Savanna Energy Services Corp. Reports Interest from Potentia
A lot of activity in the comming year as companies finnaly get some confidence that the worst is over. Time for those with good ballance sheets to take advantage of the discounts, and also for many to just lower their operating costs further.
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CALGARY, ALBERTA--(Marketwired - Dec 15, 2016) - Savanna Energy Services Corp. (SVY.TO) ("Savanna" or the "Company") today reported interest from other potential bidders for Savanna since the announcement by Total Energy Services Inc. ("Total") in November of its intention to make an unsolicited takeover bid for Savanna. Separately, Savanna announced improved business in all three of the countries in which it operates: Canada, the U.S. and Australia.
The Special Committee intends to conduct a formal process early next year to explore strategic alternatives with a view to maximizing value for all shareholders of Savanna. Meanwhile, the Company is benefiting from increased drilling and well servicing activity amid improved commodity prices for both oil and natural gas. Based on current trends, stronger activity levels are expected to continue into 2017.
Third Party Expressions of Interest
Over the past three weeks, Savanna has had discussions with various stakeholders of the Company including certain of its shareholders and customers. As a result of these discussions and strong expressions of interest from third parties in evaluating the opportunity to make a competing offer for Savanna, the Special Committee of the Board of Directors of the Company has instructed its financial advisor, Peters & Co. Limited, to, among other things, prepare to conduct a formal process to explore strategic alternatives with a view to maximizing value for all shareholders of Savanna. The Special Committee anticipates that a strategic alternatives process will commence in early 2017.
It is the Company's current intention not to disclose developments with respect to the strategic review process until the Board of Directors has approved a specific transaction or otherwise determines that disclosure is necessary or appropriate. The Company cautions that there are no assurances or guarantees that, if a process is commenced, the process will result in a transaction or, if a transaction is undertaken, what the terms or timing of such a transaction will be.
Increased Business Activity
With improved commodity prices, industry conditions have become increasingly positive in each of the three countries where Savanna operates. The recovery, which was just emerging when Savanna announced its Q3 2016 results on November 8, 2016, appears to be gaining traction as both oil and natural gas prices return to levels not seen since mid-2015 or earlier.
Savanna is well positioned to benefit from the recovery now that it has completed its previously announced bought deal offering for gross proceeds of $21.68 million and financings providing for a $200 million second lien senior secured term loan facility and a private placement for gross proceeds of $18.85 million.
In the Board's view, these financings significantly reduce the Company's debt risk profile and put Savanna in an excellent position to capitalize on a recovery of market conditions with its competitive cost structure, experienced management team and proven ability to quickly adapt to changing circumstances. These core competencies will be deployed utilizing the Company's significant footprint in three countries that should have strong participation in improving oil and gas market fundamentals.
The following is an update of Savanna's operations by country:
CANADA: Q4 2016 ACTIVITY LEVELS TO DATE ARE CONSIDERABLY HIGHER THAN Q4 2015
Up to December 13, 2016, Q4 2016 activity levels in Canada are considerably higher than a year ago, despite wet weather through the start of the quarter. Fourth quarter operating days, to December 13, 2016, in Savanna's Canadian drilling division are more than 20% higher and operating hours in Savanna's Canadian well servicing division are nearly 10% higher than the same period in 2015.
Heading into the first quarter of 2017, bookings in Canada are strong and Savanna expects to run between 25 and 30 service rigs on average in Q1 2017, compared to the average of 20 service rigs working during Q1 2016. On the drilling side, Savanna expects to operate a peak of 40 to 45 drilling rigs in Q1 2017, including nine coring rigs, compared to its peak of 29 drilling rigs in Q1 2016, of which nine were coring rigs.
Management believes the expected increase in utilization, despite having only one drilling rig on a long-term contract in Canada, demonstrates the diversity of a drilling fleet that can work in all but the deepest basins in Western Canada. In 2016, Savanna's rigs were three of the top five busiest drilling rigs in Canada (source: June Warren-Nickles Energy, October 11, 2016) and Savanna has increased its market share of drilling activity in Canada every quarter in 2016 compared to the same quarters in 2015. Management believes Savanna's customers are well aware of Savanna's drilling and service rig fleets' capabilities, as evidenced through Savanna's top tier customer base, increased market share, and above-market utilization.