MANAGEMENT’S DISCUSSION AND ANALYSIS Basis of Analysis in this MD&A, Non-Standard and Additional GAAP Items Effective January 1, 2013, the Company adopted a new accounting standard under IFRS, IFRS 11 “Joint  Arrangements”, in relation to reporting its joint venture activities. Under IFRS 11, AKITA is required to report  its joint venture assets, liabilities, revenues and expenses using the equity method of accounting. However,  for purposes of analysis in this MD&A, the proportionate share of assets, liabilities and financial activities is  included as non-standard information (“Adjusted”) where appropriate. The Company provides the same drilling  services and utilizes the same management, financial and reporting controls for its joint venture activities as  are in place for its wholly owned operations. Operating margin, revenue per operating day, operating and maintenance expense per operating day and  operating margin per operating day are not recognized measures under IFRS. Management and certain  investors may find operating margin data to be a useful measurement metric as it provides an indication of the  profitability of the business prior to the influence of depreciation, overhead expenses, financing and income  taxes. Management and certain investors may find “per operating day” measures for revenue and operating  margin indicate pricing strength while operating and maintenance expense per operating day demonstrates the  degree of cost control and provides a proxy for specific inflation rates incurred by the Company. Readers should  be cautioned that in addition to the foregoing, other factors including the mix of rigs between conventional and  pad and singles, doubles and triples can also impact these results. Readers should also be aware that AKITA  includes standby revenue, construction revenue and construction costs in its determination of “per operating  day” results. Funds flow from operations is considered as an additional GAAP measure. AKITA’s method of determining  funds flow from operations may differ from methods used by other companies and includes cash flow from  operating activities before working capital changes as well as equity income from joint ventures adjusted for  income tax amounts paid during the period. Management and certain investors may find funds flow from  operations to be a useful measurement to evaluate the Company’s operating results at year-end and within  each year since the seasonal nature of the business affects the comparability of non-cash working capital  changes both between and within periods. 8 AKITA DRILLING LTD.  ANNUAL REPORT