Total Energy Services Trust

Total Energy Services Trust

February 25, 2005 07:00 ET

Total Energy Services Ltd. Announces Proposal for Reorganization into an Income Trust




FEBRUARY 25, 2005 - 07:00 ET

Total Energy Services Ltd. Announces Proposal for
Reorganization into an Income Trust

CALGARY, ALBERAT--(CCNMatthews - Feb. 25, 2005) - Total Energy Services
Ltd. (TSX:TOT) ("Total Energy" or the "Corporation") announces that its
Board of Directors has unanimously approved a proposal to reorganize
Total Energy into an income trust (the "Trust").

The proposed reorganization is the foundation of a plan to enhance
shareholder value. Such plan includes the reorganization of Total Energy
to facilitate the Corporation's continued disciplined approach to
growing its business and to provide for the distribution to shareholders
of a portion of cash flow generated by Total Energy's operations on a
tax effective basis. Under the terms of the proposed reorganization,
Total Energy shareholders will receive, at their election, one unit (a
"Unit") of the Trust or one exchangeable share for every one common
share of Total Energy held. There will be a maximum of 4.0 million
exchangeable shares issued pursuant to the plan of arrangement
representing approximately 15 percent of the total outstanding common
shares. If requests for exchangeable shares exceed the maximum, the
exchangeable shares will be prorated among those electing. In lieu of
monthly cash distributions, the exchange value of the exchangeable
shares will increase by the amount of distributions paid to Unitholders.
Non-resident and tax exempt shareholders will only be eligible to
receive Units.

The reorganization will be accomplished by way of a plan of arrangement
under the Business Corporations Act (Alberta) that is subject to the
approval of at least 66 2/3% of the votes cast by the security holders
of Total Energy at an annual and special meeting to be held on April 28,

The Board of Directors recommends that security holders of Total Energy
approve the proposed reorganization. Directors and senior officers of
Total Energy, who control approximately eight percent of the 27.5
million issued and outstanding common shares of the Corporation, have
indicated that they intend to vote in favour of the proposed
reorganization at the security holder meeting. In addition to the
requirement for security holder approval, the reorganization will be
subject to a number of other conditions including finalization and
execution of banking and other transaction documentation as well as the
receipt of all necessary regulatory and court approvals.

The Board of Directors of Total Energy anticipates setting the initial
level of annual distributions at approximately $0.72 per Unit ($0.06 per
Unit on a monthly basis), with distributions to commence on a monthly
basis after the conversion is completed. The Board of Directors believes
that this initial distribution level will provide holders of Units with
a substantial distribution but will also permit the Trust to fund
anticipated maintenance capital expenditures and future growth plans,
including the previously announced preliminary 2005 capital expenditure
budget of $24.5 million, primarily through cash flow from operations.

The existing management of Total Energy will manage the Trust. The
current business and operations of Total Energy will not be affected by
the reorganization and the current management and employees of Total
Energy and its subsidiaries will continue in similar roles following the

The Board of Directors of Total Energy established a special committee
(the "Special Committee") consisting of Messrs. Bruce Pachkowski, Tom
Stan and Greg Fletcher to consider strategic alternatives available to
Total Energy with a view to enhancement of shareholder value, including
the possibility of reorganizing the Corporation into an income fund.
Following deliberations and consultations with financial, legal and tax
advisors, the Special Committee unanimously recommended to the Board of
Directors that the Corporation be reorganized into an income trust.

The Board of Directors believes that the reorganization is in the best
interests of Total Energy and its shareholders. In establishing the
terms of the reorganization and in making its recommendation, the Board
considered, among other things, the following factors:

- the recommendation of the Special Committee and the advice of
financial, legal and tax advisors;

- Total Energy's existing energy service businesses generate substantial
levels of free cash flow;

- Total Energy's revenue diversification between Drilling Services
(Contract Drilling and Drilling and Production Rentals) and Production
Services (Gas Compression);

- Total Energy and its subsidiaries have a stable and experienced
management team that has been involved with Total Energy's various
business segments since Total Energy entered each business. The current
management team is committed to continuing to manage the business and
affairs of Total Energy following conversion to an income trust;

- Total Energy commenced operations in 1997 and has demonstrated the
ability to substantially grow its business in a capital efficient manner
and without significant reliance on the equity markets while at the same
time maintaining a strong balance sheet. By retaining a significant
portion of its free cash flow for growth opportunities, Total Energy
anticipates a continuation of this track record of efficient growth;

- Total Energy is currently cash taxable. The income trust structure is
expected to allow the Corporation to more efficiently deal with its cash
taxes by substantially reducing the liability at the corporate level and
thereby increasing the amount of cash available for future capital
expenditures and distribution to Unitholders without unduly compromising
the ability of the Trust to continue to internally fund future growth

- Units of the Trust are expected to be valued more favorably than are
the common shares of Total Energy;

- Unitholders are expected to benefit from increased liquidity relative
to holders of common shares of Total Energy; and

- The Trust is expected to have improved access to capital markets to
finance future growth opportunities.

Sprott Securities Inc. ("Sprott") is providing financial advisory
services to Total Energy in connection with the proposed reorganization.
Sprott has provided the Special Committee and the Board of Directors of
Total Energy with a verbal opinion, subject to its review of the final
form of documents effecting the reorganization, that the consideration
to be received by Total Energy security holders as a result of the
completion of the plan of arrangement is fair from a financial point of

An information circular describing the reorganization and detailing the
proposed plan of arrangement will be mailed to security holders in March
for the purpose of obtaining security holder approval. The information
circular will be available on the internet at and on Total
Energy's website at

Total Energy also announces that it will conduct a conference call
following the release of its financial results for the three and 12
months ended December 31, 2004. The financial results will be released
the morning of the conference call. Messrs. Daniel Halyk, Chief
Executive Officer, Larry Coston, President and Chief Operating Officer
and David Hawkins, Vice President Finance and Chief Financial Officer
will host the conference call.

Open to: Analysts, investors and all interested parties
Date: Wednesday, March 9, 2005
Time: 2:30 p.m. MST
Call: (800) 769-8320

Those who are unable to listen to the call live may listen to a
recording of it by calling (888) 509-0082, which will be available until
March 12.

Total Energy is a publicly traded energy service company engaged in
contract drilling services, drilling and production rentals and natural
gas compression equipment manufacturing, sales, rental and service. The
common shares of Total Energy are listed and trade on the Toronto Stock
Exchange under the symbol TOT.

Certain statements contained in this press release, including statements
which may contain words such as "could", "should", expect", "believe",
"will" and similar expressions and statements relating to matters that
are not historical facts are forward-looking statements. Such
forward-looking statements involve known and unknown risks and
uncertainties which may cause the actual results, performances or
achievements of Total Energy to be materially different from any future
results, performances or achievements expressed or implied by such
forward-looking statements. Such factors include fluctuations in the
market for oil and gas and related products and services, political and
economic conditions, the demand for services provided by Total Energy,
Total Energy's ability to attract and retain key personnel and other

Not for distribution to U.S. newswire services or for dissemination in
the United States.


Contact Information

    Total Energy Services Ltd.
    Bruce L. Pachkowski
    (403) 213-2903
    Total Energy Services Ltd.
    Daniel K. Halyk
    (403) 216-3921
    Total Energy Services Ltd.
    2410, 520 - 5th Avenue S.W.
    Calgary, Alberta T2P 3R7
    (403) 216-3939
    (403) 234-8731 (FAX)
    The Toronto Stock Exchange has neither approved nor disapproved of the
    information contained herein.