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Press release from Marketwire

Secure Energy Services Inc. Announces Strategic Acquisition and Bought Deal Financing

Wednesday, April 27, 2011

Secure Energy Services Inc. Announces Strategic Acquisition and Bought Deal Financing08:15 EDT Wednesday, April 27, 2011CALGARY, ALBERTA--(Marketwire - April 27, 2011) -NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) announced today that it has entered into an agreement to acquire Marquis Alliance Energy Group Inc. ("Marquis Alliance") for an aggregate purchase price of approximately $131 million, subject to certain customary closing adjustments (the "Acquisition"). The purchase price for the Acquisition is $65.5 million in cash and the issuance of common shares of Secure. Secure will assume long term debt of $1.7 million and Marquis Alliance will deliver minimum working capital of $19.8 million at closing. Closing of the Acquisition is expected to occur on or before June 1, 2011. Marquis Alliance estimates that it will generate revenue of $132.0 million and EBITDA of $26.4 million for the fiscal year ending March 31, 2011.To fund the cash portion of the purchase price, Secure has entered into an agreement with a syndicate of underwriters co-led by FirstEnergy Capital Corp. and Raymond James Ltd. with respect to a $75 million bought deal public offering of subscription receipts, as further described below (the "Offering"). Summary of the Acquisition Marquis Alliance is an energy services company specializing in the supply and development of drilling fluids and drilling fluid systems. An industry leader in the drilling fluid business, Marquis Alliance focuses on providing products and systems designed for more complex wells, such as medium to deep wells, horizontal wells and horizontal SAGD wells. Marquis Alliance also provides environmental services comprised of drilling waste management and environmental sciences in connection with reclamation services. In addition, Marquis Alliance provides solids control and ancillary equipment rentals for drilling operations. Marquis Alliance is the second largest Canadian drilling fluid company with 175 employees focused on servicing the ongoing major resource plays such as the Muskwa shales of the Horn River basin, the Cardium of Central Alberta, the Montney in the Deep Basin of Alberta and British Columbia, the oil sands of Alberta and Saskatchewan and the Bakken of Saskatchewan and North Dakota. Strategic RationaleThe addition of the Marquis Alliance business fits within Secure's stated strategy of exploiting the full value chain and adding complimentary services to the Corporation's business lines. The acquisition of the second largest Canadian drilling fluid company allows Secure to provide a broad integrated drilling fluid service that customers are demanding as a result of tightening environmental standards.By integrating Marquis Alliance's product and service offering with Secure's existing network of facilities, the pro forma entity will be able to offer customers expanded services and products such as: Recycled drilling fluids at Secure's Full Service Terminals ("FSTs"); New drilling fluid blending facilities at Secure's FSTs to reduce transportations costs; Efficient drilling waste handling at the well site; and Enhanced environmental stewardship for our customers. In addition, the Acquisition provides strategic corporate benefits which include:Immediate accretion to Secure on an earnings and cash flow per share basis; Significant operational synergies over the next 12 to 24 months; Integration into Secure's existing network with minimal costs; and Secure emerges as the only company to provide full cycle 'cradle to grave' drilling fluid solutions. Rene Amirault, Chairman and Chief Executive Officer of Secure stated that "The acquisition of Marquis Alliance is not only accretive to Secure shareholders, but is also strategic in that it will allow Secure to further leverage its growing network of facilities. By expanding the services our facilities provide with the complimentary services of Marquis Alliance, we can help our customers recycle drilling fluids and reduce their transportation costs. With drilling and completing wells becoming more complex and environmentally challenging, it is imperative that we provide our customers with an efficient and cost effective full cycle drilling waste management program."George Wadsworth, President of Marquis Alliance, added "Now as part of Secure, Marquis Alliance can offer its clients a facility based approach to the supply and recovery of costly hydrocarbon based drilling fluids. In addition to leveraging our business with Secure's facility network, a key component of the transaction is the cultural fit between the two organizations. Both organizations are comprised of service oriented and innovative leaders in their prospective fields. Secure and Marquis Alliance will have the opportunity to provide a unique approach to the drilling and completion fluids and drilling waste business. Marquis Alliance is excited about the new growth opportunities and leveraging our combined strengths to meet our customers' growing needs."Pro Forma Summary, Transaction Terms and ConditionsUpon closing of the Acquisition and the Offering, Secure will have the following pro forma characteristics:Basic shares outstanding of 85,164,239 million; Market capitalization of approximately $600 million based on the April 26, 2011 closing price of Secure shares; and Exceptionally strong balance sheet with net debt leverage ratios well below peer averages. All executive and senior management of Marquis Alliance will enter into non-competition agreements. In addition, the common shares of Secure issued as consideration for the Acquisition will be held in escrow, ranging from two to five years.Marquis Alliance shareholders combined will hold approximately 12% of the outstanding shares of Secure and no one Marquis Alliance shareholder will hold in excess of 2% of the outstanding shares of Secure after the Acquisition and the Offering have closed.The boards of directors of Secure and Marquis Alliance have both approved the transaction. FirstEnergy Capital Corp. acted as strategic advisor to Secure in relation to the Acquisition. The Acquisition is being made pursuant to a share purchase agreement among Secure, Marquis Alliance and the shareholders of Marquis Alliance which provides for the acquisition by Secure of all of the issued and outstanding shares of Marquis Alliance. Closing of the Acquisition is subject to customary closing conditions including receipt of all necessary regulatory and third party approvals, including the approval of the Toronto Stock Exchange. Secure anticipates that the closing of the Acquisition will occur on or before June 1, 2011. Details of the terms of the Acquisition are set out in the share purchase agreement and will be available on SEDAR (www.sedar.com).Equity FinancingTo fund the Acquisition, Secure has entered into an agreement, on a bought deal basis, with a syndicate of underwriters co-led by FirstEnergy Capital Corp. and Raymond James Ltd., and including CIBC World arkets Inc., Peters & Co. Limited, Macquarie Capital Markets Canada Ltd. and Paradigm Capital Inc. (collectively, the "Underwriters") pursuant to which the Underwriters have agreed to purchase for resale to the public 11,278,200 subscription receipts of Secure ("Subscription Receipts") at a price of $6.65 per Subscription Receipt for gross proceeds of approximately $75 million. In addition, the Underwriters have been granted an over-allotment option, exercisable for a period of 30 days following closing of the Offering, to purchase an additional 1,691,730 Subscription Receipts, at a price of $6.65 per Subscription Receipt for additional gross proceeds of approximately $11.25 million. Closing of the Offering is expected to occur on or about May 19, 2011 and is subject to customary conditions and regulatory approvals, including the approval of the Toronto Stock Exchange.The net proceeds of the Offering will be used by Secure to fund the cash portion of the purchase price of the Acquisition and for working capital and general corporate purposes, including the funding of capital expenditures. The Subscription Receipts will be issued pursuant to a short form prospectus to be filed by Secure in each of the provinces of Canada, other than Quebec, and will also be offered for sale internationally pursuant to applicable registration or prospectus exemptions as permitted.The gross proceeds of the Offering will be held in escrow by a Canadian trust company or other escrow agent pending the completion of the Acquisition. If the Acquisition is completed on or before June 15, 2011, the net proceeds will be released to Secure and each Subscription Receipt will be exchanged for one common share of Secure for no additional consideration. If (i) the Acquisition is not completed on or before June 15, 2011, (ii) the share purchase agreement is terminated at an earlier time, or (iii) Secure advises the Underwriters or announces to the public that it is not proceeding with the Acquisition, the escrowed funds and any accrued interest earned thereon will be returned to the holders of the Subscription Receipts.About Secure Energy Services Inc.Secure is a TSX publicly traded energy services company that focuses on providing specialized services to upstream oil and natural gas companies operating in the Western Canadian Sedimentary Basin. The services provided by Secure assist these companies with the treatment and sale of crude oil and the handling of by-products associated with oil and natural gas development and production. The services provided by Secure include crude oil emulsion treatment, the terminalling and marketing of crude oil, oilfield waste processing, tank washing, landfill disposal, disposal of produced and waste water and the purchase and resale of crude oil at Secure facilities. The Corporation's services are provided at ten facilities in Alberta and two facilities in British Columbia.About Marquis Alliance Energy Group Inc.Marquis Alliance is an energy services company that specializes in the supply and development of drilling fluids and drilling fluid systems. Marquis Alliance focuses on providing products and systems that are designed for more complex wells, such as medium to deep wells, horizontal wells and horizontal SAGD wells. Marquis Alliance provides drilling fluids services in the western Canadian Sedimentary Basin and in the northern United States, with strategic focus on servicing the ongoing major resource plays such as, but not limited to, the Muskwa shales of the Horn River, the Cardium of Central Alberta, the Montney in the Deep Basin of Alberta and British Columbia, the oil sands of Alberta and Saskatchewan, the Bakken of Saskatchewan and North Dakota. Marquis Alliance also provides environmental services comprised of drilling waste management and environmental sciences in connection with reclamation services. Environmental services involves determining the appropriate processes for disposing of drilling waste such as drill cuttings and fluids and/or the recycling of the fluids produced by drilling operations. In addition, Marquis Alliance provides reclamation services to assess and determine the most appropriate and cost effective method for reclaiming the land back to its original pre-drilling state. Environmental scientists and chemists, in conjunction with its drilling fluids specialists, work to execute the reclamation and disposal process.Marquis Alliance also provides solids control and ancillary equipment rentals for drilling operations in both western Canada and the Rocky Mountain States. The majority of the activity for the solids control and equipment rental service line is in central Alberta and the oil sands. Marquis Alliance' current fleet of high speed centrifuges, drying shakers, bead recovery units, tanks and ancillary equipment is offered as a standalone package or part of an integrated package with drilling fluids and environmental services. Non-GAAP measuresThis press release contains references to EBITDA. The Corporation uses accounting principles that are generally accepted in Canada (the issuer's "GAAP"), which includes without limitation, International Financial Reporting Standards ("IFRS"). EBITDA is not a measure that has any standardized meaning prescribed by IFRS and is therefore referred to as a non-GAAP measure. This non-GAAP measure used by the Corporation may not be comparable to a similar measure used by other companies. Management believes that in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how those activities are financed or how the results are taxed. EBITDA is calculated as net income excluding depreciation, depletion and accretion, stock-based compensation, interest, and taxes.Cautionary Statement Regarding Forward-Looking InformationStatements expressed in, or implied by this press release contain forward-looking statements, including statements regarding the anticipated timing and closing of the Acquisition and of the Offering and anticipated synergies arising from completion of the Acquisition. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous unknown risks, uncertainties, and other factors, many of which are beyond the control of Secure. These risks include, but are not limited to the risks identified in Secure's Annual Information Form for the year ended December 31, 2010 under the heading "Risk Factors" and in Secure's Management Discussion and Analysis for the year ended December 31, 2010 under the heading "Business Risks" and also includes the risks associated with failing to satisfy all conditions to closing the Acquisition and the Offering; risks associated with the possible failure to realize the anticipated synergies in integrating the operations of Marquis Alliance with the operations of Secure; the risks associated with the oil and gas industry, commodity prices and exchange rate changes, regulatory changes, changes in drilling activity and general global economic, political and business conditions. Industry related risks could include, but are not limited to: operational risks, delays or changes in plans, health and safety risks and the uncertainty of estimates and projections of costs and expenses and access to capital. The risks outlined above should not be construed as exhaustive. The reader is cautioned not to place undue reliance on this forward-looking information. These forward-looking statements are made as of the date of this press release and Secure disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities law. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities law and may not be offered or sold in the United States absent registration or applicable exemption from those registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY UNITED STATES NEWS SERVICES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.FOR FURTHER INFORMATION PLEASE CONTACT: Rene AmiraultSecure Energy Services Inc.Chairman, President and Chief Executive Officer(403) 984-6100(403) 984-6101 (FAX)ORNick WielerSecure Energy Services Inc.Chief Financial Officer(403) 984-6100(403) 984-6101 (FAX)www.secure-energy.caThe Toronto Stock Exchange has not reviewed, nor does it accept responsibility for the adequacy or accuracy of this release.