Q1 2026 Ensign Energy Services Inc Earnings Call

May 7, 2026

Operator: Good afternoon, ladies and gentlemen, and welcome to the Ensign Energy Services Inc. Q1 2026 Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Thursday, 7 May 2026. I would now like to turn the conference over to Michael Gray, Chief Financial Officer. Please go ahead.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Ensign Energy Services Inc. Q1 2026 Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, 7 May 2026. I would now like to turn the conference over to Michael Gray, Chief Financial Officer. Please go ahead.

Speaker #2: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Speaker #2: This call is being recorded on Thursday, May 7, 2026. I would now like to turn the conference over to Michael Gray, Chief Financial Officer.

Speaker #2: Please go ahead. Thank you. Yeah, just to clarify, former Chief Financial Officer. But thank you, and good morning, and welcome to Ensign Energy Services' first quarter conference call and webcast.

Michael Gray: Thank you. Yeah, just to clarify, former Chief Financial Officer. Thank you and good morning, and welcome to Ensign Energy Services Q1 conference call and webcast. On our call today, Bob Geddes, President and COO, Trevor Russell, a new Chief Financial Officer, and myself, Mike Gray. Today, we will review Ensign's Q1 highlights, financial results, followed by operational update and outlook. We will then open the call for questions after that. Our discussions today may include forward-looking statements based upon current expectations that involve several business risks and uncertainties.

Speaker #2: On our call today, Bob Geddes, President and COO; Trevor Russell, a new Chief Financial Officer; and myself, Mike Gray. Today we will review Ensign's first quarter highlights, financial results, followed by operational update and outlook.

Speaker #2: We will then open the call for questions after that. Our discussion today may include forward-looking statements based upon current expectations that involve several business risks and uncertainties.

Speaker #2: The factors that could cause results to differ materially include, but are not limited to, political and economic and market conditions, crude oil and natural gas prices, foreign currency fluctuations, weather conditions, the company's defensive lawsuits, the ability of oil and gas companies to pay accounts receivable balances, or other unforeseen conditions, which could impact the demand for services supplied by the company.

Michael Gray: The factors that could cause results to differ materially include, but are not limited to, political and economic and market conditions, crude oil and natural gas prices, foreign currency fluctuations, weather conditions, the company's defensive lawsuits, the ability of oil and gas companies to pay accounts receivable balances or other unforeseen conditions which could impact the demand for services supplied by the company. Our discussions today may refer to non-GAAP financial measures such as Adjusted EBITDA. Please see our Q1 earnings release and SEDAR+ filings for more information on forward-looking statements and the company's use of non-GAAP financial measures. Before I pass the call back over to Bob, I'd like to take a moment to sincerely thank all of Ensign's employees for their hard work and dedication. I've truly appreciated my time here and the opportunity to work alongside such a strong team.

Speaker #2: Additionally, our discussion today may refer to non-GAAP financial measures such as adjusted EBITDA. Please see our first quarter earnings release and see our SEDAR+ filings for more information.

Speaker #2: On forward-looking statements. And the company's use of non-GAAP financial measures. Before I pass the call back over to Bob, I'd like to take a moment to sincerely thank all of Ensign's employees for their hard work and dedication.

Speaker #2: I truly appreciated my time here and the opportunity to work alongside such a strong team. I'm confident that the company is in very good hands going forward under Trevor's leadership.

Michael Gray: I'm confident that the company is in very good hands going forward under Trevor's leadership. On that, I'll pass the call back to Bob.

Speaker #2: On that, I'll pass the call back to Bob.

Speaker #3: Thanks, Mike. Let me start by acknowledging that Mike Gray is retiring as you understand here, and we have the appointment of Trevor Russell into the CFO role.

Bob Geddes: Thanks, Mike. Let me start by acknowledging that Mike Gray is retiring, as you understand here, and we have appointed Trevor Russell into the CFO role. I just want to first of all thank Mike for his guidance and service with Ensign over the last years on behalf of the board of directors, myself, and all employees. Mike has helped the company manage through some intense Trinidad acquisition, the Nabors acquisition, the COVID years, et cetera. Thank you, Mike, for all of that. I also want to congratulate Trevor on his promotion to the CFO role. Trevor has been with the company for 20 years and was last in the role of VP Finance. Mr. Russell will provide a seamless transition for us moving forward.

Bob Geddes: Thanks, Mike. Let me start by acknowledging that Mike Gray is retiring, as you understand here, and we have appointed Trevor Russell into the CFO role. I just want to first of all thank Mike for his guidance and service with Ensign over the last years on behalf of the board of directors, myself, and all employees. Mike has helped the company manage through some intense Trinidad acquisition, the Nabors acquisition, the COVID years, et cetera. Thank you, Mike for all of that. I also want to congratulate Trevor on his promotion to the CFO role. Trevor has been with the company for 20 years and was last in the role of VP Finance. Mr. Russell will provide a seamless transition for us moving forward.

Speaker #3: I just want to, first of all, thank Mike for his guidance and service with Ensign over the last years on behalf of the board of directors, myself, and all employees.

Speaker #3: Mike has helped the company manage through some intense Trinidad acquisition, the Neighbors acquisition, the COVID years, etc. Thank you, Mike, for all of that.

Speaker #3: I also want to congratulate Trevor on his promotion to the CFO role. Trevor has been with the company for 20 years, and was the last in the role of VP Finance.

Speaker #3: Mr. Russell will provide a seamless transition for us moving forward. Also, Mike Gray has agreed to stay on as an executive advisor until July to help through the transition period.

Bob Geddes: Mike Gray has agreed to stay on as an executive advisor until July to help through the transition period. We've had two significant events in Q1 that have provided a very positive construct for Ensign. Right out of the gate in 2026, we saw Venezuela become de-risked to a large extent with a strong proxy for increased activity. With Ensign having the only rigs operating in Venezuela, we are well-positioned to expand that business unit. We have the Middle East conflict, which has pushed oil prices up significantly. Today, we are bumping in the CAD low 90s. If anyone had told me WTI would be in the CAD low 90s a few months ago. We would have been critical of such a prediction. Let's just hope demand stays somewhat inelastic. Here we are.

Speaker #3: So, we've had two significant events in the first quarter that have provided a very positive construct for Ensign. Right out of the gate in 2026, we saw Venezuela become de-risked to a large extent, with a strong proxy for increased activity.

Speaker #3: With Ensign having the only rig operating in Venezuela, we are well positioned to expand that business unit. And then we have the Middle East conflict, which has pushed oil prices up significantly.

Speaker #3: Today, we are bumping in the low 90s. If anyone had told me WTI would be in the low 90s a few months ago, we would have been critical of such a prediction.

Speaker #3: Let's just hope the man stays somewhat inelastic. Anyway, here we are. So for a deeper dive into the first quarter financial results, I'll turn the call over to Trevor Russell.

Bob Geddes: For a deeper dive into the Q1 financial results, I'll turn the call over to Trevor Russell. Trevor?

Speaker #3: Trevor?

Speaker #4: Thanks, Bob. Dual field services sector maintains a generally constructive outlook despite a year-over-year activity declining Canada. With the political and security situation in the Middle East, the disruption of shipping within the Strait of Hormuz, and the continuing conflict between the Russian Federation and Ukraine, and the recent actions of the United States and Venezuela, the expectation is these factors and their continued development will have a direct impact on the industry.

Trevor Russell: Thanks, Bob. The oilfield services sector maintains a generally constructive outlook despite a year-over-year activity decline in Canada. With the political and security situation in the Middle East, the disruption of shipping within the Strait of Hormuz, and the continuing conflict between the Russian Federation and the Ukraine, and the recent actions of the United States and Venezuela, the expectation is these factors and their continued development will have a direct impact on the industry. To date, oil and natural gas producers continue to moderate their capital spend, remain committed to cash flow generation, and maintaining current production levels. Furthermore, the impact of uncertainty around the global economy and tariff policies adopted by the United States administration and the implications of such policies continue to impact operating activity.

Speaker #4: To date, oil and natural gas producers continue to moderate their capital spend. Remain committed to cash flow generation and maintaining current production levels. Furthermore, the impact of uncertainty around the global economy and tariff policies adopted by the United States administration and the implications of such policies continue to impact operating activity.

Speaker #4: Total operating days were slightly lower in the first quarter of 2026, with the United States and international operations recording a 15% and a 1% increase respectively.

Trevor Russell: Total operating days were slightly lower in Q1 2026, with the United States and international operations recording a 15% and a 1% increase, respectively. While our Canadian operations saw a 15% decrease compared to Q1 2025. The company generated revenue of CAD 418 million in Q1 2026, a 4% decrease compared to the revenue of CAD 436.5 million generated in Q1 of the prior year. Adjusted EBITDA for Q1 2026 was CAD 94.8 million, a 7% decrease from the Adjusted EBITDA of CAD 102.4 million in Q1 2025.

Speaker #4: While our Canadian operations saw a 15% decrease compared to the first quarter of 2025. The company generated revenue of $418 million in the first quarter of 2026, a 4% decrease compared to the revenue of $436.5 million generated in the first quarter of the prior year.

Speaker #4: Adjusted EBITDA for the first quarter of 2026 was $94.8 million, a 7% decrease from the adjusted EBITDA of $102.4 million in the first quarter of 2025.

Speaker #4: The decrease in adjusted EBITDA was primarily due to a decrease in the operating activity as well as a negative 4% translation difference of converting our US dollar-denominated earnings.

Trevor Russell: The decrease in Adjusted EBITDA was primarily due to a decrease in the operating activity, as well as a -4% translation difference of converting our US dollar-denominated earnings. Depreciation in the first three months of 2026 was CAD 85.1 million, 4% higher than the CAD 81.9 million for the first three months of 2025. The decrease in depreciation is due to the more assets entering services following additional capital spending. Offsetting the decrease is a 4% decrease in the translation effect of converting our depreciation on US-denominated assets. General and administration expenses was CAD 14.7 million, 3.5% of revenue for Q1 2026 compared to 15% up for Q1 2025.

Speaker #4: The depreciation in the first three months of 2026 was $85.1 million, 4% higher than the $81.9 million for the first three months of 2025.

Speaker #4: The decrease in depreciation is due to the more assets entering services following additional capital spending, offsetting the decrease as a 4% decrease in the translation effect of converting our depreciation on US and automated assets.

Speaker #4: General and administration expenses was 14.7 million and a half percent of revenue for the first quarter of 2026 compared to 15% up for the first quarter of 2025.

Speaker #4: General and administration expenses decreased due to non-reoccurring fees incurred in the prior year and a positive 4% translation effect of converting our US-denominated expenses.

Trevor Russell: General and administration expenses decreased due to non-recurring fees incurred in the prior year and a +4% translation effect of converting our USD-denominated expenses. Net capital purchases for the quarter were CAD 64.8 million. The purchases consist of CAD 14.4 million in upgrade capital and CAD 50.9 million in maintenance capital, for a total of CAD 65.3 million offset by sales proceeds of CAD 600,000. Our 2026 maintenance capital budget is set at CAD 162 million and CAD 79.2 million in selective upgrade capital, of which CAD 58.2 million is customer-funded and will be monitored very closely and will be adjusted if required.

Speaker #4: Net capital purchases for the quarter were $64.8 million. The purchases consist of $14.4 million in upgrade capital and $50.9 million in maintenance capital. For a total of $65.3 million offset by sales proceeds of $600,000.

Speaker #4: Our 2026 maintenance capital budget is set at $162 million, and $79.2 million in selective upgrade capital, of which 58.2 million is customer-funded and will be monitored very closely and will be adjusted if required.

Speaker #4: Interest expense in the first quarter of 2026 was $12.9 million, a decrease of 37% from the first quarter of 2025. As a result of lower debt levels and effective interest rates at one time recovery, and a positive 4% translation on converting US-denominated interest expense.

Trevor Russell: Interest expense in Q1 2026 was CAD 12.9 million, a decrease of 37% from Q1 2025 as a result of lower debt levels and effective interest rates, a one-time recovery, and a +4% translation on converting USD-denominated interest expense. The company expects its blended interest rate to be less than 7% and will allow us to reduce our interest expense going forward. Net repayments against debt totaled CAD 7 million during the quarter. Our trailing 12-month net debt Adjusted EBITDA was 2.47 and will continue to reduce as the company continues to reduce debt. Our debt reduction for 2026 is targeted to be approximately CAD 125 million. If the industry conditions change, this target will be increased or decreased. On that note, I'll turn it back to Bob.

Speaker #4: The company expects its blended interest rate to be less than 7% and will allow us to reduce our interest expense going forward. Net repayments against debt totaled $7 million during the quarter.

Speaker #4: Our trailing 12-month net debt adjusted EBITDA was $2.47 and will continue to reduce as the company continues to reduce debt. Our debt reduction for 2026 is targeted to be approximately $125 million.

Speaker #4: If industry changes if the industry conditions change, this target will be increased or decreased. An odd note, I'll turn it back to Bob.

Speaker #3: Thanks, Trevor. So, let's circle the globe now with a summary of our first quarter and some insight into what we're seeing develop under this strong commodity pricing environment.

Bob Geddes: Thanks, Trevor. Let's circle the globe now with a summary of our Q1 and some insight, operation into what we're seeing develop under this strong commodity pricing environment. Starting with US drilling, which is our biggest revenue and margin generator. Today, we have 45 rigs under contract in the US. We are seeing a more active bid book over the last month develop, obviously the result of generous commodity prices. We are seeing more private equity and new names to the game. At these prices, a lot more shoulder players become more compelling. Starting on the West Coast and moving east, we are seeing our California drilling asset base now up to 8 high-spec ADR drilling rigs under contract, and the business looks very steady moving forward.

Speaker #3: Starting with US drilling. Which is our biggest revenue and margin generator. Today, we have 45 rigs on the contract in the US. We are seeing a more active good book over the last month develop.

Speaker #3: Obviously, the result of generous commodity prices. We are seeing more private equity and new names in the game. At these prices, a lot more shoulder play has become more compelling.

Speaker #3: Starting on the West Coast and moving east, we are seeing our California drilling asset base now up there. Eight high-spec radar drilling rigs under contract.

Speaker #3: And the business looks very steady moving forward. We have eight rigs active in the Rockies division and 29 in our US Southern division, mostly in the Permian.

Bob Geddes: We have 8 rigs active in the Rockies division and 29 in our US Southern division, mostly in the Permian. The Permian continues to be extremely active for our high-spec ADR rigs, with an expectation that we should see 2 to 3 more rigs go to work over the next 6 months. Almost half our US rigs are on a performance-based contract, which elevates margin opportunities. Going to Canada, we operate a wide range, 47 to 60 high-spec ADR drill rigs in Canada. In Q1, we saw 5 of our rigs come down early in the quarter for their 5-year recertifications, which were planned for breakup, but because the operator wanted to get after their drilling during breakup, we had to take these rigs off the production line the Q1 and get them in for the recertification. This, of course, affected Q1 results.

Speaker #3: The Permian continues to be extremely active for our high-spec radar rigs with an expectation that we should see two to three more rigs go to work over the next six months.

Speaker #3: Almost half our US rigs are on a performance-based contract, which elevates margin opportunities. Going to Canada, we operate a wide range for even 76 high-spec radar drill rigs in Canada.

Speaker #3: In the first quarter, we saw five of our rigs come down early in the quarter for their five-year recertifications. Which were planned for breakup because they operated wanted to get after their drilling during breakup.

Speaker #3: We had to take these rigs off the production line in the first quarter and get them in for the recertification. This, of course, affected first quarter results.

Speaker #3: So we have a lumpy first quarter, which we'll see pushed into a beneficial uptick in our second quarter activity. Last year, we had 30 rigs active over breakup building up to 43 into July.

Bob Geddes: We had a lumpy Q1, which we'll see pushed into a beneficial uptick in our Q2 activity. Last year, we had 30 rigs active over breakup, building up to 43 into July. This year we expect to have those 5 rigs incrementally added year-over-year, and we'll see us build up from 30 rigs today to 50 by late summer. This is a 7 rig year-over-year uptick in the in the Q2 and entering into the Q3, which we expect will stay sticky at 50 plus through the rest of the year. We have 2 cold stacked rigs coming back to work after breakup, and we have 3 rigs receiving operator re-requested upgrades, which are tied into 2-year contracts.

Speaker #3: This year, we expect to have those five rigs incrementally added year over year. And we'll see us build up from 30 rigs today to 50 by late summer.

Speaker #3: This is a seven-rig year-over-year uptick in the second quarter and entering into the third quarter, which we expect will stay sticky at 50-plus through the rest of the year.

Speaker #3: We have two cold-stacked rigs coming back to work after breakup, and we have three rigs receiving operator requested upgrades. Which are tied into two-year contracts.

Speaker #3: We are already seeing operators wanting to tie up rigs in the spring of 2027 and deleting indicator for business getting busier. We are now wanting to get our book not too long as we see upward demand construct.

Bob Geddes: We are already seeing operators wanting to tie up rigs in the spring of 2027. That's a leading indicator for business getting busier. We are now wanting to get our book, not too long, as we see upward demand construct, and we will start raising rates about 5% to 10% as we move into the back half of the year. On the international front, we have a fleet of 25 rigs in our international fleet. We have 9 rigs, of which, 8 are under contract in the Middle East. All our rigs in the Middle East were kept on contract with the revenue rigs. Some on standby rig with crews, but in any case, we're making revenue during the conflict. Cost to run crews and parts while the conflict is on has pushed some additional expenses our way, which are clipping margins, obviously.

Speaker #3: And we will start raising rates about 5 to 10 percent as we move into the back half of the year. On the international front, we have a 325 rigs in our international fleet.

Speaker #3: We have nine rigs of which eight are under contract in the Middle East. All our rigs in the Middle East were kept on contract with a revenue rate somewhat standby rate with crews, but in any case, we're making revenue during the conflict.

Speaker #3: Cost to run crews and parts while the conflict is on has pushed some additional expenses our way. Which are clipping margins, obviously. We added in a rig in Oman in the quarter, and we'll have another one on the payroll on long-term contract in the second quarter.

Bob Geddes: We added in a rig in Oman in Q1, and we'll have another one on the payroll on long-term contract in Q2. We had hoped to have that fifth rig in Oman commissioned in Q1, the Middle East conflict created some challenges. Nonetheless, it is up and running today. In Australia, we have 5 rigs operating and expect to add a sixth and seventh into H2. Argentina is steady with both our high-spec ADR 2000s under contract and contract extensions underway. Venezuela. Let's talk about Venezuela. Everything changed in 6 January. Ensign has the only 2 drilling rigs running in the country, and we expect to add a third rig before year-end. Infrastructure buildup will determine how fast Venezuela is able to add rigs efficiently. We feel it will be into 2027 before it catches traction.

Speaker #3: We had hoped to have that fifth rig in Oman commissioned in the first quarter, but the Middle East conflict created some challenges. Nonetheless, it is up and running today.

Speaker #3: In Australia, we have five rigs operating and expect to add a sixth and seventh into the back half of the year. Argentina is steady with both our high-spec radar 2000s under contract and contract extensions underway.

Speaker #3: Venezuela, let's talk about Venezuela. Everything changed in January the 6th. Enzyme has the only two drilling rigs running in the country, and we expect to add a third rig before year-end.

Speaker #3: Infrastructure buildup will determine how fast Venezuela is able to add rigs efficiently. We feel it will be into 2027 before it catches traction. In any case, our strategic positioning in the country over the last 25 years will provide great opportunities for the company moving forward.

Bob Geddes: In any case, our strategic positioning in the country over the last 25 years will provide great opportunities for the company moving forward. Well Servicing. We operate a fleet of roughly 92 Well Servicing rigs in North America, split mostly into the US, 2/3 US, 1/3 Canada. To drive better focus on the Well Servicing assets, we incorporated all our assets under the responsibility of one focused Vice President, Well Servicing VP, Mr. Pat Kerley. Pat is solely now responsible for all the Well Servicing assets. This focus will help drive growth in this business segment for Ensign. The Edge Drilling Rig automation. Our Edge Drilling Rig Control System platform is now on 65% of our rigs globally, generating revenue anywhere from CAD 650 a day to CAD 2,600 a day.

Speaker #3: While servicing, we operate a fleet of roughly 90 two well-servicing rigs in North America, but mostly in the US. Two-thirds US, one-third Canada. To drive better focus on our well-servicing assets, we incorporated all our assets under the responsibility of one focused vice president.

Speaker #3: Well-servicing VP, Mr. Pat Kearley. Pat is solely now responsible for all the well-servicing assets. This focus will help drive growth in this business segment for Enzyme.

Speaker #3: The edge drilling rig automation. Our edge drilling rig control 65 form is now on 65% of our rigs globally. Generating revenue anywhere from $650 a day to $2,600 a day.

Speaker #3: We continue to see the opportunity to grow this business. Top line and bottom line by 15% year over year, well into the future. We're also beta testing our directional guidance system, DGS, which with the help of AI, a team we're able to deliver a beta test-ready product in months versus years at one-tenth the cost.

Bob Geddes: We continue to see the opportunity to grow this business top line and bottom line by 15% year over year well into the future. We're also beta testing our directional guidance system, DGS, which with the help of AI, the team were able to deliver a beta test-ready product in months versus years at 1/10 the cost. Our other business segments, directional drilling, and NGD, are delivering consistent, steady revenue and margin. I'll turn it back to the operator for questions.

Speaker #3: Our other business segments, directional drilling and NPD, are delivering consistent, steady revenue and margin. So I'll turn it back to the operator for questions.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touchstone phone.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Aaron MacNeil with TD Cowen. Your line is now open.

Speaker #1: You raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the hands up before pressing any keys.

Speaker #1: One moment, please, for your first question. Your first question comes from Aaron McNeil with TD Cowan. Your line is now open.

Speaker #4: Hey, morning all. Thanks for taking my questions. Before I get into that, Mike, just wishing you all the best. It's been an absolute pleasure working with you over the years, and Trevor, I wouldn't take the share price performance today as your first day as CFO personally.

Aaron MacNeil: Hey, morning all. Thanks for taking my questions. Before I get into that, Mike, just wishing you all the best. It's been an absolute pleasure working with you over the years. Trevor, I wouldn't take the share price performance today as your first day as CFO personally, so looking forward to working with you going forward.

Speaker #4: So looking forward to working with you going forward.

Speaker #5: So thanks very much. Thanks.

Michael Gray: Thanks very much, Aaron. Thanks.

Aaron MacNeil: Bob, on the Venezuela rig add, can you give us any additional insights on the upgrade? Is it in country? What type of rig is it? What kind of work does it require? And then, you know, you mentioned 2027 before we likely get more, but bigger picture, what do you think is sort of the potential quantum of rig adds beyond the current 3?

Speaker #4: Bob, on the Venezuela rig ad, can you give us any additional insights on the upgrade? Is it in-country? What type of rig is it?

Speaker #4: What kind of work does it require? And then you mentioned 2027 before we likely get more, but bigger picture, what do you think is sort of the potential quantum of rig ads beyond the current three?

Speaker #3: Yeah. So to unpack that, it's a lighter version of our high-spec ADR 1500 currently in the US. That's getting specific upgrades and recertifications. For the Venezuela market, because we've been operating there for so long, we've got a pretty good idea of what's required.

Bob Geddes: To unpack that, it's a lighter version of our high-spec ADR 1500 currently in the US that's getting specific upgrades and recertifications for the Venezuela market. Because we've been operating there for so long, we've got a pretty good idea of what's required. The rig will be down there forever. Well, not expect, we have a long-term contract with the rig, an operator-funded CapEx upgrades that they specifically requested, which will help to drive a little bit of efficiency in their well planning into the future. As far as infrastructure, and this is a challenge I think that beholds Venezuela, is everyone wants to turn on the tap tomorrow, but there's a lot of infrastructure issues, building locations, getting services and products.

Speaker #3: But the rig will be down there forever. We expect—well, not expect. We have a long-term contract with the rig and operator-funded CapEx upgrades that they specifically requested, which will help to drive a little bit of efficiency in their well planning into the future.

Speaker #3: As far as infrastructure, this is a challenge, I think, that beholds Venezuela. As everyone wants to turn on the tap tomorrow, but there's a lot of infrastructure issues—building locations, getting services and products.

Speaker #3: We've got a great field professional field crew presence, and they're all Venezuelans. And they're highly trained. We're able to add kind of a rig at a time.

Bob Geddes: We've got a great field, professional field crew presence. They're all, they're all Venezuelans. They're, you know, highly trained. We're able to add, you know, kind of a rig at a time. I think it develops slower than everyone thinks, but it will develop positively, upward for sure. We've got the capacity to add more rigs into that market, as it needs be.

Speaker #3: So I think that develops slower than everyone thinks, but it will develop positively upward for sure. And we've got the capacity to add more rigs into that market as it needs to.

Speaker #4: Okay. And then I just wanted to make sure I heard this right, but I think you mentioned the potential for two to three rig ads in the US.

Aaron MacNeil: Okay. I just wanted to make sure I heard this right, but I think you mentioned the potential for 2 to 3 rig adds in the US. Is that based on contracts in hand today? You know, one of your largest US customers has said, I think, you know, last week or earlier this week, that they may return to a higher spending and growth rate going forward.

Speaker #4: Is that based on contracts in hand today? And then one of your largest US customers has said I think last week or earlier this week that they may return to a higher spending and growth rate going forward.

Bob Geddes: Right.

Speaker #4: So is there the potential for something incremental to that if the strong commodity price persists?

Aaron MacNeil: Is there the potential for something incremental to that if the strong commodity price persists?

Speaker #3: Yeah. That's the story. We're adding two to three user contracts into the near-term future. That's what those are talking to. We can tie those two comments together.

Bob Geddes: Yeah. That's the story. We're adding 2 to 3 these are contracted into the near-term future. That's what those are talking to. You can tie those two comments together.

Speaker #4: Okay. Great. I'll turn it back.

Aaron MacNeil: Okay. Great. I'll turn it back.

Speaker #3: Thank you, Aaron.

Bob Geddes: Thank you, Dylan.

Bob Geddes: Thank you, Aaron.

Speaker #1: Your next question comes from Parvin Madov with Equinox. Your line is now open.

Operator: Your next question comes from Parvin Mamedov with Equinox. Your line is now open.

Speaker #4: Hi. Congrats on the results. I had two questions. First one was more high-level. Your expectations of the rig market and when do you think it changes the dynamics for you?

Parvin Mamedov: Hi. Congrats on the results. I had 2 questions. First one was more high level, your expectations of the rig market, and when do you think it changes the dynamics for you? So far it seems like, and you noticed this in your release too, in North America, the rig count hasn't moved significantly in response to prices. Do you think it takes another quarter or 2 quarters of high oil prices to push it higher? What is your internal expectation?

Speaker #4: So so far, it seems like and you noticed this in your release too. In North America, the rig count hasn't moved significantly. In response to prices, do you think it takes another quarter or two quarters of high oil prices to push it higher?

Speaker #4: What is your internal expectation?

Speaker #3: So what that's a very good question. And the question we've been putting to our client base of course, the consistent response we're getting back is, "We'll take a quarter of these nice prices and once we get past the second quarter, we'll start to expand." Drilling to take up on that.

Bob Geddes: What, that's a very good question and a question we've been putting to our client base. Of course, the consistent response we're getting back is, we'll take a quarter of these nice prices. Once we get past the Q2, we'll start to expand drilling to pick up on that. That's why you're also seeing private equity slide in where they're putting together some management teams and going after areas where, you know, the cost-based entry level may have been around $60 a barrel. When the oil's in the $60s, it doesn't attract capital.

Speaker #3: It's why you're also seeing private equity slide in where they're putting together some management teams and going after areas where the cost-based entry-level may have been around 60 bucks a barrel.

Speaker #3: And so when oil's in the 60s, it doesn't attract capital. Now it's attracting capital and we're seeing a lot of private equity names we haven't seen before put together teams and call us and ask us for rigs and rig activity.

Bob Geddes: Now it's attracting capital, and we're seeing a lot of private equity names we haven't seen before, put together teams, and call us and ask us for rigs and rig activity. Rig activity, of course, the desirable rigs, most desirable rigs are always fully booked. The operators who have them now are hanging on to them. A couple of our operators have told us they wanted to add 1 or 2 rigs into the H2. Everyone is waiting to your question, for a Q2 under the belt of these prices before they start to move with any conviction.

Speaker #3: Rig activity of course is desirable rigs. Most desirable rigs are always fully booked. The operators who have them now are hanging onto them. A couple of our operators have told us they wanted to add one or two rigs into the back half of the year.

Speaker #3: But everyone is waiting for your question. For a second quarter under the belt of these prices before they start to move with any conviction.

Parvin Mamedov: Got it. Thank you. My next question is, I guess your CapEx behavior in response to this. Q1 was almost more than 30% of, I think, total annual CapEx already spent. Is this partially because you expect higher activities in H2 of the year and you're already spending now, or this just happened to be so?

Speaker #4: Got it, thank you. And my next question is, I guess your CapEx behavior in response to this—Q1 was almost more than 30% of, I think, total annual CapEx already spent.

Speaker #4: Is this partially because you expect higher activities in the second half of the year? And you already spending now, or this just happened to be so?

Speaker #3: Yeah. A combination of both. We've had a lot of customer-funded CapEx where they wanted to make upgrades to the rigs. Oman is a perfect example where we had a couple of rigs in the first quarter.

Bob Geddes: Yeah, a combination of both. We've had a lot of customer-funded CapEx, where they wanted to make upgrades to the rigs. Oman is a perfect example where we had a couple of rigs in Q1. One got pushed into Q2 because of the delay in commissioning because of the situation in the Middle East. Generally, you're seeing a little bit of an acceleration of capital. At least half of that is operator-funded capital, which will push into work starting in H2 of 2026. It's not to suggest that there's any difference in our run rate, our maintenance CapEx is right on schedule with the number of rigs we have running.

Speaker #3: One got pushed into the second quarter because of the delay in commissioning, because of the situation in the Middle East. But generally, you're seeing a little bit of an acceleration of capital at least half of that is operator-funded capital, which will push into work starting in the second half of '26.

Speaker #3: So it's not to suggest that there's any difference in that run rate or maintenance CapEx right on schedule, with the number of rigs we have running. But as you add rigs, you have to recertify, reactivate, and put them to work.

Bob Geddes: As you add rigs, you have to recertify, reactivate, and put them to work. In most cases, we're able to get the operator to fund that and/or the changes they request and also tie in term contracts. We're careful to tie in term contracts, not to get too long because we see a situation developing where, you know, 5% to 10% increases through the back half of 2026 will happen and into 2027. 'Cause available rig equipment is starting to tie up. I mean, you just can't get it. If you need new pumps, you can't go buy them at an auction anymore. You have to order them. You're almost a year out now.

Speaker #3: And in most cases, we're able to get the operator to fund that and/or the changes they request. And also tie in term contracts. And we're careful to tie in term contracts not to get too long because we see a situation developing where 5 to 10 percent increases through the back half of '26 will happen, and into '27.

Speaker #3: Because available rig equipment is starting to tie up. I mean, you just can't get it. And if you need new pumps, you can't go buy them at an auction anymore; you have to order them.

Speaker #3: And they're almost a year out now. So everything is starting to tighten up, which is a great construct for starting to get the value that we've created over the last decade back to the drilling contractors.

Bob Geddes: Everything is starting to tighten up, which is a great construct for, you know, starting to get the value that we've created over the last decade back to the billing contract.

Speaker #4: Thank you. One quick last one for me. On Canadian activity, it seems like your peers have gained market share in Canada. What do you attribute that to?

Parvin Mamedov: Thank you. One quick last one for me on Canadian activity. It seems like your peers have.

Parvin Mamedov: gained market share in Canada. What do you attribute that to?

Parvin Mamedov: Gained market share in Canada. What do you attribute that to?

Speaker #3: So capital investment. One particular company invested more capital into Canada specifically. Where we've been deploying capital focus into other areas of the world, the US, and the Middle East where we get a higher margin.

Bob Geddes: Capital investment, well, because the company invested more capital into Canada specifically, where we've been deploying capital, focus into other areas of the world, the US, and Middle East, where we get a higher margin.

Speaker #4: Okay. Thank you so much.

Parvin Mamedov: Okay. Thank you so much.

Speaker #3: Thank you, Martin.

Bob Geddes: Thank you, Brandon.

Bob Geddes: Thank you, Parvin.

Speaker #1: Your next question comes from Joseph Schachter with Schachter Energy Research. Your line is now open.

Operator: Your next question comes from Josef Schachter with Schachter Energy Research. Your line is now open.

Speaker #5: Good morning, everyone. And Mike, congratulations. And good luck with your career and go forward life intentions. Two questions. For me, Bob, with all the problems going on in the Middle East, did you guys pull back on and get your crews away when the fighting was on?

Josef Schachter: Good morning, everyone. Michael Gray, congratulations and good luck with your career and go forward life intentions. Two questions from me. Bob Geddes, with all the problems going on in the Middle East, did you guys pull back and get your crews away when the fighting was on? If there is no peace deal the next week or two, and they go back to fighting, what do you do in the field? Do you stop drilling? Do you bring your crews out? How do you handle the safety of your employees, you know, when the craziness goes on there?

Speaker #5: And if there is no peace deal in the next week or two, and they go back to fighting, what do you do in the field?

Speaker #5: Do you stop drilling? Do you bring your crews out? How do you handle the safety of your employees when the craziness goes on there?

Speaker #3: Yeah. Fair question. I get a report every day and the team is on top of us every day. Safety of the crews is most important of course.

Bob Geddes: Yeah, fair question. I get a report every day, and the team is on top of this every day. Safety of the crews is most important, of course. It's interesting. If you've been watching news, you will see occasional fireworks in the skies every night. The Bahrain operation is the most affected. Oman, not really. Kuwait, not as much either. We, you know, we run a lot of crews here in camps. Of course, we're on top of it. Moving crews in and out, we've had to bring them in other ways through land, rather than, you know, fly them in.

Speaker #3: It's interesting if you didn't watch the news you will see occasional fireworks in the skies every night. The Marine operation is the most affected.

Speaker #3: Oman not really. Kuwait not as much either. So we run a lot of crews in camps. And of course, we're on top of it.

Speaker #3: Moving crews in and out, we've had to bring them in other ways through land. Rather than fly them in. Obviously, we used to describe the Middle East as our most stable part of the world and then everything changed.

Bob Geddes: Obviously, you know, we used to describe the Middle East as the most stable part of the world, and then everything changed. You know, we've operated in difficult places of the world. We were in Libya when it went through its conflict. You know, we're pretty street smart, got great teams. To your point, safety of the crews is always first. Always first.

Speaker #3: But we've operated in difficult places of the world. We were in Libya when it went through its conflict, so we're pretty street smart. Got great teams.

Speaker #3: But to your point, safety of the crews is always first. Always first.

Speaker #5: Okay. Second one is Venezuela. The last speaker used international recount showed there were four rigs in the country, so two of the four were yours.

Josef Schachter: Okay. The second one is Venezuela. The last Baker Hughes International Rig Count showed there were 4 rigs in the country, so 2 of the 4 were yours. Production, you know, has gone up. I think Energy Secretary Wright said there were 1.2 million barrels a day up from the 800,000. How much upside is there? He's throwing a number of 1.5 million by the end of the year. Is that possible? Does they have enough rigs, equipment, and, you know, the whole, you know, infrastructure to raise production that quickly? How much more activity does that do for Ensign?

Speaker #5: And production has gone up. I think the Energy Secretary said they were at 1.2 million barrels a day, up from the 800s. How much upside is there?

Speaker #5: He's throwing a number of 1.5 million by the end of the year. Is that possible? And do they have enough rigs and equipment, and the whole infrastructure to raise production that quickly?

Speaker #5: And where do you see potential production in the next two to three years? And then how much more activity does that do for Ensign?

Speaker #3: Well, Venezuela, we've been there pre-Chavez, Chavez, Madero, and now under Rodriguez. They used to produce 3 million barrels a day. They're around 800. And the numbers you mentioned are reasonably accurate.

Bob Geddes: Well, you know, Venezuela, we've been there, pre-Chavez, Chavez, Maduro, and now under Rodríguez. You know, they used to produce 3 million barrels a day. They're around 800. The numbers you mentioned are reasonably accurate. That is coming through a lot of working in the wells that were shut in, getting current infrastructure going. That's where the efforts are. I think that behind that starts to come the drilling, and that will start in the back half of 2026 and into 2027. Everyone's efforts are spent just getting wells completed or not completed, re-serviced, well-serviced, back on production, getting infrastructure going, changing valves, fixing leaks, all of that, getting things up and running. That'll take them from the 800 to the 1.2.

Speaker #3: That is coming through a lot of working in the wells that were shut in, getting current infrastructure going. That's where the efforts are. I think that behind that starts to come the drilling.

Speaker #3: And that will start in the back half of '26 and into '27. So everyone's efforts are spent just getting wells completed or not completed.

Speaker #3: Reservist well serviced. Back on production. Getting infrastructure going. Changing valves. Fixing leaks. All of that. Getting things up and running. That'll take them from the 800 to the 1,200.

Speaker #3: To get up to the 1.5 by the end of the year, they're going to have to start to do some drilling to get to 3.

Bob Geddes: To get up to the 1.5 by the end of the year, they're gonna have to start to do some drilling. To get to 3, they're absolutely gonna have to do some drilling. It's anyone's guess, you know, you can extrapolate how many rigs you think are gonna be required to get there, but it's gonna be a bunch. Venezuela is a challenging area to work in. Again, we've been working there for a long time. 95% of our people there are Venezuelan, so we've got a great infrastructure to lever off of. As I mentioned, we'll be adding a third rig into the H2 2026. We've got capacity to, you know, add rigs as they are required into the country.

Speaker #3: They're absolutely going to have to do some drilling. And it's anyone's guess. You can extrapolate how many rigs you think are going to be required to get there.

Speaker #3: But it's going to be a bunch. And Venezuela is a challenging area to work in. Again, we've been working there for a long time.

Speaker #3: 95% of our people there are Venezuelans. So we've got a great infrastructure to lever off of. As I mentioned, we'll be adding a third rig into the back half of 2026.

Speaker #3: And we've got capacity to add rigs as they are required into the country. So it will move up. It's been de-risked. So far, everything is looking very nice.

Bob Geddes: It will move up. It's been de-risked. So far everything is looking very nice.

Josef Schachter: Super. Is the pricing of the rigs, because of the, you know, political risk, et cetera, et cetera, that, are you getting higher margins on those Venezuelan rigs than other parts of your international business?

Speaker #5: Super. Is the pricing of the rigs because of the political risk, etc., etc., that—are you getting higher margins on those Venezuelan rigs than other parts of your international business?

Speaker #3: It's all relative. And it's all relative. Generally, because of crew-based costs. So the margins in Venezuela are very close to what we'd be getting in the Middle East.

Bob Geddes: It's all relative. It's all relative generally because of crew base costs. The margins in Venezuela are very close to what we've been getting in the Middle East.

Speaker #5: Super. That's it for me. Thanks so much. Thanks for answering my question.

Josef Schachter: Super. That's it for me. Thanks so much. Thanks for answering my question.

Speaker #3: Thanks, Joseph. Goodbye.

Bob Geddes: Thanks, Josef. You bet.

Speaker #1: Your next question comes from Keith McKay with RBC. Your line is now open.

Operator: Your next question comes from Keith Mackey with RBC. Your line is now open.

Speaker #4: Hey, good morning and thanks. Maybe Bob just want to pick up on a comment you made about your capital deployment strategy maybe some of your peers a little bit more focused on Canada.

Keith Mackey: Hey, good morning, and thanks. Maybe Bob, just wanna pick up on a comment you made about your capital deployment strategy. Maybe some of your peers are a little bit more focused on Canada, and you've got a bit more focus in other parts of the world. Can you just comment on the returns you're seeing in some of these other regions? What underpins your long-term strategy of, you know, whether it's US, Middle East, Latin America, et cetera, beyond just Canada? Is it the level of resource available? Is it geopolitical factors? Just a little bit more color there would be appreciated.

Speaker #4: And you've got a bit more focus in other parts of the world. Can you just comment on the returns you're seeing in some of these other regions?

Speaker #4: And what underpins your long-term strategy of whether it's US, Middle East, Latin America, etc., beyond just Canada? Is it the level of resource available?

Speaker #4: Is it geopolitical factors? Just a little bit more color there would be appreciated.

Speaker #3: Well, first and foremost, we want to stay focused on debt reduction. As Trevor pointed out, 125 million is our target for 2026. So when we're having conversations about rig upgrades and movement of rigs, our clients, we have that in our background.

Bob Geddes: Well, first and foremost, we wanna stay focused on debt reduction. As Trevor pointed out, CAD 125 million is our target for 2026. When we're having conversations about rig upgrades and movement of rigs, our clients, we have that in our background. Because we operate in 8 different countries, we've got pools for capital in different ways. The US has been absorbing a lot of our capital input over the last 3 to 4 years. The Middle East, specifically Oman, the last 2 years. Canada, we're just starting to focus back into Canada.

Speaker #3: Because we operate in eight different countries, we've got polls for capital in different ways. The US has been absorbing a lot of our capital input over the last three to four years.

Speaker #3: The Middle East, specifically Oman, the last two years. And Canada, we're just starting to focus back into Canada. We've got five rigs two of those five are cold stack and then are being reactivated.

Bob Geddes: We've got five rigs, two of those five are cold stacked and are being reactivated. They'll go to work here right after breakup. We're starting to focus back onto the high-spec singles, which were sold out of in Canada, and high-spec triple upgrades, and with, you know, buy two packages, things like that. We've got a good runway of projects for capital in Canada, for example, that are paying for themselves in a year or less with the incremental margin that they'll be making. Again, we put capital where it provides us the best return and now you're starting to see us focus back into Canada.

Speaker #3: They'll go to work here right after breakup. So we're starting to focus back onto the high-spec singles, which were sold out of in Canada.

Speaker #3: And high-spec triple upgrades and with buy fuel packages, things like that. But we've got a good runway of projects for capital in Canada, for example, that are paying for themselves in a year or yes with the incremental margin that they'll be making.

Speaker #3: So again, we put capital where it provides us the best return. And now you're starting to see us focus back into Canada. So our goal is to get to 25% market share.

Bob Geddes: You know, our goal is to get to 25% market share. That's what we used to own in Canada. We grew our market share in the US, and we're holding onto that significantly. Our market share in Oman has grown, et cetera. That's the strategy we're deploying.

Speaker #3: That's what we used to own in Canada. We grew our market share in the US. And we're holding on to that. Significantly. Our market share in Oman has grown etc.

Speaker #3: So, that's the strategy we deploy.

Speaker #4: Got it. Appreciate the color. Just on the debt reduction target, so 125 targeted for this year. If I'm not mistaken, and it is quite possible that I am, but that would take you beyond the initial 600 that you had planned to do from 2023 to 2025.

Keith Mackey: Got it. Appreciate the color. Just on the debt reduction target, so CAD 125 targeted for this year. If I'm not mistaken, and it is quite possible that I am, but that would take you beyond the initial CAD 600 that you had planned to do from 2023 to 2025. Can you just comment on, you know, what you think the right amount of debt is, or even if it's an amount of debt versus an amount of liquidity for the company? Ultimately, what portion of free cash flow do you think that CAD 125 will represent? I'm guessing substantially all, but is there also some, say, dispositions or potential small dispositions built into that target?

Speaker #4: Can you just comment on what you think the right amount of debt is, or even if it's an amount of debt versus an amount of liquidity, is for the company?

Speaker #4: And then ultimately, what portion of free cash flow do you think that 20, I'm guessing substantially all, but is there also some, say, dispositions or potential small dispositions built into that target?

Speaker #3: Yeah. Trevor, do you want to take that one on?

Bob Geddes: Yeah. Trevor, do you want to take that one on?

Trevor Russell: Sure, yeah. To start with our CAD 600 million debt reduction target that we announced a while back, from 2023 to 2026 H1, we should hit that target. We're on target for that now to complete that. The target for this year is a CAD 125 million debt reduction. We feel with the cash flow that we're generating that will be an achievable target. There is some excess room in our free cash flow to cover some more on that. But with our CapEx commitments and plans, we are leaving a little bit left over to make sure we hit that. We're comfortable with the CAD 125, and it remains our focus to hit that target.

Speaker #2: Sure. Yeah. So to start, with our 600 million debt reduction target that we announced a while back, from 2023 to 2026, first half, we should hit that target we're on target for that now to complete that.

Speaker #2: The target for this year is 125 million debt reduction. We feel with the cash flow that we're generating that that will be an achievable target.

Speaker #2: There is some excess room in our free cash flow to cover some more on that. But with our CapEx commitments and plans, we are leaving a little bit left over to make sure we hit that.

Speaker #2: So, we're comfortable with the 125, and it remains our focus to hit that target. Overall, debt ratio—I mean, we're probably at that 2 and a quarter, 2 and a half, somewhere in that zone.

Trevor Russell: Overall, I mean, debts ratio, we're probably at that, like, 2 and a quarter, 2 and a half, somewhere in that zone. Target would be to get down to that 1, maybe 1 and a half, in the near future, 2 years. We feel that that's kind of the appropriate level of debt for our company. Looking forward to continue moving on towards that target.

Speaker #2: Target would be to get down to that 1, maybe 1 and a half in the near future, a couple of years. We feel that that's kind of the appropriate level for debt for our company.

Speaker #2: Looking forward to continuing to move on towards that target.

Speaker #4: Understood. Thanks very much.

Keith Mackey: Understood. Thanks very much.

Speaker #1: Your next question comes from Josh Young with Bison. Your line is now open.

Bob Geddes: Thank you.

Operator: Your next question comes from Josh Young with Bison.

Operator: Your next question comes from Josh Young with Bison, your line is now open.

Speaker #3: Hey, guys. Thanks for taking my questions. First question, can you talk a little bit about California and your activity trajectory there and when we might be more rigs active there?

Josh Young: Hey, guys. Thanks for taking my questions. First question, can you talk a little bit about California and your activity trajectory there and when we might see more rigs after that?

Speaker #5: Yeah. Yeah. Well, California is such an enigma. I don't like oil and gas, but don't take it away and give us more of it.

Bob Geddes: Yeah, yeah. Well, California is such an enigma. They don't like oil and gas, but don't take it away and give us more of it. You know, it's expensive gallon, it's interesting. Yeah, we've been in California for a long time. We're the biggest driller in California. We were down to three or four rigs at the beginning of the year. We're up to eight rigs now. We're seeing that as a steady business moving forward. You know, we've probably only got one available rig left to put back to work. You know, California is almost like a different country. They have their own transportation regulations, the tax, everything else and a little bit of a high barrier to entry into California.

Speaker #5: It's expensive gallonage. It's putting us in debt. Yeah. We've been in California for a long time. We're the biggest dealer in California. We were down to three or four rigs at the beginning of the year.

Speaker #5: We're up to eight rigs now. We're seeing that as a steady business moving forward. We've probably only got one available rig left to put back to work.

Speaker #5: California is almost like a different country. They have their own transportation regulations. Tax and everything else. And a little bit of a high barrier to entry into California.

Speaker #5: So, we see a little bit of upside to maybe add another rig before the end of the year, but we're certainly steady at eight, which we're very happy with.

Bob Geddes: We see a little bit of upside to maybe add another rig before the end of the year, but we're certainly steady at eight, which we're very happy with.

Speaker #3: Got it. That's great. Thanks. And then on the Canadian market share, you guys have been slipping a little bit over the last year or so.

Josh Young: Got it. That's great. Thanks. On Canadian market share, you guys have been slipping a little bit over the last year or so. Do you guys have thoughts on where you want to be there and any plan or strategy to either make back market share gains or sort of continue as you're going?

Speaker #3: Do you guys have thoughts on where you want to be there, and any plan or strategy to either make back market share gains or sort of continue as you're going?

Bob Geddes: Right. Yeah, fair question. Market share is always important to us, and we want to gain that market share back. Over the last few years, we've sent 2,000 horsepower rigs down to the US. We got tired of waiting for the Northeast, the DC gas play to develop. We shipped those rigs down to the US. Now we're focusing back on market share expansion into Canada. 25% market share is where we need to be and where we will get to. As I mentioned, we've got 5 rigs that will come on stream at the back end of breakup period the next month or two.

Speaker #5: Right. Yeah. Fair question. Yeah. Market share is always important to us. And we want to gain that market share back. Over the last few years, we've sent two of our biggest rigs 2,000 horsepower rigs down to the US.

Speaker #5: We've gotten tired of waiting for the Northeast BC gas play to develop. So we shipped those rigs down to the US. And starting now, we're focusing back on market share expansion into Canada.

Speaker #5: Twenty-five percent market share is where we need to be and where we will get to. As I mentioned, we've got five rigs that will come on stream at the back end of breakup here in the next month or two.

Speaker #5: And year over year, we're going to have seven to eight rigs more running year over year. We should be getting to 50 rigs by mid-summer.

Bob Geddes: Year over year, we're going to have 7 to 8 rigs more running year over year. We should be getting to 50 rigs by midsummer. The plan is to extend and grow up. We're gonna be growing market share at an uptick market, which is a nice place to be. It's better than trying to grow market share in a downtick market. You know, we've been focusing on debt reduction at the same time, deploying capital to the markets that provided us the best return. Keep in mind, in Canada, you make Canadian dollars. You know, whereas the equipment we buy to put on rigs like cats are all denominated US dollars.

Speaker #5: And the plan is to extend and grow up. So we're going to be growing market share into an uptick market, which is a nice place to be.

Speaker #5: It's better than trying to grow market share in a downtick market. And we've been focusing on debt reduction at the same time. Deploying capital to the markets to provide us the best return.

Speaker #5: Keep in mind, in Canada, you make Canadian dollars. So whereas the equipment we buy to put on rigs like cats are all denominated US dollars, so that's why other areas other than Canada have seen a lot of capital deployment because it's just been better business for us.

Bob Geddes: That's why other areas other than Canada has seen a lot of capital deployment because it's just been better business sense for us. Now we've got five projects underway that will pay for the incremental upgrade capital in about 8 to 10 months.

Speaker #5: But now we've got five projects underway that will pay for the incremental upgrade capital. And about 8 to 10 months.

Speaker #3: Great. Thank you.

Josh Young: Great. Thank you.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Tim Monachello with ATB Capital Markets. Your line is now open.

Speaker #1: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Tim Monachello with ATB Cormark.

Speaker #1: Your line is now open.

Tim Monachello: Hey, good morning, everyone. I joined the call late, so I don't know if I missed this, but could you just outline how many rig upgrades your capital program contemplates and in which regions?

Speaker #2: Hey, good morning, everyone. I joined the call late, so I don't know if I missed this, but could you just outline how many rig upgrades your capital program contemplates and in which regions?

Speaker #5: So we've got here, just let me get that for you, Tim. Bear with me. Here. We've got five in Canada. Generally, we get one we've got about 10 projects underway, five of them are in Canada.

Bob Geddes: Let me get that for you, Tim. Bear with me here. We've got 5 in Canada. Generally, we've got about 10 projects underway. 5 of them are in Canada, 1 in Venezuela, and the rest are in the US. I'm sorry, 1 in Australia. 5 Canada, 1 Australia, 1 Venezuela, and the rest are in the US.

Speaker #5: One in Venezuela, and the rest are in the US. I'm sorry. And one in Australia. The five—Canada, one Australia, one Venezuela, and the rest are in the US.

Tim Monachello: Okay. Are all those rigs idle currently? Are those, like, net new additions to rig activity through the back half of the year?

Speaker #2: Okay. And are all those rigs idle currently, or are those net new additions to the rig activities through the back half of the year?

Bob Geddes: You know, 4 of those 10 would be net new additions. Yeah.

Speaker #5: Three of those 10 no, four of those 10 would be net new additions. Roughly. Yeah.

Speaker #2: Okay. And then, when you talk about customer-funded capital, how much of that is upfront payments and how much of it is, I guess, implied in higher daily rates over the term of the contract?

Tim Monachello: Okay. Then when you talk about customer-funded capital, how much of that is upfront payments and how much of it is like, I guess, implied in higher day rates over the term of the contract?

Speaker #5: So there's I would say probably at least a third of them are upfront capital and with term contracts. Probably the remainder of them are where we've been able to raise our rates to retrieve the capital within the first year.

Bob Geddes: There's, I would say, probably, at least a third of them are upfront capital. With term contracts, probably, the remainder of them are where we've been able to raise our rates to retrieve the capital within the first year. Of course, we have a lead base for contract extension after that first year at a higher rate. We've tended not to go long on those contracts.

Speaker #5: And then, of course, we have a new base for contract extension after that first year at a higher rate. So we've tended not to go long on those contracts.

Speaker #2: Got it. In the US market, can you talk a little bit about the state of your idle fleet and the amount of rigs available that you think could be upgraded for a reasonable cost or, I guess, an economic cost in current market conditions?

Tim Monachello: Got it. In the US market, can you talk a little bit about the state of your idle fleet and the amount of rigs available that you think could be upgraded for a reasonable cost, or I guess an economic cost in current market conditions?

Bob Geddes: Yeah

Tim Monachello: to go back to work in an upcycle?

Speaker #2: Can you go back to work in an upcycle?

Speaker #5: Right. Right. Well, we think we're going to get close to 50 rigs running in the back half of 2026, as I mentioned before. We have a fleet of 70 rigs set up for the moment.

Bob Geddes: Right. Right. Well, we've, we think we're gonna get close to 50 rigs running in the back half of 2026. As I mentioned before, we have a fleet of 70 rigs. Let's look at that for a moment. We have about 20 rigs that we can put to work that the sales team can market. That varies from some in the Rockies, a couple of bubbles. The rest are probably at least 10 of them are the kind of the high-spec triples that can be deployed and put to work competitively for probably about CAD 5 million, CAD 5 to 8 million per rig of research and upgrade capital.

Speaker #5: So we have about 20 rigs that we can put to work that the sales team can market. And that varies from some of the Rockies a couple of doubles.

Speaker #5: But the rest probably at least 10 of them are kind of the high-spec triples. That can be deployed and put to work competitively for probably about $5 million five to eight million dollars per rig of research and upgrade capital.

Speaker #2: Okay. And is that Venezuela rig that's being added in Q4—is that coming out of the US fleet?

Tim Monachello: Okay. Is that Venezuela rig that's being added in Q4, is that coming out of the US fleet?

Speaker #5: Correct. Yeah.

Bob Geddes: Correct. Yeah.

Tim Monachello: Do you expect to see more rigs going down there?

Speaker #2: Do you expect to see more rigs going down there?

Speaker #5: Yeah. I think that if it plays out like everyone thinks it will, we've got the capacity to feed into it, and we've got the infrastructure to support it, yes.

Bob Geddes: Yeah, I think that, if it plays out like everyone thinks it will, we've got the capacity to feed into it, and we've got the infrastructure to support it, yes.

Speaker #2: Okay. Great. I appreciate the details. Turn it back.

Tim Monachello: Okay, great. I appreciate the details. Turn it back.

Speaker #5: Thank you.

Bob Geddes: Thank you.

Speaker #1: I don't know if we're the questions at this time. I will now turn the call over to Bob. For closing remarks.

Operator: There are no further questions at this time. I will now turn the call over to Bob for closing remarks.

Speaker #5: Thank you, Joel. This industry keeps on finding ways to deliver value by reducing well times. And we have equipment performing at higher duty and delivering more work in a daily basis.

Bob Geddes: Thank you, Gail. This industry keeps on finding ways to deliver value by reducing well times. When you have equipment performing at higher duty and delivering more work on a daily basis, that value has, for the last decade, been captured by the operators and helped keep industry competitive globally. Notwithstanding, as a result, contracted daily costs have increased with replacement equipment costs moving up. It's time for contractors to capture the value creation generated over the last decade. With that, and with tightening supply of high-spec rigs, we will be increasing rates roughly 5% to 10% on contract rollovers. This will help contractors cover those costs and monetize into the future the value we've created over the last decade. We'll see where oil pricing lands, but it certainly is lining up from where it was.

Speaker #5: That value has for the last decade been captured by the operators and helped keep industry competitive globally. Notwithstanding, as a result, contracting daily costs have increased with replacement equipment costs moving up.

Speaker #5: It's time for contractors to capture the value creation generated over the last decade. With that and with tightening supply of high-spec rigs, we will be increasing rates roughly 5 to 10 percent on contract rollovers.

Speaker #5: This will help contractors cover those costs and monetize them in the future. The value we've created over the last decade. We'll see where oil pricing lands, but it certainly is landing up from where it was.

Speaker #5: And with very little excess rig equipment capacity, and lead times on rig equipment getting out there—up to a year or more—and with utilization moving up, the market can strike what’s very promising for Ensign for Q2 in three months.

Bob Geddes: With very little excess rig equipment capacity and lead times on rig equipment getting out there up to a year or more, and with utilization moving up, the market can construct what's very promising for Ensign. We'll chat in three months. Thank you for joining the call.

Speaker #5: Thank you for joining the call.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.