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ENSIGN RESOURCE SERVICE GROUP INC.
900, 400 – Fifth Avenue S.W., Calgary, Alberta T2P 0L6, Canada
Tel (403) 262-1361 Fax (403) 262-8215 www.ensigngroup.com
2002 2002
1 Corporate Profile
2 Ensign’s Global Vision
4 Letter to Shareholders
10 Ensign’s Commitment to Safety and the Environment
12 Management’s Discussion & Analysis
30 Management’s Report
30 Auditors’ Report
31 Consolidated Financial Statements
34 Notes to the Consolidated Financial Statements
40 10 Year Financial Information
40 Quarterly Financial Information
41 Share Trading Summary
42 Corporate Governance
43 Additional Information
45 Operating Management
48 Corporate and Field Offices
IBC Corporate Information
Highlights ($000s, except per share data) 2002 2001
F I N A N C I A L
Revenue 651,768 767,669
Net income 51,743 100,828
Per share 0.70 1.37
Cash flow 100,064 132,087
Per share 1.35 1.79
Shareholders’ equity 475,476 432,059
Long-term debt, net of current portion 7,689 –
Weighted average number of shares outstanding 74,197,152 73,673,402
Return on average shareholders’ equity 11.4% 26.2%
2002 2001
O P E R A T I N G
Number of drilling rigs
Canada 144 154
United States 71 69
International (includes workover rigs) 29 –
Number of well servicing rigs and coiled tubing units
Canada 139 139
Wells drilled
Canada 4,001 4,564
United States 821 874
International 124 –
Rig utilization rate (%)
Canada (146 marketed rigs) 37.1 48.1
United States (50 marketed rigs) 48.2 66.7
International (29 marketed rigs) 68.1 –
Well servicing utilization rate (%) (139 marketed rigs/units) 31.4 36.1
Corporate Information
Designed and Produced by Result Inc.Printed in Canada
DIRECTORS
Jack DonaldChairman of the BoardParkland Industries Ltd.
N. Murray Edwards 2,3
PresidentEdco Financial Holdings Ltd.
James B. Howe 1,2,3
PresidentBragg Creek Financial Consultants Ltd.
Donald Jewitt 1,2
PresidentVeteran Resources Inc.
Len Kangas 2
Independent Businessman
Selby PorterPresidentEnsign Resource Service Group Inc.
John Schroeder 1,3
Vice President FinanceParkland Industries Ltd.
Kenneth J. Skirka (nominee)Independent Businessman
George S. WardIndependent Businessman
Committee Members1 Audit2 Corporate Governance3 Compensation
CORPORATE MANAGEMENT
N. Murray EdwardsChairman
Selby PorterPresident
Glenn DagenaisVice President Finance andChief Financial Officer
Bob GeddesVice President and Chief Operating Officer – Canadian Drilling
Ed KautzVice President and Chief Operating Officer – United States Drilling
Ken PicardVice President and Chief Financial Officer – International Drilling
Garry WhiteVice President and Chief Operating Officer – International Drilling
Tom MedvedicTreasurer
Bruce MoyesCorporate Controller
HEAD OFFICE
900, 400 - Fifth Avenue S.W.Calgary, AB T2P 0L6Telephone (403) 262-1361Facsimile (403) 262-8215
BANKERS
Royal Bank of CanadaWells Fargo Bank, N.A.HSBC Bank Australia LimitedNational Australia Bank Limited
AUDITORS
PricewaterhouseCoopers LLP
LEGAL COUNSEL
Burnet, Duckworth & Palmer LLP
STOCK EXCHANGE LISTING
The Toronto Stock ExchangeSymbol: ESI
TRANSFER AGENT
Computershare Trust Company of Canada
WEBSITE
www.ensigngroup.com
NOTICE OF ANNUAL AND SPECIAL MEETING
The Ensign Group’s Annual and Special Meeting of Shareholders will be held on Thursday, May 22,2003, at 3:00 p.m. M.S.T. at the Calgary PetroleumClub, 319 – 5th Avenue S.W., Calgary, Alberta. Allshareholders are invited to attend, but if unable, werequest the form of proxy be signed and returned.
ENSIGN RESOURCE SERVICE GROUP INC. 1
ENSIGN RESOURCE SERVICE GROUP INC. is a cost-effective, high-value oilfield service provider with
technically and geographically diverse operations. Headquartered in Calgary, Alberta, Canada, its operations
span western Canada, the Rocky Mountain region of the United States and California, and with its 2002
acquisition of Oil Drilling & Exploration Limited, internationally from a base in Sydney, New South Wales,
Australia. The Ensign Group has accumulated an extensive fleet of equipment to meet the technical and
operational challenges associated with providing oilfield services in almost every type of terrain and climate.
C A N A D A U N I T E D S TAT E S I N T E R N AT I O N A L
Ensign Drilling Partnership
• Ensign Drilling
• Tri-City Drilling
• Champion Drilling
Enhanced Petroleum
Services Partnership
• Enhanced Drill Systems
• Chandel Equipment Rentals
Caza Drilling Inc.
Caza Drilling (California) Inc.
–
Oil Drilling &
Exploration Limited
–
Rockwell Servicing Partnership
Opsco Energy Industries Ltd.
–Oil Drilling &
Exploration Limited
– –
CONTRACTDRILLING
UNDERBALANCEDDRILLING
AND RENTALEQUIPMENT
WELLSERVICING
MANUFACTURINGAND PRODUCTION
SERVICES
O P E R A T I N G D I V I S I O N S
E N S I G N R E S O U R C E S E R V I C E G R O U P I N C .
2 ENSIGN RESOURCE SERVICE GROUP INC.
Ensign’s Global Vision
C O N T R A C T D R I L L I N G
0-1,000 1,001-2,000 2,001-3,000 3,001-4,000 4,001-5,000 5,001+ Total
C A N A D A
Ensign 1
2
2
3
–
–
–
–
–
1
8
–
5
4
5
–
6
5
24
3
1
5
28
5
20
–
6
–
–
16
20 10 – – – 32
55
14 14 – – – 30
14 42 20 3 2 82
Rig Depth (metres)
Tri-City
Champion
U N I T E D S T A T E S
Caza California
Caza Rockies
I N T E R N A T I O N A L
OD&E – Workover
OD&E
S E R V I C E R I G C L A S S I F I C A T I O N
Coil TubingUnits Slant Single Skid Single Mobile Single Mobile Double Medium & Heavy
Doubles Total
C A N A D A
Rockwell 13 10 6 80 20 10 139
E N S I G N A R O U N D T H E W O R L D
Experience inregion (years) 50 35 49
3,400 900 1,050
144 71 24
126 – 5
13 – –
420.1 159.3 72.4
Employees
Number of drilling rigs
Number of service rigsNumber of coiltubing units2002 revenue ($ millions)
CANADA UNITEDSTATES INTERNATIONAL
Canada United States South America North Africa Mozambique Middle East S.E. Asia AustraliaNew Zealand
In 2002, the Ensign Group
entered the international oil
and natural gas oilfield services
market through the acquisition
of Oil Drilling & Exploration
Limited, based in Sydney,
Australia. This acquisition
provides the Ensign Group
with an exciting new platform
for further growth.
4 ENSIGN RESOURCE SERVICE GROUP INC.
ON ENSIGN GROUP IN 2002
We chose the theme “Transcending Borders” for this
Annual Report because it captures the significance of
our acquisition of Australian Oil & Gas Corporation
Limited and its wholly-owned subsidiary Oil Drilling
& Exploration Limited (OD&E) in July 2002. With
this transaction, the Ensign Group became a truly
international company. Although our operating base has
included the United States since our very successful
acquisition of Caza Drilling in 1994, the OD&E
acquisition opens the door to land-based drilling
activities and operations around the world. It signifies
the move to new, growth-oriented international markets
and was our single greatest accomplishment of the year.
Becoming a global entity is a strategy and an opportu-
nity we’ve been considering for a number of years. It
was a decision that required a great deal of thought
and analysis to ensure there was a fit between serving
our core markets here in North America and opening
the door to new opportunities abroad. Our motivation
was continued growth with due consideration to our
historical business risk profile, and the continuing
creation of shareholder value. We recognize that as the
North American sedimentary basins mature, we must
continually adapt to changing business demands by
scouting out new opportunities to grow our Company.
We pride ourselves on our understanding of the supply
and demand dynamics that affect our business perform-
ance. The Ensign Group has always been a strong
leader in the oilfield services industry, particularly with
regard to our ability to grow organically by developing
innovative and technically superior field products and
services. We believe that there is growth potential for
Ensign in the international marketplace, and as a global
entity we are in a better position to capitalize on the
expertise we have developed in Canada and the United
States over the years. The rationale and outcome of
the acquisition of OD&E will be further discussed later
in this message.
To summarize activity in 2002, the North American
energy industry was stalled during most of the year. As
we anticipated, our financial and operating results
reflect this slowdown that began in the last half of
2001 and continued throughout most of 2002. Several
factors significantly contributed to this reduced activity
including the rationalization of assets by our customers,
significant merger and acquisition activity during the
year, and the accompanying rapid growth of the energy
trust business in the oil and natural gas sector, a
business that focuses on exploitation as opposed to
Letter to Shareholders
ENSIGN RESOURCE SERVICE GROUP INC. 5
exploration. This restructuring of the ownership of
assets was compounded by the uncertainty surrounding
the potential effects of ratification and implementation
of the Kyoto Accord in Canada. During the year, oil
and natural gas commodity prices fluctuated in a
volatile environment, which was exacerbated by a large
overhang of natural gas in storage following the
2001/2002 winter. By the end of 2002, oil and natural
gas commodity fundamentals improved, culminating in
higher than average prices. These attractive prices have
since encouraged exploration and production companies
to resume drilling, putting the Ensign Group to work at
utilization rates closer to historic levels.
ON OPERATIONAL DIVERSITY
Ensign Resource Service Group is a full service
drilling and well servicing contractor, operating in the
most prolific onshore crude oil and natural gas
producing areas in North America. Now, with a base
for international operations in Australia, the Ensign
Group has taken a significant step towards global
geographical diversity.
In Canada, the Ensign Drilling Partnership, comprised
of Ensign Drilling, Tri-City Drilling and Champion Drilling,
is the second largest drilling contractor in the country.
Together, these divisions own and operate 144 drilling
rigs. The fleet’s diversity is demonstrated by its varying
rig capabilities and drilling depths ranging from 400
metres (1,300 feet) to 6,000 metres (20,000 feet).
Becoming a global entity is a strategy and an opportunity we’ve
been considering for a number of years. It was a decision that
required a great deal of thought and analysis to ensure there
was a fit between serving our core markets here in North
America and opening the door to new opportunities abroad.
6 ENSIGN RESOURCE SERVICE GROUP INC.
Our underbalanced drilling business, Enhanced Drill
Systems, employs a fleet of 14 complete underbal-
anced drilling packages in the Canadian market,
including two additional packages commissioned in the
2002/2003 winter season. In addition, our oilfield
rental division, Chandel Equipment Rentals, provides
equipment that is closely associated to drilling and
production operations including specialty drill pipe,
blow-out preventers, loaders, tanks, pumps and rig
matting. In January 2003, this rental business was
expanded through an acquisition of rental equipment
from Canadian Select Energy West.
Our Canadian oil and natural gas well servicing divi-
sion, Rockwell Servicing Partnership, now incorporates
all of the Ensign Group’s Canadian well servicing
operations. Rockwell owns 126 well servicing rigs and
13 coiled tubing units. During 2002, an oversupply of
equipment in the industry, combined with a shortage
of labour, constrained our operating capacity to
80 rigs/units. During the year, Rockwell continued to
differentiate itself from the competition through its
program to convert many of its mobile single well
servicing rigs to “free-standing”, a cost effective
feature which also adds a level of convenience for
our customers. This free-standing feature has given
Rockwell Servicing an edge in this market.
To complete the suite of products and services provided
to our Canadian customers, the Ensign Group offers
custom designed and manufactured oilfield production
equipment, including separators, dehydrators and line-
heaters that are used in the natural gas production
process. We offer these products through our Opsco
Energy Industries division. Opsco also offers mechanical
wireline, production testing and well optimization
services to our customers primarily in the Western
Canadian Sedimentary Basin (WCSB), and over the
last two seasons, in the Arctic region of Canada.
Opsco continued to expand its wireline group with
the acquisition of two units from Freedom Wireline
in the last quarter of 2002. This acquisition has
opened the door to opportunities in the high pressure,
sour gas market.
Caza Drilling Inc. (Caza Rockies) and Caza Drilling
(California) Inc. (Caza California) form the Ensign Group’s
United States oilfield services arm. These business
units operate under the direction of Caza Drilling Inc.’s
head office located in Denver, Colorado. Caza Rockies
provides contract drilling services in the Rocky
Mountain region of the United States, a producing
region that is growing in its importance with respect to
the supply of natural gas in the United States. Caza
California provides contract drilling services throughout
the California and Nevada market area. The Ensign
Group actively marketed 50 drilling rigs in the United
States during 2002, 38 in the Rocky Mountain region
and 12 in California. In late 2002, Caza Rockies
completed an acquisition, backed by a long-term
contract, of three drilling rigs and related equipment
from one of its long-term customers, further strength-
ening the relationship between the two companies
while increasing our foothold in the Utah market.
ENSIGN RESOURCE SERVICE GROUP INC. 7
Our international division, OD&E, with its head office in
Sydney and its operations base in Adelaide, has grown
from a pioneer of oil and gas drilling in Australia to the
international entity it is today. OD&E currently has 24
drilling rigs and five workover rigs, and has operations
in Australia, Southeast Asia, the Middle East, Northern
and Southern Africa, South America, and New Zealand.
OD&E customers benefit from its 49 years of experience
in the international market; for Ensign Group, this
made OD&E a very attractive platform for future growth
outside North America.
ON SAFETY AND CUSTOMER SERVICE
From a safety standpoint, 2002 was a challenging
year. The challenges of 2002 underline the importance
of the resources directed towards safety and training
to ensure a safe work environment, and that priorities
and attitudes regarding our safety program must be
rigorously promoted and enforced. This requires a
cultural shift in the mindset of everyone associated
with the oilfield services industry, including the
management and all employees of our firm. We are
working hard to communicate and teach the absolute
necessity of accepting and adopting safety as a way of
life for each of our employees, crews and customers.
In 2002, we expanded several safety initiatives.
These include upgraded orientation programs for new
employees and training programs for new and existing
employees that will enhance the knowledge and skills
of each individual, promote the mentoring of the
unskilled, and help mold safety into a unified team
effort. In addition, we have adopted a behaviour-based
safety program to instill the importance of leading by
example, recognizing and being aware of hazards and
the means to mitigate them, and developing an attitude
that supports the ‘right’ of the individual to identify and
refuse unsafe work.
The Ensign Group has committed significant additional
funds for these training and personnel development
programs. In addition, we continue to use applied
engineered solutions to constantly improve the safety
of our equipment. We strive to mitigate all risks
associated with the worksite, including getting to and
from work. Furthermore, at Ensign Group we recognize
that our safety record can only be improved with a
commitment from all employees to these initiatives.
8 ENSIGN RESOURCE SERVICE GROUP INC.
ON OPPORTUNISTIC GROWTH
Growing our Company, both organically and through
acquisitions, has always been a key strategy for the
Ensign Group. In 2001, we expanded our service offer-
ing organically through the innovation of the Automated
Drilling Rig (ADR™), four of which were commissioned
during 2002. In addition, during 2001, we partnered to
establish two oilfield service companies in northern
Canada. During 2002, one drilling rig, one coiled tubing
unit and one production testing unit were operated in
the Arctic region of Canada through these new entities.
In 2002, we continued to execute our opportunistic
growth strategy to generate exceptional value for our
shareholders. We examined potential acquisitions using
the disciplined and focused approach to managing for
success – a strategy for which we are known. We identify
our ideal acquisition as one with a complementary
asset base, a platform to deploy our innovative
technologies, and room to grow the business based on
the core values established by the Ensign Group.
Two years ago, the Ensign Group acquired a 16
percent interest in Australian Oil & Gas Corporation
Limited, the publicly listed parent of OD&E. Since
taking this initial position, the Ensign Group gained
further insight into OD&E’s operations. This period
convinced us that this acquisition would be mutually
beneficial for both companies. We could see, for
example, that OD&E offered several synergies; its
assets round out Ensign’s skill set and asset portfolio
and vice versa; and its management team and
employees possess impressive credentials. Their
acumen mirrored the Ensign Group’s, and we believed
that together we would make a very strong team. The
integration of OD&E into the Ensign Group has been
a success not only for shareholders but also for
employees, all of whom were retained and now have
broader horizons of opportunity. The integration was
further assisted by the fact that the two organizations
enjoy similar operating cultures. We believe that the
acquisition of OD&E represents good value – OD&E’s
rig fleet is in excellent condition and there were no
negative surprises following the closing of the
transaction. In 2003, we will continue to solidify the
relationship with our newest division and our place in
the international drilling and well servicing arena.
ON FINANCIAL AND OPERATIONAL DISCIPLINE
The Ensign Group is recognized for its ability to maintain
financial discipline through the ups and downs of the
energy cycle. This year, the industry downturn
contributed to decreased financial and operational
results. Revenue totaled $651.8 million in 2002,
a decrease of 15 percent from 2001. However, our
balance sheet remains one of the strongest in our
industry, which has been achieved by continuously and
consistently demonstrating financial discipline.
To date, we would rate our acquisition of OD&E as
highly successful. The increase in fourth quarter
revenues is largely attributed to the newest member of
our group, and we believe that this positive impact will
only be enhanced over time.
Our understanding of the energy industry dynamics
allows us to recognize when and where capital is best
ENSIGN RESOURCE SERVICE GROUP INC. 9
spent. In 2002, we determined the acquisition of
OD&E would be the most beneficial way to grow share-
holder value. Capital project spending during 2002 was
reduced from 2001, in line with the reduced demand
for oilfield services. The cyclicality of the oilfield
services industry dictates that we continuously control
operating costs, and opportunistically pursue activities
and acquisitions that add value to our bottom line.
OUTLOOK
The 2003 fiscal year has the potential to be a very
good year for the Ensign Group. North American natural
gas storage levels have been reduced below the
longer-term average due to the prolonged cold winter
across the continent. This fact, combined with the high
rate of depletion of most natural gas reservoirs and
the increased emphasis on stable sources of energy,
should lead to an increase in oilfield services activity
during 2003. The activity levels experienced during the
first quarter of 2003 confirm this trend. For 2003, the
Canadian Association of Oilwell Drilling Contractors is
estimating 17,532 wells to be drilled in the WCSB.
This is an increase of 21 percent over the actual
number of wells drilled during 2002.
In the coming year, we will continue to focus on creating
a more safety-minded culture, which includes the
ongoing development of innovative concepts to make
rig work safer. Another priority for the Ensign Group in
2003 is securing our international presence, first by
ensuring that our newest division, OD&E, is on firm
ground in all aspects of its business, and then by
bidding on contracts that present a good fit with our
operations and skill set. In North America, we will take
advantage of the opportunities afforded by strong
natural gas commodity fundamentals.
As we embark on new challenges and transcend borders
around the world, we would like to thank our employees,
Directors and shareholders for their continued support
of the Ensign Group.
N. Murray Edwards Selby PorterChairman President
April 17, 2003
14.43 19.26 30.36 25.93 26.07
Crude Oil Pricing(U.S. $/bbl – WTI)
98 99 00 01 02
2.16 2.32 4.31 3.94 3.36
Natural Gas Pricing(U.S. $/mmbtu – NYMEX)
98 99 00 01 02
4.50 11.17 18.50 13.35 16.66
Share Performance($/share)
CloseHigh/Low
98 99 00 01 02
task should be performed and how equipment should
be operated. Skill is the ability to operate all equipment
competently and follow procedures safely. Attitude is
the behavioural quality a person has towards specific
tasks as well as a willingness to follow regulations and
ensure others do so as well. Knowledge and skill can
be taught and learned, but attitudes are unique to
each employee and are developed over time. In the
last year, the Ensign Group has significantly stepped
up its training and evaluation programs to increase
these three competencies.
10 ENSIGN RESOURCE SERVICE GROUP INC.
Ensign’s Commitment to Safety and the Environment
SAFETY
The nature of the oilfield services business involves
inherent risks, which the Ensign Group constantly
strives to reduce and manage. From its inception, the
Ensign Group has been committed to continuously
monitoring and upgrading its safety policies and main-
taining its equipment to the highest standards to help
ensure a safe working environment for all employees.
Safety in the oilfield services industry involves three
key competency measures: knowledge, skill and attitude.
Knowledge is the fundamental understanding of how a
ENSIGN RESOURCE SERVICE GROUP INC. 11
Behaviour-Based Safety has become a way of life at
the Ensign Group. This initiative requires modifying
behaviours by providing on-going coaching and
correction of at risk behaviours. In doing so, the
Company reduces the likelihood of its employees finding
themselves in hazardous situations. The Ensign Group
focuses on its Behaviour-Based Safety initiative to
improve day-to-day routines for each of its employees,
and will continue to dedicate the necessary funds to
ensure positive change occurs.
From its inception, the
Ensign Group has been
committed to continuously
monitoring and upgrading
its safety policies and
maintaining its equipment
to the highest standards
to help ensure a safe
working environment for
all employees.
The high employee turnover rates that are inherent in
the oilfield services industry challenge our ability to
instill the importance of safety among our seasonal
workforce. In 2002, the Ensign Group initiated several
safety measures, including a more comprehensive
driller training program. The fundamentals of this
improved program revolve around the three key compe-
tency measures noted above and involve more
structured training for drillers. Managers have become
more involved in evaluating the knowledge, skill and
attitude of crewmembers, as well as constructively
addressing any shortcomings.
The Ensign Group continues to develop engineered
solutions that allow for even greater improvements in
safety across all aspects of drilling and well servicing
operations. The Ensign Group is a leader in the devel-
opment of automated drilling technology, as evidenced
by its introduction of the Automated Drilling Rig (ADR™)
last year. This technology has been very well received
by customers, and has eliminated the need for rig
crews to handle drill pipe directly, a function historically
prone to causing injury.
ENVIRONMENT
At the Ensign Group, all of our employees are commit-
ted to upholding the highest of environmental standards
and practices. The Ensign Group strives to ensure each
of its divisions demonstrate the resolve to reduce,
reuse, recycle and reclaim materials used during the
provision of oilfield services. Our ongoing efforts to
develop innovative technologies help crews to operate
oilfield services equipment in an environmentally-
friendly manner at all times.
12 ENSIGN RESOURCE SERVICE GROUP INC.
This Management’s Discussion and Analysis for Ensign Resource
Service Group Inc. (the Company or the Ensign Group) and all of its
subsidiaries and partnerships is supplemental to the consolidated
financial statements and related notes contained in the Company’s
2002 Annual Report. The consolidated financial statements for the
year ended December 31, 2002 were prepared in accordance with
generally accepted accounting principles in Canada.
This Management’s Discussion and Analysis contains forward-
looking statements based upon current expectations that involve
a number of business risks and uncertainties. The factors that
could cause results to differ materially include, but are not limited
to, national and economic conditions, oil and natural gas prices,
weather conditions and the ability of oil and natural gas companies
to raise capital or other unforeseen conditions which could impact
on the use of services supplied by the Company.
Management’s Discussion & Analysis
In 2002, the Ensign Group expanded its operations to include
Australian-based international drilling contractor OD&E. This
acquisition demonstrates the Company’s diligence in pursuing
an opportunistic growth strategy, and provides the Ensign Group
with a valuable platform for future growth in the global oilfield
services marketplace.
During 2002, drilling and well servicing activity declined
in North America, continuing the overall industry slow-
down that began in the second half of 2001. During
2002, 15,393 wells were drilled in the Western
Canadian Sedimentary Basin (WCSB). This represents
a decrease of 13 percent from the 17,647 wells drilled
during 2001. The Company’s United States divisions
also felt the impact of reduced drilling activity during
2002, particularly in the Rocky Mountain region.
Outside of North America, 2002 was a year where
drilling and well servicing activity remained relatively
consistent compared to 2001.
OVERVIEW OF 2002
The Ensign Group’s four core strengths – diverse
operations; opportunistic growth strategy; commitment
to safety and customer service; and financial strength
and discipline – continued to set the standards by
which the Company operates in its three market
segments: Canadian, United States and International
oilfield services. In 2002, the Ensign Group expanded
its operations to include Australian-based international
drilling contractor OD&E. This acquisition demonstrates
the Company’s diligence in pursuing an opportunistic
growth strategy, and provides the Ensign Group with a
valuable platform for future growth in the global oilfield
services marketplace.
ENSIGN RESOURCE SERVICE GROUP INC. 13
CONSOLIDATED RESULTS
For the year ended December 31, 2002, net income of $51.7 million ($0.70 per share) was 49 percent lower than
the $100.8 million ($1.37 per share) earned during the year ended December 31, 2001. Consolidated revenues for
2002 totaled $651.8 million, $115.9 million lower than the $767.7 million of revenue generated during 2001. Cash
flow for the year ended December 31, 2002 was $100.1 million ($1.35 per share), 24 percent lower than cash flow
of $132.1 million ($1.79 per share) generated during the year ended December 31, 2001. The decreases in revenue,
net income and cash flow reflect a period of reduced activity in the oilfield services industry, a period which was
characterized by lower equipment utilization and lower revenue rates compared to the preceding year.
Return on average shareholders’ equity in 2002 was 11.4 percent compared to 26.2 percent for 2001. Despite the
significant reduction in oilfield services activity during the year, the Ensign Group was able to provide a relatively
strong return for the 2002 fiscal year.
REVIEW OF OPERATIONS
CANADIAN OPERATIONS
The Ensign Group is Canada’s second largest drilling contractor and third largest well servicing contractor. The
Ensign Group operates in every oil and natural gas producing area in the WCSB. The Company’s Canadian oilfield
service operations are comprised of land-based contract drilling, underbalanced drilling, oilfield equipment rental,
well servicing, equipment manufacturing, wireline and production testing services.
Contract Drilling
The Ensign Group’s Canadian fleet of 144 drilling rigs at December 31, 2002 is operated through the Ensign
Drilling Partnership, which comprises three separate divisions: Ensign Drilling and Tri-City Drilling – based in Nisku,
Alberta; and Champion Drilling – based in Brooks, Alberta. In 2001 and 2002, the Company continued with its
program to modernize its drilling rig fleet. This program has resulted in the re-engineering and, in large part, the
0.72 0.42 1.19 1.37 0.70
Net Income Per Share(Basic – $)
98 99 00 01 02
48.8 29.8 87.0 100.8 51.7
Net Income($ millions)
98 99 00 01 02
14 ENSIGN RESOURCE SERVICE GROUP INC.
replacement of various rig components with the latest technology. The 2001 program to refurbish and upgrade nine
drilling rigs, including the commissioning of four ADR™ rigs, was completed in 2002. The 2002 program included the
refurbishment of an additional three drilling rigs in its Canadian fleet. Also during 2002, Ensign Drilling constructed
a modern state-of-the-art drilling rig subject to a long-term contract with a major customer.
In conjunction with the rig refurbishments performed during 2001 and 2002, the Company decommissioned ten
older technology drilling rigs during 2002, reducing the number of marketed drilling rigs from a high of 154 during
the early part of 2002, to 144 at December 31, 2002. Of the 144 drilling rigs marketed at December 31, 2002,
38 were triples, 76 were doubles and 30 were singles.
The Ensign Group’s Canadian drilling rig fleet offers customers both quality and flexibility, and encompasses the
complete spectrum of oil and natural gas drilling depths – from approximately 400 metres (1,300 feet) to more than
6,000 metres (20,000 feet). The mobility characteristics of a drilling contractor’s fleet are critical to its competitive
nature. The Ensign Group’s rig fleet meets the highest standards for mobility. In addition, the Ensign Group’s
Canadian drilling rig fleet is configured to accommodate the requirements of the latest drilling technology and
processes, such as horizontal and underbalanced drilling technology, slant drilling, and the horizontal re-entry of
existing wells.
RIG DEPTH CAPABILITIES
Depth (metres) Ensign Tri-City Champion Total % of Fleet
0 – 1,000 1 2 2 5 3
1,001 – 2,000 14 14 20 48 33
2,001 – 3,000 42 14 10 66 47
3,001 – 4,000 20 – – 20 14
4,001 – 5,000 3 – – 3 2
5,001 + 2 – – 2 1
Total 82 30 32 144 100
18,176 20,071 28,386 25,649 19,974
Canadian Drilling(Operating Days)
98 99 00 01 02
39.8 40.1 54.6 48.1 37.1
Canadian Drilling(Rig Utilization – %)
98 99 00 01 02
9,744 10,605 16,485 17,647 15,3932,852 3,991 4,980 4,564 4,001
Wells Drilled in Canada(wells drilled)
EnsignIndustry
98 99 00 01 02
ENSIGN RESOURCE SERVICE GROUP INC. 15
Through its three divisions, the Ensign Drilling Partnership drilled 4,001 wells, encompassing approximately 4.2
million metres (13.8 million feet), during 2002. During 2001, the Ensign Drilling Partnership drilled 4,564 wells,
encompassing approximately 4.8 million metres (15.7 million feet). The Ensign Group’s Canadian drilling divisions
accounted for approximately 26 percent of all drilling in the WCSB in both 2002 and 2001, demonstrating the
Company’s ability to maintain market share during a period of reduced industry activity levels.
The Ensign Group’s Canadian drilling divisions combined to record 19,974 operating days in 2002, down 22 percent
from the 25,649 operating days recorded in 2001. The rig utilization rate for the Ensign Drilling Partnership was 37.1
percent in 2002, a decrease of 11 percentage points from the 48.1 percent utilization rate attained during 2001.
Ensign Drilling continues to be an industry leader in the provision of specialized drilling services to exploration and
production companies. All of the 82 rigs in this division are capable of performing horizontal drilling, underbalanced
drilling and horizontal re-entry services. With regard to the Company’s 2001 program to re-engineer nine drilling
rigs, five of these rigs were deployed in the Ensign Drilling division, including one ADR™. In addition, during 2002,
the Company constructed a new telescoping double drilling rig, complete with pipe handling automation similar to
features found on the ADR™ design. This drilling rig is operating under a long-term contract with a major customer.
The Ensign Drilling division decommissioned four drilling rigs during 2002. Ensign Drilling drilled 1,203 wells
representing 1.8 million metres (5.9 million feet) in 2002, compared to 1,490 wells representing 2.2 million
metres (7.2 million feet) drilled in 2001. Rig utilization in this division during 2002 was 33.3 percent compared to
47.2 percent in 2001.
Tri-City Drilling specializes in shallow and intermediate-depth well drilling and operates drilling rigs primarily in northern
and central Alberta. The division’s fleet consisted of 30 drilling rigs at December 31, 2002. One of the newly
refurbished ADR™ rigs was deployed in the Tri-City Drilling division late in 2001. During 2002, three drilling rigs
were refurbished and six drilling rigs were decommissioned. Tri-City drilled 787 wells and 0.8 million metres
(2.6 million feet) during 2002, compared to 906 wells and 0.9 million metres (2.9 million feet) drilled in 2001. The
utilization rate for the Tri-City division’s equipment was 36.3 percent in 2002, compared to 43.2 percent in 2001.
At December 31, 2002, Champion Drilling’s fleet was comprised of 32 drilling rigs, including two ADR’s™ that were
constructed as part of the Company’s 2001 program to re-engineer nine drilling rigs. This division specializes in the
drilling of shallow natural gas wells in the southern Alberta and southwest Saskatchewan regions of the WCSB.
During 2002, Champion Drilling drilled 2,011 wells and 1.7 million metres (5.6 million feet), compared to 2,168
wells and 1.7 million metres (5.6 million feet) drilled in 2001. During 2002, Champion’s rig utilization rate was
48.9 percent, down from 56.1 percent in 2001.
16 ENSIGN RESOURCE SERVICE GROUP INC.
Underbalanced Drilling and Oilfield Equipment Rental Services
Enhanced Drill Systems, based in Red Deer, Alberta, was formed in the third quarter of 1999 through the purchase
of eight underbalanced drilling systems. These state-of-the-art operating units provide a completely self-contained
underbalanced drilling system including nitrogen generation, compression equipment and surface control systems.
By the end of 2001, this division had increased its equipment inventory to 12 complete underbalanced drilling
packages. During the fourth quarter of 2002, this division introduced the Genesis I underbalanced drilling package,
a state-of-the-art Programmable Logic Controller (PLC) controlled unit incorporating the latest computer data
acquisition systems and advanced safety features. The addition of two Genesis I packages brings the total number
of underbalanced drilling packages to 14 at December 31, 2002.
In addition to its underbalanced drilling operations, this division also operates an oilfield equipment rental business
under the name of Chandel Equipment Rentals. This rental business offers customers an extensive inventory of
specialty drill pipe, blow out preventers, loaders, tanks, pumps and rig matting. In January 2003, the Ensign Group
completed the acquisition of the oilfield rental equipment of Canadian Select Energy West, a division of Enerflex
Systems Ltd. This acquisition significantly increased the rental equipment available to the division.
Well Servicing
The Ensign Group is the third largest well servicing contractor in Canada, providing shallow to deep well servicing to
crude oil and natural gas producers throughout most of the WCSB. Effective January 1, 2002, the Ensign Group
consolidated all of its well servicing operations into the Rockwell Servicing Partnership. As a result, this division is
now better able to ensure operational consistency through a singular performance standard. In addition, marketing
and administration for the Company’s well servicing operations has become more streamlined and economical.
34.1 34.3 41.0 36.1 31.4
Well Servicing(Utilization – %)
98 99 00 01 02
156 187.1 209.1 184.1 159.7
Well Servicing(Operating Hours – 000s)
98 99 00 01 02
ENSIGN RESOURCE SERVICE GROUP INC. 17
The Rockwell Servicing Partnership offers all facets of well servicing, including completions, abandonments, produc-
tion workovers and bottom-hole pump changes. Nearly five years ago the Ensign Group acquired coiled tubing units,
enabling the Company to provide customers with an alternative well servicing technology. Rockwell Servicing has
expertise regarding the use of its fleet of 13 coiled tubing units for production optimization, cement squeezes,
drillouts, new drills, abandonments and the setting of bridge plugs.
CANADIAN RIG CLASSIFICATION – SERVICE RIGS
Total % of Fleet
Coiled tubing units 13 9
Slant single 10 7
Skid single 6 4
Mobile single 80 58
Mobile double 20 14
Medium double 5 4
Heavy double 5 4
Total 139 100
Of the 139 coiled tubing units and service rigs noted above, 27 are free-standing at March 31, 2003.
Compared to 2001, the number of well servicing rigs and coiled tubing units in the Ensign Group’s fleet held steady
at 139. During 2001 and 2002, the Rockwell Servicing Partnership converted 12 of its service rigs to free-stand-
ing. The conversion of a service rig to free-standing results in eliminating the need to anchor the rig, thereby making
moving and rigging-up more efficient, a characteristic highly desired by customers. As market conditions allow, the
Company will continue to convert a larger portion of its service rig fleet to free-standing.
The Ensign Group offers well servicing from operating stations located in Alberta at Ardmore, Brooks, Grande
Prairie, Red Deer and Lloydminster, and in Saskatchewan at Estevan. Rockwell Servicing Partnership amassed
159,713 operating hours in 2002, a decrease of 13 percent from 184,054 operating hours recorded in 2001.
During 2002, the Rockwell Servicing Partnership’s equipment utilization rate was 31.4 percent compared to 36.1
percent for the year ended December 31, 2001.
MANUFACTURING AND PRODUCTION SERVICES
The Ensign Group also provides manufacturing and production services to the oil and natural gas industry through
its Opsco Energy Industries division. Headquartered in Calgary, Alberta, Opsco has been a leading provider of
mechanical wireline, production well testing and well optimization services in the WCSB. In addition, Opsco
manufactures customized oil and natural gas production equipment.
18 ENSIGN RESOURCE SERVICE GROUP INC.
Manufacturing
Bringing 25 years of expertise to its customers, Opsco manufactures and refurbishes a wide range of oil and
natural gas production equipment, with an emphasis on the natural gas side of the business. Products include
separation and dehydration equipment, line heaters, metering skids, production satellites and patented automatic
pig launchers. Custom design and fabrication is performed by the engineering and technical group to meet the
specific requirements of each customer. Beginning in 2003, Opsco’s manufacturing operations will place greater
focus on the production of high-pressure, sour gas equipment. Opsco’s 35,000 square foot manufacturing facility,
located in Calgary, Alberta, includes engineering, welding shop fabrication, sheet metal buildings, sand blasting and
paint shops. To further elevate the level of service offered to customers, Opsco is currently reviewing a proposed
expansion of its manufacturing facility.
Production Testing
Opsco offers a full range of production testing services, from field operations to data reporting and well test analysis.
Opsco currently has 41 production testing units and more than 30 fully certified crews. With locations in Calgary,
Red Deer, Grande Prairie, Onoway and Lac La Biche, Alberta, Opsco is able to offer its customers reliable production
testing services across a wide geographical area. The Company continues to work toward its goal of expanding
Opsco’s capabilities in the high-pressure, high concentration, sour gas well testing market.
Wireline Services
Opsco’s 35 wireline units and auxiliary equipment are used to install and retrieve downhole pressure and tempera-
ture instrumentation, and operate subsurface completion and production tools. During the fourth quarter of 2002,
Opsco expanded its wireline operation through the acquisition of the assets of Freedom Wireline. With the addition
of the two wireline trucks and related assets associated with this acquisition, Opsco is able to provide an expanded
range of slick-line and, as a result of the acquisition, braided wireline services. Opsco’s wireline stations are
located in Brooks, Red Deer, Sedgewick, Drayton Valley, Grande Prairie, Whitecourt, Edson and Hinton, Alberta;
Moose Mountain, Saskatchewan; and Fort St. John, British Columbia.
ENSIGN RESOURCE SERVICE GROUP INC. 19
UNITED STATES OILFIELD SERVICES
The Ensign Group has two main operating subsidiaries in the United States: Caza Drilling Inc. (Caza Rockies) based
in Denver, Colorado, and Caza Drilling (California) Inc. (Caza California), based in Bakersfield, California. Caza
Rockies is the second largest and, for the last three years, the most active land-based drilling contractor in the
Rocky Mountain region of the United States. This area of the United States contains a number of oil and natural
gas basins, but is predominately known for natural gas production. Caza California’s contract drilling operations are
located primarily in the San Joaquin and Los Angeles basins of California.
4,981 3,031 9,623 11,953 8,759
U.S.Drilling(Operating Days)
98 99 00 01 02
Metres Drilled(thousands of metres)
U.S.Canada
800 600 1,700 1,800 1,6002,800 3,800 5,200 4,800 4,200
300
Int.
98 99 00 01 02
20 ENSIGN RESOURCE SERVICE GROUP INC.
RIG DEPTH CAPABILITIES
Depth (metres) Caza Rockies Caza California Total % of Fleet
0 - 1,000 – 3 3 4
1,001 - 2,000 1 3 4 6
2,001 - 3,000 28 5 33 47
3,001 - 4,000 20 5 25 35
4,001 - 5,000 6 – 6 8
Total 55 16 71 100
Caza Rockies
With its headquarters in Denver, Colorado, Caza Rockies owns 55 out of a total of approximately 174 drilling rigs
currently available in the Rocky Mountain region of the United States. Of the 55 drilling rigs owned, only 40 are
currently marketed as customer demand and crew availability effectively limit the utilization of this division’s
equipment. In 2002, drilling activity in the United States Rocky Mountain region decreased from the prior year due
to the impact of volatile commodity prices on customer demand and the limitations caused by the relative shortage
of natural gas transportation infrastructure in the region. During 2002, approximately 40 percent of Caza Rockies
revenues were derived from performance drilling contracts. Such contracts generally enable the Company to earn a
premium by accepting some of the risk associated with drilling a well. The Company minimizes its risk and exposure
under performance drilling contracts by utilizing its extensive operating knowledge in the areas being drilled.
During 2002, Caza Rockies drilled 488 wells representing 1.3 million metres (4.3 million feet) compared to 602
wells and 1.5 million metres (4.9 million feet) in 2001. Caza Rockies’ drilling rig utilization was 46.3 percent in 2002
compared to 69.8 percent in 2001. Of the nine drilling rigs re-engineered as part of the Company’s 2001 program to
upgrade its drilling rig fleet, one drilling rig was deployed in Caza Rockies late in 2001. Effective December 31,
2002, Caza Rockies acquired three drilling rigs and related equipment from Westport Oil and Gas Company, L.P.,
a long time customer of Caza Rockies. In addition, in December 2002, one drilling rig was re-deployed from the
Ensign Drilling Partnership to Caza Rockies in response to customer demand.
Caza California
At December 31, 2002, Caza California owned a total of 16 drilling rigs, of which 12 are actively marketed. Caza
California operates primarily in the heavy oil markets of central California. In addition, Caza California managed two
labour contracts in 2002. One contract operated a drilling rig in a fixed facility in Beverly Hills, California. The second
labour contract was acquired in the year to operate a drilling rig in the geyser fields of northern California.
In 2002, Caza California drilled 333 wells comprising 0.3 million metres (1.0 million feet), an increase from the
272 wells and 0.3 million metres (1.0 million feet) drilled in 2001. During 2002, activity levels for Caza California
remained relatively consistent with those of the prior year. Unlike the significant reduction in equipment utilization
experienced by Caza Rockies, the reduction in equipment utilization of Caza California was limited to approximately
three percentage points, falling from 57.3 percent for 2001 to 54.0 percent for 2002.
ENSIGN RESOURCE SERVICE GROUP INC. 21
INTERNATIONAL OPERATIONS
In July 2002, the Ensign Group acquired the international drilling contractor OD&E. This acquisition propelled the
Ensign Group into the international oilfield services marketplace and provides the Company with a platform for
future growth outside of North America. The integration of OD&E into the Ensign Group has been very successful,
with both companies sharing similar operating cultures and business practices. At December 31, 2002, OD&E
operated 24 drilling rigs and five workover rigs in Australia, Southeast Asia, the Middle East, Northern and Southern
Africa, South America and New Zealand. Of these 24 drilling rigs, 11 are triples, 10 are doubles and the remaining
three are singles.
RIG DEPTH CAPABILITIES
Depth (metres) Drilling Workover Total % of Fleet
0 - 1,000 – – – –
1,001 - 2,000 – – – –
2,001 - 3,000 8 1 9 31
3,001 - 4,000 5 – 5 17
4,001 - 5,000 5 4 9 31
5,001 + 6 – 6 21
Total 24 5 29 100
During 2002, oilfield services activity in the international marketplace did not experience the same reduction as
that experienced in North America. In the almost six months since its acquisition in July 2002, OD&E accumulated
3,635 contracted days. This translates into an equipment utilization rate of 68.1 percent. With the financial and
equipment resources of the Ensign Group supporting the operations of OD&E, this division will be better able to
increase its participation in the international oilfield services marketplace.
22 ENSIGN RESOURCE SERVICE GROUP INC.
FINANCIAL RESULTS
NET INCOME AND NET INCOME PER SHARE
2002 2001 Change Percent
Net income $ 51.7 $ 100.8 $ (49.1) (49)
Net income per share
Basic $ 0.70 $ 1.37 $ (0.67) (49)
Diluted $ 0.69 $ 1.34 $ (0.65) (49)
Net income for the year ended December 31, 2002 was $51.7 million, $49.1 million lower than the $100.8 million
of net income earned for the year ended December 31, 2001. Basic earnings per share decreased from $1.37 per
share for the year ended December 31, 2001 to $0.70 per share for the year ended December 31, 2002. The
decreases in net income and earnings per share reflect a market characterized by lower equipment utilization and
reduced margins.
REVENUE AND OILFIELD SERVICES EXPENSES
2002 2001 Change Percent
Revenue $ 651.8 $ 767.7 $ (115.9) (15)
Oilfield services expenses (498.3) (546.4) (48.1) (9)
$ 153.5 $ 221.3 $ (67.8) (31)
Gross margin 23.6% 28.8%
For the year ended December 31, 2002, total Company revenue decreased $115.9 million, or 15 percent, to $651.8
million. Of the $651.8 million in revenue generated during 2002, revenues earned in North America totaled $579.4
million and revenues from OD&E, the Company’s newly acquired international division, totaled $72.4 million. The
decrease in year-over-year revenues is attributed solely to reduced levels of oilfield services activity in North America.
During 2002, the oilfield services market in North America experienced a significant reduction in activity compared
to the previous year. During 2002, wells drilled in Western Canada totaled 15,393, representing 16,483,339
metres drilled. These amounts compare to 17,647 wells drilled and 19,272,632 metres drilled during 2001. This
reduction in drilling activity in Western Canada during 2002 serves as a proxy for the overall reduction in demand
for oilfield services throughout North America.
During 2002, the Company’s Canadian drilling divisions had an equipment utilization rate of 37.1 percent compared
to 48.1 percent for 2001, based on an average of 146 rigs. The Company’s well servicing and manufacturing and
production services divisions also experienced reductions in activity in 2002. Equipment utilization in the
Company’s well servicing operations fell six percentage points to 31.4 percent for 2002 based on 139 service rigs
and coiled tubing units, and revenues from the Company’s manufacturing and production services division fell
11 percent compared to the previous year. The reduction in Canadian equipment utilization rates, combined with
the downward pressure on revenue rates, resulted in Canadian revenues decreasing $126.4 million, from $546.5
million in 2001 to $420.1 million in 2002.
ENSIGN RESOURCE SERVICE GROUP INC. 23
In the United States, the reduction in equipment utilization during 2002 was even more pronounced than in
Canada. During 2002, the Company’s equipment utilization rate in the Rocky Mountain region of the United States
fell 24 percentage points to 46.3 percent, based on 38 marketed rigs. In California, the reduction in equipment
utilization was limited to a three-percentage point drop to 54.0 percent, based on 12 marketed rigs. The reduction
in the Company’s United States drilling utilization rates translated into a reduction in revenue of $61.9 million, from
$221.2 million in 2001 to $159.3 million in 2002.
The Company’s international operations, conducted through OD&E, generated revenues of $72.4 million in the
six months since its acquisition by the Ensign Group in July 2002. The utilization rate for the international division
was 68.1 percent, based on 29 rigs, since the date of acquisition in July 2002. During 2002, this division operated
in Indonesia, Oman, Argentina, Northern Africa, Australia and New Zealand, and has benefited from several
longer-term contracts.
The gross margin earned by the Ensign Group fell 5.2 percentage points from 28.8 percent in 2001 to 23.6 percent
in 2002. The decrease in the 2002 gross margin compared to the 2001 gross margin is primarily a result of two
factors. First, the substantial reduction in demand for oilfield services in North America during 2002 exerted a
significant downward pressure on North American revenue rates. Second, the margins generated by the Company’s
international operations are generally below those attained in North America. Although the Company’s international
division benefits from longer-term contracts, the cost structure associated with these contracts is different than the
cost structure associated with the Company’s North American operations. As such, the Company’s international
division benefits from a more stable and predictable revenue stream afforded by longer-term contracts; however,
the average margins have been lower than those experienced by the Company’s North American operations.
418.9 372.3 672.0 767.7 651.8
Revenue($ millions)
98 99 00 01 02
128.0 98.2 186.0 221.3 153.5
Gross Margin($ millions)
98 99 00 01 02
United States $159.3 million
Canada $420.1 million
International $72.4 million
2002 Revenue($ millions)
24 ENSIGN RESOURCE SERVICE GROUP INC.
The Ensign Group takes pride in maintaining its equipment to the highest industry standards. Equipment maintenance
expenses are a significant operating cost for the Company and, as such, management is diligent to ensure that
maintenance expenditures are incurred only on equipment that is operating or scheduled to operate. This discipline is
particularly important when the oilfield services industry moves into a period of reduced levels of activity, as was the
case in 2002. This strategy helps to ensure that expenditures are not incurred unnecessarily on idle equipment, and
therefore reduces the impact of an environment characterized by lower equipment utilization and revenue rates.
DEPRECIATION
2002 2001 Change Percent
Depreciation $ 39.2 $ 29.2 $ 10.0 34
Depreciation expense for 2002 was $39.2 million, an increase of $10.0 million, or 34 percent, over depreciation
expense of $29.2 million recorded in 2001. The most significant portion of the increase in depreciation expense
results from consolidating the operations of OD&E since its acquisition in July 2002. Of the $10.0 million increase
in depreciation expense in 2002, approximately $5.5 million relates to the newly acquired OD&E. The remainder of
the increase is a result of depreciation on the Company’s expanded asset base. During the latter half of 2001, the
Ensign Group incurred significant capital expenditures re-engineering nine drilling rigs. During the first half of 2002,
the Ensign Group re-engineered a further three drilling rigs. Depreciation expense on these refurbished assets
accounts for the remainder of the increase in depreciation for 2002 compared to 2001.
GENERAL AND ADMINISTRATIVE EXPENSE
2002 2001 Change Percent
General and administrative $ 29.7 $ 26.2 $ 3.5 13
For the year ended December 31, 2002, general and administrative expense increased $3.5 million to $29.7 million
(4.5 percent of revenue) compared to $26.2 million (3.4 percent of revenue) in the prior year. The increase in general
and administrative expense for the year relates almost entirely to the inclusion of OD&E in 2002. The increase in
general and administrative expense, expressed on a percentage of revenue basis, reflects the reduction in North
American oilfield services activity in 2002 compared to 2001.
INTEREST EXPENSE
2002 2001 Change Percent
Interest on long-term debt $ 0.3 $ 0.7 $ (0.4) (57)
Interest – other 1.6 0.4 1.2 300
$ 1.9 $ 1.1 $ 0.8 73
For the year ended December 31, 2002, interest expense on long-term debt decreased $0.4 million to $0.3 million.
In January 2002, the Company repaid the remaining $15.0 million of long-term debt that existed at December 31,
2001. As a result, between mid-January 2002 and July 11, 2002, the Ensign Group was long-term debt free. On
the acquisition of OD&E in July 2002, the Ensign Group assumed $14.7 million of long-term debt. The $0.3 million
of long-term interest expense recorded during 2002 relates to the assumed OD&E debt.
ENSIGN RESOURCE SERVICE GROUP INC. 25
Other interest expense in 2002 of $1.6 million was $1.2 million higher than other interest expense of $0.4 million
for the year ended December 31, 2001. Other interest expense includes interest charges relating to the Company’s
short-term operating facilities. The increase in other interest expense reflects the Company’s use of cash and
short-term facilities to finance the acquisition of OD&E.
INCOME TAXES
2002 2001 Change Percent
Current income tax $ 21.8 $ 61.9 $ (40.1) (65)
Future income tax 9.2 2.1 7.1 338
$ 31.0 $ 64.0 $ (33.0) (52)
Effective rate 37.4% 38.8%
Total income tax expense for the year ended December 31, 2002 was $31.0 million compared to $64.0 million for
the year ended December 31, 2001. Current income tax expense decreased $40.1 million, or 65 percent, from
$61.9 million in 2001, and reflects the significant reduction in pre-tax income in 2002 compared to 2001. The
higher proportion of future income tax to total income tax in 2002 compared to 2001 reflects the increased income
deferral relating to the Company’s Canadian drilling partnership, which was established in the fourth quarter of
2001. For 2002, the effective income tax rate was 37.4 percent compared to 38.8 percent for the preceding year.
The reduction in the effective tax rate in 2002 is a result of lower Canadian federal and Alberta tax rates as well as
the inclusion of OD&E, which has an effective tax rate of approximately 30 percent.
261.9 256.8 338.7 432.1 475.5
Shareholders’ Equity($ millions)
98 99 00 01 02
44.8 29.8 14.9 – 7.7
Long-Term Debt, Net of Current Portion($ millions)
98 99 00 01 02
26 ENSIGN RESOURCE SERVICE GROUP INC.
DIVIDENDS
2002 2001 Change Percent
Dividends $ 15.2 $ 14.5 $ 0.7 5
The Ensign Group, pursuant to its quarterly dividend policy, declared dividends on common shares totaling $15.2
million ($0.2050 per share) in 2002 compared to $14.5 million ($0.1967 per share) in 2001, reflecting a 4.2
percent increase in the annual dividend rate. A quarterly dividend of $4,120, being $0.055 per common share, was
declared on March 10, 2003 for payment on April 1, 2003 to all shareholders of record as of March 21, 2003.
FINANCIAL CONDITION AND LIQUIDITY
WORKING CAPITAL AND CASH PROVIDED BY OPERATIONS
For the year ended December 31, 2002, cash provided by operating activities of $100.1 million ($1.35 per share)
was $32.0 million, or 24 percent, lower than the $132.1 million ($1.79 per share) for the preceding year. The
decrease in cash flow results primarily from the decrease in pre-tax income due to lower activity levels and reduced
margins for much of 2002 compared to 2001. At December 31, 2001, the Company had working capital of $76.6
million compared to a working capital deficit of $33.6 million at December 31, 2002. The large decrease in the
Ensign Group’s year-over-year working capital position is due to the large increase in the use of the Company’s
operating credit facilities in 2002 compared to the prior year. The Company’s operating line of credit increased
$116.3 million to $116.8 million at December 31, 2002 compared to $0.5 million at December 31, 2001. As
previously mentioned, the increase results because of the Company’s use of its short-term operating facilities,
including the addition of a short-term $50.0 million facility, to help finance the acquisition of OD&E in July 2002.
1.08 0.88 1.45 1.79 1.35
Cash Flow Per Share(Basic – $)
98 99 00 01 02
73.1 62.5 105.9 132.1 100.1
Cash Flow($ millions)
98 99 00 01 02
ENSIGN RESOURCE SERVICE GROUP INC. 27
INVESTING ACTIVITIES
On July 11, 2002, the Ensign Group acquired control of OD&E pursuant to its take-over offer. Including the cost of
Ensign’s 16 percent ownership held at December 31, 2001, the total cost of this acquisition was approximately
$127.5 million, excluding the $6.6 million of cash that existed in OD&E at the time of acquisition. The acquisition
was financed from cash, existing operating lines of credit and a new $50.0 million credit facility.
For the year ended December 31, 2002, the Ensign Group had net capital additions of $63.0 million, a decrease of
$8.0 million over net additions of $71.0 million in 2001. The majority of the 2002 capital expenditures relate to
costs associated with the refurbishment and re-engineering of several drilling rigs in Canada and the fourth quarter
acquisition of three drilling rigs in the United States. Additional capital expenditures in Canada for 2002 include the
construction of a new drilling rig under contract with a significant customer, costs for new top drives, and expendi-
tures related to the construction of an operating facility in Nisku, Alberta. In addition, at December 31, 2002, the
Company was nearing completion of the construction of two new underbalanced drilling packages. The majority of the
2001 capital expenditures relate to the Company’s program to refurbish and upgrade nine drilling rigs, costs associ-
ated with the acquisition of slick-line wireline assets and the construction of two underbalanced drilling packages.
FINANCING ACTIVITIES
During 2002, the Company repaid $16.8 million (2001 – $15.0 million) of its outstanding long-term debt. Excluding
the $5.1 million current portion of long-term debt, at December 31, 2002, the Ensign Group had long-term debt
outstanding of $7.7 million. This debt was assumed as part of the acquisition of OD&E. The Company’s outstanding
operating line of credit facilities increased by $91.6 million in 2002, excluding the $24.7 million of short-term
operating facility obligations assumed as part of the Company’s acquisition of OD&E. As noted previously, the
majority of this increase was due to the use of the Company’s existing operating line of credit facilities and a new
$50.0 million short-term facility to finance the acquisition of OD&E.
RISKS AND UNCERTAINTIES
The Ensign Group derives its revenue by providing oilfield services to crude oil and natural gas exploration and
production companies in North America and, since its acquisition of OD&E in July 2002, internationally. The
demand for the services provided by the Ensign Group are directly related to the operational strength and financial
budgets of its customers. In turn, the exploration and development budgets of the Company’s customers are
directly affected by the strength and stability of crude oil and natural gas prices.
Lower commodity prices have a direct impact on customers’ ability to generate cash flow, which in turn impacts the
demand these customers have for the services provided by the Company. Factors that impact the price of crude oil
and natural gas are beyond the control of the Ensign Group, and therefore represent an area of significant uncertainty
for the Company. In addition, fluctuating commodity prices can have a negative impact on customers’ ability to
discharge their obligations through normal business operations. The Ensign Group has been very proactive in its
approach to credit management and has devoted significant resources to the implementation of policies and
procedures to mitigate credit risk.
28 ENSIGN RESOURCE SERVICE GROUP INC.
With the acquisition of OD&E in July of 2002, the Ensign Group is now subject to operating and political risks in
jurisdictions outside of North America. The Company continuously monitors the business and political environments
of all jurisdictions in which it operates in an effort to ensure the Company’s employees and operating equipment
remain safeguarded.
The Ensign Group is faced with a number of other uncertainties during the normal course of its day-to-day operations.
The Company operates in an industry that is subject to legislation governing environmental and safety matters, and
to unpredictable and uncontrollable weather patterns which can affect the ability of the Company to provide con-
tracted services in remote locations. In addition, the Company is exposed to fluctuations in the currency exchange
rates and interest rates. The Ensign Group continually monitors all areas of risk to ensure that its exposure to
these risks falls within acceptable parameters as determined by management.
The Ensign Group carries adequate levels of insurance to protect the Company in the event of the destruction of
or damage to its property and equipment. Public liability insurance is also maintained at prudent levels to limit
exposure in the event of unforeseen incidents. A comprehensive review of the Company’s insurance coverage is
completed annually to ensure that the risk of loss is maintained within acceptable levels.
OUTLOOK
Historically, the demand for oilfield services has been directly correlated with the level of oil and natural gas commodity
prices. Improved levels of commodity prices generally means increased cash flows for the oil and natural gas
producers, the Ensign Group’s customers. Further, improved cash flows typically resulted in increased demand for
oilfield services as the producers attempt to take advantage of strong commodity prices and improved levels of
cash flow by increasing production and adding to reserves. The last half of 2002 was not “typical” within North
America as there was a disconnect between commodity prices and oilfield activity. It was the Ensign Group’s view
that, barring an unforeseen collapse in the level of oil and natural gas commodity prices, activity levels within North
America would improve with the start of the 2003 calendar year. This has, in fact, been the case and the
Company’s Canadian oilfield services divisions have enjoyed very good winter drilling season activity levels aided by
a Canadian cold spell in March 2003. Additionally, the Company is encouraged by the level of activity in our United
States drilling operations during the first quarter, historically its seasonal low period. The International oilfield
services division, which does not have the same weather-related seasonality to its business as is experienced in
North America, has remained relatively active and is reporting increased customer interest for equipment in the
second quarter and beyond.
ENSIGN RESOURCE SERVICE GROUP INC. 29
At the time of writing, there is still much uncertainty regarding global oil and natural gas commodity prices due in no
small part to the situation involving Iraq. The commencement of hostilities has already resulted in a reduction in crude
oil price as the war “premium” was replaced by a “discount” owing to an expected (now realized) quick victory by the
coalition forces led by the United States. In any event, these lower oil prices are still within a range that should
enable continued demand for oilfield services. As for the natural gas situation, inventory levels in North America
are at historically low levels at the end of the winter heating season. Accordingly, the Company anticipates strong
demand for the drilling and servicing of natural gas wells through the remainder of the year if natural gas inventory
levels are to be replenished before the start of next winter’s heating season.
The Ensign Group’s financial results for the 2003 fiscal year are expected to be significantly improved over the
results for the 2002 fiscal year due to increased demand for oilfield services in North America on a year-over-year
basis. Further, the Company’s entry into the international oilfield services market with the acquisition of OD&E in
July 2002 provides an exciting new dimension to the Ensign Group. The Company believes that the combination of
solid longer-term contracts with major oil and natural gas producing companies in various international markets and
expanded growth opportunities provides increased value for Ensign Group shareholders. As the Company adds
critical mass, it will be better positioned to not only weather the cyclicality of the global oilfield services industry,
but also to take advantage of the opportunities which arise from such cycles.
30 ENSIGN RESOURCE SERVICE GROUP INC.
The consolidated financial statements and other information contained in the annual report are the responsibility of the manage-
ment of the Company. The consolidated financial statements have been prepared in accordance with Canadian generally accepted
accounting principles consistently applied, using management’s best estimates and judgements, where appropriate.
Preparation of financial statements is an integral part of management’s broader responsibilities for the ongoing operations of the
Company. Management maintains a system of internal accounting controls to ensure that properly approved transactions are accu-
rately recorded on a timely basis and result in reliable financial statements. The Company’s external auditors are appointed by the
shareholders. They independently perform the necessary tests of the Company’s accounting records and procedures to enable them
to express an opinion as to the fairness of the consolidated financial statements, in conformity with Canadian generally accepted
accounting principles.
The Audit Committee, which is comprised of outside Directors, meets with management and the Company’s external auditors to
review the financial statements and reports on them to the Board of Directors. The consolidated financial statements have been
approved by the Board of Directors.
Selby Porter Glenn DagenaisPresident Vice President Finance and Chief Financial OfficerMarch 7, 2003
T O T H E S H A R E H O L D E R S O F E N S I G N R E S O U R C E S E R V I C E G R O U P I N C .
We have audited the consolidated balance sheets of Ensign Resource Service Group Inc. as at December 31, 2002 and 2001 and
the consolidated statements of income and retained earnings and cash flows for the years then ended. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the over-
all financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2002 and 2001 and the results of its operations and its cash flows for the years then ended in accordance
with Canadian generally accepted accounting principles.
Chartered Accountants
March 7, 2003
Management’s Report
Auditors’ Report
ENSIGN RESOURCE SERVICE GROUP INC. 31
As at December 31 (in thousands of dollars) 2002 2001
A S S E T S
Current assets
Cash and cash equivalents $ 22,860 $ 49,273
Accounts receivable 165,154 132,140
Inventory and other 36,784 18,382
224,798 199,795
Property and equipment (note 3) 643,004 433,311
Investment in Australian Oil & Gas Corporation Limited (note 7) – 9,928
$ 867,802 $ 643,034
L I A B I L I T I E S
Current liabilities
Accounts payable and accrued liabilities $ 130,030 $ 88,982
Dividends payable 4,098 3,691
Income taxes payable 2,341 15,119
Operating line of credit (note 4) 116,802 485
Current portion of long-term debt (note 4) 5,125 14,958
258,396 123,235
Long-term debt – net of current portion (note 4) 7,689 –
Future income taxes (note 5) 126,241 87,740
392,326 210,975
S H A R E H O L D E R S ’ E Q U I T Y
Capital stock (note 6) 115,053 109,720
Cumulative translation adjustment 8,606 5,343
Retained earnings 351,817 316,996
475,476 432,059
$ 867,802 $ 643,034
Contingencies (note 10)
Approved by the Board of Directors
N. Murray Edwards Selby PorterDirector Director
Consolidated Balance Sheets
32 ENSIGN RESOURCE SERVICE GROUP INC.
For the years ended December 31 (in thousands of dollars, except per share data) 2002 2001
R E V E N U E
Oilfield services $ 651,768 $ 767,669
E X P E N S E S
Oilfield services 498,325 546,350
Depreciation 39,170 29,184
General and administrative 29,655 26,243
Interest on long-term debt 288 682
Interest and other 1,635 423
569,073 602,882
Income before income taxes 82,695 164,787
Income taxes (note 5)
Current 21,801 61,884
Future 9,151 2,075
30,952 63,959
Net income for the year 51,743 100,828
Retained earnings – beginning of year 316,996 230,665
Adjustment relating to transitional provisions on adoption of the new
Stock Based Compensation accounting standard (note 6) (1,687) –
Retained earnings – beginning of the year restated 315,309 230,665
Dividends (15,235) (14,497)
Retained earnings – end of year $ 351,817 $ 316,996
Net income per share (note 6)
Basic $ 0.70 $ 1.37
Diluted $ 0.69 $ 1.34
Consolidated Statements of Income and Retained Earnings
ENSIGN RESOURCE SERVICE GROUP INC. 33
For the years ended December 31 (in thousands of dollars, except per share data) 2002 2001
C A S H P R O V I D E D B Y ( U S E D I N )
O P E R A T I N G A C T I V I T I E S
Income for the year $ 51,743 $ 100,828
Items not affecting cash
Depreciation 39,170 29,184
Future income taxes 9,151 2,075
Cash provided by operating activities before the change
in non-cash working capital 100,064 132,087
(Increase) decrease in non-cash working capital (10,755) 7,937
89,309 140,024
I N V E S T I N G A C T I V I T I E S
Acquisition (note 7) (117,584) –
Net purchase of property and equipment (63,040) (71,033)
(180,624) (71,033)
F I N A N C I N G A C T I V I T I E S
Net decrease in long-term debt (16,819) (14,980)
Net increase (decrease) in operating line of credit 91,623 (4,015)
Issue of capital stock 5,333 3,052
Dividends (15,235) (14,497)
64,902 (30,440)
(Decrease) increase in cash during the year (26,413) 38,551
Cash – beginning of year 49,273 10,722
Cash – end of year $ 22,860 $ 49,273
Cash flow per share (note 6)
Basic $ 1.35 $ 1.79
Diluted $ 1.33 $ 1.76
Interest paid during the year $ 2,066 $ 1,720
Income taxes paid during the year $ 35,045 $ 74,602
For the purpose of the cash flow per share calculations, cash flow is defined as “Cash provided by operating activities before the change in non-cash working capital”.
Consolidated Statements of Cash Flows
34 ENSIGN RESOURCE SERVICE GROUP INC.
For the years ended December 31, 2002 and 2001.
(in thousands of dollars – except per share data)
1 BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of Ensign Resource Service Group Inc. and all of its
wholly-owned subsidiaries and partnerships. The companies and partnerships carry on the business of providing oilfield services
to the oil and natural gas industry in Canada, the United States and Internationally.
2 SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term market investments with maturities of three months or less.
Inventory
Inventory, comprised of spare rig parts and equipment, is recorded at the lower of cost and replacement cost.
Property and equipment
Property and equipment is recorded at cost. Depreciation is based on the estimated useful lives of the assets as follows:
Rigs and equipment 15 years Straight-line (residual 20%)
Buildings 20 years Straight-line
Automotive equipment 3 - 15 years Straight-line (residual 15%)
Office furniture and shop equipment 5 years Straight-line
Income from contracts
Income from contracts is recorded using the percentage of completion method. Losses are provided for in full when first determined.
Foreign currency translation
Financial statements of the Company’s self-sustaining United States and International subsidiaries are translated to Canadian
dollars using the exchange rate in effect at the balance sheet date for all assets and liabilities, and at average rates of exchange
during the period for revenues and expenses.
In the Company’s International subsidiary, the Australian dollar equivalents of amounts payable and receivable in currencies other
than the Australian dollar are hedged. The Company does not enter into derivative contracts for speculative or other trading purposes.
Note 9 provides a description of the financial instruments utilized by the Company’s International subsidiary to reduce exposure
to market risks from changes in foreign exchange rates.
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, income tax liabilities and assets are
recognized for the estimated tax consequences attributable to differences between the amounts reported in the financial statements
and their respective tax bases, using enacted income tax rates. The effect of a change in income tax rates on future income tax
liabilities and assets is recognized in income in the period that the change occurs.
Stock-based compensation plans
The Company has an employee stock option plan and a stock appreciation rights plan. The Company accounts for its stock option
plan using the intrinsic value method whereby no compensation cost is recognized in the financial statements for share options
granted to employees and directors. Any consideration received on the exercise of stock options is credited to capital stock.
Notes to the Consolidated Financial Statements
ENSIGN RESOURCE SERVICE GROUP INC. 35
Effective January 1, 2002, the Company adopted the provisions of the Canadian Institute of Chartered Accountants’ new Stock
Based Compensation accounting standard for its stock appreciation rights plan. Under the provisions of this standard, the
Company accrues a liability for stock appreciation rights based on the excess of the market price of the Company’s common shares
over the grant price. The accrued liability is adjusted on a quarterly basis for the effect of changes in the underlying price of the
Company’s common shares through charges or credits to compensation expense.
Measurement uncertainty
The preparation of the Company’s consolidated financial statements in conformity with Canadian generally accepted accounting
policies requires management to make estimates and assumptions that affect the reported amounts of assets at the date of the
consolidated financial statements and the reported amounts of revenue and expense during the reporting periods presented.
Actual results could differ from the estimates.
3 PROPERTY AND EQUIPMENT
2002 2001
Land and buildings $ 9,825 $ 6,466
Rigs and related equipment 804,796 568,477
Automotive and other equipment 39,023 33,488
853,644 608,431
Accumulated depreciation (210,640) (175,120)
$ 643,004 $ 433,311
4 LONG-TERM DEBT
2002 2001
Bank term loan, at LIBOR plus 0.800% (U.S. $8,066) $ 12,814 $ –
Bank term loan, at prime or bankers’ acceptance rate plus 0.800% stamping fee – 14,958
12,814 14,958
Current portion (2002 – U.S. $3,226) (5,125) (14,958)
$ 7,689 $ –
At December 31, 2002, the Company had available operating lines of credit in Canada, at the bank prime interest rate or bankers’
acceptance rate plus 0.625% stamping fee, totalling $67,000 (2001 – $48,000) and a short-term bridge financing facility, at the
bankers’ acceptance rate plus 1.0% stamping fee, of $50,000. At December 31, 2002, the Company also had an operating line
of credit in Australia, at an average effective interest rate of 4.92%, of $31,112 (AUD $35,000). At December 31, 2002, the
Company has utilized $116,802 (2001 – $485) of these facilities. Additionally, the Company had in place $17,778 (AUD $20,000) of
indemnity guarantee facilities, of which $11,987 (AUD $13,485) was outstanding at December 31, 2002 in respect of guarantees
provided to third parties in support of the Company’s International operations.
The United States dollar bank term loan existing at December 31, 2002 is unsecured. Collateral for the Canadian dollar bank term
loan in existence at December 31, 2001 consisted of a floating charge on certain assets and an assignment of insurance on cer-
tain property and equipment. Collateral on the Canadian dollar operating line of credit consists of a general security agreement.
There is no collateral for the Australian dollar operating line of credit.
Principle payments on long-term debt are:
2003 U.S. $3,226
2004 U.S. $3,226
2005 U.S. $1,614
36 ENSIGN RESOURCE SERVICE GROUP INC.
5 INCOME TAXES
The provision for future income taxes arises from temporary differences in the recognition of revenues and expenses for income
tax and accounting purposes. The temporary differences comprising the future income tax liability as at December 31, 2002 and
2001 are as follows:
2002 2001
Property and equipment $ 375,957 $ 228,050
Non-capital tax losses (32,214) (5,764)
Capital losses (67,316) –
Partnership timing differences 24,477 22,974
Other (20,793) (4,876)
280,111 240,384
Valuation allowance 88,241 –
$ 368,352 $ 240,384
Future income taxes at expected tax rate $ 126,241 $ 87,740
The valuation allowance is comprised of $20,925 of non-capital losses and $67,316 of capital losses.
The provision for income tax, including future income taxes, differs from the expected combined federal and provincial taxes as follows:
2002 2001
Income before income taxes $ 82,695 $ 164,787
Income tax rate 40% 42%
Expected income tax provision 33,078 69,211
Increase (decrease) resulting from:
Rate reduction on future income (1,211) (4,296)
US - lower effective tax rate (793) (442)
Non-deductible expenses 148 196
Capital taxes 408 387
Other (678) (1,097)
$ 30,952 $ 63,959
Effective tax rate 37.4% 38.8%
6 CAPITAL STOCK
a) Authorized
Unlimited common shares
Unlimited preferred shares, issuable in series
b) Outstanding
2002 2001
Number Numberof Shares Amount of Shares Amount
Common shares
Balance – beginning of year 73,821,506 $ 109,720 24,417,965 $ 106,668
Issued under employee stock option plan
– pre-stock split – – 131,971 2,249
Adjustment for 3 for 1 stock split – – 49,099,872 –
Issued under employee stock option plan
– post stock split 788,378 5,333 171,698 803
Balance – end of year 74,609,884 $ 115,053 73,821,506 $ 109,720
ENSIGN RESOURCE SERVICE GROUP INC. 37
c) Options
The Company may grant options to its employees for up to 6,741,580 shares of common stock. The exercise price equals the
market price of the Company’s stock on the date of granting. Stock options granted vest evenly over a period of five years. A summary
of the status of the Company’s stock option plan as of December 31, 2002 and 2001, and the changes during the years ending
on those dates is presented below:
2002 2001
Weighted WeightedAverage Average
Number Exercise Number Exerciseof Options Price of Options Price
Outstanding – beginning of year 3,881,227 $ 11.06 1,088,562 $ 23.54
Granted – pre-stock split – – 475,500 48.35
Exercised for shares – pre-stock split – – (131,971) (17.04)
Exercised for cash – pre-stock split – – (6,450) (32.75)
Adjustment for 3 for 1 stock split – – 2,851,282 –
Granted 2,694,500 12.50 – –
Exercised for shares – post stock split (788,378) (6.77) (171,698) (4.67)
Exercised for cash – post stock split (48,000) (11.11) (4,500) (10.92)
Forfeited – post stock split (95,499) (11.69) (219,498) (10.75)
Outstanding – end of year 5,643,850 $ 12.34 3,881,227 $ 11.06
Exercisable at December 31 1,079,950 $ 11.56 666,727 $ 7.76
Options Outstanding Options Exercisable
Average Weighted WeightedVesting Average Average
Options Remaining Exercise Options ExerciseExercise Price Outstanding (in years) Price Exercisable Price
$4.67 456,500 0.97 $ 4.67 149,300 $ 4.67
$9.83 to $10.92 1,189,350 1.28 $ 10.69 427,950 $ 10.61
$12.50 to $16.12 3,998,000 2.37 $ 13.71 502,700 $ 14.42
5,643,850 2.02 $ 12.34 1,079,950 $ 11.56
If the fair value method rather than the intrinsic value method had been used to account for the Company’s stock option plan, the
Company’s net income and net income per share would approximate the following pro-forma amounts:
Additional compensation costs – year ended December 31, 2002 $ 4,756
Net income
As reported $ 51,743
Pro-forma $ 46,987
Net income per common share
Basic
As reported $ 0.70
Pro-forma $ 0.63
Diluted
As reported $ 0.69
Pro-forma $ 0.62
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with weighted
average assumptions for grants as follows:
Risk free interest rate 4.31%
Expected option life 4.4 years
Expected volatility 45%
Annual dividends per share $ 0.20
38 ENSIGN RESOURCE SERVICE GROUP INC.
d) Common share dividends
During 2002, the Company declared dividends of $15,235 (2001 – $14,497), being $0.2050 per common share (2001 –
$0.1967). A quarterly dividend of $4,120, being $0.055 per common share, was declared on March 10, 2003 for payment on
April 1, 2003 to all shareholders of record as of March 21, 2003.
e) Net income per share and cash flow per share
Net income per share and cash flow per share have been calculated on the basis of the weighted average number of common
shares outstanding for the year which amounted to 74,197,152 shares (2001 – 73,673,402 shares). Diluted net income per share
and diluted cash flow per share have been calculated, assuming the exercise of stock options, resulting in an average number of
common shares of 75,254,775 shares (2001 – 75,044,037 shares).
f) Stock appreciation rights
The Company has a stock appreciation rights plan for certain senior executives. Compensation expense is an estimated amount,
based on the market performance of the Company’s common shares, and is therefore subject to measurement uncertainty. At
December 31, 2002, 907,500 (2001 – 1,113,000) stock appreciation rights were outstanding, of which 529,500 (2001 –
462,000) were exercisable at an average price of $6.94 (2001 – $6.54) each. The Company has an accrued liability of $8,463
(2001 – $2,611) relating to the exercisable stock appreciation rights as at December 31, 2002. Effective January 1, 2002, the
Company adopted the provisions of the Canadian Institute of Chartered Accountants’ new Stock Based Compensation accounting
standard. On following the transitional provisions of this new accounting standard, the Company has recorded an adjustment to
retained earnings at January 1, 2002 in the amount of $1,687, net of tax.
7 ACQUISITION
During 2002, the Company acquired all the issued and outstanding shares of Australian Oil & Gas Corporation Limited (AOG).
AOG is based in Sydney, Australia and provides contract drilling and well servicing in the international oilfield services arena. The
acquisition has been accounted for by the purchase method with the results of operations of AOG included in the consolidated
financial statements from July 11, 2002, the date of acquisition. The details of the acquisition are as follows:
2002
Net assets acquired at assigned values
Working capital, excluding cash of $6.6 million $ 14,595
Property and equipment 181,390
Operating line of credit (24,694)
Long-term debt (14,675)
Future income taxes (29,104)
$ 127,512
Total cash consideration $ 127,512
Paid prior to 2002 (9,928)
Paid during 2002 $ 117,584
8 SEGMENTED INFORMATION
The Company operates in three geographic segments within one industry segment. Oilfield services are provided in Canada, the
United States and Internationally. The amounts related to each segment are as follows:
2002
Canadian United States InternationalOilfield Oilfield Oilfield
Services Services Services Total
Revenue $ 420,095 $ 159,242 $ 72,431 $ 651,768
Property and equipment, net $ 392,904 $ 61,501 $ 188,599 $ 643,004
Net purchase of property and equipment $ 46,539 $ 7,037 $ 9,464 $ 63,040
Depreciation $ 29,305 $ 4,397 $ 5,468 $ 39,170
ENSIGN RESOURCE SERVICE GROUP INC. 39
2001
Canadian United States InternationalOilfield Oilfield Oilfield
Services Services Services Total
Revenue $ 546,489 $ 221,180 $ – $ 767,669
Property and equipment, net $ 375,670 $ 57,641 $ – $ 433,311
Net purchase of property and equipment $ 66,186 $ 4,847 $ – $ 71,033
Depreciation $ 25,055 $ 4,129 $ – $ 29,184
During the years ended December 31, 2002 and December 31, 2001, no one customer accounted for more than 10% of the
Company’s revenue.
9 FINANCIAL INSTRUMENTS
The Company’s financial instruments as at December 31, 2002 included cash, accounts receivable, accounts payable and accrued
liabilities, and the operating line of credit. Due to the current nature of these items, carrying amounts are considered to approximate
fair value.
Also, the Company’s financial instruments as at December 31, 2002 included long-term debt. All of this debt is floating at LIBOR
and, accordingly, the carrying amount is considered to approximate fair value.
The Company’s International subsidiary enters into forward exchange contracts that obligate it to sell specified amounts of
foreign currency at predetermined exchange rates. The value, average contract exchange rates and settlement periods of contracts
outstanding at December 31, 2002 are:
3 months or less Average exchange rate Australian dollars
U.S. $1,000 0.5635 $1,775
The unrealized foreign exchange gain relating to the above noted contract is $104 at December 31, 2002.
The Company is exposed to credit risk in relation to its accounts receivable at December 31, 2002. As substantially all of the
Company’s customers are relatively well financed and established oil and natural gas companies, the level of credit risk is considered
by management to be minimal.
10 CONTINGENCIES
The Company’s Oman operating entity has received assessments for the 1994, 1995 and 1996 financial years of $4,024 (977
Omani Rials). Management considers these tax assessments to be excessive and without merit under Oman law and international
guidelines, and are therefore being contested. The Company’s external counsel engaged to appeal the tax assessments is of the
opinion that the Oman courts will overturn these tax assessments in due course. No amount has been accrued in the consolidated
financial statements regarding this issue.
11 PRIOR YEAR AMOUNTS
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
40 ENSIGN RESOURCE SERVICE GROUP INC.
($000s, except per share data and ratios) 2002 2001 2000
Revenue 651,768 767,669 672,041
Gross margin 153,443 221,319 186,017
Gross margin % of revenue 23.6% 28.8% 27.7%
Depreciation 39,170 29,184 26,525
Net income 51,743 100,828 86,999
Net income per share
Basic 0.70 1.37 1.19
Diluted 0.69 1.34 1.17
Cash flow 100,064 132,087 105,903
Cash flow per share
Basic 1.35 1.79 1.45
Diluted 1.33 1.76 1.42
Net capital expenditures – excluding acquisitions 63,060 71,033 45,826
Working capital (deficit) (33,598) 76,560 51,817
Long-term debt, net of current portion 7,689 – 14,938
Shareholders’ equity 475,476 432,059 338,654
Long-term debt to equity 0.02:1 0.00:1 0.04:1
Weighted average common shares outstanding 74,197,152 73,673,402 72,819,858
Closing share price, December 31 16.66 13.35 18.50
All per share data and the weighted average common shares outstanding have been restated to reflect the 3-for-1 stock split effective May 31, 2001.
10 Year Financial Information
Quarter ended (unaudited) 2002 2001
($000s, except per share data) Dec 31 Sept 30 Jun 30 Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
Revenue 185,454 166,888 98,456 200,970 151,047 182,867 157,354 276,401
Net income 10,892 8,551 3,105 29,195 16,502 23,020 16,047 45,259
Net income per share
Basic 0.15 0.12 0.04 0.40 0.22 0.32 0.22 0.62
Diluted 0.15 0.11 0.04 0.39 0.22 0.30 0.21 0.60
Cash flow 21,322 23,152 10,353 45,237 21,563 32,907 21,500 56,117
Cash flow per share
Basic 0.29 0.31 0.14 0.61 0.29 0.45 0.29 0.76
Diluted 0.28 0.31 0.14 0.60 0.29 0.43 0.29 0.75
Per share information has been restated to reflect the 3-for-1 stock split effective May 31, 2001.
Quarterly Financial Information
ENSIGN RESOURCE SERVICE GROUP INC. 41
1999 1998 1997 1996 1995 1994 1993
372,322 418,919 517,500 245,429 180,665 174,940 92,715
98,240 127,999 158,240 67,907 46,216 46,606 18,886
26.4% 30.6% 30.6% 27.7% 25.6% 26.6% 20.4%
22,733 20,516 12,493 6,430 4,964 3,412 2,213
29,837 48,790 68,035 25,828 17,148 19,165 8,258
0.42 0.72 1.10 0.42 0.30 0.35 0.16
0.41 0.71 1.08 0.42 0.29 0.32 0.14
62,526 73,053 96,716 38,176 25,895 25,703 13,552
0.88 1.08 1.56 0.63 0.45 0.48 0.27
0.86 1.05 1.52 0.61 0.43 0.42 0.24
45,380 (2,175) 50,437 83,185 5,580 28,352 6,990
37,755 43,637 29,186 (4,164) 14,378 (1,049) 1,014
29,805 44,823 26,518 36,132 3,951 6,876 6,140
257,168 261,901 148,592 84,722 62,009 46,825 27,749
0.12:1 0.17:1 0.18:1 0.43:1 0.06:1 0.15:1 0.22:1
71,251,287 67,744,881 61,847,022 60,958,629 57,012,552 53,622,159 49,466,032
11.17 4.50 11.53 8.42 2.33 1.67 1.88
For the Three Months Ended High ($) Low ($) Close ($) Volume Value ($)
2002
March 31 16.19 12.15 15.62 14,823,491 207,021,421
June 30 17.75 15.05 16.51 7,140,207 118,623,729
September 30 16.75 13.10 15.19 4,845,931 73,773,942
December 31 17.30 13.50 16.66 7,993,171 129,024,103
Total 34,802,800 528,443,195
2001
March 31 18.98 14.96 15.50 9,485,442 163,692,475
June 30 19.90 14.00 15.05 10,337,025 174,214,795
September 30 15.95 10.25 11.10 20,116,731 257,175,500
December 31 13.90 10.40 13.35 12,697,369 156,473,365
Total 52,636,567 751,556,135
Information has been restated to reflect the 3-for-1 stock split effective May 31, 2001.
Share Trading Summary
42 ENSIGN RESOURCE SERVICE GROUP INC.
The Ensign Group takes the issue of Corporate
Governance very seriously. The Company’s Board of
Directors exercises overall responsibility for the
management and supervision of the affairs of the
Company. This includes the appointment of the
Company’s President, approval of compensation for
senior executives and monitoring of the President’s
and management’s performance.
The Board of Directors has established procedures
that prescribe the requirements governing the approval
of transactions carried out in the course of the
Company’s operations, the delegation of authority and
the execution of documents on behalf of the Company.
The Board of Directors reviews and approves the
Company’s annual operating budget, ensuring market
conditions as well as strategic thinking is properly
reflected in the short-term goals of each of the
Company’s operating divisions.
The Board of Directors is composed of eight directors.
Mr. N. Murray Edwards and Mr. Selby Porter, the
Ensign Group’s Chairman and President respectively,
are the only Board members who are also members
of the Company’s management.
The Board of Directors annually appoints members
to Board committees in the following three areas:
Audit, Corporate Governance, and Compensation.
All of these committees are comprised of a majority
of non-management directors.
AUDIT COMMITTEE
The Audit Committee reviews, reports and provides
recommendations to the Board of Directors on the
annual and interim financial statements and on the
integrity of the financial reporting of the Company. In
addition, the adequacy of the Company’s processes for
identifying and managing financial risk, the adequacy
of the Company’s internal control system, the appoint-
ment, terms of engagement, provision of non-audit
services and proposed fees of the Company’s
independent external auditor are also areas in which
this committee reviews, reports and provides
recommendations to the Board of Directors.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is responsible
for reviewing, reporting and providing recommendations
for improvement to the Board of Directors with respect
to all aspects of corporate governance. The Corporate
Governance Committee, on a periodic basis, assesses
the effectiveness of the Board of Directors as a whole,
the committees of the Board and the contributions of
individual members.
COMPENSATION COMMITTEE
The Compensation Committee reviews and approves
compensation of the Company’s senior management.
In addition, this committee is responsible for reviewing
succession plans and the compensation policy for all
other employees.
Corporate Governance
ENSIGN RESOURCE SERVICE GROUP INC. 43
THE COMPANY
Ensign Resource Service Group Inc. was incorporated on March 31, 1987 pursuant to the provisions of the Business Corporations
Act (Alberta). Pursuant to a prospectus, on December 15, 1987, the Company became a reporting issuer in the Province of Alberta.
SUBSIDIARIES
The following table sets forth the principal operating subsidiaries of the Company, the percentage of shares owned, directly or
indirectly, by the Company and the jurisdiction of incorporation or continuance of the subsidiaries as of March 31, 2003.
Jurisdiction of Incorporation Percentage of shares beneficially
Name of Subsidiary or Continuance owned or controlled by the Company
Artisan Corporation Alberta 100%
Arctic Ensign Drilling Ltd. Northwest Territories 49%
Australian Oil & Gas Corporation Limited Australia 100%
Badge Services Inc. Alberta 100%
Caza Drilling Inc. Colorado 100%
Caza Drilling (California) Inc. California 100%
Champion Drilling Inc. Alberta 100%
Continuous Tubing Inc. Alberta 100%
Ensign Drilling Inc. Alberta 100%
Gwich’in Ensign Oilfield Services Inc. Northwest Territories 49%
Leyen Oil Well Servicing Ltd. Saskatchewan 100%
Oil Drilling & Exploration Limited Australia 100%
Opsco Energy Industries Ltd. Alberta 100%
Rockwell Servicing Inc. Alberta 100%
Tri-City Drilling Inc. Alberta 100%
RECENT ACQUISITIONS
February 2000 Acquired in Canada: the slick-line wireline assets located in Rainbow Lake, Alberta from Halliburton
Group Canada Inc.
April 2000 Acquired in the United States: Gary Drilling Company, which owns and operates 18 drilling rigs based
in Bakersfield, California, United States.
May 2000 Acquired in the United States: five drilling rigs from Ashby Drilling Corporation.
October 2000 Acquired in Canada: five drilling rigs from Pirate Drilling Ltd.
January 2001 Acquired in Canada: the slick-line wireline assets located in Grande Prairie, Alberta and Drayton Valley,
Alberta from Baker Hughes Canada Company.
July 2002 Acquired Internationally: Australian Oil & Gas Corporation Limited and its wholly-owned subsidiary Oil
Drilling & Exploration Limited, which operates 24 drilling rigs and five workover rigs in Australia,
Southeast Asia, the Middle East, Northern and Southern Africa, South America and New Zealand.
November 2002 Acquired in Canada: the slick-line and braided wireline assets of Freedom Wireline Ltd., located in
Whitecourt, Alberta.
December 2002 Acquired in the United States: three drilling rigs from Westport Oil and Gas Company, L.P.
January 2003 Acquired in Canada: the oilfield rental assets of Canadian Select Energy West, located in
Whitecourt, Alberta.
Additional Information
44 ENSIGN RESOURCE SERVICE GROUP INC.
Additional Information
DESCRIPTION OF THE BUSINESS
All of the Company's revenue is derived from the provision of oilfield services supplied through eight divisions, which include the
subsidiaries listed previously. The following identifies the principal operating divisions of the Company and their fleet size as at
March 31, 2003.
Division Fleet size Area of operation
Ensign Drilling Partnership
Champion Drilling 32 drilling rigs Western Canada
Ensign Drilling 82 drilling rigs Western Canada
Tri-City Drilling 30 drilling rigs Western Canada
Caza Drilling Inc. 55 drilling rigs Rocky Mountain region, United States
Caza Drilling (California) Inc. 16 drilling rigs California, United States
Oil Drilling & Exploration Limited 24 drilling rigs Australia, Southeast Asia, the Middle East,
5 workover rigs Northern and Southern Africa,
South America and New Zealand
Rockwell Servicing Partnership 126 well servicing rigs Western Canada
13 coiled tubing units
Opsco Energy Industries Ltd. 41 production testing units Western Canada
35 wireline units
Enhanced Petroleum Services Partnership
Enhanced Drill Systems 14 underbalanced packages Western Canada
Chandel Equipment Rentals Western Canada
ENSIGN RESOURCE SERVICE GROUP INC. 45
CANADIAN DRILLING
Selby PorterPresident
Bob GeddesVice President and Chief Operating Officer
Earle RoutlyVice President – Drilling
Rick SimontonSales and Marketing Director
Tom FellowsDirector Credit Management
Bob AppsSales Representative
Jason DarrowSales Representative
Larry GatesSales Representative
David PageSales Representative
Judy SelbySales Representative
Rob WilmanSafety Coordinator
Walter HopfDrillers Training Manager
Grant ClearwaterAssistant Treasurer
Dave FyhnManager Administration
Champion Drilling
Joe HemsingVice President and General Manager
Darryl MaserOperations Manager
Paul FittonDrilling Superintendent
Keith MattsonDrilling Superintendent
Matt SchmitzDrilling Superintendent
Dean UlmerSafety and Personnel
Linda BrookerChief Accountant
Ensign Drilling
Wayne KippVice President – Operations
Bob ZanussoSenior Operations Manager
Dave SurridgeOperations Manager
Paul Meade-CliftDirector Engineering
Ron PettapieceSenior Operations Engineer
Wayde BarkerDrilling Superintendent
Manfred BehnkeDrilling Superintendent
Roch CurrierDrilling Superintendent
Don JuskaDrilling Superintendent
Doug LaneDrilling Superintendent
Dale LeitnerDrilling Superintendent
Rick MannDrilling Superintendent
Ed MattieDrilling Superintendent
Wayne ZandeeDrilling Superintendent
Hank vanDrunenShop Manager
Arnet PachalMaterials Coordinator
Joe BrlekovichMaintenance Superintendent
Tom McDonald8th Street Business Manager
Cindy HamesPersonnel Manager
Donna ConleyChief Accountant
Tri-City Drilling
Steve MatthewsVice President and General Manager
Rick VanEeOperations Manager
Harvey DanylukDrilling Superintendent
Ian MossopDrilling Superintendent
Darin RamsellDrilling Superintendent
Peter EnsEquipment Coordinator
Jan BadinSafety and Training Coordinator
Donna ConleyChief Accountant
Operating Management
46 ENSIGN RESOURCE SERVICE GROUP INC.
Operating Management
U.S. DRILLING
Selby PorterPresident
Ed KautzVice President and Chief Operating Officer
Caza Drilling Inc.
Mike NussGeneral Manager –Operations and Contracts
Tom SchledwitzGeneral Manager –Operations and Engineering
Hugh GibersonDrilling Manager
Jim McCathronDrilling Manager
Jeff SalenDrilling Manager
Matt RohretDrilling Manager
Mel CurtisDrilling Superintendent
Larry LorenzDrilling Superintendent
K. L. TippsEquipment Manager
Steve GrimesSales Representative
Harry OldsDirector of Health, Safety and Environment
Steve HuntController
Caza Drilling (California) Inc.
Gene GazArea Manager
Troy AzlinDrilling Manager
Terry EllisManager of Health, Safetyand Environment
Sandy BullmanChief Accountant
INTERNATIONAL DRILLING
Selby PorterPresident
Ken SkirkaDirector
Ken PicardVice President and Chief Financial Officer
Garry WhiteVice President and Chief Operating Officer
Duncan GlasgowCompany Secretary and Manager,Commercial and Legal Affairs
Oil Drilling & Exploration Limited
Neil HunterWell Services Manager – Domestic and International
Neil DeanOperations Manager – Australia and New Zealand
Gerry WestOperations Manager – Southeast Asia and South America
Geoff PickfordOperations Manager – Middle East and Africa
John BushellManager – Contracts and Tenders
Tony BelgroveManager – Purchasing/Supply
Andrew DiscombeManager – Maintenance
David GrantManager – Health, Safety and Environment
David KerrManager – Human Resources
Andrew DolmanFinancial Controller
James Van RooenArea Manager – Southern Australia,Northern Territory and Victoria
Glen WalterArea Manager – West Australia
Mike MaguireArea Manager – Queensland and New South Wales
Alan WinterArea Manager – New Zealand
Don WoodArea Manager – Indonesia
Ricardo Lopez OlacireguiArea Manager – Argentina
Steven FordArea Manager – Libya
Dean HillsArea Manager – The Middle East
Mick ValentineGroup Drilling Superintendent
CANADIAN WELL SERVICING
Glenn DagenaisPresident
Bryan TothVice President and General Manager
Kirk SchroterDivisional Controller
Lyle AubinOperations Manager
Tim HuberSoutheast Area Manager
Art BrunetNorthwest Area Manager
Gary BennettSales and Marketing Director
Cameron BennettTechnical Sales Engineer
Robin BrittnerSales Representative
Daryl SutherlandSales Representative
Keith VollminSales Representative
William KiddSenior Field Safety Coordinator
Kevin MassineField Safety Coordinator
Yvonne CoveyChief Accountant
ENSIGN RESOURCE SERVICE GROUP INC. 47
Operating Management
Ardmore Station
Jeff HallwachsStation Manager
Jeff BrantField SuperintendentSlave Lake
Kevin RudellField Superintendent
Brooks Station
Ed McCormickStation Manager
Norm ReidField Superintendent
Wayne LawsonSales Representative
Estevan Station
Jerry MehlerStation Manager
Brian CrossmanSales Representative
Grande Prairie Station
Fred StewardStation Manager
Cameron BallField Superintendent
Jim TomlinsonField Superintendent
Brett TaylorSales Representative
Lloydminster Station
Roger SniderStation ManagerLloydminster
Darwin DeanSenior Sales Representative
Miles KosterivaField Superintendent
Red Deer Station
R.J. TothStation Manager
Abe ShihinskiField Superintendent
OPSCO ENERGY INDUSTRIES
Bob DearVice President and General Manager
Dale DoeringVice President Administration and Finance
Buzz BradleyVice President Marketing and Business Development
Ashraf RajabaliManufacturing Manager
Craig DelaneyWireline Manager
Randy ReschkeProduction Testing Manager
Jim BucekSafety Supervisor
ENHANCED
PETROLEUM SERVICES
Jason HagerVice President and General Manager
Greg CedergrenAssistant General Manager
Sheldon JasperOperations ManagerEnhanced Drill Systems
Randy FasickAssistant Operations ManagerEnhanced Drill Systems
Ralph CockOperations ManagerChandel Rentals – Red Deer
Erwin SchatzStation ManagerChandel Rentals – Whitecourt
Julia HawesChief Accountant
48 ENSIGN RESOURCE SERVICE GROUP INC.
Corporate and Field Offices
CHAMPION DRILLING INC.
1 Tree RoadP.O. Box 1090Brooks, AB T1R 1B9Telephone: (403) 362-4400 Facsimile: (403) 362-6165
ENSIGN DRILLING INC.
900, 400 – Fifth Avenue S.W.Calgary, AB T2P 0L6Telephone: (403) 262-1361Facsimile: (403) 266-3596
Nisku Operations Centre
2000 Fifth StreetNisku, AB T9E 7X3Telephone: (780) 955-8808Facsimile: (780) 955-7208
Estevan Office
Telephone: (306) 634-9411Facsimile: (306) 634-6652
Grande Prairie Office
Telephone: (780) 532-5810Facsimile: (780) 532-2802
TRI-CITY DRILLING INC.
900, 400 – Fifth Avenue S.W.Calgary, AB T2P 0L6Telephone: (403) 262-1361Facsimile: (403) 266-3596
Nisku Operations Centre
2000 Fifth StreetNisku, AB T9E 7X3Telephone: (780) 955-3311Facsimile: (780) 955-3301
CAZA DRILLING INC.
Suite 360, 1801 BroadwayDenver, CO 80202 USATelephone: (303) 292-1206Facsimile: (303) 292-5843
CAZA DRILLING
(CALIFORNIA) INC.
7001 Charity AvenueBakersfield, CA 93308 USATelephone: (661) 589-0111Facsimile: (661) 589-0283
OIL DRILLING &
EXPLORATION LIMITED
Level 10, 74 Castlereagh StreetSydney, NSW 2000 AustraliaTelephone: 61 2 9223 3755Facsimile: 61 2 9223 6821
Adelaide Office
15 - 17 Westport RoadElizabeth WestAdelaide, South Australia 5113AustraliaTelephone: 61 8 8255 3011Facsimilie: 61 8 8252 0272
ROCKWELL SERVICING
PARTNERSHIP
860, 400 – Fifth Avenue S.W.Calgary, AB T2P 0L6Telephone: (403) 265-6361Facsimile: (403) 262-0026
Ardmore Office
Telephone: (780) 826-6464Facsimile: (780) 826-4305
Brooks Office
Telephone: (403) 362-3346Facsimile: (403) 362-6069
Estevan Office
Telephone: (306) 634-5522Facsimile: (306) 634-3238
Grande Prairie Office
Telephone: (780) 539-6736Facsimile: (780) 539-1993
Lloydminster Office
Telephone: (780) 875-5278Facsimile: (780) 875-6402
Red Deer Office
Telephone: (403) 346-6175Facsimile: (403) 343-6061
OPSCO ENERGY
INDUSTRIES LTD.
415 Monument Place S.E.Calgary, AB T2A 1X4Telephone: (403) 272–2206Facsimile: (403) 272-6414
ENHANCED PETROLEUM
SERVICES PARTNERSHIP
900, 400 – Fifth Avenue S.W.Calgary, AB T2P 0L6Telephone: (403) 260-5416Facsimile: (403) 264-9376
Red Deer Office
5398 – 39139 Hwy. 2ARed Deer, AB T4S 2B3Telephone: (403) 314-1564Facsimile: (403) 346-3099
Whitecourt Office
5907 – 45th AvenueWhitecourt, AB T7S 1P2Telephone: (780) 778-6101Facsimile: (780) 778-6184
1 Corporate Profile
2 Ensign’s Global Vision
4 Letter to Shareholders
10 Ensign’s Commitment to Safety and the Environment
12 Management’s Discussion & Analysis
30 Management’s Report
30 Auditors’ Report
31 Consolidated Financial Statements
34 Notes to the Consolidated Financial Statements
40 10 Year Financial Information
40 Quarterly Financial Information
41 Share Trading Summary
42 Corporate Governance
43 Additional Information
45 Operating Management
48 Corporate and Field Offices
IBC Corporate Information
Highlights ($000s, except per share data) 2002 2001
F I N A N C I A L
Revenue 651,768 767,669
Net income 51,743 100,828
Per share 0.70 1.37
Cash flow 100,064 132,087
Per share 1.35 1.79
Shareholders’ equity 475,476 432,059
Long-term debt, net of current portion 7,689 –
Weighted average number of shares outstanding 74,197,152 73,673,402
Return on average shareholders’ equity 11.4% 26.2%
2002 2001
O P E R A T I N G
Number of drilling rigs
Canada 144 154
United States 71 69
International (includes workover rigs) 29 –
Number of well servicing rigs and coiled tubing units
Canada 139 139
Wells drilled
Canada 4,001 4,564
United States 821 874
International 124 –
Rig utilization rate (%)
Canada (146 marketed rigs) 37.1 48.1
United States (50 marketed rigs) 48.2 66.7
International (29 marketed rigs) 68.1 –
Well servicing utilization rate (%) (139 marketed rigs/units) 31.4 36.1
Corporate Information
Designed and Produced by Result Inc.Printed in Canada
DIRECTORS
Jack DonaldChairman of the BoardParkland Industries Ltd.
N. Murray Edwards 2,3
PresidentEdco Financial Holdings Ltd.
James B. Howe 1,2,3
PresidentBragg Creek Financial Consultants Ltd.
Donald Jewitt 1,2
PresidentVeteran Resources Inc.
Len Kangas 2
Independent Businessman
Selby PorterPresidentEnsign Resource Service Group Inc.
John Schroeder 1,3
Vice President FinanceParkland Industries Ltd.
Kenneth J. Skirka (nominee)Independent Businessman
George S. WardIndependent Businessman
Committee Members1 Audit2 Corporate Governance3 Compensation
CORPORATE MANAGEMENT
N. Murray EdwardsChairman
Selby PorterPresident
Glenn DagenaisVice President Finance andChief Financial Officer
Bob GeddesVice President and Chief Operating Officer – Canadian Drilling
Ed KautzVice President and Chief Operating Officer – United States Drilling
Ken PicardVice President and Chief Financial Officer – International Drilling
Garry WhiteVice President and Chief Operating Officer – International Drilling
Tom MedvedicTreasurer
Bruce MoyesCorporate Controller
HEAD OFFICE
900, 400 - Fifth Avenue S.W.Calgary, AB T2P 0L6Telephone (403) 262-1361Facsimile (403) 262-8215
BANKERS
Royal Bank of CanadaWells Fargo Bank, N.A.HSBC Bank Australia LimitedNational Australia Bank Limited
AUDITORS
PricewaterhouseCoopers LLP
LEGAL COUNSEL
Burnet, Duckworth & Palmer LLP
STOCK EXCHANGE LISTING
The Toronto Stock ExchangeSymbol: ESI
TRANSFER AGENT
Computershare Trust Company of Canada
WEBSITE
www.ensigngroup.com
NOTICE OF ANNUAL AND SPECIAL MEETING
The Ensign Group’s Annual and Special Meeting of Shareholders will be held on Thursday, May 22,2003, at 3:00 p.m. M.S.T. at the Calgary PetroleumClub, 319 – 5th Avenue S.W., Calgary, Alberta. Allshareholders are invited to attend, but if unable, werequest the form of proxy be signed and returned.
ENSIGN RESOURCE SERVICE GROUP INC.
900, 400 – Fifth Avenue S.W., Calgary, Alberta T2P 0L6, Canada
Tel (403) 262-1361 Fax (403) 262-8215 www.ensigngroup.com
2002 2002