Ensign Energy Services Inc.

Good morning, ladies and gentlemen, and welcome to the Enzyme Energy Services, Inc. first quarter 2022 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on Monday, May 9, 2022. And I would like to turn the conference over to Nicole Romano. Please go ahead.

Thank you, Sylvie. Good morning and welcome to Ensign Energy Services' first quarter 2022 conference call and webcast. On our call today, Bob Geddes, President and COO, and Mike Gray, Chief Financial Officer, will review Ensign's first quarter highlights and financial results, followed by our operational update and outlook. We'll then open the call for questions. Our discussion today may include forward-looking statements based upon current expectations that involve several business risks and uncertainties. The factors that could cause results to differ materially include, but are not limited to, political, economic, and market conditions, crude oil and natural gas prices, foreign currency fluctuations, weather conditions, the company's defense of lawsuits, the ability of oil and gas companies to pay accounts receivable balances, or other unforeseen conditions which could impact the demand for services supplied by the company. Additionally, our discussion today may refer to non-GAAP financial measures such as adjusted EBITDA, Please see our first quarter earnings release and see our filings for more information on forward-looking statements and the company's use of non-GAAP financial measures. With that, I'll pass it on to Bob.

Thanks, Nicole, and thank you all for joining our call today. As you know, Enzyme Energy Services is one of the largest global energy service providers spanning four continents and eight countries, employing over 4,000 people with $3 billion of assets consisting of 245 drilling rigs, 100 well-serviced rigs, a directional drilling business, and an MPV business line, also a rentals division. With the world catapulted from a COVID-induced demand pinch now to a global supply challenge, the result of sanctions from the Russian-Ukraine conflict, the world needs to bring back production and drill holes in the ground to access that energy for a recovering world economy. Enzyme's first quarter results as delivering right on schedule as planned and is up sequentially year over year and quarter over quarter. This industry is coming from all-time low rates and is climbing the hill rather quickly to recapture pricing, while continuing to deliver the value proposition our clients have grown to expect from Ensign over the years. We continue to see activity manifest itself into quarter-over-quarter pricing leverage, which is teeing up accelerated pricing momentum as we move forward. While we had little direct COVID effects on the business in North America in Q1, we still had COVID effect our activity in our Australia operation, which hampered our first quarter results slightly. While the drilling industry is able to move, to finally move pricing up to narrow the gap between rates and value delivered for our services, the question is how cost inflation is affecting our margins. The question then becomes how sticky is the margin increase? With operational costs, net of labor costs that are exposed to inflationary effects representing about 20% of the sticker day rate, witnessing a quarter-over-quarter projected cost inflation of roughly 5%, The effective margin drag for the business is really only 1% quarter over quarter. In other words, 90% of a Q over Q rate increase is sticky and makes its way right to the gross margin bottom line. Keep in mind that most of our contracts, and certainly all contracts in North America, contain a crude wage escalation clause that covers any labor increase as a pass-through with an increase to the base day rate. Offsetting any cost inflation is, of course, overhead per day efficiency. With overhead fixed costs spread over more operating days, our margin gets more torque and easily offsets any operational cost inflation creep. We continue to focus on margin versus market share as the most productive and profitable approach in an obvious uptick in the elastic demand market. We also announced the sale of two idle Mexican rigs that were cold-stacked 3,000 horsepower rigs, purpose-built for the deep gas Mexican market, which came to us via acquisition a few years back. Having no desire to expand operations in New Mexico and being laser-focused on debt reduction, the opportunity to sell these assets was acted on. Also very happy to report that we had a record zero recordable incidents in four of our five business units. The application and stringent application of standard rig operating procedures, coupled with our highly effective standardized training program, the GSS, allows us to continue to train new recruits into a safe and efficient work environment. I'll turn it over to Mike for financials.