Ensign Energy Services Inc. is pleased to announce the acquisition of Halliburton's 40% ownership in the joint venture operating under the name Trinidad Drilling International ("TDI") which owns and operates five drilling rigs in Mexico, Kuwait and Bahrain. The 40% ownership, inclusive of working capital in the TDI joint venture, was purchased for US $33.4 million from Ensign's cash on hand. With this acquisition, Ensign now owns 100% of the TDI joint venture.
Robert Geddes, Ensign's President and Chief Operating Officer, commented on the acquisition: "with this transaction, Ensign is pleased to announce that it now owns 100% interest in the rigs held by the venture in the strategic Kuwait and Bahrain areas along with two rigs in Mexico. The transaction involves four recently constructed state-of-art 3000+hp-AC drilling rigs and one newer 2000hp-AC drilling rig. The two rigs in Kuwait are state-of-art ADR 3000+hp-AC super spec rigs that are on long term contracts. The one Bahrain 2000hp-AC super spec drilling rig that was part of the JV is also on a long term contract and augments Ensign's ongoing rig operations in Bahrain, doubling Ensign's presence in the country. In addition, Ensign also acquired full ownership of the two joint venture 3000+hp-AC drilling rigs currently cold-stacked in Mexico."
"Ensign believes this strategic and opportunistic transaction will significantly expand Ensign's platform in the Middle East with some of the newest and technically advanced drilling rigs in the region."
To help fund the acquisition costs and provide additional working capital, Ensign is reviewing the possibility of issuing additional debt that would be subordinated to its existing Credit Facility but would rank senior to the Company's 9.25% Senior Notes Due 2024 ("Senior Notes"). Under the Senior Notes Indenture Agreement, Ensign is permitted to have liens outstanding that do not exceed the greater of (a) US $125.0 million and (b) 4.0% of the Company's Consolidated Tangible Assets, measured at the time of incurrence. The proceeds from the issuance of this debt, if it were to occur, would be used to reduce the amount drawn on the Credit Facility and fund operations, which would increase Ensign's liquidity position and further strengthen the Company's balance sheet.
Subject to market conditions during the remainder of 2020, it is likely that Ensign will be required to enter into discussion with its Credit Facility syndicate to amend covenants under its Credit Facility, which otherwise may be susceptible to breach in the later half of 2020. As of the date of this press release, Ensign has not entered into formal discussions about the renewal and extension of its existing Credit Facility with the Credit Facility syndicate.
At the end of Q2, 2020, to increase working capital, Ensign finalized the sale of the building and land that was classified on its balance sheet as held for sale for net cash proceeds of $15.4 million, resulting in a book loss of $3.4 million.