Stampede Drilling completes sale of drilling components

Executive Summary

• Stampede Drilling Inc. completed the sale of certain drilling components from its A/C triple drilling rig to a private company for a total consideration of approximately $5.29 million.
• The transaction structure included $5 million in cash and the transfer of purchaser-owned drilling equipment valued at $290,000 to Stampede.
• Proceeds are designated to reduce existing operating lines, with remaining capital earmarked for strategic initiatives including potential normal course issuer bids and capital expenditures to enhance rig marketability.

Key Details

• Transaction Value: Total purchase price of approximately $5.29 million.
• Consideration Structure:
  • $5 million in cash.
  • Transfer of certain drilling equipment from the purchaser to Stampede, valued at $290,000.
• Asset Context: The equipment sold was part of the A/C triple drilling rig acquired in August 2022.
• Strategic Impact: The sale represents approximately 25% of the total value of the August 2022 acquisition.
• Asset Retention: Stampede retained nearly half of the key components from the A/C Triple, which are expected to be sold or integrated into the existing fleet.
• Use of Proceeds:
  • Reduction of existing operating line.
  • Funding capital expenditures to enhance rig marketability.
  • Potential renewal of normal course issuer bid.
  • Pursuit of growth opportunities as market conditions improve.
• Market Rationale: CEO Lyle Whitmarsh cited declining oil prices, operator consolidation, and reduced customer interest in long-term contracts for the A/C Triple as drivers for the decision to prioritize balance sheet strength over maintaining the asset in the current environment.
• Closing Conditions: Transaction completed after satisfying customary closing conditions, including representations, warranties, covenants, and the purchaser's successful completion of debt financing.

Notable Quotes

• "The completion of this transaction marks a significant milestone for Stampede, strengthening our debt position and enhancing our financial flexibility. We are pleased to have recaptured 25 per cent of the total purchase price of our August, 2022, acquisition, while retaining the majority of the assets. Since that purchase, market conditions have shifted notably, with declining oil prices, operator consolidation and reduced customer interest in committed long-term contracts for the A/C Triple. The A/C Triple would have required substantial capital to improve its marketability, but in the current environment, we chose to prioritize our balance sheet strength and flexibility, positioning ourselves for future market recovery." — Lyle Whitmarsh, President and CEO