Trican and Canyon to Combine to Create Premier Canadian Pressure Pumping Company

CALGARY, ALBERTA--(March 22, 2017) - Trican Well Service Ltd. ("Trican") (TSX:TCW) and Canyon Services Group Inc. ("Canyon") (TSX:FRC) are pleased to announce that they have entered into an arrangement agreement (the "Arrangement Agreement") pursuant to which Trican has agreed to acquire all of the issued and outstanding common shares of Canyon (the "Canyon Shares") on the basis of 1.70 common shares of Trican (the "Trican Shares") for each outstanding Canyon Share (the "Transaction").

 

The consideration to be received by Canyon shareholders reflects a value of $6.63 per Canyon Share based on the closing price of Trican Shares on the Toronto Stock Exchange (the "TSX") on March 21, 2017, which represents a 32% premium over the closing price of Canyon Shares on the TSX on March 21, 2017. The aggregate Transaction value is approximately $637 million, including the assumption of approximately $40 million in Canyon debt. Upon completion of the Transaction, existing holders of Trican Shares and Canyon Shares will collectively own approximately 56% and 44% of the combined company, respectively.

"This combination with Canyon will create a Western Canadian based leading energy services firm that has the asset base, efficient cost structure and financial capacity to create value for all of our combined stakeholders," said Dale Dusterhoft, Trican's President and Chief Executive Officer. "We have always held Canyon in very high regard and look forward to welcoming the Canyon employees to the Trican family. Our companies have a shared base of values and an alignment on our commitment to safety, service, technology and operational excellence."

 

Brad Fedora, President and Chief Executive Officer of Canyon will join Trican's board of directors (the "Trican Board") upon closing of the Transaction, and stated, "The Transaction provides our shareholders an opportunity to participate in the exceptional value potential of the combined company." Fedora continued, "Trican and Canyon have similar businesses and shared values and we are committed to driving a successful integration. We envision a combined company that will set the standard for service quality, field execution and operating efficiencies. We will deliver exceptional service and technology to our existing and prospective clients and will create new career opportunities for our employees."

 

Dusterhoft concluded, "We expect the Transaction to be significantly accretive to cash flow as the integration is completed in 2018. As we look at our businesses today, both companies' available horsepower is fully committed and we have increased visibility on strong activity through the third and fourth quarters of 2017. Job sizes and horsepower per job continue to increase and the combined company will have ability to respond to these changes in the market."

 

Transaction Rationale

 

Premier assets in Canadian pressure pumping and related services

Combined company with 675,000 HHP of available fracturing capacity, a leading footprint of service bases across Western Canada and a complementary suite of products and services across cementing, coiled tubing, nitrogen, industrial services and fluid management.

Complementary cultures and strategic vision

Trican and Canyon have very similar cultures and values and a shared vision of the industry opportunity going forward. We are committed to having the best people in the industry providing safe, high quality, efficient service with fit for purpose technology and the best maintained equipment.

Platform for continued growth and enhanced ability to service broader and more complex customer requirements

We believe the combined company will have the operating assets, technical leadership and scale to meet increasingly complex client demands and through the expanded base of service lines the company will have increased optionality to target future growth. As supportive economic conditions emerge, the combined company will look to bring a significant volume of currently parked equipment back to work at a low cost.

Significant opportunities for cost synergies

The combined company is expected to begin realizing significant synergies immediately. Trican expects to achieve approximately $20 million in annual pre-tax synergies upon the expected completion of the integration in 2018 by creating additional leverage on the combined company's fixed cost structure, reducing corporate overhead and optimizing operational facilities.

Strong balance sheet, access to capital and attractive capital markets positioning

The combined company will have a well-positioned balance sheet and the free cash flow profile to fund growth. With a market capitalization of approximately $1.4 billion at the time of announcement of the Transaction, the combined company will be one of the largest public Canadian oilfield services providers by market capitalization, will be well positioned for index inclusion and will have enhanced public market liquidity.

The Trican Board has unanimously approved the Transaction and recommends that holders of Trican Shares vote in favour of the ordinary resolution approving the issuance of Trican Shares pursuant to the Transaction. RBC Capital Markets, financial advisor to Trican, delivered a verbal opinion to the Trican Board to the effect that, as of March 21, 2017, and based upon and subject to the assumptions, limitations and qualifications set forth in the opinion, the exchange ratio is fair, from a financial point of view, to Trican.

 

The board of directors of Canyon (the "Canyon Board") has unanimously approved the Transaction and recommends that holders of Canyon Shares vote in favour of the special resolution approving the Transaction. Peters & Co. Limited is acting as financial advisor to Canyon in respect of the Transaction and has provided the Canyon Board with its verbal opinion that, subject to the assumptions, qualifications and limitations contained therein, the consideration to be received by holders of Canyon Shares pursuant to the terms of the Arrangement Agreement is fair, from a financial point of view, to the holders of Canyon Shares.

 

Transaction Terms

 

Under the terms of the Arrangement Agreement, the Transaction will be effected by way of a plan of arrangement of Canyon under the Business Corporations Act (Alberta).

 

The Transaction is expected to be completed in the second half of 2017 and is subject to TSX and Alberta Court of Queen's Bench approval, regulatory approvals and the satisfaction of other customary closing conditions.

 

The Transaction will require approval by at least 66 2/3 percent of holders of the Canyon Shares represented in person or by proxy at an annual and special meeting of holders of Canyon Shares to be called to consider the Transaction and a majority of the votes cast by holders of Canyon Shares after excluding the votes cast by those persons whose votes may not be included under the Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions.

 

The issuance of the Trican Shares pursuant to the Transaction will require approval by holders of a simple majority of Trican Shares represented in person or by proxy at an annual and special meeting of Trican shareholders called to consider the issuance of Trican Shares pursuant to the Transaction, pursuant to the requirements of the TSX.

 

Advisors

 

RBC Capital Markets is acting as lead financial advisor to Trican. Scotiabank also acted as a financial advisor. Blake, Cassels & Graydon LLP is acting as Trican's legal advisor.

 

Peters & Co. Limited is acting as financial advisor to Canyon. Burnet, Duckworth & Palmer LLP is acting as Canyon's legal advisor. 

 

Conference Call and Webcast Details

 

Trican and Canyon will host a conference call on Wednesday, March 22, 2017 at 7:00 a.m. MT (9:00 a.m. ET) to discuss the proposed Transaction.

 

An accompanying presentation will be posted to the Trican at www.tricanwellservice.com/investors. To listen to the webcast of the conference call, please enter: http://edge.media-server.com/m/p/k5uwfwry in your web browser.

 

In addition, you may participate in the call by dialing 1-844-358-9180 (North America) or 478-219-0187 (outside North America) 15 minutes prior to the call's start time and ask for the "Trican / Canyon Conference Call".

 

The conference call will be archived on Trican's website at www.tricanwellservice.com/investors.

 

About Trican

 

Headquartered in Calgary, Alberta, Trican provides a comprehensive array of specialized products, equipment and services that are used during the exploration and development of oil and gas reserves.

 

About Canyon

 

Canyon is an oilfield services company that focuses operations in the WCSB with two core business lines: Pressure Pumping Services and Fluid Management Services. Canyon provides Pressure Pumping Services while Canyon's wholly owned subsidiary, Fraction Energy Services Ltd., provides Fluid Management Services.

 

Forward-Looking Statements

 

This document contains certain forward-looking information and financial outlook based on Trican's and Canyon's current expectations, estimates, projections and assumptions that were made by each company in light of information available at the time the statement was made. Forward-looking information and financial outlook that address expectations or projections about the future, and other statements and information about Trican's or Canyon's strategy for growth, expected and future expenditures, costs, operating and financial results, future financing and capital activities are forward-looking statements. Some forward-looking information and financial outlook are identified by the use of terms and phrases such as "anticipate", "achieve", "estimate", "expect", "intend", "plan", "planned", and other similar terms and phrases. This forward-looking information and financial outlook speak only as of the date of this document and we do not undertake to publicly update this forward-looking information and financial outlook except in accordance with applicable securities laws. This forward-looking information and financial outlook include, among others, statements as to:

 

the proposed combination of the companies;

the anticipated benefits and synergies of the Transaction, including strategic integration opportunities, tax benefits, enhanced liquidity and the accretion to cash flow of Trican;

the anticipated employment levels and opportunities of the combined company;

certain combined operational, financial and other information and projections;

continued increases to job size and horsepower per job;

anticipated drilling activity in the second half of 2017; and

the anticipated completion of the Transaction and timing thereof.

Forward-looking information and financial outlook is based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect. Trican's, Canyon's and the combined company's actual results may differ materially from those expressed or implied and therefore such forward-looking information and financial outlook should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things; Trican's, Canyon's and the combined company's ability to continue its operations for the foreseeable future and to realize its assets and discharge its liabilities and commitments in the normal course of business; Trican, Canyon and the combined company being compliant with debt and other covenants; industry activity levels, including its effect of reducing Trican's, Canyon's and the combined company's capital and maintenance expenditures; the completion of currently planned work activities by our customers; the general stability of the economic and political environment; effect of market conditions on demand for Trican's, Canyon's and the combined company's products and services and prices that can be obtained for those products and services; the ability to achieve planned cost reductions; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate its business in a safe, efficient and effective manner; the performance and characteristics of various business segments; the effect of current plans; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; changes in competition and pricing in the oilfield service business; and unanticipated costs and liabilities.

 

Forward-looking information and financial outlook is subject to a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; changes in interest rates; competitive and business conditions in the markets where Trican, Canyon and the combined company operates; failure to meet the agreed upon covenants with Trican's, Canyon's and the combined company's lenders; weather conditions; regulatory changes; the successful exploitation and integration of technology; customer acceptance of technology; success in obtaining and defending issued patents; the potential development of competing technologies by market competitors; and availability of products, qualified personnel, manufacturing capacity and raw materials. The foregoing important factors are not exhaustive. In addition, actual results could differ materially from those anticipated in forward-looking information provided herein as a result of the risk factors set forth under the section entitled "Risks Factors" in Trican's Annual Information Form for the year ended December 31, 2015, and under the section entitled "Business Risks" in Trican's management's discussion and analysis for the year ended December 31, 2016, as well as under the section entitled "Risks Factors" in Canyon's Annual Information Form for the year ended December 31, 2015, and under the section entitled "Business Risks" in Canyon's management's discussion and analysis for the year ended December 31, 2016. Readers are also referred to the risk factors and assumptions described in other documents filed by Trican or Canyon from time to time with securities regulatory authorities.

 

Neither Trican nor Canyon undertake any obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward looking information.

 

None of the securities anticipated to be issued pursuant to the Transaction have been or will be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws, and any securities issued pursuant to the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This document does not constitute an offer to sell or the solicitation of an offer to buy any securities.

 

Trican Well Service Ltd.

Dale Dusterhoft

Chief Executive Officer

(403) 237-7716

(403) 266-0202

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Trican Well Service Ltd.

Michael Baldwin

Senior Vice President, Finance & CFO

(403) 237-7716

(403) 266-0202

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www.tricanwellservice.com

 

Canyon Services Group Inc.

Brad Fedora

President & CEO

(403) 355-2211

(403) 290-2491

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