Savanna Energy Services Sees Increase in Earnings

Savanna Energy Services generated revenues of $32.6 Million for the quarter ended September 30, 2004, an increase of 63% compared with the same quarter in 2003. Net earnings increased 86% to $5.1 Million in the third quarter, compared to $2.7 Million in the same period last year. Diluted earnings per share was $0.17 compared with $0.11 in 2003. Activity levels were hampered relative to the 2003 comparable period as a result of wet weather. During this period, Savanna was successful in the continued expansion of its drilling fleet.

Trailblazer Drilling Corp., Savanna's contract drilling division, generated revenues of $18.4 Million, an increase of 142% compared to the same period last year. Operating earnings were $6.9 Million, an increase of 141% over the same period in 2003. The year over year increase in the drilling fleet was the primary driver for the increase in operating earnings for the drilling division over the previous year. Savanna operated an average of 17 rigs in the third quarter of 2004 compared to 6 rigs for the third quarter of 2003. Drilling rig fleet utilization for the quarter based on Canadian Association of Oilwell Drilling Contractors ("CAODC") criteria was 72%, an aggregate of 1,096 operating days compared with 441 days and an 80% usage rate in the comparable quarter of the prior year. The reduction in utilization was solely caused by wet weather inhibiting access to drilling locations. For the first 9 months of 2004, again based on CAODC data, the drilling division has drilled 1,876 wells or 1.32 million meters of hole. By these measures, Savanna is now the third largest driller operating in Canada based on total wells and meters drilled, while maintaining its status as the top driller based on meters and wells drilled per rig both during the quarter and to date in 2004.

Service rig revenue for the quarter was $4.9 Million, a 5% decrease compared with the same period in 2003. Service rig hours were 9,293 in the third quarter of 2004 compared to 10,609 achieved in the same quarter of 2003, a decrease of 12%. The fleet size remained constant at 16 rigs. Consistent with the drilling division, utilization for heavier oilfield service equipment was constrained to a greater degree as a result of the wet weather conditions.

Wireline services revenues increased by 27% to $9.2 Million from $7.2 Million in the third quarter of 2003, achieved by an expansion of its average fleet size from 22 units for the third quarter of 2003 to 26 units for the comparable quarter in 2004 and an increase in utilization from 67% to 75%. Utilization increases are attributable to a corresponding increase in Canadian oilfield activity particularly in respect of shallow gas. Average revenues per ticket decreased by 5% while the number of jobs increased by 33% over the comparable quarter in 2003.

Consistent with its previously announced increased capital budget, Savanna anticipates exiting 2004 with 22 hybrid coiled tubing drilling rigs, 18 service rigs and 30 wireline units. A 31st wireline unit has been added for 2005 in response to customer demand. In addition, 4 more first generation hybrid coiled tubing drilling rigs have been ordered for delivery in the first half of 2005. Savanna anticipates continued expansion of its drilling fleet and additional rigs will be ordered once the market potential of the second generation rig has been assessed. Strong activity is expected to continue throughout the remainder of 2004 and 2005.