Estrella International Energy Services Ltd.
TSX VENTURE : EEN

Estrella International Energy Services Ltd.

November 04, 2013 09:16 ET

Estrella Announces Transaction and Operational Update and Resignation of CEO

BUENOS AIRES, ARGENTINA--(Marketwired - Nov. 4, 2013) - Estrella International Energy Services Ltd. (the "Company" or "Estrella") (TSX VENTUER:EEN), announces that the Company has completed its previously announced private placement ("Private Placement") of Series B Preference Shares to Ringo Holding L.P. ("Ringo"), for aggregate gross proceeds to the Company of CDN$123,322,570.

Private Placement and Consolidation

On November 1, 2013, the Company issued 24,664,514 Series B Preference Shares of the Company to Ringo at an issue price of CDN$5.00 per share, for aggregate gross proceeds to the Company of CDN$123,322,570. As previously disclosed, the proceeds of the private placement were used to repay all outstanding indebtedness owing by the Company to Ringo.

The Series B Preference Shares are convertible into post-consolidated Common Shares of Estrella on a 1 for 1 basis. The issued and outstanding Common Shares of Estrella were consolidated on a 1 for 100 basis on October 31, 2013.

Operational Update

The Company is also pleased to announce the following update on its operations:

Acquisition of San Antonio Colombia - A Key Milestone for Estrella

In June 2013, Estrella entered into a definitive share purchase agreement with San Antonio International Oil & Gas Services LLC for the acquisition of the issued and outstanding shares of San Antonio Internacional Co. Inc. ("SAIC") for a purchase price of US$122.5 million. This acquisition was completed on August 1, 2013.

SAIC provides specialized services, equipment and personnel for the exploration and development of onshore oil and gas resources throughout Colombia. It has a portfolio of complementary oilfield services and equipment business lines including drilling, workover, cementing, casing running and coiled tubing. Its assets include 26 drilling and workover rigs. SAIC was the Colombian subsidiary of San Antonio Internacional and enjoyed a leading position in the Colombian market.

The acquisition of SAIC significantly altered Estrella's scale and market position:

  • The total number of rigs of Estrella increased from 19 to 45 rigs, with rigs operating in 3 of the 5 countries where Estrella is present.
  • The pro forma consolidated revenues of Estrella as at December 31, 2012, increased from US$81 to US$240 million.
  • Estrella became the largest service provider in Colombia with a market share of approximately 15% and a total fleet of 37 rigs (24 drilling rigs and 13 workover rigs).
  • Estrella now has access to the knowledge and experience of SAIC and its management team, its best practices and their commercial relationships in the Colombian market. The Colombia team, led by Mario Rodriguez who has more than 20 years of experience in the industry, is fully devoted to taking Estrella's Colombian operations to the next level.
  • This acquisition is expected to generate synergies from an SG&A and an OPEX perspective in an estimated range of US$4 million to US$8 million.

Estrella is currently engaged in a formal process to integrate SAIC with its existing Colombian operations. This process has evolved according to plan and both companies are currently operating under common direction and are servicing clients jointly. It is expected that the coming months will show growth in the combined utilization rates and synergies in the SG&A, leading to improved financial results.

Higher rig utilization in Argentina

In Argentina, Estrella continues to see substantial growth coupled with a less uncertain political and business environment, with the Argentine government, through YPF, showing commitment in the development of significant non-conventional oil and gas reserves (mainly driven by the Vaca-Muerta formation). The Company expects increased demand for its E&P services not only from YPF but from all operators in the market.

We are pleased to announce that our utilization rates in Argentina are currently above 90%. Estrella is currently negotiating a 2 year extension with Pluspetrol for rig 103; Rigs 551 and 1201 recently won long-term contracts with YPF for 3+2 years; and Rig 1001 has been awarded a 5 year contract with YPF. Rig 1001 is currently being mobilized to Argentina and operations are expected to start in December 2013. We are pleased to report that the Company expects to have all 6 of its rigs in Argentina operating during Q1 2014.

Debt reduction and working capital improvement

Since the US$25 equity financing with Ringo in Q3 2012, the Company has reduced its overall indebtedness from US$49.3 million to US$15 million. These figures exclude the approximately US$118 million in shareholder loans owing to Ringo ("Shareholder Loan"), which was repaid in connection with the Private Placement, and the US$54.5 million in acquisition financing related to the SAIC deal.

Through this debt reduction initiative, Estrella has eliminated expensive and restrictive debt.

This increase in working capital has allowed Estrella to improve its debt position with its suppliers and secure better payment terms on recurrent purchases. This process of improving payables is expected to continue in the months to come and is expected to result in stronger relationships with key suppliers.

Key areas of value accretion over the next 12 - 18 months

Estrella has two main drivers of value accretion for the next 12 - 18 months:

  • Further optimization of the new Estrella (integrated operations of Estrella + SAIC); and
  • Exploring a wide portfolio of new business opportunities that are currently being evaluated by the Company.

In terms of optimization of the current operations, management believes that completing a successful integration of SAIC and continuing to have a strong commercial strategy are fundamental sources of value for the months to come.

In addition, the Company is currently evaluating a number of new business opportunities to create value on top of its existing platform. This portfolio of opportunities includes: further consolidation of the Colombian market, acquisition and deployment of new rigs in Colombia and Argentina, further expansion and penetration of its current E&P services portfolio, and entry into other Latin American countries where Estrella can add value to local and international operators.

Management efforts will be concentrated in making these two pillars a reality for the Company.

Resignation of CEO

Estrella regrets to announce that Warren Levy has tendered his resignation as President and Chief Executive Officer of the Company.

Mr. Levy will continue in his role as President and Chief Executive officer until December 31, 2013, and will assist the Board of Directors in identifying his successor. The Company is considering candidates from both inside the Company as well as from industry, and will make an announcement concerning a successor when the selection process is concluded.

Chairman of the Board of Directors, Horacio Reyser, commented: "We sincerely thank Warren for his hard work and effort in founding and helping grow the Company into the regional leader it is today. We wish him all the best in his future endeavours."

Mr. Levy commented, "There comes a time in the growth of every successful company when the founders recognize the need to pass the baton to new leadership. Due to the entry of Ringo and the recent acquisition of San Antonio Colombia, the Company is entering a new phase, and I feel that the time is now for a new leader to help take Estrella through its next phase of growth."

Statements in this press release may contain forward-looking information. Any statements in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. Forward-looking statements in this press release include, but are not limited to, statements with respect to the future business plans, prospects and services.

The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Estrella. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this press release are made as of the date of this press release, and Estrella does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Estrella International Energy Services Ltd.
    Warren Levy
    Chief Executive Officer
    +54 (11) 5217-5250

    Estrella International Energy Services Ltd.
    Javier Vedoya
    Chief Financial Officer
    +54 (11) 5217-5250
    +54 (11) 5217-5280 (FAX)
    info@estrellasp.com