Peak Energy Services Trust

Peak Energy Services Trust
Wellco Energy Services Trust

Wellco Energy Services Trust

December 20, 2007 09:00 ET

RETRANSMISSION: Peak Energy Services Trust to Merge With Wellco Energy Services Trust to Create a Larger, Growth Oriented Canadian Oilfield Services Trust

CALGARY, ALBERTA--(Marketwire - Dec. 20, 2007) - Peak Energy Services Trust ("Peak") (TSX:PES.UN) and Wellco Energy Services Trust ("Wellco") (TSX:WLL.UN) today announced that their respective Boards of Directors have unanimously approved, and the trusts have entered into, an agreement (the "Combination Agreement") to merge the two trusts. This combination will create a growth oriented leading Canadian oilfield services entity with an enterprise value approaching $200 million. Upon completion of the proposed transaction, the merged trust will continue to operate as "Peak Energy Services Trust".

Under the terms of the agreement, the merger will be accomplished by way of a plan of arrangement (the "Arrangement") under the Business Corporations Act (Alberta) whereby Wellco unitholders will receive 0.900 of a trust unit of Peak ("Peak Unit") for each trust unit of Wellco ("Wellco Unit") held. On completion of the proposed transaction, Peak unitholders will own approximately 63.0% and Wellco unitholders will own approximately 37.0% of the combined entity.

Mr. Christopher E. Haslam, Chairman and Chief Executive Officer of Peak stated, "Peak's Board of Directors is very pleased with this merger in many respects. The timing of the consolidation at this point in the cycle combined with complementary businesses, quality assets and experienced personnel from both sides will bode well for all stakeholders of the combined entity. Peak expects to see a smooth integration process that will allow the combined entity to maximize unitholder value and take advantage of the expected return to higher levels of activity in the oil and gas industry during the latter stages of 2008 or early 2009."

Mr. Ken Bagan, President and Chief Executive Officer of Wellco stated, "The Board of Directors of Wellco believe that this combination provides unitholders with the best possible opportunity to benefit from the growth strategy developed by the Trust. The improved market strength and fixed cost leverage of the combined entity positions it well to deliver value in the immediate future and to ensure growth in the Trust's product lines. The combined board ensures that the entity is guided with experienced directors from both Trusts."

The proposed Arrangement will be subject to approval by at least two thirds of the holders of Wellco units and holders of Wellco options, voting as a single class, the Court of Queen's Bench of Alberta, and appropriate regulatory and other authorities. The Wellco unitholders' meeting required to approve the Arrangement is expected to be held in early March 2008, and the closing of the Arrangement is anticipated to be completed no later than March 31, 2008. An information circular is expected to be mailed to Wellco unitholders in early February, 2008.


The respective boards of directors of both Peak and Wellco have unanimously approved the combination and Combination Agreement and have concluded that the combination is in the best interests of the Peak and Wellco unitholders and Wellco option holders. The board of directors and senior management of Wellco, representing 17.7% of the units outstanding will enter into agreements with Peak to vote in favor of the combination and will unanimously recommend that Wellco unitholders vote in favor of the combination.

The Combination Agreement contains provisions that, among other things, (i) prohibits each trust from soliciting or initiating any discussions regarding any other business combination or sale of material assets, subject to certain conditions; (ii) grants the parties the right to match competing unsolicited proposals; and (iii) provides for a $2.0 million reciprocal termination fee subject to certain conditions.

Mr. Curtis W. Whitteron, Peak President and Chief Operating Officer, will serve as President and Chief Executive Officer of the merged trust upon closing of the transaction. All senior management from Peak will remain with the combined organization.

The board of directors of the combined trust (the "Pro Forma Board") will consist of members from the existing Boards of Directors of Peak and Wellco. Specifically, the Pro Forma Board will be comprised of Christopher E. Haslam (Chairman), Curtis W. Whitteron, Richard A. Grafton, Frederick A. Moore and Edward H. Kernaghan. Raymond P. Antony and Douglas F. Robinson will stand for election to the Pro Forma Board at the Peak Energy Services Trust annual general meeting expected to be held in early June 2008.


Peak and Wellco have both decided to cease monthly distributions to unitholders as of December, 2007. Peak and Wellco believe that greater unitholder value can be generated through the more efficient use of their capital to expand current operations and strengthen their balance sheet both as separate and combined entities. The underlying business of the combined entities remains the same and management will be monitoring and evaluating the business environment over the next several months to determine the optimal capital structure for the merged Trust on a go forward basis.


The proposed Arrangement allows unitholders of Peak and Wellco to participate in a stronger and larger entity. Management of both Peak and Wellco believe that market developments in the North American energy service sector, combined with fiscal policy changes in Canada, have created an environment that will be supportive of a new high growth Canadian oilfield service trust. The combination of Peak and Wellco is anticipated to provide the following strategic benefits:

- An increased enterprise value of approximately $200 million, which is expected to result in enhanced liquidity, a more competitive cost of capital, and improved financing flexibility to better compete for larger and higher quality growth opportunities

- A continuing strong and experienced management team

- Economies of scale with related operating and SG&A synergies of approximately $5.5 million on an annualized basis

- As one of the first to initiate consolidation in the fragmented Canadian energy services sector, the combined entity will be well positioned to take advantage of a return to higher levels of activity in the sector that are expected in the latter stages of 2008 or early 2009

- Transaction will be immediately accretive to all unitholders of the combined entity


The merged trust creates a new, growth oriented Canadian oilfield services trust with the following attributes:

- Increased exposure to oil sands region in multiple product lines

- Dominant supplier of well site accommodations, waste water treatment and production rental equipment in western Canada.

- Opportunities to diversify geographically with existing product lines

- Increased U.S. and International exposure through the Sanitherm waste water division

- Greater visibility in capital markets due to increased critical mass

With a combined 2008 capital expansion program of approximately $10 million, the significant amount of growth capital expended over the previous two years and substantial growth plans for the future, the merged trust will be well positioned for further consolidation opportunities and to become a more dominant player in the Canadian energy services sector.


Macquarie Capital Markets Canada Ltd. acted as the financial advisor to Peak in connection with the proposed combination and Canaccord Capital Corporation has provided a verbal opinion, as of the date hereof, that the combination is fair, from a financial point of view, to the holders of Peak units.

National Bank Financial Inc. acted as exclusive financial advisor to Wellco in connection with the proposed combination and has provided a verbal opinion, as of the date hereof, that the consideration to be received by the holders of Wellco Units pursuant to the combination is fair, from a financial point of view, to the holders of Wellco Units.


Management from both of the merged entities will host a joint conference call for investors, financial analysts, media and other interested persons on December 20, 2007 at 9:00am Mountain Daylight Time (11:00am ET).

The conference call is open to analysts, investors and all interested parties.

Date: Thursday, December 20, 2007

Time: 9:00am MT (11:00am ET)

Call: 1(866) 862-3915 or if preferred, call 1(416) 641-6111

Participants are asked to call at least 10 minutes before the start of the call. For those unable to participate on the live call, a replay will be made available until Thursday, December 27, 2007 by dialing 1(800) 408-3053 or if preferred 1(416) 695-5800, verbal passcode 3246935.

About Peak Energy Services Trust

Peak Energy Services Trust is a diversified energy services organization providing oilfield equipment and related services to the energy industry in western Canada and the mid-western United States of America. Peak's trust units are listed on the Toronto Stock Exchange under the symbol "PES.UN".

About Wellco Energy Services Trust

Wellco Energy Services Trust provides a comprehensive array of oilfield services to organizations engaged in the search for oil and natural gas in western Canada. Wellco's trust units are listed on the Toronto Stock Exchange under the symbol "WLL.UN".

Certain information set forth in this news release, including management's assessment of Peak's and Wellco's future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond these parties' control, including the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of commodity prices, currency fluctuations, environmental risks, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Peak and Wellco's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance 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 that Peak and Wellco will derive there from. Peak and Wellco disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information

  • Peak Energy Services Trust
    Mr. Curtis W. Whitteron
    President and Chief Operating Officer
    (403) 543-7325
    (403) 543-7335 (FAX)
    Peak Energy Services Trust
    Mr. Matthew J. Huber
    Chief Financial Officer
    (403) 543-7325
    (403) 543-7335 (FAX)
    Peak Energy Services Trust
    Suite 900, 222 - 3rd Avenue S.W.
    Calgary, Alberta, T2P 0B4
    Wellco Energy Services Trust
    Mr. Kenneth M. Bagan
    President and Chief Executive Officer
    (403) 232-6334
    (403) 232-6338 (FAX)
    Wellco Energy Services Trust
    Mr. Corey Zahn
    Chief Financial Officer
    (403) 232-6334
    (403) 232-6338 (FAX)
    Wellco Energy Services Trust
    Suite 2300, 500 - 4th Avenue S.W.
    Calgary, Alberta, T2P 2V6