CanElson Announces A New Drilling Rig Commitment, A First Nations
Partnership and Strong Performance in the Fourth Quarter
CALGARY, ALBERTA -- (Marketwire) -- 01/07/13 -- CanElson Drilling
Inc. ("CanElson" or the "Company") (TSX:CDI) today provided an update
on recent activities, including a new drilling rig commitment, a
First Nations partnership agreement and strong performance compared
with the Canadian and US oil services industry in the fourth quarter
of 2012. CanElson also announced an update on progress with its
bi-fuel drilling rigs initiative.
"We continue to expand our footprint in our core areas of operation,"
said Randy Hawkings, President and CEO. "Our recent activities
demonstrate our ability to deploy and operate our drilling rigs at
industry leading levels of efficiency while finding unique ways to
work with other groups for our mutual benefit."
New Texas Drilling Rig
CanElson has entered into a two-year commitment and will receive a
cash advance for a new drilling rig with a customer in the Permian
Basin of West Texas. The new contract was obtained in part due to
CanElson's commitment and approach to health and safety. The new rig
(Rig #36) is expected to cost approximately $8 million. It will be
assembled at CanElson's facility in Nisku, Alberta and is scheduled
for delivery in March 2013.
As previously disclosed, CanElson is also assembling Rig #35 at Nisku
under a long term contract with a West Texas producer. Rig #35 is
scheduled for delivery in January 2013. When Rig #35 and Rig #36 are
both deployed, CanElson will have 12 rigs in West Texas, double the
number it had at end of January 2012, significantly strengthening the
Company's position in the most active drilling basin in North
The Company's previously announced capital budget included provision
for $4.5 million of long lead items for Rig #36. CanElson will now
order long lead items for another new rig (Rig #37). Pending a signed
contract, construction of Rig #37 is possible in Q2, 2013. CanElson
continues to require commitments from operators prior to full
assembly of additional rigs. As a result, CanElson will expand its
previously announced capital program by approximately $8.0 million to
complete rig #36 and purchase the long lead items for Rig #37.
First Nations Partnership
Through negotiations with File Hills Qu'Appelle Tribal Council
("FHQTC"), CanElson entered into a partnership with FHQTC
Developments Limited Partnership. Each of CanElson and FHQTC
Developments Limited Partnership own a 50% interest in a limited
partnership that owns one existing CanElson drilling rig. CanElson
will continue to operate the drilling rig as the General Partner.
CanElson believes this partnership will provide it with an
opportunity to gain further access to an expanded labour force while
also providing FHQTC with an opportunity to participate in the
economic upside of the oil and gas drilling business in Saskatchewan.
CanElson will pursue similar opportunities with other First Nations
in situations where all parties involved can benefit.
"This partnership is an excellent business, training and employment
opportunity for our community members," said Edmund Bellegarde,
President of FHQTC.
During the past three years, CanElson has established various forms
of partnership relationships and training initiatives to better
support growth in all the countries in which it does business. It is
CanElson's belief that it can execute a growth strategy that provides
top decile returns in a socially responsible fashion.
Fourth Quarter 2012 Operational Update
CanElson is also providing an update for operations in Canada and the
US during the fourth quarter of 2012. In both geographic areas,
CanElson has outperformed the industry as a whole amid subdued
In Canada, CanElson achieved utilization rates that were 1.5 times
better than current industry estimates for the fourth quarter. In the
United States, CanElson has seen a 38% increase in operating days for
the fourth quarter, relative to the same period in 2011, even though
the US industry has seen an approximate 12% decline in the land
drilling rig count year over year.
Results of operations for Canada and the United States during the
fourth quarter are as follows:
Canada United States
Three months ended Three months ended
December 31, December 31,
2012 2011 % change 2012 2011 % change
Operating days (spud
to rig release) 1,300 1,436 -9% 1,068 772 38%
Average gross rig
fleet size 22.3 20.3 10% 13.9 10.0 39%
The customer of CanElson's Mexico joint venture has signed its
production sharing contract with PEMEX. Through its Mexico Joint
Venture, CanElson expects that this new contract should provide it
with an opportunity to expand the service offering and increase
exposure to performance-related contract terms in 2013 and beyond.
Bi-Fuel Drilling Rigs Progress
CanElson's subsidiary CanGas Solutions continues to advance
previously announced bi-fuel (natural gas and diesel fuel) drilling
rig initiatives in Alberta and Saskatchewan. The objective of these
initiatives is to displace as much diesel fuel as possible with
lower-cost natural gas on CanElson drilling rigs, for the benefit of
both CanElson and its contract-drilling customers.
In the fourth quarter of 2012 CanGas began delivery of compressed
natural gas (CNG) by truck transport to fuel two bi-fuel CanElson
drilling rigs in Alberta. The rigs are operated by CanElson under
long-term contract to an oil and gas producer. CanGas is also
delivering CNG by truck transport to several of CanElson's rigs in
Saskatchewan. Conversion of CanElson's Saskatchewan fleet is ongoing.
CanElson is using temporary gas compression facilities as a supply
source while a permanent facility is developed under a previously
disclosed agreement. The permanent facility is scheduled to become
operational in 2013.
CanElson operates contract drilling rigs in Canada, the US and Mexico
for oil and natural gas exploration and development companies.
CanElson also assembles new drilling rigs at a facility in Nisku,
Alberta, operates contract oil and gas service rigs in Mexico, and
operates a CNG transportation and related services business. CanGas
is a Calgary-based CNG transport company and a North American leader
in the development and utilization of containerized natural gas
transport. More information on CanElson can be found on its website:
This press release contains certain statements or disclosures
relating to CanElson that are based on the expectations of CanElson
as well as assumptions made by and information currently available to
CanElson which may constitute forward-looking information under
applicable securities laws. In particular, statements pertaining to
receipt of a cash advance; the expected cost to construct rig #36;
the expected location and timing of deployment of new rig build #35
and #36; the expected timing for assembly of Rig #37; the expectation
that the partnership with FHQTC will provide an opportunity to gain
further access to an expanded labour force while providing FHQTC an
opportunity to participate in the economic benefits of a drilling rig
business; the expectation that CanElson can execute a growth strategy
that provides top decile returns in a socially responsible fashion;
the expectation that CanElson should have an opportunity to expand
its services in Mexico; and the timing for the permanent compression
facility in Saskatchewan to become operational in, contain forward
looking information or achievements that may be expressed or implied
by such forward looking information. Many factors could cause the
performance or achievement by CanElson to be materially different
from any future results, performance or achievements that may be
expressed or implied by such forward looking information. CanElson's
Annual Information Form and other documents filed with securities
regulatory authorities (accessible through the SEDAR website
www.sedar.com) describe the risks, material assumptions and other
factors that could influence actual results and which are
incorporated herein by reference. CanElson disclaims any intention or
obligation to publicly update or revise any forward looking
information, whether as a result of new information, future events or
otherwise, except as may be expressly required by applicable
CanElson Drilling Inc.
President and CEO
CanElson Drilling Inc.
Chief Financial Officer
CanElson Drilling Inc.
700, 808 - 4th Avenue SW
Calgary, Alberta T2P 3E8
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