Trican Well Service Reaches Agreement for Sale of Its United States Pressure Pumping Business and Amended Covenant Package With Its Lenders
Trican Well Service Ltd. (“Trican” or “the Corporation”) (TSX:TCW) is pleased to announce that it has entered into a definitive agreement with Keane Group, a privately-held, U.S. based well completion services company (“Keane”) for the sale of Trican’s United States pressure pumping business. The transaction involves the sale of the pressure pumping and select related assets and the assumption of certain liabilities of Trican Well Service, L.P., Trican’s wholly-owned subsidiary. Concurrently, Trican has also reached an agreement in principle with its bank lenders under its revolving credit facility (“RCF”) and the holders of its senior notes to make certain amendments to the applicable credit documentation subject to closing of the U.S. operations sale.
The agreed purchase price for the disposition is USD $200 million, or CDN $285 million at the January 25, 2016 exchange rate of .70, with customary working capital adjustments to be determined. In addition to this cash consideration, Trican will receive, on closing of the transaction, 10% of the shares of Keane Group Holdings, LLC, as well as certain economic interests in Keane that represent up to an additional 20% economic participation above certain thresholds upon a Keane liquidity event.
Trican is currently estimating its 10% investment in Keane to have a value between CDN $67 million and CDN $120 million. As a result, the total consideration is estimated to be between CDN $352 million and CDN $405 million. As part of the transaction, Trican will have two seats on Keane’s board of directors. Trican intends to apply the net cash proceeds from this transaction to reduce its outstanding debt.
Trican will retain its Completion Solutions, Geological Services and Industrial Services businesses and will continue to offer these products and services in the United States following the closing of the transaction.
Trican and Keane have similar corporate cultures with a strong focus on safety, operational efficiency and employee development. Adding Trican’s U.S. operations to Keane brings scale, additional technology and engineering expertise, service offerings, and a broader geographic reach to new and existing customers. Trican’s management expects that the combined company, in which Trican’s shareholders will participate through Trican’s investment in Keane, will have the scale required to withstand the current downturn and grow to become one of the top-tier pressure pumpers in the United States with a significant presence in the major shale basins.
Closing of the transaction is expected to occur on or before March 15, 2016. Closing of the transaction is subject to Hart-Scott-Rodino Act approval as well as certain other customary conditions precedent. A break fee equal to USD $20 million is payable by Keane to Trican in the event of a financing failure and a USD $55 million fee is payable by Keane to Trican if the transaction is not consummated in certain other limited circumstances.
Dale Dusterhoft, Chief Executive Officer, commented, “The proposed transaction with Keane will strengthen Trican’s balance sheet and will allow Trican to focus on generating profits from our remaining businesses. The cash proceeds from the transaction allow Trican to substantially reduce its overall debt levels and revise our covenant package to allow the Corporation to manage through this point of the commodity cycle and positions it to create long-term value. The retained equity interest and additional economic interests in Keane provide Trican with upside leverage to a recovery in the U.S. pressure pumping sector and alignment with Keane’s high quality, proven management team and platform. I view the combination as a mutually beneficial transaction for both Trican and Keane.”
Trican would like to thank its employees, customers, and suppliers for their support in building the U.S. business.
RBC Capital Markets is acting as financial advisor to Trican and provided a fairness opinion with respect to the transaction to the Board of Directors of Trican.
Continued Reduction in Leverage and Amended Covenant Package
In conjunction with this sale, Trican is also pleased to announce that it has reached an agreement in principle with its bank lenders under its RCF and the holders of its senior notes to make certain amendments to the applicable credit documentation subject to closing of the U.S. operations sale.
Dale Dusterhoft, Chief Executive Officer, commented, “We are pleased to announce the terms of our further covenant relief and thank our lenders and noteholders for their continued commitment and support for Trican’s business. The U.S. business sale transaction, together with this further covenant relief package, puts us in a strong financial position to continue operations and focus on generating profits from our remaining businesses throughout this period of volatility.”
After giving effect to the cash proceeds from the sale of the U.S. pressure pumping business, Trican expects its total debt balance to be reduced to approximately CDN $235 million. Since December 31, 2014, Trican is expected to have reduced its total long-term debt by over CDN $540 million pro-forma the completion of the U.S. business sale.
