Savanna Energy Services Corp.

Savanna Energy Services Corp.

January 05, 2011 10:21 ET

Savanna Energy Services Corp.: Update on Australian Operations

CALGARY, ALBERTA--(Marketwire - Jan. 5, 2011) - Pursuant to our five year take-or-pay contract to supply hybrid drilling rigs, service rigs and related equipment in Australia, Savanna (TSX:SVY) has now landed two service rigs and ancillary equipment in the country. Savanna initiated operations in December, 2010, however extreme rainfall had curtailed operations throughout much of December, 2010, resulting in reduced utilization of our equipment relative to expectations. This situation has been further exacerbated by the service rigs getting caught in the primary flood zone. The rigs are currently inaccessible, but aerial photos of one of them indicate that it has suffered extensive damage, and will encounter extended downtime to effect repairs and restoration. The status of the second rig is also uncertain, as all components other than the carrier are currently outside the flood zone. The magnitude of the costs and timing of repairs to the rigs is as yet undeterminable, however Savanna does carry insurance on the equipment impacted by the flood. Savanna does not carry business interruption insurance.

In respect of the remaining Australian operations, the first of the two hybrid drilling rigs under contract has arrived in Australia, cleared customs, and is awaiting conditions in the field drying sufficiently to initiate operations. We anticipate the second drilling rig to be field-ready by Q2, 2011, as well. Crews identified to operate these rigs will continue working in Canada until conditions in Australia improve, partially alleviating the shortage of manpower that Savanna is currently facing in this region.

Additionally, the Company continues the manufacture of two additional drilling rigs, and an additional service rig for supply into the Australian market in 2011 as well.

While the delay in operations and rig damage caused by the flooding is not anticipated to be financially material to Savanna's results, and does not in any way negatively impact the terms of our existing take-or-pay contract supporting our Australian operations, we felt it is important to update investors on developments in this new growth market for the Company. Savanna remains committed to building a strong core area in Australia, and has participated in further tenders to supply additional equipment into the region. None of these awards have yet been made or announced.

Savanna is a Canadian-based drilling and well servicing provider with operations in Canada, the United States and Australia, focused on providing fit-for-purpose equipment and technologies.

Cautionary Statement Regarding Forward-Looking Information and Statements

Certain statements and information contained in this press release may constitute forward-looking information within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are based on certain assumptions and analysis made by Savanna in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results, performance or achievements will conform to Savanna's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from Savanna's expectations. Consequently, all of the forward-looking information and statements made in this press release are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by Savanna will be realized or, even if substantially realized, that they will have the expected consequences to or effects on Savanna or its business or operations. Except as may be required by law, Savanna assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.

Contact Information

  • Savanna Energy Services Corp.
    Dwayne LaMontagne
    Executive Vice President & Chief Development Officer
    (403) 503-9990
    (403) 267-6749 (FAX)
    Savanna Energy Services Corp.
    Ken Mullen
    President & Chief Executive Officer
    (403) 503-9990
    (403) 267-6749 (FAX)