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CALGARY, May 17 /CNW/ - Western Energy Services Corp. ("Western") is pleased to announce that it has closed its previously announced purchase of Grenville Energy Partnership's ("Grenville") oilfield service equipment (the "Equipment") for $12.5 million, effective January 1, 2007, as previously announced on March 28, 2007. The acquisition was funded by the issuance of an $8.7 million convertible note (the "Note") and a new credit facility with a Canadian chartered bank. Grenville has provided equipment financing to Western through a revenue sharing joint venture since July 2005. Under the joint venture, the Equipment was owned by Grenville and operated by Western. Western's acquisition of the Equipment results in the termination of the joint venture, such that Western now has full ownership of the Equipment, receiving all revenue therefrom, effective January 1, 2007.
Western also announces the closing of the sale of its well testing assets to TestAlta Services Ltd. for the cash purchase price of $1.575 million, as previously announced on April 18, 2007.
"The closing of these transactions and securing bank financing has simplified our company and has given us the means to continue Western's focus of becoming a strong stimulation company with emphasis on production optimization" stated Jim McQuarrie, President and CEO of Western.
Western's new banking facility is a $6.4 million term loan due on demand but otherwise repayable over a 60 month period, bearing interest at prime plus 1.5% and secured by a charge over the present and after acquired property of Western and its wholly owned subsidiary StimSol Canada Inc. The banking facility was used toward the purchase price of the Equipment, to repay a demand term loan of $650,000 and extinguish revolving credit facilities of $1.5 million.
The Note has a one year maturity, bears interest at 8%, payable monthly, is convertible at the option of the holder into common shares of Western at $0.20 per share, may be repaid by Western at any time without penalty and is secured on a subordinated basis to Western's bank and its bridge loan lender by equipment having a book value of approximately $17 million. Western can force the conversion of the Note into common shares upon raising at least $5 million in equity or having its shares trade at an average of $0.30 or more for 20 consecutive trading days or meeting certain earnings tests during fiscal 2007. If Western forces the conversion of the Note, the conversion price will be the lesser of (A) $0.20, and (B) 120% of the weighted average issue price of the shares issued by Western in meeting the conversion tests or the 20 day weighted average closing price of Western's shares up to the date of conversion, whichever is greater. In no event will the conversion price be less than $0.12 per share. Any Western common shares issued on the conversion of the Note will be subject to a hold period of 4 months from the date of issuance of the Note. Based on current shareholder information, no change of control of Western will result from a possible conversion of the Note.
Western is an oil field services company trading on the TSX Venture Exchange in Canada under the symbol "WSV". Western is active in Canada, Texas and Latin America.
Forward Looking Information
This release contains certain forward-looking statements related but not limited to the Western's expectations, intentions, plans and beliefs. Investment advisors, shareholders and potential investors are cautioned not to place undue reliance on forward-looking information which by its nature involves assumptions, risks and uncertainties, both general and specific, that contribute to the possibilities that predictions, projections, forecasts and future events will not occur. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. Western does not assume any responsibility to update this information for events subsequent to its preparation.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.