CanElson Drilling Inc.

CanElson Drilling Inc.

May 19, 2011 16:51 ET

CanElson Drilling Inc. to Acquire North Dakota Driller

CALGARY, ALBERTA--(Marketwire - May 19, 2011) -


CanElson Drilling Inc. ("CanElson") (TSX VENTURE:CDI) announces that it has entered into a purchase and sale agreement to acquire all of the issued and outstanding units of a Private North Dakota Driller ("Private Co."), which owns 4 drilling rigs operating in the Bakken area of North Dakota (the "Acquisition").

Under the terms of the purchase and sale agreement with the unitholders of Private Co. (the "Purchase Agreement"), CanElson will pay total consideration of approximately US$19.3 million consisting of cash and the issuance of common shares of CanElson (the "CanElson Shares") and assume net debt of approximately US$4.7 million, for a total purchase price of approximately US$24.0 million. Pursuant to the Purchase Agreement, holders of Private Co.'s Units (the "Private Co. Unitholders") will receive US$2.9 million cash consideration and approximately 3.3 million CanElson Shares. In addition to the four month resale restriction arising under applicable securities law, pursuant to the Purchase Agreement 95% of the CanElson Shares received by Private Co. Unitholders will be subject to resale restrictions. Of those CanElson Shares, 33.33% are subject to a resale restriction of 4 months, 33.33% are subject to an 8 month resale restriction and the remainder are subject to a one year resale restriction.

Pursuant to the Acquisition, CanElson will acquire 4 fully crewed drilling rigs which have been primarily drilling horizontal wells in North Dakota resource plays.

  • Mechanical triple rated to 4,600 meters true vertical depth (new 2010)
  • Electric triple rated to 5,000 meters true vertical depth (purchased by Private Co. in July 2008)
  • Small footprint ultra-heavy-duty telescopic double rated to 3,500 meters true vertical depth (new 2006)
  • Double rated to 2,500 meters true vertical depth (Purchased by Private Co. in 2005)

In addition to the 4 fully crewed rigs, CanElson will also acquire positive working capital estimated at US$3.0 million and spares and spare equipment with an estimated value of US$1.5 million. It is expected that key employees and management of Private Co. will be retained and continue with CanElson. To further strengthen CanElson's presence in North Dakota, CanElson may deploy some of its new small footprint ultra-heavy-duty telescoping double rigs to North Dakota depending on customers' demand.

It is anticipated that the Acquisition will close on or about June 2, 2011. Completion of the Acquisition is subject to certain conditions including the finalization of certain due diligence investigations and the receipt of all regulatory approvals, including the approval of the TSXV.

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 and currently drilling in resource plays.

Randy Hawkings, CanElson's President and CEO, stated "Private Co comes with 2 triple drilling rigs ideally suited to drill the deeper North Dakota oil resource plays, and 2 doubles well suited to the shallower North Dakota oil resource plays. In addition to excellent well-maintained rigs, their quality experienced personnel will allow CanElson to get an immediate foothold in the second most active oil drilling state in the United States. With the addition of these 4 drilling rigs to CanElson's existing United States drilling rig fleet, CanElson will now operate 9 drilling rigs in the United States (10 by the end of Q2 2011). CanElson will continue to review opportunities for further growth and expansion in all the areas where CanElson operates."

By January 2012, CanElson is expecting to operate a combined rig fleet of 36 rigs. With the acquisition of Private Co., combined with the acquisition of Eagle (closed on January 28, 2011) and the previously announced 5 tele-double rig construction program (announced February 23, 2011), in a period of approximately one year, CanElson will have added or expects to add 17 drilling rigs (14 tele-doubles, 2 triples and one double), all currently operating or expected to operate in resource drilling markets. The total cost of these investing activities is expected to be approximately $145 million.

Upon completion of the Acquisition, CanElson will have approximately 72,818,427 shares outstanding and approximately 2,965,266 options outstanding with a weighted average exercise price of $2.90 per share.


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 completion of the Acquisition, the retention of key employees and management, the number of drilling rigs CanElson will operate at the end of Q2 2011 and by January 2012, total number of rigs CanElson expects to add in a period of approximately 12 months, expected deployment location of rigs, review of opportunities for expansion in the areas we operate and expected cost of investing activities all of which statements contain forward looking information. Readers are cautioned that certain conditions must be met before the Acquisition can be completed. Such conditions include the receipt of all necessary regulatory approvals, including the approval of the TSXV. There is no assurance that the Acquisition will be completed in the time frame anticipated or at all.

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 describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. Other factors include the failure by CanElson to be satisfied with the results of its due diligence investigations and to obtain the required approvals for the Acquisition. 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.

Contact Information

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

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