CIBC Take on New Contracts Savanna announced a $25 million increase to its 2014 capital program with
the incremental spend being used to fund the construction of one new drilling rig for North America and three new flush-by units for Australia.The total 2014 capital program is now expected to be ~$170 million.
The new build drilling rig is an AC electric heavy double capable of drilling tovertical depths of >4,000 meters. Although not disclosed in the pressrelease, we believe the rig will be deployed in Canada for an existing customer and will be supported by a three-year take-or-pay contract.
The three new flush-by units that will be deployed in Australia are self-contained service units, which integrate the features of a pressure truck and a small rod rig. The units will be supported by a long-term contract and webelieve are a natural extension of its well servicing offering in the country.
Overall, we view the increased budget positively and believe the contracts highlight continuing momentum in North America and Australia. The net impact is a modest ~1% bump in our 2014 estimates with the bulk of the contribution to be realized in 2015. We maintain our SO rating & $9.50 PT