Savanna Energy Services Corp. Announces Rig Additions for Australia and Capital
CALGARY, ALBERTA -- (Marketwired) -- 06/07/13 --
New Rigs for Australia:
Savanna Energy Services Corp. ("Savanna" or the "Company") (TSX:SVY)
is pleased to announce that we have entered into a long term drilling
rig contract to deploy an additional hybrid drilling rig to
Queensland, Australia. Savanna will provide ancillary equipment and
services to coincide with the drilling services. The contract is
based on a 365 day (24 hour) take or pay basis for a term of three
years. Savanna has also entered into a similar three year contract to
supply an additional workover rig to the same customer. These
equipment additions will bring Savanna's fleet in Australia to 10
rigs, 5 drilling and 5 workover.
The drilling rig will be a newly built proprietary international
hybrid drilling rig. This rig is capable of drilling with coiled
tubing or conventional drill pipe utilizing an integrated top drive
based on the hybrid platform pioneered by Savanna. The rig is
targeted to commence operations in Australia in December 2013. The
workover rig is expected to begin operations in Q2, 2014.
Savanna's proprietary hybrid platform has proven itself to be highly
efficient drilling vehicle and is demonstrating its ability to
improve the economics of drilling in Australia. The Australian coal
seam gas (CSG) drilling and workover market is continuing to mature
and expand, and Savanna expects activity levels to continue
increasing for the next several years.
Savanna is currently operating four of its hybrid drilling rigs in
Australia along with four specialized workover rigs and other
ancillary equipment. The latest rig additions were awarded outside of
the common tendering process in Australia, which Savanna believes is
reflective of the growing acceptance of Savanna's capabilities and
relationships in the market.
In light of the contract award Savanna is also updating its capital
program for 2013. Savanna previously outlined a capital program for
2013, including capital maintenance and long-lead items for future
rig builds, of $107 million. Below is an update on this budget,
increasing the 2013 capital budget to $118 million:
2013 2013 Incremental Remaining
(Stated in thousands Capital Incurred Approved Capital
of dollars) Budget to Date Capital - 2013
recertifications & upgrades 40,000 (9,900) 4,000 (1) 34,100
Spare equipment & drillpipe 20,000 (6,800) 1,500 14,700
equipment 8,000 (4,200) 16,500 (2) 20,300
Long-lead items for drilling
(excl.Australia) 18,000 (200) (11,000)(3) 6,800
North Dakota workover rigs 4,000 (3,300) - 700
Expansion capital for
rentals and oilfield
services 17,000 (6,700) (4,000)(4) 6,300
Corporate capital - (3,700) 4,000 (5) 300
2012 Carryover - (2,300) - 500
Totals 107,000 (6) 37,100 11,000 (6) 83,700
(1) Represents estimated engineering and retrofit costs to transfer up to 8
workover rigs to North Dakota and to upgrade depth capacity of 1
Canadian drilling rig.
(2) Represents incremental capital to manufacture and deliver 1
international hybrid drilling rig, 1 high-specification workover rig and
associated spare, ancillary and trucking assets to Australia.
(3) Represents deferral of long-lead spend based on expected timing of award
of tenders Savanna is currently participating in.
(4) Represents reduction in estimated capital expansion in rental assets in
2013 relative to previous estimates.
(5) Represents down payment on land for future Leduc, Alberta drilling and
workover facility and corporate capital additions.
(6) Total 2013 approved capital budget to date = $118,000.
A heavy snowpack and ongoing wet weather in many of Savanna's core
operating areas in Canada have constrained the re-start of activity
post-spring break-up. In the United States, however, activity levels
have remained much more consistent, with minimal reduction in overall
activity in our core markets. Australian activity has continued to
accelerate through the quarter.
Activity in North America in the second half of 2013 remains
uncertain but has become increasingly more positive as 2013 unfolds
in all Savanna markets. Savanna's relatively strong contract position
in the United States and Australia should ensure stable activity in
those markets. In Canada activity levels will have a greater impact
on Savanna performance due to a lower contract status on our fleet.
Savanna has participated in numerous drilling rig tenders for Canada
and the United States over the past few months and will further
update our capital program based on the results of these tenders, if,
as or when they are announced. In addition, several rig tenders, both
drilling and workover, for Australia remain active which could also
result in an expansion of Savanna's authorized capital for 2013. It
is our expectation that awarding of most of these tenders is likely
to be deferred until 2014.
While Savanna operates a fleet very well suited to current and
projected high activity sectors of all markets it serves, the Company
is also committed to increasing its drilling rig depth and operating
capacity in order to continue expanding the Company's product
offering for its customers. The Company will design, commission and
operate equipment aligned to our position as a sustainable,
profitable oilfield service provider. In the context of an uncertain
North American market for drilling and workover services, we have
approved a capital budget providing for growth and expansion in our
key markets, recognizing the potential risks to activity levels in
the near term. Our capital plans also reflect Savanna's commitment to
sustain and grow our current monthly dividend. The Board of Directors
reviews our dividend policy quarterly, and is satisfied with current
Savanna is a Canadian-based drilling and oilfield services provider
with operations in Canada, United States and Australia, focused on
providing fit for purpose equipment and technologies.
Cautionary Statement Regarding Forward-Looking Information and
Certain statements and information contained in this press release
including statements related to the Company's expectation of the
timing of delivery of new workover or drilling rigs, the expectations
of regarding activity levels, utilization, operating margins, and
returns from Savanna's operations, the expectation of continued
uncertainty in North American activity levels and the Company's
ability to mitigate the effect of such, the expectation of a
long-term increase in well servicing activity, and statements that
contain words such as "could", "should", "can", "anticipate",
"expect", "believe", "will", "may", "likely", "estimate", "predict",
"potential", "continue", "maintain", "retain", "grow", and similar
expressions and statements relating to matters that are not
historical facts may constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the United States
Private Securities Litigation Reform Act of 1995.
These statements are based on certain assumptions and analysis made
by the Company in light of its experience and its perception of
historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in
the circumstances. In particular, the Company's expectation of the
timing of delivery of new rigs is premised on current advice from its
suppliers on the progress of the rig builds. The Company's
expectation of increased activity levels and increased utilization in
Savanna's Australian operations is premised on actual results
experienced to date in 2013, the contracts in place and
communications with its customers in the region, and the general
expectation that coal seam gas activity will increase in that country
as plans for liquefied natural gas plants move forward. Whether
actual results, performance or achievements will conform to the
Company's expectations and predictions is subject to a number of
known and unknown risks and uncertainties which could cause actual
results to differ materially from the Company's expectations. Such
risks and uncertainties include, but are not limited to: fluctuations
in the price and demand for oil and natural gas; fluctuations in the
level of oil and natural gas exploration and development activities;
fluctuations in the demand for well servicing, oilfield rentals and
contract drilling; the effects of weather conditions on operations
and facilities; the existence of competitive operating risks inherent
in well servicing, oilfield rentals and contract drilling; general
economic, market or business conditions; changes in laws or
regulations, including taxation, environmental and currency
regulations; the lack of availability of qualified personnel or
management; the other risk factors set forth under the heading "Risks
and Uncertainties" in the Company's Annual Report and under the
heading "Risk Factors" in the Company's Annual Information Form; and
other unforeseen conditions which could impact on the use of services
supplied by the Company.
Consequently, all of the forward-looking information and statements
made in this press release are qualified by this cautionary statement
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially
realized, that they will have the expected consequences to or effects
on the Company or its business or operations. Except as may be
required by law, the Company assumes no obligation to update publicly
any such forward-looking information and statements, whether as a
result of new information, future events, or otherwise.
Savanna Energy Services Corp.
President & CEO
Savanna Energy Services Corp.
Executive Vice-President, Finance
& Chief Financial Officer
Savanna Energy Services Corp.
Executive Vice-President &
Chief Development Officer
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