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CanElson Drilling Inc. Closes North Dakota Acquisition

CALGARY, ALBERTA–(Marketwire – June 2, 2011) –

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

CanElson Drilling Inc. (“CanElson”) announces that it has closed the previously announced acquisition of Redhawk Drilling, LLC. (“Redhawk”), a private North Dakota United States Limited Liability Company which owns 4 drilling rigs operating in the Bakken area of North Dakota (the “Acquisition”).

CanElson has acquired 100% of the membership units of Redhawk for consideration of US$2,893,921 cash and the issuance of 3,321,092 common shares of CanElson (“CanElson Shares”).

CEO and President Randy Hawkings states “With the addition of these 4 drilling rigs we have added 20 resource based drilling rigs organically and through acquisition at a cost of approximately $162 million in a period of less than one year,. We continue to focus our efforts on building and / or acquiring modern rigs (average age of less than 5 years) that are suited to customer requirements for horizontal resource play drilling.”

By the end of Q2 2011, and including the closing of the Acquisition, CanElson will operate a combined rig fleet of 32 (net 29) rigs which includes 18 drilling rigs in western Canada, 10 (net 9) drilling rigs in the United States, 2 (net 1) sub-contracted drilling rigs in Mexico and 2 (net 1) service rigs in Mexico. 100% of CanElson’s owned drilling rig fleet is suited for drilling in resource plays.

As a result of the Acquisition there are 72,839,427 CanElson Shares outstanding and approximately $9.0 million of net debt (bank debt less cash). At the date of this press release CanElson has approximately 2,944,266 options outstanding with a weighted average exercise price of $2.90 per share.

Overview of Redhawk

Founded in 2005, Redhawk currently has 2 double rigs and 2 triple rigs that are fully crewed and are suited for horizontal and resource play drilling, which align with CanElson’s existing drilling rig fleet. The Redhawk rig fleet has been focused on drilling the Bakken play in North Dakota. During the year ending December 31, 2010, Redhawk operated at a 57% utilization rate increasing to 64% in the first quarter of 2011. The industry activity in North Dakota has increased substantially from a year ago. The weekly rig count ending April 1, 2011 was 166 compared to the prior year where there were only 74 active rigs for the week ending January 1, 2010 (Source: Smith Bits Stats – weekly rig count by State).

Redhawk is presently undertaking certain capital upgrades, including the upgrade of 2 pumps to 1600 HP at an estimated cost of $1.8 million and other capital expenditures of $0.45 million. CanElson has not presently made any specific further capital commitments specific to Redhawk.

The following table presents selected annual and quarterly financial information based on the unaudited financial statements of Redhawk for the years ended December 31, 2010 and 2009 and the first quarters ended March 31, 2011 and 2010.

As at and for the years ended Dec 31, 
('000s of United States dollars, 
except average number of rigs)                                2010     2009
----------------------------------------------------------------------------
Revenue                                                    $17,504  $11,202 
EBITDA (i)                                                 $ 7,552  $ 4,940 
Net income before tax                                      $ 1,979  $   382 
Current assets                                             $ 2,616  $ 1,057 
Total assets                                               $16,900  $19,274 
Current liabilities (excluding current 
 portion of bank debt)                                     $   384  $ 2,405 
Bank debt                                                  $ 4,288  $ 5,287 
Average number of rigs available for operations                  4      3.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at and for the three month period ended Mar 31, 
('000s of United States dollars,        
except average number of rigs)                                2011     2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                                                    $ 4,145  $ 3,311 
EBITDA (i)                                                 $ 1,822  $ 1,037 
Net income before tax                                      $   751    ($260)
Current assets                                             $ 3,591  $ 1,796 
Total assets                                               $17,027  $19,347 
Current liabilities  (excluding current 
 portion of bank debt)                                     $   341  $ 1,382 
Bank debt                                                  $ 4,707  $ 7,476 
Average number of rigs available for operations                  4     3.67
----------------------------------------------------------------------------
----------------------------------------------------------------------------

This press release contains references to EBITDA. This financial measure is not a measure that has any standardized meaning prescribed by International Financial Reporting Standards (“IFRSs”) and is therefore referred to as a non-GAAP measure. This non-GAAP measure used by the Corporation may not be comparable to similar measures used by other companies.

(i) EBITDA is defined as “income before interest expense (income), income taxes, depreciation, stock based compensation expense, non-inventory gains and losses on capital assets and foreign exchange.” Management believes that in addition to net and comprehensive income (loss), EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation’s principal business activities prior to consideration of how these activities are financed, how the results are taxed in various jurisdictions, and how the results are affected by the accounting standards associated with the Corporation’s stock based compensation plan.

CanElson is an Alberta, Canada corporation that is engaged in the manufacture, acquisition, operation and sale of rigs into business relationships involving the Corporation for the oil and gas industry. The Corporation currently operates in the western Canadian sedimentary basin, the United States and Mexico.

FORWARD-LOOKING INFORMATION

This press release contains certain statements or disclosures relating to CanElson that are based on the expectations of CanElson as well as assumptions made by and information currently available to CanElson which may constitute forward-looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that CanElson anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward-looking information can be identified by terms such as “forecast”, “future”, “may”, “will”, “expect”, “anticipate”, “believe”, “potential”, “enable”, “plan”, “continue”, “contemplate”, “pro-forma”, or other comparable terminology.

In particular, this press release makes reference to the number of drilling rigs CanElson will operate at the end of Q2 2011 and the expected cost of Redhawk capital upgrades, all of which statements contain forward looking information.

Many factors could cause the performance or achievement by CanElson to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking information. CanElson’s Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. CanElson disclaims any intention or obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction. This news release is not an offer for sale within the United States of any CanElson Shares or other securities of CanElson. Any offering of securities of CanElson will not be registered under the U.S. Securities Act and may not be offered or sold in the United States absent registration under U.S. securities laws or an applicable exemption from registration under such laws. These securities may not be sold in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.

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

Contacts

Randy Hawkings
CanElson Drilling Inc.
President and CEO
(403) 266-3922

Robert Skilnick
CanElson Drilling Inc.
Chief Financial Officer
(403) 266-3922

700, 808 – 4th Avenue SW
CanElson Drilling Inc.
Calgary, Alberta T2P 3E8

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