WESTERN ENERGY SERVICES CORP. RELEASES FOURTH QUARTER AND YEAR END 2017 FINANCIAL AND OPERATING RESULTS FOR IMMEDIATE RELEASE: February 21, 2018

Transcription

1 WESTERN ENERGY SERVICES CORP. RELEASES FOURTH QUARTER AND YEAR END 2017 FINANCIAL AND OPERATING RESULTS FOR IMMEDIATE RELEASE: February 21, 2018 CALGARY, ALBERTA Western Energy Services Crp. ( Western r the Cmpany ) (TSX: WRG) annunces the release f its furth quarter and year end 2017 financial and perating results. Additinal infrmatin relating t the Cmpany, including the Cmpany s financial statements and management s discussin and analysis as at and fr the years ended December 31, 2017 and 2016 will be available n SEDAR at Nn-Internatinal Financial Reprting Standards ( Nn-IFRS ) measures and abbreviatins fr standard industry terms are included in this press release. All amunts are denminated in Canadian dllars (CDN$) unless therwise identified. Furth Quarter 2017 Operating Results: Operating Revenue in the furth quarter f 2017 benefited frm the imprved ecnmic cnditins and resulted in higher custmer spending and a crrespnding increase in demand fr Western s services. Furth quarter Operating Revenue increased by $17.7 millin (r 42%) t $59.3 millin in 2017 as cmpared t $41.6 millin in the same perid f the prir year. In the cntract drilling segment, Operating Revenue ttalled $45.9 millin in the furth quarter f 2017 as cmpared t $29.0 millin in the furth quarter f 2016, an increase f $16.9 millin (r 58%); while in the prductin services segment, Operating Revenue ttalled $13.4 millin fr the three mnths ended December 31, 2017 as cmpared t $12.7 millin in the same perid f the prir year, an increase f $0.7 millin (r 5%). Higher utilizatin in the cntract drilling segment in the furth quarter f 2017, and imprved pricing in Canada, psitively impacted Operating Revenue in the cntract drilling and prductin services segments as described belw: Drilling rig utilizatin Operating Days ( Drilling Rig Utilizatin ) in Canada averaged 38% in the furth quarter f 2017 cmpared t an average f 28% in the furth quarter f 2016, reflecting a 1,000 basis pints ( bps ) increase. Furth quarter 2017 Drilling Rig Utilizatin represented a premium f 1,000 bps t the Canadian Assciatin f Oilwell Drilling Cntractrs ( CAODC ) industry average f 28%, whereas in the furth quarter f 2016, Drilling Rig Utilizatin f 28% represented a 300 bps premium t the industry average. The increase in the Cmpany s utilizatin premium t the industry average in the furth quarter f 2017 is attributable t: the quality f Western s drilling rig fleet, which meets current custmer demands; the ability f the Cmpany s rig crews; the effrts by the Cmpany s marketing grup t repsitin rigs fr existing and new custmers; and a number f Western s custmers increasing their capital budgets in 2017, as cmpared t 2016 when custmer spending was limited. These factrs, cmbined with imprved market cnditins, resulted in higher demand fr the Cmpany s drilling rigs and a 13% imprvement in Operating Revenue per Billable Day in the furth quarter f 2017, as cmpared t the same perid in the prir year; In the United States, five f the Cmpany s six drilling rigs perated during the quarter, tw f which were wrking n lng term cntracts, resulting in Drilling Rig Utilizatin f 63% in the furth quarter f 2017, as cmpared t 29% in the same perid f the prir year. In the furth quarter f 2017, Operating Revenue per Billable Day in the United States decreased by 11% as cmpared t the furth quarter f 2016 mainly due t changes in the mix f rigs wrking n spt rates versus lng term cntracts, as cmpared t the same perid f the prir year when the Cmpany had ne rig wrking n a lng term legacy cntract fr much f the quarter at a favrable day rate; and Well servicing utilizatin f 26% in the furth quarter f 2017 cmpared t 27% in the same perid f the prir year. Imprved market cnditins resulted in an 11% increase in hurly rates during the furth quarter f 2017, as cmpared t the same perid in the prir year, mainly due t increased demand fr fully crewed rigs, which resulted in higher hurly rates in Lwer utilizatin was ffset by imprved pricing, which led t a $0.8 millin (r 8%) increase in well servicing Operating Revenue in the perid. Furth quarter Adjusted EBITDA imprved by $6.6 millin (r 187%) t $10.1 millin in 2017 as cmpared t $3.5 millin in the furth quarter f The year ver year change in Adjusted EBITDA is due t increased activity in the cntract drilling segment and imprved pricing in Canada, which was partially ffset by lwer pricing in the United States and decreased well servicing activity. Administrative expenses, excluding depreciatin and stck based cmpensatin, increased by $0.8 millin (r 16%) t $5.8 millin, as cmpared t $5.0 millin in the furth quarter f 2016, mainly due t higher emplyee related csts. The Cmpany incurred a net lss f $5.0 millin in the furth quarter f 2017 ($0.06 per basic cmmn share) as cmpared t a net lss f $14.5 millin in the same perid in 2016 ($0.20 per basic cmmn share). The change can be attributed t the fllwing: A $6.6 millin increase in Adjusted EBITDA due t higher utilizatin in the cntract drilling segment and imprved pricing fr cntract drilling and well servicing in Canada, partially ffset by lwer cntract drilling pricing in the United States and decreased well servicing activity;

2 A $1.6 millin increase in incme tax recveries mainly due t the decrease in the federal crprate tax rates in the United States frm 35.0% t 21.0%, which was signed int law in December 2017; A $0.6 millin increased gain in ther items, which mainly cnsist f gains and lsses n freign exchange and asset sales; A $0.4 millin decrease in depreciatin expense mainly due t certain equipment being fully depreciated ver the last fur quarters; and A $0.2 millin decrease in stck based cmpensatin expense as fewer unvested stck ptins and restricted share units were utstanding in the quarter. Furth quarter 2017 capital expenditures f $5.9 millin included $3.0 millin f expansin capital and $2.9 millin f maintenance capital. In ttal, capital spending in the furth quarter f 2017 increased by $3.2 millin frm the $2.7 millin incurred in the furth quarter f The Cmpany incurred expansin capital mainly related t drilling rig upgrades and the purchase f ilfield rental equipment in the furth quarter f 2017, as well as necessary maintenance capital related t the higher activity in the perid Operating Results: Operating Revenue in 2017 benefited frm imprved market cnditins and higher custmer spending which resulted in a crrespnding increase in demand fr Western s services. In 2017, Operating Revenue increased by $102.1 millin (r 87%) t $219.0 millin as cmpared t $116.9 millin in In the cntract drilling segment, Operating Revenue ttalled $166.7 millin in 2017, an increase f $87.8 millin (r 111%), as cmpared t $78.9 millin in 2016, and included $6.4 millin in shrtfall cmmitment revenue in 2017, as cmpared t $1.8 millin in shrtfall cmmitment revenue in 2016; while in the prductin services segment, Operating Revenue ttalled $52.5 millin, an increase f $14.4 millin (r 38%) as cmpared t $38.1 millin in Higher utilizatin in all divisins and higher pricing in Canada in 2017 as cmpared t 2016, impacted Operating Revenue in the cntract drilling and prductin services segments as described belw: Drilling Rig Utilizatin in Canada f 37% fr the year ended December 31, 2017, cmpared t 17% fr the prir year, reflects a 2,000 bps increase. Drilling Rig Utilizatin f 37% in 2017 represents an 800 bps premium t the CAODC industry average, whereas in 2016, Drilling Rig Utilizatin f 17% was n par with the CAODC industry average f 17%. The increase in the Cmpany s utilizatin premium in 2017 is attributable t: the quality f Western s drilling rig fleet which meets current custmer demands; the ability f the Cmpany s rig crews; the effrts by the Cmpany s marketing grup t repsitin rigs fr existing and new custmers; and a number f Western s custmers increasing their capital budgets in 2017, as cmpared t 2016 when custmer spending was limited. These factrs, cmbined with imprved market cnditins, resulted in higher demand fr the Cmpany s drilling rigs in Additinally, Western cntinued t increase its market share in Western s 50 drilling rigs in Canada represent apprximately 8% f the rigs registered with the CAODC, hwever Western s ttal perating days in 2017, represented 10% f the ttal industry Operating Days reprted by the CAODC. The factrs nted abve led t imprved Operating Revenue per Billable Day in 2017 particularly in the latter part f the year, resulting in a 3% year ver year imprvement as cmpared t In the United States, five f the Cmpany s six drilling rigs perated during the perid, tw f which were wrking n lng term cntracts, resulting in Drilling Rig Utilizatin f 52% fr the year ended December 31, 2017, as cmpared t 24% in the prir year. Operating Revenue per Billable Day in the United States decreased by 12% fr the year ended December 31, 2017, due t changes in the mix f rigs wrking n spt rates versus lng term cntracts, as cmpared t the prir year when the Cmpany had ne rig wrking n a lng term legacy cntract fr much f the year at a favrable day rate; and Well servicing utilizatin f 26% fr the year ended December 31, 2017 cmpared t 20% in the prir year. Cntinued imprvements in the ecnmic envirnment helped increase activity year ver year. Additinally, well servicing hurly rates increased by 5% in 2017, as cmpared t 2016, as activity cntinued t imprve thrughut Imprved utilizatin and pricing led t a $12.0 millin (r 39%) year ver year increase in well servicing Operating Revenue. Adjusted EBITDA increased by $29.9 millin (r 518%) t $35.7 millin in 2017 as cmpared t $5.8 millin in The year ver year increase in Adjusted EBITDA is due t higher activity acrss all divisins, a $4.6 millin increase in shrtfall cmmitment revenue in 2017, and the Cmpany s ability t safely and efficiently reactivate equipment and crews withut incurring significant csts, including rigs that had been idle fr an extended perid f time. These factrs were aided by imprved pricing in Canada, which was partially ffset by lwer pricing in the United States. Administrative expenses in 2017, excluding depreciatin and stck based cmpensatin, increased by $2.6 millin (r 13%) t $22.6 millin as cmpared t $20.0 millin in The increase in administrative expenses is mainly due t higher emplyee related csts, cupled with ne time prfessinal fees incurred in the perid. The Cmpany incurred a net lss f $37.4 millin fr the year ended December 31, 2017 ($0.48 per basic cmmn share) as cmpared t a net lss f $62.0 millin fr the year ended December 31, 2016 ($0.84 per basic cmmn share). The decrease in net lss can be attributed t the fllwing:

3 A $29.9 millin increase in Adjusted EBITDA due t higher utilizatin in bth the cntract drilling and prductin services segments, imprved cntract drilling and well servicing pricing in Canada, and increased shrtfall cmmitment revenue; A prir perid lss n asset decmmissining f $5.2 millin in the cntract drilling segment; A $1.8 millin decrease in stck based cmpensatin expense as fewer f the Cmpany s unvested stck ptins and restricted share units were utstanding in the perid; and A $0.6 millin decrease in finance csts mainly due t the Cmpany reducing its available Credit Facilities in 2016, resulting in lwer standby fees. Offsetting the abve mentined items are the fllwing: An increase f $7.0 millin in depreciatin expense due t the Cmpany changing frm unit f prductin t straight line depreciatin fr drilling and well servicing rigs effective April 1, 2016; A $2.9 millin increase in ther items which ttaled a lss f $1.4 millin in 2017, as cmpared t a gain f $1.5 millin in 2016, and include $1.6 millin in transactin csts related t the unsuccessful acquisitin f Savanna Energy Services Crp. ( Savanna ) in 2017, as well as gains and lsses n freign exchange and asset sales; and A $3.4 millin decrease in incme tax recvery due t imprved earnings befre taxes, ffset by the decrease in the United States federal crprate tax rates frm 35.0% t 21.0%, which was signed int law in December Capital expenditures f $18.1 millin fr the year ended December 31, 2017 included $9.4 millin f expansin capital and $8.7 millin f maintenance capital. In ttal, capital spending fr 2017 increased by $13.4 millin frm the $4.7 millin incurred in The Cmpany incurred expansin capital mainly related t drilling rig upgrades in 2017, which have cntributed t the increase in cash flw frm perating activities in the year, as well as necessary maintenance capital related t the higher activity in the perid. On Octber 17, 2017 the Cmpany clsed the fllwing financing transactins: A lending agreement with Alberta Investment Management Crpratin ( AIMC ) prviding fr a $215.0 millin secnd lien secured term lan facility (the Secnd Lien Facility ). The Secnd Lien Facility was available in a single draw which was made subsequent t December 31, 2017, and was used t repay a prtin f the Cmpany s utstanding 7⅞% senir unsecured ntes (the Senir Ntes ). Interest is payable semi-annually, at a rate f 7.25% per annum, n January 1 and July 1 each year. Amrtizatin payments equal t 1% f the principal amunt are payable annually in quarterly installments beginning n July 1, 2018, with the balance due n January 31, In cnjunctin with the Secnd Lien Facility, Western issued t AIMC apprximately 7.1 millin warrants t purchase cmmn shares f Western, at an exercise price f $1.77 per cmmn share, which expire n Octber 17, 2020; A private placement with AIMC f 9.1 millin cmmn shares f Western at a price f $1.25 per cmmn share, fr aggregate grss prceeds f $11.4 millin; A bught deal ffering f cmmn shares f Western with a syndicate f underwriters where the underwriters purchased 9.1 millin cmmn shares f Western at a price f $1.25 per cmmn share, fr aggregate grss prceeds f $11.4 millin; and Cmpleted a number f amendments t its Credit Facilities, including the fllwing: Extended the maturity f its syndicated revlving credit facility (the Revlving Facility ) and its cmmitted perating facility (the Operating Facility and tgether the Credit Facilities ) t December 17, 2020; Increased the limit f the Revlving Facility frm $50.0 millin t $70.0 millin, while the $10.0 millin Operating Facility limit remained unchanged; The interest cverage and current rati cvenants were permanently remved; A debt service cverage rati was added, which is calculated based n EBITDA, as defined in the Credit Facilities agreement, divided by the sum f interest expense and scheduled lng term debt principal repayments. This cvenant will nly be tested when the utstanding principal under the Credit Facilities exceeds $40.0 millin r the net bk value f prperty and equipment is less than $400.0 millin. If applicable, the debt service cverage rati must meet r exceed 1.0 as at and prir t March 31, 2018, 1.25 as at June 30, 2018, 1.5 as at September 30, 2018 and December 31, 2018, and 2.0 thereafter; and The Revlving Facility cntinues t include an accrdin feature, whereby an incremental $50.0 millin f brrwing wuld be available, subject t the apprval f the lenders. Subsequent t December 31, 2017, n January 31, 2018 the Cmpany cmpleted the ne time draw f $215.0 millin n its Secnd Lien Facility. The prceeds frm the Secnd Lien Facility draw, alng with cash n hand and funds available under the Credit Facilities were used t redeem the Senir Ntes at their par value f $265.0 millin n February 1, 2018.

4 Selected Financial Infrmatin (stated in thusands, except share and per share amunts) Three mnths ended December 31 Year ended December 31 Financial Highlights Change Change Revenue 66,515 45,126 47% 238, ,438 91% Operating Revenue (1) 59,255 41,649 42% 218, ,907 87% Grss Margin (1) 15,886 8,507 87% 58,310 25, % Grss Margin as a percentage f Operating Revenue 27% 20% 35% 27% 22% 23% Adjusted EBITDA (1) 10,067 3, % 35,695 5, % Adjusted EBITDA as a percentage f Operating Revenue 17% 8% 113% 16% 5% 220% Cash flw frm perating activities (800) (1,327) (40%) 24,641 16,631 48% Capital expenditures 5,912 2, % 18,132 4, % Net lss (4,974) (14,509) (66%) (37,445) (61,973) (40%) -basic net lss per share (0.06) (0.20) (70%) (0.48) (0.84) (43%) -diluted net lss per share (0.06) (0.20) (70%) (0.48) (0.84) (43%) Weighted average number f shares -basic 88,812,216 73,795,896 20% 77,601,827 73,703,437 5% -diluted 88,812,216 73,795,896 20% 77,601,827 73,703,437 5% Outstanding cmmn shares as at perid end 92,175,598 73,795,944 25% 92,175,598 73,795,944 25% (1) See Nn-IFRS measures included in this press release. Three mnths ended December 31 Year ended December 31 Operating Highlights (1) Change Change Cntract Drilling Canadian Operatins: Cntract drilling rig fleet: -Average active rig cunt % % -End f perid (2%) (2%) Operating Revenue per Billable Day 18,807 16,657 13% 17,558 (3) 16,984 (4) 3% Operating Revenue per Operating Day 21,100 18,811 12% 19,446 (3) 19,058 (4) 2% Operating Days 1,774 1,317 35% 6,801 3, % Drilling rig utilizatin - Billable Days 43% 32% 34% 41% 20% 105% Drilling rig utilizatin - Operating Days 38% 28% 36% 37% 17% 118% CAODC industry average utilizatin (2) 28% 25% 12% 29% 17% 71% United States Operatins: Cntract drilling rig fleet: -Average active rig cunt % % -End f perid % % Operating Revenue per Billable Day (US$) 18,038 20,197 (11%) 19,198 21,805 (12%) Operating Revenue per Operating Day (US$) 21,265 23,440 (9%) 22,338 25,166 (11%) Operating Days % % Drilling rig utilizatin - Billable Days 75% 34% 121% 61% 28% 118% Drilling rig utilizatin - Operating Days 63% 29% 117% 52% 24% 117% Prductin Services Well servicing rig fleet: -Average active rig cunt (3%) % -End f perid Service rig Operating Revenue per Service Hur % % Service Hurs 15,650 16,182 (3%) 62,946 47,305 33% Service rig utilizatin 26% 27% (4%) 26% 20% 30% (1) See Nn-IFRS measures included in this press release. (2) Surce: The Canadian Assciatin f Oilwell Drilling Cntractrs ( CAODC ). The CAODC industry average is based n Operating Days divided by ttal available days. (3) Excludes shrtfall cmmitment revenue frm take r pay cntracts f $6.4 millin fr the year ended December 31, (4) Excludes shrtfall cmmitment revenue frm take r pay cntracts f $1.8 millin fr the year ended December 31, 2016.

5 Financial Psitin at (stated in thusands) December 31, 2017 December 31, 2016 Change Wrking capital 62,866 51,118 23% Prperty and equipment 652, ,567 (8%) Ttal assets 760, ,525 (4%) Lng term debt 265, ,070 - Western is an ilfield service cmpany fcused n three cre business lines: cntract drilling, well servicing and ilfield rental equipment services. Western prvides cntract drilling services thrugh its divisin, Hrizn Drilling ( Hrizn ) in Canada, and its whlly wned subsidiary, Stneham Drilling Crpratin ( Stneham ) in the United States ( US ). Western prvides well servicing and ilfield rental equipment services in Canada thrugh its whlly wned subsidiary Western Prductin Services Crp. ( Western Prductin Services ). Western Prductin Services divisin, Eagle Well Servicing ( Eagle ) prvides well servicing peratins, while its divisin, Aer Rental Services ( Aer ) prvides ilfield rental equipment services. Financial and perating results fr Hrizn and Stneham are included in Western s cntract drilling segment, while financial and perating results fr Eagle and Aer are included in Western s prductin services segment. Western has a drilling rig fleet f 56 rigs specifically suited fr drilling hrizntal wells f increased cmplexity. Western is currently the fifth largest drilling cntractr in Canada, based n the CAODC registered rigs, with a fleet f 50 rigs perating thrugh Hrizn. Of the Canadian fleet, 23 are classified as Cardium class rigs, 19 as Mntney class rigs and eight as Duvernay class rigs. As cmpared t the Cardium class rigs, the Mntney class rigs have a larger hklad, while the Duvernay class rigs have the largest hklad allwing the rig t supprt mre drill pipe dwnhle. Additinally, Western has six drilling rigs perating thrugh Stneham, including five Duvernay class triple drilling rigs. Western is als the fifth largest well servicing cmpany in Canada with a fleet f 66 rigs perating thrugh Eagle. Western s ilfield rental equipment divisin, which perates thrugh Aer, prvides ilfield rental equipment fr hydraulic fracturing services, well cmpletins and prductin wrk, cil tubing and drilling services. Crude il and natural gas prices impact the cash flw f Western s custmers, which in turn impacts the demand fr Western s services. The fllwing table summarizes average crude il and natural gas prices, as well as average freign exchange rates fr the three mnths ended December 31, 2017 and 2016 and fr the years ended December 31, 2017 and Average crude il and natural gas prices (1)(2) Three mnths ended December 31 Year ended December Change Change Crude Oil West Texas Intermediate (US$/bbl) % % Western Canadian Select (CDN$/bbl) % % Natural Gas 30 day Spt AECO (CDN$/mcf) (46%) % Average freign exchange rates (2) US dllar t Canadian dllar (5%) (2%) (1) See Abbreviatins included in this press release. (2) Surce: Blmberg West Texas Intermediate ( WTI ) n average imprved in the furth quarter f 2017 as cmpared t the third quarter f 2017, increasing by 15%, and was 12% higher cmpared t the same perid in the prir year. Fr Western s Canadian custmers, the impact f the weaker US dllar when translating WTI int Canadian dllars, resulted in nly a 7% increase fr the three mnths ended December 31, 2017, as cmpared t the same perid in the prir year. Canadian heavy crude pricing imprved in the furth quarter f 2017, as Western Canadian Select ( WCS ) n average increased by 4% as cmpared t the third quarter f 2017, and by 7% as cmpared t the same perid f the prir year. The prices fr cndensate and natural gas liquids ( NGL ) in Canada als imprved in the furth quarter f 2017, as cmpared t the same perid in the prir year. Fr the year ended December 31, 2017, WTI was 17% higher than the prir year, WCS n average increased by 26% in 2017 as cmpared t 2016, and the price fr cndensate and NGLs in Canada als imprved year ver year. When translating WTI int the Canadian dllar equivalent fr the year ended December 31, 2017, the weaker US dllar resulted in a 15% increase as cmpared t the year ended December 31, Canadian natural gas prices, such as AECO, declined quarter ver quarter, decreasing n average by 1% frm the third quarter f 2017 t the furth quarter f 2017 and decreasing by 46% cmpared t the furth quarter f Additinally, fr the year ending December 31, 2017, AECO increased by 2% as cmpared t 2016.

6 Imprved market cnditins in 2017, particularly the imprved crude il and cndensate prices, has led t a crrespnding increase in the demand fr ilfield services in bth Canada and the United States. The CAODC reprted that fr drilling in Canada, the ttal number f Operating Days in the Western Canadian Sedimentary Basin ( WCSB ) increased apprximately 54% in 2017 as cmpared t Similarly, as reprted by Baker Hughes, a GE Cmpany, the average number f active drilling rigs in the United States increased apprximately 71% in 2017 as cmpared t Outlk Currently, 37 f Western s drilling rigs are perating. Fur f Western s 56 drilling rigs (r 7%) are under lng term take r pay cntracts, with ne expected t expire in 2018, tw expected t expire in 2019 and ne expected t expire in These cntracts each typically generate between 250 and 350 Billable Days per year. Western s capital budget fr 2018 remains unchanged and is expected t ttal $20 millin, including capital spending carry frward fr 2017 f apprximately $2 millin, with $8 millin allcated fr expansin capital and $12 millin fr maintenance capital. Western believes the 2018 capital budget prvides a prudent use f cash resurces and will allw it t maintain its premier drilling and well servicing rig fleets, while remaining respnsive t custmer requirements. Western will cntinue t manage its peratins in a disciplined manner and make any required adjustments t its capital prgram as custmer demand changes. Since hitting 10 year lws in the first quarter f 2016, crude il prices, while remaining well belw previus highs, have imprved. As such, Nrth American drilling rig cunts recvered in 2017 and the Cmpany is expecting stable year ver year activity levels in Imprving grss margin cntinues t be a pririty fr the Cmpany and, as has been demnstrated ver the last three quarters, Western is wrking t implement higher rates with each rig that is awarded wrk. Prices fr Western s services remain belw histrical levels and will cntinue t impact Adjusted EBITDA and cash flw frm perating activities in the near term. Hwever, Western s variable cst structure and a prudent capital budget will aid in preserving balance sheet strength. As at December 31, 2017, in additin t $48.8 millin in cash and cash equivalents, Western had $80.0 millin f available credit under its Credit Facilities, which d nt mature until December 17, Western repaid the $265.0 millin in utstanding Senir Ntes at par in the first quarter f 2018 with prceeds frm the $215.0 millin Secnd Lien Facility, alng with cash n hand and funds available under the Credit Facilities. Cmpleting these financing transactins has lwered Western s ttal debt and leverage metrics, decreased Western s effective interest rates and extended the maturity n all f Western s lng term debt. Additinally, Western will save apprximately $5.3 millin annually in cash interest expense, due t the decreased ttal debt level and lwer interest rate n the Secnd Lien Facility, as cmpared t the Senir Ntes. Oilfield service activity in Canada will be affected by the develpment f resurce plays in Alberta and nrtheast British Clumbia which will be impacted by pipeline cnstructin, increased envirnmental regulatins including the implementatin f a carbn tax in Alberta, and decreased freign investment int Canada. Currently, the largest challenges facing the ilfield service industry are cntinued custmer spending cnstraints as a result f lwer cmmdity prices and the increasing challenge f staffing field crews, particularly in the well servicing divisin. Western s view is that its mdern drilling and well servicing rig fleets, reputatin, and disciplined cash management prvide a cmpetitive advantage which will enable the Cmpany t manage thrugh the current slwdwn in ilfield service activity Furth Quarter and Year End Financial and Operating Results Cnference Call and Webcast Western has scheduled a cnference call and webcast t begin prmptly at 9:00 a.m. MT (11:00 a.m. ET) n Thursday, February 22, The cnference call dial-in number is A live webcast f the cnference call will be accessible n Western s website at by selecting Investrs, then Webcasts. Shrtly after the live webcast, an archived versin will be available fr apprximately 14 days. An archived recrding f the cnference call will als be available apprximately tw hurs after the cmpletin f the call until March 8, 2018 by dialing , passcde

7 Nn-IFRS Measures Western uses certain measures in this press release which d nt have any standardized meaning as prescribed by Internatinal Financial Reprting Standards ( IFRS ). These measures, which are derived frm infrmatin reprted in the cnslidated financial statements, may nt be cmparable t similar measures presented by ther reprting issuers. These measures have been described and presented in this press release in rder t prvide sharehlders and ptential investrs with additinal infrmatin regarding the Cmpany. These Nn-IFRS measures are identified and defined as fllws: Operating Revenue Management believes that in additin t revenue, Operating Revenue is a useful supplemental measure as it prvides an indicatin f the revenue generated by Western s principal perating activities, excluding flw thrugh third party charges such as rig fuel, which at the custmer s request may be paid fr initially by Western, then recharged in its entirety t Western s custmers. Grss Margin Management believes that in additin t net incme, Grss Margin is a useful supplemental measure as it prvides an indicatin f the results generated by Western s principal perating activities prir t cnsidering administrative expenses, depreciatin and amrtizatin, stck based cmpensatin, hw thse activities are financed, the impact f freign exchange, hw the results are taxed, hw funds are invested, and hw nncash items and ne-time gains and lsses affect results. The fllwing table prvides a recnciliatin f revenue under IFRS, as disclsed in the cnslidated statements f peratins and cmprehensive incme, t Operating Revenue and Grss Margin: Three mnths ended December 31 Year ended December 31 (stated in thusands) Operating Revenue Drilling 45,906 28, ,660 78,887 Prductin services 13,362 12,710 52,456 38,064 Less: inter-cmpany eliminatins (13) (26) (128) (44) 59,255 41, , ,907 Third party charges 7,260 3,477 19,187 7,531 Revenue 66,515 45, , ,438 Less: perating expenses (66,933) (53,308) (245,352) (157,212) Add: Depreciatin perating 16,238 16,551 65,227 57,903 Stck based cmpensatin perating Grss Margin 15,886 8,507 58,310 25,762 Adjusted EBITDA Management believes that in additin t net incme, earnings befre interest and finance csts, taxes, depreciatin and amrtizatin, ther nncash items and ne-time gains and lsses ( Adjusted EBITDA ) is a useful supplemental measure as it prvides an indicatin f the results generated by the Cmpany s principal perating segments similar t Grss Margin but als factrs in the cash administrative expenses incurred in the perid. Operating Earnings Management believes that in additin t net incme, Operating Earnings is a useful supplemental measure as it prvides an indicatin f the results generated by the Cmpany s principal perating segments similar t Adjusted EBITDA but als factrs in the depreciatin expense incurred in the perid.

8 The fllwing table prvides a recnciliatin f net lss under IFRS, as disclsed in the cnslidated statements f peratins and cmprehensive incme, t earnings befre interest and finance csts, taxes, depreciatin and amrtizatin ( EBITDA ), Adjusted EBITDA and Operating Lss: Three mnths ended December 31 Year ended December 31 (stated in thusands) Net lss (4,974) (14,509) (37,445) (61,973) Add: Finance csts 5,598 5,478 21,950 22,522 Incme tax recvery (6,842) (5,183) (18,555) (21,955) Depreciatin perating 16,238 16,551 65,227 57,903 Depreciatin administrative ,213 1,569 EBITDA 10,304 2,702 32,390 (1,934) Add: Stck based cmpensatin perating Stck based cmpensatin administrative ,689 3,135 Lss n asset decmmissining ,490 Other items (700) (83) 1,356 (1,549) Adjusted EBITDA 10,067 3,506 35,695 5,775 Subtract: Depreciatin perating (16,238) (16,551) (65,227) (57,903) Depreciatin administrative (284) (365) (1,213) (1,569) Operating Lss (6,455) (13,410) (30,745) (53,697) Net Debt The fllwing table prvides a recnciliatin f lng term debt under IFRS, as disclsed in the cnslidated balance sheets t Net Debt: (stated in thusands) December 31, 2017 December 31, 2016 Lng term debt 265, ,070 Current prtin f lng term debt Less: cash and cash equivalents (48,825) (44,597) Net Debt 216, ,157 Defined Terms: Average active rig cunt (cntract drilling): Calculated as drilling rig utilizatin Billable Days multiplied by the average number f drilling rigs in the Cmpany s fleet fr the perid. Average active rig cunt (prductin services): Calculated as service rig utilizatin multiplied by the average number f service rigs in the Cmpany s fleet fr the perid. Billable Days: Defined as Operating Days plus rig mbilizatin days. Drilling rig utilizatin Operating Days (r Drilling Rig Utilizatin ): Calculated based n Operating Days divided by ttal available days. Drilling rig utilizatin Billable Days: Calculated based n Billable Days divided by ttal available days. Operating Days: Defined as cntract drilling days, calculated n a spud t rig release basis. Service Hurs: Defined as well servicing hurs cmpleted. Service rig utilizatin: Calculated based n Service Hurs divided by available hurs, being 10 hurs per day, per well servicing rig, 365 days per year in 2017 (2016: 366 days). Cntract Drilling Rig Classificatins: Cardium class rig: Defined as any cntract drilling rig which has a ttal hklad less than r equal t 399,999 lbs (r 177,999 dan). Mntney class rig: Defined as any cntract drilling rig which has a ttal hklad between 400,000 lbs (r 178,000 dan) and 499,999 lbs (r 221,999 dan). Duvernay class rig: Defined as any cntract drilling rig which has a ttal hklad equal t r greater than 500,000 lbs (r 222,000 dan). Abbreviatins: Barrel ( bbl ); Basis pint ( bps ): A 1% change equals 100 basis pints and a 0.01% change is equal t ne basis pint; Canadian Assciatin f Oilwell Drilling Cntractrs ( CAODC ); DecaNewtn ( dan );

9 Internatinal Financial Reprting Standards ( IFRS ); Natural Gas Liquids ( NGL ); Punds ( lbs ); Thusand cubic feet ( mcf ); West Texas Intermediate ( WTI ); and Western Canadian Sedimentary Basin ( WCSB ). Frward-Lking Statements and Infrmatin This press release cntains certain statements r disclsures relating t Western that are based n the expectatins f Western as well as assumptins made by and infrmatin currently available t Western which may cnstitute frward-lking infrmatin under applicable securities laws. All infrmatin and statements cntained herein that are nt clearly histrical in nature cnstitute frward-lking infrmatin, and the wrds may, will, shuld, culd, expect, intend, anticipate, believe, estimate, prpse, plan, predict, ptential, cntinue, r the negative f these terms r ther cmparable terminlgy are generally intended t identify frward-lking infrmatin. Such infrmatin represents the Crpratin s internal prjectins, estimates r beliefs cncerning, amng ther things, an utlk n the estimated amunts and timing f capital expenditures, anticipated future debt levels and revenues r ther expectatins, beliefs, plans, bjectives, assumptins, intentins r statements abut future events r perfrmance. This infrmatin invlves knwn and unknwn risks, uncertainties and ther factrs that may cause actual results r events t differ materially frm thse anticipated in such frward-lking infrmatin. In particular, frward-lking infrmatin in this press release includes, but is nt limited t, statements relating t cmmdity pricing; the future demand fr and utilizatin f the Cmpany s services and equipment; the pricing fr the Cmpany s services and equipment; the terms f existing and future drilling cntracts in Canada and the US and the revenue resulting therefrm (including the number f Operating Days typically generated frm the Cmpany s cntracts); the Cmpany s expansin and maintenance capital plans fr 2018; the Cmpany s liquidity needs including the ability f current capital resurces t cver Western s financial bligatins and the 2018 capital budget; the use and availability f the Cmpany s Credit Facilities; pricing fr Western s services and impact n Adjusted EBITDA; the Cmpany s ability t maintain certain cvenants under its Credit Facilities; the future declaratin f dividends; expectatins as t the increase in crude il transprtatin capacity thrugh pipeline develpment; the ptential impact f changes t envirnmental laws and regulatins and the implementatin f a carbn tax in Alberta; the expectatin f cntinued freign investment int the Canadian crude il and natural gas industry; expectatins relating t prducer spending, and the Cmpany s ability t find and maintain enugh field crew members and the Cmpany s change t its depreciatin assumptins. The material assumptins in making the frward-lking statements in this press release include, but are nt limited t, assumptins relating t, demand levels and pricing fr ilfield services; demand fr crude il and natural gas and the price and vlatility f crude il and natural gas; pressures n cmmdity pricing; the cntinued business relatinships between the Cmpany and its significant custmers; crude il transprt and pipeline apprval and develpment; the Cmpany s ability t finance its peratins; the effects f seasnal and weather cnditins n peratins and facilities; the cmpetitive envirnment t which the varius business segments are, r may be, expsed in all aspects f their business; the ability f the Cmpany s varius business segments t access equipment (including spare parts and new technlgies); changes in laws r regulatins; currency exchange fluctuatins; the ability f the Cmpany t attract and retain skilled labur and qualified management; the ability t retain and attract significant custmers; and general business, ecnmic and market cnditins. Althugh Western believes that the expectatins and assumptins n which such frward-lking statements and infrmatin are based n are reasnable, undue reliance shuld nt be placed n the frward-lking statements and infrmatin as Western cannt give any assurance that they will prve t be crrect. Since frward-lking statements and infrmatin address future events and cnditins, by their very nature they invlve inherent risks and uncertainties. Actual results culd differ materially frm thse currently anticipated due t a number f factrs and risks. These include, but are nt limited t, the risk that the demand fr ilfield services will nt cntinue t imprve fr the remainder f 2018 and that cmmdity prices will remain lw, and ther general industry, ecnmic, market and business cnditins. Readers are cautined that the freging list f risks, uncertainties and assumptins are nt exhaustive. Additinal infrmatin n these and ther risk factrs that culd affect Western s peratins and financial results are included in Western s annual infrmatin frm which may be accessed thrugh the SEDAR website at The frward-lking statements and infrmatin cntained in this press release are made as f the date heref and Western des nt undertake any bligatin t update publicly r revise any frward-lking statements and infrmatin, whether as a result f new infrmatin, future events r therwise, unless s required by applicable securities laws. Fr mre infrmatin, please cntact: Alex R.N. MacAusland, President and CEO, r Jeffrey K. Bwers, Senir VP Finance and CFO at