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TSX SYMBOL: TDG
CALGARY, Feb. 13, 2014 /CNW/ - Trinidad Drilling Ltd. (Trinidad or "the Company") today announced that it has agreed to expand its joint venture international operations into a second country. It also announced an expected capital expenditure budget for 2014 of approximately $315 million, including four new high performance, AC, walking rigs for operation in Mexico through its joint venture.
The capital program will include capital projects carried over from 2013, upgrades to existing equipment, new builds in Canada, Mexico and Saudi Arabia and maintenance capital.
"Trinidad is in the fortunate position of having a large basket of opportunities to select from," said Lyle Whitmarsh, Trinidad's Chief Executive Officer. "Our international joint venture with Halliburton Company is progressing well and is expanding into new areas of operation. Our existing relationships with key players in the LNG market position us well to add to our current LNG-related growth and our existing fleet provides us with opportunities to upgrade and improve the already high performance level of our fleet. We are very selective in which opportunities we choose. By maintaining a balance between upgrading existing equipment and building new rigs in 2014, we are able to demonstrate growth, while also focusing on existing customers and maintaining market share."
Trinidad will be working on six new rigs in 2014, one for its Canadian operations and five that will be operating through its joint venture in Saudi Arabia and Mexico. The Canadian rig will be operating under a five-year contract in northern Canada drilling wells related to a proposed LNG plant on the British Columbia coast. Once completed, this rig will be one of the largest, most technically-advanced rigs operating in Canada. As previously announced, Trinidad has agreed to move four rigs into the joint venture to work in Saudi Arabia, including one new build and three upgraded rigs from its US fleet. These rigs will be under three-year contracts with an optional one year extension. In addition, Trinidad has recently agreed to build four new rigs for operation in Mexico through its joint venture. These rigs will be 3,000 horsepower rigs operating under three-year, take-or-pay contracts with an optional one year extension. The design and construction of the new rigs will be managed by Trinidad's in-house manufacturing division, Trinidad Design and Manufacturing, and will take place in Nisku and Houston, with some final completion in the Middle East. The rigs destined for Canada and Saudi Arabia are expected to be in operation in the second half of 2014, while the Mexican rigs are expected to be complete in late 2014/early 2015.
Trinidad has made a reputation for itself as a high performance driller with well-trained crews and modern, efficient equipment. Customers' demands have been changing over the past few years. As they drill deeper and longer-reach horizontal wells, the demand for larger equipment with increased mud handling and higher pressure capacity has grown. Customers have also increasingly recognized the efficiency gains from pad drilling using an automated rig moving system over the past few years. Trinidad is committed to providing high quality equipment to meet its customers' needs and has reviewed its existing fleet to identify rigs that would benefit from upgrades to meet this changing demand.
Trinidad has selected approximately 30 rigs that are candidates for upgrades in 2014. The upgrades on these rigs include improvements that increase the efficiency and performance of the rigs such as adding moving systems and top drives, changing to AC drawworks and upgrading pumping capacity. These changes increase the marketability of the equipment and in a lot of cases come with increased dayrates and extended contract terms. In addition, Trinidad plans to move the three rigs currently idle in Mexico to its Canadian or US operations and upgrade them. The number of rigs upgraded in 2014 may vary and will depend on industry conditions, relocation opportunities through the joint venture and customer demand.
In addition to new builds and upgrades, Trinidad expects to spend approximately $40 million on maintenance capital, capital inventory and infrastructure. This includes recertification of rigs and capital items that need to be replaced or added over time such as drill pipe, vehicles, shop and yard facilities and spare equipment.
The 2014 capital budget is expected to be split as follows:
|New builds and JV related(1)||$ 135 million|
|Capital upgrades and enhancements||$ 140 million|
|Maintenance and infrastructure capital||$ 40 million|
|Total estimated 2014 capital||$ 315 million|
(1) This figure is net of the 40% of the value of the rigs Trinidad receives when it transfers rigs into the joint venture.
The budget is based on current market conditions and remains very flexible. The timing of spending, rigs selected or upgrade type selected may change depending on customer demands and other industry conditions.
Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange (TSX) under the symbol TDG. Trinidad's divisions operate in the drilling and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States and Mexico. In addition, through a joint venture, Trinidad has the opportunity to operate drilling rigs in other international markets such as Saudi Arabia and Mexico. Trinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.
This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking information") within the meaning of applicable Canadian securities laws. The use of any of the words "expect", "anticipate", "will", "future" and similar expressions are intended to identify forward-looking information. In particular, this press release contains forward-looking information pertaining to Trinidad's plans, strategies, objectives, expectations and intentions including, without limitation: the manufacturing and upgrading of drilling rigs; the timing of the delivery of the rigs into operation; Trinidad's and the joint venture's growth opportunities; Trinidad's 2014 capital expenditure program; Trinidad's expectation that it will fund the building and upgrading of rigs through cash flow from operations; and the potential success of the joint venture and Trinidad's ability to enter new international markets.
The forward-looking information included in this press release reflects several factors, expectations and assumptions including, without limitation: oil and gas industry conditions and oil and gas production levels; commodity prices; supply and demand for commodities; scheduling and timing of certain projects and Trinidad's and the joint venture's strategy for growth; capital expenditure programs and other expenditures by oil and gas exploration and production companies; Trinidad's and the joint venture's future operating and financial results; that Trinidad will continue to conduct its operations, including with respect to rig design and manufacturing, in a manner consistent with its past performance.
The forward-looking information included in this press release is not a guarantee of future performance and should not be unduly relied upon. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking information including, without limitation: volatility in market prices for oil, natural gas and LNG; liabilities inherent in the drilling and manufacturing industries, including technical problems; competition for skilled personnel; changes in general economic, market and business conditions; actions by governmental or regulatory authorities including changes to tax or environmental laws; the ability of Trinidad's customers to raise capital and to continue with their drilling programs; increases and overruns in construction costs; supply and demand for commodities; and the risks inherent in Trinidad's ability to generate sufficient cash flow from operations to meet its current and future obligations. Should any one of a number of issues arise, Trinidad may find it necessary to alter its current business strategy and/or capital expenditure program. Additional risks that could impact the business and operations of Trinidad are detailed under the heading "Risk Factors" in Trinidad's annual information form for the year ended December 31, 2012. Trinidad cautions that the foregoing list of risks and uncertainties is not exhaustive. The forward-looking information contained in this press release speaks only as of the date of this press release and Trinidad assumes no obligation to publicly update or revise such forward-looking information to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy the shares in any jurisdiction. The shares offered will not be and have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States or to a United States person, absent registration, or an applicable exemption therefrom.
SOURCE: Trinidad Drilling Ltd.
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