News releaseThey have secured work for 45% of their rigs for the next 2.5 years. Gross margin will be 3 to 5 % lower for the rigs involved, but the security that the contracts provide is welcome in this environment.
https://www.newswire.ca/en/releases/archive/May2009/04/c8053.html
Trinidad Drilling Ltd. announces the renegotiation and extension of long-term, take-or-pay contracts with key U.S. operator
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./ TSX SYMBOL: TDG, TDG.DB CALGARY, May 4 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or the"Company") (TSX-TDG and TDG.DB) announced today that it has successfullyrenegotiated and extended the terms on 17 long-term, take-or-pay contractswith one of its key US customers. These changes provide ongoing stability tothe Company's revenue stream during a period of considerable uncertainty. Trinidad's ability to renegotiate and extend the terms of its contractsreflects the customer's continued demand for its high-quality,high-performance equipment and its strong customer relationships. Trinidad renegotiated the terms on 17 existing long-term, take-or-paycontracts with a major US oil and gas exploration and development company.These rigs had existing contracts that were due to expire over the next fewyears with an average term of approximately 1.7 years. Following theirrenegotiation, the average remaining term is extended to 2.7 years, givingTrinidad added visibility over a substantial portion of its revenue stream. In addition to changes in term, dayrates on the contracts were adjustedto more accurately reflect the current operating environment. The impact ofsomewhat lower dayrates will be considerably mitigated by specific reductionsin operating costs that Trinidad has identified and is currently implementing.Using the new dayrate and operating cost expectations, average gross margin(on a percentage basis) on the rigs involved is expected to be three to fivepercent lower. Trinidad believes that the benefit of guaranteed work over thecontracted period more than outweighs the slightly lower gross margins therigs are anticipated to achieve. The terms of the new contracts came into effect on May 1, 2009. In addition, Trinidad has agreed with the customer to cancel theconstruction of one of the rigs included in the 2009 rig construction program.This rig, a 16,000 ft Candrill 1500ac drilling rig, was originally scheduledto be delivered in the second quarter of 2009. Trinidad will keep thecomponents of the cancelled rig in inventory and utilize them within theremaining construction program or for repairs and maintenance of existingequipment. Following these contract changes, Trinidad will have approximately 45percent of its fleet under long-term, take-or-pay contract, with an averageterm of more than 2.5 years remaining. Trinidad is a growth-oriented corporation that trades on the TorontoStock Exchange (TSX) under the symbol TDG and TDG.DB. Trinidad's divisionsoperate in the drilling, well-servicing, coring and barge-drilling sectors ofthe North American oil and natural gas industry. With the completion of the2008/2009 rig construction program, Trinidad will have 119 land drilling rigsranging in depths from 1,000 - 6,500 metres and operations in Canada, theUnited States and Mexico. In addition to its land drilling rigs, Trinidad has23 service rigs, 20 pre-set and coring rigs and 4 barge rigs currentlyoperating in the Gulf of Mexico. Trinidad is focused on providing modern,reliable, expertly designed equipment operated by well-trained and experiencedpersonnel. Trinidad's drilling fleet is one of the most adaptable,technologically advanced and competitive in the industry.