Technicoil Sells Five Coil Fracturing Rigs to Halliburton
Halliburton Group Canada Inc. will purchase five coil fracturing rigs and ancillary equipment from Technicoil for total cash consideration of US$4,750,000. Technicoil expects to continue to fulfill Halliburton's coil tubing needs if and when their rig fleet cannot meet their internal needs. Although our business with Halliburton will be significantly reduced Technicoil will, as a result of this sale, have much lower debt levels.
The rigs are scheduled to be delivered to Halliburton between mid-January 2003 and early March 2003. Technicoil will record the assets as "held for sale" on its December 31, 2002 balance sheet and estimates that it will record a loss on the sale of the rigs of approximately $1.4 million in its 2002 results. The proceeds from the rig sales will be used primarily to reduce long-term debt. Technicoil estimates that long-term debt will be $5.7 million when the rig sales are complete, down from $11.5 million at the end of third quarter of 2002.
When the sale is complete Technicoil will have seven first generation rigs focused on the fracturing market and two larger, second generation rigs targeted at drilling. Shallow gas drilling programs have increased with stronger natural gas prices and fracturing business with other pumping companies is expected to be strong as most of these wells are multi-zone wells that are most efficiently completed using coil fracturing methods. On the drilling side Technicoil has contracts for steady winter utilization for both of the second-generation rigs.