CALGARY, ALBERTA--(Marketwire - Sept. 25, 2012) - Xtreme Drilling and Coil Services Corp. (TSX:XDC) ("Xtreme" or the "Corporation") provides below an update on certain matters relating to its third quarter.
During the third quarter of 2012, Xtreme mobilized one new-build XDR 500 drilling rig to Colorado and one rig that was converted from an XDR 400 to an XDR 500 rig to North Dakota to commence operations. The Corporation estimates approximately 1,750 operating days for the third quarter, resulting in 77 percent utilization of the combined XDR and XSR rig fleet. On September 30, 2012, it is anticipated that 18 XDR rigs will be working and 3 XSR rigs will be operating, one in the US and two in Saudi Arabia. The one remaining new‐build XDR 500 drilling rig should mobilize to the field in late October on a three year term contract.
Anticipated Impact of Historical Claims on Accounts Receivable Balances
In June 2010, one of the Corporation's subsidiaries, Xtreme Coil Drilling Mexico S.A. de C.V. ("Xtreme Mexico"), filed a lawsuit against a US publically-traded global integrated oilfield services company in Harris County, Texas. The claims against this company revolved primarily around the assertion of breach of ten drilling contracts governing work performed in Mexico. The damages claimed by Xtreme Mexico included unpaid receivables, demobilization fees, early termination fees, pre- and post-judgment interest, and attorney's fees. This company contended that the Courts of Harris County did not have proper jurisdiction and such objection to jurisdiction was argued in trial court in late March-early April 2012. The ruling from the trial court was delivered in May 2012 and favored this company. The trial court ruling on jurisdiction was then appealed by Xtreme Mexico in early June 2012. With the appeal pending in the Court of Appeals for the First District of Texas, the parties were ordered by the Court of Appeals to conduct mediation before a court appointed mediator, which occurred during the month of August 2012. This resulted in a compromise agreement pursuant to which Xtreme Mexico will receive cash settlement proceeds. It is anticipated that all conditions of the settlement will be performed within the next few days.
In December 2008, the Corporation filed a lawsuit against one of its customers, a Canadian and US publically-traded company and one of North America's largest natural gas producers, in federal court in Colorado under two long-term agreements to provide drilling rigs for work in Colorado. The claims against this customer revolved around breach of contract for drilling work performed in Colorado, and included unpaid receivables and early termination fees, plus pre- and post-judgment interest and attorney's fees. Xtreme and the customer commenced a jury trial on September 10, 2012 in the United States District Court for the Western District of Colorado. On September 14, 2012, the jury returned a verdict in favor of the Corporation in the amount of US$2,625,000, and judgment was entered. The Corporation will have 14 days from entry of judgment to file motions for the recovery of attorney's fees, interest, taxes and court costs. The District Court will determine such amounts in addition to the judgment. The Customer will have until October 12, 2012 to file any post-trial motions, including an appeal of the decision.
The Corporation anticipates that a net loss between $2 million and $4 million will be recorded in interim consolidated financial statements of the Corporation for the period ended September 30, 2012 as a result of a write-down of the amounts currently provided for these transactions under the Corporation's accounts receivables outstanding for greater than 180 days. At the present time a more definitive estimate of the expected net loss cannot be given as certain amounts relating to the recovery of attorney's fees, interest, taxes and court costs are still open to determination by the applicable courts. The Corporation intends to file such motions within the applicable time periods and thus could recover further amounts, which would reduce any net loss to be recorded. Additionally, as certain appeal rights remain open on one of the claims the amount recovered by the Corporation in respect of such claim could be affected by any appeal that is filed.
Xtreme Drilling and Coil Services Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification drilling rigs and coiled tubing well service units featuring leading-edge proprietary technology including AC high capacity coil injectors, deep re-entry drilling capability, modular transportation systems and continuous integration of in-house advances in methodologies.
Currently Xtreme operates two service lines: Drilling Services (XDR) and Coil Services (XSR) under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada, the United States and Saudi Arabia. For more information about the Company, please visit www.xtremecoil.com.
This news release contains forward-looking statements in relation to the recovery of certain amounts under the claims, the effect of such recovery on the financial position of the Corporation, the number of operating days and certain other operational matters. Although Xtreme believes expectations reflected in these statements are reasonable, readers should not place undue reliance on them because Xtreme can give no assurance they will prove to be correct. There are many factors that could cause these statements not to be correct, including risks and uncertainties inherent in the Corporation's business.