Estrella International Energy Services Ltd.
TSX VENTURE : EEN

Estrella International Energy Services Ltd.

February 22, 2011 09:00 ET

Estrella International Energy Services Ltd. Announces an Operational Update

CALGARY, ALBERTA--(Marketwire - Feb. 22, 2011) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRES

Estrella International Energy Services Ltd. ("Estrella" or the "Company") (TSX VENTURE:EEN) is pleased to announce the initiation of activity of a number of rigs, the award of new contracts and the delivery of Rig 1001 to Bolivia.

Additionally, the Company would like to provide an operational update for the Q4 2010 and address issues that were discussed in its December 6, 2010 operational update. The conclusion from the update is that three operational factors are expected to negatively impact the Company's Q4 2010 earnings. The three factors are 1) larger than expected one-time acquisition and capital raising costs associated with the acquisition of STS de Los Andes; 2) reduced revenues associated with the rig 1201 in Chile, which was operating on a standby rate for longer than originally anticipated, and rigs 351 and 552 in Peru (these rigs have since gone back onto contract); and 3) increased union related wage inflation in Argentina. 

While the Company expects to report positive earnings for fiscal 2010 as a whole, the Company expects to report a loss for the fourth quarter of 2010 as a result of the factors mentioned above. 

Operations Detail

In Argentina and Canada, Estrella has signed new consulting contracts for services for major potash solution mining projects. The contract in Canada calls for Estrella is to complete an early stage feasibility study on the drilling process. The contract in Argentina includes the design specifications, supervision of construction and delivery of two new rigs to the field in the center of the country. Both contracts started in the first quarter of 2011.

In Chile, the Company experienced reduced Q4 revenues as a result of the over- performance of geothermal Rig 1201. Rig 1201 finished its existing contract for Geothermia del Norte in October 2011, several months ahead of schedule. The rig was then placed under retainer with a new customer earning a reduced day-rate for the fourth quarter. This has negatively impacted the revenue stream of the rig for the fourth quarter, but the positive performance has ensured that the rig will stay in the key geothermal market and remain on contract. The crew has been temporarily redeployed or released during the standby period. The rig is currently being mobilized to Calama, and is expected to continue mobilization to central Chile to start operations on a new geothermal contract. During the deployment, as of January 15th, 2011, the Company has negotiated an improved retainer rate for the rig during the mobilization period.

In Peru, Rig 552 suffered delays in initial start-up, but then successfully entered operations in November. The rig has proven the capability to reduce average surface well times from multiple days down to twelve hours. The rig successfully completed its test contract, and then released while the customer builds additional new drilling locations. In the interim, Rig 552 has been deployed in service for PlusPetrol and is being mobilized to operate in the central jungle, that contract commenced in February 2011.

Also in Peru, completion of a refit of Rig 351 was delayed until January 2011. Rig 351 has been awarded a term contract with Petrobras to commence operations this month.

Finally, despite renegotiating increased day-rates with Occidental Petroleum on Rigs 101 and 102, increased wage related inflation in Argentina has resulted in even higher than expected labour and operational costs in the region. The Company is currently working with both the customer and local suppliers to improve the situation and ensure future profitability from this business.

"While a number of one time factors have led to disappointing results in the fourth quarter, we believe our business is well positioned for 2011. The region is showing strong signs of growth, and the opportunities for Estrella to win new projects in 2011 are abundant compared to last year. We anticipate improved operating results moving through 2011 and into 2012." said Warren Levy, President and Chief Executive Officer of the Company.

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 and services and final Exchange approval of the Merger.

The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances, such as future availability of capital on favourable terms, 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.
    Christian Bauwens
    Chief Financial Officer
    +54 (11) 5217-5250
    +54 (11) 5217-5280 (FAX)
    info@estrellasp.com
    or
    Estrella International Energy Services Ltd.
    Warren Levy
    Chairman & Chief Executive Officer
    +54 (11) 5217-5250
    +54 (11) 5217-5280 (FAX)
    info@estrellasp.com