Phoenix Oilfield Hauling Inc.

Phoenix Oilfield Hauling Inc.

July 09, 2008 12:21 ET

Phoenix Oilfield Hauling Inc. Announces Acquisition of the Operating Assets of Rodan Transport Ltd. and Rodan Transport (USA) Ltd.

NISKU, ALBERTA--(Marketwire - July 9, 2008) -


Phoenix Oilfield Hauling Inc. (TSX VENTURE:PHN) ("Phoenix" or the "Company") is pleased to announce that it has, pursuant to transaction agreements dated effective July 7, 2008, acquired all of the operating assets of Rodan Transport Ltd. and Rodan Transport (USA) Ltd. (collectively "Rodan"). Rodan is a privately owned company based in Strathmore, Alberta and Mineral Wells, Texas that specializes in the transportation of products, materials, supplies, and equipment required for the exploration, development and production of petroleum resources. Rodan's principal business is the movement of drilling rigs. The acquisition is an arms-length transaction.

The purchase price of Rodan is approximately $12.9 million and was paid by way of approximately $9.9 million in cash and the issuance of approximately 8.6 million common shares of Phoenix at a deemed price of $0.35 per share. The purchase price is subject to adjustment for actual working capital balances which are expected to be determined within 60 days of closing. The common shares issued are subject to a four month hold period consistent with applicable securities legislation. No finder's fee was paid in connection with the acquisition.

The acquisition of Rodan increases Phoenix's fleet by 24 trucks to approximately 120 trucks and further expands the Company's base of operations in Southern Alberta and into the United States. Concurrent with transaction the Company has relocated certain equipment to Mineral Wells, Texas and expects to operate approximately 28 trucks from that branch location prospectively. In connection with the acquisition, Danny LaChance will remain with the company and continue to be responsible for Rodan's day-to-day operations.

According to Leo Provencher, President of Phoenix, "Rodan represents a significant opportunity for Phoenix to establish a presence in the U.S. market, to expand existing customer relationships cross border and to redistribute its fleet to improve utilization and margins. While industry conditions appear to be improving in Western Canada, U.S. exposure is still a logical expansion to better balance the capacity of our equipment to market demand over the long-term. We are extremely pleased to have Danny LaChance join out team; our essential strength remains our ability to attract and integrate young, talented and aggressive leaders into our business".

The cash cost of the acquisition of approximately $9.9 million was funded by way of $10.0 million in subordinated debentures provided by certain related parties. A $2.5 million subordinated debenture was provided by a company related to the president of Phoenix (the "Provencher Debenture"). The Provencher Debenture will have a term of 36 months and will bear cash interest at 8% per annum, payable monthly, and will accrue, in addition, interest at 4% per annum ("Deferred Interest"). Subject to certain conditions the Deferred Interest may be paid by Phoenix once annually sixty days following year end. In addition, a $7.5 million subordinated debenture (the "$7.5 Million Debenture") was provided by a company related to Phoenix by virtue of being controlled by a director of the Company. The $7.5 Million Debenture will have a term of 36 months and will bear a variable interest rate depending on the Company's financial performance. The $7.5 Million Debenture will bear cash interest at a rate of 8% per annum, payable monthly. In addition the $7.5 Million Debenture will accrue interest at a rate between 3% and 10% per annum that will be determined retroactively at the end of months 9, 18, 30 and 36 based on the relationship between EBITDA and funded debt of Phoenix. Subject to certain conditions the Deferred Interest may be paid by Phoenix once annually sixty days following year end.

The $7.5 Million Debenture holder will also receive 5.0 million warrants to purchase common shares of Phoenix in connection with the financing. The warrants have a term of 5 years and an exercise price of $0.35 and vest immediately.

Based on historical performance Rodan is prospectively expected to add in excess of $13 million in revenue to the Company. EBITDA percentage margins for Rodan have historically exceeded those of Phoenix.

A special committee was formed comprised of independent directors of the Company to review the financing transaction. Blackmont Capital Inc. was retained by the special committee of Phoenix's Board of Directors to provide an opinion, which has been provided, and which confirms that the financing is fair, from a financial point of view, to the Shareholders of Phoenix.

The operations of Phoenix and Rodan will result in the combined business operating a fleet of approximately 120 trucks working out of field locations in Nisku, Calgary, Strathmore, Grande Prairie and Slave Lake in Alberta and Mineral Wells in Texas.

As a matter of record the Company also announces that today it issued 300,000 common shares at a deemed price of $0.35 per share in a separate transaction to an employee as partial payment for the acquisition of a specialized piece of equipment.

Reader Advisory

"This news release contains certain forward-looking statements, which include assumptions with respect to (i) future operations; (ii) future economic conditions; (iii) future capital expenditures; and (iv) cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, loss of markets, volatility of commodity prices, currency fluctuations, environmental risks, competition from other companies, ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Corporation will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Corporation 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 may be required by applicable securities laws."

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy and accuracy of the contents of this news release.

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