ES Investments Ltd. Announces Acquisitions of Mi Casa Rentals Inc. and Primera Bioscience Research Inc., Equity Offering, and Creation of Growth Oriented Oilfield Services Company
NOT FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.
CALGARY, May 15, 2012 /CNW/ - ES Investments Ltd. ("ES") a private oilfield services company, and Primera Bioscience Research Inc. ("Primera") (a reporting issuer in Ontario) are pleased to announce that they have entered into a definitive amalgamation agreement (the "Amalgamation Agreement") which provides for: (i) the acquisition by ES of all of the issued and outstanding common shares (the "Primera Shares") of Primera (the "Primera Acquisition") on the basis of 0.07315 of a common share of ES ("ES Share") for each 1.0 Primera Share (which represents a deemed share price of $0.1463 per Primera Share and $2.00 per ES Share). In connection with the completion of the Primera Acquisition, the name of ES will be changed to "New Wave Energy Services Group Ltd.".
ES Investments Ltd.
ES is currently a privately held company based in Calgary, Alberta, and is engaged in the business of providing full service on-site frac fluid storage and handling solutions and related rental services to the oil and gas industry, initially in North Dakota, Alberta, British Columbia and Saskatchewan.
To date, ES has completed the acquisition of New Wave Energy Services Ltd. ("New Wave"), a private on-site frac fluid storage and handling company, entered into the Amalgamation Agreement with Primera and entered into a definitive agreement to acquire Mi Casa Rentals Inc. ("Mi Casa"), a private wellsite accommodation company.
Following the completion of the Primera Acquisition, the Mi Casa Acquisition (defined below) and the Offering (defined below), ES will have outstanding an estimated 30.5 million ES Shares, share purchase warrants to acquire an aggregate of approximately 18,000 ES Shares at an exercise price of $1.37 per ES Share, stock options to acquire an aggregate of approximately 3.0 million ES Shares with an average exercise price of $1.81, and 375,000 broker warrants with an exercise price of $2.00. To date, ES and New Wave have raised an aggregate of approximately $9.3 million of equity through a series of non-brokered private placements.
New Wave Acquisition
On April 2, 2012, ES completed the acquisition of the issued and outstanding common shares of New Wave, a private company with operations in North Dakota, Saskatchewan and Alberta, in exchange for 1.8 million ES Shares.
New Wave provides a full service on-site frac fluid storage and handling solution to the oil and gas industry. The New Wave solution consists of front and back end frac fluid storage and handling and logistic support, through the use of 20,000 barrel capacity modular storage tanks ("Modular Tanks") and frac buffer tanks ("Buffer Tanks"). The Modular Tanks and Buffer Tanks were designed and tested during the last two years by frac completion professionals.
The 20,000 barrel capacity Modular Tank provides large volume front and back end on-site frac water storage capacity. The Modular Tank can be set up in less than 10 hours and is transported in one truckload, greatly reducing the volume of truckloads required for a frac and the carbon footprint of a completion compared to incumbent 400 to 500 barrel tank farms.
The 1,250 barrel capacity Buffer Tank is unique to the completion industry. The Buffer Tank eliminates the need for a working tank farm on a frac job and can be tied in directly to the pressure pumping system on a frac job. It is transported in one truckload, has a built-in manifold system and a 2,000 Btu steam coil heating system. The built-in manifold system reduces the requirement for an external manifold, reduces time lost from freezing in harsher climates and reduces the number of hoses required for tie in to the pressure pumping system, all of which factors significantly decrease the set up time when compared to incumbent systems. The Buffer Tank has multiple compartments that allow for three phase (sand, water and oil) separation on flowback after completion which allows producers to increase revenue, decrease disposal costs and recycle water in slickwater applications.
Mi Casa Acquisition
ES has entered into a definitive agreement (the "Acquisition Agreement") with Mi Casa and its shareholders. Pursuant to the Acquisition Agreement, ES will indirectly acquire all of the issued and outstanding shares of Mi Casa for aggregate equity consideration of approximately $20.1 million, consisting of approximately $11.4 million cash and approximately 6.0 million ES Shares at a deemed issuance price of $1.50 per ES Share and the assumption of net debt of approximately $6.9, prior to certain closing adjustments (the "Mi Casa Acquisition").
Mi Casa is a private wellsite accommodation company which was founded in 1993 with operations in British Columbia, Alberta and Saskatchewan. Mi Casa has been quite successful with an established 19 year track record. Mi Casa has developed strong customer loyalty and repeat business from over 75 customers resulting in a history of predictable cash flow. Mi Casa operates a fleet of 198 wellsite accommodation units. Access to capital will provide Mi Casa with the opportunity for increased returns through expansion into year round access focus areas such as the North Dakota Bakken market. Mi Casa, as a first call for rental services, will have the opportunity to offer additional rental solutions to its customers.
The Mi Casa Acquisition will be completed concurrent with the completion of the Primera Acquisition. The completion of the Mi Casa Acquisition is subject to, among other things, the completion of an equity financing for aggregate proceeds of at least $15.0 million.
Equity Financing
ES and Primera have entered into an agreement with Canaccord Genuity Corp. ("Canaccord"), on behalf of a syndicate of agents (Canaccord, and the other agents, collectively the "Agents") for an offering (the "Offering"), on a "reasonable commercial efforts" private placement basis, to raise up to aggregate gross proceeds of $25.0 million (the "Offering") through the issuance of subscription receipts ("Subscription Receipts") of Primera at a price of $0.1463 per Subscription Receipt (which equates to a deemed issuance price of $2.00 per ES Share based on the exchange ratio of 0.07315 of an ES Share for each 1.0 Primera Share).
Closing of the Offering is expected to occur on or about June 7, 2012, and is subject to customary conditions and approvals. The net proceeds from the sale of the Subscription Receipts will be used to fund the cash portion of the purchase price in respect of the Mi Casa Acquisition, for ES' initial capital program and for general corporate purposes.
The gross proceeds from the sale of the Subscription Receipts will be delivered to and held in escrow (the "Escrowed Proceeds") by a licensed Canadian trust company or other escrow agent mutually acceptable to ES and the Agents, in an interest bearing account pending the completion of the Mi Casa Acquisition and the Primera Acquisition. If the Mi Casa Acquisition and Primera Acquisition are completed on or before 5:00 p.m. on July 31, 2012, the net Escrowed Proceeds will be released to ES.
Upon the satisfaction of all conditions to the completion of the Mi Casa Acquisition and the Primera Acquisition in accordance with the Acquisition Agreement and the Amalgamation Agreement, respectively, including, without limitation, the receipt of all required shareholder and regulatory approvals (the "Escrow Release Conditions"), each Subscription Receipt shall be deemed to be exercised, for no additional consideration or action on the part of the holder thereof, for one Primera Share. In addition, all Primera Shares issued pursuant to the Offering shall be exchanged for ES Shares pursuant to the Primera Acquisition and on the same basis as all other holders of Primera Shares.
If the Escrow Release Conditions are not satisfied on or before 5:00 p.m. on July 31, 2012, or either of the Amalgamation Agreement or the Acquisition Agreement is terminated at an earlier time or if ES has advised the Agents or announced to the public that it does not intend to proceed with the Mi Casa Acquisition or the Primera Acquisition, holders of Subscription Receipts will receive a cash payment equal to the offering price of the Subscription Receipts and any interest that was earned thereon during the term of the escrow.
ES Management Team
The ES Management Team is led by Liam Balfour as President and Chief Executive Officer, Mark Hopper as Vice President, Finance and Chief Financial Officer, Rick Geisel as Vice President, Fluid Management, Brent Olson as Vice President, Wellsite Accommodation and Ryan Leininger as General Manager, U.S. Operations (collectively, the "ES Management Team").
Liam Balfour, President and Chief Executive Officer
Mr. Balfour has over 12 years of experience in capital markets, including oil and gas and oil and gas service investment banking and equity research. Most recently Mr. Balfour was a Director, Investment Banking at Jennings Capital Inc., a natural resource focused boutique investment dealer. Mr. Balfour is a CFA charterholder and a holds a Bachelor of Commerce, with Distinction, from the University of Victoria, Canada.
Mark Hopper, Vice President, Finance and Chief Financial Officer
Mr. Hopper has seven years of oilfield services experience in public financial reporting, acquisitions, divestments and capital markets. Most recently Mr. Hopper was the Controller of Essential Energy Services Ltd., an energy services company listed on the Toronto Stock Exchange ("TSX"). Mr. Hopper holds a Chartered Accountant designation and articled with KPMG LLP from 1997 to 2002.
Rick Geisel, Vice President, Fluid Management
Mr. Geisel has over 18 years of sales and management experience in the oilfield services industry. Mr. Geisel was a founder and the President of New Wave prior to its sale to ES. Prior thereto, Mr. Geisel was a founder and the President of Paragon Energy Services (Saskatchewan) Ltd., a private oilfield services company, prior to its sale to Black Diamond Group Limited in 2010.
Brent Olson, Vice President, Wellsite Accommodation
Mr. Olson has over 12 years experience in the oil and gas services industry. Mr. Olson has been the President of Mi Casa since 2009. Mr. Olson joined Mi Casa in 1999, purchased a 50% equity position in Mi Casa in 2004 and has guided the strategic expansion of Mi Casa since that time.
Ryan Leininger, General Manager, U.S. Operations
Mr. Leininger has over 15 years of oilfield services experience in North Dakota, Montana and Southeast Saskatchewan. From 2001 to 2011, Mr. Leininger held positions of increasing responsibility with S&S Sales Inc., a frac sand distributor, oilfield logistics and rental services company based in Williston, North Dakota, including as Vice President from 2005 to 2008 and as President from 2008 to 2011. Mr. Leininger was instrumental in growing sales at S&S Sales Inc. from approximately $2.0 million 2001 to approximately $38 million in 2008 at the time of its sale to EnerMax Services Inc., an SCF company.
ES Board of Directors
Upon the completion of the Primera Acquisition, the Board of Directors of ES shall consist of Liam Balfour, Walter Dawson, Sanjib (Sony) Gill, Reginald Greenslade and John Niedermaier.
Walter Dawson, Chairman
Mr. Walter Dawson, a founder of ES, has worked and been the leader of companies in the oilfield services industry for over 40 years. Mr. Dawson is a founder, director and the Executive Chairman of Tuscany International Drilling Inc. ("Tuscany"), an oilfield services company listed on the TSX. Prior thereto, Mr. Dawson was the founder of Saxon Energy Services Inc. ("Saxon"), an international oilfield services company which was publicly traded since 2001, and was Chairman of the board of directors of Saxon, prior to its acquisition by Schlumberger Oilfield Holdings Limited and private equity investors in a transaction valued at approximately $700 million. Mr. Dawson is currently a director of Perfco International Energy Inc. ("Perfco"), a private oil and gas company with interests offshore Vietnam, and Condor Petroleum Inc., an oil and gas company listed on the TSX.
Sanjib (Sony) Gill, Director
Mr. Gill is a partner in the Calgary office of the law firm of McCarthy Tétrault LLP. Mr. Gill has dealt with all aspects of a public and private company's creation, growth, restructuring and value maximization. Mr. Gill is currently the Corporate Secretary of Spartan Oil Corp. ("Spartan"), Hyperion Exploration Corp., Online Energy Inc. and Invicta Energy Corp. (all publicly traded entities listed on the TSX or the TSX Venture Exchange). Mr. Gill is also the Corporate Secretary of Perfco.
Reginald Greenslade, Director
Mr. Reginald Greenslade is a professional engineer with over 20 years of experience in the oil and gas industry. Mr. Greenslade is a Director, President and Chief Executive Officer of Tuscany. Prior thereto, Mr. Greenslade was the former Chairman, President and Chief Executive Officer of Big Horn Resources Ltd. and Enterra Energy Corp. and was the Chairman of Enterra Energy Trust until March, 2006. Mr. Greenslade is also a director of Spartan and Perfco.
John Niedermaier (Proposed Director upon completion of the Mi Casa Acquisition)
Mr. Niedermaier has over 50 years of experience in the Western Canadian oilfield services business, and has been instrumental in founding several oilfield services companies. Mr. Niedermaier is a founder of Mi Casa. Mr. Niedermaier served as the President of Mi Casa until 2009. In addition, Mr. Niedermaier is a former director of Purcell Energy, Technicoil Corporation, and is currently a director of Marksmen Energy Inc., an oil and gas company listed on the TSX Venture Exchange.
Primera Acquisition
The Primera Acquisition will be completed by way of a three-cornered amalgamation pursuant to which a new wholly-owned subsidiary of ES and Primera will carry out a statutory amalgamation whereby each Primera Share will be exchanged for 0.07315 of an ES Share (which represents a share price of $0.1463 per Primera Share and $2.00 per ES Share). It is anticipated that up to 320,031 ES Shares will be issued pursuant to the Primera Acquisition, prior to giving effect to the conversion of the Subscription Receipts.
Completion of the Primera Acquisition is subject to, among other things, receipt of the approval of 66 2/3% of the Primera shareholders voting in person or by proxy at a meeting of the Primera shareholders to be held to consider the Primera Acquisition, as well as customary regulatory approvals. The information circular to be mailed to Primera shareholders will contain detailed information in respect of the Primera Acquisition, ES and Primera. There can be no assurance that the Primera Acquisition will be completed as proposed or at all.
In connection with the execution of the Amalgamation Agreement, all of the directors and officers of Primera and certain other securityholders, representing approximately 67% of the issued and outstanding Primera Shares on a basic basis, entered into support agreements with ES to vote their Primera Shares in favour of the Primera Acquisition.
The Amalgamation Agreement prohibits Primera from soliciting or initiating any discussion regarding any other business combination or sale of material assets, contains provisions for ES to match competing, unsolicited proposals and, subject to certain conditions, provides for a reciprocal termination fee of $50,000 payable by either Primera or ES in certain circumstances.
Strategic Rationale and Corporate Strategy
The ES Management Team believes that current market conditions in the oilfield services sector provide an optimal point of entry for a full service on-site fluid handling and storage solution and related rental services company. North American oilfield services activity has increased dramatically over the past four years as horizontal drilling and water based fracture stimulation technology has unlocked the value of tight oil resource plays, including the Bakken, Viking, Utica/Marcellus and Eagleford. In addition to these resource plays, ES also plans to focus on emerging liquids rich and light oil plays such as the Duvernay in Western Canada and the Bone Springs in Texas. The demand for large volume fluid handling from fracture stimulations and production has created a significant bottleneck for the industry and is much higher than industry's current capacity. In addition, increased rig utilization and rig counts in tight oil resource plays has resulted in increased demand for rental services. It is anticipated that these factors, combined with access to capital, will provide ES with the opportunity for increased shareholder returns.
Following completion of the Primera Acquisition, ES expects to focus on the rapidly expanding North American oil and gas services industry, growing through internally generated cash flow coupled with a targeted acquisition and consolidation strategy where attractive acquisition multiples can be achieved. ES' extensive asset base, in a well capitalized corporate structure will facilitate growth. ES is poised to grow EBITDA of its existing product lines with baseline revenue predictability provided by the Mi Casa Acquisition.
For investors, ES represents an opportunity to participate in a uniquely positioned, well-capitalized and diversified oilfield services company with a proven and invested management team and board of directors committed to aggressive, value-enhancing growth.
Financial Advisor
Jennings Capital Inc. is acting as financial advisor to ES with respect to the Mi Casa Acquisition.
About Primera
Primera was incorporated on February 7, 2008, and is a company focused on early stage biomedical research. Primera currently has one project involving brain tumour and stem cell research. Primera is a reporting issuer in the Province of Ontario. The Primera Shares are not listed on the facilities of any stock exchange.
READER ADVISORY
Statements in this joint press release contain forward-looking information including, without limitation, ES' growth strategy and related milestones and schedules, ES' ability to maintain its competitive position, suggestions of future outcomes, the future use and development of technology, components of cash flow and earnings, timing and completion of the Mi Casa Acquisition, the Primera Acquisition, the Offering and ongoing corporate strategy and benefits of the Mi Casa Acquisition and the Primera Acquisition. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of ES or Primera. These risks include, but are not limited to: the risks associated with the oil and gas industry, commodity prices and exchange rate changes, regulatory changes, successful exploitation and integration of technology, customer acceptance of technology, changes in drilling activity and general global economic, political and business conditions. Industry related risks could include, but are not limited to; operational risks, delays or changes in plans, health and safety risks and the uncertainty of estimates and projections of costs and expenses and access to capital. The risks outlined above should not be construed as exhaustive. The reader is cautioned not to place undue reliance on this forward-looking information. Neither ES nor Primera undertakes any obligation to update or revise any forward-looking statements except as expressly required by applicable securities laws.
Certain of the information contained in this joint press release assumes that ES has completed the Mi Casa Acquisition and the Primera Acquisition on the anticipated basis and times set forth herein. The Primera Acquisition is subject to the receipt of the approval of the shareholders of Primera, as well as all other necessary regulatory approvals.
This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
Liam Balfour, President and Chief Executive Officer, ES Investments Ltd., Suite 1950, 140 - 4th Avenue S.W., Calgary, Alberta, T2P 3N3; Phone (403) 265-8258; Fax (403) 265-8793.
Carolyn Rayfield, President, Primera Bioscience Research Inc., 390 Bay Street, Suite 806, Toronto, Ontario, M5H 2Y2; Phone (416) 777-6772; Fax (416) 352-5693
Share this article