Deepwell Energy Services Trust
TSX : DWL.UN

Deepwell Energy Services Trust

March 25, 2010 12:57 ET

Deepwell Energy Services Trust Announces Board Approval of Proposed Business Combination, Private Placement Financing, Conversion to a Corporation and Corporate Name Change

CALGARY, ALBERTA--(Marketwire - March 25, 2010) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Deepwell Energy Services Trust ("Deepwell") (TSX:DWL.UN) is pleased to announce that its Board of Trustees and the Board of Directors of Deepwell Energy Services Ltd., (the administrator of Deepwell) (the "Administrator") have approved the previously announced proposed transaction ("the Business Combination") with Palko Energy Ltd. ("Former Palko").

In conjunction with the Business Combination, Deepwell is also pleased to announce a $3 million private placement financing ("the Financing") by Gibson Energy ULC ("Gibson"), and that upon completion of the Business Combination and the previously announced conversion of Deepwell from an income trust to a corporation (the "Conversion"), Deepwell will be renamed Palko Environmental Ltd. ("Palko Environmental").

Subject to receipt of all necessary unitholder and regulatory approvals, the Business Combination, Financing, Conversion and Name Change are expected to become effective during the second quarter of this year.

Pursuant to the proposed Business Combination and Financing, Deepwell will acquire the remaining 50% equity interest not already held in Former Palko. Deepwell first acquired a 50% equity interest in Former Palko on September 25, 2008. The proposed Business Combination will facilitate the expansion and optimization of the combined businesses of Deepwell and Former Palko.

Effective upon the closing of the Business Combination, Mr. Steven Peterson, currently the President of Former Palko, will serve as the President of Palko Environmental, and Mr. Jay B. Simmons, currently Chairman and CEO of the Administrator of Deepwell, will serve as the Chairman and CEO of Palko Environmental.

"Since the opening of its water disposal facility in the heart of the Bakken oil play in Midale, Saskatchewan, just over two and a half years ago, the performance of Palko Energy has been outstanding. Steve Peterson and his team have done an extraordinary job creating cost effective waste management solutions for their clients", said Jay Simmons. Simmons added, "The extensive opportunities for future growth as a result of Palko's strategic position in the heart of the growing Bakken oil play are exciting. Moreover, the addition of Steve Peterson into a leading role in the combined business will serve us well. In addition to Steve's strong work ethic and entrepreneurial spirit derived from his past business leadership experience, Steve's outstanding character and reputation will positively contribute to Deepwell's culture of optimizing available resources to harness the best possible returns".

"Working in this new partnership will strategically position Palko Environmental in the larger and more diversified oilfield waste management marketplace", commented Steve Peterson.

"I am very enthused to have the opportunity to work in Palko Environmental on a much larger scale going forward and am excited about the opportunity to contribute my knowledge and operating experience to further optimize all of Palko Environmental's assets. I also look forward to working more closely with Deepwell's largest unitholder and strategic partner, Gibson (Gibson Energy ULC), to evaluate and capitalize on the extensive opportunities available for rapid growth within the waste management, disposal and resource recovery business", Peterson added.

Under the terms of the proposed Business Combination, the shareholders of Former Palko (other than Deepwell) will receive $2.8 million cash and 4.5 million trust units.

In accordance with the Governance Agreement between Deepwell and Gibson dated October 30, 2009, and in conjunction with the proposed Business Combination, Gibson has elected to exercise their right to maintain their 39% interest in Deepwell. As such, Gibson will be purchasing 3,000,000 trust units of Deepwell for a total consideration (subject to TSX and unitholder approval) of $3 million. This reflects the volume weighted average price of Deepwell's trust units at the time the letter of intent regarding the Palko transaction was negotiated.

Given the proposed Business Combination and the resulting opportunities for Deepwell to advance its strategic growth plan, Deepwell believes that it is in its best interests to convert to a corporation at this time. Upon the completion of the Conversion, Palko Environmental will operate the existing businesses of the Trust and Former Palko.

The Business Combination, Financing, Conversion and Name Change are subject to various customary commercial conditions, including the receipt of unitholder and regulatory approval. The Business Combination is also subject to entering into of a formal agreement with the shareholders of Former Palko.

About Deepwell Energy Services Trust

Deepwell is a Calgary, Alberta based income trust focused exclusively on providing waste treatment and disposal services to the oil and natural gas industry in Western Canada. Deepwell owns and operates three full service waste management facilities located in Claresholm, Mayerthorpe, and Grande Cache, Alberta, as well as one wastewater disposal facility in Rycroft, Alberta. Deepwell also owns a 50% interest in Palko Energy Ltd., the owner and operator of a full service oilfield waste management and water disposal facility in Midale, Saskatchewan, the heart of the growing Bakken oil play.

About Palko Energy Ltd.

Palko Energy Ltd. is a privately owned company based in Midale, Saskatchewan. Palko owns and operates a full service oilfield waste management and water disposal facility in Midale, Saskatchewan, the heart of the growing Bakken oil play.

About Gibson Energy ULC

Gibson is one of the largest independent midstream energy companies in Canada. Founded in 1953, Gibson has extensive capabilities in the transportation, storage, processing, marketing and distribution of crude oil, condensate, NGLs, asphalt and refined products. Gibson owns two large proprietary terminals in Alberta and several small custom terminals, 277 miles of pipelines, and 3.4 million barrels of tank storage. Gibson currently has one of the largest crude oil truck hauling fleets in Western Canada with 1,400 specialized trailers that handle approximately 280,000 barrels of oil equivalent (boe) per day. Gibson Energy ULC holds a 39% ownership interest in Deepwell Energy Services Trust.

Additional information about Deepwell Energy Services Trust is available at www.sedar.com and on the Trust's website at www.deepwellenergy.com.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this press release constitute "forward-looking" statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Trust or Deepwell Energy Services LP, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this document, such statements use such words as "may", "will", "intend", "should", "expect", "believe", "plan", "anticipate", "estimate", "predict", "potential", "continue", or the negative of these terms or other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this document. Such statements include the proposed Business Combination, Financing, Conversion, Change of Name and management changes.

The Forward looking statements are based on the assumption that the Business combination, Financing and Conversion will be completed, that all regulatory and unitholder approvals will be received and all conditions to the foregoing will be satisfied.

Although the Trust believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that these expectations will prove to be correct. There are risks which could effect the Trust's future results and could cause the results to differ materially from those expressed in these forward looking statements including that regulatory approvals will not be received, the Business Combination, Financing and Conversion will not be completed, or if completed the expected benefits and results will not be attained; the impact of general economic conditions in Canada; industry conditions, including fluctuations in the price of oil and natural gas; the impact of governmental regulation, including environmental regulation; stock market volatility; the need to obtain required approvals from regulatory authorities and the uncertainty inherent in attracting capital. Statements of past performance should not be construed as an indication of future performance. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors, including those discussed above, could cause actual results to differ materially from the results discussed in the forward-looking statements. Any such forward-looking statements are expressly qualified in their entirety by this cautionary statement. Moreover, the Trust does not assume responsibility for the accuracy or completeness of such forward-looking statements. The forward-looking statements included in this Press Release are made as of the date of this Press Release and the Trust undertakes no obligation to publicly update or revise forward-looking statements other than as required by applicable laws. You should not place undue reliance on forward-looking statements.

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