 2013. In the second half of 2014, operating margins were $2.8 million, or 13%, higher compared to the second half of 2013.

Overall for the year, operating margin increases in Canadian long-reach drilling, U.S. well servicing, and Australia led to a $7.0 million, or 5%, increase in EBITDAS relative to 2013.

Based on the sharp decrease in the price of oil in the months preceding and following the end of the year and the significant degree of uncertainty regarding oil and natural gas activity and pricing for the remainder of 2015 and into 2016, Savanna has undergone an extensive review of its strategies, operating structure, and legacy asset base. As a result of this review, and given the significant uncertainty facing the oilfield services business, the Company determined to consolidate a number of its field locations as well as retire a number of assets from its active fleet. These field locations and certain assets, while economic and active at commodity pricing and activity levels that existed through most of 2014, may become challenged in a prolonged low commodity price and reduced oilfield services activity environment. In addition, the Company conducted impairment tests at September 30 and December 31, 2014, on a higher of fair value less cost to sell, and value-in-use basis. The outcome of these tests, together with the asset retirements noted above, resulted in impairment losses of $383.6 million on property and equipment and $10.3 million on goodwill and intangible assets.

In 2014, compared to 2013, Savanna also experienced higher depreciation, based on a combination of higher activity levels and an increase in the value of assets depreciated on a straight-line basis. The higher depreciation, combined with the $393.9 million of impairment losses ($281.9 million net of taxes), resulted in a significant decrease in net earnings in 2014 compared to 2013 despite improved aggregate EBITDAS overall. Absent the impairment losses, Savanna's net earnings attributable to shareholders of the Company in 2014 would have been $25.3 million, or $0.28 per diluted share.

Management Changes

Savanna also announces that John Cooper has resigned as executive Vice President, Operations and Chief Operating Officer effective March 27, 2015.

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		2014		2013		Change		2014		2013		Change
OPERATING RESULTS
Revenue		204,965		177,025		16	%	791,890		696,609		14	%
Operating expenses		147,753		130,330		13	%	576,713		494,949		17	%
Operating margin⁽¹⁾		57,212		46,695		23	%	215,177		201,660		7	%
Operating margin %⁽¹⁾		28	%	26	%			27	%	29	%
EBITDAS⁽¹⁾		41,799		34,594		21	%	157,885		150,896		5	%
	Attributable to shareholders of the Company	40,155		33,019		22	%	150,610		146,036		3	%
	Per share: diluted	0.45		0.37		22	%	1.69		1.67		1	%
Impairment losses, net of taxes⁽¹⁾		(248,288	)	-		+		(281,914	)	-		+
	Per share: diluted	(2.76	)	-		+		(3.16	)	-		+
Net earnings (loss)		(237,618	)	5,578		+		(252,025	)	33,936		+
	Attributable to shareholders of the Company	(231,269	)	4,426		+		(249,308	)	30,243		+
	Per share: diluted	(2.57	)	0.05		+		(2.79	)	0.35		+
Diluted weighted average shares outstanding (000s)		89,853		88,378		2	%	89,307		87,330		2	%


CASH FLOWS
Operating cash flows⁽¹⁾		40,624		28,838		41	%	146,488		137,593		6	%
	Per share: diluted	0.45		0.33		36	%	1.64		1.58		4	%
Acquisition of capital assets⁽¹⁾		78,875		49,604		59	%	247,841		124,870		98	%
Dividends paid		6,159		5,558		11	%	24,057		22,628		6	%


FINANCIAL POSITION AT								Dec. 31		Dec. 31
								2014		2013
Working capital⁽¹⁾								76,040		86,398		(12	%)
Capital assets⁽¹⁾								946,578		1,186,252		(20	%)
Total assets								1,183,925		1,391,602		(15	%)
Long-term debt								350,615		246,568		42	%


+ Calculation not meaningful

NOTES:
⁽¹⁾		Operating margin, operating margin percentage, EBITDAS, impairment losses, net of tax and operating cash flows are not recognized measures under IFRS, 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 both prior to and after consideration of how those activities are financed, the effect of foreign exchange, the effect of non-cash impairment losses and how the results are taxed in various jurisdictions. Similarly, capital assets, working capital, and net debt are not recognized measures under IFRS; however, management believes that these measures are useful as they provide an indication of the Company's investment in operating assets, liquidity and leverage.
	•	Operating margin is defined as revenue less operating expenses.
	•	Operating margin percentage is defined as revenue less operating expenses divided by revenue.
	•	EBITDAS is defined as earnings before finance expenses, income taxes, depreciation, amortization and share-based compensation and excludes other expenses (income).
	•	Impairment losses, net of tax are impairment losses net of the deferred tax effect thereon. The tax effect is determined based on the change in the temporary differences between the carrying amount of the impaired asset and its tax base, at the effective tax rate for the tax jurisdiction in which the assets resides.
	•	Operating cash flows are defined as cash flows from operating activities before changes in non-cash working capital.
	•	Capital assets are defined as property, equipment and intangible assets.
	•	The acquisition of capital assets includes the purchase of property, equipment and intangible assets, capital assets acquired through business acquisitions and non-cash capital asset additions.
	•	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 and excluding unamortized debt issue costs, less working capital as defined above.
⁽²⁾		Certain industry related terms used in this press release are defined or clarified as follows:
	•	Savanna reports its drilling rig utilization based on spud to release time for its operational drilling rigs and excludes moving, rig up and tear down time, even though revenue may be earned during this time. Source of Canadian industry average utilization figures: Canadian Association of Oilwell Drilling Contractors. Industry utilization figures are calculated in the same manner as the Company. To segregate industry utilization by rig type, industry totals by well depth range are used.
	•	Savanna reports its service rig utilization for its operational service rigs in North America based on standard hours of 3,650 per rig per year. Utilization for Savanna's service rigs in Australia is calculated based on standard hours of 8,760 per rig per year to reflect 24 hour operating conditions in that country. Reliable industry average utilization figures, specific to well servicing, are not available.

Segmented Results - Contract Drilling

The following is a summary of selected financial and operating information of the Company's contract drilling segment:

(Stated in thousands of dollars, except revenue per day)		Three Months Ended								Twelve Months Ended
December 31		2014			2013		Change			2014			2013		Change
Revenue	$	145,038		$	127,969		13	%	$	573,186		$	502,183		14	%
Operating expenses	$	102,337		$	92,452		11	%	$	408,855		$	348,504		17	%
Operating margin⁽¹⁾	$	42,701		$	35,517		20	%	$	164,331		$	153,679		7	%
Operating margin %		29	%		28	%				29	%		31	%
Operating days		6,076			5,321		14	%		23,997			21,469		12	%
Revenue per operating day	$	23,871		$	24,050		(1	%)	$	23,886		$	23,391		2	%
Spud to release days⁽¹⁾		5,036			4,616		9	%		20,656			18,629		11	%
Wells drilled		616			549		12	%		2,490			2,290		9	%
Meters drilled		1,322,093			1,088,310		21	%		4,843,646			4,325,496		12	%

FOURTH QUARTER RESULTS

Overall contract drilling revenue increased relative to Q4 2013, as a result of a 23% increase in operating days in the U.S. and a 7% increase in operating days in long-reach drilling in Canada. An appreciation in the value of the U.S. dollar relative to the Canadian dollar further increased revenues in U.S. drilling. The increase in revenue, combined with lower per day operating costs, resulted in a $7.3 million increase in operating margin relative to Q4 2013.

The following summarizes the operating results in the fourth quarter of 2014 and 2013 by type of rig or geographic area. Long-reach drilling in Canada includes the Company's telescoping double drilling rigs, TDS-3000™ drilling rigs and TDS-2200 drilling rigs.

(Stated in thousands of dollars)	Long-reach		Shallow
	Drilling		Drilling		Drilling		Drilling
Q4 2014	Canada		Canada		U.S.		Australia		Total
Revenue	77,625		7,033		47,650		12,730		145,038
Operating margin⁽¹⁾	25,757		230		13,709		3,005		42,701
Operating margin %⁽¹⁾	33	%	3	%	29	%	24	%	29	%

Revenue excluding cost recoveries	69,327		6,400		44,564		12,446		132,737
Operating margin⁽¹⁾	25,757		230		13,709		3,005		42,701
Operating margin %⁽¹⁾	37	%	4	%	31	%	24	%	32	%

Average number of rigs deployed	51		20		26		5		102
Utilization %⁽²⁾	58	%	13	%	82	%	31	%	54	%


+ Calculation not meaningful

(Stated in thousands of dollars)	Long-reach		Shallow
	Drilling		Drilling		Drilling		Drilling
Q4 2013	Canada		Canada		U.S.		Australia		Total
Revenue	71,899		5,338		37,111		13,621		127,969
Operating margin⁽¹⁾	23,199		135		8,769		3,414		35,517
Operating margin %⁽¹⁾	32	%	3	%	24	%	25	%	28	%

Revenue excluding cost recoveries	63,434		4,905		34,505		13,393		116,237
Operating margin⁽¹⁾	23,199		135		8,769		3,414		35,517
Operating margin %⁽¹⁾	37	%	3	%	25	%	25	%	31	%

Average number of rigs deployed	51		20		25		4		100
Utilization %⁽²⁾	54	%	11	%	71	%	67	%	50	%

ANNUAL RESULTS

Contract drilling revenue increased in 2014 relative to 2013, as a result of an increase in operating days in Canada, the U.S., and Australia, and an appreciation in the value of the U.S. dollar relative to the Canadian dollar. The increase in activity in Canada and Australia resulted in a net $10.8 million increase in operating margins despite an increase in operating costs in the U.S., which reduced operating margins there. Increased operating costs in the U.S. also resulted in lower overall operating margin percentages in Savanna's contract drilling segment compared to 2013.

(Stated in thousands of dollars)	Long-reach		Shallow
	Drilling		Drilling		Drilling		Drilling
YTD 2014	Canada		Canada		U.S.		Australia		Total
Revenue	303,676		33,602		176,513		59,395		573,186
Operating margin⁽¹⁾	100,596		7,152		42,818		13,765		164,331
Operating margin %⁽¹⁾	33	%	21	%	24	%	23	%	29	%

Revenue excluding cost recoveries	284,165		32,333		165,708		57,059		539,265
Operating margin⁽¹⁾	100,596		7,152		42,818		13,765		164,331
Operating margin %⁽¹⁾	35	%	22	%	26	%	24	%	30	%

Average number of rigs deployed	51		20		25		5		101
Utilization %⁽²⁾	59	%	16	%	81	%	58	%	56	%

The following summarizes the operating results in 2014 and 2013 by type of rig or geographic area.

(Stated in thousands of dollars)	Long-reach		Shallow
	Drilling		Drilling		Drilling		Drilling
YTD 2013	Canada		Canada		U.S.		Australia		Total
Revenue	257,926		35,018		157,068		52,171		502,183
Operating margin⁽¹⁾	85,795		9,050		45,932		12,902		153,679
Operating margin %⁽¹⁾	33	%	26	%	29	%	25	%	31	%

Revenue excluding cost recoveries	228,904		33,608		149,302		51,307		463,121
Operating margin⁽¹⁾	85,795		9,050		45,932		12,902		153,679
Operating margin %⁽¹⁾	37	%	27	%	31	%	25	%	33	%

Average number of rigs deployed	50		20		26		4		100
Utilization %⁽²⁾	51	%	18	%	76	%	64	%	51	%

Segmented Results - Oilfield Services

The following is a summary of selected financial and operating information of the Company's oilfield services segment:

(Stated in thousands of dollars, except revenue per hour)		Three Months Ended								Twelve Months Ended

December 31		2014			2013		Change			2014			2013		Change
Revenue	$	60,436		$	49,336		22	%	$	220,509		$	196,931		12	%
Operating expenses	$	45,981		$	38,241		20	%	$	169,936		$	149,312		14	%
Operating margin⁽¹⁾	$	14,455		$	11,095		30	%	$	50,573		$	47,619		6	%
Operating margin %		24	%		22	%				23	%		24	%
Operating hours - well servicing⁽¹⁾		45,044			44,059		2	%		173,910			163,884		6	%
Revenue per operating hour - well servicing	$	1,066		$	895		19	%	$	974		$	923		6	%

FOURTH QUARTER RESULTS

Revenue and operating margin for Savanna's oilfield services division increased in each operating area in Q4 2014 compared to Q4 2013 based on improved pricing and/or increased activity. Most of the operating margin increase in Q4 2014 relative to Q4 2013 came from Australia. Two of the five new service rigs and two of the three new flush-by units constructed for Australia commenced operations in the quarter, which resulted in a 146% increase in operating margin in Australia oilfield services in Q4 2014 relative to Q4 2013.

(Stated in thousands of dollars)
Q4 2014	Canada		U.S.		Australia		Total
Revenue	29,720		6,784		23,932		60,436
Operating margin⁽¹⁾	6,849		2,662		4,944		14,455
Operating margin %⁽¹⁾	23	%	39	%	21	%	24	%
Average number of rigs deployed - well servicing	73		18		7.7		99
Utilization % - well servicing⁽²⁾	42	%	50	%	44	%	49	%

The following summarizes the operating results by geographic area:


(Stated in thousands of dollars)
Q4 2013	Canada		U.S.		Australia		Total
Revenue	28,479		5,578		15,279		49,336
Operating margin⁽¹⁾	6,622		2,455		2,018		11,095
Operating margin %⁽¹⁾	23	%	44	%	13	%	22	%
Average number of rigs deployed - well servicing	83		13		4		100
Utilization % - well servicing⁽²⁾	39	%	65	%	74	%	44	%

ANNUAL RESULTS

Revenue for Savanna's oilfield services division increased in 2014 compared to 2013, as increases in both the U.S and Australia more than offset decreases in Canada. An increase in billable hours, based in part on more active rigs, in both the U.S. and Australia resulted in 52% and 59% increases in operating margin in each respective operating area in 2014 relative to 2013. The combined $8.7 million increase in operating margin from outside of Canada led to year-over-year operating margin improvements for the oilfield services division overall, despite operating margin decreases in Canada relative to 2013.

The following summarizes the operating results by geographic area:

(Stated in thousands of dollars)
YTD 2014	Canada		U.S.		Australia		Total
Revenue	113,582		28,096		78,831		220,509
Operating margin⁽¹⁾	25,852		12,477		12,244		50,573
Operating margin %⁽¹⁾	23	%	44	%	16	%	23	%
Average number of rigs deployed - well servicing	73		16		5		94
Utilization % - well servicing⁽²⁾	42	%	62	%	59	%	51	%


(Stated in thousands of dollars)
YTD 2013	Canada		U.S.		Australia		Total
Revenue	118,574		19,442		58,915		196,931
Operating margin⁽¹⁾	31,640		8,260		7,719		47,619
Operating margin %⁽¹⁾	27	%	42	%	13	%	24	%
Average number of rigs deployed - well servicing	84		11		4		99
Utilization % - well servicing⁽²⁾	37	%	70	%	67	%	42	%

Balance Sheet

Savanna's working capital at December 31, 2014, was $76 million and its net debt position was $274.6 million, an increase of $114.4 million, or 71%, from the Company's $160.2 million net debt position at December 31, 2013. The increase was due primarily to an increase in capital expenditures related to expansionary capital initiatives under the Company's 2014 capital program.

Savanna's total long-term debt outstanding on December 31, 2014, excluding unamortized debt issue costs, was $350.6 million, compared to $246.6 million outstanding at December 31, 2013. This total debt amount includes $11.2 million of unrealized foreign exchange on U.S. dollar denominated debt as well as $12.8 million in gross partnership debt, of which Savanna's proportionate share is approximately 50%.

Savanna has approximately $167.5 million drawn on Savanna's senior secured revolving credit facility of $250 million, as of the date of this release, including $17.1 million of unrealized foreign exchange on U.S. dollar denominated debt.

Dividend

In 2014, Savanna declared dividends totaling $32.2 million or $0.36 per share. Of the dividends declared, $8.1 million was reinvested in additional common shares through the Company's dividend reinvestment plan. Subsequent to the end of the year, Savanna's management and board reassessed the level of the Company's dividend in the context of prevailing market conditions. In this regard, Savanna reduced the Company's dividend from $0.03 per share per month ($0.36 per share per year), and declared a $0.03 per share quarterly dividend to be paid to shareholders of record on March 31, 2015. The Company also suspended its dividend reinvestment plan with respect to dividends paid after January 15, 2015.

Outlook

From an operations perspective, Savanna had a positive fourth quarter of 2014, with a 23% increase in EBITDAS year-over-year. Nearly all of its operating divisions achieved activity, revenue and operating margin increases relative to Q4 2013, despite industry headwinds. Overall for 2014, the Canadian long-reach drilling, U.S. well servicing, and Australian divisions translated revenue increases into considerable operating margin increases compared to 2013. These increases more than offset activity and operating margin decreases in the Company's Canadian shallow drilling, well servicing and rentals businesses, and higher operating costs in Savanna's U.S. drilling operation in the first half of the year, resulting in record annual operating margins and EBITDAS.

Looking forward, 2015 is going to be a challenging year for Savanna and the oilfield services industry as a whole. North American drilling and service rig activity to date in the first quarter of 2015, is down significantly compared to 2014. The first quarter of the year is typically the most active quarter for operations in Canada, which still constitutes the majority of Savanna's operations and revenue base. Based on dramatic declines in oil prices in the last six months, persisting low natural gas prices, and the uncertain duration of the current low price environment, oil and gas companies have reduced their spending levels for 2015, which will have a negative effect on the oilfield services industry and Savanna.

To help mitigate the effect of the low activity levels expected for the remainder of the year, Savanna took the first steps toward a significant restructuring in early 2015. Field locations are being consolidated and both the fixed cost component of its operating expenses and general and administrative expenses are being reduced. This restructuring is being completed with the aim of becoming more agile in the face of volatile oil and gas activity levels, by better aligning the Company's cost structure with the variable nature of the oilfield services industry. To date, overall fixed cost staff positions have been reduced by 30% across the Company. In addition, named executives and the Board of Directors have taken more than a 15% reduction in salaries and fees, and average salary and wage roll backs of 7% have been implemented for all other non-rig related employees. This restructuring, combined with salary and wage roll backs, will result in significant fixed cost reductions in 2015, relative to 2014. Savanna will continue to review its fixed cost structure and may make further adjustments as the market unfolds in 2015. Additionally, Savanna has begun to rationalize its legacy asset base and retired a number of assets in order to reduce the capital, repairs, maintenance and people required to manage equipment with little or no future marketability. The Company will continue to assess the long-term fit of various components of its capital asset base to unfolding market demand in terms of specific asset classes and geographies.

Savanna's 2014 rig-build initiatives added 12 rigs and, as important, 12 long-term contracts, eight of which began generating returns in the last five months. The three new Velox™ triple drilling rigs and new 1200 horse-power double drilling rig should help mitigate general activity declines on the rest of Savanna's North American drilling fleet. The other eight rig-builds, five workover rigs and three new flush-by units, were delivered to Australia. Although the Australian liquefied natural gas industry is not immune to global commodity price pressures, Savanna's take or pay contract status on the majority of its rigs in Australia should also mitigate the impact of activity reductions in 2015. The four new-build rigs yet to commence operations are all expected to be operating in Q2 2015. Including revenue days on the 12 new-builds above, contracted through 2015 and beyond, Savanna has over 9,000 take or pay contracted revenue days on its drilling and well servicing fleets in 2015 plus 13 long-reach drilling rigs currently under term contracts in Canada. These contract days will help mitigate general activity declines on the rest of Savanna's drilling and service rig fleets.

Cautionary Statement Regarding Forward-Looking Information and Statements

Certain statements and information contained in this press release including statements related to the Company's strategic or restructuring initiatives, the expected timing for the commencement of operations of rigs currently under construction, the expectation of significant fixed cost reductions in 2015 relative to 2014, expectations of activity levels for Savanna in 2015, the expectation of uncertain oil and gas industry activity in North America in 2015 and into 2016 and its effect on the oilfield services industry and Savanna, the expectation that the Company's newly built rigs and contracted days on its drilling and well servicing fleets should help mitigate general activity declines on the rest of its drilling and service rig fleets, the expectation that the Company's take or pay contract status on the majority of its rigs in Australia should also mitigate the impact of activity reductions in 2015, 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 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 expectation of significant fixed cost reductions in 2015 relative to 2014 is premised on the reduction in fixed cost positions and salary and wage roll-backs implemented to date in 2015. The Company's expectations of activity levels for Savanna in 2015, its expectation of uncertain oil and gas industry activity in North America in 2015 and into 2016 and its effect on the oilfield services industry and Savanna, the expectation that the Company's newly built rigs and contracted days on its drilling and well servicing fleets should help mitigate general activity declines on the rest of its drilling and service rig fleets, and its expectation that the Company's take or pay contract status on the majority of its rigs in Australia should also mitigate the impact of activity reductions in 2015 are premised on industry estimates, actual results experienced to date in 2015, customer contracts and commitments, the Company's expectations for its customers' capital budgets, the status of current negotiations with its customers, and the number of contracted rigs deployed into Australia and North America in the last five months. 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, oilfield rentals and contract drilling; the effects of weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing, oilfield rentals 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.

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's management's discussion and analysis and audited consolidated financial statements for the year ended December 31, 2014 are available on Savanna's website (www.savannaenergy.com) under the investor relations section and have also been filed on SEDAR at www.sedar.com.

Savanna will host a conference call for analysts, investors and interested parties on Thursday, March 5, 2015 at 10:00 a.m. Mountain Time (12:00 Noon Eastern Time) to discuss the Company's fourth quarter and year-end results. The call will be hosted by Dwayne LaMontagne, Savanna's Interim President and Chief Executive Officer and Darcy Draudson, Executive Vice President, Finance and Chief Financial Officer.

If you wish to participate in this conference call, please call 1-888-892-3255 (please call 10 minutes ahead of time). A replay of the call will be available until March 13, 2015 by dialing 1-800-937-6305 and entering passcode 342890.

Savanna is a leading North American and Australian contract drilling and oilfield services company providing a broad range of drilling, well servicing and related services with a focus on fit for purpose technologies and industry-leading aboriginal relationships.