Major Shareholder Urges Wenzel Shareholders to Vote Against the Proposed Arrangement With Basin Tools, L.P.

Major Shareholder Urges Wenzel Shareholders to Vote Against the Proposed 
Arrangement With Basin Tools, L.P. 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 07/24/13 -- Perlus
Investment Management LLP announced by way of news releases issued on
July 10, 2013 and July 22, 2013 its reasons for opposing the proposed
business combination (the "Arrangement") involving Wenzel Downhole
Tools Ltd. ("Wenzel") and Basin Tools, L.P. ("Basin"). We strongly
encourage Wenzel's shareholders to read those news releases. In both
releases, it was noted that the consideration of $2.25 per share for
Wenzel shares was grossly inadequate and in no way reflects a fair
value for Wenzel. Basin, the single largest shareholder of Wenzel,
unilaterally initiated the process whereby Basin would acquire the
balance of Wenzel at a significant discount to fundamental fair
value. Two members of Wenzel's board, including its Chairman, are
founding members of an affiliate of Basin and the non-executive
chairman of Basin. It was Basin who initiated and orchestrated the
strategic review process and it is Basin who is responsible for
paying for the valuation and fairness opinion (the "Valuation") upon
which the board of Wenzel is relying in order to fulfill their
fiduciary obligation to act in the best interests of Wenzel
shareholders and have arrogated that the consideration is fair. The
Valuation has already been found to be incorrect post issuance, which
subsequently forced an amendment to the information circular and
postponement of the meeting. Perlus firmly believes that the
Valuation remains critically flawed and has requested that Wenzel
seek another valuation that would be transparently independent.
Wenzel has ignored our requests. Basin also forced Wenzel to agree to
a non-solicitation clause; this meant that Wenzel was effectively
denied the latitude to explore or to even entertain alternative
offers. As a consequence, Wenzel was limited to simply determining
whether the consideration was fair by receipt of a Valuation
commissioned as a result of a process initiated by Basin and paid for
by Basin (the very definition of a compromised transaction); Basin
clearly wants Wenzel and has gone to extraordinary measures to get
it.  
DON'T ALLOW BASIN TO STEAL YOUR COMPANY. VOTE AGAINST THE
ARRANGEMENT. 
It is implicitly clear from Perlus' prior news releases that the
consideration is too low. In the Valuation, inappropriate comparative
companies were used to determine a multiple, the working capital of
Wenzel was deliberately discounted based on inaccurate assumptions
and incorrect tax rates were used which overstated Wenzel's tax
liabilities. All of this resulted in a range of values which
substantially undervalued Wenzel.  
We strongly urge you to ACT NOW and VOTE AGAINST the Arrangement. We
believe that given the Arrangement as an alternative, the maximum
value would be best achieved by keeping Wenzel public.  
We are of the strong belief that Wenzel is in the beginning stages of
a long term growth cycle. Not only have industry data points, such as
the price of oil and proposed drilling activity trends improved since
the Basin buyout proposal, but North American Oil/Gas Service public
equity valuation multiples are now beginning to reflect this expected
expansion. International demand for horizontal and directional
drilling technology and the equipment necessary to efficiently
extract resources is expanding at a rapid pace. On the international
front, the majority of existing wells are still being drilled using
old vertical based methods, which do not facilitate comprehensive
access to the addressable resource and is ultimately highly cost
inefficient when applied to new wells. Thus, international customers
are actively seeking and procuring North American horizontal drilling
methods and tools on many of their new on-land based projects. We
believe Wenzel will be a prime beneficiary of these well-defined
trends which should serve to generate significant, sustainable growth
in both revenue and earnings in years to come. Not only has Wenzel
recently hired a new international sales team to take advantage of
this burgeoning opportunity, it has been working on the introduction
and launch of major new products lines which are both adjunctive and
complementary to its core mud motor business. Wenzel's renewed focus
on international sales as well as these product introductions could,
in theory, permit revenue to increase significantly in a few short
years. Wenzel's business model, like many other tool manufacturers,
contains operating leverage that should, in a growth environment,
propel earnings at a significantly higher pace than that of revenue.
This prospective growth in earnings, coupled with industry multiples
that are now broaching 5.5x 2014 estimates would place Wenzel's stock
at around a $3.50 level (using the 2014 EBITDA projection in the
Valuation), a far cry from the $2.25 price Basin has proposed. It is
no wonder Basin is seeking to buy Wenzel in advance of this potential
growth and for such a parsimonious sum. Let us not forget, Basin
originally paid $2.30 when it purchased its 37% stake in Wenzel. This
was approximately a year prior to Wenzel's settlement with National
Oilwell Varco, which arguably, at the time, represented a major
overhang on Wenzel's stock price. With the lawsuit now definitively
behind it and with a clear path for sustainable, superior growth
looking forward, we urge fellow shareholders to turn down Basin's
ludicrously low price offer. 
Even if the pursuit of strategic alternatives is determined to be the
best strategy, voting against the Arrangement does not preclude such
strategic alternatives. It would simply allow for a more balanced
approach as opposed to one dictated by the interests of one party. In
the event that no other strategic alternative is found, then a
transaction with Basin, supported by an independent valuation, could
still be pursued. 
Perlus Investment Management LLP and its affiliates, Perlus Microcap
Fund L.P. and Perlus Limited (collectively, "Perlus") intend to vote
against the Arrangement. Certain other institutional shareholders
have also indicated they are voting against the Arrangement. Perlus
urges other concerned Wenzel shareholders to do the same as follows: 


 
1.  VOTE AGAINST the Arrangement using the form of proxy or voting
    instruction provided by Wenzel or by using the internet or telephone
    voting instructions provided by Wenzel in their meeting materials in
    connection with the adjourned meeting to be held in July 30, 3013. 
2.  If you have already voted for the Arrangement, revoke your prior proxy
    or voting instruction provide by Wenzel or by using the internet or
    telephone voting procedures set out in the Wenzel meeting materials. 
3.  The cutoff to submit your proxy or for internet or telephone voting is
    10:00 am (Calgary time) Friday, July 26, 2013. 
4.  Shareholders using internet or telephone voting can change their voting
    instructions more than once and at any time prior to the cutoff. 
5.  Do not appoint David LaSalle as your appointee. Leave blank or name
    another individual.

 
This solicitation is being made by Perlus and not by or on behalf of
the management of Wenzel. Perlus received an exemption order from the
Alberta Securities Commission that permits Perlus to solicit proxies
by broadcast, speech or publication without sending an information
circular to each Wenzel shareholder. The exemption order also permits
Perlus to make certain non-public solicitations. Except for certain
non-public solicitations, any solicitation will be made by broadcast,
speech or publication. Perlus will bear all the costs and expenses
associated with such solicitation. Perlus owns an aggregate of
3,413,500 Wenzel common shares ("Shares"), representing approximately
10.8% of the total Shares issued and outstanding as of the record
date.  
VOTE AGAINST the Arrangement using the form of proxy or voting
instruction provided by Wenzel. Shareholders may subsequently revoke
such proxy in any manner permitted by law. If you have previously
voted on the form of proxy or voting instruction form sent to you by
Wenzel, you may revoke your vote by voting on the internet, by fax,
by mail or over the telephone (as available). ONLY YOUR LATEST DATED
FORM OF PROXY OR VOTING INSTRUCTION FORM WILL BE COUNTED. 
This solicitation relates to Wenzel Downhole Tools Ltd. whose address
is 1200, 750-2 Street S.W., Calgary, Alberta T2P 4V5. 
Forward-Looking Statements 
Certain statements in this press release contain forward-looking
information within the meaning of applicable securities laws in
Canada ("forward-looking information"). The words "anticipates",
"believes", "budgets", "could", "estimates", "expects", "forecasts",
"intends", "may", "might", "plans", "projects", "schedule", "should",
"will", "would" and similar expressions are often intended to
identify forward-looking information, although not all
forward-looking information contains these identifying words. 
The forward-looking information in this press release includes, but
is not limited to: the timing and holding of the Wenzel meeting and
the future prospects of Wenzel. In connection with the
forward-looking information contained in this news release, Perlus
has made numerous assumptions. While Perlus considers these
assumptions to be reasonable, these assumptions are inherently
subject to significant uncertainties and contingencies. Additionally,
there are known and unknown risk factors which could cause actual
results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied
by the forward-looking information
contained herein. 
All forward-looking information in this press release is qualified in
its entirety by this cautionary statement and, except as may be
required by law, Perlus undertakes no obligation to revise or update
any forward-looking information as a result of new information,
future events or otherwise after the date hereof.
Contacts:
David LaSalle
805-379-0900
david@perlusinvestments.com