CALGARY, Oct. 3, 2013 /CNW/ - Calfrac Well Services Ltd. ("Calfrac") (TSX-CFW) is pleased to announce that it has completed the previously announced acquisition of all of the operating assets of Mission Well Services, LLC ("Mission"), a privately-held hydraulic fracturing and coiled tubing services provider focused in the Eagle Ford shale region of Texas (the "Mission Asset Acquisition"). Under the terms of the asset purchase agreement in connection with the Mission Asset Acquisition, the total purchase price was approximately US$147 million, which included certain working capital associated with the ongoing operations of the business. The purchase price is subject to certain post-closing adjustments related to inventory verifications and equipment inspections.
With the closing of the Mission Asset Acquisition, Calfrac now has approximately 1,182,500 of conventional pumping horsepower, placing it among the world's largest and most capable fracturing companies. Calfrac intends to transfer a portion of the Mission assets to other active operating areas in the United States, and believes that its geographic diversification will allow it the flexibility to redeploy other assets as opportunities arise.
Doug Ramsay, the Chief Executive Officer of Calfrac, stated that "We are very pleased that the acquisition of the operating assets of Mission has successfully closed. This acquisition provides us with a platform to enter the Eagle Ford shale region and to assess opportunities in other basins in Texas, while adding high quality fracturing and coiled tubing equipment to other Calfrac operating areas."
Peters & Co. Limited and RBC Capital Markets LLC acted as joint financial advisors to Calfrac in connection with the acquisition.
Calfrac is also pleased to announce that it has entered into a three year contract with minimum monthly commitments and on standard terms and conditions for the local market with respect to the provision of pressure pumping services to YPF S.A. in Argentina. Calfrac expects unconventional oil and gas activity will continue to develop significantly in Argentina in the future. As a result, Calfrac views this contract with the largest operator in Argentina as a major milestone since it provides a strong foundation from which to build upon Calfrac's hydraulic fracturing, coiled tubing and cementing services in Argentina.
Operational Update - Third Quarter Preliminary Results
In connection with its recently announced notes offering, Calfrac hereby announces that it expects that consolidated financial results for its third fiscal quarter ending September 30, 2013 will not meet its expectations based on a preliminary review of third quarter operating results. Calfrac estimates that revenue will be between $380 million and $400 million and that operating income, exclusive of foreign exchange gains or losses, will be between $48 million to $52 million for the third quarter. Such preliminary estimates are being provided despite the fact that Calfrac has not yet closed its books for its third quarter and its auditors have not performed any procedures with respect to such information nor completed their review of Calfrac's results for such quarter. Calfrac's actual results may differ materially from the preliminary estimates due to the completion of its financial closing procedures and other developments that may arise between now and the time the financial results for its third quarter are finalized. Calfrac expects to report its third quarter results on November 6, 2013. Investors should exercise caution in relying on this information and should not draw any inferences regarding financial or operating data not provided. These preliminary estimates are not indicative of the results to be expected for the full year or any future period.
Calfrac anticipates that third quarter operating results in Canada will be below its internal expectations primarily due to lower than expected fracturing and coiled tubing activity as a result of wet weather in July and early August. Lower than planned activity with a few significant customers as well as competitive pricing on callout work also contributed to Calfrac's Canadian operating results in the third quarter being lower than expected. Calfrac's outlook for its fourth quarter of 2013 and the first quarter of 2014 remains unchanged. Utilization is expected to improve in the fourth quarter as Calfrac's customers approach their programs with more urgency than what was experienced in the third quarter, which is expected to stabilize pricing for callout work and provide a platform for improved pricing dynamics in 2014.
In the United States, Calfrac expects revenue and operating income in the third quarter to meet its internal expectations as equipment utilization remained strong. Calfrac's contract coverage continues to mitigate the competitive pricing environment which exists in the U.S. pressure pumping market. Calfrac remains focused on managing its cost structure as proactively as possible, and its supply chain and logistic capabilities continue to further enhance its efficiencies. Calfrac's outlook for the remainder of 2013 and early part of 2014 remains unchanged. The integration of the Mission assets will provide additional contribution in the future and Calfrac's positioning in the Marcellus, Bakken and Fayetteville is expected to drive high equipment utilization. However, pricing is expected to remain competitive for the foreseeable future until the overcapacity issue currently present in the U.S. market is rectified.
The third quarter results for Calfrac's Russian operations are projected to be consistent with internal expectations as horizontal multi-stage fracturing activity continues to expand in Western Siberia. Looking to the future, Calfrac has commenced the 2014 tender process and believes it will be in a position to report the results of this process in early 2014.
Calfrac's Latin American operating results during the third quarter are projected to be below internal expectations as drilling and completion activity in the northern region of Mexico continued to be curtailed by budget reductions implemented by Calfrac's main customer. This reduction in activity is not expected to materially change in the remainder of 2013, but Calfrac is optimistic that activity will improve in 2014 as several large projects are currently being tendered. Calfrac has rationalized its cost structure to more closely align with its future revenue base and will monitor this closely as events unfold.
In Argentina, the start-up phase of fracturing operations continued in the third quarter as this market continues to develop. Based on the YPF S.A. contract mentioned above, Calfrac expects activity to increase substantially in the fourth quarter and into 2014 and beyond. Calfrac views this contract with the largest operator in Argentina as a major milestone and expects unconventional activity to continue to grow in this market in the future.
This press release does not constitute an offer to sell or the solicitation of an offer to buy the notes, and there shall not be any sale of the notes in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
Calfrac's common shares are publicly traded on the Toronto Stock Exchange under the trading symbol "CFW". Calfrac provides specialized oilfield services to exploration and production companies designed to increase the production of hydrocarbons from wells drilled throughout western Canada, the United States, Russia, Mexico, Argentina and Colombia.
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. These forward-looking statements and information are based on certain expectations and assumptions made by Calfrac. More particularly and without limitation, this press release contains forward looking statements and information concerning expected operating strategies, expected movement of assets acquired pursuant to the Mission Asset Acquisition, expected benefits from the Mission Asset Acquisition, expected continued development of fracturing operations and unconventional activity in Argentina, expected financial results for past and future periods, the expected announcement date of Calfrac's consolidated financial results for its third fiscal quarter ending September 30, 2013 and the reasons therefor, anticipated pricing levels for Calfrac's services, anticipated equipment utilization levels, future oil and natural gas well activity in Calfrac's operating jurisdictions, future costs or potential liabilities, anticipated benefits of Calfrac's competitive position, anticipated outcomes of specific events, trends in the oil and natural gas industry and Calfrac's growth prospects including, without limitation, with respect to each of Calfrac's operating jurisdictions. Although Calfrac believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information as Calfrac cannot give any assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, prevailing economic conditions; commodity prices; sourcing, pricing and availability of raw materials, component parts, equipment, suppliers, facilities and skilled personnel; dependence on major customers; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; health, safety and environmental risks; exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions, including the Mission Asset Acquisition; failure to integrate the relevant operating assets from acquisitions or realize the anticipated benefits of acquisitions, including the Mission Asset Acquisition; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations.
Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other risk factors that could affect Calfrac's operations or financial results are included in Calfrac's annual information form and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this press release are made as of the date hereof and Calfrac does not undertake any obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
SOURCE: Calfrac Well Services Ltd.
For further information:
Douglas R. Ramsay
Chief Executive Officer
Telephone: (403) 266-6000
Fax: (403) 266-7381
Tom J. Medvedic
Senior Vice President, Corporate Development and
Interim Chief Financial Officer
Telephone: (403) 266-6000
Fax: (403) 266-7381