Calmena Energy Services Inc.
TSX : CEZ

Calmena Energy Services Inc.

March 16, 2011 08:30 ET

Calmena Global Operational Update

Expanding Colombian Presence; Entry into Major New Market in Brazil; Mexican Operations Resume; and North American Operations Capitalizing on Robust Activity.

CALGARY, ALBERTA--(Marketwire - March 16, 2011) - Calmena Energy Services Inc. ("Calmena" or the "Company") (TSX:CEZ) wishes to provide the following update to our investors respecting the breadth of our operations and some significant recent changes.

Brazil

In January 2011 Calmena signed its first heli-portable drilling rig contract with Petroleos Brasileiros ("Petrobras"). This contract has a four year term. The rig is en-route to Brazil and is expected to arrive at the Brazilian port of Manaus in late March 2011. At this point, the rig will be commissioned with the contract anticipated to commence in May. A stand-by rate will be paid from the time the rig is mobilized to the first wellsite until the rig commences full drilling operations.

In addition, Calmena is pleased to announce that it is the successful bidder for additional onshore drilling services contracts with Petrobras in the Brazilian states of Bahia and Sergipe. The tender contemplates the provision of four single rigs for a term of three years. Calmena is currently engaged in the protocol of the Petrobras tender process, which process Calmena expects to result in the formal award of the drilling contracts. These contracts will be serviced with rigs from our existing Canadian drilling fleet. We expect these new contracts will generate better financial results than currently being achieved with these rigs in Canada, as well as year round utilization. These rigs have historically been under-utilized outside the short Canadian winter drilling season. Including the heli-portable rig, Calmena will have in excess of $115 million in long-term drilling contracts with Petrobras.

Colombia

Calmena has begun to establish a meaningful presence in Colombia, a growing and active energy service market in Latin America. We currently have one drilling rig under contract and have signed a letter of intent for a second rig to commence operating in May 2011. The second rig will be mobilized from Mexico. In addition, Calmena has recently re-positioned directional and horizontal drilling assets from Mexico to Colombia and has successfully completed the rigorous technical and Health, Safety and Environmental (HSE) qualification process required by Ecopetrol S.A., the Colombian national oil company. Calmena is in the process of negotiating a long-term contract with Ecopetrol, which we expect will result in directional and horizontal drilling operations commencing in Colombia in April 2011.

Mexico

Calmena purchased six high-quality rigs in Mexico in the third quarter of 2009, each of which was subject to a long-term contract with a "last man standing" clause. After experiencing some challenges due to reduced Petroleos Mexicamos ("Pemex") activity levels, Calmena was successful in putting the majority of these rigs back to work. As noted above, one of the rigs is under contract in Colombia and a second is being mobilized there shortly. Two of the drilling rigs are operating under contract in Mexico and it is anticipated that a third rig will resume operations shortly in northern Mexico. After almost eight months of uncertainty surrounding Pemex's near term spending plans, there is increasing evidence that projects are resuming, albeit at lower levels and at a more measured pace than experienced in early 2010. Upon the anticipated resumption of operations of the third rig in Northern Mexico, only one of the six rigs will remain idle, and we are encouraged by the prospects of this rig returning to work in the near future. 

North America

Calmena's broader service business is enjoying strong demand in Canada and the United States. Our Canadian operations are keeping pace with robust industry activity levels, with all service lines experiencing strong utilization and improved pricing. Our Canadian drilling rigs have been running at effectively maximum utilization and we anticipate some rigs will continue working through spring break-up as they are scheduled to move to long-term pad drilling work. As expected, our Rentals and Frac Fluid Management businesses have enjoyed record demand this winter and we anticipate a surge in activity after spring break-up in connection with completion and stimulation activities on winter drilling locations. In the United States, Calmena's directional and horizontal drilling business has enjoyed near record utilization to date in 2011, which is encouraging given that drilling activity in the southern United States does not typically peak until the second and third quarters. Management remains cautiously optimistic that North American activity will continue to generate solid results through the remainder of 2011.

Middle East and North Africa

In February, Calmena announced that its operations in Libya had been temporarily suspended by its customer, Waha Oil Company ("Waha"). Waha is owned by Libya's national oil company in a joint venture with ConocoPhillips, Marathon Oil Company and Amerada Hess. We have secured our drilling rigs and continue to closely monitor this situation and will provide further updates as new information becomes available.

New Service Offerings

Calmena continues to advance several new service lines in Canada and the United States. Calmena's Wireline Technologies business continues to enjoy success with its horizontal completions services. Our MicroSeismic and Borehole Seismic Imaging ("BSI") business has enjoyed a surge in activity, generating as much revenue in the previous three months as it did in all of 2010. We are encouraged with the continued prospects for adoption of this technology. We believe that MicroSeismic and BSI services are becoming an integral part of the optimization and evaluation of multi-stage hydraulic fracturing, which has become a key completions tool in developing resource plays in North America. Customers are utilizing MicroSeismic and BSI services in more and different applications as an accepted evaluation tool for engineering, geological and geophysical reservoir properties.

Our directional drilling services product development group introduced a new vertical monitoring tool (CSI™ – Cyclone Survey Instrument) as well as a unique mud-pulse telemetry system (Cyclone™ Non Compensated Rotary Pulser) late in the fourth quarter of 2010. Initial field operations resulted in some technological refinements to these systems. We have now entered the commercial stage, with both technologies now being utilized in the field and generating revenue. Calmena's directional and horizontal drilling business currently has eight of these new systems operating in Canada and the United States. These technologies expand Calmena's proprietary product suite and are the building blocks of our new measurement while drilling ("MWD") system, which system is expected to be in field trials by early May. Commercialization of Calmena's proprietary MWD system will differentiate our directional and horizontal drilling service business, which we believe will help fuel additional growth in the second half of 2011.

Conclusion

In summary:

  • Calmena has grown its global drilling rig fleet to 19 rigs; 
  • We have established bases of operations in key Latin American countries: Colombia, Mexico and Brazil; 
  • Our North American operation, still the largest component of our business, is experiencing record utilization; and
  • We have added key service lines which are geared towards the horizontal and directional drilling and multi-stage fracturing markets that are experiencing increased demand.

Expansion into new key markets and the resumption of drilling operations in Mexico have solidified Calmena's Latin America strategy and positioned Calmena to be a significant regional player. Calmena expects 2011 to be a building year in Latin America. Momentum is growing in our select Latin America markets, with first half start-up initiatives expected to result in positive economic contributors during the last half of the year.

North American operations are expected to produce improved financial performance in 2011. Our unique product lines position the Company as a provider of value added services to our customers and, importantly, provides us with a strategic advantage in international markets as resource plays become more prevalent internationally.

We look forward to updating you on our progress in our domestic and international markets as we move forward. 

ABOUT CALMENA ENERGY SERVICES INC.

Calmena is a diversified energy services company that provides well construction services to its customers operating in Canada, the United States, Latin America as well as the Middle East and North Africa. The common shares of Calmena trade on the Toronto Stock Exchange under the symbol "CEZ".

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. Such statements represent Calmena's internal projections, estimates or beliefs and are predictions only; actual events or results may differ materially. Although Calmena believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Calmena's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Calmena.

More particularly, and without limitation, this news release contains forward-looking statements and information with respect to statements respecting: the arrival date of Calmena's heli-portable drilling rig in Brazil; the formal award of a drilling contract for four drilling rigs in Brazil, the Brazilian drilling contract resulting in improved financial performance for these four rigs than has been experienced in Canada and Calmena then having in excess of $115 million of long term drilling contracts with Petrobras; the completion of a long term drilling contract with Ecopetrol resulting in the Company commencing drilling operations in Colombia in April 2011; drilling activity in Mexico beginning to increase and the expectation that the remaining idle Calmena drilling rigs in Mexico being expected to resume operations; some of the Company's drilling rigs continuing to work through spring break-up in North America, an anticipated surge in activity after spring break-up in connection with completion and stimulation activities in North America and North American activity generating solid results through the remainder of 2011; the continued encouraging prospects for the adoption of the Company's microseismic technology; Calmena's proprietary measurement-while-drilling system differentiating its horizontal drilling service business and fuelling additional growth for the Company in 2011; the Company's North American operations producing improved financial performance in 2011; and the Company expecting its first half start-up initiatives in Latin America to result in positive economic contributors during the last half of the year.

These forward looking statements and information are based on certain key expectations and assumptions made by the Company regarding: the implementation of the Company's international growth strategy; current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; ability of Calmena to re-finance or extend the maturity date of its senior and subordinated debt; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; supply and demand for oilfield services relating to the drilling, completion and maintenance of oil and gas wells as well as services related to oilfield equipment rentals and production and ancillary services; effects of regulation by governmental agencies; and future operating costs. Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that they will prove to be correct.

Since forward-looking statements and information address future events, by their nature, such statements and information involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks, including, but not limited to, the impact of general economic conditions; industry conditions; volatility of commodity prices; decreased demand for energy services; competition from other energy services providers; the lack of availability of qualified personnel or management; ability of Calmena to re-finance or extend the maturity date of its senior and subordinated debt and generate positive cash flow; failure of counterparties, including Petrobras, Pemex and Ecopetrol, to perform on contracts; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; international operations; seasonality; loss of key customers; fluctuations in foreign exchange or interest rates and stock market volatility; supply and demand for oilfield services relating to the drilling, completion and maintenance of oil and gas wells as well as services related to, oilfield equipment rentals and production and ancillary services; liabilities and risks, including environmental liabilities and risks inherent in oil and natural gas operations; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; and the ability to access sufficient capital from internal and external sources.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of the Company are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). 

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

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Calmena Energy Services Inc.
    John King
    President and Chief Executive Officer
    (403) 225-3879
    (403) 366-2066 (FAX)
    or
    Calmena Energy Services Inc.
    Peter Balkwill
    Vice President, Finance & CFO
    (403) 225-3879
    (403) 366-2066 (FAX)
    or
    Calmena Energy Services Inc.
    Phone: (403) 225-3879
    Fax: (403) 366-2066
    700, 333 - 7th Avenue SW
    Calgary, Alberta T2P 2Z1
    www.calmena.com