Cathedral Energy Services Ltd. (TSX:CET) (“Cathedral”) and
Precision Drilling Corporation (TSX: PD, NYSE: PDS) (“Precision”)
are pleased to announce the closing of Cathedral’s acquisition of
Precision’s directional drilling business (the “Transaction”) for a
purchase price of $6,350,000. The Transaction includes
operating assets and personnel of Precision’s directional drilling
business (including its operations facility in Nisku, Alberta),
along with an additional $3 million cash investment by Precision to
support growth and expansion of Cathedral, including continuing the
buildout of RapidFireTM measurement-while-drilling guidance systems
and nDuranceTM drilling motors. Additionally, the Transaction is
expected to enhance margins as expenses related to rental equipment
used by Precision are replaced with proprietary Cathedral tools.
As part of the Transaction, Cathedral and
Precision have entered into a strategic marketing alliance (the
“Alliance”), which is expected to produce new U.S. and Canadian
customer opportunities for Cathedral as well as potential
integrated service offerings for customers. The Alliance is
expected to support both parties’ technology initiatives and lead
the future of directional drilling. Precision’s market leading
AlphaTM digital technologies (AlphaApps, AlphaAutomation and
AlphaAnalytics) are focused on automation and drilling performance
and pair well with Cathedral’s premium downhole equipment and
directional drilling expertise.
The parties have also entered into an investor
rights agreement pursuant to which, among other things, Precision
was granted the right to nominate a member to Cathedral’s board of
directors and certain customary participation rights in respect of
future sales of securities by Cathedral. Precision will maintain
such rights for so long as it continues to hold 10% or more of
Cathedral’s common shares (calculated on a partially diluted basis
giving effect to the exercise or conversion of any convertible
securities which may be held by Precision).
Precision nominee Shuja Goraya, who is currently
employed by Precision as their Chief Technology Officer, has been
appointed to the Cathedral board of directors. Based in Houston,
Texas, Mr. Goraya has a Bachelor of Engineering degree and has
worked for over 25 years in the energy services sector, most
recently with Schlumberger Limited. Mr. Goraya’s technical
expertise and extensive directional drilling background will be a
strong complement to Cathedral’s board.The purchase price was
satisfied through the issuance by Cathedral to Precision of
13,400,000 common shares of Cathedral (the “Consideration Shares”)
along with warrants to purchase an additional 2,000,000 common
shares of Cathedral at a price of $0.60 per common share within a
two-year period after closing. In addition to a 4-month statutory
hold period on the Consideration Shares, the parties have agreed to
contractual restrictions on resale as follows: 25% of the
Consideration Shares are restricted until January 22, 2022; a
further 25% of the Consideration Shares are restricted until July
22, 2022; and a further 50% of the Consideration Shares are
restricted until July 22, 2023, subject to certain exceptions.
As stated by Tom Connors, Cathedral President
& CEO, “This strategic combination and alliance with Precision
initiates some necessary consolidation and cements our position as
one of the larger directional drilling contractors in the Canadian
market space. It further provides for a strong platform for growth
into the future as we harness the combined strength of Precision’s
brand, market presence, operational footprint, and AlphaTM suite of
digital technologies with the proprietary technology, focused
experience and expertise of Cathedral. As the industry continues to
evolve and drive efficiency through technology we are also excited
about the capacity and potential, through this partnership, to
develop directional specific apps and technology that further
differentiate our offering and help set our performance apart in
the marketplace. Additionally, the integrated service and
technological offering enabled by this partnership has the
potential to provide a greener future for the provision of
directional drilling services as we advance the development and
delivery of a reduced footprint in the field through reliable
“remote” products and technology.” On the addition of Mr. Goraya to
the board, Mr. Connors added, “Mr. Goraya is well known and highly
regarded in the industry, we are excited to welcome his perspective
and experience to our board and look forward to his contribution to
the further growth and evolution of Cathedral.”
President and Chief Executive Officer of
Precision, Kevin Neveu, noted “Our investment and strategic
partnership with Cathedral allow for the combined strengths of both
entities to further advance directional specific technologies and
provide a differentiated service offering. The
combination of Cathedral’s people, technology, and
industry-specific focus with our operating platform and AlphaTM
suite of digital technologies will drive further value for our
customers as we continue to push efficiency benchmarks within the
industry.”
Precision did not hold any securities of
Cathedral prior to the transaction. Post-closing, Precision owns
approximately 17.5% of Cathedral’s issued and outstanding common
shares on a non-diluted basis and approximately 19.6% on a
partially diluted basis giving effect to the exercise of the
warrants. Precision may increase or decrease its investment,
directly or indirectly, in Cathedral from time to time, depending
on market conditions or any other relevant factors.
FORWARD-LOOKING INFORMATION
This news release contains statements and
information that, to the extent that they are not historical fact,
may constitute "forward-looking information" within the meaning of
applicable securities legislation. Forward-looking information is
typically, but not always, identified by the use of words such as
"proposed", "expected", "will" and similar words, including
negatives thereof, or other similar expressions concerning matters
that are not historical facts. Forward-looking information in this
news release includes, but is not limited to, statements regarding:
the expected benefits of the strategic marketing alliance, use of
cash received as part of the transaction, expected market share
growth and expanded offering to Precision’s former directional
drilling customers and other statements relating to the expected
operation of and benefit from the assets and business purchased in
the Transaction going forward. Such forward-looking information is
based on various assumptions and factors that may prove to be
incorrect, including, but not limited to, factors and assumptions
with respect to: the ability of Cathedral to integrate the acquired
business into Cathedral’s business; and the ability of Cathedral
and Precision to successfully implement their strategic plans and
initiatives and whether such strategic plans and initiatives will
yield the expected benefits. Although Cathedral and Precision
believe that the assumptions and factors on which such
forward-looking information is based are reasonable, undue reliance
should not be placed on the forward-looking information because
Cathedral and Precision can give no assurance that it will prove to
be correct or that any of the events anticipated by such
forward-looking information will transpire or occur, or if any of
them do so, what benefits Cathedral and Precision will derive there
from. Actual results could differ materially from those currently
anticipated due to a number of factors and risks including, but not
limited to: conditions in the oil and gas market; fluctuations in
market conditions, including in securities markets; economic
factors; and the impact of general economic conditions and the
COVID-19 pandemic in Canada and the United States. Additional
information regarding risks and uncertainties relating to
Cathedral's business are contained under the heading "Risk Factors"
in the Company's annual information form for the financial year
ended December 31, 2020 and Cathedral's other public filings,
copies of which are available under Cathedral's profile on SEDAR at
www.sedar.com. Additional information regarding risks and
uncertainties relating to Precision’s business are contained under
the heading “Risk Factors” in Precision’s annual information form
for the financial year ended December 31, 2020 and Precision’s
other public filings, copies of which are available under
Precision’s profile on SEDAR at www.sedar.com. The forward-looking
information included in this news release is made as of the date of
this news release and Cathedral and Precision do not undertake an
obligation to publicly update such forward-looking information to
reflect new information, subsequent events or otherwise, except as
required by applicable law.
ABOUT CATHEDRAL
Cathedral Energy Services Ltd., based in
Calgary, Alberta is incorporated under the Business Corporations
Act (Alberta) and operates in the U.S. under Cathedral Energy
Services Inc. Cathedral is publicly traded on the Toronto Stock
Exchange under the symbol "CET". Cathedral is a trusted partner to
North American energy companies requiring high performance
directional drilling services. We work in partnership with our
customers to tailor our equipment and expertise to meet their
specific geographical and technical needs. Our experience,
technologies and responsive personnel enable our customers to
achieve higher efficiencies and lower project costs. For more
information, visit www.cathedralenergyservices.com.
ABOUT PRECISION
Precision is a leading provider of safe and High
Performance, High Value services to the oil and gas industry.
Precision provides customers with access to an extensive fleet of
Super Series drilling rigs supported by an industry leading
technology platform that offers innovative drilling solutions to
deliver efficient, predictable and repeatable results through
service differentiation. Precision also offers well service rigs,
camps and rental equipment all backed by a comprehensive mix of
technical support services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta, Canada. Precision
is listed on the Toronto Stock Exchange under the trading symbol
“PD” and on the New York Stock Exchange under the trading symbol
“PDS”.
Requests for further information should
be directed to:
Tom Connors, President & Chief Executive
Officer
Ian Graham, Chief Financial Officer
Cathedral Energy Services Ltd.
6030 3 Street S.E.
Calgary, Alberta T2H 1K2
Telephone: 403.265.2560, Fax: 403.262.4682
www.cathedralenergyservices.com
Carey Ford, Senior Vice President and Chief
Financial Officer
Precision Drilling Corporation
800, 525 - 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1
Telephone: 713.435.6100
www.precisiondrilling.com
For a copy of the early warning report
filed by Precision under applicable Canadian securities legislation
in connection with its acquisition of Cathedral securities, please
go to Cathedral’s profile on the SEDAR website (www.sedar.com) or
contact Precision as set forth above.
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