Trinidad Energy Services to Acquire Saturn Drilling
Trinidad Energy Services Income Trust, through its wholly owned subsidiary Trinidad Drilling Ltd., has entered into an exclusive agreement to purchase the assets of Saturn Drilling Inc. Saturn's assets include two heavy doubles rigs and one triple rig, the doubles having a depth rating of 3000 meters and the triple having a depth rating of 3500 meters. The acquisition also includes all drill pipe, spare parts and other miscellaneous inventory items related to this drilling equipment. The purchase price for these assets is $17.50 million less post closing adjustments resulting in a net purchase price to Trinidad of approximately $16.6 million or approximately $5.53 million per rig. Closing of the agreement is subject to usual conditions as well as the successful completion of the trust unit offering described below.
Trinidad expects to finance this acquisition with approximately $4.60 million of debt and approximately $12.00 million of new equity through the issuance of trust units. The Trust has entered an agreement with a syndicate of agents, led by Raymond James Ltd. as the lead agent, to arrange for an offering of trust units by way of prospectus to purchasers on a fully marketed basis for the $12.00 million in new equity required to complete the Saturn acquisition. The offering and the acquisition are expected to close in late March or early April of 2003.
Trinidad expects that the acquisition of the Saturn assets will be accretive to the Trust's distributions per unit and will provide expanded depth capacity and broader drilling market coverage for Trinidad. For the year ended May 31, 2002 the Saturn assets generated $9.02 million of revenue and $ 4.17 million of earnings before interest, taxes, deprecation and amortization (EBITDA).
The additional depth capacity gained by Trinidad through this acquisition will serve to meet the demands of their existing customers. Trinidad also believes that its overall utilization rate will increase as result of Saturn's historical and current utilization rates of 57% in 2001, 46% in 2002 and 81% 2003 YTD. This acquisition will, as well, result in lower general and administrative expenses in relation to Trinidad's revenue due to it current infrastructure being capable of absorbing the additional Saturn rigs without adding incremental general and administrative expenses.
The employees of Saturn are long term and highly experienced drilling rig operators with a strong history of safety performance. The Company's management is excited about providing opportunities for all of the Saturn employees to join Trinidad, and is looking forward to making the transition for such employees as easy and effortless as possible. In addition Mr. W.R. (Bill) Dunbar the co-owner and operator of Saturn will be staying on with Trinidad to help with the transition and will take on an active role going forward focused on equipment construction and design. Mr. Dunbar has over 30 years of experience in the drilling industry and will be a valuable addition to Trinidad.