CALGARY, May 7, 2019 /CNW/ - Calfrac Well Services Ltd. ("Calfrac") (TSX-CFW) provides this update concerning the action commenced by Calfrac on May 30, 2018 against Wilks Brothers, LLC ("Wilks Brothers") in the Alberta Court of Queen's Bench.
As described below, in a decision released on May 7, 2019, the Alberta Court of Queen's Bench found that Wilks Brothers breached its confidentiality agreement with Calfrac and dismissed Wilks Brothers' motion for summary judgment. Calfrac's action will continue in relation to damages issues.
Wilks Brothers' Competing Agenda
Wilks Brothers competes against Calfrac through its ownership of a U.S.-based fracturing business, Profrac Services, LLC ("Profrac"). To advance its commercial agenda, starting in late 2017, Wilks Brothers pressured Calfrac to sell or "spin-off" its U.S. business, the division that generates the majority of Calfrac's revenues and earnings.
While Wilks Brothers claimed that spinning off Calfrac's U.S. business would unlock value for Calfrac's shareholders, Wilks Brothers also expressed interest in purchasing or in financing the purchase of Calfrac's U.S. business.
The Confidentiality Agreement
In an effort to constructively engage with Wilks Brothers, Calfrac recommended that Wilks Brothers enter into a confidentiality agreement, which would allow for a candid exchange of views, including about Calfrac's U.S. business.
Calfrac and Wilks Brothers executed a confidentiality agreement in February 2018, following which Calfrac shared confidential information with Wilks Brothers, including about Calfrac's U.S. business.
Wilks Brothers' Press Release
When Calfrac refused to accede to Wilks Brothers' demands that it take steps toward separating its U.S. business, Wilks Brothers withheld votes at Calfrac's May 8, 2018 annual meeting, and issued a press release the following day.
Calfrac believes that Wilks Brothers' May 9, 2018 press release, which was issued hours after Calfrac announced a then unpriced debt financing, increased Calfrac's borrowing costs to the detriment of all Calfrac shareholders.
Calfrac then sued Wilks Brothers, alleging that Wilks Brothers' May 9, 2018 press release breached the confidentiality agreement.
Motions for Summary Judgment
After exchanging pleadings, Wilks Brothers and Calfrac brought competing motions for summary judgment.
In a decision released on May 7, 2019, the Alberta Court of Queen's Bench dismissed Wilks Brothers' motion for summary judgment to dismiss the action.
In the same decision, the Court found that Wilks Brothers breached the confidentiality agreement by certain of the disclosures made by Wilks Brothers in its May 9, 2018 press release. As a result of the Court's decision, Calfrac's action against Wilks Brothers will now continue on the issues of quantum and causation in relation to damages.
"We are pleased with the Court's finding that Wilks Brothers breached the confidentiality agreement" said Ronald Mathison, Chairman of Calfrac. "From the outset, we have been determined to seek redress for our shareholders arising from that breach. We will now press ahead with the damages issues that remain outstanding."
Calfrac's common shares are publicly traded on the Toronto Stock Exchange under the trading symbol "CFW". Calfrac provides specialized oilfield services to exploration and production companies designed to increase the production of hydrocarbons from wells drilled throughout western Canada, the United States, Argentina and Russia.
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward-looking statements and information relating to the continuance of Calfrac's action against Wilks Brothers.
These forward-looking statements and information are based on certain key expectations and assumptions made by Calfrac in light of its experience and perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances, including, but not limited to, the following: the economic and political environment in which Calfrac operates; Calfrac's expectations for its customers' capital budgets and geographical areas of focus; the effect unconventional oil and gas projects have had on supply and demand fundamentals for oil and natural gas; Calfrac's existing contracts and the status of current negotiations with key customers and suppliers; and the likelihood that the current tax and regulatory regime will remain substantially unchanged.
Although Calfrac believes that the expectations and assumptions on which such forward looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information as Calfrac cannot give any assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with: global economic conditions; the level of exploration, development and production for oil and natural gas in Canada, the United States, Argentina and Russia; the demand for fracturing and other stimulation services during drilling and completion of oil and natural gas wells; volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oilfield services generally; the availability of capital on satisfactory terms; restrictions resulting from compliance with debt covenants and risk of acceleration of indebtedness; direct and indirect exposure to volatile credit markets, including credit rating risk; sourcing, pricing and availability of raw materials, component parts, equipment, suppliers, facilities and skilled personnel; excess oilfield equipment levels; regional competition; currency exchange rate risk; risks associated with foreign operations; dependence on, and concentration of, major customers; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; liabilities relating to legal and/or administrative proceedings; operating restrictions and compliance costs associated with legislative and regulatory initiatives relating to hydraulic fracturing and the protection of workers and the environment; changes in legislation and the regulatory environment; failure to maintain Calfrac's safety standards and record; liabilities and risks associated with prior operations; the ability to integrate technological advances and match advances from competitors; intellectual property risks; third party credit risk; failure to realize anticipated benefits of acquisitions and dispositions; and the effect of accounting pronouncements issued periodically. The forward-looking statements and information contained in this press release are made as of the date hereof and Calfrac does not undertake any obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
SOURCE Calfrac Well Services Ltd.