Cordy Oilfield Services Inc.

Cordy Oilfield Services Inc.

March 29, 2006 16:47 ET

Cordy Enters into Letter of Intent to Acquire Sphere Drilling Fluids Ltd. and Announces $50 Million Bought Deal Financing

CALGARY, ALBERTA--(CCNMatthews - March 29, 2006) -

This news release is not for distribution to U.S. wire services or for dissemination in the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws.

Cordy Oilfield Services Inc. (the Corporation) (TSX VENTURE:CKK) is pleased to announce that it has entered into a letter of intent to acquire Sphere Drilling Fluids Ltd. Headquartered in Calgary, Sphere has been in business since 1988 and sells, manufactures, and provides drilling solutions in the mining, construction and heavy oil sectors (tar sands) domestically and internationally.

The purchase price to be paid for Sphere will be $9.0 million. Fifty per cent of the purchase price will be paid by the issuance of common shares of the Corporation at the deemed price of $4.30 per share with the balance of the purchase price to be paid in cash. In addition, incentive stock options to acquire up to 500,000 common shares of the Corporation, subject to the approval of the TSX Venture Exchange, are proposed to be granted to the key employees and consultants of Sphere. The Corporation hereby reserves $4.30 per share as exercise price for these stock options.

For the six month period ended February 28, 2006 Sphere generated revenue of $15,400,000 and achieved earnings before income taxes, depreciation and amortization of $3,900,000. For the year ended August 31, 2005 Sphere generated revenue of $15,000,000 and achieved earnings before income taxes, depreciation and amortization of $2,100,000. This summary financial information has been taken from the unaudited management prepared financial statements of Sphere for the six month period commencing September 1, 2005 and ending February 28, 2006 and the unaudited review engagement financial statements of Sphere for the year ended August 31, 2005. Readers are cautioned that this summary financial information has been provided to the Corporation by management of Sphere. Management of the Corporation has not verified the accuracy of this information. There is no assurance that the financial information provided in this press release is accurate.

The acquisition of Sphere is an arm's length transaction and, subject to the satisfaction of conditions precedent, including the acceptance of the TSX Venture Exchange, is anticipated to be completed on or before May 31, 2006 subsequent to the completion of due dilligence on behalf of the parties.

In conjunction with this acquisition, Cordy is pleased to announce that it has entered into an agreement with a syndicate of underwriters, led by TD Securities Inc. and including First Energy Capital Corp. and Blackmont Capital Inc. to sell on a bought deal basis, by way of private placement, 11,628,000 Common Shares at a price of $4.30 per Common Shares for gross proceeds of approximately $50 million. The Company has granted the Underwriters an option to puchase up to an additional 1,744,200 Common Shares, at a price of $4.30 per Common Share, for gross proceeds of up to approximately $7.5 million, exercisable, in whole or in part, at any time until 24 hours prior to closing. The completion of the offering is subject to receipt of all regulatory approvals. The net proceeds from this offering will be used to partially finance the recently announced acquisition of Wiebe Construction and the acquisition of Sphere Drilling Fluids Ltd., and for general corporate purposes including funding future acquisitions and the possible retirement of a portion of previously incurred debt.

Closing of the Common Share financing is expected to occur on or about April 19, 2006.

The Common Shares offered will not be and have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to a U.S. person, absent registration, or any state securities laws, or an applicable exemption therefrom. This news release shall not constitute an offer to sell or the solicitation of an offer to buy the Common Shares in any jurisdiction. This news release may contain forward-looking statements concerning the anticipated performance of the Company. Forward-looking statements are based on the estimates and opinions of management at the date the statements are made, and such estimates and opinions, while considered reasonable at the time they are made, may prove incorrect. The Company undertakes no obligation to update forward-looking statements if conditions or opinions should change.

The TSX Venture Exchange does not accept responsibility for the accuracy or adequacy of this release.

Contact Information

  • Cordy Oilfield Services Inc.
    Sid Dutchak
    President & CEO
    (866) 854-8075 (FAX)
    For investor relations information:
    Cordy Oilfield Services Inc.
    David Orr
    Vice President - Corporate Development