Canadian Energy Services L.P.
TSX : CEU.UN

Canadian Energy Services L.P.

May 15, 2008 08:06 ET

Canadian Energy Services L.P. Announces Strategic Acquisition, Expanded Organic Capital Program and Concurrent Bought Deal Financing

CALGARY, ALBERTA--(Marketwire - May 15, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Canadian Energy Services L.P. ("CES" or the "Partnership") (TSX:CEU.UN) is pleased to announce that it has entered into a letter agreement to acquire all of the business assets of Clear Environmental Solutions Inc. ("Clear"), an Alberta-based private oil and natural gas services company which provides drilling fluids waste management solutions for operators in the Western Canadian Sedimentary Basin (WCSB). Clear designs and carries out programs to appropriately recycle and dispose of drilling fluids waste, performs environmental site assessments and ensures operator compliance with applicable environmental regulations.

CES is also pleased to announce that it has entered into an agreement with a syndicate of underwriters led by Cormark Securities Inc. ("Cormark") and including National Bank Financial Inc., Thomas Weisel Partners Canada Inc., Dundee Securities Corp, and Paradigm Capital Inc. (collectively the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a bought deal basis 1,122,000 Class A Common limited partnership units ("Class A Units") at a price of $10.25 per Class A Unit for aggregate gross proceeds of approximately $11.5 million. The Partnership has also granted the Underwriters an option (the "Over-Allotment Option") to purchase up to an additional 112,200 Class A Units to cover over-allotments, if any, for additional gross proceeds of approximately $1.2 million. The Over-Allotment Option is exercisable in whole or in part for a period of 30 days following closing of the Offering.

The Class A Units will be offered in certain provinces of Canada by way of short form prospectus. The Offering is scheduled to close on or about June 5, 2008 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange.

"The Clear acquisition is consistent with the Partnership's focus on the drilling fluids business and on businesses with low maintenance capital requirements. Clear's business is directly linked to drilling activity in the WCSB and provides the Partnership with exposure to the shallow gas market. Clear is working for a number of oil sands producers and we are excited with the growth opportunities available in shallow gas drilling, coalbed methane, oil sands and Southeast Saskatchewan." said Tom Simons, President and Chief Executive Officer of Canadian Energy Services Inc., the general partner of CES. "We are also very pleased the founders of Clear will be joining CES, and will continue to lead the development of the business."

Clear generated approximately $13 million in revenue for the year ended March 31, 2008 and will operate as a division of the Partnership following closing of the acquisition. The acquisition of the business assets of Clear is expected to close on or prior to June 30, 2008 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including approval of the Toronto Stock Exchange and entering into a definitive asset purchase agreement.

The Board of Directors of the general partner of CES has also approved a $3.25 million increase in the 2008 capital budget of the Partnership. Tom Simons commented "The growth in our market share of the drilling fluids industry has required that we increase the size of our trucking and blending facilities to meet the needs of our customers". CES will use the increase in capital expenditures to acquire additional trucking capacity that will be based out of its Carlyle, Saskatchewan and Edson, Alberta facilities. The Partnership will also use a portion of the increased budget to expand its blending and warehousing facilities in Carlyle and Edson.

The proceeds from the sale of the offering will be used to fund the cash portion of the purchase price of the acquisition of the Clear business assets and the balance will be used to fund the 2008 capital budget. In the event the acquisition of the Clear business assets is not completed, the proceeds of the offering that would have been used to fund the cash portion of the purchase price will be used to fund other growth opportunities.

Stonepoint Strategic Advisors Inc. acted as strategic advisor to the Partnership with respect to the acquisition and the financing.

CES designs and implements drilling fluid systems for the oil and gas industry, in particular relating to drilling medium to deep vertical and directional wells and horizontal wells in western Canada and the United States through its subsidiary AES Drilling Fluids, LLC. Additional information about CES is available at www.sedar.com or at the Partnership's website at www.CanadianEnergyServices.com.

CES is organized in accordance with the terms and conditions of a limited partnership agreement which provides that only persons who are resident in Canada, or, if partnerships, are Canadian partnerships, in each case for purposes of the Income Tax Act (Canada) (the "Tax Act"), may own units of the Partnership. Units may not be purchased as a "tax shelter investment" for the purposes of the Tax Act or by any entity an interest in which is a tax shelter investment.

This news release does not constitute an offer to sell the securities in the United States. The securities offered have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States.

Certain statements in this press release may constitute "forward-looking information" which involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the partnership, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. When used in this press release, such information uses such words as "may", "would", "could", "will", "intend", "expect", "believe", "plan", "anticipate", "estimate", and other similar terminology. This information reflects the Partnership's current expectations regarding future events and operating performance and speaks only as of the date of the press release. Forward-looking information involves significant risks and uncertainties, should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, including, but not limited to, the factors discussed below. Although the forward-looking information contained in this press release is based upon what management of the Partnership believes are reasonable assumptions, the Partnership cannot assure readers that actual results will be consistent with this forward-looking information. This forward-looking information is provided as of the date of this press release, and, subject to applicable securities laws, the Partnership assumes no obligation to update or revise such information to reflect new events, or circumstances.

In particular, this press release contains forward-looking information pertaining to the following: the acquisition of the assets and business of Clear; proposed capital expenditure programs of the Partnership; and the use of proceeds of the offering in the event the acquisition is not completed.

The Partnership's actual results could differ materially from those anticipated in the forward-looking information as a result of the following factors: the non-completion of the acquisition; deficiencies in the assets and undertaking of Clear to be acquired in connection with the acquisition, including but not limited to the inability of the Partnership to collect on accounts receivable that are acquire, and working capital deficiencies; failure to integrate the business of Clear with that of the Partnership; the potential that the Partnership will not be able to maintain distributions at the current rate, either because the assets acquired from Clear do not contribute to the EBITDA of the Partnership or, if the acquisition is not completed, the additional funds raised in connection with offering cannot be employed in business activities or allocated to capital projects of the Partnership that generate revenue or cost savings sufficient to service distributions on the additional Class A Units issued in connection with the offering, and the potential that distributions could be negatively affected as a result; and the other factors considered under "Risk Factors" in the Partnership's Annual Information Form dated March 26, 2008 for the year ended December 31, 2007.

Without limiting the foregoing, the forward-looking information contained in this Press release is expressly qualified by this cautionary statement.

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Canadian Energy Services Inc., the general
    partner of Canadian Energy Services L.P.
    Tom Simons
    President and Chief Executive Officer
    (403) 269-2800 or Toll Free: 1-888-785-6695
    Email: info@ceslp.ca
    or
    Canadian Energy Services Inc., the general
    partner of Canadian Energy Services L.P.
    Laura A. Cillis
    Chief Financial Officer
    (403) 269-2800 or Toll Free: 1-888-785-6695
    Website: www.CanadianEnergyServices.com