IROC Energy Services Corp. announces fourth quarter and year end 2012 results

CALGARY, March 20, 2013 /CNW/ - IROC Energy Services Corp. ("IROC" or the "Corporation") (TSXV: "ISC") is pleased to present a summary of its operating and financial results for the three and twelve months ended December 31, 2012. For a complete copy of IROC's interim financial statements and management's discussion and analysis ("MD&A") please visit www.sedar.com.

HIGHLIGHTS

Following a robust industry environment in 2011, lower commodity prices caused exploration and production companies to curtail their capital spending in 2012, negatively impacting industry activity levels in 2012.  In spite of the macro industry challenges, IROC was able to continue to execute its growth plans resulting in a number of positive achievements in 2012:

• Achieved record annual revenue and EBITDAS of $101.2 million and $30.3 million, respectively, representing a 18% and 13% respective increase in revenue and EBITDAS over fiscal 2011;
  
  
• Invested $37.0 million in capital expenditures, increasing IROC's service rig fleet by 9 rigs and added $10.1 million in new rental assets.  Continued demand for IROC's services prompted the board of directors to approve a $25.2 million capital expenditure budget for 2013, which will include 6 new service rigs, $8.0 million in new rental assets and $2.5 million for miscellaneous equipment and maintenance capital; and
  
  
• Returned a total of $5.0 million to investors via dividends, with a further $1.5 million paid in January 2013.

The positive results achieved in 2012 were a direct result of IROC's $69.9 million investment in the enhancement and expansion of the Corporation's operating assets over the last two years.  Strong customer demand for IROC's service rigs allowed the Corporation to expand its service rig fleet by 9 rigs in 2012 leaving IROC with a fleet of 50 free standing service rigs as at December 31, 2012.  Revenue also benefited from IROC's expansion of its rental business during 2011 and 2012, resulting in a 10% increase in rental revenue for 2012 versus 2011.  IROC continues to invest in opportunities to expand its service rig fleet as well as its inventory of specialized high pressure completions rental equipment.

Although revenue increased $15.4 million year over year, increased labor and fuel costs combined with competitive pricing resulted in margin compression during the year relative to 2011.  Gross margin as a percentage of revenue declined 2% to 39% for the year ended 2012 versus the 41% margin achieved in 2011.

This lower gross margin contribution was partially offset by lower general and administrative costs as a percentage of revenue which was 9% in 2012 versus 10% in 2011, resulting in EBITDAS of $30.3 million (30% of revenue) versus $26.9 million (31% of revenue) in 2011.  The lower general and administrative costs as a percentage of revenue is due to greater economies of scale being achieved by the expansion of IROC's business operations.

The increased EBITDAS was partially offset by higher depreciation costs resulting in a nominal increase in net income from continuing operations to $13.5 million during 2012 versus $13.4 million in 2011.  Depreciation expense increased $3.2 million to $10.6 million in 2012 as a result of the capital investments made during 2011 and 2012.

IROC's larger average fleet size of 47.8 rigs in the fourth quarter of 2012 allowed the Corporation to generate $27.1 million in revenue, exceeding the $26.7 million in revenue generated in the fourth quarter of 2011.  However, lower fleet utilization combined with competitive pricing pressures and increased field operating costs resulted in gross margin declining to $10.3 million (38% of revenue) during the quarter from $10.8 million (41% of revenue) in the fourth quarter of 2011.  Lower than expected operating performance and utilization of the Corporation's three coiled tubing units also negatively impacted the Corporation's operating results during the quarter.

The lower gross margin results in the quarter were partially offset by a $0.2 million decline in general and administrative expenses resulting in EBITDAS of $8.3 million (31% of revenue) in the quarter versus $8.6 million (32% of revenue) in fourth quarter of 2011.  The decline in gross margin combined with increased depreciation expense caused net income to decline to $3.6 million in the quarter from the $4.8 million generated in the fourth quarter of 2011.

As a result of the strength and success of IROC's business operations, IROC was presented with a proposed business combination by Western Energy Services Corp. ("Western") subsequent to year end.  On February 21, 2013 IROC entered into an arrangement agreement with Western whereby Western would acquire IROC's outstanding shares in exchange for a combination of cash and Western shares.  The Western offer equated to an implied value of $3.10 per IROC share which was a 32% premium to IROC's 20-day volume weighted average trading price of $2.35 per share as at February 21, 2013.  Additional details of the transaction are contained in IROC's February 22, 2013 press release as well as the subsequent event discussion in the Corporation's MD&A and December 31, 2012 audited financial statements.

RESULTS OF OPERATIONS

		Three months ended December 31		Year ended December 31
($ Thousands, except per share amounts)		2012	2011	2012	2011
Revenue		$ 27,117	$ 26,724	$ 101,154	$ 85,740
Operating expenses		$ 16,840	$ 15,887	$ 62,026	$ 50,456
Gross margin ^(1)		$ 10,277	$10,837	$ 39,128	$ 35,284
	Gross margin %	38%	41%	39%	41%
General and administrative expenses		$ 1,979	$2,194	$ 8,816	$ 8,370
EBITDAS ^(1)		$ 8,298	$ 8,643	$ 30,312	$ 26,914
	EBITDAS %	31%	32%	30%	31%
Depreciation and amortization		$ 2,983	$ 2,112	$ 10,603	$ 7,397
Share-based compensation		$ 200	$ 167	$ 724	$ 604
Other (income) expense		$ (152)	$ (9)	$ (218)	$ 11
Operating income		$ 5,267	$ 6,373	$ 19,203	$ 18,902
Finance costs		$ 242	$ 163	$ 785	$ 803
Income before income tax		$ 5,025	$ 6,210	$ 18,418	$ 18,099
Provision for current and deferred income taxes		$ 1,435	$ 1,432	$4,917	$ 4,720
Net income from continuing operations		$ 3,590	$ 4,778	$ 13,501	$ 13,379
Loss from discontinued operations		$ (70)	$ (8)	$ (70)	$ (1,192)
Net income		$ 3,520	$ 4,770	$ 13,431	$ 12,187
Net income per share from continuing operations:
	Basic Diluted	$ 0.07 $ 0.07	$ 0.10       $ 0.10	$ 0.27       $ 0.26	$ 0.28       $ 0.27
Net income per share:
	Basic	$ 0.07	$ 0.10	$ 0.27	$ 0.25
	Basic	$ 0.07	$ 0.10	$ 0.26	$ 0.25
^(1)     See non-IFRS measures.

IROC is an oilfield services company operating in the Western Canadian Sedimentary Basin ("WCSB").  The Corporation's business is conducted through two segments: Drilling and Production Services and Rental Services.  The discussion that follows provides an overview of IROC's financial and business performance in these two segments as well as a discussion on the other general business expenditures incurred by the Corporation.

FINANCIAL OVERVIEW - YEAR ENDED DECEMBER 31, 2012 VERSUS 2011

Drilling and Production Services Operations

		Year ended December 31
($ Thousands)		2012	2011	Variance	% Change
Revenue		$ 84,583	$ 70,589	$ 13,994	20%
Operating expenses ^(1)		$ 54,612	$ 44,110	$ 10,502	24%
Gross margin ^(2)		$ 29,971	$ 26,479	$ 3,492	13%
	Gross margin %	35%	38%	(3%)	(8%)
Service rig utilization % ^(3)		61%	65%	(4%)	(6%)
Average number of service rigs during period		45.4	37.3	8.1	22%
Service rigs at end of period		50	41	9	22%

^(1)	Operating expenses includes $662 ($537 in 2011) of intersegment costs charged to the Drilling and Production Services division from the Rental Services division.
^(2)	See non-IFRS measures.
^(3)	IROC calculates utilization based on full utilization being 10 hours per day, 365 days per year, which is consistent with the Canadian Association of Drilling Contractors ("CAODC") standard.

IROC's Drilling and Production Services segment consists of the Corporation's conventional service rig division, Eagle Well Servicing ("Eagle"), as well as the Corporation's coiled tubing division, Helix Coil Services ("Helix").

As at December 31, 2012, IROC owned a fleet of 50 free standing service rigs in its Eagle division which have enjoyed strong customer acceptance due to their use of industry leading technologies and reliable operational performance.  The average age of Eagle's service rig fleet is approximately 4.5 years, which is one of the newest service rig fleets in the WCSB.  The recent additions to Eagle's rig fleet has allowed the rigs to benefit from technology enhancements that have provided opportunities for Eagle to reduce well servicing times resulting in cost savings for Eagle's customers.  Eagle's rig designs also incorporate lightweight materials where possible to reduce rig weights which allow for greater rig mobility during seasonal road ban periods.

In response to strong customer demand for Eagle's service rigs, IROC added 9 service rigs to its fleet in 2012.  The rig additions consisted of 3 singles, 3 doubles, and 3 slant rigs.  Eagle's double service rigs have greater depth and weight capacities than its single rigs allowing the double rigs to operate in the deeper and more challenging well conditions associated with the growing shale gas and oil resource plays in the WCSB.  The single rigs are generally utilized to service conventional oil and natural gas wells located in central Alberta and Saskatchewan.  Eagle's slant rigs are specially designed to service heavy oil wells located in northern Alberta and Saskatchewan.

In addition to the benefits received from Eagle's newer rig fleet, the industry trend towards oil related exploration and development activity continues to benefit the Corporation as service rigs are typically utilized more for oil well completions and workovers versus natural gas wells.  Oil wells also generally require more frequent workover services than natural gas wells.  Over 90% of Eagle's service rig activity is levered to the completion, workover and abandonment of oil wells.

A significant portion of the increase in oil related activities is focused in heavy oil resource plays, which is beneficial to IROC's slant rigs.  These rigs are specially designed to service slant wells which are prevalent in heavy oil resource plays. In addition to the slant design of the rigs, they also utilize integrated rod X-celerators which allows the rig to handle both jointed pipe as well as continuous rod pipe which is common on heavy oil wells.  The dual purpose functionality of these rigs provides IROC's customers with a more efficient and cost effective service rig to complete their well workover requirements.

In addition to IROC's service rig fleet, IROC also has three coiled tubing units operating under the Corporation's Helix division.  The Helix coiled tubing units were introduced during the second half of 2011 and are primarily used for horizontal well completions and workovers.  During the industry's period of high completions activity, the units enjoyed strong utilization in 2011 and early 2012, however, coil utilization declined in the second half of 2012 due to lower industry horizontal well completions activity levels.  The Helix division contributed $5.6 million in revenue during 2012 versus $4.4 million in 2011.

As a result of the Eagle service rig additions, combined with a full year contribution from Helix's coiled tubing units, revenue in the Drilling and Production Services segment increased to $84.6 million in 2012 versus $70.6 million in 2011.  Revenue also benefitted from a 5% increase in Eagle's average service rig revenue rate in 2012 versus 2011.  This average rate increase was primarily due to the expansion of Eagle's double and slant rig fleet which receive higher rates associated with the more technically challenging work these rigs perform relative to Eagle's smaller single rigs.

The revenue increase resulted in a $3.5 million increase in gross margin in IROC's Drilling and Production Services segment to $30.0 million for 2012 from $26.5 million in 2011.  Partially offsetting the positive impact to gross margin from increased revenue were higher operating costs which caused gross margin as a percentage of revenue to decline to 35% for the year in comparison to the 38% gross margin percentage achieved in 2011.  The primary contributing factors to higher operating costs were increased labor costs as well as higher fixed operating costs for the coiled tubing units.

Labor costs increased due to wage increases implemented in late 2011 combined with recruitment and training related costs for new staff.  The ability to hire and retain sufficient skilled labor continues to be one of the primary challenges facing the oilfield service industry resulting in high turnover and increased training and wage costs to attract and retain skilled staff.

Operating costs for the Helix coiled tubing units increased due to the impact of full year operations as well as fixed salary costs for the coiled tubing staff.  Unlike the compensation structure for the Eagle service rig staff which is fully variable, coiled tubing staff are compensated through a combination of a fixed monthly salary and a variable field rate when the units work.  Due to the slowdown in activity during the second half of 2012, the fixed salary costs negatively impacted gross margins for the coiled tubing units.  Activity for the Corporation's coiled tubing units has increased in the first quarter of 2013 in conjunction with increased completions activities of IROC's customers.

Rental Services Operations

		Year ended December 31
($ Thousands)		2012	2011	Variance	% Change
Revenue ^(1)		$ 17,233	$ 15,688	$ 1,545	10%
Operating expenses		$ 8,076	$ 6,883	$ 1,193	17%
Gross margin ^(2)		$ 9,157	$ 8,805	$ 352	4%
	Gross margin %	53%	56%	(3%)	(5%)
Capital cost of rental equipment at end of period		$ 28,456	$ 19,729	$ 8,727	44%

^(1)	Revenue includes $662 ($537 - 2011) of intersegment revenue charged to the Drilling and Production Services division from the Rental Services division.
^(2)	See non-IFRS measures.

IROC's rental services segment consists of the Aero Rental Services division ("Aero").  Aero specializes in the rental and service of high pressure equipment utilized in drilling and completions activities.  Aero's fleet of rental equipment primarily consists of: blow out prevention devices ("BOPs"); well fracturing manifolds and pressure control devices; and tubular handling devices.  This equipment is ideally suited for well completions in the emerging shale and tight natural gas and oil resource plays in the WCSB.  Development of these resource plays requires intensive well fracturing services at high pressures which require the use of various types of equipment provided by Aero.

Revenue from the rental services segment increased to $17.2 million from $15.7 million in 2011.  This increase is primarily derived from IROC's $10.1 million investment in additional rental equipment in 2012, combined with the $4.0 million investment in rental equipment in the second half of 2011.

While revenue increased 10% year over year, the mix of equipment being rented combined with increased fixed operating costs caused gross margin as a percentage of revenue to decline to 53% in 2012 versus 56% in 2011.  Competitive pricing pressures also exist in the market, however, management believes that the high quality of Aero's rental equipment combined with Aero's strong customer service will allow the division to mitigate some of the impact of competitive pricing pressures.  IROC also continues to evaluate new technology and service additions to Aero's service offerings which will help to grow Aero's market share and differentiate itself from its competitors.

General and Administrative Expenses

As a result of the Corporation's growth in 2012, additional investment in general and administrative support infrastructure was required resulting in general and administrative expenses increasing to $8.8 million in 2012 versus $8.4 million in 2011.  However, general and administrative costs declined as a percentage of revenue to 9% from 10% in 2011.

Depreciation and Amortization Expense

Depreciation expense increased to $10.6 million in 2012 versus $7.4 million in 2011.  This increase is due to IROC's $37.0 million investment in capital expenditures in 2012, combined with the effect of the full year depreciation related to the $22.1 million capital asset expenditures made in the last six months of 2011.

Share-based Compensation Expense

Share-based compensation expense increased $0.1 million to $0.7 million during 2012 as a result of additional stock options and restricted share units ("RSUs") issued in 2012 under the Corporation's stock option and RSU plans.  As at December 31, 2012 the Corporation had 1,725,701 stock options and 471,838 RSUs outstanding.

Other (income) Expense

Other income is primarily comprised of a $0.2 million gain on the sale of older obsolete equipment in 2012 for proceeds of $0.8 million.  Consistent with IROC's goal of maintaining a high quality operating fleet, management routinely reviews its operating fleet and determines opportunities to divest of older, less efficient equipment and reinvest the proceeds in new equipment.

Finance Costs

Interest and financing costs were consistent year over year at $0.8M.  The Corporation utilized a combination of operating cash flows and debt facilities to fund its $37.0 million in capital expenditures during 2012.  The average debt balance outstanding during 2012 was $19.3 million versus $14.5 million in 2011.  The impact to interest cost of this higher average debt balance was offset by lower average interest rates during 2012 relative to 2011.

Income Taxes

Income tax expense increased to $4.9 million versus $4.7 million in 2011.  The increase was primarily due to the Corporation's higher pre-tax income during the year.  IROC's effective tax rate was 26.7% versus the combined federal and Alberta provincial statutory rate of 25.0%.  The higher effective rate was related to the impact of non-deductible expenses for tax purposes such as stock-based compensation expense.

Discontinued Operations

On July 14, 2011 IROC sold the business assets of its Canada Tech division ("Canada Tech").  Subsequent to year end IROC settled, on a no fault basis, an outstanding lawsuit with the former owners of Canada Tech for $0.2 million.  The cost of this settlement has been accrued in the Corporation's December 31, 2012 year end results.  This settlement combined with the final settlement of various other outstanding accounts receivable and payable amounts resulted in the Corporation incurring a net after-tax loss of $0.1 million from discontinued operations for fiscal 2012.

FINANCIAL OVERVIEW - THREE MONTHS ENDED DECEMBER 31, 2012 VERSUS 2011

Drilling and Production Services Operations

		Three months ended December 31
($ Thousands)		2012	2011	Variance	% Change
Revenue		$ 22,714	$ 22,317	$ 397	2%
Operating expenses ^(1)		$ 14,948	$ 14,133	$ 815	6%
Gross margin ^(2)		$ 7,766	$ 8,184	$ (418)	(5%)
	Gross margin %	34%	37%	(3%)	(8%)
Service rig utilization % ^(3)		63%	69%	(6%)	(9%)
Average number of service rigs during period		47.8	39.6	8.2	21%
Service rigs at end of period		50	41	9	22%

^(1)	Operating expenses includes $137 ($258 - 2011) of intersegment costs charged to the Drilling and Production Services division from the Rental Services division.
^(2)	See non-IFRS measures.
^(3)	IROC calculates utilization based on full utilization being 10 hours per day, 365 days per year, which is consistent with the Canadian Association of Drilling Contractors ("CAODC") standard.

Consistent with the increase in IROC's full year results, IROC's larger fleet size allowed the Corporation to increase revenue to $22.7 million in the quarter versus $22.3 million in the fourth quarter of 2011.  The positive contribution from the Corporation's service rigs was partially offset by lower activity in the Corporation's Helix division.  The Helix division generated $1.0 million in revenue during the quarter versus $2.7 million in the fourth quarter of 2011.

Increased operating costs associated with the Corporation's larger fleet size and higher wage costs combined with high fixed operating costs in the Helix division caused gross margin to decline to $7.7 million (34% of revenue) in the quarter from $8.2 million (37% of revenue) in the fourth quarter of 2011.  Lower industry activity levels have not provided IROC an opportunity to increase revenue rates to offset increasing wage costs, thus margins have been negatively impacted.

Rental Services Operations

		Three months ended December 31
($ Thousands)		2012	2011	Variance	% Change
Revenue ^(1)		$ 4,540	$ 4,665	$   (125)	(2%)
Operating expenses		$ 2,029	$ 2,012	$ 17	1%
Gross margin ^(2)		$ 2,511	$ 2,653	$ (142)	(4%)
	Gross margin %	56%	57%	(1%)	(2%)
Capital cost of rental equipment at end of period		$ 28,456	$ 19,729	$ 8,727	44%

^(1)	Revenue includes $137 ($258 - 2011) of intersegment revenue charged to the Drilling and Production Services division from the Rental Services division.
^(2)	See non-IFRS measures.

Lower industry activity levels for well completions negatively impacted IROC's rental services operations during the quarter resulting in flat quarter over quarter revenue results of $4.6 million in spite having an additional $2.0 million in rental assets available during the quarter.

In spite of the recent industry slowdown in completions activities, IROC continues to experience strong demand for its high pressure well fracturing rental equipment.  The demand for this equipment is mitigating the decline in demand for other rental equipment in the Corporation's fleet.  IROC continues to expand its high pressure rental equipment fleet in an effort to differentiate itself from its competitors and capture a greater share of this market segment.

Operating costs for IROC's rental services operation are relatively fixed, thus the decline in rental revenue during the quarter caused gross margin to decline to $2.6 million (56% of revenue) from $2.7 million (57% of revenue) generated in the fourth quarter of 2011.

General and Administrative Expenses

General and administrative expenses decreased to $2.0 million in the fourth quarter of 2012 as compared to $2.2 million in the fourth quarter of 2011.  As a percentage of revenue, general and administrative expenses were 7% of revenue in the quarter, which is slightly lower than the full year average of 9%.  Higher professional fees were incurred in prior quarters resulting in higher general and administrative costs relative to the fourth quarter.

Depreciation and Amortization Expense

Consistent with the increase seen in prior quarters during 2012, depreciation expense increased to $3.0 million in the fourth quarter versus $2.1 million in the fourth quarter of 2011.  This increase is due to IROC's investment in capital expenditures in 2012.

Share-based Compensation Expense

No significant employee stock option or RSU grants were made during the quarter.  As a result, share-based compensation expense was consistent quarter over quarter at $0.2 million.

Other (income) Expense

Other income in the quarter related to $0.2 million in gains recorded from the sale of older obsolete equipment for proceeds of $0.3 million.  Similar sales of this magnitude did not occur in the comparative quarter in 2011.

Finance Costs

The Corporation borrowed $2.6 million on its debt facilities in the quarter to fund its fourth quarter capital expenditures.  This increased borrowing resulted in a small increase in finance costs during the quarter.  The Corporation continues to benefit from low interest rates, which have mitigated increases in finance costs despite increased debt borrowings during the year to fund the Corporations business expansion.

Income Taxes

Income tax expense was $1.4 million for the quarter which equates to a 28.6% effective tax rate versus the combined federal and provincial corporate tax rate of 25%.  Consistent with the full year results, the higher effective tax rate primarily related to non-deductible expenses for tax purposes.  These non-deductible expense items had a greater impact on the Corporation's fourth quarter effective tax rate given the lower quarterly pre-tax income relative to the Corporation's full year pre-tax income.

In 2011 the federal government amended certain tax legislation related to the deferral of income from partnership structures.  This amendment has resulted in the acceleration of previously deferred partnership income into income over a 5 year period.  As a result of the acceleration of a portion of IROC's previously deferred income, the majority of IROC's non-capital loss tax pools were utilized during the year to offset this additional income inclusion resulting in the Corporation becoming cash taxable during the quarter.

OUTLOOK

The steady execution of IROC's organic growth plans over the last two years has allowed IROC to achieve record revenue and EBITDAS results for 2012 solidifying IROC as a premier provider of well service rigs in the WCSB.  While the industry is currently faced with near-term uncertainty and challenges associated with lower natural gas and oil prices, management believes the long-term fundamentals remain strong for increased industry activity in the WCSB.

This cautious near-term outlook resulted in a slowdown in industry activity in the fourth quarter of 2012 and has continued into the first quarter of 2013.  However, the growth in IROC's rig fleet has placed the Corporation on track to exceed the total hours generated by IROC's service rigs in the first quarter of 2013 versus the first quarter of 2012.  Management believes that IROC's fleet of newer rigs in oil focused areas is helping to mitigate the impact to IROC from the current slowdown in industry activity.  IROC's continued expansion of its rig fleet during this period of slower industry activity will also put IROC in a position to meet increased customer demand as industry activity levels improve.

IROC's rental operations continues to expand its inventory of specialized high pressure equipment that is ideally suited for the growing shale gas development in northern Alberta and British Columbia.  Management expects activity in these resource development areas to increase in the second half of 2013 and into 2014 as a result of the recent foreign investments made in Canadian exploration and production companies operating in these areas.  In addition, positive discussions surrounding potential LNG export terminals further enhances the long-term development of these resource development areas.  Development of these resources are well fracturing intensive and require the specialized high pressure rental equipment that the Aero Rental division offers.

The near-term slowdown in industry activity will continue to produce margin pressures as competitors look for opportunities to improve utilization through pricing declines.  In addition, despite the overall slowdown in industry activity, the industry still faces challenges in attracting and retaining sufficient qualified employees which is causing higher wage costs.

In spite of the near-term industry challenges, management believes that IROC is in a strong position to successfully manage through the current industry cycle and prosper when industry activity increases.  The proposed business combination with Western, if completed, also provides further stability and growth opportunities for IROC and its shareholders as the business combination will create a premier drilling, well service and oilfield rental company which should provide opportunities to break into new markets and access customers through the more comprehensive service offering that the combined company will provide and offer.

RISKS AND UNCERTAINTIES

Certain activities of the Corporation are affected by factors that are beyond its control or influence.  Additional risks and uncertainties that management may be unaware of, or that they determine to be immaterial may also become important factors which affect the Corporation.  Prior to making any investment decision regarding IROC, investors should carefully consider, among other things, the risk factors set forth in the Corporation's December 31, 2012 management discussion and analysis as well as the Corporation's most recent Annual Information Form both of which are available under the Corporation's profile at www.sedar.com or by contacting the Corporation.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION AND STATEMENTS

Certain information contained in this news release contains forward looking information that is based upon IROC's current internal expectations, estimates, projections, assumptions and beliefs.  In some cases, words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur, are intended to identify forward looking information.  These statements are not guarantees of future performance and involve known and unknown risks and uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward looking information.  In addition, this news release may contain forward looking information attributed to third party industry sources.  By its nature, forward looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward looking information will not occur.  Such forward looking information in this news release speaks only as of the date of December 31, 2012 or as of the date specified herein.

Forward looking information in this news release includes, but is not limited to, statements with respect to:

• adequacy of capital resources required to finance IROC's operations and the capital budget;
• the business objectives of IROC;
• the intended expansion of rental inventory and other capital expenditures;
• results of operations and the performance of IROC;
• the completion and timing of the construction of IROC's new service rigs; and
• benefits and opportunities related to the proposed business combination with Western.

With respect to the forward looking information contained in this news release, IROC has made assumptions regarding, among other things:

• IROC's relationships with its key customers;
• economic conditions that influence the demand of IROC's customers for equipment and services;
• receipt of necessary regulatory approvals;
• IROC's cash flow from sales; and
• the availability of debt financing through the corporation's credit facilities.

Although IROC believes that the expectations reflected in the forward looking information are reasonable, there can be no assurance that such expectations will prove to be correct.  IROC cannot guarantee future results, levels of activity, performance or achievements.  Consequently, there is no representation by IROC that actual results achieved will be the same, in whole or in part, as those set out in the forward looking information.  Some of the risks and other factors, some of which are beyond IROC's control, which could cause results to differ materially from those expressed in the forward looking information contained in this news release include, but are not limited to:

• supply and demand for oilfield services;
• competition for, and access to, among other things, capital and skilled personnel;
• incorrect assessments of the value of future acquisitions;
• fluctuations in the market for oil and natural gas and related products and services;
• liabilities and risks, including environmental liabilities and risk, inherent in oil and natural gas operations;
• fluctuations in foreign exchange or interest rates;
• political and economic conditions;
• failure of counterparties to perform on contracts;
• regional competition;
• IROC's ability to attract and retain customers;
• IROC's ability to attract and retain qualified employees;
• amounts retained by IROC for capital expenditures;
• volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oil and natural gas services generally;
• stock market volatility and market valuations;
• uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed;
• fixed costs in relation to variable revenue streams;
• the presence of heavy competition in the industries in which IROC currently operates;
• general economic conditions in Canada and globally;
• failure to realize anticipated benefits of future acquisitions;
• The ability of IROC to be successful in building and growing its new coil tubing business, Helix Coil Services
• the availability of capital on acceptable terms; and
• the other factors disclosed under "Risks" in IROC's management discussion and analysis and "Risk Factors" in IROC's  Annual Information Form ("AIF").

Readers are cautioned that the foregoing list of factors is not exhaustive.  All forward looking information contained in this news release is expressly qualified by this cautionary statement.  IROC disclaims any intent or obligation to update publicly any forward looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

NON-IFRS MEASURES

The financial statements have been prepared in accordance with IFRS.  Certain supplementary information and measures not recognized under IFRS are provided where management believes they assist the reader in understanding IROC's results.  The following is a reconciliation to the Corporation's non-IFRS measures:

		Three months ended December 31		Year ended December 31
($ Thousands)		2012	2011	2012	2011
^(1)     EBITDAS:
Net Income from continuing operations		$ 3,590	$ 4,778	$ 13,501	$ 13,379
Add:
	Depreciation	$ 2,983	$ 2,112	$ 10,603	$ 7,397
	Gain on sale of equipment	$ (150)	$ (8)	$ (224)	$ (19)
	Stock based compensation	$ 200	$ 167	$ 724	$ 604
	Interest and financing costs	$ 242	$ 163	$ 785	$ 803
	Income tax expense	$ 1,435	$ 1,432	$ 4,917	$ 4,720
	Loss (gain) on foreign exchange	$ (2)	$ (1)	$ 6	$ 30
EBITDAS		$ 8,298	$ 8,643	$ 30,312	$ 26,914
^(2)     Gross Margin:
Revenue		$ 27,117	$ 26,724	$ 101,154	$ 85,740
Operating expenses		$ 16,840	$ 15,887	$ 62,026	$ 50,456
Gross margin		$ 10,277	$ 10,837	$ 39, 128	$ 35,284

^(1)

EBITDAS is defined as earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, foreign exchange gains and losses, goodwill impairment, note receivable impairment, and gains or losses on disposal of property and equipment.  EBITDAS is not recognized measures under IFRS.  The Corporation believes that EBITDAS is provided as a measure of operating performance without reference to financing decisions, income tax impacts and non-cash expenses, which are not controlled at the operating management level.  Accordingly, the Corporation believes EBITDAS is a useful measure for prospective investors in evaluating the financial performance of the Corporation, and specifically, the ability of the Corporation to service the interest on its indebtedness.  Investors should be cautioned that EBITDAS should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Corporation's performance.  IROC's method of calculating EBITDAS may differ from those of other companies, and accordingly, EBITDAS may not be directly comparable to measures used by other companies. EBITDAS % is calculated as EBITDAS divided by revenue.

^(2)

Gross margin is defined as revenue less operating expenses.  Gross margin % is defined as gross margin divided by revenue.  The Company believes that gross margin and gross margin % are useful measures which provide an indicator of the Corporation's fundamental ability to make money on the services it sells.  The Corporation believes the relationship between revenues and costs expressed by the gross margin % is a useful measure when compared between different financial periods as it demonstrates the trending relationship between revenues, costs and margins.  Gross margin and gross margin % are not recognized measures of IFRS and do not have any standardized meaning prescribed by IFRS.  IROC's method of calculating gross margin and gross margin % may differ from those of other companies, and accordingly, may not be directly comparable to measures used by other companies.

I

	IROC ENERGY SERVICES CORP. CONSOLIDATED BALANCE SHEETS
Stated in thousands of Canadian dollars
		December 31, 2012	December 31, 2011
Assets
Current
	Cash	$            29	$           229
	Accounts receivable	17,523	18,746
	Inventory	668	493
	Prepaid expenses and deposits	775	390
	Note receivable	-	719
		18,995	20,577
Intangible assets		288	390
Property and equipment		117,620	91,641
		$       136,903	$       112,608
Liabilities
Current
	Accounts payable and accrued liabilities	$          9,311	$        14,742
	Dividend payable	1,518	1,254
	Income taxes payable	69	-
	Loans and borrowings	645	2,262
		11,543	18,258
Loans and borrowings		25,782	8,471
Deferred tax liabilities		13,900	9,076
		51,225	35,805
Shareholders' equity:
	Common share capital	59,826	59,530
	Contributed surplus	5,587	5,146
	Retained earnings	20,265	12,127
		85,678	76,803
		$       136,903	$       112,608

IROC ENERGY SERVICES CORP. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Stated in thousands of Canadian dollars
Years ended December 31, 2012 and 2011
				2012	2011
Revenue				$    101,154	$   85,740
Expenses
Cost of services				72,310	57,636
Cost of administration				9,859	9,191
Interest and financing costs				785	803
Other				(218)	11
				82,736	67,641
Net income from continuing operations before income taxes				18,418	18,099
Income taxes
Current				69	-
Deferred				4,848	4,720
				4,917	4,720
Net income from continuing operations				13,501	13,379
Loss from discontinued operations				(70)	(1,192)
Net income and comprehensive income				$     13,431	$     12,187
Earnings per share from continuing operations
Basic				$    0.27	$     0.28
Diluted				$    0.26	$     0.27
Earnings per share
Basic				$    0.27	$     0.25
Diluted				$    0.26	$     0.25
Weighted average number of shares outstanding
Basic				50,310,985	48,034,018
Diluted				51,534,810	49,136,072

I

ROC ENERGY SERVICES CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
Stated in thousands of Canadian dollars
Years ended December 31, 2012 and 2011
					2012	2011
Operating activities:
	Net income from continuing operations				$       13,501	$      13,379
	Adjustments for:
		Depreciation and amortization			10,603	7,397
		Deferred income taxes			4,848	4,720
		Interest and financing costs expense			785	803
		Stock-based compensation expense			724	604
		Gain on disposal of property and equipment			(224)	(19)
					30,237	26,884
	Changes in non-cash working capital balances				(2,466)	(3,635)
Operating cash flow from continuing operations					27,771	23,249
Operating cash flow from discontinued operations					393	1,738
Investing activities:
		Purchase of property and equipment			(37,019)	(32,861)
		Proceeds on disposal of property and equipment			764	328
	Change in non-cash working capital balances				(2,086)	3,797
Investing cash flow used in continuing operations					(38,341)	(28,736)
Investing cash flow from discontinued operations					-	4,400
Financing activities:
		Bank loan advances (repayments)			15,667	(9,082)
		Interest and financing costs amounts paid			(758)	(769)
		Payment of dividends			(5,029)	-
		Shares repurchased for cancellation			-	(320)
		Public offering of common shares			-	9,198
		Exercise of stock options			73	425
		Cash paid on settlement of stock options			(61)	(159)
	Change in non-cash working capital balances				85	(16)
Financing cash flow from (used in) continuing operations					9,977	(723)
Increase (decrease) in cash during the year:
	Continuing operations				(593)	(6,210)
	Discontinued operations				393	6,138
					(200)	(72)
Cash, beginning of year					229	301
Cash, end of year					$          29	$      229

CONFERENCE CALL AND WEBCAST

IROC will conduct a conference call on Thursday March 21, 2013 at 9:00 a.m. MST (11:00 a.m. EST).  Thomas Alford, President and CEO, and Brian Peters, CFO, will both be presenting during the call.

To access the conference call, contact the conference call operator at [phone] (North America) or [phone] (Toronto and outside North America) approximately 10 minutes prior to the call and request the "IROC Energy Services Corp. 2012 Annual Results Conference Call".  The call will be open to all analysts, investors and other interested parties.

The conference call will also be available via webcast by visiting http://www.newswire.ca/en/webcast/detail/1122949/1224637 from a web browser.

ABOUT IROC ENERGY SERVICES CORPORATION

IROC Energy Services Corp. is an Alberta oilfield services company that, through the IROC Energy Services Partnership, provides services and equipment to the oil and gas industry that is among the newest and most innovative in the WCSB.  IROC Energy Services Partnership operates under the business names of Eagle Well Servicing, Aero Rental Services and Helix Coil Services.  IROC combines cutting-edge technology with depth of experience to deliver equipment and services offerings in the following core areas: well servicing & equipment, rental services and coiled tubing services. For more information on IROC Energy Services Corp., visit IROC's website at www.iroccorp.com.

This news release is not for dissemination in United States or to any United States news services.  The Common Shares of IROC have not and will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the United States or to any US person except in certain transactions exempt from the registration requirements of the United States Securities Act and applicable state securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

 

SOURCE: IROC Energy Services Corp.

IROC Energy Services Corp.
Mr. Thomas Alford, President and CEO,
Telephone:  [phone]
Email: [email protected]

or

Mr. Brian Peters, Chief Financial Officer
Telephone:  [phone]
Email: [email protected]