CALGARY, ALBERTA--(Marketwire - Jan. 15, 2013) - CanElson Drilling Inc. ("CanElson" or the "Company") (CDI.TO) announces that its Mexican Joint Venture, Diavaz CanElson de Mexico, S.A. de C.V. ("DCM") has acquired two existing telescoping double drilling rigs ("tele-doubles") for US$5.6 million.
"The acquisition of these two rigs is a significant step forward for our Mexican joint venture," said Randy Hawkings, President and CEO of CanElson. "We expect this will increase profitability and improve payouts compared with DCM's current practice of using a sub-contracted drilling rig in Mexico."
The two tele-doubles are already in southern Mexico and will be moved to Tampico, a city in the eastern part of the country. In Tampico the rigs will undergo refurbishment to fit-for-purpose small-footprint plug-n-play configuration, complete with built-in managed pressure drilling and snubbing capability. When the refurbishment is completed, the rigs will be similar to the other highly standardized rigs in CanElson's North American fleet.
Cost, with refurbishing, compares favourably with new tele-doubles
The refurbishment of each tele-double is expected to cost about US$2.5 million resulting in a total expected cost per rig of US$5.3 million. This compares favourably with the cost of approximately $8 million to assemble new tele-doubles.
DCM intends to finance these capital investment activities using a combination of existing working capital and external funding as needed. DCM's Mexican engineering team, which has been training with CanElson, will supervise the upgrades.
Rigs to commence drilling in Q2 2013
During the second quarter of 2013, upon completion of the re-configuration, CanElson expects that the tele-doubles will commence drilling in the Ebano Panuco fields, located near the Central Gulf of Mexico. While the tele-doubles are being refurbished, DCM's drilling operations will continue through use of one sub-contracted drilling rig.
DCM expects to finalize a 5-year contract for one of the tele-doubles with its customer DS Servicios Petroleros, S.A. de C.V. ("DS") imminently. Discussions regarding the contract terms for the second tele-double are ongoing.
DS recently signed a 30-year production-sharing contract with PEMEX, Mexico's state-owned petroleum company, to operate the Ebano heavy oil block near Tampico, Mexico. CanElson anticipates increased profitability and excellent payouts for DCM-owned tele-doubles drilling on a performance basis with Mexican crews, as compared with sub-contracting third-party drilling rigs.
Established Operations at DCM
DCM has established a profitable operation and has substantially improved its drilling operations since the joint venture was formed in 2009. Among other things, DCM has:
- Reduced well drilling times by more than 50% through performance-based drilling management, and
- Developed a base of local Mexican engineers and management expertise through a strategy of transferring CanElson's Canadian drilling optimization practices and technology.
During its first 38 months of operations DCM has grown an initial US$3.9 million of partner equity investment into US$6.2 million of retained earnings.
DCM was formed in 2009 as a joint venture between CanElson and D&S Petroleum, S.A. de C.V., a subsidiary of Grupo Diavaz, S.A. de C.V. ("Diavaz"). Diavaz, a Mexican headquartered service company, is celebrating 40 years of providing oil and gas services in Mexico, primarily focused on servicing PEMEX.
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: www.canelsondrilling.com.
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 the intention to move the tele-doubles to Tampico and refurbish them; the estimated refurbishment cost of the two tele-doubles; DCM's intentions for financing the purchase and refurbishment of the two tele-doubles; expected timing of when the tele-doubles will commence drilling; expected timing for execution of drilling contracts with DS; and expected increased profitability and excellent payouts from owning the two tele-doubles, 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 securities laws.
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President and CEO
CanElson Drilling Inc.
Chief Financial Officer