2013/06/16 Estrella announces proposed acquisition of San Antonio ...

Draft June 16, 2013
ESTRELLA INTERNATIONAL ENERGY SERVICES LTD.
ANNOUNCES PROPOSED ACQUISITION OF
SAN ANTONIO INTERNACIONAL COLOMBIA
NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRES
Toronto, Ontario, June 17, 2013 – Estrella International Energy Services Ltd. (“Estrella” or the “Company”)
(TSX Venture Exchange: EEN) is pleased to announce that it has entered into a definitive share purchase
agreement dated June 16, 2013 (“Purchase Agreement”) with San Antonio International Oil & Gas
Services LLC and Armadillo Drilling Services LLC (collectively the “Sellers”) for the acquisition of all of the
issued and outstanding shares of San Antonio Internacional Co. Inc. (“SAI Colombia”) for a purchase price
of approximately US$122 million (the “Acquisition”). SAI Colombia is a company registered under the
laws of the British Virgin Islands and is the owner of San Antonio Internacional-­‐Sucursal Colombia, a
branch registered in Bogotá, Colombia (the “SAIC”).
About SAIC
SAIC provides specialized services, equipment and personnel on a contractual basis for the exploration
and development of onshore oil and gas resources throughout Colombia. SAIC has a portfolio of
complementary oilfield services and equipment business lines including, among others, drilling, workover,
cementing and coiled tubing. SAIC has a strong operational platform throughout key Colombian basins,
such as Los Llanos and Magdalena Medio. Its assets include 20 drilling rigs, 6 workover rigs, 4 cementing
sets, 2 coiled tubing units and operating bases in four locations around Colombia.
SAIC Rig Fleet – Drilling
3 x 2000 HP
1 x 1700 HP
4 x 1500 HP
2 x 1200 HP
4 x 1000 HP
6 x 550 – 900 HP
SAIC Rig Fleet – Workover
3 x 550 HP
3 x 250 HP
SAIC Services Fleet
4 x Cementing Units
2 x Coil Tubing Units
Upon completion of the transaction Estrella will control 37 rigs in the Colombian market (45 rigs total),
making the combined company the largest rig operator in the market. On the services front, the
combination gives the Company a broad range of services, and strengthens the capabilities for project
management and handing of bundled services and integrated projects. During the year ended 2012,
SAIC’s average daily workforce consisted of approximately 1,260 employees, of which 1,054 are active rig-­based
personnel who operate the rigs on a day-­‐to-­‐day basis.
Estrella International Energy Services Ltd.
www.estrellasp.com

Warren Levy, CEO of Estrella states “Estrella is pleased to announce the acquisition of SAIC. The
acquisition will dramatically increase revenues and cash flow from the combined companies which should
provide greater visibility to institutional investors and access to capital markets The acquisition will also make
the combined entity the largest single rig operator in Colombia offering a broad range of services with critical
mass. The combination of SAIC’s long and successful operating history, Estrella’s management expertise and
technical knowhow, together with the strengthening of the Company’s balance sheet, will help Estrella
achieve its goal of being the standard of excellence for operations in Latin America.”
Terms of the Purchase Agreement
Under the terms of the Purchase Agreement, Estrella will acquire all of the issued and outstanding shares
of SAI for a purchase price of approximately US$122.5 million which will be paid in cash at closing. The
company will be purchased cash and debt free. Additionally an anticipated US$30.5 million will be injected
into the company to repay indebtedness for working capital and other general corporate purposes. The
Purchase Agreement contains representations, warranties and covenants of each of the Company, the
Sellers and SAI Colombia that are customary in transactions of this nature.
Closing of the Acquisition is subject to the approval of the TSX Venture Exchange and certain other
conditions precedent customary in transactions of this type all as more specifically set forth in the
Purchase Agreement, a copy of which has been filed on SEDAR. The transaction is expected to close on or
about July 31, 2013.
Financing Arrangements
In connection with the completion of the Acquisition the Company has entered into a secured loan
agreement dated June 16, 2013 (“Loan Agreement”) with Ringo Holding L.P. (“Ringo”), the Company’s
controlling shareholder, whereby Ringo has agreed to loan the Company up to US$97 million (the
“Shareholder Loan”) and to grant the Company an additional US$56 million loan in the event that the
Company is unable for any reason to obtain the Colombian Bank Loans referred to below (the “Additional
Shareholder Loan”). The Shareholder Loan will bear interest at the rate of 12% per annum from the
Effective Date (as such term is defined in the Loan Agreement) until 6 months from the Effective Date,
and thereafter at the rate of 14% per annum. The Shareholder Loan will be due and payable on the date
that is one year from the Effective Date.
Concurrently with the Shareholder Loan, the Company has been offered financing by Colombian banks of
an amount in the range of US$50 to 58 million (“Colombian Bank Loans”). It is anticipated that the
Colombian Bank Loans will be seven year fully amortizing term loans, with the first two years being
interest only.
The proceeds of the Shareholder Loan and the Colombian Bank Loans or Additional Shareholder Loan, as
applicable, will be used as follows: (i) approximately US$122.5 million to satisfy the purchase price for the
Acquisition and (ii) approximately US$30.5 million to repay indebtedness, and for working capital and
other general corporate purposes.
In the event that the Company completes a sale of equity securities or incurs any additional indebtedness
(excluding bank financing sourced in connection with the Acquisition) the Shareholder Loan will, up to the
amounts raised by the Company in connection with the forgoing, become immediately due and payable.
The Loan Agreement contains representations, warranties and covenants of each of the Company and
Ringo that are no more onerous than those the Company could obtain from commercial lenders, and are
customary in loans of this type. A copy of the Loan Agreement has been filed by the Company on SEDAR.
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Proposed Private Placement
Estrella is also pleased to announce that Ringo has executed a definitive investment agreement with the
Company dated June 16, 2013 (the “Investment Agreement”). Pursuant to the Investment Agreement,
Ringo has agreed to purchase by way of private placement Series B Preference Shares (“Preference
Shares”) of the Company based on a pre-­‐consolidated share price of CAD$0.05 (the “Subscription Price”),
for gross proceeds to the Company of up to CAD$130 million (“Private Placement”). The gross proceeds
of the Private Placement will be reduced by the amount, if any, of the proceeds raised in a Concurrent
Financing (as defined below).
It is anticipated that the Series B Preference Shares will carry a fixed preferred dividend at the rate of 6%
per annum, a liquidation preference equal to the paid up capital on such shares together with all accrued
and unpaid dividends, and would be convertible at the option of the holder into post-­‐consolidated
common shares of the Corporation on a one for one basis.
Closing of the Private Placement is subject to, among other things, disinterested shareholder approval,
the approval of the TSX Venture Exchange and certain other conditions precedent customary in
transactions of this type all as more specifically set forth in the Investment Agreement, a copy of which
has been filed on SEDAR.
The Company will request the approval of the disinterested shareholders of the Company at the
Company’s upcoming annual general and special meeting of shareholders (the “AGM”). The parties
intend to complete the Private Placement as soon as practicable following the AGM, subject to receipt of
final approval from the Exchange. The Company expects to use of the proceeds of the Private Placement
to repay the outstanding indebtedness on the Shareholder Loan specified above.
Concurrent Financing
In addition to the Private Placement, the Company may also complete a concurrent financing of
Preference Shares at the Subscription Price or other equity securities to subscribers other than Ringo
through a brokered or non-­‐brokered private placement or public offering (the "Concurrent Financing").
The Company expects to use of the proceeds of the Concurrent Financing, if any, in the same manner as
the Private Placement.
Closing of a Concurrent Financing would be subject to, among other things, the approval of the TSX
Venture Exchange and certain other conditions precedent customary in transactions of its type and would
be expected to take place at the same time as the closing of the Private Placement.
Annual General and Special Meeting
Currently the AGM is scheduled for July 8, 2013. The Company wishes to announce that in light of
importance of the Acquisition, the Company will changing the date of the AGM to a later date to be
determined by the directors. In addition to the approval of the Private Placement it is expected that the
shareholders will also be asked to consider and approve as a special resolution to consolidate the existing
common shares on a ratio to be determined by the directors.
About Estrella
Estrella is an oil and natural gas, geothermal and mining service company with operations throughout
Latin and South America. It provides conventional drilling services; directional drilling services; tools and
equipment sales and rentals; work-­‐over and finishing services; and consulting and engineering services.
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The Corporation is headquartered in Buenos Aires, Argentina and has operating locations in six countries
Latin and South America.
For further information:
Estrella International Energy Services Ltd.
Warren Levy,
Javier Vedoya
Telephone:
Facsimile:
Email:
Chief Executive Officer
Chief Financial Officer
+54 (11) 5217-­‐5250
+54 (11) 5217-­‐5280
info@estrellasp.com
Forward Looking Statements
This press release may contain forward-­‐looking statements which reflect management’s expectations regarding
future growth, results of operations, performance and business prospects of Estrella, the completion of the
Acquisition, the Shareholder Loan, the Private Placement and the Concurrent Financing. These forward-­‐looking
statements may relate to, among other things, forecasts or expectations regarding business outlook for Estrella;
commodity prices for oil and natural gas; oil and natural gas demand and production growth; debt service
requirements for Estrella; improvements in operating procedures and technology; capital expenditures by Estrella
and the oil and gas industry; the business strategies of Estella’s customers; future global economic conditions; and
future results of operations; expectations regarding the Corporation’s ability to raise capital; realization of the
anticipated benefits of acquisitions and dispositions, revenue growth, future acquisitions, generation of cash flow,
and may also include other statements that are predictive in nature, or that depend upon or refer to future events or
conditions, and can generally be identified by words such as “may”, “will”, “expects”, “anticipates”, “intends”,
“plans”, “believes”, “estimates”, “guidance” or similar expressions. In addition, any statements that refer to
expectations, projections or other characterizations of future events or circumstances are forward-­‐looking
statements. These statements are not historical facts or guarantees of future performance, but instead represent
management’s current expectations, estimates and projections regarding future events.
The reader is cautioned that assumptions used in the preparation of any forward-­‐looking information may prove to
be incorrect. Events or circumstances, such as future availability of capital on favourable terms, may cause actual
results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties,
and other factors, many of which are beyond the control of Estrella. The reader is cautioned not to place undue
reliance on any forward-­‐looking information. Such information, although considered reasonable by management at
the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated.
Forward-­‐looking statements contained in this press release are expressly qualified by this cautionary statement. The
forward-­‐looking statements contained in this press release are made as of the date of this press release, and Estrella
does not undertake any obligation to update publicly or to revise any of the included forward-­‐looking statements,
whether as a result of new information, future events or otherwise, except as required by securities law.
THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S.
NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE
UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR
EXEMPT THEREFROM.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of
the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
14825550.4
www.estrellasp.com
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