Trican finds possible lifeline with proposed sale of U.S. assets

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Fighting for its survival, Trican Well Service Ltd. has found a possible lifeline in the proposed sale of its U.S. pressure pumping business to the Keane Group, a privately held well-completion services company.

The sale of Trican's U.S. assets could be valued anywhere from $140-million to $450-million, mostly for equipment, according to TD Securities Inc. The sale – still far from a certainty – would be a tenuous but much-needed win for Trican, which has about $100-million (U.S.) in debt coming due in April.

The company said in a news release its "management believes the offered price represents fair value and that the sale of this business would be in the best interest of shareholders if acceptable terms and conditions can be negotiated."

If the sale goes through and nets Trican a decent price, "it probably removes the spectre of just general failure, of the company actually going bankrupt," said Michael Mazar, a Calgary-based analyst for BMO Nesbitt Burns Inc.

"It's just them punting. And then they're saying, 'we can't make this U.S. business work – maybe somebody else can. I don't really care. I just want it to be somebody else's problem.' "

Trican shares were valued at more than $15 in mid-2014 but have lost more than 90 per cent of their value in the past 52 weeks – in the past two months dropping to well below a dollar. News of the possible deal for the U.S. unit bumped shares up in Wednesday morning trading on the Toronto Stock Exchange by more than 30 per cent, to about $0.52.

TD Securities analyst Scott Treadwell wrote Wednesday that a sale would allow Trican to meet its near-term debt maturities and reduce the risk of insolvency. "However, it does little to change the leverage outlook of the company, as the sale would significantly reduce the company's future earnings capability."

He added Trican's Canadian pumping and cementing franchise is one of the best in the segment, but the company's U.S. operation has consistently struggled to post strong results.

Oilfield companies such as Trican have suffered some of the worst effects of the crude price rout. With oil prices at 12-year lows this week, investment bank Peters & Co. Ltd. said North American oilfield activity at the weakest level in more than two decades. In order to survive, companies need to manage their debt, have a strong management team, a "differentiated" business model, and be positioned for mergers and acquisitions activity. In the Western Canadian Sedimentary Basin, drilling activity this year is expected to decline by 23 per cent compared to 2015 – its lowest level since 1992, Peters & Co. said. In the U.S., capital spending for key operators is expected to decline by 34 per cent from 2015 levels.

Mr. Mazar said for the industry in general, one positive of the proposed sale is it shows there might be more buyers for oilfield companies than expected.

"What it does indicate that there's more buyers out there than just waiting for Schlumberger to come and buy you. So that's helpful."

If the sale goes through, Trican operations will be focused almost solely in Western Canada (although it still has a small operation in Kazakhstan). In August, the firm sold its Russian pressure pumping business to a subsidiary of Rosneft, the state-owned energy giant, for $140-million (U.S.).

Trican provides hydraulic fracturing, cementing, coil tubing, and associated services as well as downhole tool product lines.