Corporate Profile - Major Drilling Group International

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CorporateProfileMajor Drilling Group International Inc. (“the Company”) is one of the world’s largest drilling services companiesprimarilyservingtheminingindustry.Tosupportitscustomers’variedexplorationdrillingrequirements,MajorDrillingmaintainsfieldoperationsandofficesinCanada,theUnitedStates,Mexico,SouthAmerica,Asia,AfricaandEurope.MajorDrillingprovidesalltypesofdrillingservicesincludingsurfaceandundergroundcoring,directional,reversecirculation,sonic,geotechnical,environmental,water‐well,coal‐bedmethane,shallowgas,undergroundpercussive/longholedrilling,surfacedrillandblast,andavarietyofmineservices.

Overtheyears,theCompanyhaspositioneditselfasoneofthelargestspecializedoperatorsintheworldbyleveragingitsmaincompetitiveadvantages:skilledpersonnel,specializedequipment,robustsafetysystems,long‐standingrelationshipswiththeworld’slargestminingcompaniesandaccesstocapital.ThispositioningisstrengthenedbytheCompany’sseniormanagementhavingexperiencedseveraleconomicandminingindustrycycles.Ourcorporatestrategyremainsto:

betheworldleaderinspecializeddrilling; diversifyourserviceswithinthedrillingfield; maintainastrongbalancesheet; bethebestinclassinsafetyandhumanresources;and modernizeourconventionalfleetandexpandourfootprintinstrategicareas.

MajorDrilling’scommonsharestradeontheTorontoStockExchangeunderthesymbolMDI.

IndexMessagetoShareholders.......................................................................................................................................... 2Management’sDiscussionandAnalysis............................................................................................................. 3Management’sResponsibility................................................................................................................................. 18IndependentAuditor’sReport................................................................................................................................ 19ConsolidatedStatementsofOperations............................................................................................................. 20ConsolidatedStatementsofComprehensiveLoss......................................................................................... 20ConsolidatedStatementsofChangesinEquity............................................................................................... 21ConsolidatedStatementsofCashFlows............................................................................................................. 22ConsolidatedBalanceSheets................................................................................................................................... 23NotestoConsolidatedFinancialStatements.................................................................................................... 24HistoricalSummary..................................................................................................................................................... 44ShareholderInformation.......................................................................................................................................... 45

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MessagetoShareholdersCalendar2016markedthefourthyearofdecliningexplorationexpendituresworldwide,adecreaseof20%from2015anddown65%fromthepeakin2012.ThisaffectedbothourrevenueandmarginsfortheyearendedApril30,2017.However,themineralreservesofmostseniorandintermediatecompanieshavebeendepletingoverthelastfewyearsandthey recognize the need to address supply shortages looming in most commodities. Going into calendar 2017, goldcustomersincreasedtheirexplorationbudgetsbyanaverageof30%.Thishasresultedinanincreaseindemandforourservicesoverthepastfewmonthsasmostofourseniorgoldcustomershaveaddedrigstotheirexistingprojects. Basemetalcompaniesremaincautiousintheirexplorationspendingassupplycontinuestobeinbalancewithdemand.However,accordingtoindustryexperts,startingin2018,thesituationshouldchangeformostbasemetals,andmoveintoasupplydeficituntilreservesarereplaced,whichcantypicallytakeover10yearsfromearlyexploration.Ourmanagementteamcontinuedtofocusonpreparingforarecoverybyrefurbishingdrillrigsandsupportequipmentinordertorespondquicklytocustomerdemands,andincreasingandstrategicallydeployingconsumablesinventorytooffsetananticipatedshortageofproductsupply.Aswell,theCompanyimproveditssafetysystemsbyaddingacompetency‐basedtrainingprocess,whichcontributedto improvedsafetyperformanceand,goingforward,willacceleratetrainingofnewrecruits.Wehavealsomadeprogressonseveralfrontsduringtheyearintermsofdiversificationbeyondpureexplorationwork:(i) we continued to grow our underground percussive division; and (ii) we have broadened services offered to ourcustomers,includingdewatering,surfacedrillandblast,groundmonitoringandpaste‐fillholes.Wecontinuetofocusandinvestinsafety,whichhasproducedcontinuousimprovementsoverthelastfewyears.Wehaveenhancedourrecruitingandtrainingsystems,allowingustoefficientlybringcompetentemployeestothefieldwhileatthesametime,inourquestforzeroharm,reducingthenumberofinjuriessustainedbynewrecruitsascomparedtopreviouscycles.WeareverypleasedwithwheretheCompanyispositioned.Comingoutofoneofthelongestdownturnsintheindustrywithnetcashonhandallowsusto improveour fleetandmeetourcustomers’demands intermsofrigs,rodhandling,mobileequipmentanddeep‐holecapacity,whichhasalwaysbeenkeytooursuccessastheleaderinspecializeddrilling.Wewouldliketoextendoursincereappreciationtoourmorethan2,000employeesfortheircontinuinghardworkanddedication,particularlyduringthispastyear.WehaveanenthusiasticworkforceanditiscrucialthattheCompanysupplythemwiththebestmachinery,toolsandconsumablestodeliversafe,productiveresultstoourcustomers.MajorDrilling’sleadingpositioninthemineraldrillingindustryiswithoutadoubttheresultofouremployees’tremendouscommitmenttoqualityandservice.Wewanttothankourcustomersandshareholdersfortheirongoingsupport.“DavidTennant” “DenisLarocque”DavidTennant DenisLarocqueChairoftheBoard President&ChiefExecutiveOfficer

Management’sDiscussionandAnalysis

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Thefollowingmanagement’sdiscussionandanalysis(“MD&A”),preparedasofJune5,2017,shouldbereadtogetherwiththeauditedfinancialstatementsfortheyearendedApril30,2017andrelatednotesattachedthereto,whicharepreparedinaccordancewithInternationalFinancialReportingStandards.AllamountsarestatedinCanadiandollarsunlessotherwiseindicated. FORWARD‐LOOKINGSTATEMENTSThisMD&Acontainsforward‐lookingstatementsabouttheCompany’sobjectives,strategies,financialcondition,resultsofoperations, cash flows and businesses. These statements are “forward‐looking” because they are based on currentexpectations,estimates,assumptions,risksanduncertainties.Theseforward‐lookingstatementsaretypicallyidentifiedbyfutureorconditionalverbssuchas“outlook”, “believe”, “anticipate”, “estimate”, “project”, “expect”, “intend”, “plan”,andtermsandexpressionsofsimilarimport.Suchforward‐lookingstatementsaresubjecttoanumberofrisksanduncertaintiesthat include,butarenot limitedto:cyclical downturn; competitive pressures; dealing with business and political systems in a variety of jurisdictions;repatriationof fundsorproperty inother jurisdictions;paymentof taxes invarious jurisdictions;exposure tocurrencymovements; inadequate or failed internal processes, people or systems or from external events; dependence on keycustomers;safetyperformance;expansionandacquisitionstrategy;regulatoryandlegalrisk;corruption,briberyorfraudbyemployeesoragents;extremeweatherconditionsandtheimpactofnaturalorotherdisasters;specializedskillsandcostoflabourincreases;equipmentandpartsavailability,reputationalriskandcybersecurityrisk.Thesefactorsandotherriskfactors,asdescribedunder“GeneralRisksandUncertainties”intheCompany’sAnnualInformationForm,representriskstheCompanybelievesarematerial. Actualresultscouldbemateriallydifferentfromexpectationsifknownorunknownrisksaffectthebusiness,orifestimatesorassumptionsturnouttobeinaccurate.TheCompanydoesnotguaranteethatany forward‐looking statementwillmaterializeand,accordingly, the reader is cautionednot toplace relianceon theseforward‐lookingstatements.TheCompanydisclaimsany intentionandassumesnoobligationtoupdateanyforward‐lookingstatement,even ifnewinformationbecomesavailable,asaresultoffutureeventsorforanyotherreasons,exceptinaccordancewithapplicablesecuritieslaws.RisksthatcouldcausetheCompany’sactualresultstomateriallydifferfromitscurrentexpectationsarealsodiscussedintheCompany’sAnnualInformationForm.AdditionalinformationrelatingtotheCompany,includingtheCompany’sAnnualInformationFormforthepreviousyearandthemostrecentlycompletedfinancialyear,areorwillbeavailableontheSEDARwebsiteatwww.sedar.com.CORPORATEOVERVIEWMajorDrillingGroupInternationalInc.(“MajorDrilling”or“theCompany”)isoneoftheworld’slargestdrillingservicescompaniesprimarilyservingtheminingindustry.Tosupportitscustomers’variedexplorationdrillingrequirements,MajorDrillingmaintainsfieldoperationsandofficesinCanada,theUnitedStates,Mexico,SouthAmerica,Asia,AfricaandEurope.Major Drilling provides all types of drilling services including surface and underground coring, directional, reversecirculation, sonic, geotechnical, environmental, water‐well, coal‐bed methane, shallow gas, undergroundpercussive/longholedrilling,surfacedrillandblast,andavarietyofdrilling‐relatedmineservices.


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BUSINESSSTRATEGYMajorDrillingcontinuestobase itsbusinesspremiseonthefollowing:miningcompaniescontinuetodepletethemoreeasilyaccessiblemineralreservesaroundtheworldandattractivedepositswillbeinincreasinglyremotelocations,areasdifficulttoaccessand/ordeepintheground.Forthisreason,MajorDrilling’sstrategyistofocusitsservicesonprojectsthathavethesecharacteristics,callingtheseservices“specializeddrilling”. Overtheyears,theCompanyhaspositioneditselfasoneofthelargestspecializeddrillingoperatorsintheworldbyleveragingitsmaincompetitiveadvantages:skilledpersonnel, specialized equipment, robust safety systems, long‐standing relationships with the world’s largest miningcompaniesandaccesstocapital.TheCompany intends tocontinue tomodernizeand innovate its fleet andexpand its footprint in strategic areaswhilemaintainingastrongbalancesheetandremainingbestinclassinsafetyandhumanresources.TheCompanyalsoseekstodiversifybyinvestinginundergroundanddrilling‐relatedmineservicesthatarecomplementarytoitsskillset.The Company categorizes its mineral drilling services into three types: specialized drilling, conventional drilling andundergrounddrilling.Specializeddrillingcanbedefinedasanydrillingprojectthat,byvirtueofitsscope,technicalcomplexityorlocation,createssignificant barriers to entry for smaller drilling companies.This would include, for example, deep‐hole drilling,directionaldrilling,andmobilizationstoremotelocationsorhigh altitudes. Because significant ore bodies are gettingmore difficult to find, the Company expects specializeddrillingservices tocontinueto fuel futuregrowthand,overthenexttwodecades,theCompanybelievestheseskillswillbeingreaterandgreaterdemand.Conventional drilling tends to be more affected by theindustrycycleasthebarrierstoentryarenotassignificantaswithspecializeddrilling. Thispartof the industry ishighlyfragmented and has numerous competitors. Because theCompanyoffersonlylimiteddifferentiationinthissector,itisnotitspriorityforinvestment.The Company’s underground services include bothundergroundexplorationdrillingandundergroundpercussive/longholedrilling.Undergroundexplorationdrillingtakeson greater importance in the latter stages of the mining cycle as clients develop underground mines. Undergroundpercussive/longholedrilling,whichrelatesmoretotheproductionfunctionofamine,providesmorestableworkduringtheminingcycles.Byofferingbothundergroundproductiondrillingandundergroundcoredrilling,theCompanyprovidesawiderangeofcomplementaryservicestoitsclients.AkeypartoftheCompany’sstrategyistomaintainastrongbalancesheet.TheCompanyisinauniquepositiontoreactquickly when the industry begins to recover as its financial strength allows it to invest in safety and continuousimprovementinitiatives,toretainkeyemployeesandtomaintainitsequipmentingoodcondition.TheCompanyalsohasavariablecoststructurewherebymostofitsdirectcosts,includingfieldstaff,goupordownwithcontractrevenue,andalargepartoftheCompany’sotherexpensesrelatetovariableincentivecompensationbasedontheCompany’sprofitability.


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INDUSTRYOVERVIEWThemetalsandmineralsdrilling industry isreliantprimarilyondemandfromtwometalgroups,goldandbasemetals.Eachcommoditygroupisinfluencedbydistinctmarketforces.Goldhasalwaysbeenasignificantdriverintheminingindustryaccountingfor40to50%oftheexplorationspendcarriedonaroundtheworld.Explorationactivitygenerallyvariesupordownwiththetrendingoldprices.The demand for base metals is dependent on economicactivity.Inthelonger‐term,thefundamentaldriversofbasemetals remain positive, with worldwide supply of mostmetalsexpectedtotightenandhigherdemandcomingfromthe emerging markets over the last few years. As thesemarkets continue to urbanize, the requirement for basemetalswillcontinuetoincreaseatthesametimeastheeasilyaccessiblereservesarebeingdepleted.One of the realities of the mining industry is that futuremineral deposits will have to come from areas difficult toaccess,eitherinremoteorpoliticallysensitiveareas,deeperin the ground or at higher altitudes. This should improvedemandforspecializedservicesinthefuture.Intermsofcustomerbase,theCompanyhastwocategoriesofcustomers:senior/intermediatecompanies,forwhichtheCompany provides greenfield exploration drilling and/ordrillingatoperatingmines,andjuniorexplorationcompanies.The industry has experienced a cyclical downturn over the past several years. At this point in time,most senior andintermediateminingcompanieshaveincreasedtheirexplorationbudgetsforcalendar2017,althoughexplorationlevelsarestilllowerthanatthepeakin2012.Manyjuniorminingcompanieshavebeenabletoaccesscapitalmarketsandobtainfinancingfortheirminingprojects.Largebasemetalproducerswilleventuallyneedtoexpandexistingminesanddevelopnewonestomeettheworld’sgrowth,especiallyinemergingmarkets.Activityfromseniorgoldproducersislikelytoshowgreatervolatilityasgoldpricesvary,whichwillimpacttheirexplorationbudgets.OVERALLPERFORMANCERevenueforthefiscalyearendedApril30,2017was$300.6million,down1%fromrevenueof$304.6millionrecordedintheprioryear.Althoughtheyear‐over‐yearrevenueremainedrelativelyflat,theCompanyhasseenanincreaseinactivitiesover the latter part of the year, due to both the juniormining companies’ ability to access capital and seniorminingcompaniesincreasingtheirexplorationbudgetsfromtheprioryear.Grossmarginfortheyearwas20.0%,downfrom23.0%forthepreviousyear.Pricingcontinuedtobechallengingduringtheyearduetocompetitivepressure,buttheCompanyhasseenaslightincreaseoverthepastquarterastherehasbeenmoreactivityinthefourthquarterandtheindustryisexperiencinglabourshortagesinsomeareas.Thecombinationofrelativelyflatrevenueandlowermarginsresultedinalossfortheyearof$42.1millionor$0.52pershare, compared to a net loss of $45.3 million or $0.57 per share for the prior year, which included an $8.4 millionrestructuringchargeontheshutdownofoperationsinSouthAfricaandNamibia.


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SELECTEDANNUALINFORMATION YearsendedApril30 (inmillionsofCanadiandollars,exceptpershareinformation) 2017 2016 2015Revenuebyregion Canada‐U.S. $ 180 $ 195 $ 177SouthandCentralAmerica 71 66 76AsiaandAfrica 50 44 53 301 305 306Grossprofit 60 70 66asapercentageofrevenue 20.0% 23.0% 21.6%Netloss (42) (45) (50)pershare(basicanddiluted) $ (0.52) $ (0.57) $ (0.62) Totalassets 495 503 543Totallong‐termfinancialliabilities 8 13 16Dividendspaid ‐ 3 16RESULTSOFOPERATIONSFISCAL2017COMPAREDTOFISCAL2016RevenueforthefiscalyearendedApril30,2017was$300.6million,down1%fromrevenueof$304.6millionrecordedintheprioryear. AlthoughtheCompanyendedtheyearvirtuallyflatfromtheprioryear,thereweremanymorepositivesigns.Fiscal2016startedoffwithrelativelygoodrevenuebutfelloffdramaticallyduringtheyearandendedwithaverysoftfourthquarter.ThefiscalyearendedApril30,2017startedslowbutimprovedprogressivelyduetojuniorfundingandaslightincreaseinexplorationworkfromseniors,particularlyingold.Pricingremainedsoftthroughouttheyearbuthasseenimprovementsincertainareasgiventheshortageofexperienceddrillcrews.Canada‐U.S.Canada‐U.S.revenuedecreasedby7.6%to$179.8million,comparedto$194.6millionlastyear.Thisdecreasecamefromthe Canadian operation due to continued competition andcompetitivepricingpressure.GrossmarginsinCanada‐U.S.weredowncomparedtolastyear, mainly as a result of the competitive environmentputtingpressureonpricing.SouthandCentralAmericaRevenueinSouthandCentralAmericaincreasedby8.7%to$71.4million, comparedto$65.7million for theprioryear.Increasedactivity levels inSurinameandBrazilwereoffsetslightlybyreductionsinChileandMexico.Grossmarginsintheregionweredowncomparedtolastyear,asmarginscontinuedtobeaffectedbylowpricingasaresultofincreasedcompetitivepressuresinsomejurisdictions.


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AsiaandAfricaRevenueinAsiaandAfricaincreased11.3%to$49.4millionfrom$44.4millionintheprioryear.IncreasedactivitylevelsinbothIndonesiaandBurkinaFasowereoffsetsomewhatbytheclosureofoperationsinSouthAfricaandNamibiaduringfiscal2016,andthereductionofworkinMozambiquerelatedtothedropinactivityincoalexploration.Grossmarginsfortheregionweredownyear‐over‐year,mainlyasaresultofpricingpressures.OperatingexpensesGeneralandadministrativecostswereup1.1%to$44.6million,comparedto$44.1millionintheprioryear.Morethanhalfoftheincreasewasrelatedtoanincreaseinforeignexchangetranslation.TheCompanyhasbeenabletokeepgeneralandadministrativecostsinlinewithactivity,andstillretainmanyofitsskilledemployees,strategicallypositioningittoreactquicklywhentheindustryrecovers.Otherexpenseswere$5.2millionfortheyear,comparedto$4.1millionfortheprioryear.Theincreaseisdueprimarilytoseverancecostsincurredduringtheyearandatrue‐upof$0.7milliononthecontingentconsiderationduetobetterthanexpectedresultsarisingfromtheTaurusacquisition.Incometaxexpensefortheyearwas$0.1million,comparedto$3.7millionfortheprioryear.Theeffectivetaxratefortheyearwasimpactedbyseveralfactors,including:non‐taxaffectedlosses,temporarydifferencesdrivenbyforeignexchangevariances,andnon‐deductibleexpenses.Netlossfortheyearwas$42.1millionor$0.52pershare($0.52persharediluted),comparedtoanetlossof$45.3millionor$0.57pershare($0.57persharediluted)fortheprioryear.SUMMARYANALYSISFISCAL2016COMPAREDTOFISCAL2015RevenueforthefiscalyearendedApril30,2016wasrelativelyflatat$304.6millionfrom$305.7millioninfiscal2015.TheCompanycontinuedtoseeadecline inexplorationrevenuecomparedto fiscal2015duetoa lackof funding for juniorexplorationcompaniesandareductionofexplorationspendingbyseniorcompaniesduetolowcommodityprices.Thisreductioninrevenuewaspartiallyoffsetbyanincreaseinrevenuefromthepercussivedivision.Grossmarginfor2016increasedto23.0%from21.6%in2015.Pricingcontinuedtobechallengingasaresultofincreasedcompetitive pressures. Aswell, the Company’s customerswere focused onmine site drilling, especially undergrounddrilling,whichtendstohavelowermargins.TheCompanycontinuedtobedisciplinedonpricingandcostcontrols.

During2016,theCompanyrecordedarestructuringchargeof$8.4millionprimarilyrelatingtothedecisiontoshutdownoperationsinSouthAfricaandNamibia.Thischargeconsistedmainlyofanon‐cashwrite‐downofassetsandclose‐downcostsrelatingtoseveranceandmovementofequipment,materialandpersonnel.Also,theCompanyincurredadditionalrestructuringchargesasitcontinuedtoreducecostsacrosstheorganization.

Thecombinationofflatrevenueandonlyaslightincreaseinmargins,alongwiththeaforementionedrestructuringcharges,producedanetlossof$45.3million($0.57pershare)in2016,comparedtoanetlossof$49.6million($0.62pershare)for2015.


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SUMMARYOFQUARTERLYRESULTS (in$000CAD,except

pershare) Fiscal2016 Fiscal2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Revenue $ 83,934 $84,667 $ 71,887 $ 64,133 $69,089 $79,913 $ 70,117 $81,469 Grossprofit 21,617 23,311 12,982 12,051 15,141 16,088 9,380 19,609Grossmargin 25.8% 27.5% 18.1% 18.8% 21.9% 20.1% 13.4% 24.1% Netloss (11,180) (5,349) (15,897) (12,859) (9,782) (9,757) (14,294) (8,231)

Pershare‐basic (0.14) (0.07) (0.20) (0.16) (0.12) (0.12) (0.18) (0.10)Pershare‐diluted (0.14) (0.07) (0.20) (0.16) (0.12) (0.12) (0.18) (0.10)

Withtheexceptionofthethirdquarter,theCompanyexhibitscomparativelylessseasonalityinquarterlyrevenuethaninthepast.The thirdquarter (November to January) isnormally theCompany’sweakestquarterdue to theshutdownofminingandexplorationactivities,oftenforextendedperiodsovertheholidayseason.SUMMARYANALYSISFOURTHQUARTERRESULTSENDEDAPRIL30,2017Totalrevenueforthequarterwas$81.5million,up27.1%fromrevenueof$64.1millionrecordedinthesamequarterlastyear.Thefavourableforeignexchangetranslationimpactforthequarter,whencomparingtotheeffectiveratesforthesameperiodlastyear,isestimatedat$0.3milliononrevenue,withanegligibleimpactonnetearnings.RevenueforthequarterfromCanada‐U.S.drillingoperationsincreasedby19.0%to$47.5million,comparedtothesameperiodlastyear.TheincreasecamefromalloperationsastheCompanysawincreasedactivityfrombothseniorsandjuniorsoverthesameperiodlastyear.SouthandCentralAmericanrevenueincreasedby52.0%to$22.8millionforthequarter,comparedtothesamequarterlast year. The increase was driven primarily by Mexico and the Guiana Shield, with other countries showing slightimprovements.AsianandAfricanoperationsreportedrevenueof$11.2million,up21.7%fromthesameperiodlastyear.BurkinaFasoandthePhilippinesmakeupmostofthisincrease,offsetbyaslightdecreaseinIndonesiaasaresultofongoingpoliticalissuesinthecountry.Theoverallgrossmarginpercentageforthequarterwas24.1%,upfrom18.8%forthesameperiodlastyear.Theincreasedmarginsresultedfromincreasedactivity,alongwithsomepriceadjustmentsandbetterproduction.Generalandadministrativecostswereup3.5%fromthesamequarterlastyearat$11.7million.GeneralandadministrativeexpenseshaveincreasedslightlyinthequarterastheCompanycontinuestoprepareforincreasedactivityintheindustry.Otherexpenseswere$2.6millioncomparedto$0.6millionforthesamequarter lastyear. This increasewas impactedprimarilybyanincreaseinbaddebtexpense,severancepaidinthequarterandatrue‐upof$0.7milliononthecontingentconsiderationduetobetterthanexpectedresultsarisingfromtheTaurusacquisition.Foreignexchangelosswas$0.8millioncomparedtoalossof$0.5millioninthesamequarterlastyear.Thislosswasduetoexchangeratevariationsonmonetaryworkingcapitalitems.


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Theincometaxprovisionforthequarterwasanexpenseof$0.2millioncomparedtoarecoveryof$0.8millionfortheprioryearperiod.Thetaxexpenseforthequarterwasimpactedbynon‐taxaffectedlossesandnon‐deductibleexpenses.Netlosswas$8.2millionor$0.10pershare($0.10persharediluted)forthequarter,comparedtoanetlossof$12.9millionor$0.16pershare($0.16persharediluted)fortheprioryearquarter.LIQUIDITYANDCAPITALRESOURCESOperatingactivitiesCashflowfromoperations(beforechangesinnon‐cashoperatingworkingcapitalitems,interestandincometaxes)fortheyearendedApril30,2017,wasaninflowof$10.9millioncomparedtoaninflowof$17.4millioninthepreviousyear.Thechangeinnon‐cashoperatingworkingcapitalitemswasanoutflowof$8.0millioncomparedtoaninflowof$9.3millionfortheprioryear.Theoutflowofnon‐cashoperatingworkingcapitalinfiscal2017wasprimarilyimpactedby:

anincreaseinaccountsreceivableof$12.5million; anincreaseininventoryof$7.9million; anincreaseinprepaidsof$0.7million;and anincreaseinaccountspayableof$13.3million.

FinancingactivitiesUnderthetermsofcertainoftheCompany’sdebtagreements,theCompanymustsatisfyspecificfinancialcovenants.Suchagreementsalsolimit,amongotherthings,theCompany’sabilitytoincuradditionalindebtedness,createliens,engageinmergersoracquisitionsandmakedividendandotherpayments.Duringtheyear,theCompanywas,andcontinuestobe,incompliancewithallcovenantsandotherconditionsimposedbyitsdebtagreements.The$25millionoperatingfacilityandthe$50millionrevolvingfacilitywererenewedonSeptember21,2016forthreeyearstoSeptember30,2019,onthesametermsasthepreviousagreement.OperatingcreditfacilitiesThecreditfacilitiesrelatedtooperationstotal$29.1million,($25.0millionfromaCanadiancharteredbankand$4.1millionfromanAmericancharteredbank)andareprimarilysecuredbycorporateguaranteesofcompanieswithinthegroup.AtApril30,2017,theCompanyhadutilized$0.5millionoftheselines.TheCompanyalsohasacreditfacilityof$2.6millionforcreditcardsforwhichinterestrateandrepaymentareaspercardholderagreements.Long‐termdebtTotallong‐termdebtdecreasedby$4.4millionduringtheyearto$7.8millionatApril30,2017.Thedecreaseisduetodebtrepaymentsof$5.4million,additionaldebtof$0.9millionand$0.1millioninexchangeratevariationsduringtheyear.AsofApril30,2017,theCompanyhadthefollowinglong‐termdebtfacilities:

$50.0 million revolving facility for financing the cost of equipment purchases or acquisition costs of relatedbusinesses.AtApril30,2017,thisfacilityhadnotbeenutilized.

$4.3millionnon‐revolvingfacility.Thisfacilitycarriesafixedinterestrateof5.9%andisamortizedovertenyears

endinginAugust2021.

TheCompanyalsohasvariousotherloansandcapitalleasefacilitiesrelatedtoequipmentpurchasesthattotaled$3.5millionatApril30,2017,whichwerefullydrawnandmaturethrough2022.


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Paymentsduebyperiod(in$000CAD) Lessthan Contractualobligations Total 1year 2‐3years 4‐5years 6+yearsContingentconsideration $ 5,135 $ 5,135 $ ‐ $ ‐ $ ‐Long‐termdebt(interestincluded) 8,190 3,428 3,333 1,429 ‐Purchasingcommitments 372 372 ‐ ‐ ‐Operatingleases 3,570 1,481 1,181 724 184Totalcontractualobligations $ 17,267 $ 10,416 $ 4,514 $ 2,153 $ 184TheCompanybelievesthatitwillbeabletogeneratesufficientcashflowtomeetitscurrentandfutureworkingcapital,capitalexpenditureanddebtobligations.AsatApril30,2017,theCompanyhadunusedborrowingcapacityunderitscreditfacilitiesof$78.6millionandcashof$26.0million,foratotalof$104.6millioninavailablefunds.InvestingActivitiesCapitalExpendituresCapitalexpenditureswere$17.7million(netof$0.9millionofequipment financing) fortheyearendedApril30,2017,comparedto$12.1million(netof$4.7millionofequipmentfinancing)fortheprioryear.Duringtheyear,theCompanyadded10drillrigs,whileretiringordisposingof54older,inefficientandmorecostlydrillrigs.Thisbringsthetotaldrillrigcountto646atyear‐end.OUTLOOKTheCompanyhasapositivebutcautiousviewlookingaheadtofiscal2018.Mostseniorandintermediatecompanieshaveseentheirmineralreservesdepleteoverthelastfewyearsandrecognizetheneedtoaddresssupplyshortagesloominginmostcommodities.Oneofthechallengesthatisre‐emerginginthesectoristheshortageofexperienceddrillcrewsintheindustry,a factor thatwillputsomepressureoncostandproductivityas theCompanymoves forward. TheCompanycontinuestofocusandinvestinsafety,whichhasproducedcontinuousimprovementsoverthelastfewyears.TheCompanyhasenhanceditsrecruitingandtrainingsystems,allowingittoefficientlybringcompetentemployeestothefieldwhileatthesametime,intheCompany’squestforzeroharm,reducingthenumberofinjuriessustainedbynewrecruitsascomparedtoprevious cycles. TheCompany’spartnershipwith theBathurst campusof theCollègeCommunautaireduNouveau‐BrunswickfortheirnewdrillertrainingprogramwillhelpwiththeinitiativestheCompanyisdeployingtorecruitandtrainnewemployees,andispartoftheeffortstogetpreparedforapotentialupturnintheindustry.Duetotremendouseffortsfromitsdedicatedemployees,theCompanyiswellpositionedwithnetcashof$18.1milliononhandcomingoutofoneofthelongestdownturnsintheindustry.ThiswillallowtheCompanytoimproveitsfleetandmeetcustomers’ demands in terms of rod handling, mobile equipment and deep‐hole capacity, which has been key to theCompany’ssuccessastheleaderinspecializeddrilling.The Company expects to spend approximately $25 million in capital expenditures in fiscal 2018 to meet customers’demands,improverigreliability,productivityandutilization,aswellasinvestinitscontinuousimprovementinitiatives.However,theCompanywillremainvigilantandflexibleinordertoreactandadjusttounforeseenmarketconditions.NON‐GAAPFINANCIALMEASURETheCompanyusesthenon‐GAAPfinancialmeasure,EBITDA,excludingrestructuringchargeandcontingentconsiderationtrue‐up. TheCompanybelievesthisnon‐GAAPfinancialmeasureprovidesuseful informationtobothmanagementandinvestors inmeasuringthe financialperformanceoftheCompany.ThismeasuredoesnothaveastandardizedmeaningprescribedbyGAAPandthereforemaynotbecomparabletosimilarlytitledmeasurespresentedbyotherpubliclytradedcompanies,andshouldnotbeconstruedasanalternativetootherfinancialmeasuresdeterminedinaccordancewithGAAP.


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(in$000CAD) 2017 2016 Netloss $ (42,064) $ (45,285)Financecosts 331 554Incometaxprovision 100 3,699Depreciationandamortization 51,580 52,967Restructuringcharge ‐ 8,377Contingentconsiderationtrue‐up 669 ‐EBITDA $ 10,616 $ 20,312

FOREIGNEXCHANGE TheCompany’s reportingcurrency is theCanadiandollar,howeverasignificantportionof theCompany’s revenueandoperatingexpensesoutsideofCanadaaredenominatedinU.S.dollars.Theyear‐over‐yearcomparisonsinthegrowthofrevenueandoperatingexpenseshavebeenimpactedbythefallingCanadiandollaragainsttheU.S.dollar.Duringfiscal2017,approximately28%ofrevenuegeneratedwasinCanadiandollarswithmostofthebalancebeinginU.S.dollars.Sincemostoftheinputcostsrelatedtothisrevenueisdenominatedinthesamecurrencyastherevenue,theimpactonearningsissomewhatmuted.Thefavourableforeignexchangetranslationimpactfortheyear,whencomparingtotheeffectiveratesfortheprioryear,isestimatedatapproximately$1milliononrevenue.Netearningshowever,remainedlessimpactedbycurrencyfluctuationsduringtheyearasalargeproportionofcostsaretypicallyincurredinthesamecurrencyasrevenue.ThetotalFXimpactonnetearningsfortheyearwasnegligible.FUTUREACCOUNTINGCHANGESTheCompanyhasnotappliedthefollowingIASBstandardsthathavebeenissued,butarenotyeteffective:

IFRS2(asamendedin2016)Share‐basedPaymentIFRS9(asamendedin2014)FinancialInstrumentsIFRS15RevenuefromContractswithCustomersIFRS16LeasesIAS7(amended)StatementofCashFlowsIAS12(amended)IncomeTaxes

TheCompanyiscurrentlyintheprocessofassessingtheimpactoftheadoptionoftheabovestandardsandamendments,however,theyarenotexpectedtohaveasignificantimpactontheConsolidatedFinancialStatements.KEYSOURCESOFESTIMATIONUNCERTAINTYANDCRITICALACCOUNTINGJUDGMENTSUseofestimatesThepreparationoffinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgments,estimatesandassumptionsthatarenotreadilyapparentfromothersources,whichaffectthereportedamountsofassetsandliabilitiesatthedatesoftheConsolidatedFinancialStatementsandthereportedamountsofrevenueandexpensesduringthereportedperiods.Theestimatesandassociatedassumptionsarebasedonhistoricalexperienceandotherfactorsthatareconsideredtoberelevant.Actualresultscoulddifferfromtheseestimates.


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The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognized in theperiod inwhichtheestimate isrevised if therevisionaffectsonly thatperiod,or intheperiodof therevisionandfutureperiodsiftherevisionaffectsbothcurrentandfutureperiods.Significantareasrequiringtheuseofmanagementestimatesrelatetotheuseful livesofproperty,plantandequipment(“PP&E”)fordepreciationpurposes,PP&Eandinventoryvaluation,determinationofincomeandothertaxes,assumptionsusedincompilationofshare‐basedpayments,fairvalueofassetsacquiredandliabilitiesassumedinbusinessacquisitions,amountsrecordedasaccruedliabilitiesandcontingentconsiderations,andimpairmenttestingofgoodwillandintangibleassetsandlong‐livedassets.ManagementdeterminestheestimatedusefullivesofitsPP&EbasedonhistoricalexperienceoftheactuallivesofPP&Eofsimilarnatureandfunctions,andreviewstheseestimatesattheendofeachreportingperiod.Managementreviewstheconditionofinventoriesattheendofeachreportingperiodandrecognizesaprovisionforslow‐moving and obsolete items of inventory when they are no longer suitable for use. Management’s estimate of the netrealizablevalueofsuchinventoriesisbasedprimarilyonsalespricesandcurrentmarketconditions.AmountsusedforimpairmentcalculationsarebasedonestimatesoffuturecashflowsoftheCompany.Bytheirnature,theestimatesofcashflows,includingtheestimatesoffuturerevenue,operatingexpenses,utilization,discountratesandmarketpricingaresubjecttomeasurementuncertainty.Accordingly,theimpactintheConsolidatedFinancialStatementsoffutureperiodscouldbematerial.Taxinterpretations,regulationsandlegislationinthevariousjurisdictionsinwhichtheCompanyoperatesaresubjecttochange. As such, income taxes are subject to measurement uncertainty. Deferred income tax assets are assessed bymanagementattheendofthereportingperiodtodeterminetheprobabilitythattheywillberealizedfromfuturetaxableearnings.Compensationcostsaccruedforlong‐termshare‐basedpaymentplansaresubjecttotheestimationofwhattheultimatepayoutwillbeusingtheBlack‐Scholespricingmodel,whichisbasedonsignificantassumptionssuchasvolatility,dividendyieldandexpectedterm.The amount recognized as accrued liabilities and contingent considerations, including legal, restructuring, contractual,constructiveandotherexposuresorobligations, is thebestestimateof theconsiderationrequired to settle the relatedliability,includinganyrelatedinterestcharges,takingintoaccounttherisksanduncertaintiessurroundingtheobligation.Inaddition,contingencieswillonlyberesolvedwhenoneormorefutureeventsoccurorfailtooccur.Therefore,assessmentofcontingenciesinherentlyinvolvestheexerciseofsignificantjudgmentandestimatesoftheoutcomeoffutureevents.TheCompanyassessesitsliabilities,contingenciesandcontingentconsiderationsbaseduponthebestinformationavailable,relevanttaxlawsandotherappropriaterequirements.JudgmentsTheCompanyapplied judgment indeterminingthe functionalcurrencyof theCompanyand itssubsidiaries.Functionalcurrencywasdeterminedbasedonthecurrencythatmainlyinfluencessalesprices,labour,materialsandothercostsofprovidingservices.PP&E and goodwill are aggregated into cash‐generating units (“CGUs”) based on their ability to generate largelyindependentcash inflowsandareused for impairment testing.Thedeterminationof theCompany’sCGUs is subject tomanagement’sjudgmentwithrespecttothelowestlevelatwhichindependentcashinflowsaregenerated.TheCompanyhasappliedjudgmentindeterminingthedegreeofcomponentizationofPP&E.EachpartofanitemofPP&Ewithacostthatissignificantinrelationtothetotalcostoftheitemandhasaseparateusefullifehasbeenidentifiedasaseparatecomponentandisdepreciatedseparately.


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TheCompanyhasappliedjudgmentinrecognizingprovisionsandaccruedliabilities,includingjudgmentastowhethertheCompanyhasapresentobligation(legalorconstructive)asaresultofapastevent;whetheritisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation;andwhetherareliableestimatecanbemadeoftheamountoftheobligation.Deferredincometaxassetsareassessedbymanagementattheendofthereportingperiodtodeterminetheprobabilitythattheywillberealizedfromfuturetaxableearnings.Thisdeterminationissubjecttomanagementjudgment. OFFBALANCESHEETARRANGEMENTSExcept foroperating leasesdisclosed innote20“Commitments”of theNotes toConsolidatedFinancialStatementsandpresentedascontractualobligationsintheliquidityandcapitalresourcessectionherein,theCompanydoesnothaveanyotheroffbalancesheetarrangements.GENERALRISKSANDUNCERTAINTIESTherisksdescribedbelowandelsewhereinthisMD&Adonotincludeallpossiblerisks,andtheremaybeotherrisksofwhichmanagementiscurrentlynotaware.CyclicaldownturnThemostsignificantoperatingriskaffectingtheCompanyisadownturnindemandforitsservicesduetoadecreaseinactivityintheminingindustry.Inattemptingtomitigatethisrisk,theCompanyisexploitingitscompetitiveadvantageinspecializeddrillingandcontinues toexploreopportunities todiversifyandtorationalize itsregional infrastructures. Inpreviouscyclicalmarketdownturns,theCompanyrealizedthatitsspecializedserviceswerenotasaffectedbydecreasesinmetalandmineralprices,comparedtoitstraditionalservices.Consequently,theCompany’sadditionofrigsandacquisitionofbusinesseshavegenerallybeenfocusedonspecializeddrillingservices. TheimpactontheCompanyofasevereandpersistentdownturnintheminingindustryisnotfullymitigatedbytheforegoingmeasures.Inmanycases,capitalmarketsaretheonlysourceoffundsavailabletojuniorminingcompaniesandanychangeintheoutlookforthesectororthelackofsuccessofaspecificexplorationprogramcanquicklyimpairtheabilityofthesejuniorstoraisecapitaltopayfortheirdrillingprograms.Levelsofinventorytypicallyincreaseasaresultofincreasedactivitylevels.Inadditiontodirectvolumerelatedincreaseshowever,inventorylevelsalsoincreaseduetoanexpansionofactivityinremotelocationsattheendoflongsupplychainswhere it is necessary to increase inventory to ensure an acceptable level of continuing service, which is part of theCompany’scompetitiveadvantage.Intheeventofasuddendownturnofactivitiesrelatedeithertoaspecificprojectortothesectorasawhole, it ismoredifficultandcostly toredeploy thisremote inventorytootherregionswhere itcanbeconsumed.CompetitivepressuresPressures from competitors can result in decreased contract prices that negatively impact revenue. There can be noassurancethattheCompany’scompetitorswillnotbesuccessfulincapturingashareoftheCompany’spresentorpotentialcustomerbase.CountryriskTheCompanyiscommittedtoutilizingitsexpertiseandtechnologyinexplorationareasaroundtheworld.Withthiscomesthe risk of dealingwith business and political systems in a variety of jurisdictions. Unanticipated events in a country(precipitatedbydevelopmentswithinorexternaltothecountry),suchaseconomic,political,taxrelated,regulatoryorlegalchanges (orchanges in interpretation), could,directlyor indirectly,haveamaterialnegative impactonoperationsandassets.Therisksinclude,butarenotlimitedto,militaryrepression,extremefluctuationsincurrencyexchangerates,highratesofinflation,changesinminingorinvestmentpolicies,nationalization/expropriationofprojectsorassets,corruption,


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delays inobtainingor inability toobtainnecessarypermits, nullificationof existingmining claimsor interests therein,hostagetakings,labourunrest,oppositiontominingfromenvironmentalorothernon‐governmentalorganizationsorshiftsinpoliticalattitudethatmayadverselyaffectthebusiness.Therehasbeenanemergenceofatrendbysomegovernmentsto increase theirparticipation in the industryand thereby their revenues through increased taxation,expropriation,orotherwise.Thiscouldnegativelyimpactthelevelofforeigninvestmentinminingandexplorationactivitiesandthusdrillingdemandintheseregions.Sucheventscouldresultinreductionsinrevenueandadditionaltransitioncostsasequipmentisshiftedtootherlocations.Nationalization/expropriationofminingprojectshasadirectimpactonsupplierstotheminingindustry,liketheCompany.WhiletheCompanyworkstomitigateitsexposurestopotentialcountryriskevents,theimpactofanysucheventislargelynot under the control of the Company, is highly uncertain and unpredictable and will be based on specific facts andcircumstances.Asaresult,theCompanycangivenoassurancethatitwillnotbesubjecttoanycountryriskevent,directlyorindirectly,inthejurisdictionsinwhichitoperates.RepatriationoffundsorpropertyThereisnoassurancethatanyofthecountriesinwhichtheCompanyoperatesormayoperateinthefuturewillnotimposerestrictionsontherepatriationoffundsorpropertytootherjurisdictions.TaxesTheCompanyissubjecttomanydifferentformsoftaxationinvariousjurisdictionsthroughouttheworld,includingbutnotlimitedto,propertytax,incometax,withholdingtax,commoditytax,socialsecurityandotherpayrollrelatedtaxes,whichmayleadtodisagreementswithtaxauthoritiesregardingtheapplicationoftaxlaw.TaxlawandadministrationisextremelycomplexandoftenrequirestheCompanytomakesubjectivedeterminations.Thecomputationof income,payroll andother taxes involvesmany factors, including the interpretationof tax legislation invariousjurisdictionsinwhichtheCompanyissubjecttoongoingtaxassessments.TheCompany’sestimateoftaxrelatedassets, liabilities,recoveriesandexpenses incorporatessignificantassumptions.Theseassumptions include,butarenotlimited to, the tax rates in various jurisdictions, the effect of tax treaties between jurisdictions and taxable incomeprojections.Totheextentthatsuchassumptionsdifferfromactualresults,theCompanymayhavetorecordadditionaltaxexpensesandliabilities,includinginterestandpenalties.ForeigncurrencyTheCompanyconductsasignificantproportionofitsbusinessoutsideofCanadaandconsequentlyhasexposuretocurrencymovements,principallyinU.S.dollars.Inordertoreduceitsexposuretoforeignexchangerisksassociatedwithcurrenciesofdevelopingcountries,whereasubstantialportionoftheCompany’sbusinessisconducted,theCompanyhasadoptedapolicyofcontractinginU.S.dollars,wherepracticalandlegallypermitted.Foreign exchange translations can have a significant impact on year‐to‐year comparisons because of the geographicdistributionoftheCompany’sactivities.Year‐over‐yearrevenuecomparisonshavebeenaffectedbythefluctuationintheCanadiandollaragainsttheU.S.dollar.Marginperformance,however,islessaffectedbycurrencyfluctuationsasalargeproportionofcostsaretypicallyinthesamecurrencyasrevenue.Infutureperiods,year‐to‐yearcomparisonsofrevenuecouldbesignificantlyaffectedbychangesinforeignexchangerates.OperationalriskOperationalriskistheriskoflossresultingfrominadequateorfailedinternalprocesses,peopleand/orsystemsorfromexternalevents.OperationalriskispresentinalloftheCompany’sbusinessactivities,andincorporatesexposurerelatingtofiduciarybreaches,regulatorycompliancefailures,legaldisputes,businessdisruption,pandemics,technologyfailures,processingerrors,businessintegration,theftandfraud,damagetophysicalassets,employeesafetyandinsurancecoverage.DependenceonkeycustomersFromtimetotime, theCompanymaybedependentonasmallnumberofcustomers forasignificantportionofoverallrevenueandnet income. Shouldoneormore such customers terminate contractswith theCompany, there canbenoguaranteethattheCompanywillobtainsufficientreplacementcontractstomaintaintheexistingrevenueandincomelevels.


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Consequently,theCompanycontinuestoworktoexpanditsclientbaseandgeographicfieldofoperationstomitigateitsexposuretoanysingleclient,commodityorminingregion.SafetyFailuretomaintainarecordofacceptablesafetyperformancemayhaveanadverse impactontheCompany’sabilitytoattractandretaincustomers.MostoftheCompany’scustomersconsidersafetyandreliabilitytwoprimaryattributeswhenselectingaproviderofdrillingservices.TheCompanycontinuestoinvestintrainingtoimproveskills,abilitiesandsafetyawareness.ExpansionandacquisitionstrategyTheCompanyintendstoremainvigilantwithregardstopotentialstrategicfutureacquisitionsandinternalexpansion.Itisnot possible to ensure that future acquisition opportunities will exist on acceptable terms, or that newly acquired ordevelopedentitieswillbesuccessfullyintegratedintotheCompany’soperations.Additionally,theCompanycannotgiveassurancesthatitwillbeabletosecurethenecessaryfinancingonacceptabletermstopursuethisstrategy.RegulatoryandlegalriskRegulatory risk incorporatesexposure relating to the riskofnon‐compliancewithapplicable legislationandregulatorydirectives.Legalrisk incorporatesnon‐compliancewith legalrequirements, includingtheeffectivenessofpreventingorhandling litigation. Local management is responsible for managing day‐to‐day regulatory risk. In meeting thisresponsibility, local management receives advice and assistance from such corporate oversight functions as legal,compliance and internal audit. Compliance and internal audit test the extent to which operations meet regulatoryrequirements,aswellastheeffectivenessofinternalcontrols.Corruption,bribery,fraudTheCompanyisrequiredtocomplywiththeCanadianCorruptionofForeignPublicOfficialsAct(“CFPOA”)aswellassimilarapplicablelawsinotherjurisdictions,whichprohibitcompaniesfromengaginginbriberyorotherprohibitedpaymentsorgifts to foreign public officials for the purpose of retaining or obtaining business. The Company’s policies mandatecompliancewiththeselaws.However,therecanbenoassurancethatthepoliciesandproceduresandothersafeguardsthattheCompanyhasimplementedinrelationtoitscompliancewiththeselawswillbeeffectiveorthatCompanyemployees,agents, suppliers,orother industrypartnershavenotengagedorwillnotengage in such illegal conduct forwhich theCompanymaybeheldresponsible.ViolationsoftheselawscoulddisrupttheCompany’sbusinessandresultinamaterialadverseeffectonitsbusinessandoperations.ExtremeweatherconditionsandtheimpactofnaturalorotherdisastersTheCompanyoperatesinavarietyoflocations,someofwhicharepronetoextremeweatherconditions.Fromtimetotimetheseconditions,aswellasnaturalorotherdisasters,couldhaveanadversefinancialimpactonoperationslocatedintheregionswheretheseconditionsoccur.SpecializedskillsandcostoflabourincreasesGenerally speaking, drilling activity related tometals andminerals is broadly linked to price trends in themetals andmineralssector.Duringperiodsofincreasedactivity,alimitingfactorinthisindustrycanbeashortageofqualifieddrillers.TheCompanyaddressesthisissuebyattemptingtobecomethe“employerofchoice”fordrillersintheindustry,aswellashiring and trainingmore locally‐based drillers. The development of local drillers has had a positive impact in SouthAmerican,African,MongolianandIndonesianoperations,andisexpectedtocontinuetoplayanimportantrole.TheCompanyalsoreliesonanexperiencedmanagementteamacrosstheCompanytocarryonitsbusiness.Adepartureofseveralmembersofthemanagementteamatonetimecouldhaveanadversefinancialimpactonoperations.A material increase in the cost of labour can materially affect gross margins and therefore the Company’s financialperformance.


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EquipmentandpartsavailabilityTheCompany’sabilitytoprovidereliableserviceisdependentupontimelydeliveryofequipmentandreplacementpartsfrom fabricators and suppliers. Any factor that substantially increases the order time on equipment and increasesuncertainty surrounding final delivery dates may constrain future growth, existing operations, and the financialperformanceoftheCompany.ReputationalriskNegativepublicity,whethertrueornot,regardingpractices,actionsorinactions,couldcauseadeclineintheCompany’svalue,liquidity,orcustomerbase.CybersecurityriskWhileinformationsystemsareintegraltosupportingtheCompany’sbusiness,duetothenatureoftheCompany’sservices,itisnotconsideredtobesubjecttothesamelevelofcybersecurityrisksascompaniesoperatinginsectorswheresensitiveinformationisatthecoreoftheirbusiness.Nevertheless,theCompanyispotentiallyexposedtorisksrangingfrominternalhumanerrortouncoordinatedindividualattemptstogainunauthorizedaccesstoitsinformationtechnologysystems,tosophisticated and targetedmeasures directed at the Company and its systems, clients or service providers. Any suchdisruptions in the Company’s systems or the failure of the systems to operate as expected could, depending on themagnitudeoftheproblem,resultinthelossofclientinformation,alossofcurrentorfuturebusiness,reputationalharmand/orpotentialclaimsagainsttheCompany,allofwhichcouldhaveanadverseeffectontheCompany’sbusiness,financialcondition and operating results. The Company continues to enhance its efforts to mitigate these risks. It invests intechnologysecurityinitiativestobetteridentifyandaddressanyvulnerabilitiesincludingperiodicthirdpartyvulnerabilityassessments,testinguserknowledgeofcybersecuritybestpractices,andauditsofsecurityprocessesandprocedures.Inaddition, the Company continues to increase the employees’ awareness of security policies through ongoingcommunications.DISCLOSURECONTROLSANDINTERNALCONTROLSOVERFINANCIALREPORTINGDisclosurecontrolsandproceduresaredesignedtoprovidereasonableassurancethatallrelevantinformationrequiredtobedisclosedindocumentsfiledwithsecuritiesregulatoryauthoritiesisrecorded,processed,summarizedandreportedonatimelybasis,andisaccumulatedandcommunicatedtotheCompany’smanagement,includingtheChiefExecutiveOfficer(“CEO”)andtheChiefFinancialOfficer(“CFO”),asappropriate,toallowtimelydecisionsregardingrequireddisclosure.Management,includingtheCEOandtheCFO,doesnotexpectthattheCompany’sdisclosurecontrolswillpreventordetectallerrorsandallfraud.Theinherentlimitationsinallcontrolsystemsaresuchthattheycanprovideonlyreasonable,notabsolute,assurancethatallcontrolissuesandinstancesoffraudorerror,ifany,withintheCompanyhavebeendetected.TheCompany’sCEOandCFOhaveevaluatedtheeffectivenessoftheCompany’sdisclosurecontrolsandconcludedthat,subjecttotheinherentlimitationsandrestrictionsnotedabove,thosedisclosurecontrolswereeffectivefortheyearendedApril30,2017.TheCompany’sCEOandCFOareresponsiblefordesigninginternalcontrolsoverfinancialreporting(“ICFR”)orcausingthemtobedesignedundertheirsupervision.TheCompany’sICFRaredesignedtoprovidereasonableassuranceregardingthe reliabilityof theCompany’s financial reportingand itspreparationof financial statements forexternalpurposes inaccordancewithInternationalFinancialReportingStandards.Asdiscussedabove, the inherent limitations inall control systemsare such that they canprovideonly reasonable,notabsolute,assurancethatallcontrolissuesandinstancesoffraudorerror,ifany,withintheCompanyhavebeendetected.Therefore,nomatterhowwelldesigned,ICFRhasinherent limitationsandcanprovideonlyreasonableassurancewithrespecttofinancialstatementpreparationandmaynotpreventanddetectallmisstatements.


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Duringfiscal2017,management,includingitsCEOandCFO,evaluatedtheexistenceanddesignoftheCompany’sICFRandconfirmtherewerenochangestotheICFRthathaveoccurredduringtheyearthatmateriallyaffected,orarereasonablylikelytomateriallyaffect,theCompany’sICFR.TheCompanycontinuestoreviewanddocumentitsdisclosurecontrolsanditsICFR,andmayfromtimetotimemakechangesaimedatenhancingtheireffectivenessandtoensurethatitssystemsevolvewiththebusiness.AsofApril30,2017,anevaluationwascarriedout,underthesupervisionoftheCEOandCFO,oftheeffectivenessoftheCompany’sICFRasdefinedinNI52‐109. Basedonthisevaluation,theCEOandtheCFOconcludedthatthedesignandoperationoftheseICFRwereeffective.TheevaluationswereconductedinaccordancewiththeframeworkandcriteriaestablishedinInternalControl‐IntegratedFramework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), arecognizedcontrolmodel,andtherequirementsofNI52‐109.OUTSTANDINGSHAREDATATheauthorizedcapitaloftheCompanyconsistsofanunlimitednumberofcommonshares,whichiscurrentlytheonlyclassofvotingequitysecurities.Holdersofcommonsharesareentitledtoreceivenoticeof,attendandvoteatallmeetingsoftheshareholdersoftheCompany.EachcommonsharecarriestherighttoonevoteinpersonorbyproxyatallmeetingsoftheshareholdersoftheCompany.TheCompany’ssharecapitalwascomposedofthefollowing: (amountsinthousands) AsatJune5,2017 AsatJune7,2016 Commonshares 80,140 80,137 Stockoptionsoutstanding 4,083 4,254

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Management’sResponsibilityManagement is responsible for preparation and presentation of the annual Consolidated Financial Statements,Management’sDiscussionandAnalysis(“MD&A”)andallotherinformationintheannualreport.In management’s opinion, the accompanying Consolidated Financial Statements have been properly prepared withinreasonablelimitsofmaterialityinaccordancewithInternationalFinancialReportingStandards.TheMD&AhasbeenpreparedinaccordancewiththerequirementsofCanadiansecuritiesregulators. Managementhasdesignedandevaluatedtheeffectivenessofitsdisclosurecontrolsandprocedures.Sinceaprecisedeterminationofmanyassetsandliabilitiesisdependentuponfutureevents,thepreparationofperiodicfinancialstatementsandtheMD&Anecessarilyinvolvestheuseofestimatesandapproximations.ThesehavebeenmadeusingcarefuljudgmentandwithallinformationavailableuptoJune5,2017.TheMD&Aalsoincludesinformationregardingtheestimatedimpactofcurrenttransactionsandevents,sourcesofliquidity,operatingtrendsandrisksanduncertainties.Actualresultsinthefuturemaydiffermateriallyfrommanagement’spresentassessmentofthisinformationbecausefutureevents may not occur as expected. Financial operating data in the report are consistent, where applicable, with theConsolidatedFinancialStatements.Tomeetitsresponsibilityforreliableandaccuratefinancialstatements,managementhasestablishedsystemsofinternalcontrol,whicharedesignedtoprovidereasonableassurancethatfinancialinformationisrelevant,reliableandaccurate,andthatassetsaresafeguardedandtransactionsareexecutedinaccordancewithmanagement’sauthorization.The Consolidated Financial Statements have been examined by Deloitte LLP, independent chartered professionalaccountants.Theindependentauditors’responsibilityistoexpressaprofessionalopiniononthefairnessofmanagement’sConsolidatedFinancialStatements.Theauditor’sreportoutlinesthescopeoftheirexaminationandsetsforththeiropinion.TheAuditCommitteeoftheBoardofDirectorsiscomprisedofindependentdirectors.TheAuditCommitteemeetsregularlywithmanagementandtheindependentauditorstosatisfyitselfthateachisproperlydischargingitsresponsibilities,andtoreviewtheConsolidatedFinancialStatementsandtheMD&A. TheAuditCommitteereports its findingstotheBoardofDirectors for considerationwhen approving the Consolidated Financial Statements and theMD&A for issuance to theshareholders.TheAuditCommitteealsorecommends,forreviewbytheBoardofDirectorsandapprovalofshareholders,theappointmentoftheindependentauditors.TheindependentauditorshavefullandfreeaccesstotheAuditCommittee.MajorDrillingGroupInternational Inc.’sChiefExecutiveOfficerandChiefFinancialOfficerhavecertifiedMajorDrillingGroupInternationalInc.’sannualdisclosuredocumentsasrequiredinCanadabytheCanadiansecuritiesregulators.“DenisLarocque” “DavidBalser”DenisLarocque DavidBalserPresident&ChiefExecutiveOfficer ChiefFinancialOfficerJune5,2017Moncton,NewBrunswick

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IndependentAuditor’sReport

TotheShareholdersofMajorDrillingGroupInternationalInc.

Wehave audited theaccompanying consolidated financial statementsofMajorDrillingGroup International Inc.,whichcomprise the consolidatedbalance sheets as at April 30, 2017 andApril 30, 2016, and the consolidated statements ofoperations,consolidatedstatementsofcomprehensiveloss,consolidatedstatementsofchangesinequityandconsolidatedstatementsofcashflowsfortheyearsthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

Management’sResponsibilityfortheConsolidatedFinancialStatements

Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordancewithInternationalFinancialReportingStandards,andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationofconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’sResponsibility

Ourresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithCanadiangenerallyacceptedauditingstandards.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheconsolidatedfinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of theconsolidatedfinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.

Webelievethattheauditevidencewehaveobtainedinourauditsissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,theconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionofMajorDrillingGroupInternationalInc.asatApril30,2017andApril30,2016,anditsfinancialperformanceanditscashflowsfortheyearsthenendedinaccordancewithInternationalFinancialReportingStandards.

/s/DeloitteLLP

CharteredProfessionalAccountantsJune5,2017Moncton,NewBrunswick

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ConsolidatedStatementsofOperations

FortheyearsendedApril30,2017and2016 (inthousandsofCanadiandollars,exceptpershareinformation)

2017 2016 TOTALREVENUE $ 300,588 $ 304,621 DIRECTCOSTS 240,370 234,660 GROSSPROFIT 60,218 69,961 OPERATINGEXPENSES Generalandadministrative 44,594 44,081Otherexpenses 5,239 4,079Loss(gain)ondisposalofproperty,plantandequipment 48 (2,149)Foreignexchangeloss 390 3,638Financecosts 331 554Depreciationofproperty,plantandequipment(note7) 48,955 49,702Amortizationofintangibleassets(note9) 2,625 3,265Restructuringcharge(note18) ‐ 8,377 102,182 111,547 LOSSBEFOREINCOMETAX (41,964) (41,586) INCOMETAX‐PROVISION(RECOVERY)(note12) Current 8,999 8,652Deferred (8,899) (4,953) 100 3,699 NETLOSS $ (42,064) $ (45,285)

LOSSPERSHARE(note14) Basic $ (0.52) $ (0.57)

Diluted $ (0.52) $ (0.57)

ConsolidatedStatementsofComprehensiveLoss

FortheyearsendedApril30,2017and2016 (inthousandsofCanadiandollars)

2017 2016 NETLOSS $ (42,064) $ (45,285) OTHERCOMPREHENSIVELOSS Itemsthatmaybereclassifiedsubsequentlytoprofitorloss Unrealizedgainonforeigncurrencytranslations(netoftax) 24,891 11,252Unrealized(loss)gainonderivatives(netoftax) (163) 302 COMPREHENSIVELOSS $ (17,336) $ (33,731)

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ConsolidatedStatementsofChangesinEquity


Share‐based Retained Foreign currency Share capital Reserves payments reserve earnings translation reserve Total

BALANCEASATMAY1,2015 $ 239,726 $ 24$ 17,234$ 152,764$ 50,644 $ 460,392 Share‐basedpaymentsreserve(note13) ‐ ‐ 1,083 ‐ ‐ 1,083Dividend(note22) ‐ ‐ ‐ (1,603) ‐ (1,603) 239,726 24 18,317 151,161 50,644 459,872Comprehensiveloss: Netloss ‐ ‐ ‐ (45,285) ‐ (45,285)Unrealizedgainonforeigncurrency translations ‐ ‐ ‐ ‐ 11,252 11,252Unrealizedgainonderivatives ‐ 302 ‐ ‐ ‐ 302Totalcomprehensiveloss ‐ 302 ‐ (45,285) 11,252 (33,731) BALANCEASATAPRIL30,2016 239,726 326 18,317 105,876 61,896 426,141 Exerciseofstockoptions(note13) 25 ‐ (4) ‐ ‐ 21Share‐basedpaymentsreserve(note13) ‐ ‐ 937 ‐ ‐ 937 239,751 326 19,250 105,876 61,896 427,099Comprehensiveloss: Netloss ‐ ‐ ‐ (42,064) ‐ (42,064)Unrealizedgainonforeigncurrency translations ‐ ‐ ‐ ‐ 24,891 24,891Unrealizedlossonderivatives ‐ (163) ‐ ‐ ‐ (163)Totalcomprehensiveloss ‐ (163) ‐ (42,064) 24,891 (17,336) BALANCEASATAPRIL30,2017 $ 239,751 $ 163 $ 19,250$ 63,812$ 86,787 $409,763

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ConsolidatedStatementsofCashFlows


2017 2016 OPERATINGACTIVITIES Lossbeforeincometax $ (41,964) $ (41,586)Operatingitemsnotinvolvingcash Depreciationandamortization 51,580 52,967Loss(gain)ondisposalofproperty,plantandequipment 48 (2,149)Share‐basedpaymentsreserve(note13) 937 1,083Restructuringcharge(note18) ‐ 6,554Financecostsrecognizedinlossbeforeincometax 331 554 10,932 17,423Changesinnon‐cashoperatingworkingcapitalitems(note16) (8,036) 9,277Financecostspaid (331) (554)Incometaxespaid (5,810) (3,816)Cashflow(usedin)fromoperatingactivities (3,245) 22,330 FINANCINGACTIVITIES Repaymentoflong‐termdebt (5,445) (7,858)Issuanceofcommonshares 21 ‐Dividendspaid(note22) ‐ (3,206)Cashflowusedinfinancingactivities (5,424) (11,064) INVESTINGACTIVITIES Businessacquisition(note17) (3,881) (1,783)Acquisitionofproperty,plantandequipment (netofdirectfinancing)(note7) (17,652) (12,125)Proceedsfromdisposalofproperty,plantandequipment 3,223 6,997Cashflowusedininvestingactivities (18,310) (6,911) Effectofexchangeratechanges 2,726 976 (DECREASE)INCREASEINCASH (24,253) 5,331 CASH,BEGINNINGOFTHEYEAR 50,228 44,897 CASH,ENDOFTHEYEAR $ 25,975 $ 50,228

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ConsolidatedBalanceSheets

AsatApril30,2017and2016 (inthousandsofCanadiandollars)

2017 2016ASSETS CURRENTASSETS Cash $ 25,975 $ 50,228Tradeandotherreceivables 72,385 55,829Notereceivable 476 457Incometaxreceivable 5,771 7,513Inventories(note6) 88,047 74,144Prepaidexpenses 3,210 2,498 195,864 190,669 NOTERECEIVABLE 1,055 1,531 PROPERTY,PLANTANDEQUIPMENT(note7) 221,524 240,703 DEFERREDINCOMETAXASSETS(note12) 17,026 9,564 GOODWILL(note8) 58,432 57,641 INTANGIBLEASSETS(note9) 669 3,193 $ 494,570 $ 503,301

LIABILITIES CURRENTLIABILITIES Tradeandotherpayables $ 48,359 $ 34,068Incometaxpayable 3,036 1,859Currentportionofcontingentconsideration 5,135 3,000Currentportionoflong‐termdebt(note11) 3,291 5,288 59,821 44,215 CONTINGENTCONSIDERATION ‐ 5,347 LONG‐TERMDEBT(note11) 4,544 6,936 DEFERREDINCOMETAXLIABILITIES(note12) 20,442 20,662 84,807 77,160SHAREHOLDERS'EQUITY Sharecapital(note13) 239,751 239,726Reserves 163 326Share‐basedpaymentsreserve 19,250 18,317Retainedearnings 63,812 105,876Foreigncurrencytranslationreserve 86,787 61,896 409,763 426,141 $ 494,570 $ 503,301

Contingenciesandcommitments(notes19and20) ApprovedbytheBoardofDirectors "DavidTennant""JoMarkZurel" DavidTennantJoMarkZurel ChairmanoftheBoardChairmanoftheAuditCommittee

NotestoConsolidatedFinancialStatements

FortheyearsendedApril30,2017and2016(inthousandsofCanadiandollars,exceptpershareinformation)

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1. NATUREOFACTIVITIESMajorDrillingGroupInternationalInc.(the“Company”)isincorporatedundertheCanadaBusinessCorporationsActandhasitsheadofficeat111St.GeorgeStreet,Suite100,Moncton,NB,Canada.TheCompany’scommonsharesarelistedontheTorontoStockExchange(“TSX”).Theprincipalsourceofrevenueconsistsofcontractdrillingforcompaniesprimarilyinvolved inmining andmineral exploration. The Company has operations in Canada, the United States,Mexico, SouthAmerica,Asia,AfricaandEurope.2. BASISOFPRESENTATIONStatementofcomplianceTheseConsolidatedFinancialStatementspresenttheCompany’sanditssubsidiaries’ financialresultsofoperationsandfinancialpositioninaccordancewithInternationalFinancialReportingStandards(“IFRS”)andusingtheaccountingpoliciesdescribedherein.OnJune5,2017,theBoardofDirectorsauthorizedtheseConsolidatedFinancialStatementsforissue.BasisofconsolidationTheseConsolidatedFinancialStatementsincorporatethefinancialstatementsoftheCompanyandentitiescontrolledbytheCompany.ControlisachievedwhentheCompanyisexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvesteeandhastheabilitytoaffectthosereturnsthroughitspowerovertheinvestee.The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Statements ofOperationsfromtheeffectivedateofacquisitionoruptotheeffectivedateofdisposal,asappropriate.Intra‐grouptransactions,balances,incomeandexpensesareeliminatedonconsolidation,whereappropriate.BasisofpreparationTheConsolidatedFinancialStatementshavebeenpreparedbasedonthehistoricalcostbasisexceptforcertainfinancialinstrumentsthataremeasuredatfairvalue,asexplainedintherelatedaccountingpoliciespresentedinnote4.3. APPLICATIONOFNEWANDREVISEDIFRSThe following IASB standards, now in effect, have had no significant impact on the Company’s Consolidated FinancialStatements:

IFRS10(amended)ConsolidatedFinancialStatementsIFRS11(amended)JointArrangements‐AccountingforAcquisitionsofInterestsinJointOperationsIAS1(amended)PresentationofFinancialStatementsIAS16(amended)Property,PlantandEquipmentIAS28(amended)InvestmentsinAssociatesandJointVenturesIAS38(amended)IntangibleAssets



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3. APPLICATIONOFNEWANDREVISEDIFRS(Continued)TheCompanyhasnotappliedthefollowingIASBstandardsthathavebeenissued,butarenotyeteffective:

IFRS2(asamendedin2016)Share‐basedPayment*IFRS9(asamendedin2014)FinancialInstruments*IFRS15RevenuefromContractswithCustomers*IFRS16Leases**IAS7(amended)StatementofCashFlows***IAS12(amended)IncomeTaxes****EffectiveforannualperiodsbeginningonorafterJanuary1,2018,withearlierapplicationpermitted**EffectiveforannualperiodsbeginningonorafterJanuary1,2019,withearlierapplicationpermitted***EffectiveforannualperiodsbeginningonorafterJanuary1,2017,withearlierapplicationpermitted

TheCompanyiscurrentlyintheprocessofassessingtheimpactoftheadoptionoftheabovestandardsandamendments,however,theyarenotexpectedtohaveasignificantimpactontheConsolidatedFinancialStatements,withtheexceptionofIFRS16Leases.TheCompanyisintheprocessofquantifyingtheimpactIFRS16willhaveontheConsolidatedFinancialStatements.4. SIGNIFICANTACCOUNTINGPOLICIESCashCashiscomprisedofcashonhandanddemanddepositsinbanks.FinancialinstrumentsFinancialassetsandfinancialliabilitiesareinitiallyrecognizedatfairvalueandtheirsubsequentmeasurementisdependentontheirclassificationasdescribedbelow.Theirclassificationdependsonthepurposeforwhichthefinancialinstrumentswere acquired or issued, their characteristics and the Company’s designation of such instruments. Settlement dateaccountingisused.

Asset/Liability Classification MeasurementCash Loansandreceivables AmortizedcostTradeandotherreceivables Loansandreceivables AmortizedcostTradeandotherpayables Otherfinancialliabilities AmortizedcostLong‐termdebt Otherfinancialliabilities Amortizedcost

Transactioncostsare included in the initialcarryingvalueof financial instruments,exceptthoseclassifiedas fairvaluethroughprofitorloss,andareamortizedintoincomeusingtheeffectiveinterestmethod.RevenuerecognitionRevenuefromdrillingcontractsisrecognizedbasedonthetermsofcustomercontractsthatgenerallyprovideforrevenuerecognition on the basis of actualmeters drilled at contract rates or fixedmonthly charges, or a combination of both.Revenuefromancillaryservices,primarilyrelatingtoextraservicestothecustomer, isrecordedwhentheservicesarerendered.Revenueisrecognizedwhencollectionisreasonablyassured.InventoriesTheCompanymaintainsaninventoryofoperatingsupplies,drillrodsanddrillbits.Inventoriesarevaluedatthelowerofcostandnetrealizablevalue,determinedonafirstin,firstout(“FIFO”)basis.Thevalueofusedinventoryitemsisconsideredminimalthereforetheyarenotvalued,exceptfordrillrods,which,ifstillconsideredusable,arevaluedat50%ofcost.



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4. SIGNIFICANTACCOUNTINGPOLICIES(Continued)Property,plantandequipmentProperty, plant and equipment (“PP&E”) aremeasured at cost, less accumulated depreciation and impairment losses.Depreciation,calculatedusingthestraight‐linemethod,ischargedtooperationsatratesbasedupontheestimatedusefullifeofeachdepreciableasset.WhensignificantcomponentsofanitemofPP&Ehavedifferentusefullives,theyareaccountedforasseparateassets.Thefollowingratesapplytothoseassetsbeingdepreciatedusingthestraight‐linemethod: Residualvalue(%) Usefullife(years) Buildings 0‐15 15‐20Drillingequipment 0‐15 5‐15Automotiveandoff‐roadequipment 0‐10 5‐10Other(office,computerandshopequipment)

0 5‐15

Landandassetsunderconstructionnotavailableforusearenotdepreciated.Costsforrepairsandmaintenancearechargedto operations as incurred. Subsequent costs are included in the asset’s carrying valuewhen it is probable that futureeconomic benefits associated with such costs will flow to the Company when the asset is ready for its intended use.Subsequentcostsaredepreciatedovertheusefullifeoftheassetandreplacedcomponentsarede‐recognized.AnitemofPP&Eisde‐recognizedupondisposalorwhennofutureeconomicbenefitsareexpectedtoarisefromthecontinueduseoftheasset.Gainorlossarisingonthedisposalorretirementisdeterminedasthedifferencebetweenthesaleproceedsandthecarryingamountoftheasset,andisrecognizedinprofitorloss.Depreciationmethods,residualvaluesandusefullivesarere‐assessed,atminimum,onanannualbasis.LeasesTheCompanydeterminestheclassificationofleasesasfinanceoroperatingbasedontherisksandrewardsofownershipoftheunderlyingassets.Whetheraleaseisafinanceleaseoranoperatingleasedependsonthesubstanceofthetransactionratherthantheformofthecontract.BusinesscombinationsAcquisitionsofbusinessesareaccounted forusing theacquisitionmethod.Theconsideration transferred inabusinesscombination,inexchangeforcontroloftheacquiree,ismeasuredatfairvalue.Atacquisitiondate,theidentifiableassetsacquiredandtheliabilitiesassumedarerecognizedattheirfairvalues.ResultsofoperationsofabusinessacquiredareincludedintheCompany’sConsolidatedFinancialStatementsfromthedateofthebusinessacquisition.Businessacquisitionandintegrationcostsareexpensedinprofitorlossasincurred.WhentheconsiderationtransferredbytheCompanyinabusinesscombinationincludesassetsorliabilitiesresultingfromacontingentconsiderationarrangement, thecontingentconsideration ismeasuredat itsacquisition‐date fairvalueandincludedaspartof theconsiderationtransferred inabusinesscombination.Changes inthe fairvalueof thecontingentconsideration that qualify as measurement period adjustments are adjusted retrospectively, with correspondingadjustmentsappliedagainstgoodwill.Contingentconsiderationthatisclassifiedasanassetoraliabilityisre‐measuredatsubsequent reportingdates inaccordancewith IAS39Financial Instruments:RecognitionandMeasurement,or IAS37Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss beingrecognizedinprofitorloss.Goodwillismeasuredastheexcessofthesumoftheconsiderationtransferred,theamountofanynon‐controllinginterestsintheacquiree,andthefairvalueoftheacquirer'spreviouslyheldequityinterestintheacquiree(ifany)overthenetoftheacquisition‐datefairvalueoftheidentifiableassetsacquiredandtheliabilitiesassumed.



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4. SIGNIFICANTACCOUNTINGPOLICIES(Continued)GoodwillGoodwillrepresentstheexcessofthepurchasepriceofbusinessacquisitionsoverthefairvalueoftheidentifiablenetassetsacquired.Thevalueofgoodwillistestedforimpairmentatleastannually.Anyimpairmentlossidentifiedbythistestwouldbereportedinprofitorlossfortheperiodduringwhichthelossoccurred.Forthepurposesofimpairmenttesting,goodwillisallocatedtoeachoftheCompany’scash‐generatingunits(“CGUs”)orgroupsofcash‐generatingunitsthatareexpectedtobenefitfromthesynergiesofthecombination.Anyimpairmentlossrecognizedforgoodwillisnotreversedinsubsequentperiods.IntangibleassetsIntangibleassets thatareacquired inabusinesscombinationare recognizedseparately fromgoodwill andare initiallyrecognizedat their fairvalueattheacquisitiondate(which isregardedastheircost).Subsequentto initialrecognition,intangibleassetsacquiredinabusinesscombinationarereportedatcostlessaccumulatedamortizationandaccumulatedimpairment losses. Intangibleassets includecustomer relationships/contractsandnon‐competeagreements,whichareamortizedonastraight‐linebasisoverathreeandfive‐yearperiod,respectively.Impairmentoflong‐livedassetsAttheendofeachreportingperiod,theCompanyassesseswhetherthereareanyindicatorsthatthecarryingvaluesofitslong‐livedassetsareimpaired.Ifanysuchindicationexists,therecoverableamountoftheassetisestimatedinordertodeterminetheextentoftheimpairmentloss(ifany).Therecoverableamountofanassetisfirsttestedonanindividualbasis,ifdeterminable,orotherwiseattheCGUlevel.ACGUisthesmallestidentifiablegroupofassetsthatgeneratecashinflowsthatarelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets.CorporatelevelassetsareallocatedtotherespectiveCGUswhereanallocationcanbedoneonareasonableandconsistentbasis.Therecoverableamountisthehigherofthefairvaluelesscostsofdisposalandthevalueinuse.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre‐taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetforwhichtheestimatesoffuturecashflowshavenotbeenadjusted.Iftherecoverableamountofanasset(orCGU)isestimatedtobelessthanitscarryingamount,the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognizedimmediatelyinprofitorloss.At the end of each reporting period, the Company assesses whether there is any indication that an impairment lossrecognizedinpriorperiodsforalong‐livedassetotherthangoodwillmaynolongerexistormayhavedecreased.Ifanysuchindicationexists,theCompanyestimatestherecoverableamountofthatasset.Whereanimpairment losssubsequentlyreverses,thecarryingamountoftheasset(orCGU)is increasedtotherevisedestimateofitsrecoverableamount,butsothattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedfortheasset(orCGU)inprioryears.Areversalofanimpairmentlossisrecognizedimmediatelyinprofitorloss.IncometaxesCurrent‐Thetaxcurrentlyreceivableorpayableisbasedontaxableprofitfortheyearandanyadjustmentsresultingfromprioryears.TaxableprofitdiffersfromprofitasreportedintheConsolidatedStatementsofOperationsbecauseofitemsofincome or expense that are taxable or deductible in other years and items that are never taxable or deductible. TheCompany’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.



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4. SIGNIFICANTACCOUNTINGPOLICIES(Continued)Deferred‐TheCompanyfollowstheassetandliabilitymethodofaccountingfordeferredtaxes.Thismethodtakesabalancesheetapproachandfocusesontheamountofincometaxespayableorreceivablethatwillariseifanassetisrealizedoraliabilityissettledforitscarryingamount.Theseresultingassetsandliabilities,referredtoas“deferredincometaxassetsand liabilities”,arecomputedandrecognizedbasedoncarry forwardsofunused tax losses,unusedtaxcreditsand thedifferencesbetweenthecarryingamountofbalancesheetitemsandtheircorrespondingtaxvaluesusingtheenacted,orsubstantivelyenacted,incometaxratesineffectwhentheassetsareexpectedtoberealizedortheliabilitiesareexpectedtobesettled.The Company’s primary temporary differences arise between the tax carrying value and net book value of PP&E. Thecarryingamountofdeferredtaxassetsisreviewedattheendofeachreportingperiodandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.TranslationofforeigncurrenciesTheConsolidatedFinancialStatementsarepresentedinCanadiandollars,whichistheCompany'spresentationcurrency,andthefunctionalcurrencyoftheparentcompany.Financialstatementsofforeignoperationsaretranslatedusingtherateineffectatthebalancesheetdateforassetsandliabilities,andusing theaverageexchangeratesduring theperiod forrevenueandexpenses.Adjustmentsarising fromforeigncurrencytranslationarerecordedinothercomprehensiveearnings.Foreign currency transactions are transactions in a currency other than the Company's functional currency. Foreigncurrencytransactionsaretranslatedtothefunctionalcurrencybyapplyingtheexchangerateprevailingatthedateofthetransactions.Translationgainsandlossesonassetsandliabilitiesdenominatedinaforeigncurrencyareincludedinthestatementofcomprehensiveearnings.Additionally, foreignexchangegainsand lossesrelatedtocertain intercompany loansthatarepermanent innatureareincludedinothercomprehensiveearningsandforeigncurrencytranslationreserve.Share‐basedpaymentsThe Company uses the fair value method to measure compensation expense at the date of grant of stock options toemployeesandDirectors.ThefairvalueofeachtrancheforalloptiongrantsisdeterminedusingtheBlack‐Scholesoption‐pricingmodel,whichconsidersestimatedforfeituresattimeofgrant,andeachtrancheisamortizedseparatelytoearningsoverthevestingperiodofthetranchewithanoffsettotheshare‐basedpaymentsreserve.Whenoptionsareexercised,thecorrespondingshare‐basedpaymentsreserveandtheproceedsreceivedbytheCompanyarecreditedtosharecapital.TheCompanyrecordsthefairvalueofcash‐settleddeferredshareunitsascompensationexpense,withoffsettoaccruedliabilities.ProvisionsProvisionsarerecognizedwhenthereisapresent(legalorconstructive)obligationasaresultofapastevent,itisprobablethattheCompanywillberequiredtosettletheobligationandareliableestimateoftheamountoftheobligationcanbemade.Theamountrecognizedasaprovisionisthepresentvalueofthebestestimateoftheconsiderationrequiredtosettlethepresentobligationat theendof thereportingperiod, taking intoaccount therisksanduncertaintiesspecific to theobligation.



29

4. SIGNIFICANTACCOUNTINGPOLICIES(Continued)Restructurings ‐ A restructuring provision is recognizedwhen the Company has developed a detailed formal plan forrestructuring andhas raised a valid expectation in those affected that itwill carry out the restructuringby starting toimplementtheplanorannouncingitsmainfeaturestothoseaffectedbyit.Themeasurementofarestructuringprovisionincludesonlythedirectexpendituresarisingfromtherestructuring,whicharethoseamountsthatarebothnecessarilyentailedbytherestructuringandnotassociatedwiththeongoingactivitiesoftheentity.DerivativefinancialinstrumentsTheCompanyentersintoderivativefinancialinstruments,fromtimetotime,tomanageexposureandrisk.Thederivativesareinitiallyrecognizedatfairvalueatthedatethederivativecontractisexecutedandaresubsequentlyre‐measuredtofairvalueateachreportingdate.Theresultinggainorlossisrecognizedinothercomprehensiveearningsunlessthederivativeisconsideredtobeineffective,inwhicheventitisrecognizedinprofitorloss.HedgeaccountingTheCompany’scurrentderivativesaredesignatedascashflowhedges.Attheinceptionofthehedges,andonanongoingbasis,theCompanydocumentswhetherthehedginginstrumentsusedinthehedgingrelationshipsarehighlyeffectiveinoffsettingchangesincashflowsofthehedgeditems.CashflowhedgeTheeffectiveportionofchangesinthefairvalueofthederivativesarerecognizedinothercomprehensiveearningsandaccumulatedinshareholders’equity.Thegainorlossrelatingtotheineffectiveportionisrecognizedimmediatelyinprofitorloss.HedgeaccountingisdiscontinuedwhentheCompanyrevokesthehedgingrelationship,thehedginginstrumentexpiresoris terminated,orwhen thehedging relationshipno longerqualifies forhedgeaccounting. Any cumulativegainor lossaccumulatedinshareholders’equityatthattimeisrecognizedimmediatelyinprofitorloss.5. KEYSOURCESOFESTIMATIONUNCERTAINTYANDCRITICALACCOUNTINGJUDGMENTSUseofestimatesThepreparationoffinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgments,estimatesandassumptionsthatarenotreadilyapparentfromothersources,whichaffectthereportedamountsofassetsandliabilitiesatthedatesoftheConsolidatedFinancialStatementsandthereportedamountsofrevenueandexpensesduringthereportedperiods.Theestimatesandassociatedassumptionsarebasedonhistoricalexperienceandotherfactorsthatareconsideredtoberelevant.Actualresultscoulddifferfromtheseestimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognized in theperiod inwhichtheestimate isrevised if therevisionaffectsonly thatperiod,or intheperiodof therevisionandfutureperiodsiftherevisionaffectsbothcurrentandfutureperiods.SignificantareasrequiringtheuseofmanagementestimatesrelatetotheusefullivesofPP&Efordepreciationpurposes,PP&Eandinventoryvaluation,determinationofincomeandothertaxes,assumptionsusedincompilationofshare‐basedpayments, fair value of assets acquired and liabilities assumed in business acquisitions, amounts recorded as accruedliabilitiesandcontingentconsiderations,andimpairmenttestingofgoodwillandintangibleassetsandlong‐livedassets.ManagementdeterminestheestimatedusefullivesofitsPP&EbasedonhistoricalexperienceoftheactuallivesofPP&Eofsimilarnatureandfunctions,andreviewstheseestimatesattheendofeachreportingperiod.



30

5. KEYSOURCESOFESTIMATIONUNCERTAINTYANDCRITICALACCOUNTINGJUDGMENTS(Continued)Managementreviewstheconditionofinventoriesattheendofeachreportingperiodandrecognizesaprovisionforslow‐moving and obsolete items of inventory when they are no longer suitable for use. Management’s estimate of the netrealizablevalueofsuchinventoriesisbasedprimarilyonsalespricesandcurrentmarketconditions.AmountsusedforimpairmentcalculationsarebasedonestimatesoffuturecashflowsoftheCompany.Bytheirnature,theestimatesofcashflows,includingtheestimatesoffuturerevenue,operatingexpenses,utilization,discountratesandmarketpricingaresubjecttomeasurementuncertainty.Accordingly,theimpactintheConsolidatedFinancialStatementsoffutureperiodscouldbematerial.Taxinterpretations,regulationsandlegislationinthevariousjurisdictionsinwhichtheCompanyoperatesaresubjecttochange. As such, income taxes are subject to measurement uncertainty. Deferred income tax assets are assessed bymanagementattheendofthereportingperiodtodeterminetheprobabilitythattheywillberealizedfromfuturetaxableearnings.Compensationcostsaccruedforlong‐termshare‐basedpaymentplansaresubjecttotheestimationofwhattheultimatepayoutwillbeusingtheBlack‐Scholespricingmodel,whichisbasedonsignificantassumptionssuchasvolatility,dividendyieldandexpectedterm.The amount recognized as accrued liabilities and contingent considerations, including legal, restructuring, contractual,constructiveandotherexposuresorobligations, is thebestestimateof theconsiderationrequired to settle the relatedliability,includinganyrelatedinterestcharges,takingintoaccounttherisksanduncertaintiessurroundingtheobligation.Inaddition,contingencieswillonlyberesolvedwhenoneormorefutureeventsoccurorfailtooccur.Therefore,assessmentofcontingenciesinherentlyinvolvestheexerciseofsignificantjudgmentandestimatesoftheoutcomeoffutureevents.TheCompanyassessesitsliabilities,contingenciesandcontingentconsiderationsbaseduponthebestinformationavailable,relevanttaxlawsandotherappropriaterequirements.JudgmentsTheCompanyapplied judgment indeterminingthe functionalcurrencyof theCompanyand itssubsidiaries.Functionalcurrencywasdeterminedbasedonthecurrencythatmainlyinfluencessalesprices,labour,materialsandothercostsofprovidingservices.PP&EandgoodwillareaggregatedintoCGUsbasedontheirabilitytogeneratelargelyindependentcashinflowsandareusedforimpairmenttesting.ThedeterminationoftheCompany’sCGUsissubjecttomanagement’sjudgmentwithrespecttothelowestlevelatwhichindependentcashinflowsaregenerated.TheCompanyhasappliedjudgmentindeterminingthedegreeofcomponentizationofPP&E.EachpartofanitemofPP&Ewithacostthatissignificantinrelationtothetotalcostoftheitemandhasaseparateusefullifehasbeenidentifiedasaseparatecomponentandisdepreciatedseparately.TheCompanyhasappliedjudgmentinrecognizingprovisionsandaccruedliabilities,includingjudgmentastowhethertheCompanyhasapresentobligation(legalorconstructive)asaresultofapastevent;whetheritisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation;andwhetherareliableestimatecanbemadeoftheamountoftheobligation.Deferredincometaxassetsareassessedbymanagementattheendofthereportingperiodtodeterminetheprobabilitythattheywillberealizedfromfuturetaxableearnings.Thisdeterminationissubjecttomanagementjudgment.



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6. INVENTORIESThecostofinventoryrecognizedasanexpenseandincludedindirectcostsfortheyearendedApril30,2017is$39,852(2016‐$36,288).Duringthecurrentyear,therewerenosignificantwrite‐downsofinventoryasaresultofnetrealizablevaluebeinglowerthancost.Duringthepreviousyear,write‐downsofinventoryasaresultofnetrealizablevaluebeinglowerthancost,aredetailedinnote18.Noinventorywrite‐downsrecognizedinpreviousyearswerereversed.Thefollowingisabreakdownofinventorybycategory: 2017 2016 Rodsandcasings $ 26,688 $ 23,315Consumables 7,128 5,532Machineparts 31,067 26,634Wirelineanddownholetools 7,628 7,068Diamondbits 7,641 6,610Other 7,895 4,985 $ 88,047 $ 74,144

TheCompany’screditfacilityrelatedtooperationsisinpartsecuredbyageneralassignmentofaportionoftheCompany’sinventoryincertainregions.7. PROPERTY,PLANTANDEQUIPMENTChangesinthePP&Ebalancewereasfollowsfortheyear: Land Buildings Drills Auto Other TotalCost: BalanceasatApril30,2016 $ 3,525$ 18,946$ 369,145$ 111,535$ 20,844$ 523,995Additions ‐ ‐ 14,020 2,804 1,723 18,547Disposals ‐ ‐ (16,330) (3,823) (969) (21,122)Effectofexchangeratechanges andother 215 514 24,795 5,326 625 31,475BalanceasatApril30,2017 $ 3,740$ 19,460$ 391,630$ 115,842$ 22,223$ 552,895 AccumulatedDepreciation: BalanceasatApril30,2016 $ ‐$ (7,145)$ (180,876)$ (78,284)$ (16,987)$ (283,292)Disposals ‐ ‐ 13,478 3,465 908 17,851Depreciation ‐ (1,514) (37,203) (8,108) (2,130) (48,955)Effectofexchangeratechanges andother ‐ (200) (12,626) (3,724) (425) (16,975)BalanceasatApril30,2017 $ ‐$ (8,859)$(217,227)$ (86,651)$ (18,634)$(331,371) CarryingvalueApril30,2016 $ 3,525$ 11,801$ 188,269$ 33,251$ 3,857$ 240,703

CarryingvalueApril30,2017 $ 3,740$ 10,601$ 174,403$ 29,191$ 3,589$ 221,524



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7. PROPERTY,PLANTANDEQUIPMENT(Continued)TheCompanyhasassessedwhetherthereisanyindicationthatanimpairmentlossrecognizedinpriorperiodsforPP&Emaynolongerexistormayhavedecreased.TherewerenoimpairmentsrequiringreversalasatApril30,2017or2016.Capitalexpenditureswere$18,547and$16,789,respectively,fortheyearsendedApril30,2017and2016.TheCompanyobtaineddirectfinancingof$895and$4,664,respectively,fortheyearsendedApril30,2017and2016.ThecarryingvalueofPP&EunderfinanceleasesfortheyearendedApril30,2017was$5,647(2016‐$5,855).8. GOODWILLChangesinthegoodwillbalancewereasfollows: 2017 2016 Openingbalance $ 57,641 $ 57,274Effectofmovementinexchangerates 791 367Endingbalance $ 58,432 $ 57,641AllocationofgoodwilltoCGUsThecarryingamountofgoodwillwasallocatedtoCGUsasfollows: 2017 2016 Canada $ 48,548 $ 48,548U.S. 9,884 9,093 $ 58,432 $ 57,641 CanadaTherecoverableamountofthe“Canadianbranch”asaCGUisdeterminedbasedonavalue‐in‐usecalculation,whichusescashflowprojectionsbasedonfinancialbudgetsandforwardprojectionsapprovedbymanagementcoveringafive‐yearperiod,andadiscountrateof12.83%perannum.Cashflowsbeyondthatperiodhavebeenextrapolatedusingasteady2%perannumgrowthrate.WhiletheminingservicesmarketinCanadaiscyclicalinnature,thisorganicgrowthratehasbeenachievedacrosstwobusinesscyclesandisseenbymanagementasafairandconservativelong‐termaveragegrowthrate.Managementbelieves thatanyreasonablypossiblechange in thekeyassumptionsonwhich the recoverableamount isbasedwouldnotcausetheaggregatecarryingamounttoexceedtheaggregaterecoverableamountoftheCGU.U.S.Therecoverableamountofthe“U.S.branch”asaCGUisdeterminedbasedonavalue‐in‐usecalculation,whichusescashflowprojectionsbasedonfinancialbudgetsandforwardprojectionsapprovedbymanagementcoveringafive‐yearperiod,andadiscountrateof12.83%perannum.Cashflowsbeyondthatperiodhavebeenextrapolatedusingasteady2%perannumgrowthrate.WhiletheminingservicesmarketintheU.S. iscyclical innature,thisorganicgrowthratehasbeenachievedacrosstwobusinesscyclesandisseenbymanagementasafairandconservativelong‐termaveragegrowthrate.Managementbelieves thatanyreasonablypossiblechange in thekeyassumptionsonwhich the recoverableamount isbasedwouldnotcausetheaggregatecarryingamounttoexceedtheaggregaterecoverableamountoftheCGU.



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8. GOODWILL(Continued)KeyassumptionsThekeyassumptionsinthevalue‐in‐usecalculationsareasfollows:Revenue‐Thevaluesassignedtotheassumptionsreflectpastexperience.Theeffectoftheincorporationoftheacquireddrill fleetsandsignificantlevelsofcapitalexpendituresince2007thathavebeenonaveragehigherthanthesustaininglevel,haveprovidedthebasisonwhichtogrow.Thegrowthexpectedisconsistentwithmanagement’splansforfocusingoperationsandgrowingshareinthespecializeddrillingmarket.Grossmargin‐Managementexpectsthatgrossmarginswillremaininarangeinlinewithhistoricallyachievedlevels.9. INTANGIBLEASSETSChangesintheintangibleassetsbalancewereasfollows: Accumulated Cost amortization Total BalanceasatMay1,2015 $ 17,281 $ (11,021) $ 6,260Amortization ‐ (3,265) (3,265)Effectofmovementinexchangerates 236 (38) 198BalanceasatApril30,2016 $ 17,517 $ (14,324) $ 3,193Amortization ‐ (2,625) (2,625)Effectofmovementinexchangerates 120 (19) 101

BalanceasatApril30,2017 $ 17,637 $ (16,968) $ 669Intangibleassetsconsistofcustomerrelationships/contracts.10. DEMANDCREDITFACILITIESTheCompanyhascreditfacilitiesavailableinCanadaandtheU.S.of$29,094bearinginterestatthebank’sprimelendingrateplus0.75%orthebankers’acceptancerateplus2.25%forCanadiandollardrawsandthebank’sU.S.dollarbaserateinCanadaplus0.75%orthebank’sLondoninterbankofferrate(“LIBOR”)plus2.25%forU.S.dollardraws.Thedemandcredit facilitiesareprimarily securedbycorporateguaranteesof companieswithin thegroup.TheCompanyhascreditfacilitiesof$2,622forcreditcards,withinterestratesandrepaymentsasperthecardholderagreement.AsatApril30,2017,theCompanyhadutilized$478(2016‐$439)oftheselinesforstand‐bylettersofcredit.



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11. LONG‐TERMDEBT 2017 2016 Non‐revolvingtermloan,bearinginterestateitherthebank’s primerateplus0.75%orthebankers'acceptancerateplus 2.25%forCanadiandollardraws,andeitherthebank'sU.S. dollarbaserateinCanadaplus0.75%orthebank'sLIBOR plus2.25%forU.S.dollardraws,payableinmonthly installmentsof$417,securedbycorporateguaranteesof companieswithinthegroup,repaidduringthecurrentyear. $ ‐ $ 2,081 Termloanbearinginterestat5.9%,payableinmonthly installmentsof$83,unsecured,maturinginAugust2021. 4,333 5,333 Termloansbearinginterestatratesrangingfrom0%to9.50%, payableinmonthlyinstallmentsof$230,securedbycertain equipment,maturingthrough2022. 3,502 4,810 7,835 12,224 CurrentPortion 3,291 5,288 $ 4,544 $ 6,936 Therequiredannualprincipalrepaymentsonlong‐termdebtareasfollows:2018 $ 3,291 2019 1,955 2020 1,239 2021 1,009 2022 341

$ 7,835



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12. INCOMETAXESIncometaxesvaryfromamountsthatwouldbedeterminedbyapplyingthecombinedstatutoryCanadiancorporateincometaxratetoearningsbeforeincometaxwithdetailsasfollows: 2017 2016 Lossbeforeincometax $ (41,964) $ (41,586) StatutoryCanadiancorporateincometaxrate 27% 27% Expectedincometaxrecoverybasedonstatutoryrate (11,330) (11,228)Non‐recognitionoftaxbenefitsrelatedtolosses 4,272 7,079Otherforeigntaxespaid 510 1,027Ratevariancesinforeignjurisdictions 1,223 (452)Permanentdifferencesandother 4,550 7,095 (775) 3,521Adjustmentsrecognizedinthecurrentyearin relationtothecurrenttaxinprioryears 875 178Incometaxexpenserecognizedinnetloss $ 100 $ 3,699Thetaxrateusedforthe2017and2016reconciliationshereinistheeffectivefederalandprovincialCanadiancorporatetaxrateof27%.Themovementsindeferredincometaxbalancesareasfollows:

Tax 2016 Provision Exchange Reclassified 2017 Deferredtaxassetsrelatedtonon‐capital losses $ 9,564 $ 6,597 $ 814 $ 51 $ 17,026Deferredtaxliabilitiesrelatedtodifferencein taxandbookbasis (20,662) 2,302 (2,082) ‐ (20,442)Netdeferredtaxliabilities $ (11,098) $ 8,899 $ (1,268) $ 51 $ (3,416)Incometaxexpenserecognizedinnetloss: 2017 2016

Currenttax

Currenttaxexpenseinrespecttothecurrentyear $ 8,124 $ 8,474

Adjustmentsrecognizedinthecurrentyearinrelation

tothecurrenttaxofprioryears 875 178

Deferredtax

Deferredtaxexpenserecognizedinthecurrentyear (8,899) (4,953)Incometaxprovision $ 100 $ 3,699



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12. INCOMETAXES(Continued)Therecognitionandmeasurementofthecurrentanddeferredtaxassetsandliabilitiesinvolvesdealingwithuncertaintiesintheapplicationofcomplextaxregulationsinamultitudeofjurisdictionsandintheassessmentoftherecoverabilityofdeferredtaxassets.PotentialliabilitiesarerecognizedforanticipatedtaxauditissuesinvarioustaxjurisdictionsbasedontheCompany’sestimateofwhether,andtheextenttowhich,additionaltaxeswillbedue.Ifpaymentoftheaccruedamountsultimatelyprovestobeunnecessary,theeliminationoftheliabilitieswouldresultintaxbenefitsbeingrecognizedintheperiodwhentheCompanydeterminestheliabilitiesnolongerexist.Iftheestimateoftaxliabilitiesprovestobelessthantheultimateassessment,afurtherchargetoexpensewillresult.TheCompanyhasaccumulatedapproximately$175,095 innon‐capital lossesofwhich$77,334 is recognized toreducefutureincometaxesotherwisepayableinforeignjurisdictions.Theselosses,ifunused,willexpireinthefollowingcalendaryears:2017‐$1,985;2018‐$2,757;2019‐$3,309;2020‐$7,458;2021‐$3,272;2022‐$1,882;2034‐$11,555;2035‐$19,607;2036‐$14,272;2037‐$16,565;indefinite‐$92,433.TheCompanyhasaccumulatedapproximately$6,810(A$6,668)ofcapitallossesthatareavailabletoreduceincometaxesotherwise payable on capital gains realized in Australia. The benefit of these losses has not been recognized in theConsolidatedFinancialStatements.TheCompanyhasapproximately$200,000oftemporarydifferencesassociatedwithitsinvestmentsinforeignsubsidiariesforwhichnodeferredtaxeshavebeenprovidedonthebasisthattheCompanyisabletocontrolthetimingofthereversalofsuchtemporarydifferencesandsuchreversalisnotprobableintheforeseeablefuture.Therepatriationofcashthroughdividends, fromcertain jurisdictions,maycausewithholdingtaxexpenseforwhichnoliabilityhasbeenprovidedonthebasisthattheCompanyisabletocontrolthetimingofrepatriation.TheCompanyperiodicallyassesses its liabilitiesandcontingencies forall taxyearsopentoauditbaseduponthe latestinformationavailable.Forthosematterswhereitisprobablethatanadjustmentwillbemade,theCompanyhasrecordeditsbestestimateofthesetaxliabilities,includingrelatedinterestcharges.Inherentuncertaintiesexistinestimatesoftaxcontingenciesdue to changes in tax laws.Whilemanagementbelieves theyhaveadequatelyprovided for theprobableoutcomeofthesematters,futureresultsmayincludefavorableorunfavorableadjustmentstotheseestimatedtaxliabilitiesintheperiodtheassessmentsaremadeorresolved,orwhenthestatuteoflimitationlapses.13. SHARECAPITALAuthorizedUnlimitednumberoffullypaidcommonshares,withoutnominalorparvalue,witheachsharecarryingonevoteandarighttodividendswhendeclared.ThemovementintheCompany’sissuedandoutstandingsharecapitalduringtheyearwasasfollows: 2017 2016

Numberof

shares Sharecapital Numberof

shares SharecapitalOpeningbalance 80,136,884 $ 239,726 80,136,884 $ 239,726Exerciseofstockoptions 3,000 25 ‐ ‐

Endingbalance 80,139,884 $ 239,751 80,136,884 $ 239,726



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13. SHARECAPITAL(Continued)StockoptionplanDetailsoftheCompany’sstockoptionplan(the“Plan”)forDirectors,OfficersandotheremployeesoftheCompanyanditssubsidiariescanbefoundintheCompany’s2016ManagementProxyCircular.TherehavebeennochangestothePlansincethatdate.AsummaryofthestatusofthePlan,asatApril30,2017and2016,andofchangesduringthoseyears,ispresentedbelow: 2017 2016

Numberof

options

Weightedaverage

exerciseprice Numberof

options

Weightedaverage

exerciseprice

Outstanding,beginningofyear 4,253,908 $ 9.09 3,841,508 $ 9.49Optionsgranted 406,000 6.97 460,400 5.90Optionsexpired (574,203) 7.55 (48,000) 10.32Optionsexercised (3,000) 6.87 ‐ ‐Outstanding,endofyear 4,082,705 9.09 4,253,908 9.09ThefollowingtablesummarizesinformationonstockoptionsoutstandingasatApril30,2017:Rangeofexercise Outstanding at Weighted average Weighted average Exercisable at Weighted average prices April30,2017 remaining life (years) exerciseprice April 30, 2017 exerciseprice

$4.48‐$9.16 2,668,502 4.34 $ 7.27 1,908,535 $ 7.50$10.98‐$14.03 1,270,203 1.91 11.98 1,270,203 11.98$15.42‐$19.72 144,000 1.39 17.52 144,000 17.52 4,082,705 3.48 9.09 3,322,738 9.65TheCompany’scalculationsofshare‐basedcompensationforoptionsgrantedweremadeusingtheBlack‐Scholesoption‐pricingmodelwithweightedaverageassumptionsasfollows: 2017 2016 Risk‐freeinterestrate 0.67% 0.98%Expectedlife 5.8years 5.7yearsExpectedvolatility(basedonhistoricalvolatility) 42.2% 42.7%Expecteddividendyield 0.6% 0.8%Theweightedaveragegrantdate fairvalueofoptionsgrantedduring theyearendedApril30,2017was$2.62(2016 ‐$1.99).FortheyearendedApril30,2017,theamountofcompensationcostrecognizedinearningsandcreditedtoshare‐basedpaymentsreservewas$937(2016‐$1,083).



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13. SHARECAPITAL(Continued)DeferredshareunitsTheCompanyhasaDeferredShareUnitPlan(the“DSUPlan”)forDirectorsandcertaindesignatedOfficersasdescribedindetailintheCompany’s2016ManagementProxyCircular.TherehavebeennochangestotheDSUPlansincethatdate.ThefollowingtablesummarizesinformationonDSUsearnedundertheDSUPlanatApril30,2017and2016: 2017 2016

Numberof

units Numberof

units

Outstanding,beginningofyear 79,754 71,749DSUsissuedduringyear ‐ 8,005Outstanding,endofyear 79,754 79,754

AsatApril30,2017,thetotalvalueofDSUsoutstandingwas$604(2016‐$603).14. LOSSPERSHAREAlloftheCompany’searningsareattributabletocommonshares,thereforenetlossisusedindetermininglosspershare.

2017 2016 Netloss $ (42,064) $ (45,285) Weightedaveragesharesoutstanding(000's) 80,138 80,137Neteffectofdilutivesecurities: Stockoptions 44 ‐Weightedaveragenumberofshares‐diluted(000's) 80,182 80,137 Losspershare: Basic $ (0.52) $ (0.57)Diluted $ (0.52) $ (0.57) ThecalculationofdilutedlosspersharefortheyearendedApril30,2017and2016excludestheeffectof3,339,522and4,135,892options,respectively,astheywereanti‐dilutive.



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15. SEGMENTEDINFORMATIONTheCompany’soperationsaredividedintothreegeographicsegmentscorrespondingtoitsmanagementstructure:Canada‐ U.S.; South and Central America; and Asia and Africa. The services provided in each of the reportable segments areessentially the same. The accounting policies of the segments are the same as those described in note 4.Managementevaluatesperformancebasedonearningsfromoperationsinthesethreegeographicsegmentsbeforefinancecosts,generalandcorporateexpensesandincometax.DatarelatingtoeachoftheCompany’sreportablesegmentsispresentedasfollows: 2017 2016Revenue Canada‐U.S.* $ 179,789 $ 194,552SouthandCentralAmerica 71,420 65,658AsiaandAfrica 49,379 44,411 $ 300,588 $ 304,621

Lossfromoperations Canada‐U.S. $ (15,529) $ (4,306)SouthandCentralAmerica (11,375) (9,675)AsiaandAfrica (7,165) (17,658) (34,069) (31,639)Financecosts 331 554Generalandcorporateexpenses** 7,564 9,393Incometax 100 3,699Netloss $ (42,064) $ (45,285)*Canada‐U.S.includesrevenuein2017of$83,992(2016‐$106,864)forCanadianoperations.**Generalandcorporateexpensesincludeexpensesforcorporateoffices,stockoptionsandcertainunallocatedcosts.Restructuringchargesforthepreviousyear,asdetailedinnote18,areincludedinabovefiguresasfollows:Canada‐U.S.$106;SouthandCentralAmerica$495;AsiaandAfrica$6,844;andgeneralandcorporateexpenses$932. 2017 2016Capitalexpenditures Canada‐U.S. $ 9,860 $ 12,296SouthandCentralAmerica 5,928 2,501AsiaandAfrica 2,663 1,992Unallocatedandcorporateassets 96 ‐Totalcapitalexpenditures $ 18,547 $ 16,789Depreciationandamortization Canada‐U.S. $ 28,457 $ 27,975SouthandCentralAmerica 12,876 12,614AsiaandAfrica 8,325 11,299Unallocatedandcorporateassets 1,922 1,079Totaldepreciationandamortization $ 51,580 $ 52,967



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15. SEGMENTEDINFORMATION(Continued) 2017 2016Identifiableassets Canada‐U.S.* $ 216,391 $ 223,606SouthandCentralAmerica 151,894 138,961AsiaandAfrica 99,850 95,554Unallocatedandcorporateassets 26,435 45,180Totalidentifiableassets $ 494,570 $ 503,301*Canada‐U.S.includesproperty,plantandequipmentin2017of$57,689(2016‐$70,527)forCanadianoperations.16. ADDITIONALINFORMATIONTOTHESTATEMENTSOFCASHFLOWSChangesinnon‐cashoperatingworkingcapitalitems: 2017 2016 Tradeandotherreceivables $ (12,499) $ 2,788Inventories (7,857) 5,047Tradeandotherpayables 13,259 961Otheritems (939) 481 $ (8,036) $ 9,277

17. BUSINESSACQUISITIONDuringtheyear,theCompanymadethesecondpaymentonthecontingentconsiderationarisingoutoftheTaurusDrillingServicesacquisition,for$3,881(2016‐$1,783).18. RESTRUCTURINGCHARGEDuring thepreviousyear,due toongoingmarketdifficulties in theRepublicofSouthAfricaandNamibia, theCompanydecidedtocloseitsoperationsinthosecountries.Thecostsrelatedtotheseinitiativeswererecordedaspartoftherestructuringchargeforatotalof$8,377,whichincludedanimpairmentchargeof$4,379relatingtoproperty,plantandequipment;awrite‐downof$1,913toreduceinventorytonetrealizablevalue;employeeseverancechargesof$823;othernon‐cashchargesof$262;andachargeof$1,000relatingtothecostofwindingdownoperations.19. CONTINGENCIESTheCompanyisinvolvedinvariouslegalclaimsandlegalnoticesarisingintheordinarycourseofbusiness.Theoutcomeofall theproceedingsandclaimsagainsttheCompanyissubjecttofutureresolutionandtheuncertaintiesof litigation.BasedoninformationcurrentlyknowntotheCompanyandafterconsultationwithoutsidelegalcounsel,itismanagement’sopinionthattheultimatedispositionofthesematterswillnothaveamaterialadverseeffectontheCompany’sfinancialposition,resultsofoperations,orcashflows.Anyamountsawardedasaresultoftheseactionswillbereflectedwhenknown.



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20. COMMITMENTSTheCompanyhasacommitmentforthepurchaseofequipmenttotaling$372withadeliverydateearlyinfiscal2018,aswellasvariouscommitments,primarilyforrentalofpremises,witharms‐lengthpartiesasfollows:2018‐$1,481;2019‐$619;2020‐$562;2021‐$389;2022‐$335;thereafter$184.21. RELATEDPARTYTRANSACTIONSTheremunerationofDirectorsandothermembersofkeymanagementpersonnelduringtheyearwasasfollows: 2017 2016

Salaries,bonusesandfees $ 2,353 $ 1,929Post‐employmentbenefits ‐ 39Otherlong‐termbenefits 66 38Share‐basedpaymentsbenefits 686 738 $ 3,105 $ 2,744

22. DIVIDENDDuring theprevious year, theCompanydeclared adividendof $0.02per common sharepaidonNovember2, 2015 toshareholdersofrecordasofOctober9,2015.23. CAPITALMANAGEMENTThe Company includes shareholders’ equity (excluding foreign currency translation and other reserves), long‐termborrowingsandcashinthedefinitionofcapital.Totalmanagedcapitalwasasfollows: 2017 2016

Long‐termdebt $ 7,835 $ 12,224Sharecapital 239,751 239,726Share‐basedpaymentsreserve 19,250 18,317Retainedearnings 63,812 105,876Cash (25,975) (50,228) $ 304,673 $ 325,915

TheCompany’sobjectivewhenmanagingitscapitalstructureistomaintainfinancial flexibility inorderto:(i)preserveaccesstocapitalmarkets;(ii)meetfinancialobligations;and(iii)financeinternallygeneratedgrowthandpotentialnewacquisitions.Tomanageitscapitalstructure,theCompanymayadjustspending,issuenewshares,issuenewdebtorrepayexistingdebt.



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23. CAPITALMANAGEMENT(Continued)UnderthetermsofcertainoftheCompany’sdebtagreements,theCompanymustsatisfycertainfinancialcovenants.Suchagreementsalsolimit,amongotherthings,theCompany’sabilitytoincuradditionalindebtedness,createliens,engageinmergersoracquisitionsandmakedividendandotherpayments.TheCompanyisincompliancewithallcovenantsandotherconditionsimposedinitscreditagreement.Inordertofacilitatethemanagementofitscapitalrequirements,theCompanypreparesannualbudgetsthatareupdatedasnecessary,dependentonvariousfactors.TheCompany’sobjectiveswithregardstocapitalmanagementremainunchangedfrom2016.24. FINANCIALINSTRUMENTSRiskmanagementobjectivesTheCompany’s corporate treasury functionmonitors andmanages the financial risks relating to the operations of theCompanythroughanalysisofthevariousexposures.Whendeemedappropriate,theCompanyusesfinancialinstrumentstohedgetheseriskexposures.InterestrateriskmanagementTheCompanyisexposedtointerestrateriskasitborrowsfundsatbothfixedandfloatinginterestrates.TheriskismanagedbytheCompanybyuseofinterestrateswapcontractswhendeemedappropriate.

FairvalueThecarryingvaluesofcash,tradeandotherreceivables,demandcreditfacilityandtradeandotherpayablesapproximatetheir fairvaluesduetotherelativelyshortperiodtomaturityof the instruments.Thecarryingvalueof long‐termdebtapproximatesitsfairvalue.Contingentconsiderationisrecordedatfairvalueandisclassifiedaslevel2inaccordancewiththefairvaluehierarchy.

• Level1‐quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities;• Level2‐inputsotherthanquotedpricesincludedinlevel1thatareobservablefortheassetsorliabilities,either

directly(i.e.,asprices)orindirectly(i.e.,derivedfromprices);and• Level3‐inputsfortheassetsorliabilitiesthatarenotbasedonobservablemarketdata(unobservableinputs).

Therewerenotransfersofamountsbetweenlevel1,level2andlevel3financialinstrumentsfortheyearendedApril30,2017.Additionally,therearenofinancialinstrumentsclassifiedaslevel3.Thefairvaluehierarchyrequirestheuseofobservablemarketinputswheneversuchinputsexist.Afinancialinstrumentisclassifiedtothelowestlevelofthehierarchyforwhichasignificantinputhasbeenconsideredinmeasuringfairvalue.

CreditriskTheCompanyhasadoptedapolicyofonlydealingwithcreditworthycounterpartiesandobtainingsufficientcollateral,whereappropriate,asameansofmitigatingtheriskoffinanciallossfromdefaults.ThemaximumcreditrisktheCompanywasexposedtoasatApril30,2017was$98,360(2016‐$106,057),representingtotalcashandtradeandotherreceivables.AsatApril30,2017and2016,onecustomerrepresentedmorethan10%oftotalrevenue.TheCompany’sexposureandthecreditratingsofitscounterpartiesarecontinuouslymonitored.AsatApril30,2017,87.3%(2016‐85.9%)oftheCompany’stradereceivableswereagedascurrentand1.4%(2016‐7.2%)ofthetradereceivableswereimpaired.



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24. FINANCIALINSTRUMENTS(Continued)Themovementintheallowanceforimpairmentoftradereceivablesduringtheyearwasasfollows: 2017 2016 Openingbalance $ 3,554 $ 4,204Increaseinimpairmentallowance 668 1,315Recoveryofamountspreviouslyimpaired (92) (1,833)Write‐offchargedagainstallowance (3,374) (206)Foreignexchangetranslationdifferences 91 74Endingbalance $ 847 $ 3,554ForeigncurrencyriskIn order to reduce its exposure to foreign exchange risks associatedwith currencies of developing countries,where asubstantialportionoftheCompany’sbusinessisconducted,theCompanyhasadoptedapolicyofcontractinginU.S.dollars,wherepracticalandlegallypermitted.

AsatApril30,2017,themostsignificantcarryingamountsofnetmonetaryassetsthat:(i)aredenominatedincurrenciesotherthanthefunctionalcurrencyoftherespectiveCompanysubsidiary;(ii)causeforeignexchangerateexposure;and(iii)may include intercompanybalanceswithother subsidiaries, including the impactonearningsbefore income taxes(“EBIT”),ifthecorrespondingratechangesby10%,areasfollows: Rate Variance CFA/USD PES/USD USD/AUD USD/CAD OtherNetexposureon monetaryassets $ 4,441 $ 1,936 $ 1,110 $ (18,027) $ 512EBITimpact +/‐10% 493 215 123 2,003 58 Currency controls andgovernmentpolicies in foreign jurisdictions can restrict theCompany’s ability to exchange suchforeigncurrencyforothercurrencies,suchastheU.S.dollar.Tomitigatethisrisk,theCompanyhasadoptedapolicyofcarryinglimitedforeigncurrenciesinlocalbankaccounts.

LiquidityriskTheCompanymanagesliquidityriskbymaintainingadequatereserves,bankingfacilitiesandreserveborrowingfacilities,bycontinuouslymonitoringforecastandactualcashflows,andbymatchingthematurityprofilesoffinancialassetsandliabilities.Note10setsoutdetailsofadditionalundrawnfacilitiesthattheCompanyhasatitsdisposaltofurtherreduceliquidityrisk.ThefollowingtabledetailstheCompany’scontractualmaturitiesforitsfinancialliabilities: 1year 2‐3years 4‐5years Total Tradeandotherpayables $ 48,359 $ ‐ $ ‐ $ 48,359Contingentconsideration 5,135 ‐ ‐ 5,135Long‐termdebt(interestincluded) 3,428 3,333 1,429 8,190 $ 56,922 $ 3,333 $ 1,429 $ 61,684

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HistoricalSummary

The2010figuresabovehavenotbeenrestatedforIFRSadoption.

(1) Allamountsre‐statedtoreflect3for1stocksplitinfiscal2011.

(2) Non‐GAAPmeasure:Earningsbeforeinterest,incometaxes,depreciation,amortization.2017excludes$0.7millionofcontingentconsiderationtrue‐up.2016excludes$8.4millionofrestructuringcharges;2015‐$4.6million;2014‐$20.5million; 2013 ‐ $5.4 million; 2010 ‐ $1.2 million. 2014 excludes $14.3 million of goodwill and intangible assetsimpairment;2013 ‐ $3.3million;2010 ‐ $1.5million.2013excludes$2.0millionofgainon reversalof contingentconsideration.

2017 2016 2015 2014 2013 2012 2011 2010 (inmillionsofCanadiandollars,exceptpershareinformation)

OPERATINGSUMMARY Revenuebyregion

Canada‐U.S. $ 180 $ 195 $ 177 $ 176 $ 317 $ 322 $ 181 $ 103 SouthandCentralAmerica 71 66 76 74 203 252 169 108 Australia,AsiaandAfrica 50 44 53 105 176 223 132 97

301 305 306 355 696 797 482 308 Grossprofit 60 70 66 104 220 251 120 74

asapercentageofrevenue 20.0% 23.0% 21.6% 29.4% 31.7% 31.5% 25.0% 24.2% Generalandadministrative

expenses 45 44 45 50 64 58 41 33 asapercentageofrevenue 15.0% 14.4% 14.7% 14.1% 9.2% 7.3% 8.5% 10.7%

Net(loss)earnings (42) (45) (50) (55) 52 90 28 ‐ (Loss)earningspershare(1)

Basic (0.52) (0.57) (0.62) (0.70) 0.66 1.18 0.39 (0.01) Diluted (0.52) (0.57) (0.62) (0.70) 0.65 1.16 0.38 (0.01)

EBITDA(2) 11 20 13 44 143 174 73 36

pershare(1) 0.13 0.25 0.17 0.56 1.80 2.26 1.02 0.51 Dividendspaid ‐ 3 16 16 15 12 10 9 Totalnetcash(netofdebt) 18 38 30 46 39 (14) (17) 6 BALANCESHEETSUMMARY Cash,(netofdemandloans) 26 50 45 70 82 37 16 30 Property,plantandequipment 222 241 277 307 340 318 235 211 Debt 8 12 15 24 44 51 33 24 Shareholders'equity 410 426 460 484 538 488 328 318

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ShareholderInformation DIRECTORS TRANSFERAGENT DavidTennant(Chair) CSTTrustCompanyEdwardBreiner JeanDesrosiers AUDITORSFredDyment DavidFennell DeloitteLLPDenisLarocque CatherineMcLeod‐Seltzer JaniceRennie JoMarkZurel OFFICERS CORPORATEOFFICE DenisLarocquePresident&ChiefExecutiveOfficer

MajorDrillingGroupInternationalInc.111St.GeorgeStreet,Suite100

Moncton,NewBrunswick,E1C1T7,CanadaDavidBalserChiefFinancialOfficer

Tel:506‐857‐8636Toll‐free:866‐264‐3986

Fax:506‐857‐9211LarryPistoVPNorthAmericanOperations

Website:www.majordrilling.comEmail:[email protected]

KellyJohnsonVPLatinAmerican&WestAfricanOperations

ANNUALGENERALMEETINGBenGrahamVPHR&Safety

TheAnnualGeneralMeetingoftheshareholdersofMajorDrillingGroupInternationalInc.willbeheldat:

MarcLandryVPIT&Logistics

TMXBroadcastCentre,Gallery

TheExchangeTower130KingStreetWestToronto,ON,Canada

AndrewMcLaughlinGeneralCounsel&CorporateSecretary September8,2017at3:00pmEastern

Corporate Profile - Major Drilling Group International

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