Allis-Chalmers has entered into an agreement with BCH Ltd., to invest $40 million in cash in BCH in the form of a 15% Convertible Subordinated Secured debenture. The debenture is convertible, at any time, at the option of Allis-Chalmers into 49% of the common equity of BCH. At the end of two years, Allis-Chalmers has the option to acquire the remaining 51% of BCH from its parent, BrazAlta Resources Corp., ("BrazAlta"), based on an independent valuation from a mutually acceptable investment bank. BrazAlta is a publicly traded Canadian-based international oil and gas corporation with operations in Brazil, Northern Ireland, and Canada.
BCH is a Canadian-based oilfield services company engaged in contract drilling operations exclusively in Brazil. BCH has five drilling rigs under two to three year contracts with Petroleo Brasileiro S.A., ("Petrobras") and its partners, and contracts for two additional drilling rigs and one service rig with BrazAlta for a term of three years. Allis-Chalmers expects that these contracts have the potential to generate revenues of approximately $125 million to BCH over the next three years.
Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer, stated, "We are very excited about the opportunity to make an investment in the drilling and completion market in Brazil, the most advanced economy in South America. We could not have found an investment in this market with a more predictable, stable and profitable business model. As capital expenditures by Petrobras and BrazAlta continue to increase, we look forward to increasing our assets in Brazil by working with BCH's management team in exploring potential markets for our rental inventory, directional drilling, underbalanced drilling, coil tubing and casing and tubing installation services. We also believe that the very capable management team at BCH will quickly seize the opportunity to expand its drilling and completion services with its principal customers, Petrobras and BrazAlta."
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