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CALGARY, March 28 /CNW/ - Western Energy Services Corp. ("Western") is pleased to announce that it has entered into an agreement with Grenville Energy Partnership ("Grenville") to acquire all of Grenville's oilfield service equipment (the "Equipment") for the purchase price of $12.5 million. The Equipment consists of all oilfield service equipment owned by Grenville and operated by Western pursuant to its joint venture with Grenville, which joint venture will terminate on closing. The purchase price will be paid using $4.1 million from a new credit facility Western has negotiated with a Canadian chartered bank, with the balance being paid by the issuance of a convertible debenture (the "Debenture").
Jim McQuarrie, President and CEO of Western, states, "This transaction is a key step in our plan to refocus Western into the more stable and less cyclical market of production optimization through stimulation services. The Grenville equipment purchase will double the size of our equipment fleet, increase our top and bottom lines, and eliminate the complexity and extra costs of operating under the joint venture agreement. Significantly, the debt service costs of the new credit facility will be less than Western's revenue sharing obligations to Grenville under the joint venture agreement."
The effective date of the purchase is January 1, 2007 and is expected to close within the next 30 days. The transaction is subject to the approval of the TSX Venture Exchange and Western entering into formal documentation with its bank.
The Debenture 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 Debenture 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 Debenture, 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.
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.