Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

June 01, 2006 14:02 ET

Wenzel Responds to Unsolicited Offer from High Arctic Energy Services Trust and Advises Shareholders to Take no Action at This Time

CALGARY, ALBERTA--(CCNMatthews - June 1, 2006) - Wenzel Downhole Tools Ltd. ("Wenzel" or the "Company") (TSX:WZL) today advises its shareholders to take no action at this time with respect to the unsolicited offer (the "High Arctic Offer") from High Arctic Energy Services Trust ("High Arctic") to purchase all of the outstanding common shares of the Company.

The Board of Directors (the "Board"), in consultation with its financial and legal advisors and the Special Committee, will carefully consider and evaluate the High Arctic Offer and issue a Directors' Circular that will contain important information, including the Board's recommendation with respect to the High Arctic Offer. The Company advises all shareholders to defer making any
determination with respect to the High Arctic Offer until reading the Director's
Circular and related disclosure documents.

The Directors' Circular will be available on or before June 13, 2006. A copy of
the Directors' Circular will be available on SEDAR at www.sedar.com or can be
obtained free from the Company by directing a request to the Company at 500,
736 - 6th Avenue S.W., Calgary, Alberta, Canada T2P 3T7, (403) 205-6696,
Attention: President.

The Company advises that on April 10, 2006, the Company formed a Special
committee, comprised of all the independent directors of the Board (the "Special
Committee"), to deal with all matters pertaining to evaluating any potential offer from High Arctic and to potentially explore alternatives to maximize shareholder value and in that connection to consider and recommend to the Board
acceptance or rejection of any potential offer from High Arctic. On April 13, 2006, the Special Committee retained TD Securities Inc. ("TD Securities") as its
financial adviser in connection with evaluating any potential offer from High Arctic and to potentially explore alternatives to maximize shareholder value. On May 3, 2006, TD Securities provided a report and an opinion regarding the High Arctic matter and will be updating the report shortly. The full text of this opinion will be included in Directors' Circular. The Special Committee has also engaged the services of independent legal counsel.

At this time, the Special Committee and the Board unanimously recommend that
shareholders not tender their shares into the High Arctic Offer and to wait for the Director's Circular.

The Company also advises of the following:

1. On March 14, 2006 the Board adopted a Shareholder Rights Plan, in order
to permit the Board more time during which a potential take-over offer can be
considered. The Rights Plan was not adopted in response to, or in anticipation
of, any known take-over bid. Given the long period of time which the Company
was not trading, its significant shareholder issues and ongoing Alberta Securities Commission (the "Commission") matters, it was apparent to the Board that in the event of an unsolicited offer the Rights Plan would be required to allow the Board the time necessary to evaluate any proposed transaction, and if
required, conduct an orderly process to maximize shareholder value. Such
process may include soliciting superior proposals as well as consideration of
alternative structures including but not limited to conversion to an income fund.

2. The Company filed an application to the Commission to vary and clarify a previously issued cease trade order (the "CTO"). The application argued that CTO should be enforceable in relation to any securities of the Company beneficially owned by 376348 Alberta Ltd. ("376"), a company controlled by Doug Wenzel and that the tender of shares of the Company owned by 376 to any takeover bid, constitutes a violation of the CTO. On May 26, 2006, the Commission issued a decision holding that any tender of 376's securities of the Company into a takeover bid would not violate the CTO given the variations made by a settlement agreement. The Company is appealing that decision to the Court of Appeal. The ASC decision also held that any further action taken by 376 to any takeover bid must be brought before and approved by the Commission.

3. The Company has already communicated with individuals who hold or
represent shareholders holding, in aggregate, greater than 10% of
the Company's common shares, who have indicated they do not intend to accept
the High Arctic Offer at the current offer price.

4. An update to the current recommendation of the Board, as well as
important information about the history of the Company's discussions with High
Arctic will be provided in the Directors' Circular.

Significant issues face the Company and the Board is currently of the opinion
that the timing of the High Arctic Offer is opportunistic and disadvantageous to
shareholders and the current trading price of the Company's shares is devalued
because of the reasons stated above and other factors. Although the Board was
not considering a sale of the Company prior to receiving High Arctic's expression of interest, it feels compelled, in light of the High Arctic Offer, to explore other strategic alternatives, including obtaining competing bids that may enhance shareholder value. The Company and TD Securities have engaged discussions to gauge potential levels of interest from certain parties that may provide greater shareholder value.

The Board cautions shareholders that tendering into the High Arctic Offer before
the Board and its advisors have had an opportunity to fully review the bid,
consider strategic alternatives and review competing proposals may preclude the
possibility of a superior shareholder value maximization strategy from emerging.

About Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd. is listed for trading on the Toronto Stock Exchange,
under the symbol WZL.

Wenzel Downhole Tools Ltd. is a manufacturer, seller and renter of drilling tools used in oil and gas exploration. In Canada, the Company has its manufacturing and servicing facilities located in Edmonton, Alberta and its corporate offices in Calgary, Alberta. Its U.S. headquarters and service facilities are in Conroe, Texas, a service and sales office in Casper, Wyoming and a sales office in Oklahoma City, Oklahoma.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy and accuracy of this release.

Contact Information

  • Wenzel Downhole Tools Ltd.
    Harvie Andre
    President and CEO
    (403) 205-6696
    (403) 265-8154 (FAX)
    Wenzel Downhole Tools Ltd.
    Ron Dooley
    Chief Financial Officer
    (403) 205-6696
    (403) 265-8154 (FAX)
    Website: www.downhole.com