SERVICE SECTOR / Corlac Oilfield Acquisition & Merger
CORLAC OILFIELD ANNOUNCES PROPOSED ACQUISITION OF GAS RENTAL COMPANY
ASSETS AND NEGOTIATIONS ON ADDITIONAL BUSINESS COMBINATION
Date: 6/2/98 9:02:19 AM
Stock Symbol: CKL
CORLAC OILFIELD LEASING LTD. ("Corlac") (ASE: CKL) is pleased to announce
that it has entered into an arm's- length letter of intent dated May 29, 1998
with Select Oilfield Services Ltd. ("Select"), pursuant to which Corlac,
through a wholly-owned subsidiary, has agreed to acquire all of the fixed
operating assets and goodwill comprising the current leasing and rental
business of Select for a purchase price of $7,600,000, subject to standard
adjustments (the "Select Acquisition"). In order to complete the Select
Acquisition, Corlac intends to complete a private placement of common shares
of Corlac, or securities exchangeable into common shares of Corlac, for
minimum gross proceeds of $3,500,000 and maximum gross proceeds of $8,000,000
(the "Private Placement"), the final terms of which have not yet been
established. The Corporation has reserved an undiscounted price of $0.85 per
share for up to 9,500,000 common shares to be issued pursuant to the Private
Placement. Corlac may engage registered dealers in the applicable provinces
to assist Corlac in the Private Placement and intends to pay the registered
dealers a commission to be negotiated. The completion of the Select
Acquisition and the Private Placement is subject to regulatory approval and
Corlac is required to file a formal application with The Alberta Stock
Exchange within 14 calendar days of this press release. The completion of the
Select Transaction is also subject to several additional conditions
precedent, including satisfactory completion by Corlac of a due diligence
review of Select, Corlac board of directors approval, the entering into a
formal asset purchase agreement among the parties, the entering into of
employment agreements with the key employees of Select and the completion of
the Private Placement for proceeds of not less than $3,500,000. In the event
Corlac only completes the Private Placement for proceeds of $3,500,000,
Corlac intends to use debt financing and existing cash assets to complete the
Select Acquisition.
The proposed Select Acquisition would provide Corlac with a larger and more
diverse lease fleet of gas related production equipment. Select is a private
company based in Edmonton, Alberta that has been in the business of renting
gas related production equipment for over 25 years with a history of
providing quality products and service in the gas rental market. It is
expected Select will become the cornerstone of Corlac's gas related rental
division. As a result of Corlac's association with Corlac Inc., it is
expected the rental fleet of Select will be significantly expanded over the
next year. Select's equipment rentals and sales revenue in the fiscal year
ended December 31, 1997 was $4,500,000.
All gas related assets owned by Select are fabricated to meet specifications
required for sour gas service. Select has a stringent capital replacement
policy resulting in the average age of equipment being between the ages of
two to three years. The rental assets of Select included in the purchase
price are rental assets in the progress of being completed, as well as the
following:
I. Over 50 separators ranging from 12 inches to 60 inches in diameter, and
rated from 125PSI to 2500PSI, with substantially all being 720PSI or higher;
II. Approximately 15 treaters ranging up to 10 feet in diameter and 40 feet
in length;
III. Seventeen (17) line heaters ranging from 250,000 BTU to 11MMBTU;
IV. Four (4) free water knock-outs ranging up to 10 feet in diameter, heated
and unheated, and rated at 75PSI;
V. Four (4) gas boots from 20 inches to 36 inches designed for atmospheric
working pressure;
VI. Two (2) 20 inch glycol dehydration units; and
VII. Five (5) tanks ranging from 50BBL to 400BBL.
The business related real estate properties being acquired from Select are
located in Edmonton, Alberta and are comprised of approximately 6,000 square
feet of development on 3.1 acres of land. The purchase price for the Select
Acquisition also includes substantially all related shop and office
equipment, inclusive of business related vehicles.
Finally, pursuant to the Select Acquisition, Corlac will not be assuming any
liabilities of Select, whether in the form of accounts payable, bank
indebtedness or accruals. All current liabilities of Select will remain with
Select.
Corlac is also pleased to announce it is in discussions with Corlac Inc. with
a view to negotiating a business combination of Corlac and Corlac Inc. (the
"Corlac Transaction"). In the event the parties successfully negotiate some
form of a business combination, either Corlac or Corlac Inc. intend to
proceed with an equity financing of common shares, or securities exchangeable
into common shares, for gross proceeds of up to $5,000,000 (the "Corlac
Financing"). Corlac has reserved an undiscounted price of $0.85 per share for
up to 42,000,000 common shares to be issued pursuant to the Corlac
Transaction and the Corlac Financing in the event they proceed. Corlac or
Corlac Inc. may engage registered dealers in the applicable provinces to
assist them in the Corlac Financing and intend to pay the registered dealers
a commission to be negotiated. The completion of the Corlac Transaction and
the Corlac Financing is subject to the successful negotiation and entering
into of a business combination agreement, regulatory approval, which may
include minority shareholder approval of Corlac, and Corlac is required to
file a formal application with The Alberta Stock Exchange within 14 calender
days of this press release. There is no assurance Corlac and Corlac Inc. will
successfully negotiate and enter into a business combination agreement.
Corlac Inc. is a private company that is engaged in the design, manufacturing
and sale of oil and gas production equipment and other proprietary
technologically-based products. Corlac Inc. also refurbishes gas and oilfield
equipment, in addition to providing other mechanical services to the gas and
oil industry. Corlac Inc.'s primary market is Western Canada and it is also
currently establishing a presence in Venezuela and Yemen by distributing its
products and proprietary technology to international customers. The equipment
currently manufactured and refurbished by Corlac Inc. includes engines,
pumpjacks, wellhead drives, hydraulic skids, oilfield production tanks,
drilling-related tanks, proprietary free water knockouts and other gas
related production equipment. Corlac and Corlac Inc. are currently parties to
an exclusivity agreement, pursuant to which Corlac has been appointed the
exclusive leasing agent for Corlac Inc.'s operations. For the fiscal year
ended December 31, 1997, Corlac Inc. had revenues of $48,733,510. For the
first quarter ended March 31, 1998, Corlac Inc. had revenues of $7,750,000.
Management of Corlac Inc. advises the reduction in revenues is due to the
decrease in oil prices and the general decrease in oil and gas activity in
Western Canada, as well as the ongoing transition of Corlac Inc. into the
international market place and into gas related equipment. Management of
Corlac Inc. advises it is continuing to pursue acquisitions of proprietary
product based companies to combine its management and distribution
infrastructure with new and innovative products in the gas and oil market
place. In addition, Corlac Inc. is actively pursuing a plan to diversify it's
product line, through internal development and acquisitions.
Finally, Corlac also announces it has reserved an undiscounted price of $0.85
per share for the grant of stock options to acquire up to 1,000,000 common
shares (the "Stock Options") in the event the Select Acquisition and the
Private Placement are completed. The grant of the Stock Options is subject to
regulatory approval and the Corporation is required to file a formal
application with The Alberta Stock Exchange within 14 calendar days of this
press release.
Corlac is a public company whose common shares are listed and posted for
trading on The Alberta Stock Exchange that is engaged in the business of
leasing, renting and financing products to the oil and gas industry. Its
current lease fleet includes engines, pumps, separators, line heaters,
drilling-related tanks, water injection skids, proprietary free water
knock-outs and oilfield production tanks. Corlac's strategic plan is to
increase its industry presence in each of its divisions (gas production
related equipment, drilling related equipment, oil production related
equipment and custom financing). The current board of directors of Corlac
consists of Daniel M. Echino, Keith MacPhail, Calvin MacPhail, James G. van
der Sloot and Al J. Kroontje. It is not anticipated there will be any changes
to the board of directors of Corlac as a result of either the Select
Acquisition or the Corlac Transaction.
Neither the Select Acquisition nor the proposed Corlac Transaction will
constitute a reverse takeover of Corlac pursuant to Circular No. 8 of the ASE
Policies and Procedures Manual as no change of control will result from
either transaction, and there will not be a substantial change in the nature
of the business of Corlac. |
