In Canada, in Q1 2012, a strong industry focus on developing oil and liquids-rich prospects and coring and delineation of the oil sands, propelled demand for Savanna's fleet of drilling rigs. Demand decreased in all drilling categories post Q1 2012; however, Savanna's long-reach horizontal drilling rigs managed to maintain utilization rates higher than industry averages (in the same depth categories) and day rates above those of 2011. As a result, the Canadian long-reach horizontal drilling fleet, which contributed 45% of Savanna's overall operating margin in 2012 (2011 - 51%), was able to maintain overall operating margins and operating margin percentages despite lower revenues year-over-year. Revenue for long-reach drilling in Canada was $246.4 million in 2012 compared to $253.7 million in 2011 and operating margins were $88.7 million and $89.3 million in the same respective periods.
Similarly, operating margins for Savanna's shallow drilling fleet were virtually unchanged at $8.8 million in 2012 compared to $9 million in 2011, despite a $12.2 million decrease in revenues (to $39.6 million), as a result of a decrease in the number of rigs in the fleet. Operating margin percentages were five percentage points higher in 2012 compared to 2011, a clear indication that Savanna's shallow drilling rigs benefited from a reduction in the overall fleet size, and consequently a reduction in the fleets' fixed operating cost structure, to a level more aligned with base shallow drilling and coring activity in Canada.
In Q4 2012, customers continued to pull back on their second half projects and deferred their winter programs into Q1 2013. This resulted in a decrease in operating days from Q4 2011 and, although day rates were virtually unchanged from a year ago, the decreased utilization in Canada magnified the negative effect of fixed operating costs and crew retention costs incurred in anticipation of a busy Q1 2013. Retention costs for contract drilling in Canada aggregated $2.5 million in Q4 2012, compared to $1.5 million in Q4 2011. The benefits of these costs are expected to be realized in Q1 2013 as Savanna believes the extra contribution from these crews in Q1 2013 will exceed the costs incurred in the retention program.
Revenue for the Canadian long-reach drilling rigs in Q4 2012 was $61.9 million versus $78.2 million in Q4 2011 and operating margins decreased to $18.7 million, or 35%, from $28.6 million in Q4 2011, on the lower overall demand levels. Savanna's shallow fleet in Canada generated negative $1.7 million in operating margins in Q4 2012, compared to the $0.7 million positive operating margin contribution made in Q4 2011. Lower demand for shallow drilling led to a decrease in utilization relative to a year ago and the shallow rigs were not able to generate sufficient revenues to cover fixed operating costs or crew retention costs in Q4 2012.
Savanna's oilfield services division generated 7% lower revenues based on an 18% decrease in operating hours in Q4 2012 compared to Q4 2011 based on lower overall demand levels. Overall revenues decreased by $3.4 million to $48.8 million in Q4 2012 compared to $52.2 million in Q4 2011 and operating margins decreased to $12.4 million from $15 million in Q4 2011. On an annual basis, the increase in the average number of service rigs deployed and scale of oilfield service equipment operating in 2012 compared to 2011, resulted in a $22.3 million increase in revenue. However, sharply reduced demand, post Q1 2012, resulted in lower year-over-year utilization which negatively affected operating margins compared to 2011. Overall operating margins were $45 million in 2012 compared to $47.7 million in 2011.
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