Canyon Services Group Inc.
TSX : FRC

Canyon Services Group Inc.

October 06, 2009 08:08 ET

Canyon Services Group Inc. Announces $45.0 Million Financing by Way of Bought Deal and Concurrent Private Placement

CALGARY, ALBERTA--(Marketwire - Oct. 6, 2009) -

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

Canyon Services Group Inc. ("Canyon" or the "Company") (TSX:FRC) is pleased to announce that it has entered into an agreement with a syndicate of underwriters led by Cormark Securities Inc. and including Peters & Co. Limited and Raymond James Ltd. (the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a "bought deal" basis 7.5 million common shares ("Common Shares") of Canyon at a price of $2.00 per Common Share for aggregate gross proceeds of $15.0 million (the "Bought Deal Offering").

Additionally, Canyon has entered into an agreement with the Underwriters pursuant to which the Underwriters have agreed to purchase on an underwritten private placement basis, 15.0 million Common Shares of Canyon at a price of $2.00 per Common Share for aggregate proceeds of $30.0 million (the "Private Placement"). Canyon has received a binding commitment from the limited partnerships comprising ARC Energy Fund 6 (the "ARC Fund") to subscribe for all of the Common Shares pursuant to the Private Placement. Pursuant to the terms of the Private Placement and subject to certain Common Share ownership levels by the ARC Fund, the ARC Fund shall be entitled to nominate one director to the Company's Board of Directors upon closing and a second mutually agreed upon director to the Company's Board of Directors at a later date. Further details regarding the Board of Directors appointments will be announced once they are available. Following the completion of the Bought Deal Offering and Private Placement, the ARC Fund will exercise control or direction over approximately 33.6% of the issued and outstanding Common Shares.

ARC Financial Corp., the advisor to the ARC Fund, is one of the world's leading energy focused private equity firms. The ARC Fund invests both in Canada and internationally across the energy sector, with a core focus on oil and gas exploration, production, and related services. It also seeks to invest in areas such as non-conventional hydrocarbon resources, infrastructure, electrical power generation, and alternative energy technologies.

Proceeds of the Bought Deal Offering and Private Placement will be used to fund the Company's capital program, to temporarily reduce bank indebtedness and for general corporate purposes. Canyon's continued expansion into deeper segments of the pressure pumping market with the successful completion of large, horizontal, multi-stage fracturing programs in the Montney area of the WCSB, has resulted in increased demand for Canyon's services and the need to expand its pressure pumping fleet. Canyon's expanded capital program increases the Company's horsepower capabilities from 26,000 hhp to over 70,000 hhp, which management believes positions Canyon as one of the leaders in providing pressure pumping services to Canada's unconventional natural gas resource plays.

Pursuant to the Bought Deal Offering, the Common Shares will be offered in all provinces of Canada (except Quebec) by way of a short form prospectus and by way of private placement in the United States pursuant to exemptions from the registration requirements pursuant to Rule 144A and/or Regulation D of the United States Securities Act of 1933.

Closing of the Bought Deal Offering and Private Placement is expected to occur concurrently on or about October 28, 2009 and is subject to certain customary conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange and, if required, shareholder approval as well as the execution of definitive documentation regarding the Private Placement. The Underwriters shall be entitled to terminate the Bought Deal Offering if the Private Placement shall not have closed prior to or concurrently with the Bought Deal Offering.

Third Quarter Update

Third quarter 2009 natural gas prices averaged C$2.98 per Mcf, resulting in a number of oil & gas exploration and production companies shutting in production and significantly deferring drilling activity until the fourth quarter of 2009 and into 2010. As a result, from an operational perspective, the Canadian rig count more closely resembled a typical spring break-up quarter (second quarter) than a typical third quarter. Canyon's third quarter financial results are expected to reflect this deferral in industry drilling activity. While job sizes continued to increase and the Company enjoyed improved year over year field margins on its larger jobs, the Company anticipates its third quarter 2009 EBITDA to be approximately negative $2.0 million. Canyon anticipates that it will directly benefit from improved activity levels in the fourth quarter of 2009 and in 2010.

ADVISORY: This press release contains forward- looking statements which may include statements concerning the closing date of the offering, expected EBITDA, the anticipated use of the net proceeds of the offering, expanded capital program and debt reduction. Although Canyon believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because Canyon can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. The closing of the offering could be delayed if Canyon is not able to obtain the necessary regulatory and stock exchange approvals on the timelines it has planned. The offering will not be completed at all if these approvals are not obtained or some other condition to the closing is not satisfied. Accordingly, there is a risk that any proposed acquisition or offering will not be completed within the anticipated time or at all. The intended use of the net proceeds of the offering by Canyon might change if the board of directors of Canyon determines that it would be in the best interests of Canyon to deploy the proceeds for some other purpose.

The forward-looking statements contained in this press release are made as of the date hereof and Canyon undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The term "EBITDA" is used in this press release to refer to Earnings from continuing operations before interest, taxes, depreciation and amortization. EBITDA is not a term recognized under Canadian GAAP and does not have a standardized meaning prescribed by GAAP. While management of the Company believes that EBITDA is commonly used, and is a useful measure for readers in evaluating financial performance of the Company, the Company's method of calculating EBITDA may differ from, and therefore, not be comparable to similar measures provided by other reporting issuers.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities of the Corporation within the United States. The securities of the Corporation have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act") or any state securities laws. Accordingly, the Common Shares may not be offered or sold in the United States or to U.S. persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws or an exemption from such registration is available.

The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.

Contact Information

  • Canyon Services Group Inc.
    Brad Fedora
    President
    (403) 290-2491
    or
    Canyon Services Group Inc.
    Barry O'Brien
    Vice President, Finance and CFO
    (403) 290-2478