CALGARY, ALBERTA confirmed today that it has provided Grey Wolf,
Inc. ("Grey Wolf") with a final business combination proposal for
US$10.00 per Grey Wolf share. Precision is strongly of the view
that its proposal offers Grey Wolf shareholders a superior
alternative to a merger with Basic Energy Services, Inc. ("Basic")
and represents a compelling long-term value creation opportunity
for both Precision and Grey Wolf securityholders.
Precision's final proposal provides for the acquisition of all
of the common shares of Grey Wolf for US$10.00 per share (on a
fully diluted basis), comprised of cash and trust units of
Precision, at the election of Grey Wolf shareholders, subject to
proration such that the cash portion does not exceed 50% of the
aggregate offer price. Precision's proposal is in relation to Grey
Wolf alone and does not, and will not, extend to a merged Grey Wolf
and Basic. A copy of Precision's proposal letter to Grey Wolf is
attached to this press release.
The US$10.00 per share offer implies a multiple of 8.1 times
consensus 2008 estimated cash flow per share and represents a 34%
premium to the average closing price over the thirty trading days
prior to June 8, 2008, the date Precision's initial proposal was
provided to Grey Wolf. In addition, this proposal represents a 21%
premium to Grey Wolf's closing price of US$8.28 on June 9, 2008,
the day before Precision's initial proposal to Grey Wolf became
public.
"We believe our offer to Grey Wolf represents a compelling
strategic opportunity which is in the best interests of the
securityholders of both companies. Our proposal is fully priced and
we will not make any further revisions. We are prepared to commence
our due diligence and work towards the execution of a definitive
agreement immediately. If the Grey Wolf board of directors chooses
to reject our proposal, we will cease all current efforts to pursue
a merger with Grey Wolf" said Kevin Neveu, Precision's Chief
Executive Officer.
Precision has received letters from Deutsche Bank Securities
Inc. and Royal Bank of Canada with respect to each being highly
confident in their ability to provide Precision with the debt
financing required to complete the proposed business combination.
Each bank is prepared to commence its customary due diligence with
the objective of providing the debt financing on a committed basis
on customary terms and conditions in advance of the execution of a
definitive agreement. In addition, Precision has a number of
existing credit facilities available to finance its activities.
Precision's existing committed facilities include a C$700 million
unsecured credit facility led by Royal Bank of Canada, of which
approximately C$600 million is currently available to Precision to
assist in the funding of the proposed business combination with
Grey Wolf.
Precision's proposal is subject to (i) completion by Precision
and its representatives of focused confirmatory due diligence which
will be conducted on an expedited basis, and (ii) negotiation of
acceptable legal documentation, which is expected to contain
substantially the same terms (apart from consideration) as the
Agreement and Plan of Merger between Grey Wolf and Basic (the
"Basic Agreement"). Closing of the proposed transaction would be
subject to Grey Wolf shareholder, Hart-Scott-Rodino, and other
customary approvals. Given sufficient access to information,
Precision expects to be able to complete its due diligence and
enter into a mutually satisfactory definitive agreement and plan of
merger with Grey Wolf within a two week period.
Precision expects to maintain Grey Wolf's principal offices and
facilities and to offer attractive opportunities for Grey Wolf's
employees to have continued roles in the combined entity. Precision
is also prepared to discuss Grey Wolf nominees to the Board of
Directors of Precision Drilling Corporation, the administrator of
Precision.
Precision's previously disclosed growth strategy includes
expansion of its service offerings to the United States by
leveraging its competitive strengths and its reputation for high
performance, high value onshore drilling services for oil and
natural gas exploration and development. Precision believes a
business combination with Grey Wolf fits this strategy and
accelerates its organic new rig construction program. The combined
companies would have much greater scale and a stronger financial
position allowing Precision and Grey Wolf to substantially advance
their mutual business objectives in the contract drilling
business.
Formal discussions in relation to the proposed business
combination have not yet been initiated between Precision and Grey
Wolf. While Precision is hopeful that discussions with Grey Wolf
will commence immediately so that a formal agreement can be reached
as soon as possible, there can be no assurance that discussions
will be initiated, or that any agreement will be reached, between
Precision and Grey Wolf in respect of the proposed business
combination.
Precision is a leading provider of safe, high performance energy
services to the North American oil and gas industry. Precision
provides customers with access to an extensive fleet of contract
drilling rigs, service rigs, camps, snubbing units, wastewater
treatment units and rental equipment backed by a comprehensive mix
of technical support services and skilled, experienced
personnel.
Precision Drilling Trust is listed on the Toronto Stock Exchange
under the trading symbol "PD.UN" and on the New York Stock Exchange
under the trading symbol "PDS".
This press release contains statements that may constitute
"forward-looking information" or "forward-looking statements"
(collectively, "forward-looking information") within the meaning of
applicable securities legislation. This forward-looking information
includes, among others, statements regarding business strategy,
plans and other expectations, beliefs, goals, objectives,
information and statements about possible future events, including
Precision's proposed business combination with Grey Wolf. Readers
are cautioned not to place undue reliance on such forward-looking
information. Forward-looking information is based on current
expectations, estimates and assumptions that involve a number of
risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Precision
and described in the forward-looking information contained in this
press release. There can be no assurance that discussions will be
initiated, or that any agreement will be reached, between Precision
and Grey Wolf.
June 24, 2008
Mr. Thomas P. Richards
Chairman & Chief Executive Officer
Grey Wolf, Inc.
10370 Richmond Ave., Suite 600
Houston, Texas 77042
Dear Mr. Richards:
Upon further reflection of the strategic merits of a combination
of Precision Drilling Trust ("Precision") and Grey Wolf, Inc.
("Grey Wolf"), the Board of Trustees of Precision is prepared to
make a final proposal to you on the terms outlined below. We
believe that this final proposal represents a compelling long-term
value creation opportunity for both Precision and Grey Wolf
securityholders.
1. Purchase Price. Precision's proposal provides for the
acquisition of all of the common shares of Grey Wolf for US$10.00
per share (on a fully diluted basis), comprised of cash and trust
units of Precision, at the election of Grey Wolf shareholders,
subject to proration such that the cash portion does not exceed 50%
of the aggregate offer price. Precision's proposal is in relation
to Grey Wolf alone and does not, and will not, extend to a merged
Grey Wolf and Basic Energy Services, Inc. ("Basic").
The US$10.00 per share amount implies a multiple of 8.1 times
consensus 2008 estimated cash flow per share and represents a 34%
premium to the average closing price over the thirty trading days
prior to June 8, 2008, the date Precision's initial proposal was
provided to Grey Wolf. In addition, this proposal represents a 21%
premium to Grey Wolf's closing price of US$8.28 on June 9, 2008,
the day before Precision's initial proposal to Grey Wolf became
public.
2. Conditions. Our proposal is subject to (i) completion by
Precision and its representatives of focused confirmatory due
diligence, which we will conduct on an expedited basis, and (ii)
negotiation of acceptable legal documentation, which we expect to
contain substantially the same terms (apart from consideration) as
the Agreement and Plan of Merger between Grey Wolf and Basic (the
"Basic Agreement"). Closing of the proposed transaction would be
subject to Grey Wolf shareholder, Hart-Scott-Rodino, and other
customary approvals. Please note that we are not required to seek
Precision unitholder approval for the proposed transaction.
3. Timing. As communicated to you previously, Precision is
prepared to move expeditiously in evaluating, negotiating and
entering into a transaction and expects to be able to complete this
process within a two week period.
4. Financing. We have received assurances in writing (see
attachments) from Deutsche Bank Securities Inc. and Royal Bank of
Canada, financial institutions of national reputation, with respect
to each being highly confident in their ability and willingness to
provide us with the debt financing required to complete the
proposed business combination. Each bank is prepared to commence
its customary due diligence with the objective of providing the
debt financing on a committed basis on customary terms and
conditions in advance of execution of a definitive merger
agreement. In addition, and as communicated to you previously,
Precision has a number of existing credit facilities available to
finance our activities, including a C$700 million unsecured credit
facility led by Royal Bank of Canada. As of the date of this
letter, we have approximately C$600 million of borrowing capacity
available to us to assist in the funding of the proposed business
combination.
We expect to maintain Grey Wolf's principal offices and
facilities and to offer attractive opportunities for Grey Wolf's
employees to have continued roles in the combined entity. We are
also prepared to discuss Grey Wolf nominees to the Board of
Directors of Precision Drilling Corporation, the administrator of
Precision.
Precision's growth strategy includes expansion of its service
offerings to the United States by leveraging its competitive
strengths and its reputation for high performance, high value
onshore drilling services for oil and natural gas exploration and
development. We believe that a business combination with Grey Wolf
fits this strategy and accelerates our organic new rig construction
program. Our combined companies would have much greater scale and a
stronger financial position allowing us to substantially advance
our mutual business objectives in the contract drilling
business.
We hope that you will again give our proposal your prompt and
fullest consideration. We believe that our proposal provides a
compelling strategic opportunity for our collective
securityholders, which the shareholders of Grey Wolf should be
given the opportunity to consider. Although we believe strongly in
the merits of the proposed merger of our two companies, we are only
prepared to proceed with a merger in circumstances where the
consideration offered to the shareholders of Grey Wolf is also
equitable to the unitholders of Precision. Do not hesitate to
contact me at the numbers previously provided, if you have any
questions or if we can assist you in further evaluating our
proposal.
Sincerely,
PRECISION DRILLING TRUST, by its
administrator, Precision Drilling Corporation
---------------------------------
Kevin A. Neveu,
Chief Executive Officer
cc: Robert L. Phillips, Chairman
Attachments
Contacts: Kevin Neveu, Chief Executive Officer of Precision
Drilling Corporation, Administrator of the Trust (403) 716-4500
(403) 264-0251 (FAX) Doug Strong, Chief Financial Officer of
Precision Drilling Corporation, Administrator of the Trust (403)
716-4500 (403) 264-0251 (FAX) Precision Drilling Trust 4200, 150 -
6th Avenue S.W. Calgary, Alberta T2P 3Y7 Website: website:
www.precisiondrilling.com
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