Estrella International Energy Services Ltd.
TSX VENTURE : EEN

Estrella International Energy Services Ltd.

December 01, 2010 08:44 ET

Estrella International Energy Services Ltd. Announces Completion of Acquisition of STS de los Andes S.A., Closing of $80 Million Credit Facilities With Credit Suisse, Release of Q3 Results

CALGARY, ALBERTA--(Marketwire - Dec. 1, 2010) -

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 that it completed its previously announced acquisition of 100% interest in Colombian based STS de los Andes S.A. ("STS") from its shareholders for a purchase price of approximately US$20 Million, including financial debt assumption. STS is a leading Colombian oilfield service company providing rigs and related services. This acquisition significantly expands the Company's foothold in the Colombian market, a strategic area of growth.

Concurrently, Estrella is also pleased to announce that it has closed a previously announced 5 year credit facility with Credit Suisse. Upon meeting conditions precedents customary to this type of credit facilities, the amount immediately available will be $32 million with a possibility to increase the facility up to US$80 Million. The new credit facility was used in part by Estrella to finance a portion of the acquisition of STS, and will be used to finance the acquisition of additional rigs and for working capital purposes.

Third quarter 2010 highlights:

  • Revenue increased by 4.5% for the quarter to US$ 8.8 million from US$ 8.4 million in Q3 2009;
  • Solid revenues growth in all segments of business as year over year comparison impacted by Q3, 2009 Maple contract in Peru;
  • Improved earnings with operating income of US$144k versus operating income of US$58k in Q3 2009;
  • Continued progress on establishing two new bases in Colombia and in Peru;
  • Completed importation of rig 552, a 550 hp ultra portable light drilling rig with start of operations in Q4, 2010;
  • Successfully extended key contracts in Argentina with improved terms;
  • Good progress to enter new markets in Bolivia and Paraguay.

Details on the STS Acquisition

The purchase price of the shares of STS was approximately US$20,000,000 ("Purchase Price"). The Purchase Price was satisfied as follows: cash in the amount of US$14,250,000 and the assumption of approximately US$1,000,000 of net financial debt. The balance of the Purchase Price was satisfied by issuing to the vendors 4,750,000 Series A Preference Shares in the capital of Estrella. The Series A Preference Shares have a deemed issue price of US$1.00 per share, and have the following material attributes:

  • The holders of Series A Preference shares will be entitled to receive a cumulative dividend of 4% of the paid up capital per-annum (the "Cumulative Dividend");
  • A liquidation right equal to the US$1.00 per share plus any accrued but unpaid Cumulative Dividend (the "Liquidation Preference");
  • The Company may, at its sole option, elect to convert the Series A Preference shares into common shares, in the event that the 20 consecutive trading day closing price of the common shares of the Company, is greater than or equal to US$1.00. The conversion rate shall be 1 common share of the Company for each 1 Series A Preference Share;
  • The holders may at any time elect to convert the Series A Preference shares into common shares of Estrella. The conversion rate shall be 1 common share of the Company for each 1 Series A Preference Share;
  • The Company may at any time and at its option redeem the outstanding Series A Preference Shares for a redemption purchase price of US$1.00 per Series A Preferred share plus any accrued and unpaid Cumulative Dividends.

The Series A Preference Shares issued in connection with the acquisition are subject to an escrow to secure payment of potential contingency obligations of the vendors to Estrella.

About STS: STS is a leading provider of workover rigs and related services to the oil and gas sector in Colombia. They have an excellent reputation for providing high quality services. There modern fleet of five rigs fit well into the profile of mobile, high quality rigs that Estrella offers. STS has just over 180 staff split between their offices in Bogota and their operational center in Bucaramanga. The fleet consists of rigs with horsepower ratings between 250 and 550 HP. Four of the five rigs are currently on term contracts, and the fifth is expected to start operations in the coming 60-90 days.

STS has been operating rigs for Occidental Petroleum for three of years and has recently been awarded new contracts from Ecopetrol.

New Credit Facilities with Credit Suisse

Concurrently with the Closing of the acquisition of STS, Estrella is also pleased to announce that it has closed previously announced credit facility with Credit Suisse (the "Lender") for a total capacity of $32 million (the "Loan"). On Closing Estrella drew US$14,250,000 on the Loan which was used to satisfy the cash portion of the Purchase Price of STS. The remainder of the draw will be used to finance the purchase of additional rigs in Estrella's operating region, and for working capital purposes. The credit agreement also includes the possibility to increase the facility up to $80 million.

In connection with the initial $32 million facility size, Estrella issued 3,072,000 transferable common share purchase warrants ("Warrants") to the Lender. Each Warrant will entitle the holder to purchase 1 common share in the capital of Estrella for a purchase price of US$0.91 per share, for a period of 4 years form the date of issuance. Estrella may, in the future, issue additional Warrants in connection with the syndication of the Loan. The Loan will bear interest at a rate of LIBOR plus 8%, and will be amortized quarterly over a period of 5 years with first amortization happening 15 months post closing date.

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
    or
    Estrella International Energy Services Ltd.
    Warren Levy
    Chairman & Chief Executive Officer
    +54 (11) 5217-5250
    +54 (11) 5217-5280 (FAX)
    info@estrellasp.com
    www.estrellasp.com