Total Energy Services Trust
TSX : TOT.UN

Total Energy Services Trust

March 19, 2009 22:28 ET

Total Energy Services Trust Announces Proposed Conversion to a Corporation

CALGARY, ALBERTA--(Marketwire - March 19, 2009) - Total Energy Services Trust ("Total") (TSX:TOT.UN) is pleased to announce that Total, Total Energy Services Ltd. ("TESL") and Biomerge Industries Ltd. ("Biomerge") have entered into an agreement (the "Arrangement Agreement") pursuant to which, among other things, Total will convert from an income trust to a corporation (the "Conversion"). The Conversion will occur pursuant to a statutory plan of arrangement under Section 193 of the Business Corporations Act (Alberta) (the "Plan of Arrangement") and is expected to become effective prior to May 31, 2009. Total's present monthly distribution of $0.03 per unit will continue until May 2009, with the final distribution being paid on or about May 15, 2009 for the month of April 2009. Total presently anticipates that subsequent to the Conversion a quarterly dividend in the amount of $0.03 per share will be paid to shareholders, with the first dividend being paid in respect of the third quarter of 2009.

Rationale and Benefits for the Conversion

On October 31, 2006, the Department of Finance announced the Specified Investment Flow-Through Trust ("SIFT") income and distribution tax (the "SIFT Tax"). As a result of the SIFT Tax, it is clear that the goal of the Department of Finance is to eliminate public income trusts. In order to qualify under new legislation for a tax-free conversion, Total must convert to a corporation before the end of 2013. Having regard to these legislative changes, the current difficult economic and industry environment as well as the opportunities arising in such environment to advance Total's long-term strategic plan, Total believes that it is in its best interests to proceed with the Conversion at this time.

In addition:

- the Plan of Arrangement provides for an effective and efficient method of converting from a SIFT to a corporation consistent with existing legislation;

- the Conversion may result in greater access to capital and the removal of the "normal growth" and "undue expansion restrictions" in the SIFT legislation that limited Total's ability to consider strategic acquisitions;

- the corporate structure following the Conversion is expected to facilitate Total's ongoing international expansion, particularly within its Gas Compression Services division;

- the Conversion is expected to be a tax deferred rollover for unitholders of Total ("Total Unitholders") resident in Canada;

- in respect of the anticipated $0.12 annual ($0.03 quarterly) dividend following the Conversion, Canadian taxable Total Unitholders will receive a dividend tax credit compared to current unitholders' tax treatment as other income under Canadian tax legislation;

- following the Conversion, Total will not be restricted in its efforts to broaden its investor base to include more non-resident shareholders as is presently the case under its current legal structure;

- Total will have an estimated tax basis of over $150 million following the Conversion, including approximately $80 million of undepreciated capital cost allowance and $74 million of non-capital losses and scientific research and experimental development tax pools; and

- the Conversion will lead to a simplified and more efficient corporate structure that will reduce overhead and administrative costs.

Details of the Conversion

Under the Plan of Arrangement, Total Unitholders will receive one common share of Total Energy Services Inc. ("New Total") in exchange for every trust unit of Total held on the effective date of the Conversion. Upon completion of the Conversion, New Total will operate the existing businesses of the Trust and its subsidiaries and the existing board and management of TESL will become the board and management of New Total. New Total is not, as a consequence of the Conversion, acquiring any additional business carried on by Biomerge. Biomerge Securityholders (as defined herein) will receive consideration in the form of cash and common shares of New Total of an aggregate value, calculated in accordance with the Plan of Arrangement, not to exceed $3.9 million.

The Conversion is subject to various customary commercial conditions, including the receipt of regulatory approvals which include the approval of The Toronto Stock Exchange and the continuance of Biomerge from British Columbia to Alberta under the Business Corporations Act (Alberta). The Conversion is also subject to the approval of the court and of not less than 66 2/3% of the votes cast by Total Unitholders and the holders of voting and non-voting shares of Biomerge (collectively, "Biomerge Securityholders") at the respective securityholder meetings called to approve, among other things, the Conversion. The mailing of a joint information circular to the Trust Unitholders and Biomerge Securityholders is expected to occur in April 2009 and the Conversion is expected to occur prior to the end of May, 2009.

Complete details of the terms of the Plan of Arrangement are set out in the Arrangement Agreement that will be filed by Total on SEDAR. (www.sedar.com).

Conversion Approvals

The board of directors of TESL, as administrator of Total, has unanimously determined that the Arrangement is in the best interests of Total and the Total Unitholders. The board of directors of Biomerge has also unanimously determined that the proposed Arrangement is in the best interests of Biomerge and the Biomerge Securityholders.

Support Agreement with Nexia

Nexia Biotechnologies Ltd. ("Nexia") has entered into a support agreement with Biomerge and Total, pursuant to which, among other things, Nexia has agreed to vote all of its common shares and non-voting shares of Biomerge in favor of the Conversion. Nexia owns approximately 45% of the issued and outstanding common shares of Biomerge and 100% of the issued and outstanding non-voting shares of Biomerge.

About Total Energy Services Trust

Total Energy Services Trust is a growth oriented oil and gas service income trust involved in contract drilling services, drilling and production rentals and natural gas compression equipment fabrication, sales, rental and service. The trust units of Total are listed and trade on the TSX under the symbol "TOT.UN".

About Biomerge Industries Ltd.

Prior to entering into the Arrangement Agreement, Biomerge was seeking a financial partner who would be interested in utilizing Biomerge's assets as a publicly traded company. On October 23, 2006, after receiving a demand letter from a secured creditor, for the repayment of the long-term debt, Biomerge filed for and received creditor protection under the Companies' Creditors Arrangement Act ("CCAA") pursuant to an order issued by the Supreme Court of British Columbia. Biomerge completed a restructuring plan on September 24, 2007 (the "Restructuring Plan") and as a result of the Restructuring Plan, since such time, Biomerge has had no operating business and no assets other than cash and other incidental assets. Biomerge's principal business activities prior to the Restructuring Plan were the development and commercialization of Biomerge's medical imaging technologies for the detection and localization of cancer in its early stages of development. Biomerge shares trade on the NEX under the symbol "BIL.H".

This press release contains certain forward-looking statements and forward-looking information ("forward-looking information") within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release includes forward-looking information relating to results of operations, dividends, taxes, plans and objectives, access to capital, projected costs, business strategy and anticipated benefits of the Conversion. Total believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.

Forward-looking information is based on various assumptions. Those assumptions are based on information currently available to Total, including information obtained from third party industry analysts and other third party sources and include the historic performance of Total's businesses, current business and economic trends, completion of the Conversion and utilization of the tax basis, currency, exchange and interest rates, trading data and cost estimates. You are cautioned that the preceding list of assumptions is not exhaustive.

Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Total's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. These risks and uncertainties include but are not limited to the risks identified in Total's Annual Information Form under the heading "Risk Factors" and the risks associated with the availability and amount of the tax basis. Any forward-looking information is made as of the date hereof and, except as required by law, Total assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • Total Energy Services Trust
    Daniel Halyk
    President and Chief Executive Officer
    (403) 216-3921
    or
    Total Energy Services Trust
    Mark Kearl
    Vice-President Finance and Chief Financial Officer
    (403) 216-3920
    Email: investorrelations@totalenergy.ca
    Website: www.totalenergy.ca