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Highlights for the DS division included:
-- Revenue for the DS division for the year ended, December 31, 2012 increased 78% to $262.3 million from $147.7 million for the seven months ended December 31, 2011. The year over year increase in revenue is mostly attributable to a full year of activities in 2012 versus the seven months of 2011 and the increase in Canadian market share. Canadian market share for the drilling fluids service line for the year ended December 31, 2012 was approximately 29%, up from 26% in 2011. The market share increased as a result of the successful integration of the XL Fluids Systems Inc. and New West Drilling Fluids Inc. acquisitions, offering a broader product line by adding SAGD and completion fluid products and the introduction of new technology such as well bore strengthening and lost circulation additives for oil based mud drilling and new products for the drilling of horizontal wells in the oil sands.-- In the fourth quarter of 2012, the CAODC's average rig count was 351 rigs, down 28% from the 489 average rigs working during the comparative period of 2011. Despite activity being down 28%, revenue only decreased 4% from the previous year's quarter. DS revenue did not decrease to the same extent as industry due to the division's ability to increase its market share over the same quarter of 2011 and due to the addition of IDF. For the fourth quarter of 2012, market share for the Canadian drilling fluid service line was approximately 30% compared to 25% for the same period in 2011, again for the same reasons as discussed above.-- Revenue per operating day for the year ended December 31, 2012 for the Canadian drilling fluids service line was $5,449 compared to $4,995 for the seven months ended December 31, 2012. Fourth quarter 2012 revenue per operating day in Canada increased to $5,642 compared to $5,563 for the prior year period. Revenue per operating day for the year and quarter in 2012 increased over the same respective periods in 2011 due to an increased volume of oil based muds. Oil based fluids have a higher selling price than water based fluids. Oil based fluid demand has increased due to an increase in horizontal and directional drilling.-- Operating margin for the fourth quarter of 2012 improved by 1% compared to the same period of 2011. A contributing factor in the one percentage point margin increase is due to logistical savings associated with the Drayton Valley blending plant and increased sales on higher margin proprietary products. For the year ended December 31, 2012, operating margins decreased by 2% compared to the seven months ended December 31, 2011. The decrease in the operating margin for the year is due to a higher proportion of revenue associated with oil based drilling fluids use which has a lower margin than water based drilling fluids.-- General and administrative costs for the three and twelve months ended December 31, 2012 increased by 28% and 123%, respectively, versus the comparative periods of 2011. The year over year increase is the result of a full twelve months of operations in 2012 versus seven months of operation in 2011 and an increase in headcount and associated costs to manage the growth in U.S. operations. The increase in the fourth quarter of 2012 is attributable to a higher headcount plus associated costs to improve infrastructure and manage the growing business in the US, including supporting the recent IDF acquisition. G&A as a percentage of revenue for the three and twelve months ended December 31, 2012 was 10% for both respective periods compared to 8% for both the three and seven month period ended December 31, 2011. The G&A percentage increased by two percentage points in the quarter due to lower revenue from slower industry conditions. On an annual basis, the percentage increase was due to the reasons as cited above.
