NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1) IFRS 11 “Joint Arrangements” (2) IAS 19 (Revised 2011) “Employee Benefits” 64 AKITA DRILLING LTD.  ANNUAL REPORT Reconciliation of Cash Flows For the Year ended December 31, 2012 Adjustments for changes in  accounting policies $Thousands Before  Accounting  Policy  Changes IFRS 11  (1) IAS 19  (2) After  Accounting  Policy  Changes Operating Activities Net income $ 28,703   $ -   $ 52   $ 28,755  Non-cash items included in net income Depreciation and amortization 24,342 -  -  24,342 Deferred income taxes 6,725 -  17 6,742  Expense for defined benefit pension plan  422  -  (69)  353  Stock options charged to expense  302  -  -   302  Gain on sale of joint venture interests in rigs and other assets  (1,082) -  -   (1,082) Funds flow from operations  59,412  -  -  59,412  Change in non-cash working capital: Accounts receivable  (17,765) 3,188 -   (14,577) Prepaid expenses and other 197 57 -  254 Income taxes recoverable (4,487) -  -  (4,487) Accounts payable and accrued liabilities 19,537 (653) -  18,884 Deferred revenue 1,995 (2,046) - (51)  58,889 546 -  59,435 Equity income from joint ventures -   (14,163) -   (14,163) Pension benefits paid  (15) -  -   (15) Income taxes expense - current 2,916 -  -  2,916 Income taxes paid   (6,185) -  -   (6,185) Net cash from operating activities 55,605  (13,617) -  41,988 Investing Activities Capital expenditures   (65,356) -  -   (65,356) Change in non-cash working capital related to capital  (2,425) -  -   (2,425) Net distributions from investments in joint ventures -  15,010 -  15,010 Change in term deposits  9,500  -  -  9,500 Proceeds on sale of joint venture interests in rigs and other assets  3,984  -  -   3,984  Net cash used in investing activities  (54,297) 15,010 -   (39,287) Financing Activities Dividends paid  (5,038) -  -   (5,038) Proceeds received on exercise of stock options 18 - - 18 Repurchase of share capital (1,091) - - (1,091) Loan commitment fee paid (140) - - (140) Net cash used in financing activities  (6,251) -  -   (6,251) Decrease in cash and cash equivalents  (4,943) 1,393 -   (3,550) Cash and cash equivalents, beginning of year  18,228   (3,675) -   14,553  Cash and Cash Equivalents, End of Year  $ 13,285   $ (2,282)  $ -   $ 11,003 