Canyon Expands Capital Program

TSX - FRC

CALGARY, Sept. 8, 2016 /CNW/ - Canyon Services Group Inc. ("Canyon" or the "Company") announces it is expanding its capital program by $16.5 million, primarily to upgrade the capability of existing pressure pumping equipment and expand its fluid management equipment.  The revised 2016 and Q1 2017 capital program will total approximately $28 million.

Capital Program Expansion
Canyon is upgrading 11 existing 2500 hydraulic horse power (HHP) pumps to new SPM QEM 3000 HHP pumps (QEM 3000). Since February 2016 Canyon has been testing a prototype of the QEM 3000 in deeper high pressure reservoirs in the Western Canadian Sedimentary Basin (WCSB).  Increased pumping pressures and durations required by our customers in areas such as the Duvernay and Montney have pushed the current 2500 HHP pumps to their maximum capabilities resulting in high maintenance costs and increased downtime.  The QEM 3000 is a more robust pump designed for continuous operation and is better suited to 24 hour operations with high pumping pressures and long pumping times compared to the existing 2500 HHP pumps currently operating in the WCSB.  The upgrade will reduce Canyon's operating costs and will provide our customers with more continuous pumping operations.  At completion of the retrofit, Canyon will have 12 QEM 3000s, which will represent 14% of Canyon's total pressure pumping fleet. 

The key elements of the QEM 3000 investment are as follows:

• The operational capabilities of the QEM 3000 have been field tested by Canyon for over 1,400 hours over a nine month period.
• The upgraded pump design will allow Canyon to reduce: the number of pumps on our customers' locations, fuel consumption, manpower and repair and maintenance requirements.
• Deployment of the new pumps is anticipated to occur from December 2016 through the first quarter 2017.

In addition to investment in the QEM 3000s, Canyon will make investments in its Fluid Management Services and other ancillary equipment for support services in its Pressure Pumping division. Currently, Canyon has $10 million drawn on its $100 million credit facility and funding for the program will primarily be sourced from a combination of the unused portion of existing credit facilities, and from working capital. 

Capital Expenditure Program Summary
The capital spending plans are summarized below:

Capital Spending
(millions)
Capital Expenditures		Maintenance		Upgrade / Expansion		Fluid Management		Total
Previously disclosed expenditures		$10.0		$0.0		$1.5		$11.5
Additional capital expenditures		0.0		12.9		3.6		16.5
Total revised capital expenditures		$10.0		$12.9		$5.1		$28.0
Timing of capital spending:
Q1/Q2 2016		$1.6		$0.0		$0.3		$1.9
Q3 2016		4.8		3.0		2.8		10.6
Q4 2016		3.6		5.9		2.0		11.5
Q1 2017		0.0		4.0		0.0		4.0
		$10.0		$12.9		$5.1		$28.0

Operational Update
While Q3 is showing slightly improved activity, the pricing environment remains largely unchanged from that previously described in the Canyon's Management Discussion and Analysis dated August 4, 2016.  However, Canyon continues to see positive signs towards an improving supply and demand balance as equipment intensity per well continues to increase.  If the market continues to move toward a more balanced state, Canyon's relatively low debt levels would allow for further investment into new QEM 3000s.

About Canyon
Canyon is an oilfield services company that focuses operations in the WCSB with two core business lines: Pressure Pumping Services and Fluid Management Services.  Canyon provides Pressure Pumping Services while Canyon's wholly owned subsidiary, Fraction Energy Services Ltd., provides Fluid Management Services.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking information and statements within the meaning of applicable securities laws.  The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company including, without limitation: the amount of capital spending by Canyon; the timing of capital spending by the company; the cost savings of the new pumps; the economics of the capital investment; source of funding for the new capital funding and that funding will continue to be available to the Company; and anticipated timing of market improvements.  The Company believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.

The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon.  Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of the Company's services; unanticipated operating results; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in the development plans of third parties; increased debt levels or debt service requirements; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; reliance on industry partners; attracting and retaining skilled personnel and certain other risks detailed from time to time in the Company's public disclosure documents (including, without limitation, those risks identified in this document and the Company's Annual Information Form).

The forward-looking information and statements contained in this document speak only as of the date of the document, and none of the Company or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

SOURCE Canyon Services Group Inc.

Brad Fedora, President and CEO, Canyon Services Group Inc., 2900 Bow Valley Square III, 255 - 5 Avenue SW, Calgary, Alberta, T2P 3G6, Phone: [phone], Fax: [phone]; or Barry O'Brien, Vice President, Finance and CFO, Canyon Services Group Inc., 2900 Bow Valley Square III, 255 - 5 Avenue SW, Calgary, Alberta, T2P 3G6, Phone: [phone], Fax: [phone]