Xtreme Drilling Corp. Announces Additional Strategic Initiatives to Deliver Value to Shareholders and Increase Competitiveness in US Resource Plays
Xtreme Drilling Corp. ("Xtreme", the "Company") (TSX:XDC) is pleased to announce the next steps in the strategic direction of the Company.
The recent announcement of the 850XE rig upgrades and the XDR 500 optimization program was the first step in the Company's strategy to re-position Xtreme as a high-spec United States shale focused drilling contractor. The Company believes that by leveraging its heritage of technology and innovation, it can provide best in class rigs to customers in the recovering United States shale drilling market.
The Company is initiating two additional steps to further focus the organization and enhance shareholder value. These additional steps include the commencement of a substantial issuer bid to purchase Xtreme common shares ("Xtreme Shares") and an intention to explore strategic options with respect to the eight shallower capacity AC electric XDR 200 and 300 drilling rigs.
The recent increase in US active drilling rigs has been dominated by high specification AC electric rigs. It is estimated by industry sources that since activity levels bottomed in the second quarter of 2016 that more than 80% of the increase in the rig count was in the high or super-spec segment of the market. The Company believes that the demand for deep capacity high-spec AC electric rigs will continue in the future. By the end of 2017 Xtreme will have 13 rigs that fit this category, ten XDR 500 and three 850XE rigs.
"This two-pronged plan enables us to immediately return meaningful value to Xtreme shareholders and further focus our efforts in the major US resource plays," said Matt Porter, President and Chief Executive Officer. "We believe this plan makes best use of our strong balance sheet and cash position as it allows the Company to maintain considerable flexibility for opportunities in our core high-spec US drilling business while continuing to provide liquidity and return of capital to our shareholders."
Substantial Issuer Bid
The Company intends to undertake a substantial issuer bid to purchase up to an aggregate of $25 million in Xtreme Shares through a Dutch Auction tender process (the "Proposed Issuer Bid"). The Proposed Issuer Bid demonstrates Xtreme's confidence in the strength of the business and commitment to delivering shareholder value through the return of capital and enhancing liquidity to shareholders that elect to tender their Xtreme Shares. The Company believes that the growth prospects, long-term strategy and associated cash flow are not accurately reflected by the Company's current price of Xtreme Shares.
The Board of Directors has appointed an independent committee of the Directors to set the price and details around the Proposed Issuer Bid.
XDR 200/300 Strategic Review
In addition, the Company is evaluating strategic options with respect to its four XDR 200 and four XDR 300 AC electric drilling rigs. These rigs were designed and built by Xtreme and have leading edge AC electric technology.
Due to the shallower depth capacities (up to 3,500 meters) of these rigs they are ideally suited for the Canadian or international drilling markets and do not align with Xtreme's focus on the deeper basins of the United States. The Company will continue to operate the existing three rig XDR 200 operation in Canada while strategic options are evaluated. The Company is reviewing international opportunities to deploy the rigs alongside the potential for an outright sale.
As the Company moves forward in a lower priced commodity environment, the strategy set forth improves Xtreme's competitiveness and should ultimately enhance value to shareholders.
Currently, the Company has seven of ten XDR 500 rigs contracted and is in the process of finalizing a contract for an eighth XDR 500, which the Company anticipates to commence work later in Q2 2017.
The Company is currently in the initial stages of upgrading the three super-spec 850XE rigs with anticipated delivery of one rig in Q3 2017 and the remaining two rigs in Q4 of 2017. The first rig was recently contracted on a 24 month term contract to an operator in Oklahoma. The commercial conversations for the final two 850XE rigs remain very encouraging and Xtreme anticipates an additional rig to be contracted in the second quarter for a Q4 2017 delivery.
Xtreme Drilling Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification AC drilling rigs featuring leading-edge proprietary technology. Currently Xtreme operates one service line - Drilling Services (XDR) under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada and the United States. For more information about the Company, please visit www.xdccorp.com.
SOURCE: Xtreme Drilling Corp.
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