Trinidad Drilling Ltd. Reports Strong Second Quarter 2012 Results; Dayrates, Profitability and Financial Flexibility All Continue to Improve

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TSX SYMBOL:  TDG

CALGARY, Aug. 8, 2012 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or "the Company") reported strong second quarter and year-to-date 2012 results that demonstrate the ongoing demand for the Company's modern, technically advanced equipment. During the quarter and the first half of 2012, Trinidad recorded increased dayrates which drove higher revenue, improved margins and higher adjusted EBITDA⁽¹⁾ and net earnings than in the same periods last year, despite lower activity levels. In addition, the Company continued to lower its debt levels and made important strides towards reaching its leverage reduction targets.

"Trinidad's business model is about performance. Our high quality equipment and well trained crews provide consistent top performance for our customers. Trinidad's commitment to high performance not only keeps our existing customers satisfied but allows us to increase market share, maintain industry leading activity and deliver more stable margins even in today's ever-changing oil and gas industry," said Lyle Whitmarsh, Trinidad's Chief Executive Officer. "This ability has been evident in the first half of 2012, where we were able to redeploy assets into higher demand areas, maintain strong activity levels and deliver solid financial results with increased profitability and improved financial flexibility. In addition, we have remained committed to the safety of our people and continued to improve our already strong safety performance. These impressive results have been achieved during a time of global economic uncertainty and weakening commodity prices. We have built Trinidad with a long-term vision that can withstand the cycles in the industry and capture opportunities for success as conditions change. Our adaptable, top performing equipment, high proportion of long-term contracts and growing financial flexibility position us well for continued success in the future."

⁽¹⁾ Please see the Non-GAAP Measures Definitions section of this document for further details.

FINANCIAL HIGHLIGHTS
		Three months ended June 30,			Six months ended June 30,
($ thousands except share and per share data)		2012	2011	% Change	2012	2011	% Change
Revenue ^(3)		167,568	149,666	12.0	423,148	373,984	13.1
Revenue, net of third party costs		159,835	139,100	14.9	395,027	343,798	14.9
Gross margin ^(1)		65,784	52,638	25.0	169,977	137,367	23.7
Gross margin percentage ^(1, 3)		39.3%	35.2%	11.6	40.2%	36.7%	9.5
Gross margin - net percentage ^(1)		41.2%	37.8%	9.0	43.0%	40.0%	7.5
EBITDA ^(1)		53,081	41,164	29.0	144,321	104,977	37.5
	Per share (diluted) ^(2)	0.44	0.34	29.4	1.19	0.87	36.8
Adjusted EBITDA ^(1)		53,344	39,069	36.5	145,295	108,692	33.7
	Per share (diluted) ^(2)	0.44	0.32	37.5	1.20	0.90	33.3
Cash provided by operations		96,134	82,320	16.8	163,601	106,580	53.5
	Per share (basic / diluted) ^(2)	0.80	0.68	17.6	1.35	0.88	53.4
Funds provided by operations		51,209	34,860	46.9	122,665	99,219	23.6
	Per share (basic / diluted) ^(2)	0.42	0.29	44.8	1.01	0.82	23.2
Net earnings		12,866	5,005	157.1	47,334	20,994	125.5
	Per share (basic / diluted) ^(2)	0.11	0.04	175.0	0.39	0.17	129.4
Adjusted net earnings ^(1)		13,129	11,903	10.3	55,827	33,702	65.6
	Per share (basic / diluted) ^(2)	0.11	0.10	10.0	0.46	0.28	64.3
Capital expenditures net of dispositions		46,357	11,044	319.7	107,008	35,314	203.0
Dividends declared		6,043	6,043	-	12,086	12,086	-
Shares outstanding - basic
	(weighted average) ^(2)	120,859,476	120,858,226	-	120,859,476	120,851,072	-
Shares outstanding - diluted
	(weighted average) ^(2)	120,859,476	120,906,245	-	120,859,476	120,899,091	-
As at					June 30,	December 31,
($ thousands except percentage data)					2012	2011	% Change
Total assets					1,615,348	1,608,126	0.4
Total long-term liabilities					648,616	666,717	(2.7)
Net debt ^(1)					439,322	440,338	(0.2)

 

(1)		Readers are cautioned that gross margin, gross margin percentage, gross margin - net percentage, EBITDA, Adjusted EBITDA, Adjusted net earnings and net debt and the related per share information do not have standardized meanings prescribed by IFRS - see "Non-GAAP Measures".
(2)		Basic shares include the weighted average number of shares outstanding over the period.  Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, the number of shares issuable pursuant to the Incentive Option Plan.
(3)		Revenue and gross margin percentage have been recalculated in the prior year based on changes in presentation - see "Change in Presentation".

OPERATING HIGHLIGHTS
		Three months ended June 30,				Six months ended June 30,
		2012	2011	% Change		2012	2011	% Change
Land Drilling Market
Operating days ^(1, 2)
	Canada	1,288	1,646	(21.7)		5,395	6,006	(10.2)
	United States and International	5,289	5,170	2.3		10,551	10,258	2.9
Rate per operating day^(1, 3, 4)
	Canada (CDN$)	25,343	20,796	21.9		24,478	20,551	19.1
	United States and International (CDN$)	22,586	18,470	22.3		22,261	18,145	22.7
	United States and International (US$)	22,616	19,095	18.4		22,158	18,491	19.8
Utilization rate - operating day^(^1, 3, 5)
	Canada	26%	34%	(23.5)		54%	60%	(10.0)
	United States and International	86%	89%	(3.4)		88%	90%	(2.2)
Number of drilling rigs at quarter end
	Canada	55	54	1.9		55	54	1.9
	United States and International	68	65	4.6		68	65	4.6
	Utilization rate for service rigs ^(6)	-	34%	-		-	51%	-
	Number of coring and surface casing rigs at quarter end	20	20	-		20	20	-
Barge Drilling Market
	Operating days ^(1, 2)	429	436	(1.6)		793	881	(10.0)
	Rate per operating day (CDN$) ^(1, 3, 4)	29,072	22,680	28.2		27,408	22,339	22.7
	Rate per operating day (US$) ^(1, 3, 4)	29,106	23,441	24.2		27,314	22,755	20.0
	Utilization rate - operating day^(1, 5)	94%	96%	(2.1)		87%	97%	(10.3)
	Number of barge drilling rigs at quarter end	2	2	-		2	2	-
	Number of barge drilling rigs under Bareboat Charter Agreements at quarter end	3	3	-		3	3	-

(1)		Operating days, utilization rate - operating day and rate per operating day have been recalculated, see "Change in Presentation".
(2)		Operating days include drill days and move days.
(3)		Rate per operating day includes operating revenue divided by operating days.
(4)		Operating revenue is presented net of third party costs
(5)		Utilization rate - operating day is based on operating days divided by total days available.
(6)		In the second quarter of 2011, Trinidad disposed of its 22 well servicing rigs and related equipment.

 

OVERVIEW

The record results achieved in the first quarter of 2012 continued into the second quarter, with Trinidad achieving increased dayrates and improved profitability over the same periods last year. Ongoing demand for high performance equipment and increased revenue generation combined with a continued focus on cost control drove record levels of gross margins, adjusted EBITDA and net earnings in the quarter and year-to-date 2012.

During the second quarter of 2012, commodity prices weakened from the previous quarter and from the same quarter last year. The gap between current natural gas storage levels and the five-year average narrowed during the second quarter; however, levels still remain high and have kept downward pressure on natural gas prices. In the second quarter of 2012, Henry Hub natural gas prices averaged US$2.21 per mmBtu, down from US$2.44 per mmBtu in the previous quarter and US$4.37 per mmBtu in the second quarter of last year. Year to date, natural gas prices declined from US$4.27 per mmBtu in the first half of 2011 to US$2.34 per mmBtu in the same period this year. Crude oil prices also weakened in the second quarter of 2012, reflecting increased concerns for delayed economic recovery in North America and globally. West Texas Intermediate crude oil prices averaged US$93.29 per barrel in the second quarter, down from US$102.98 per barrel in the previous quarter and US$102.02 per barrel in the same quarter last year. Year-to-date crude oil prices remained relatively unchanged in 2012 compared to 2011. Weaker natural gas prices have driven a strong move away from natural gas drilling towards oil and liquids-rich drilling in the past few years. Trinidad has participated in this trend and has moved a large number of rigs for its customers into oil or liquids-rich plays. The Company currently has approximately 90.0% of its fleet drilling in these higher activity plays.

During the second quarter of 2012, the industry active rig count in the US lowered slightly reflecting the weaker commodity price environment and the growing supply of equipment that has moved away from natural gas drilling and is now competing for work in oil or liquids-rich plays. The US active rig count in the second quarter averaged 1,970 rigs, compared to 1,989 rigs in the previous quarter. Despite a slight decrease in the active rig count in the current quarter, US drilling activity still remains above the level in the same quarter last year, when it averaged 1,834 active rigs. Trinidad's US and international utilization levels were down slightly compared to the previous year as a result of customer logistical delays.

Industry utilization levels in Canada were lower in the second quarter due to wet weather conditions which delayed the start-up of drilling equipment. Industry utilization averaged 18.0% for the quarter compared to 23.0% for the same quarter last year. Trinidad was also impacted by these conditions but exceeded industry utilization levels by six percentage points, averaging 24.0% in the quarter compared to 31.0% for the same quarter last year.

Increased dayrates in both the Canadian and US and international segments drove higher revenue generation in the current quarter and year-to-date 2012, compared to the same periods last year. This strong performance combined with a continued focus on cost control led to higher gross margin, adjusted EBITDA and net earnings in the quarter and year-to-date.

Trinidad understands the cyclicality of the drilling industry and typically keeps a significant proportion of its fleet under long-term, take-or-pay contracts in order to minimize the impact of industry cycles on its revenue stream. Currently, Trinidad has more than 60.0% of its fleet under this style of contract with an average term remaining of approximately two years.

The company continues to be focused on maintaining a sustainable growth program. The 2012 rig build program remains unchanged with five new rigs expected to be delivered into operations during the year or early in 2013. In addition, the Company completed two new rigs and four upgraded rigs from its 2011 program in the first half of 2012.

Trinidad remains committed to its leverage reduction strategy and reached a significant milestone during the second quarter. At June 30, 2012, Trinidad reached its near-term goal of lowering Total Debt to EBITDA to below 2.0 times, closing the quarter at 1.97 times. By comparison, the Company's Total Debt to EBITDA at the end of 2011 was 2.42 times, at June 30, 2011 it was 2.53 times and at its peak at December 31, 2007 it was 3.53 times. Trinidad's ability to make consistent progress on its leverage reduction strategy is due to the Company's ongoing capital discipline, commitment to living within free cash flow and adapting its business to maintain profitable and high performing operations during a time of significant change in the industry. Trinidad is moving towards its long-term leverage goal of Total Debt to EBITDA at either side of 1.5 times.

Second quarter 2012 and year-to-date highlights

• Trinidad generated revenue of $167.6 million for the second quarter and $423.1 million year to date, an increase of 12.0% and 13.1% from the same periods of 2011. Revenue grew in the quarter and year to date as a result of increased dayrates in each of the Canadian and the US and international operations. The impact of the improved market conditions was partially offset by a reduction in operating days due to wet weather conditions experienced in Canada during the second quarter of 2012.
  
  
• Gross margin grew to $65.8 million in the second quarter and $170.0 million year to date, an increase of 25.0% and 23.7%, respectively, from the prior comparative periods. Gross margin increased due to higher revenue generation which was partially offset by higher operating costs. Gross margin net percentage was 41.2% in the quarter and 43.0% year to date, which increased from 37.8% and 40.0%, respectively, in 2011. Increase in gross margin and gross margin net-percentage were a result of increased dayrates reflecting the improved market conditions and a continued focus on cost containment.
  
  
• Adjusted EBITDA was $53.3 million in the second quarter and $145.3 million year to date, up 36.5% and 33.7%, respectively, from the same periods of 2011. Adjusted EBITDA improvements were driven by higher dayrates, increased gross margin and lower general and administrative expenses (before share-based payments).
  
  
• Net earnings were $12.9 million ($0.11 per share (diluted)) for the quarter and $47.3 million ($0.39 per share (diluted)) year to date, up 157.1% and 125.5%, respectively, from 2011. Net earnings grew as a result of improved EBITDA, partially offset by an increase in income taxes in the current three and six month period when compared to the prior year.
  
  
• In the second quarter of 2012, Total Debt to EBITDA decreased to 1.97 times, compared to 2.42 times at year-end 2011 and 2.53 times at the end of the second quarter of 2011, a direct result of Trinidad's ongoing commitment to reducing indebtedness.

RESULTS FROM OPERATIONS

Canadian Operations
									Three months ended June 30,				Six months ended June 30,
($ thousands except percentage and operating data)									2012	2011	% Change		2012	2011	% Change
Operating revenue ^(1, 2, 3, 4)									33,802	38,225	(11.6)		148,767	147,087	1.1
Other revenue									116	379	(69.4)		242	584	(58.6)
									33,918	38,604	(12.1)		149,009	147,671	0.9
Operating costs ^(1, 2, 3, 4)									23,140	29,885	(22.6)		86,527	91,244	(5.2)
Gross margin									10,778	8,719	23.6		62,482	56,427	10.7
Gross margin - net percentage									31.8%	22.6%	40.7		41.9%	38.2%	9.7
Drilling days									1,182	1,522	(22.3)		4,966	5,530	(10.2)
Operating days ^(1, 5)									1,288	1,646	(21.7)		5,395	6,006	(10.2)
Rate per operating day (CDN$) ^(1, 6)									25,343	20,796	21.9		24,478	20,551	19.1
Utilization rate - operating day ^(1, 7)									26%	34%	(23.5)		54%	60%	(10.0)
Utilization rate - drilling day ^(1, 8)									24%	31%	(22.6)		50%	55%	(9.1)
CAODC industry average^(1, 9)									18%	23%	(21.7)		42%	44%	(4.5)
Number of drilling rigs at quarter end									55	54	1.9		55	54	1.9
Utilization rate for service rigs ^(1, 10)									-	34%	-		-	51%	-
Number of coring and surface rigs at quarter end									20	20	-		20	20	-

(1)		Operating revenue, operating costs, operating days, utilization rate - operating day and rate per operating day have been recalculated, see "Change in Presentation".
(2)		Inter-segment revenue and operating costs of ($2.4) million and $13.1 million has been excluded for the three months ended June 30, 2012 and 2011, respectively.  Inter-segment revenue and operating costs of $4.9 million and $26.2 million has been excluded for the six months ended June 30, 2012 and 2011, respectively. Each of these inter-segment revenue and operating costs relates to rig construction for the US operations.
(3)		External construction revenue and operating costs of $0.1 million and $0.2 million for the three and six months ended June 30, 2012, respectively, are included in the above table. External construction revenue and operating costs of $0.3 million and $1.1 million for the three and six months ended June 30, 2011, are included in the above table.
(4)		Operating revenue and operating costs exclude third party recovery and third party costs of $3.8 million and $6.0 million for the three month period ended June 30, 2012 and 2011, respectively. Operating revenue and operating costs exclude third party recovery and third party costs of $19.0 million and $21.5 million have been excluded for the six month period ended June 30, 2012 and 2011, respectively.
(5)		Operating days include drill days and move days.
(6)		Rate per operating day includes operating revenue divided by operating days.
(7)		Utilization rate - operating day is based on operating days divided by total days available.
(8)		Utilization rate - drilling day is based on drilling days divided by total days available.
(9)		CAODC industry average is based on drilling days divided by total days available.
(10)		In the second quarter of 2011, Trinidad disposed of all of its 22 well servicing rigs and related equipment.

 

Trinidad's Canadian operations performed strongly in the second quarter and year to date 2012. Higher dayrates in the current period drove improved profitability and more than offset slightly lower activity levels and the impact of the sale of the Company's well service rigs in the second quarter of 2011.

The second quarter is typically influenced by spring breakup, as activity levels drop due to the road bans which restrict the movement of heavy equipment during this period. In 2012, wetter than normal conditions in the second quarter led to an extended spring break up and resulted in lower operating days than the same quarter last year. Trinidad's high performance, modern fleet has a long track record of consistently outperforming industry activity levels and despite the impact of wet weather this quarter, the fleet continued this trend with industry-leading utilization levels. Changes in customer demand also impacted activity levels during the second quarter of 2012. A weaker commodity price environment resulted in customers re-evaluating their current drilling plans, causing them to switch activity between plays and also led to an increase in exploratory drilling versus development drilling.  These changes in customer focus resulted in increased move days and lower pad drilling during the quarter.

Dayrates increased in the second quarter of 2012 compared to the same period of 2011.  Improved pricing was largely the result of high customer demand reflecting stronger market conditions year over year. Dayrates also increased due to crew wage increases that occurred in the third quarter of 2011, these additional costs were passed through to the operator.  Additionally, in the current quarter and year to date 2012, dayrates were $1,050 per operating day and $320 per operating day, respectively, higher than the prior year due to standby revenue received as a result of operator logistical delays.  Standby revenue increases average dayrates as it generates revenue, but does not count as an operating day. Compared to the first quarter of 2012, dayrates increased by $1,137 per operating day as a higher proportion of contracted, high performance rigs operated, driving up the overall average dayrate.

Gross margin in the current period and year to date 2012 was higher than the same periods of 2011 due to the ongoing demand for modern, technically advanced equipment and subsequently higher dayrates.  Improved pricing more than offset the absence of the well servicing assets, and the impact of lower operating days. These factors also drove higher gross margin net percentages in both the current quarter and year-to-date 2012, compared to the same periods in 2011.

Trinidad's rig fleet increased by one rig in the current period, versus the same period of 2011, as one new build was delivered from the Company's manufacturing division in the second quarter of 2012.

In the first and second quarters of 2011, the construction operations delivered one rig per quarter into the US operations.  In addition, they continued construction of the two new builds added in early 2012.

In the second quarter of 2012, the construction operations continued work on Trinidad's five rig new build program.  The company expects two rigs to be delivered in the second half of 2012, two rigs in the later part of 2012 or early 2013, and the final rig in the first quarter of 2013.

United States and International Operations
		Three months ended June 30,				Six months ended June 30,
($ thousands except percentage and operating data)		2012	2011	% Change		2012	2011	% Change
Operating revenue ^(1, 2)		125,907	100,329	25.5		246,004	195,824	25.6
Other revenue		10	167	(94.0)		14	303	(95.4)
		125,917	100,496	25.3		246,018	196,127	25.4
Operating costs ^(1, 2)		70,911	56,577	25.3		138,523	115,187	20.3
Gross margin		55,006	43,919	25.2		107,495	80,940	32.8
Gross margin - net percentage		43.7%	43.7%			43.7%	41.3%
	Land Drilling Rigs
Drilling days		4,560	4,741	(3.8)		9,140	9,280	(1.5)
Operating days ^(1 ,3)		5,289	5,170	2.3		10,551	10,258	2.9
Rate per operating day (CDN$) ^(1, 4)		22,586	18,470	22.3		22,261	18,145	22.7
Rate per operating day (US$) ^(1, 4)		22,616	19,095	18.4		22,158	18,491	19.8
Utilization rate - operating day ^(1, 5)		86%	89%	(3.4)		88%	90%	(2.2)
Utilization rate - drilling day ^(1, 6)		74%	82%	(9.8)		76%	81%	(6.2)
Number of drilling rigs at quarter end		68	65	4.6		68	65	4.6
	Barge Drilling Rigs
Operating days^(3)		429	436	(1.6)		793	881	(10.0)
	Rate per operating day (CDN$) ^(1, 4)	29,072	22,680	28.2		27,408	22,339	22.7
	Rate per operating day (US$) ^(1, 4)	29,106	23,441	24.2		27,314	22,755	20.0
Utilization rate - operating day ^(1, 5)		94%	96%	(2.1)		87%	97%	(10.3)
	Number of barge drilling rigs at quarter end	2	2	-		2	2	-
	Number of barge drilling rigs under Bareboat Charter Agreements at quarter end	3	3	-		3	3	-

(1)		Operating revenue, operating costs, operating days, utilization rate - operating day and rate per operating day have been recalculated, see "Change in Presentation".
(2)		Operating revenue and operating costs exclude third party recovery and third party costs of $4.0 million and $4.6 million for the three months ended June 30, 2012 and 2011, respectively; and $9.1 million and $8.7 million for the six months ended June 30, 2012 and 2011, respectively.
(3)		Operating days include drill days and move days.
(4)		Rate per operating day includes operating revenue divided by operating days.
(5)		Utilization rate - operating day is based on operating days divided by total days available.
(6)		Utilization rate - drilling day is based on drilling days divided by total days available.

 

Industry conditions remained strong in Trinidad's US and international operations for the second quarter and first half of 2012.  Revenue and gross margins increased versus the same periods of 2011 as a result of an expanded rig fleet and growing dayrates.

Strong demand for Trinidad's modern, high performance equipment led to upward momentum on dayrates in the quarter, versus the same period of 2011 and the first quarter of 2012. Higher dayrates also reflected increases in crew wages, flat sum trucking, and standby revenue generated in the quarter. While gross margin net percentage levels remained strong and consistent in both the second quarter of last year and the first quarter of the current year, they did not fully reflect the increased dayrates. Wage increases incurred in the past year have been passed on to the operator at cost, and therefore have no gross margin impact, but do negatively impact gross margin net percentage.  Standby revenue received in the current period and year to date increased dayrates per operating day versus the same periods of 2011 by approximately US$1,100 and US$1,050 per operating day, respectively. In addition, in 2011, Trinidad received one-time demobilization revenue that positively impacted the gross margin. Trinidad does not count standby and demobilization in the operating day statistics, which increases dayrates.

Utilization levels in the second quarter and year-to-date 2012 lowered from the levels experienced in 2011 and the first quarter of 2012. During the second quarter, Trinidad had an increased number of rigs receiving standby revenue as customers re-evaluated their development opportunities in light of weaker commodity prices. While standby revenue does not add operating days and utilization, it does contribute to revenue and the profitability of operations.

The land drilling rig count increased by net three rigs in the current period versus the same period of 2011; five new builds were delivered into service in the US, one rig in the third quarter of 2011 and four rigs in the first half of 2012. Of the new builds delivered, four were rigs purchased externally and retrofitted to meet the company's specifications, with one rig built internally. The additional rigs were partially offset by two rigs being removed from the company's marketable fleet at year-end 2011.  These two rigs are being assessed for sale or possible retrofit to meet current customer demands and Trinidad's target fleet mix. The four rigs delivered into service in 2012 were delivered into the Niobrara shale in Wyoming.

The Company's barge drilling operations continued its positive momentum, with quarter-over-quarter and sequential dayrate increases.  Higher dayrates for these operations are a reflection of the increased level of demand and the limited supply of high quality equipment in this sector.  Activity levels increased from the first quarter of 2012, but were lower compared to the second quarter and year to date in 2011, as a result of short-term customer logistical delays. The increased activity in the current quarter demonstrates that the customer delays are largely complete and barge drilling operations are expected to remain at stable activity levels going forward.

QUARTERLY ANALYSIS

FINANCIAL HIGHLIGHTS - QUARTERLY ANALYSIS
		2012		2011				2010
($ millions except per share data and operating data)		Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3
Revenue		167.6	255.6	226.5	196.8	149.7	224.3	194.4	167.4
Gross margin		65.8	104.2	88.8	81.5	52.6	84.7	76.7	62.5
Gross margin percentage		39.3%	40.8%	39.2%	41.4%	35.2%	37.8%	39.4%	37.3%
Gross margin - net percentage		41.2%	44.3%	42.4%	44.3%	37.8%	41.4%	43.0%	39.7%
Net earnings (loss) for the year		12.9	34.5	25.3	30.2	5.0	16.0	(84.8)	0.8
Adjustments for:
	Depreciation and amortization	25.8	28.1	29.1	28.6	25.4	29.6	27.7	28.6
	Foreign exchange	(0.7)	0.5	2.4	(6.1)	(1.2)	1.8	0.5	5.1
	Loss (gain) on sale of property and equipment	(0.5)	0.2	(0.6)	(0.1)	(5.3)	-	0.4	-
	Impairment of property and equipment	-	7.5	-	-	9.0	-	24.9	-
	Impairment of intangible assets and goodwill	-	-	-	-	-	-	59.1	0.3
	Finance costs	10.5	10.8	10.9	10.9	10.5	12.4	36.2	14.0
	Income taxes	4.4	10.2	4.8	6.4	(3.4)	5.9	(2.2)	0.4
	Other	1.0	0.1	2.5	(0.5)	(0.9)	4.0	1.7	0.7
	Income taxes paid	(0.7)	(0.7)	-	(4.5)	(0.9)	(2.4)	(0.4)	(1.9)
	Income taxes recovered	-	-	0.8	1.5	-	0.2	-	-
	Interest paid	(1.5)	(19.8)	(1.6)	(21.4)	(3.3)	(3.1)	(25.7)	(2.6)
Funds provided by operations		51.2	71.4	73.6	45.0	34.9	64.4	37.4	45.4
Net earnings (loss) per share (diluted)		0.11	0.29	0.21	0.25	0.04	0.13	(0.70)	0.01
Funds provided by operations per share (diluted)		0.42	0.59	0.61	0.37	0.29	0.53	0.31	0.38

 

NON-GAAP MEASURES HIGHLIGHTS - QUARTERLY ANALYSIS
			2012				2011								2010
($ millions except per share data and operating data)			Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3
EBITDA ^(1)			53.1		91.2		69.5		76.0		41.2		63.8		61.5		44.1
		Per share (diluted) ^(2)	0.44		0.75		0.58		0.63		0.34		0.53		0.51		0.37
Adjusted EBITDA ^(1)			53.3		92.0		74.4		69.4		39.1		69.6		63.7		49.9
		Per share (diluted) ^(2)	0.44		0.76		0.62		0.57		0.32		0.58		0.53		0.41
Adjusted net earnings ^(1)			13.1		42.7		30.2		23.5		11.9		21.8		1.5		6.9
		Per share (diluted) ^(2)	0.11		0.35		0.25		0.19		0.10		0.18		0.01		0.06

(1)		See the Non-GAAP Measures Definitions section of this document for further details.
(2)		Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, the number of shares issuable pursuant to the Incentive Option Plan.

 

OPERATING HIGHLIGHTS - QUARTERLY ANALYSIS
		2012		2011				2010
		Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3
Land Drilling Market
Operating days ^(1, 2)
	Canada	1,288	4,107	3,665	3,675	1,646	4,359	3,522	2,971
	United States and International	5,289	5,262	5,547	5,579	5,170	5,088	4,958	4,769
Rate per operating day^(1, 3, 4)
	Canada (CDN$)	25,343	24,206	23,652	20,315	20,796	20,459	20,163	18,751
	United States and International (CDN$)	22,586	21,935	20,710	18,600	18,470	17,815	18,172	18,414
	United States and International (US$)	22,616	21,698	20,387	19,143	19,095	17,878	17,789	17,681
Utilization rate - operating day^(1, 5)
	Canada	26%	84%	74%	74%	34%	87%	70%	60%
	United States and International	86%	90%	92%	92%	89%	90%	82%	78%
Number of drilling rigs at quarter end
	Canada	55	54	54	54	54	55	55	55
	United States and International	68	66	64	66	65	63	62	66
	Utilization rate for service rigs ^(6)	-	-	-	-	34%	66%	57%	41%
	Number of service rigs at quarter end ^(6)	-	-	-	-	-	22	22	22
	Number of coring and surface casing rigs at quarter end	20	20	20	20	20	20	20	20
Barge Drilling Market
	Operating days ^(1, 2)	429	364	373	454	436	445	456	368
	Rate per operating day (CDN$) ^(1, 3, 4)	29,072	25,448	25,835	24,833	22,680	22,004	24,368	24,556
	Rate per operating day (US$) ^(1, 3, 4)	29,106	25,204	25,455	25,547	23,441	22,083	23,844	23,581
	Utilization rate - operating day^(1, 5)	94%	80%	81%	99%	96%	99%	99%	88%
	Number of barge drilling rigs at quarter end	2	2	2	2	2	2	2	2
	Number of barge drilling rigs under Bareboat Charter at quarter end	3	3	3	3	3	3	3	3

(1)		Operating revenue, operating costs, operating days, utilization rate - operating day and rate per operating day have been recalculated, see "Change in Presentation".
(2)		Operating days include drill days and move days.
(3)		Rate per operating day includes operating revenue divided by operating days.
(4)		Operating revenue is presented net of third party costs
(5)		Utilization rate - operating day is based on operating days divided by total days available.
(6)		In the second quarter of 2011, Trinidad disposed of its 22 well servicing rigs and related equipment.

 

FINANCIAL SUMMARY
As at						June 30,		December 31,
($ thousands except percentage data)						2012		2011		$ Change
Working capital ^(1)						107,726		139,829		(32,103)
Current portion of long-term debt						605		580		25
Long-term debt ^(2)						547,048		580,167		(33,119)
Total debt						547,653		580,747		(33,094)
Total debt as a percentage of assets						33.9%		36.1%
Net debt ^(1)						439,322		440,338		(1,016)
Net debt as a percentage of assets						27.2%		27.4%
Total assets						1,615,348		1,608,126		7,222
Total long-term liabilities						648,616		666,717		(18,101)
Total long-term liabilities as a percentage of assets						40.2%		41.5%
Shareholders' equity						877,313		841,226		36,087
Total debt to shareholders' equity						62.4%		69.0%
Net debt to shareholders' equity						50.1%		52.3%

(1)		See Non-GAAP Measures Definition section of this document for further details.
(2)		Long-term debt is net of associated transaction costs.

 

At June 30, 2012, working capital decreased by $32.1 million from December 31, 2011. The lower level of working capital was driven by a collection of receivables, lower inventory reflecting materials utilized for rig construction during the period, a reduction in prepaid expenses, and an increase in deferred revenue related to a delay penalty received from a customer to be amortized over the remaining periods of 2012. These factors were partially offset by higher cash balances, an increase in assets held for sale due to the classification of a building in the US operations, as well as a decrease in accounts payable and accruals due to lower activity levels in the second quarter of 2012 compared to the fourth quarter of 2011.

Trinidad's total debt balance declined by $33.1 million during the current quarter when compared to the year ended December 31, 2011. During this period, Trinidad reduced its revolving credit facility balances by $34.2 million, offset slightly by a small increase in the Senior Notes as a result of the change in the US dollar foreign exchange rate at June 30, 2012. The Senior Notes are translated at each quarter end, as such their value will fluctuate quarterly with variations in exchange rates.  The Senior Notes are due January 2019 and interest is payable semi-annually in arrears on January 15 and July 15.

Trinidad's net debt declined by $1.0 million during the current quarter, due to a lower debt balance offset by a lower working capital for reasons as mentioned above.

At June 30, 2012, Trinidad had CDN$68.0 million outstanding on its Canadian revolving credit facility and US$30.0 million on its US revolving credit facility, leaving CDN$132.0 million and US$70.0 million unutilized in the facility, respectively.  The Canadian and US revolving facility requires quarterly interest payments that are based on Bankers Acceptance and LIBOR rates and incorporate a tiered interest rate, which varies depending on the results of the Consolidated Total Debt to Consolidated EBITDA ratio (see table below). In 2011 Trinidad's lenders agreed to an extension of the facility, which now matures on December 16, 2015, and is subject to annual extensions of an additional year on each anniversary.

A total of $108.9 million of capital expenditures were spent during the six months ended June 30, 2012, compared to $72.1 million for the same period in the prior year.  Capital expenditures were substantially related to the Company's rig build program.

Trinidad expects cash provided by operations and the Company's various sources of financing to be sufficient to meet its debt repayments, future obligations and to fund planned capital expenditures.

Current financial performance is well in excess of the financial ratio covenants under the revolving credit facility as reflected in the table below under IFRS:

RATIO							June 30,		December 31,		THRESHOLD
							2012		2011
Consolidated Senior Debt to Consolidated EBITDA ^(1)							0.37:1		0.59:1		3.00:1 maximum
Consolidated Total Debt to Consolidated EBITDA ^(1)							1.97:1		2.42:1		4.00:1 maximum
Consolidated EBITDA to Consolidated Cash Interest Expense ^(1)							6.88:1		5.74:1		2.75:1 minimum

(1)

Please see the Non-GAAP Measures Definition section of this document for further details.

Readers are cautioned that the ratios noted above do not have standardized meanings prescribed in IFRS.

OUTLOOK

Trinidad's operations have continued to operate smoothly and profitably over the first half of 2012. The company relocated a large number of rigs into oil and liquids-rich plays following the weakness in natural gas prices in the later part of 2011 and into 2012. During this time, Trinidad demonstrated the adaptability and the ongoing customer demand for its high performance equipment and the Company's ability to perform well during periods of industry change.

Moving into the second half of 2012, commodity prices have continued to fluctuate. Trinidad closely monitors these changes, the economic indicators that drive them, as well as the impact on its customers' capital spending programs. To date, Trinidad has seen customers re-evaluate drilling programs and move activity between plays in order to maintain their economic returns; however, the Company has not seen an overall pull back in spending. Several of Trinidad's customers are owned by, or have agreements with, foreign national oil companies which tend to have long-term development plans and less sensitivity to fluctuations in commodity prices. Other customers tend to be bigger exploration and development companies with a large number of development opportunities to select from.

While current commodity price levels drive solid activity and good dayrates, Trinidad is aware that additional weakness in crude oil prices, in particular, could cause softening in the market. Trinidad expects that there may be some reduction in activity levels and dayrates in select areas and for select styles of equipment, depending on the commodity being developed and the efficiency of the equipment, but overall the Company does not expect activity and pricing to drop to levels seen in the 2009 downturn. The extent of these changes, if any, will largely depend on commodity prices going forward. As economics become tighter for exploration and development companies, the importance of using efficient, high performance equipment grows. With more than three quarters of its fleet fitting into this category, Trinidad expects that its equipment will continue to achieve industry leading activity levels and solid dayrates. In addition, Trinidad has more than 60.0% of its fleet under long-term, take-or-pay contracts that provide the Company with a high level of revenue protection.

Moving forward into 2012 and beyond, Trinidad will continue to work towards its goals of lower leverage and sustainable growth. In the second quarter, Trinidad achieved the next milestone in its leverage reduction strategy by lowering its Total Debt to EBITDA level to below 2.0 times. The Company remains committed to this strategy and is moving closer to its long-term goal of maintaining its leverage at either side of 1.5 times.

During the first half of the year, Trinidad completed six rigs from its 2011 capital program and continues to have five new builds for construction in 2012. In addition, the Company has been focusing on upgrading existing equipment to ensure it remains marketable in an increasingly competitive industry. Trinidad has shown a disciplined approach to capital spending and a commitment to reaching its leverage goals for a number of years and a clear path to achieving its targets in the near future is now visible. Trinidad has also shown its commitment to providing a yield as part of its shareholders' total return. The Company has kept its dividend in place for the past ten years throughout industry cycles and the challenging economic times experienced during the past few years. Trinidad will continue to carefully balance its growth program with its debt reduction strategy while also reviewing alternative ways of adding value for shareholders.

Notwithstanding recent media reports regarding producers' future spending plans, our customers continue to perform as expected under their contracts. Trinidad anticipates that while there may be some softness in specific areas of the industry in the next few months, current industry conditions will remain solid and that Trinidad, with its high performing fleet, significant contract base and improved financial flexibility, will continue to perform well for the remainder of 2012 and into the future.

CONFERENCE CALL

A conference call and webcast to discuss the results will be held for the investment community on Thursday Aug 9^th, 2012 beginning at 9:00 a.m. MT (11:00 a.m. ET).  To participate, please dial [phone] (toll-free in North America) or [phone] approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 2:00 p.m. ET on Aug 9^th, 2012 until midnight Aug 16^th, 2012 by dialing [phone] or [phone] and entering replay access code 98511193.

A live audio webcast of the conference call will also be available via the Investor Relations page of Trinidad's website.

A full copy of Trinidad's second quarter 2012 report including Management's Discussion and Analysis, Consolidated Financial Statements and Notes to the Consolidated Financial Statements can be found on the Investor Relations page of Trinidad's website or at www.sedar.com

TRINIDAD DRILLING LTD.

Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange under the symbol TDG. Trinidad's divisions operate in the drilling, coring and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States and Mexico. Trinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at	June 30,			December 31,
($ thousands) - unaudited	2012			2011
Assets
Current Assets
Cash and cash equivalents	14,596			-
Accounts receivable	155,008			207,143
Inventory	13,236			17,523
Prepaid expenses	2,250			6,298
Assets held for sale	12,055			9,048
	197,145			240,012
Property and equipment	1,329,953			1,279,826
Intangible assets and goodwill	88,250			88,288
	1,615,348			1,608,126
Liabilities
Current Liabilities
Bank indebtedness	-			4,600
Accounts payable and accrued liabilities	80,349			88,960
Dividends payable	6,043			6,043
Deferred revenue	2,422			-
Current portion of long-term debt	605			580
	89,419			100,183
Long-term debt	547,048			580,167
Deferred income taxes	101,568			86,550
	738,035			766,900
Shareholders' Equity
Common shares	952,043			952,043
Contributed surplus	49,794			49,462
Accumulated other comprehensive income (loss)	(24,870)			(25,377)
Retained earnings (deficit)	(99,654)			(134,902)
	877,313			841,226
	1,615,348			1,608,126
Commitments and contingencies

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
		Three months ended		Six months ended
		June 30,		June 30,
($ thousands except per share data) - unaudited		2012	2011	2012	2011
Revenue
Oilfield service revenue		167,442	149,120	422,892	373,097
Other revenue		126	546	256	887
		167,568	149,666	423,148	373,984
Expenses
Operating expense		101,784	97,028	253,171	236,617
General and administrative		13,414	12,691	25,751	31,850
Depreciation and amortization		25,817	25,418	53,947	54,993
Foreign exchange		(711)	(1,217)	(95)	540
(Gain) loss on sale of property and equipment		(491)	(5,342)	(321)	(5,353)
Impairment of property and equipment		-	8,993	7,519	8,993
		139,813	137,571	339,972	327,640
Finance costs		10,496	10,452	21,298	22,833
Earnings before income taxes		17,259	1,643	61,878	23,511
Income taxes
Current		19	2,441	(36)	3,166
Deferred		4,374	(5,803)	14,580	(649)
		4,393	(3,362)	14,544	2,517
Net earnings		12,866	5,005	47,334	20,994
Other comprehensive income (loss)
Foreign currency translation adjustment, net of income tax		7,288	(6,053)	507	(14,848)
		7,288	(6,053)	507	(14,848)
Total comprehensive income (loss)		20,154	(1,048)	47,841	6,146
Earnings per share
Net earnings
	Basic	0.11	0.04	0.39	0.17
	Diluted	0.11	0.04	0.39	0.17

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For six months ended June 30, 2012 and 2011
						Accumulated
						other		Retained
		Common		Contributed		comprehensive		earnings		Total
($ thousands) - unaudited		shares		surplus		income (loss) ^(1)		(deficit)		equity
Balance at December 31, 2011		952,043		49,462		(25,377)		(134,902)		841,226
Share-based payments		-		332		-		-		332
Total comprehensive income (loss)		-		-		507		47,334		47,841
Dividends		-		-		-		(12,086)		(12,086)
Balance at June 30, 2012		952,043		49,794		(24,870)		(99,654)		877,313
Balance at January 1, 2011		951,863		49,016		(30,030)		(187,211)		783,638
Exercise of stock options		163		(44)		-		-		119
Share-based payments		-		382		-		-		382
Total comprehensive income (loss)		-		-		(14,848)		20,994		6,146
Dividends		-		-		-		(12,086)		(12,086)
Balance at June 30, 2011		952,026		49,354		(44,878)		(178,303)		778,199

^(1)

Accumulated other comprehensive income consisted of foreign currency translation adjustment.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For six months ended June 30,
($ thousands) - unaudited		2012		2011
Cash provided by (used in)
Operating activities
Net earnings		47,334		20,994
Adjustments for:
	Depreciation and amortization	53,947		54,993
	Foreign exchange	(95)		540
	(Gain) on sale of property and equipment	(321)		(5,353)
	Impairment of property and equipment	7,519		8,993
	Finance costs	21,298		22,833
	Income taxes	14,544		2,517
	Other	1,064		3,132
	Income taxes paid	(1,353)		(3,352)
	Income taxes recovered	30		247
	Interest paid	(21,307)		(6,368)
	Interest received	5		43
Funds provided by operations		122,665		99,219
Change in non-cash operating working capital		40,936		7,361
Cash provided by operations		163,601		106,580
Investing activities
Purchase of property and equipment		(108,877)		(72,076)
Proceeds from disposition of property and equipment		1,869		36,762
Change in non-cash working capital		8,882		(3,773)
Cash used by investing		(98,126)		(39,087)
Financing activities
Proceeds from long-term debt		30,964		35,156
Repayments of long-term debt		(65,560)		(88,224)
Proceeds from exercise of options		-		119
Dividends paid		(12,086)		(12,085)
Financing costs		-		(1,180)
Cash used by financing		(46,682)		(66,214)
Cash flow from operating, investing and financing activities		18,793		1,279
Effect of translation of foreign currency cash		403		245
Increase in cash for the period		19,196		1,524
(Bank indebtedness) cash and cash equivalents - beginning of period		(4,600)		7,905
Cash and cash equivalents - end of period		14,596		9,429

 

SEGMENTED INFORMATION
The following presents the result of Trinidad's operating segments:
Three months ended				United States /		Inter-
June 30, 2012		Canadian		International		segment
($ thousands)		Operations		Operations		Eliminations		Corporate		Total
	Operating revenue	33,802		125,907		-		-		159,709
	Other revenue	116		10		-		-		126
	Third party recovery	3,757		3,976		-		-		7,733
	Inter-segment revenue	(2,382)		-		2,382		-		-
		35,293		129,893		2,382		-		167,568
	Operating costs	23,140		70,911		-		-		94,051
	Third party costs	3,757		3,976		-		-		7,733
	Inter-segment operating	(2,382)		-		2,382		-		-
	Operating income	10,778		55,006		-		-		65,784
	Depreciation and amortization	6,005		19,812		-		-		25,817
	(Gain) loss on sale of property and equipment	17		(508)		-		-		(491)
	Impairment of property and equipment	-		-		-		-		-
	Impairment of intangible assets and goodwill	-		-		-		-		-
		6,022		19,304		-		-		25,326
	Segmented income	4,756		35,702		-		-		40,458
	General and administrative	-		-		-		13,414		13,414
	Foreign exchange	-		-		-		(711)		(711)
	Finance costs	-		-		-		10,496		10,496
	Income taxes	-		-		-		4,393		4,393
	Net earnings (loss)	4,756		35,702		-		(27,592)		12,866
	Purchase of property and equipment	36,006		11,066		-		-		47,072
Three months ended				United States /		Inter-
June 30, 2011		Canadian		International		segment
($ thousands)		Operations		Operations		Eliminations		Corporate		Total
	Operating revenue	38,225		100,329		-		-		138,554
	Other revenue	379		167		-		-		546
	Third party recovery	5,961		4,605		-		-		10,566
	Inter-segment revenue	13,097		-		(13,097)		-		-
		57,662		105,101		(13,097)		-		149,666
	Operating	29,885		56,577		-		-		86,462
	Third party costs	5,961		4,605		-		-		10,566
	Inter-segment operating	13,097		-		(13,097)		-		-
	Operating income	8,719		43,919		-		-		52,638
	Depreciation and amortization	6,250		19,168		-		-		25,418
	(Gain) loss on sale of property and equipment	(4,219)		(1,123)		-		-		(5,342)
	Impairment of property and equipment	1,535		7,458		-		-		8,993
	Impairment of intangible assets and goodwill	-		-		-		-		-
		3,566		25,503		-		-		29,069
	Segmented (loss) income	5,153		18,416		-		-		23,569
	General and administrative	-		-		-		12,691		12,691
	Foreign exchange	-		-		-		(1,217)		(1,217)
	Finance costs	-		-		-		10,452		10,452
	Income taxes	-		-		-		(3,362)		(3,362)
	Net earnings (loss)	5,153		18,416		-		(18,564)		5,005
	Purchase of property and equipment	13,599		33,925		-		-		47,524
Six months ended				United States /		Inter-
June 30, 2012		Canadian		International		segment
($ thousands)		Operations		Operations		Eliminations		Corporate		Total
	Operating revenue	148,767		246,004		-		-		394,771
	Other revenue	242		14		-		-		256
	Third party recovery	18,994		9,127		-		-		28,121
	Inter-segment revenue	4,914		-		(4,914)		-		-
		172,917		255,145		(4,914)		-		423,148
	Operating costs	86,527		138,523		-		-		225,050
	Third party costs	18,994		9,127		-		-		28,121
	Inter-segment operating	4,914		-		(4,914)		-		-
	Operating income	62,482		107,495		-		-		169,977
	Depreciation and amortization	15,367		38,580		-		-		53,947
	(Gain) loss on sale of property and equipment	47		(368)		-		-		(321)
	Impairment of property and equipment	5,957		1,562		-		-		7,519
	Impairment of intangible assets and goodwill	-		-		-		-		-
		21,371		39,774		-		-		61,145
	Segmented income	41,111		67,721		-		-		108,832
	General and administrative	-		-		-		25,751		25,751
	Foreign exchange	-		-		-		(95)		(95)
	Finance costs	-		-		-		21,298		21,298
	Income taxes	-		-		-		14,544		14,544
	Net earnings (loss)	41,111		67,721		-		(61,498)		47,334
	Purchase of property and equipment	61,238		47,639		-		-		108,877
Six months ended				United States /		Inter-
June 30, 2011		Canadian		International		segment
($ thousands)		Operations		Operations		Eliminations		Corporate		Total
	Operating revenue	147,087		195,824		-		-		342,911
	Other revenue	584		303		-		-		887
	Third party recovery	21,461		8,725		-		-		30,186
	Inter-segment revenue	26,189		-		(26,189)		-		-
		195,321		204,852		(26,189)		-		373,984
	Operating costs	91,244		115,187		-		-		206,431
	Third party costs	21,461		8,725		-		-		30,186
	Inter-segment operating	26,189		-		(26,189)		-		-
	Operating income	56,427		80,940		-		-		137,367
	Depreciation and amortization	17,481		37,512		-		-		54,993
	(Gain) loss on sale of property and equipment	(4,171)		(1,182)		-		-		(5,353)
	Impairment of property and equipment	1,535		7,458		-		-		8,993
	Impairment of intangible assets and goodwill	-		-		-		-		-
		14,845		43,788		-		-		58,633
	Segmented income	41,582		37,152		-		-		78,734
	General and administrative	-		-		-		31,850		31,850
	Foreign exchange	-		-		-		540		540
	Finance costs	-		-		-		22,833		22,833
	Income taxes	-		-		-		2,517		2,517
	Net earnings (loss)	41,582		37,152		-		(57,740)		20,994
	Purchase of property and equipment	17,828		54,248		-		-		72,076

 

ADVISORY

CHANGE IN PRESENTATION

Effective December 31, 2011, Trinidad changed the presentation of third party costs and recovery to be accounted for on a gross basis versus a net basis.  This presentation change provides improved disclosure on the Company's operating segments; in addition, the presentation more accurately reflects the legal form of the contracts.  The change resulted in a reclassification of third party rental equipment costs, which were previously netted against revenue, to be presented on a gross basis as third party recovery and third party costs.  In addition, third party fuel costs, which were previously reported on a gross basis, have been reclassified to be included in third party recovery and third party costs.

Additionally in the first quarter of 2012, the calculation of dayrates was changed to be based on operating revenue divided by operating days (drilling plus move days), and now excludes third party recovery revenue as well as other income.  Previously, only drilling days were included in the dayrate calculation.  Furthermore, the Company began including additional disclosure in regards to utilization, adding utilization rate - operating day which is based on operating days instead of just the previously disclosed drilling day based utilization. The change in presentation of dayrates and utilization better aligns our disclosure with our peers, and our management measurement tools.  Furthermore, the changes allow the users of the financial statements a higher degree of disclosure.  See "Non-GAAP Measures Definitions" for calculations.  The changes in presentation have been applied retrospectively.

NON-GAAP MEASURES DEFINITIONS

This document contains references to certain financial measures and associated per share data that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.  These financial measures are computed on a consistent basis for each reporting period and include gross margin, gross margin percentage, gross margin - net percentage, EBITDA, Adjusted EBITDA, Adjusted net earnings, net debt, working capital, Senior Debt to EBITDA, Total Debt to EBITDA, EBITDA to Cash Interest Expense, drilling days, operating days, utilization rate - drilling day, utilization rate - operating day, and rate per operating day.  These non-GAAP measures are identified and defined as follows under IFRS:

"Gross margin" is used by management and investors to analyze overall and segmented operating performance.  Gross margin is not intended to represent operating income nor should it be viewed as an alternative to net earnings or other measures of financial performance calculated in accordance with IFRS.  Gross margin is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information contained in the notes to the consolidated interim financial statements and is defined as revenue less operating expenses.

"Gross margin percentage" is used by management and investors to analyze overall and segmented operating performance.  Gross margin percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated interim financial statements and is defined as gross margin divided by revenue.

"Gross margin - net percentage" is used by management and investors to analyze overall and segmented operating performance.  Gross margin - net percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated interim financial statements and is defined as gross margin divided by revenue net of third party costs.

"EBITDA" is a measure of the Company's operating profitability.  EBITDA provides an indication of the results generated by the Company's principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, or how the results are taxed in various jurisdictions.

"Adjusted EBITDA" is used by management and investors to analyze EBITDA (as defined above) prior to the effect of foreign exchange and share-based payment expense, and is not intended to represent net earnings as calculated in accordance with IFRS.

"Adjusted net earnings" is used by management and the investment community to analyze net earnings prior to the effect of foreign exchange, share-based payments and impairment charges and is not intended to represent net earnings as calculated in accordance with IFRS.

"Net debt" is used by management and the investment community to analyze the amount of debt less the working capital of the Company.

"Working capital" is used by management and the investment community to analyze the operating liquidity available to the Company.

"Senior Debt to EBITDA" is defined as the consolidated balance of the revolving facility and other debt secured by a lien at quarter end to consolidated EBITDA for the trailing twelve months (TTM).  Consolidated EBITDA used in this financial ratio is calculated as EBITDA plus share-based payments and unrealized foreign exchange.

"Total Debt to EBITDA" is defined as the consolidated balance of long-term debt, which includes the Senior Debt, Senior Notes Payable and dividends payable at quarter end, to consolidated EBITDA for the TTM.  Consolidated EBITDA used in this financial ratio is calculated as EBITDA plus share-based payments and unrealized foreign exchange.

"EBITDA to Cash Interest Expense" is defined as the consolidated EBITDA for TTM to the cash interest expense on all debt balances for TTM.  Consolidated EBITDA used in this financial ratio is calculated as EBITDA plus share-based payments and unrealized foreign exchange.

"Drilling days" is defined as rig days between spud to rig release.

"Operating days" is defined as moving days (move in, rig up and tear out) plus drilling days (spud to rig release).

"Utilization rate - drilling day" is defined as drilling days divided by total available rig days.

"Utilization rate - operating day" is defined as operating days (drilling days plus moving days) divided by total available rig days.

"Rate per operating day" is defined as operating revenue (net of third party costs) divided by operating days (drilling days plus moving days).

References to gross margin, gross margin percentage, gross margin - net percentage, EBITDA, Adjusted EBITDA, Adjusted net earnings, net debt, working capital, Senior Debt to EBITDA, Total Debt to EBITDA, EBITDA to Cash Interest Expense, drilling days, operating days, utilization rate - drilling day, utilization rate - operating day, and rate per operating day throughout this document have the meanings set out above.

FORWARD-LOOKING STATEMENTS

The document contains certain forward-looking statements relating to Trinidad's plans, strategies, objectives, expectations and intentions.  The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "confident", "might" and similar expressions are intended to identify forward-looking information or statements.  Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this document.  The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon.  Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements.  Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements.  In particular, but without limiting the foregoing, this document may contain forward-looking information and statements pertaining to the completion of announced rig construction programs on a timely basis and economical terms; the assumption that Trinidad's customers will honour their take-or-pay contracts; fluctuations in the demand for Trinidad's services; the ability for Trinidad to attract and retain qualified personnel, in particular field staff to crew the Company's rigs; the existence of competitors, technological changes and developments in the oilfield services industry; the existence of operating risks inherent in the oilfield services industry; assumptions respecting capital expenditure programs and other expenditures by oil and gas exploration and production companies; assumptions regarding commodity prices, in particular oil and natural gas; assumptions respecting supply and demand for commodities, in particular oil and natural gas; assumptions regarding foreign currency exchange rates and interest rates; the existence of regulatory and legislative uncertainties; the possibility of changes in tax laws; and general economic conditions including the capital and credit markets. Trinidad cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive.  The forward-looking information and statements contained in this document speak only as of the date of this document and Trinidad assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.

 

 

 

 

 

SOURCE: Trinidad Drilling Ltd.

Lyle Whitmarsh,
Chief Executive Officer

Brent Conway
President

Lisa Ciulka
Vice President, Investor Relations
Phone: [phone] Fax: [phone]
Email: [email protected]