News Releases

Archive for November, 2013

Tuscany International Drilling Inc. Announces Sale of Two Colombian Rigs and Caroil Africa and Financial Results for the Third Quarter 2013

CALGARY, ALBERTA–(Marketwired – Nov. 14, 2013) – Tuscany International Drilling Inc. (“Tuscany” or the “Company”) (TSX:TID)(COLOMBIA:TIDC) is pleased to announce the execution of definitive agreements with Etablissements Maurel et Prom S.A. (“M&P”) pursuant to which:

   1. M&P will acquire Rigs 112 (Colombia) and C16 (Colombia) from Tuscany 
      (the "Rig Purchase"); and 

   2. through the acquisition of the issued and outstanding shares of Caroil 
      SAS ("Caroil"), a wholly-owned subsidiary of Tuscany (the "Caroil Sale"), 
      M&P will indirectly acquire Tuscany's business operations in Africa which 
      are primarily comprised of 9 drilling and workover rigs, associated 
      inventory and related drilling contracts and obligations in respect of 
      the French branch office of Caroil. Caroil's business operations in 
      Colombia, including 5 drilling and workover rigs, associated inventory 
      and related drilling contracts, will be transferred to a wholly-owned 
      subsidiary of Tuscany immediately prior to the completion of the Caroil 
      Sale (the "Caroil Colombia Transfer" and together with the Rig Purchase 
      and the Caroil Sale, the "Transaction").

The aggregate consideration payable by M&P to Tuscany pursuant to the Transaction is comprised of: (i) payment in cash in the aggregate amount of U.S. $23.0 million, of which U.S. $15.3 million has already been advanced by M&P to Tuscany, U.S. $0.7 million to be paid upon completion of the Rig Purchase and U.S. $7.0 million to be deposited into escrow upon completion of the Rig Purchase and released upon the satisfaction of certain conditions, including as to 50% upon completion of the Caroil Sale and as to the remaining 50% upon receipt of Tanzanian competition approval and the repayment to M&P of certain Colombian withholding taxes remitted by M&P in connection with the Transaction; (ii) the assumption by M&P of U.S. $50.0 million of debt under Tuscany’s syndicated credit facility; and (iii) subject to compliance with applicable laws, the transfer of the 109 million common shares of Tuscany (“Tuscany Shares”) owned by M&P to Tuscany for cancellation (or, in the alternative, a special purpose vehicle not controlled by M&P). Following the completion of the Transaction and the transfer of the Tuscany Shares, M&P will not hold any securities of Tuscany. Based on the average closing price of the Tuscany Shares between October 21, 2013 and October 25, 2013, the Tuscany Shares have a deemed value of $15.3 million.

The proceeds from the completion of the Transaction will be used by Tuscany to reduce its indebtedness under its credit facility and to fund operations.

Upon completion of the Transaction, Tuscany will refocus its operations to South America, including existing operations in Colombia, Brazil and Ecuador. Including the 5 rigs that will remain with Tuscany pursuant to the Caroil Colombia Transfer, Tuscany’s fleet will be comprised of 12 rigs in Colombia, 9 rigs in Brazil and 5 rigs in Ecuador.

The table below details the utilization of Tuscany’s fleet following the completion of the Transaction:

 
Country              Working/Mobilizing  Not Working  Total 
-------------------  ------------------  -----------  ----- 
Colombia                             11            1     12 
Brazil                                2            5      7 
Heli-rigs (Brazil)                    0            2      2 
Ecuador                               3            2      5 
                     ------------------  -----------  ----- 
                                     15           11     26 
                     ------------------  -----------  -----

Citigroup Global Markets Inc. (“Citigroup”) provided certain financial advisory services to Tuscany in connection with the Transaction. Black Spruce Merchant Capital Corp. also acted as financial advisor to Tuscany.

As the Transaction involves M&P, an insider of the Company by virtue of holding 29.05% of the issued and outstanding voting securities of the Company, being the 109 million of Tuscany Shares, Tuscany is required to obtain shareholder approval pursuant to the applicable policies of the Toronto Stock Exchange (“TSX”) including under subsection 501(c) with respect to transactions involving insiders or other related parties of a non-exempt issuer. Tuscany has applied to the TSX, pursuant to the provisions of subsection 604(e), the “financial hardship exemption”, of the TSX Company Manual, for an exemption (the “TSX Exemption”) from the requirement to obtain shareholder approval, in consideration of the serious financial circumstances of the Company.

The Company’s application to rely on the TSX Exemption was made upon the unanimous recommendation of a special committee (the “Special Committee”) of the board of directors (the “Board”) of the Company, comprised of Donald Wright, Herb Snowdon and William Dorson, all of whom are members of the Board and independent of any interest in M&P or the Transaction. The Special Committee was established for the purposes of pursuing and evaluating strategic alternatives available to the Company and for negotiating and approving the Transaction.

The Board, after consultation with management of the Company and its advisors, and relying in part on: (i) the fact that the Transaction is designed to improve the financial situation of the Company; (ii) the unanimous recommendation and determinations of the Special Committee; (iii) the fairness opinion received from Citigroup, based on and subject to the matters specified therein, as to the fairness, from a financial point of view and as of the date of such opinion, to Tuscany of the aggregate consideration to be received by Tuscany pursuant to the Transaction; and (iv) after having given due regard to the outcome of the Company’s ongoing strategic alternatives review process, which has not been successful in providing a solution for the Company and its shareholders, has concluded that the Company is in serious financial difficulty and the Transaction is reasonable and represents the only practicable solution available to the Company under the current circumstances.

Closing of the Transaction is conditional on receipt of approval by the TSX of the Transaction. The Transaction has not yet been granted conditional approval by the TSX. There can be no assurance that the TSX will grant approval or accept the application for the use of the TSX Exemption, in which case the Transaction may also be subject to the receipt of approval of Tuscany shareholders, excluding M&P. In the event that the TSX permits the Company to rely on the TSX Exemption, this will automatically result in the initiation of a continued listing review by the TSX, as is customary under such circumstances.

In addition, the Transaction is considered to be a “related party transaction” within the meaning of Multilateral Instrument 61-101 (“MI 61-101″). The Company has relied on the exemptions from the valuation and minority shareholder approval requirements in MI 61-101 contained in sections 5.5(g) and 5.7(1)(e) of MI 61-101 in respect of such requirements.

Tuscany’s lenders under its syndicated credit facility have provided Tuscany with a “no-objection” letter with respect to the Transaction.

The Company anticipates that the Rig Purchase will be completed within five business days of the Company receiving confirmation from the TSX that it has conditionally approved the Transaction, subject to customary conditions to receipt of final approval. The remainder of the Transaction is expected to be completed on or about December 31, 2013.

The closing of the Transaction is subject to the satisfaction or waiver of conditions customary for transactions of this nature, including, among other things, TSX approvals, regulatory approvals and third party consents.

Messrs. Perret and Canel, the M&P representatives on the board of directors of Tuscany, have tendered their resignations. The Board of Directors of Tuscany thanks Messrs. Perret and Canel for their valuable service to the Company and wish them much success in their future endeavours.

Third Quarter 2013 Financial Results

The unaudited condensed interim consolidated financial statements of the Company for the third quarter ended September 30, 2013 and the related management’s discussion and analysis will be filed under the Company’s profile on the SEDAR website at www.sedar.com. The financial information described below should be read in conjunction therewith. Unless otherwise stated, the financial information included herein has been presented in thousands of United States dollars.

Q3 2013 Highlights

   -- On November 13, 2013, the Company entered into several agreements whereby 
      the Company effectively will sell all of the assets and liabilities 
      comprising the Company's African segment, as well as two rigs currently 
      located in Colombia to M&P. Total consideration for the sales is $23,000 
      in cash, the assumption by M&P of $50,000 of the Company's long term debt 
      and the return of 109,000,000 Common shares previously issued to M&P as 
      part of the Company's acquisition of Caroil SAS in September 2011. The 
      Company's September 30, 2013, unaudited condensed consolidated financial 
      statements treat the Company's African operations as discontinued and the 
      two rigs to be sold in conjunction with the sale of the African segment 
      as assets held for sale. 

   -- The Company has a scheduled principal and interest payment in December 
      2013 that it will not be able to make. Tuscany anticipates that it will 
      enter into a new credit agreement which will address the requirement to 
      make the December principal and interest payment. In addition, as of the 
      September 30, 2013, determination date, the Company was in breach of the 
      interest coverage ratio outlined in the credit agreement. Subsequent to
      September 30, 2013, Tuscany received a waiver of this covenant 
      breach. The full amount of long term debt has been classified as a 
      current liability as at September 30, 2013. In addition, during the third 
      quarter Tuscany amortized $11,080 of deferred financing fees relating to 
      the Company's credit facility. 

   -- In the third quarter of 2013, Tuscany recorded $14,898 of bad debt 
      provisions (in general and administration expense) relating to customers 
      whose accounts receivable were deemed to be uncollectible. Tuscany also 
      recorded $4,010 in other one-time items consisting of termination costs 
      associated with the closing of the Company's Houston office, costs 
      associated with the Company's failed bond financing and previously 
      deferred costs associated with the importation of rigs and equipment into 
      Brazil. 

   -- The Company recorded revenue from continuing operations of $43,278 during 
      the third quarter compared to $51,756 from continuing operations during 
      the same period last year. 

   -- Gross margin1 from continuing operations was $10,373 during the third 
      quarter compared to $15,876 from continuing operations during the same 
      period last year. 

   -- Adjusted EBITDA1 from continuing operations was $(11,885) during the 
      third quarter compared to adjusted EBITDA from continuing operations of 
      $9,207 during the same period in 2012, reflecting the bad debt provisions 
      and other one-time items noted above. 

   -- Cash generated by continuing operations was $16,228 during the third 
      quarter of 2013 compared to cash generated by continuing operations of 
      $14,760 during the same period in 2012. 

   -- Net loss from continuing operations was $33,848 during the third quarter 
      compared to net loss from continuing operations of $3,273 during the same 
      period in 2012. The net loss recorded in the third quarter of 2013 
      reflects the bad debt expense, other one-time costs and amortization of 
      deferred financing fees noted above. 

   -- General and administrative expenses from continuing operations were 
      $22,290, or 51.5% of revenue, during the third quarter compared to $7,509 
      of general and administrative expenses from continuing operations, or 
      14.5% of revenue, during the same period in 2012. Included in the $22,290 
      is $14,898 in bad debt expense written off during the third quarter of 
      2013. 

   -- Revenue utilization of the Company's continuing fleet was 62.9% during 
      the third quarter of 2013 as compared to 62.6% utilization from the 
      Company's continuing fleet during the same period in 2012.

Highlights from Continuing Operations

 
                       Three months ended September  Nine months ended September 
                                    30                            30 
                       ----------------------------  ---------------------------- 
$ thousands, except 
per share data and 
operating 
information              2013     2012    % change     2013     2012    % change 
---------------------  --------  -------  ---------  --------  -------  --------- 

Revenue                  43,278   51,756      (16)%   128,684  182,633      (30)% 
Gross margin(2)          10,373   15,876      (35)%    32,613   57,435      (43)% 
Gross margin 
 percentage               24.0%    30.7%      (22)%     25.3%    31.4%      (19)% 

Adjusted EBITDA(2)     (11,885)    9,207     (229)%     (449)   38,824     (101)% 
Adjusted EBITDA per 
 share (basic and 
 diluted)               $(0.03)    $0.03     (200)%   $(0.01)    $0.11      (91)% 

Net loss for the 
 period                (33,848)  (3,273)     (934)%  (59,350)  (4,575)   (1,197)% 
Net loss per share 
 (basic and diluted)    $(0.09)  $(0.01)     (800)%   $(0.16)  $(0.01)   (1,500)% 

Funds from (used in) 
 operations(2)          (2,498)    4,031     (162)%  (11,340)   24,656     (146)% 
Funds from (used in) 
 operations per share 
 (basic and diluted)     (0.01)     0.01     (200)%    (0.03)     0.07     (143)% 

Cash from (used in) 
 operating 
 activities              16,228   14,760        10%    11,052  (1,768)       725% 
Cash from (used in) 
 operating activities 
 per share (basic and 
 diluted)                  0.04     0.04       800%      0.03   (0.01)       400% 

General and 
 administrative 
 expenses                22,290    7,509       197%    33,726   21,545        57% 
General and 
 administrative 
 expenses as a % of 
 revenue                  51.5%    14.5%       255%     26.2%    11.8%       107% 

Total assets            480,766  660,691      (27)%   480,766  660,691      (27)% 
Total long term 
 liabilities              5,307  200,405      (97)%     5,307  200,405      (97)% 

Operating Information 
 Number of available 
  rigs                    28(3)       29       (3)%     28(3)       29       (3)% 
Revenue days              1,620    1,644       (1)%     5,002    6,253      (20)% 
Utilization               62.9%    62.6%         1%     65.4%    79.6%      (19)%

Highlights from Discontinued Operations

 
                       Three months ended September  Nine months ended September 
                                    30                           30 
                       ----------------------------  --------------------------- 
$ thousands, except 
per share data and 
operating 
information              2013     2012    % change     2013     2012   % change 
---------------------  --------  -------  ---------  --------  ------  --------- 

Revenue                  18,131   22,407      (19)%    63,587  71,041      (10)% 
Gross margin(4)           (939)    6,289     (115)%    16,238  22,228      (27)% 
Gross margin 
 percentage              (5.2)%    28.1%     (118)%     25.5%   31.3%      (18)% 

Adjusted EBITDA(4)      (4,532)    5,514     (182)%     7,539  13,094      (42)% 
Adjusted EBITDA per 
 share (basic and 
 diluted)               $(0.01)    $0.02     (133)%     $0.02   $0.04      (50)% 

Net income (loss) for 
 the period            (63,835)    2,593   (2,562)%  (55,155)   5,439   (1,114)% 
Net income (loss) per 
 share (basic and 
 diluted)               $(0.17)    $0.01   (1,800)%   $(0.15)   $0.02     (900)% 

Funds from (used in) 
 operations(4)          (7,754)    3,303     (335)%     2,437   8,011      (70)% 
Funds from (used in) 
 operations per share 
 (basic and diluted)     (0.02)     0.01     (300)%      0.01    0.02      (50)% 

Cash from (used in) 
 operating 
 activities             (3,504)  (6,069)      (42)%     1,650   7,840      (79)% 
Cash from (used in) 
 operating activities 
 per share (basic and 
 diluted)                (0.01)   (0.02)      (50)%      0.00    0.02     (100)% 

General and 
 administrative 
 expenses                 3,593      775       364%     8,699   9,134       (5)% 
General and 
 administrative 
 expenses as a % of 
 revenue                  19.8%     3.5%       460%     13.7%   12.9%         5% 

Operating Information 
 Number of available 
  rigs                        9        8        13%         9       8        13% 
 Revenue days               616      463        33%     1,772   1,484        19% 
 Utilization              74.4%    62.9%        18%     72.1%   67.7%         6%

Non-IFRS Measures

This Press Release contains references to adjusted EBITDA, adjusted EBITDA per share, funds from operations, funds from operations per share, and gross margin.

Adjusted EBITDA is defined as “Oilfield services revenue less oilfield services expenses less general and administrative expenses (excluding stock-based compensation expense)”. Management believes that in addition to net income, adjusted EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company’s principal business activities prior to the consideration of how these activities are financed, how the results are taxed in various jurisdictions and how the results are impacted by accounting standards associated with the Company’s share-based compensation plan and corporate development activities. Per share amounts are calculated using the weighted average number of outstanding shares for the period under review.

Adjusted EBITDA – Continuing Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                 -----------------------------  ------------------------------ 
$ thousands          2013            2012            2013            2012 
---------------  -------------  --------------  --------------  -------------- 
Oilfield 
 services 
 revenue                43,278          51,756         128,684         182,633 
Oilfield 
 services 
 expenses             (32,905)        (35,880)        (96,071)       (125,198) 
General and 
 administrative 
 expenses             (22,290)         (7,509)        (33,726)        (21,545) 
Stock-based 
 compensation 
 expense                    32             840             664           2,934 
---------------  -------------  --------------  --------------  -------------- 
Adjusted EBITDA       (11,885)           9,207           (449)          38,824

Adjusted EBITDA – Discontinued Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                 -----------------------------  ------------------------------ 
$ thousands          2013            2012            2013            2012 
---------------  -------------  --------------  --------------  -------------- 
Oilfield 
 services 
 revenue                18,131          22,407          63,587          71,041 
Oilfield 
 services 
 expenses             (19,070)        (16,118)        (47,349)        (48,813) 
General and 
 administrative 
 expenses              (3,593)           (775)         (8,699)         (9,134) 
---------------  -------------  --------------  --------------  -------------- 
Adjusted EBITDA        (4,532)           5,514           7,539          13,094

Funds from operations is defined as “cash flow provided by/used in operating activities before the change in non-cash working capital”. Funds from operations is a measure that provides shareholders and potential investors additional information regarding the Company’s liquidity and its ability to generate funds to finance its operations. Management will use this measure to assess the Company’s ability to finance operating activities, capital expenditures and corporate development initiatives. Per share amounts are calculated using the weighted average number of outstanding shares for the period under review.

Funds from Operations – Continuing Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                ------------------------------  ------------------------------ 
$ thousands          2013            2012            2013            2012 
--------------  --------------  --------------  --------------  -------------- 
Cash flow 
 provided by 
 (used in) 
 operating 
 activities             16,228          14,760          11,052         (1,768) 
Changes in 
 non-cash 
 working 
 capital              (18,726)        (10,729)        (22,392)          26,424 
--------------  --------------  --------------  --------------  -------------- 
Funds from 
 (used in) 
 operations            (2,498)           4,031        (11,340)          24,656

Funds from Operations – Discontinued Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                ------------------------------  ------------------------------ 
$ thousands          2013            2012            2013            2012 
--------------  --------------  --------------  --------------  -------------- 
Cash flow 
 provided by 
 (used in) 
 operating 
 activities            (3,504)         (6,069)           1,650           7,840 
Changes in 
 non-cash 
 working 
 capital               (4,250)           9,372             787             171 
--------------  --------------  --------------  --------------  -------------- 
Funds from 
 (used in) 
 operations            (7,754)           3,303           2,437           8,011

Gross margin is defined as “oilfield services revenue less oilfield services expenses”. Gross margin is a measure that provides shareholders and potential investors additional information regarding the profitability of the Company’s rig operations and is used by management to help assess operational performance.

Gross Margin – Continuing Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                ------------------------------  ------------------------------ 
$ thousands          2013            2012            2013            2012 
--------------  --------------  --------------  --------------  -------------- 
Oilfield 
 services 
 revenue                43,278          51,756         128,684         182,633 
Oilfield 
 services 
 expenses             (32,905)        (35,880)        (96,071)       (125,198) 
--------------  --------------  --------------  --------------  -------------- 
Gross margin            10,373          15,876          32,613          57,435

Gross Margin – Discontinued Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                ------------------------------  ------------------------------ 
$ thousands          2013            2012            2013            2012 
--------------  --------------  --------------  --------------  -------------- 
Oilfield 
 services 
 revenue                18,131          22,407          63,587          71,041 
Oilfield 
 services 
 expenses             (19,070)        (16,118)        (47,349)        (48,813) 
--------------  --------------  --------------  --------------  -------------- 
Gross margin             (939)           6,289          16,238          22,228

Adjusted EBITDA, adjusted EBITDA per share, funds from operations, funds from operations per share, and gross margin are not measures that have any standard meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies.

Overview of Continuing Operations

During the three months ended September 30, 2013, the Company recorded a net loss from continuing operations of $33,848 ($0.09 per common share) compared to net loss from continuing operations of $3,273 ($0.01 per common share) for the three months ended September 30, 2012. Of significance, the Company provided bad debt provisions during the third quarter of 2013 based on new information received during the quarter; CYA $4,000, Centurion $6,500, OGX $1,392, HRT $2,200 and SK Energy $751, for a total of $14,843. In addition, during the third quarter of 2013, Tuscany fully amortized the financing costs related to its existing credit facility. During the nine months ended September 30, 2013, the Company recorded a net loss from continuing operations of $59,350 ($0.16 per common share) compared to a net loss from continuing operations of $4,575 ($0.01 per common share) for the nine months ended September 30, 2012. During the three months ended September 30, 2013, the Company recorded oilfield services revenue of $43,278, adjusted EBITDA(5) of $(11,885) and gross margin(5) of $10,373 compared to revenue of $51,756, adjusted EBITDA of $9,207 and gross margin of $15,876 during the three months ended September 30, 2012. During the nine months ended September 30, 2013, the Company recorded oilfield services revenue of $128,684, adjusted EBITDA of $(449) and gross margin of $32,613 compared to revenue of $182,633, adjusted EBITDA of $38,824 and gross margin of $57,435 during the nine months ended September 30, 2012.

The decreases in revenue, adjusted EBITDA and gross margin for the third quarter of 2013 compared to the third quarter of 2012 reflect a 1% decrease in operating activity and a 12% decrease in average revenue per day resulting from high day rate rigs coming off contract during 2012, and three rigs in Colombia being contracted at lower day rates compared to rigs of similar capacity. For the three months ended September 30, 2013, the Company had 1,620 revenue days from continuing rig operations compared to 1,644 revenue days from continuing rig operations during the three months ended September 30, 2012. Gross margin for the three months ended September 30, 2013, was offset by general and administrative expenses of $22,290 (2012 – $7,509), net finance costs of $17,154 (2012 – $6,151), foreign exchange contract gain of $63 (2012 – $299) and depreciation of $5,261 (2012 – $4,922). For the three months ended September 30, 2013, the Company also recorded current income tax expense of $326 (2012 – $2,520), a deferred income tax recovery of $1,224 (2012 – $1,991), foreign exchange losses of $97 (2012 – $304) and equity income of $16 (2012 – loss of $33). The increase in general and administrative expense for the three months ended September 30, 2013, compared to the three months ended September 30, 2012, reflects a $14,898 bad debt provision relating to customers whose accounts receivable were deemed to be uncollectible.

The decreases in revenue, adjusted EBITDA and gross margin for the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, reflect a 20% decrease in operating activity and a 12% decrease in average revenue per day resulting from rigs coming off contract in the second half of 2012. For the nine months ended September 30, 2013, the Company had 5,002 revenue days from continuing rig operations compared to 6,253 revenue days from continuing rig operations during the nine months ended September 30, 2012. Gross margin for the nine months ended September 30, 2013, was offset by general and administrative expenses of $33,726 (2012 – $21,545), net finance costs of $29,498 (2012 – $19,482), foreign exchange contract gain of $50 (2012 – expense of $259) and depreciation of $17,192 (2012 – $20,294). For the nine months ended September 30, 2013, the Company also recorded current income tax expense of $2,391 (2012 – $5,257), deferred income tax expense of $6,424 (2012 – recovery of $3,996), foreign exchange loss of $91 (2012 – $423) and an equity loss of $567 (2012 – income of $1,268). The increase in general and administrative expense in the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, reflects a $ 16,770 bad debt provision relating to customers whose accounts receivable were deemed to be uncollectible.

During the nine months ended September 30, 2013, The Company spent $22,487 on investing activities from continuing operations, which includes $15,984 of capital expenditures comprised primarily of rig refurbishment activity, and a $6,503 increase in restricted cash. During the nine months ended September 30, 2013, The Company drew an additional $15,000 on its credit facility and repaid $2,000 of its long term debt.

 
Review of Interim Condensed Consolidated Statement 
 of Financial Position 
($ thousands) 

                                 Change ($)(6)  Explanation 
                                 -------------  ------------------------------ 
Cash and cash equivalents              (2,822)  See consolidated statement of 
                                                cash flows. 
Restricted cash                          6,503  Restricted cash results from 
                                                the requirement to maintain a 
                                                debt service reserve account 
                                                pursuant to the Company's 
                                                credit facility. In September 
                                                2013, debt interest was paid 
                                                from this reserve account, 
                                                reducing the balance. 
                                                Subsequent to the interest 
                                                payment, deposits of $6,776 
                                                were made. 
Accounts receivable                   (33,628)  Decrease is due to 
                                                reclassification of accounts 
                                                receivable amounts related to 
                                                the Company's African segment 
                                                to assets of disposal group 
                                                held for sale and a bad debt 
                                                provision of $16,044. 
Prepaid expenses and deposits          (2,430)  Decrease is due to 
                                                reclassification of prepaid 
                                                expenses related to the 
                                                Company's African segment to 
                                                assets of disposal group held 
                                                for sale. 
Inventory                              (3,899)  Decrease is due to 
                                                reclassification of inventory 
                                                amounts related to the 
                                                Company's African segment to 
                                                assets of disposal group held 
                                                for sale. 
Assets held for sale                    17,721  Increase is due to two rigs 
                                                reclassified from property and 
                                                equipment. 
Assets of disposal group held           65,261  Increase is due to assets from 
for sale                                        the Africa operations being 
                                                revalued and reclassified. 
Foreign VAT recoverable               (12,249)  Decrease is due to 
(current and non-current)                       reclassification of foreign 
                                                VAT recoverable amounts 
                                                related to the Company's 
                                                African segment to assets of 
                                                disposal group held for sale. 
Long term investments                    (835)  Decrease is due to losses 
                                                incurred by Warrior Rig Ltd. 
                                                ("Warrior") for the period and 
                                                a foreign exchange loss 
                                                resulting from the translation 
                                                of this investment. 
Property and equipment               (127,118)  Decrease is due to 
                                                reclassification of property 
                                                and equipment related to the 
                                                Company's African segment to 
                                                assets of disposal group held 
                                                for sale and the 
                                                reclassification of two rigs 
                                                to assets held for sale. 
Bank indebtedness                      (3,403)  Decrease is due to 
                                                reclassification of bank 
                                                indebtedness amounts related 
                                                to the Company's African 
                                                segment to assets of disposal 
                                                group held for sale. 
Lines of credit                         14,888  Increase due to draw on the 
                                                Company's revolving line of 
                                                credit. 
Accounts payable and accrued           (2,170)  Decrease is due to 
liabilities                                     reclassification of accounts 
                                                payable amounts related to the 
                                                Company's African segment to 
                                                assets of disposal group held 
                                                for sale offset by a deposit 
                                                of $15,300 related to the 
                                                pending sale of the two rigs 
                                                held for sale. 
Income taxes payable                   (2,829)  Decrease is due to 
                                                reclassification of income 
                                                taxes payable amounts related 
                                                to the Company's African 
                                                segment to assets of disposal 
                                                group held for sale. 
Long term debt (current and             11,572  Increase is due to 
long term)                                      amortization of all financing 
                                                costs associated with its 
                                                existing credit facility 
                                                (included in long term debt) 
                                                partially offset by repayment 
                                                of debt. 
Derivative contracts                     (880)  Decrease is due to the change 
                                                in fair value of hedging 
                                                contracts entered into during 
                                                the first three quarters of 
                                                2013. 
Net deferred taxes                     (3,435)  Decrease is due to 
                                                reclassification of deferred 
                                                income taxes payable amounts 
                                                related to the Company's 
                                                African segment to assets of 
                                                disposal group held for sale. 
Share capital                           23,128  Increase is due to the 
                                                exercise of warrants during 
                                                the first quarter of 2013. 
Contributed surplus                      3,240  Increase relates to the expiry 
                                                of warrants and stock-based 
                                                compensation expense recorded 
                                                during the first three 
                                                quarters of 2013. 
Warrants                              (25,704)  Decrease is due to the 
                                                exercise and expiry of 
                                                warrants during the first and 
                                                second quarters of 2013. 

Review of Interim Condensed Consolidated Statement 
 of Comprehensive Income and Loss from Continuing Operations 
($ thousands) 

            Three months ended September 30    Nine months ended September 30 
            --------------------------------  -------------------------------- 
              2013       2012      % Change      2013       2012     % Change 
            ---------  ---------  ----------  ----------  ---------  --------- 
Oilfield 
 services 
 revenue       43,278     51,756       (16)%     128,684    182,633      (30)% 
Oilfield 
 services 
 expenses    (32,905)   (35,880)        (8)%    (96,071)  (125,198)      (23)% 
Gross 
 margin(7)     10,373     15,876       (35)%      32,613     57,435      (43)% 
----------  ---------  ---------  ----------  ----------  ---------  --------- 
Gross 
 margin %      23.97%     30.67%       (13)%      25.34%     31.45%      (20)% 
----------  ---------  ---------  ----------  ----------  ---------  ---------

Oilfield services revenue was $43,278 for the three months ended September 30, 2013, compared to $51,756 for the three months ended September 30, 2012, a decrease of 16%. The decrease in revenue is a result of the decrease in the number of revenue days and average revenue per day in the three months ended September 30, 2013, compared to the three months ended September 30, 2012. During the three months ended September 30, 2013, the Company had 1,620 revenue days (62.9% utilization) compared to 1,644 revenue days (62.6% utilization) in the three months ended September 30, 2012. For the three months ended September 30, 2013, average revenue per day decreased to $27.79 from $31.49 for the three months ended September 30, 2012. Average revenue per day decreased in the third quarter of 2013 compared to the third quarter of 2012 due to larger, high day rate rigs coming off contract during the last nine months of 2012, and three rigs in Colombia being contracted at lower day rates compared to rigs of similar capacity. These lower day rates are more than offset by contract terms that provide that the majority of the operating costs are borne by the customer. Twenty-one of the Company’s 28 available drilling and heavy-duty workover rigs earned revenue from drilling operations during the three months ended September 30, 2013. During the three months ended September 30, 2012, the Company earned revenues from 25 rigs.

Oilfield services revenue was $128,684 for the nine months ended September 30, 2013, compared with $182,633 for the nine months ended September 30, 2012, a decrease of 30%. The decrease in revenue is a result of decrease in the number of revenue days and average revenue per day in the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012. During the nine months ended September 30, 2013, the Company had 5,002 revenue days (65.4% utilization) compared to 6,253 revenue days (79.6% utilization) in the nine months ended September 30, 2012. Revenue days decreased in the nine months ended September 30, 2013, primarily as a result of rigs coming off contract during the second half of 2012. For the nine months ended September 30, 2013, average revenue per day decreased to $25.73 from $29.20 for the nine months ended September 30, 2012. Average revenue per day decreased in the first nine months of 2013 compared to the first nine months of 2012 due to larger, high day rate rigs coming off contract during 2012, and three rigs in Colombia being contracted at lower day rates compared to rigs of similar capacity. These lower day rates are more than offset by contract terms that provide that the majority of the operating costs are borne by the customer. Twenty-three of the Company’s 28 available drilling and heavy-duty workover rigs earned revenue from drilling operations during the nine months ended September 30, 2013. During the nine months ended September 30, 2012, the Company earned revenues from 29 rigs.

For the three months ended September 30, 2013, gross margin was $10,373, or 23.97%, compared with a gross margin of $15,876, or 30.67%, for the three months ended September 30, 2012. For the nine months ended September 30, 2013, gross margin was $32,613, or 25.34%, compared with a gross margin of $57,435 or 31.45%, for the nine months ended September 30, 2012. The decrease in gross margin percentage for the three and nine months ended September 30, 2013, compared to the gross margin percentage for the three and nine months ended September 30, 2012, is primarily due to costs, primarily related to labour, incurred in 2013 associated with rigs that have come off contract during the latter part of 2012.

 
                Three months ended September 
                             30                Nine months ended September 30 
               ------------------------------  ------------------------------- 
                 2013      2012     % Change     2013       2012     % Change 
               --------  ---------  ---------  ---------  ---------  --------- 
Depreciation      5,261      4,922         7%     17,192     20,294      (15)%

Depreciation expense totaled $5,261 for the three months ended September 30, 2013, compared with $4,922 for the three months ended September 30, 2012. Depreciation expense totaled $17,192 for the nine months ended September 30, 2013, compared with $20,294 for the nine months ended September 30, 2012. Under the Company’s depreciation policy, depreciation of rigs and related equipment is based on the number of days in operation. Depreciation for the three months ended September 30, 2013, compared to the three months ended September 30, 2012, was consistent with the comparable number of revenue days in the three months ended September 30, 2013 compared with the three months ended September 30, 2012. The decrease in depreciation expense for the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, is a result of a decrease in the operating days in the nine months ended September 30, 2013, compared to the corresponding period in 2012. During the nine months ended September 30, 2013, the Company recorded depreciation on 28 rigs.

 
                 Three months ended September 
                              30                Nine months ended September 30 
                 -----------------------------  ------------------------------ 
                   2013      2012    % Change     2013      2012     % Change 
                 --------  --------  ---------  --------  ---------  --------- 
General and 
 administrative    22,290     7,509       197%    33,726     21,545        57%

General and administrative expense was $22,290 (51.5% of revenue) for the three months ended September 30, 2013, compared to $7,509 (14.5% of revenue) for the three months ended September 30, 2012. General and administrative expense was $33,726 (26.2% of revenue) for the nine months ended September 30, 2013, compared to $21,545 (11.8% of revenue) for the nine months ended September 30, 2012. Included in general and administrative expenses for the three and nine months ended September 30, 2013, is $14,898 and $16,045, respectively, of bad debt expense relating to customers whose accounts receivable were deemed to be uncollectible. The increase in general and administrative expense as a percentage of revenue from the three and nine months ended September 30, 2013, compared to the three and nine months ended September 30, 2012, is due to a 16% and 30% decrease, respectively, in revenue for the three and nine months ended September 30, 2013, respectively, compared to the corresponding periods of 2012.

Included in general and administrative expense for the three and nine months ended September 30, 2013, is $32 and $664, respectively, of stock-based compensation compared to $840 and $2,934, respectively, for the three months and nine months ended September 30, 2012. Stock-based compensation expense represents the value, calculated using the Black-Scholes option pricing model, related to the granting of stock options.

 
            Three months ended September 30    Nine months ended September 30 
            --------------------------------  -------------------------------- 
               2013       2012     % Change     2013       2012      % Change 
            ----------  --------  ----------  ---------  ---------  ---------- 
Net 
 finance 
 costs          17,154     6,151        177%     29,498     19,482         51%

For the three and nine months ended September 30, 2013, net finance costs includes interest and amortization of costs associated with the Company’s credit facility, the change in value on the Company’s interest rate hedges and other smaller interest charges in various countries, net of interest income. Net finance costs increased to $17,154 for the three months ended September 30, 2013, from $6,151 for the three months ended September 30, 2012, and to $29,498 for the nine months ended September 30, 2013, from $19,482 for the nine months ended September 30, 2012, as a result of the increase in the amount drawn under the revolving credit line during the first nine months of 2013 and the amortization of the remainder of deferred financing fees associated with the Company’s existing credit facility.

The Company currently has a $253,000 credit facility comprised of a $208,000 term loan and a $45,000 revolving line of credit. Fees associated with the credit facility have been presented as a direct reduction to the face value of the long term debt. The effective interest rate method has been applied and results in the amortization of the debt discount over the life of the loan. As noted above, during the third quarter of 2013 Tuscany has fully amortized the remainder of the deferred financing fees associated with its existing credit facility. Total amortization of financing fees are $11,080 and $13,828 for the three months and nine months ended September 30, 2013, respectively, compared to $1,112 and $3,280 for the three and nine months ended September 30, 2012. In addition to the financing fees associated with this facility, the Company incurs interest expense on the amount drawn under the credit facility at three-month LIBOR plus 6.5% per annum. During the three and nine months ended September 30, 2013, the Company recorded $4,971 and $14,377, respectively, of interest related to the credit facility compared to $4,193 and $12,386, respectively, for the three and nine months ended September 30, 2012.

During the year ended December 31, 2012, the Company entered into two separate agreements to hedge the interest rate on a total of $100,000 of the $210,000 term loan. The Company has entered into floating for fixed swap agreements on three-month LIBOR to maturity of the term loan under the Company’s credit facility. The fair value of these interest rate contract liabilities decreased by $400 for the three months ended September 30, 2013, compared to an increase of $696 for the three months ended September 30, 2012. The fair value of these interest rate contract liabilities increased by $38 for the nine months ended September 30, 2013, compared to an increase of $3,803 for the nine months ended September 30, 2012.

Interest of $703 and $1,256 was incurred in various countries for the three and nine months ended September 30, 2013, respectively, compared to $149 and $278 for the three and nine months ended September 30, 2012, respectively.

 
              Three months ended September 30   Nine months ended September 30 
              --------------------------------  ------------------------------ 
                2013      2012      % Change      2013     2012     % Change 
              --------  ---------  -----------  --------  -------  ----------- 
Foreign 
 exchange 
 contracts        (63)      (299)        (79)%      (50)      259       (102)%

During the six month period ended September 30, 2012, the Company entered into a Euro/United States dollar cross costless collar on a total of 19,200 Euro. The contract consists of 24 contracts with notional amounts of 800 Euro per contract. The contract has a two year term and the fair value of this foreign exchange contract liability increased $63 (2012 – $299) in the three months ended September 30, 2013 and increased $50 in the nine months ended September 30, 2013 (2012 – decrease $259).

 
                                                  Nine months ended September 
                Three months ended September 30                30 
                --------------------------------  ---------------------------- 
                     2013       2012    % Change    2013     2012    % Change 
                ---------  ---------  ----------  --------  -------  --------- 
Change in fair 
 value of 
 contingent 
 refundable 
 consideration          -          -         N/A     1,728        -        N/A

These costs relate to the acquisition of Drillfor Perfurações do Brasil Ltda (“Drillfor”) in May 2011 which were identified during the second quarter of 2013. The costs would normally be included in the acquisition costs at the time of acquisition; however under IFRS standards there can be no changes to the purchase price allocation of an acquired company subsequent to the end of the measurement period, which is one year after the date of acquisition. Since the one year period has expired, these costs are recorded as an expense, as prescribed by IFRS standards.

 
              Three months ended September 30  Nine months ended September 30 
              -------------------------------  ------------------------------- 
                2013      2012     % Change      2013     2012      % Change 
              --------  --------  -----------  --------  -------  ------------ 
Foreign 
 exchange 
 loss               97       304        (68)%        91      423         (78)%

In addition to incurring operating expenses and capital expenditures in the Company’s functional currency (United States dollars), the Company also incurs operating expenses and capital expenditures in Colombian pesos (COP), Canadian dollars (CDN $)and Brazilian real (BRL). Foreign exchange gains and losses arise primarily on the settlement of accounts payable invoices that are denominated in currencies other than the United States dollar.

 
             Three months ended September 30   Nine months ended September 30 
             -------------------------------  -------------------------------- 
               2013      2012     % Change      2013       2012     % Change 
             --------  --------  -----------  ---------  --------  ----------- 
Equity 
 income 
 (loss)            16      (33)         148%      (567)     1,268         145%

The Company has a 33.87% ownership interest in Warrior, a private oilfield services company involved in the development and manufacture of oilfield services equipment. The carrying value of this investment is adjusted to include the pro-rata share of the investee’s earnings, less dividends received. Equity income totaled $16 for the three months ended September 30, 2013, compared with an equity loss of $33 for the three months ended September 30, 2012. Equity losses totaled $567 for the nine months ended September 30, 2013, compared with equity income of $1,268 for the nine months ended September 30, 2012. Equity income has decreased as a result of decreased activity in Warrior in the first three quarters of 2013 compared to the first three quarters of 2012.

 
             Three months ended September 30   Nine months ended September 30 
             -------------------------------  -------------------------------- 
               2013      2012      % Change     2013       2012     % Change 
             --------  ---------  ----------  ---------  --------  ----------- 
Current 
 income 
 taxes            326      2,520       (87)%      2,391     5,257        (55)%

For the three and nine months ended September 30, 2013, the Company’s total current income tax expense is $326 and $2,391, respectively. This is comprised primarily of income taxes calculated on equity in Colombia.

 
             Three months ended September 30   Nine months ended September 30 
             --------------------------------  ------------------------------- 
               2013        2012     % Change     2013       2012     % Change 
             ---------  ----------  ---------  --------  ----------  --------- 
Deferred 
 income 
 taxes 
 (recovery)    (1,224)     (1,991)        39%     6,424     (3,996)       261%

For the three months ended September 30, 2013, the Company recorded a deferred income tax recovery of $1,224 and for the nine months ended September 30, 2013, the Company recorded deferred income tax expense of $6,424, primarily as a result of the revaluation of the deferred tax assets in Colombia resulting from an eight percent strengthening of the Colombian peso compared to the United States dollar since December 31, 2012.

Review of Interim Condensed Consolidated Statement of Comprehensive Income and Loss from Discontinued Operations

 
                 Three months ended September 
                              30                Nine months ended September 30 
                 -----------------------------  ------------------------------ 
                   2013      2012    % Change     2013      2012     % Change 
                 --------  --------  ---------  --------  ---------  --------- 
Oilfield 
 services 
 revenue           18,131    22,407      (19)%    63,587     71,041      (10)% 
Oilfield 
 services 
 expenses          19,070    16,118        18%    47,349     48,813       (3)% 
Depreciation        1,258       710        77%     3,065      2,601        18% 
General and 
 administrative     3,593       775       364%     8,699      9,134       (5)% 
Other (income) 
 and expenses         344       552     (168)%     (504)      1,176     (143)% 
Current and 
 deferred 
 income tax 
 expense            3,798     1,659       129%     6,230      3,878        61% 
Loss recognized 
 on 
 re-measurement 
 of assets of 
 disposal group 
 (net of tax)      53,903         -        N/A    53,903          -        N/A 
Net income 
 (loss) from 
 discontinued 
 operations      (63,835)     2,593   (2,562)%  (55,155)      5,439   (1,114)%

Discontinued operations represent the Company’s African operations (including costs associated with its Paris head office). As noted previously, on November 13, 2013, the Company entered into several agreements whereby the Company’s African segment will be sold to M&P, the previous shareholders of the Company’s Caroil subsidiary. The above table shows the major components of the net income (loss) of this segment for the three and nine months ended September 30, 2013 and 2012.

 
Condensed Interim Consolidated Statement of Financial 
 Position (Unaudited) 
----------------------------------------------------- 
(expressed in thousands of U.S. dollars) 

                                         September 30, 2013  December 31, 2012 
                                         ------------------  ----------------- 
Assets 
Current Assets 
Cash and cash equivalents                             3,481              6,303 
Restricted cash                                       6,776                273 
Accounts receivable, net                             73,334            106,962 
Prepaid expenses and deposits                         3,654              6,084 
Inventory                                            14,767             18,666 
Foreign VAT recoverable                               1,062              4,219 
                                         ------------------  ----------------- 
                                                    103,074            142,507 
Assets held for sale                                 17,721                  - 
Assets of disposal group held for sale               99,497                  - 
                                         ------------------  ----------------- 
                                                    220,292            142,507 

Foreign VAT recoverable                                  11              5,455 
Deferred tax asset                                    6,652             15,772 
Long term investment                                  5,577              6,412 
Property and equipment                              347,731            474,849 
                                         ------------------  ----------------- 
                                                    580,263            644,995
                                         ------------------  ----------------- 

Liabilities 
Current Liabilities 
Bank indebtedness                                     1,092              4,495 
Lines of credit                                      46,357             31,469 
Accounts payable and accrued 
 liabilities                                         61,199             63,369 
Current portion of long term debt                   208,000             16,875 
Foreign VAT payable                                   3,648                  - 
Income taxes payable                                  6,018              8,847 
                                         ------------------  ----------------- 
                                                    326,314            125,055 
Liabilities of disposal group held for 
 sale                                                34,236                  - 
                                         ------------------  ----------------- 
                                                    360,550            125,055 

Long term debt                                            -            179,553 
Derivative contracts                                  3,057              3,937 
Deferred tax liability                                1,502              7,187 
                                         ------------------  ----------------- 
                                                    365,109            315,732 
                                         ------------------  ----------------- 

Shareholders' Equity 
Share capital                                       389,428            366,300 
Contributed surplus                                  24,900             21,660 
Warrants                                                  -             25,704 
Accumulated other comprehensive loss                  (657)              (389) 
Deficit                                           (198,517)           (84,012) 
                                         ------------------  ----------------- 
                                                    215,154            329,263 
                                         ------------------  ----------------- 
                                                    580,263            644,995 
                                         ------------------  ----------------- 

Condensed Interim Consolidated Statement of Comprehensive 
 Income and Loss (Unaudited) 
For the three and nine months ended September 30, 
 2013 and 2012 
--------------------------------------------------------- 
(expressed in thousands of U.S. dollars) 

                      Three months ended              Nine months ended 
                 -----------------------------  ------------------------------ 
                 September 30    September 30    September 30    September 30 
                     2013            2012            2013            2012 

Revenue 
Oilfield 
 services               43,278          51,756         128,684         182,633 

Expenses 
Oilfield 
 services               32,905          35,880          96,071         125,198 
Depreciation             5,261           4,922          17,192          20,294 
General and 
 administrative         22,290           7,509          33,726          21,545 
Foreign 
 exchange loss              97             304              91             423 
Equity (income) 
 loss                     (16)              33             567         (1,268) 
                 -------------  --------------  --------------  -------------- 
                      (17,259)           3,108        (18,963)          16,441 

Net finance 
 costs                  17,154           6,151          29,498          19,482 
Loss (gain) on 
 disposal of 
 property and 
 equipment                 396               -             396            (44) 
Loss on sale of 
 investment                  -               -               -              58 
Loss (gain) on 
 foreign 
 exchange 
 contract                 (63)           (299)            (50)             259 
Change in fair 
 value of 
 contingent 
 refundable 
 consideration               -               -           1,728               - 
                 -------------  --------------  --------------  -------------- 
Loss before 
 income taxes         (34,746)         (2,744)        (50,535)         (3,314) 

Current income 
 taxes                     326           2,520           2,391           5,257 
Deferred income 
 taxes                 (1,224)         (1,991)           6,424         (3,996) 
                 -------------  --------------  --------------  -------------- 

Net loss from 
 continuing 
 operations for 
 the period           (33,848)         (3,273)        (59,350)         (4,575) 
Net income 
 (loss) from 
 discontinued 
 operations for 
 the period, 
 net of tax           (63,835)           2,593        (55,155)           5,439 
                 -------------  --------------  --------------  -------------- 
Net income 
 (loss) for the 
 period               (97,683)           (680)       (114,505)             864 

Other 
comprehensive 
gain (loss) 
Items that may 
be subsequently 
reclassified to 
income and 
loss:                        -               -               -               - 
                 -------------  --------------  --------------  -------------- 
Foreign 
 currency 
 translation              (77)              69           (268)           (144) 
                 -------------  --------------  --------------  -------------- 
Total 
 comprehensive 
 income (loss)        (97,760)           (611)       (114,773)             720 
                 -------------  --------------  --------------  -------------- 

Net loss per 
 share from 
 continuing 
 operations, 
 basic and 
 diluted                (0.09)          (0.01)          (0.16)          (0.01) 
Net income 
 (loss) per 
 share from 
 discontinued 
 operations, 
 basic                  (0.17)            0.01          (0.15)            0.02 
Net income 
 (loss) per 
 share from 
 discontinued 
 operations, 
 diluted                (0.17)            0.01          (0.15)            0.01 
Net income 
 (loss) per 
 share, basic 
 and diluted            (0.26)            0.00          (0.31)            0.00 

Condensed Interim Consolidated Statement of Changes 
 in Equity (Unaudited) 
--------------------------------------------------- 
(expressed in thousands of U.S. dollars) 

                              Attributable to equity owners of the Company 
                ------------------------------------------------------------------------ 
                                                  Accum-ulated 
                                                     other 
                 Share   Contri-buted            compre-hensive 
                Capital    surplus     Warrants       loss        Deficit   Total equity 
                -------  ------------  --------  --------------  ---------  ------------ 
Balance - 
 January 1, 
 2013           366,300        21,660    25,704           (389)   (84,012)       329,263 
Net loss for 
 the period           -             -         -               -  (114,505)     (114,505) 
Cumulative 
 foreign 
 currency 
 translation 
 adjustment           -             -         -           (268)          -         (268) 
                -------  ------------  --------  --------------  ---------  ------------ 
Comprehensive 
 loss for the 
 period               -             -         -           (268)  (114,505)     (114,773) 
Stock-based 
 compensation         -           664         -               -          -           664 
Exercise of 
 warrants        23,128             -  (23,128)               -          -             - 
Expiration of 
 warrants             -         2,576   (2,576)               -          -             - 
                -------  ------------  --------  --------------  ---------  ------------ 
Balance - 
 September 30, 
 2013           389,428        24,900         -           (657)  (198,517)       215,154 
                -------  ------------  --------  --------------  ---------  ------------ 

Balance - 
 January 1, 
 2012           366,300        18,106    25,704           (251)   (48,948)       360,911 
Net income for 
 the period           -             -         -               -        864           864 
Cumulative 
 foreign 
 currency 
 translation 
 adjustment           -             -         -           (144)          -         (144) 
                -------  ------------  --------  --------------  ---------  ------------ 
Comprehensive 
 income (loss) 
 for the 
 period               -             -         -           (144)        864           720 
Stock-based 
 compensation         -         2,934         -               -          -         2,934 
                -------  ------------  --------  --------------  ---------  ------------ 
Balance - 
 September 30, 
 2012           366,300        21,040    25,704           (395)   (48,084)       364,565 
                -------  ------------  --------  --------------  ---------  ------------ 

Condensed Interim Consolidated Statement of Cash Flows 
 (Unaudited) 
For the three and nine months ended September 30, 
 2013 and 2012 
------------------------------------------------------ 
(expressed in thousands of U.S. dollars) 

                      Three months ended             Nine months ended 
                 ----------------------------  ----------------------------- 
                 September 30   September 30   September 30    September 30 
                     2013           2012           2013            2012 
Cash flow 
provided by 
(used in): 
Operating 
Activities 
Net income 
 (loss) for the 
 period               (97,683)          (680)      (114,505)             864 
Items not 
affecting 
cash: 
 Depreciation            6,519          5,632         20,356          22,895 
 Loss (gain) on 
  sale of 
  property and 
  equipment                396              -            396            (44) 
 Loss on 
  revaluation 
  of assets of
  disposal 
  group held 
  for sale              53,903              -         53,903               - 
 Equity 
  (income) 
  loss                    (16)             33            567         (1,267) 
 Expense of 
  deferred 
  financing 
  fees                  11,080          1,112         13,828           3,280 
 Change in fair 
  value of 
  derivative 
  contracts              (106)            397          (882)           4,005 
 Stock-based 
  compensation              32            840            664           2,934 
 Provisions for 
  doubtful 
  accounts              15,623              -         16,770 
Changes in 
 non-cash 
 working 
 capital                22,976          1,357         21,605        (26,595) 
                 -------------  -------------  -------------  -------------- 
                        12,724          8,691         12,702           6,072 
                 -------------  -------------  -------------  -------------- 

Investing 
Activities 
Acquisition of 
 property and 
 equipment             (8,175)       (12,938)       (21,854)        (23,745) 
Proceeds from 
 sale of 
 property and 
 equipment                   -              -              -             588 
Restricted cash        (6,756)        (1,003)        (6,503)             223 
                 -------------  -------------  -------------  -------------- 
                      (14,931)       (13,941)       (28,357)        (22,934) 
                 -------------  -------------  -------------  -------------- 

Financing 
Activities 
Proceeds 
 (repayment) of 
 bank 
 indebtedness            (541)              -          4,409               - 
Proceeds from 
 lines of 
 credit                      -              -         15,000               - 
Repayment of 
 long term 
 debt                        -              -        (2,000)               - 
Proceeds from 
 long term 
 debt                        -              -              -          15,000 
Payment of 
 financing 
 fees                      306        (5,114)          (257)         (6,066) 
Change in 
 non-cash 
 working 
 capital                     -          (599)              -           (599) 
                 -------------  -------------  -------------  -------------- 
                         (235)        (5,713)         17,152           8,335 
                 -------------  -------------  -------------  -------------- 

Increase 
 (decrease) in 
 cash and cash 
 equivalents           (2,442)       (10,963)          1,497         (8,527) 
Cash and cash 
 equivalents, 
 beginning of 
 period                 10,242         15,592          6,303          13,156 
                 -------------  -------------  -------------  -------------- 
Cash and cash 
 equivalents, 
 end of period           7,800          4,629          7,800           4,629 
                 -------------  -------------  -------------  -------------- 

Cash Flow 
Supplementary 
Information 
Interest 
 received                   76            188            296             265 
Interest paid            5,671          4,140         15,164          12,203 
Income taxes 
 paid                    1,195          1,805          6,706           5,594 
                 -------------  -------------  -------------  --------------

About Tuscany

Tuscany, a corporation headquartered in Calgary, Alberta, is engaged in the business of providing contract drilling and work-over services along with equipment rentals to the oil and gas industry. Tuscany is currently focused on providing services to oil and gas operators in South America and Africa. Tuscany has operating centres in Colombia, Brazil, Ecuador and France.

Reader Advisories

Statements in this news release contain forward-looking information including, without limitation, statements with respect to the completion of each component of the Transaction, the receipt of the Exemption, and the future financial position of the Company. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Tuscany. These risks include, but are not limited to: counterparty completion risks, regulatory approval risk, the risks associated with the oil and gas industry, commodity prices and exchange rate changes, regulatory changes, successful exploitation and integration of technology, customer acceptance of technology, changes in drilling activity and general global economic, political and business conditions. Industry related risks could include, but are not limited to; operational risks, delays or changes in plans, health and safety risks and the uncertainty of estimates and projections of costs and expenses and access to capital. The risks outlined above should not be construed as exhaustive. The reader is cautioned not to place undue reliance on this forward-looking information. Tuscany does not undertake any obligation to update or revise any forward-looking statements except as expressly required by applicable securities laws.

The Toronto Stock Exchange has not reviewed, nor does it accept responsibility for the adequacy or accuracy of this release.

The listing of Tuscany’s common shares on the Colombian Stock Exchange does not imply a certification by the BVC of the value or the solvency of Tuscany.

(1) Refer to “Non-IFRS Measures”.

(2) Refer to “Non-IFRS Measures”.

(3) Includes two rigs held for sale.

(4) Refer to “Non-IFRS Measures”.

(5) Refer to “Non-IFRS Measures”.

(6) Reflects the movement in accounts from December 31, 2012, to September 30, 2013.

(7) Refer to “Non-IFRS Measures”.

Tuscany International Drilling Inc.

Walter Dawson

President and CEO

Tuscany International Drilling Inc.

Matt Moorman

CFO

(403) 265 8793

(403) 265 8258

www.tuscanydrilling.com

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Porto Energy to Raise Up to $1.5 Million in a Non-Brokered Private Placement of Units

THE WOODLANDS, TX, Nov. 12, 2013 /CNW/ – Porto Energy Corp., (“Porto” or the “Company”) (TSXV:PEC), today announced that further to the Company’s October 7, 2013 press release, it has launched a non-brokered private placement of up to 150 Units of the Company (the “Units”) at a price of CDN$10,000 per Unit (the “Offering Price”) to raise gross proceeds of up to CDN$1,500,000 on a reasonable commercial best efforts basis (the “Offering”).  Each Unit issued under the Offering will consist of one senior secured convertible debenture with a par value of CDN$10,000 (the “Debenture”) and one common share purchase warrant (the “Warrant”).  Each Warrant will entitle the holder to acquire up to 200,000 common shares of the Company (“Common Shares”) at a price of CDN$0.05 per Common Share for a period of up to 36 months from the closing date of the Offering.

The Debentures will be direct and senior obligations of the Company secured by the common shares of Company’s wholly-owned subsidiary Mohave Oil and Gas Corporation, which holds the Company’s interest in seven oil and gas concessions in Portugal and, effective May 31, 2013, USD$130 million in tax pools.  The Debentures will bear interest at a rate of 8.00% per annum, payable quarterly in arrears, and will mature on November 30, 2016 (the “Maturity Date”).

The Company, at its sole discretion, can elect to satisfy its interest commitments through payment in cash or, subject to regulatory approval, the issuance of Common Shares.  Subject to regulatory approval, Common Shares issued as payment for interest commitments will be issued at a price equal to the greater of CDN$0.05 per Common Share or a 10% discount to the market price of the Common Shares on the TSX Venture Exchange (“TSXV”).

The Debentures will be convertible at the holder’s option into Common Shares at any time prior to the close of business on the earlier of: (i) the business day immediately preceding the Maturity Date or (ii) if called for redemption, on the business day immediately preceding the date fixed for redemption, or (iii) if called for repurchase pursuant to a change of control, on the business day immediately preceding the payment date, at a conversion price of $0.05 per Common Share (the “Conversion Price”) during the first year of their term (subject to adjustment in certain circumstances) and, thereafter, at the greater of $0.10 per Common Share or the market price of the Common Shares on the TSXV. The Debentures will not be redeemable before November 30, 2014. On or after November 30, 2014 but prior to the Maturity Date, the Debentures will be redeemable at the Company’s option at par plus accrued and unpaid interest, provided that the volume weighted average trading price of the Common Shares on the TSXV during the 20 consecutive trading days, ending on the fifth trading day preceding the date on which notice of redemption is given, is not less than 200% of the Conversion Price.

Closing of the Offering is expected to occur on or about November 30, 2013, and may occur in one or more tranches. The Company has agreed to pay finders’ fees of up to 6% cash to qualified persons in accordance with TSXV policies and the requirements of applicable securities laws.  The Company will use the proceeds from the Offering for working capital and general corporate purposes.  The financing is subject to regulatory approval including the satisfaction of customary conditions of the TSXV.

Strategic Alternative Review Process

In addition to the Offering, and as detailed in the Company’s October 7, 2013 press release, the Company continues to fully evaluate a range of strategic alternatives available to it in order to preserve and maximize shareholder value. Porto will provide further updates on this process when the Board of Directors has approved a definitive transaction or strategic option, or as otherwise required by Porto’s continuous disclosure requirements. The Corporation cautions that there are no certainties that the strategic review process will result in any transaction or, if a transaction is undertaken, as to its terms or timing.

Porto’s common shares trade on the TSX Venture Exchange under the symbol PEC. Porto currently has 198,954,653 common shares outstanding.

About Porto Energy Corp.

Porto Energy Corp. is an international oil and gas company engaged in the exploration of crude oil and natural gas in Portugal, including the appraisal of a gas discovery.  Through its wholly owned subsidiary, Mohave Oil And Gas Corporation (a Texas corporation with branch offices in Portugal), the Company holds working interests in seven concessions in Portugal’s Lusitanian Basin totaling 1.6 million net acres. Through its exploration efforts to date, the Company has identified seven major exploration trends over its concessions and generated more than 45 prospects and leads. Porto Energy’s shares trade on the TSX Venture Exchange under the ticker symbol “PEC”. For more information on Porto Energy visit www.portoenergy.com.

About Black Spruce Merchant Capital Corp.

Black Spruce is a private merchant banking firm focused on providing specialized financing and advisory services to the global energy industry. Our award-winning principals have a history of achieving success for clients based on high-level industry focus, strong industry relationships and innovative transaction skills. Offering advice in project, corporate and credit syndication; equity-linked financings; mergers and acquisitions; and strategic business development. For more information on Black Spruce visit: www.bsmc.ca

Cautionary Statements

This press release contains certain forward-looking statements. These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact are forward-looking statements. The use of any of the words “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe”, “predict” and “potential” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. These forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements that are contained in this press release, except in accordance with applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Porto Energy Corp.

For further information:Heath Cleaver – Chief Financial Officer

Phone: 1-713-975-1725

Black Spruce Merchant Capital Corp.

Sonny Mottahed – CEO and Managing Partner

Phone:  1.403.351.1779

Email:  info@bsmc.ca

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Posted in: Energy News, Press Releases

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