ensign resource service group inc. 2002 2002s3.amazonaws.com/zanran_storage/ fileensign resource...

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 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.


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


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.


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.


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.


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


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.


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


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.


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.


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


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


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.


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


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.


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.


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



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.


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.


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.


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


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.


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)


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


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


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


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.


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


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


DIVIDENDS


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


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.


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.


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.


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


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


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


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


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


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


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


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


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


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.


($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


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


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


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


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


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


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


CANADIAN DRILLING


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



U.S. DRILLING


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


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



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


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


TRI-CITY DRILLING INC.


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


Ardmore Office


Brooks Office


Estevan Office


Grande Prairie Office


Lloydminster Office


Red Deer Office


OPSCO ENERGY

INDUSTRIES LTD.

415 Monument Place S.E.Calgary, AB T2A 1X4Telephone: (403) 272–2206Facsimile: (403) 272-6414

ENHANCED PETROLEUM

SERVICES PARTNERSHIP


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


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


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

ensign resource service group inc. 2002 2002s3.amazonaws.com/zanran_storage/ fileensign resource...

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