Trican Well Service Ltd. is pleased to announce the results of the 2013 Russian contract tendering season. Management is currently estimating 2013 revenue to increase by approximately 25%, as measured in Russian roubles, relative to 2012.

 

Customer interest in horizontal completions and multi-stage fracturing is significantly increasing and is expected to represent 20% of Russian fracturing revenues in 2013 compared to 12% in 2012. This is expected to improve equipment utilization and fits well with Trican's completion tool service line.

 

The estimated revenue increase is based on a 2% expected increase in overall activity combined with a 23% expected increase in average revenue per job. The expected increase in average revenue per job is the combined result of the trend towards larger fracturing job sizes in multi-stage completions, a shift in the sales mix toward more fracturing work relative to coiled tubing and cementing and a modest increase in pricing. Bidding for the Russian contracts was very aggressive with a number of competitors attempting to gain market share, which limited the year-over-year price increases obtained.

 

A high rate of inflation in the Russian market and strong competition continues to challenge the Russian operations profitability. That being said, management is anticipating moderate improvements in the operating income margin in 2013 as a result of a shift in our work scope to higher margin work and multi-stage activity, including completion tool revenue, and a continued focus on optimizing the Russian operations' cost structure.

 

The actual 2013 financial results for our Russian operations could be impacted by revisions in customer budgets, exploration levels, the price of commodities and general economic conditions in the Russian market.

 

In summary, management is pleased with the results of the 2013 tenders. Activity and pricing in the Russian market continue to strengthen and there is a strong customer interest in the development of oil and gas reservoirs utilizing state of the art technology.