CST: 28/05/2016 11:03:57   

Trican Well Service Reaches Agreement for Sale of Its United States Pressure Pumping Business and Amended Covenant Package With Its Lenders

122 Days ago

CALGARY, ALBERTA--(Marketwired - Jan 26, 2016) - Trican Well Service Ltd. ("Trican" or "the Corporation") (TSX:TCW) is pleased to announce that it has entered into a definitive agreement with Keane Group, a privately-held, U.S. based well completion services company ("Keane") for the sale of Trican's United States pressure pumping business. The transaction involves the sale of the pressure pumping and select related assets and the assumption of certain liabilities of Trican Well Service, L.P., Trican's wholly-owned subsidiary. Concurrently, Trican has also reached an agreement in principle with its bank lenders under its revolving credit facility ("RCF") and the holders of its senior notes to make certain amendments to the applicable credit documentation subject to closing of the U.S. operations sale.

The agreed purchase price for the disposition is USD $200 million, or CDN $285 million at the January 25, 2016 exchange rate of .70, with customary working capital adjustments to be determined. In addition to this cash consideration, Trican will receive, on closing of the transaction, 10% of the shares of Keane Group Holdings, LLC, as well as certain economic interests in Keane that represent up to an additional 20% economic participation above certain thresholds upon a Keane liquidity event.

Trican is currently estimating its 10% investment in Keane to have a value between CDN $67 million and CDN $120 million. As a result, the total consideration is estimated to be between CDN $352 million and CDN $405 million. As part of the transaction, Trican will have two seats on Keane's board of directors. Trican intends to apply the net cash proceeds from this transaction to reduce its outstanding debt.

Trican will retain its Completion Solutions, Geological Services and Industrial Services businesses and will continue to offer these products and services in the United States following the closing of the transaction.

Trican and Keane have similar corporate cultures with a strong focus on safety, operational efficiency and employee development. Adding Trican's U.S. operations to Keane brings scale, additional technology and engineering expertise, service offerings, and a broader geographic reach to new and existing customers. Trican's management expects that the combined company, in which Trican's shareholders will participate through Trican's investment in Keane, will have the scale required to withstand the current downturn and grow to become one of the top-tier pressure pumpers in the United States with a significant presence in the major shale basins.

Closing of the transaction is expected to occur on or before March 15, 2016. Closing of the transaction is subject to Hart-Scott-Rodino Act approval as well as certain other customary conditions precedent. A break fee equal to USD $20 million is payable by Keane to Trican in the event of a financing failure and a USD $55 million fee is payable by Keane to Trican if the transaction is not consummated in certain other limited circumstances.

Dale Dusterhoft, Chief Executive Officer, commented, "The proposed transaction with Keane will strengthen Trican's balance sheet and will allow Trican to focus on generating profits from our remaining businesses. The cash proceeds from the transaction allow Trican to substantially reduce its overall debt levels and revise our covenant package to allow the Corporation to manage through this point of the commodity cycle and positions it to create long-term value. The retained equity interest and additional economic interests in Keane provide Trican with upside leverage to a recovery in the U.S. pressure pumping sector and alignment with Keane's high quality, proven management team and platform. I view the combination as a mutually beneficial transaction for both Trican and Keane."

Trican would like to thank its employees, customers, and suppliers for their support in building the U.S. business.

RBC Capital Markets is acting as financial advisor to Trican and provided a fairness opinion with respect to the transaction to the Board of Directors of Trican.

Continued Reduction in Leverage and Amended Covenant Package

In conjunction with this sale, Trican is also pleased to announce that it has reached an agreement in principle with its bank lenders under its RCF and the holders of its senior notes to make certain amendments to the applicable credit documentation subject to closing of the U.S. operations sale.

Dale Dusterhoft, Chief Executive Officer, commented, "We are pleased to announce the terms of our further covenant relief and thank our lenders and noteholders for their continued commitment and support for Trican's business. The U.S. business sale transaction, together with this further covenant relief package, puts us in a strong financial position to continue operations and focus on generating profits from our remaining businesses throughout this period of volatility."

After giving effect to the cash proceeds from the sale of the U.S. pressure pumping business, Trican expects its total debt balance to be reduced to approximately CDN $235 million. Since December 31, 2014, Trican is expected to have reduced its total long-term debt by over CDN $540 million pro-forma the completion of the U.S. business sale.

The amendments include the following changes to Trican's financial covenants:

  • removal of all prior financial covenants until the third quarter of 2016;
  • elimination of the minimum EBITDA and liquidity covenants;
  • new Leverage Ratio and Interest Coverage covenants as per the following schedule:
For the quarter ended Leverage Ratio Interest Coverage Basis
December 31, 2015 waived waived n/a
March 31, 2016 waived waived n/a
June 30, 2016 waived waived n/a
September 30, 2016 5.0x 2.0x Q3 annualized
December 31, 2016 5.0x 2.0x Q3 & Q4 annualized
March 31, 2017 5.0x 2.0x Q3, Q4 & Q1 annualized
June 30, 2017 5.0x 2.0x LTM
September 30, 2017 5.0x 2.0x LTM
December 31, 2017 4.0x 2.5x LTM
Thereafter 3.0x 3.0x LTM

An Equity Cure provision whereby, if Trican elects to raise equity, 50% of the proceeds from equity offerings may be applied in the calculation of EBITDA for the Leverage and Interest Coverage covenants, provided an Equity Cure is not used more than twice in any four quarter period and the aggregate amount of any Equity Cures does not exceed CDN $20 million.

Under the proposed amendments, Trican would also agree to reduce its RCF commitment by the amount of net proceeds applied to the outstanding RCF balance. Management currently estimates that the RCF commitment would be reduced from CDN $410 million to CDN $308 million. In addition to the reduction in the RCF commitment, the Company has agreed to a temporary cap of CDN $175 million on the RCF until the date that Trican delivers its 2016 third quarter financial statements and financial covenant calculations to its lenders. Management expects that Trican will have sufficient liquidity while the temporary cap is in place.

Conference Call

Trican Well Service Ltd. will host a conference call on Tuesday, January 26, 2016 at 2:00 p.m. (MT) / (4:00 p.m. ET) to discuss the agreement for the sale of its U.S. pressure pumping business and amended covenant relief. To listen to the webcast of the conference call, please enter http://www.gowebcasting.com/7237 in your web browser or visit the Investors section of our website at www.tricanwellservice.com/investors and click on "Reports".

To participate in the Q&A session, please call the conference call operator 15 minutes prior to the call's start time and ask for the "Trican Well Service Ltd. Conference Call". Dial 1-888-789-9572 (North America) or 416-695-7806 (outside North America) and enter passcode 5965880. A replay of the conference call will be available until February 2, 2016 and can be accessed by dialing 1-800-408-3053 (North America) or 905-694-9451 (outside North America). Playback passcode: 4375442. The conference call will also be archived on Trican's website at www.tricanwellservice.com/investors.

Cautionary Statements Regarding Forward-Looking Information

This news release contains "forward-looking information" within the meaning of applicable securities laws. Forward-looking information is frequently characterized by words such as "expect" and "intend", and other similar words, or statements that certain events or conditions "may" or "will" occur. The forward-looking information in this news release relates, but is not limited to, statements with respect to the proposed sale of Trican's United States pressure pumping business, including (i) the anticipated aggregate amount of proceeds in connection with, and the expected timing for completion of, the transaction, (ii) the steps to complete the transaction including the satisfaction of conditions precedent, and (iii) the expected use of net cash proceeds therefrom, and with respect to the amendment of Trican's debt covenant relief, including (i) the reduction in the RCF commitment, (ii) the effect of the temporary cap on the RCF on Trican's liquidity, and (iii) Trican's expected debt balance following completion of the U.S. business sale transaction.

The forward-looking information set out in this news release is based on certain expectations and assumptions regarding, among other things: the ability of the Purchaser to receive funds from Keane Group's debt and equity investors in an amount which permits the Purchaser to satisfy the cash purchase price; the ability of the parties to satisfy all other conditions to closing of the U.S. business sale transaction, including the receipt of Hart-Scott-Rodino Act approvals; and the absence of further changes and further economic conditions which may otherwise effect the parties or the transactions.

Forward-looking information is subject to known and unknown risks and uncertainties and other factors which may cause actual results, events and achievements to differ materially from those expressed or implied in such forward-looking information. Such risks, uncertainties and factors include, among others, the risks that: the parties will not complete the proposed U.S. business sale transaction and amendment to Trican's debt covenants within the timeframe or on the terms described in this press release, or at all; the parties will not be able to satisfy other conditions to closing of the proposed U.S. business sale transaction; economic or other events may occur that would prevent Trican or the Purchaser from completing the transaction on the terms agreed or at all; and that the parties will not be able to obtain necessary approvals and consents for such transaction or otherwise successfully complete such transaction in accordance with agreed terms. The foregoing risk factors are not exhaustive. In addition, actual results could differ materially from those described in this press release as a result of the risk factors set forth under the section entitled "Risks Factors" in our Annual Information Form dated March 25, 2015 and under the section entitled "Business Risks" in our Management's Discussion and Analysis for the quarter ended September 30, 2015. Readers are also referred to the risk factors and assumptions described in other documents filed by Trican from time to time with securities regulatory authorities.

Trican undertakes no 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.

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.

Trican Well Service Ltd.
Dale Dusterhoft
Chief Executive Officer
ddusterhoft@trican.ca
Trican Well Service Ltd.
Michael Baldwin
Senior Vice President, Finance & CFO
mbaldwin@trican.ca
Trican Well Service Ltd.
(403) 266-0202
(403) 237-7716
www.tricanwellservice.com