Transfield Services to acquire Easternwell for $575 million

13 December 2010

• Transfield Services to acquire Easternwell, a leading Australian services provider to the mining, oil & gas and infrastructure sectors
  
• Easternwell expected to contribute over $40 million in earnings before interest, tax, depreciation and amortisation (“EBITDA”) to Transfield Services for the six months ending in June 2011

Transfield Services today announced that it has entered into an agreement to acquire Easternwell for $575 million.

Queensland-based Easternwell is a leading Australian well services and well construction business, focused on the mining, oil & gas and infrastructure sectors. It provides mainly production-focused, high margin services both earlier in the asset lifecycle and throughout the production phase. Key services include well servicing and maintenance activities, coal seam gas (“CSG”) drilling, production-related iron ore mine dewatering, backfill drilling, near-shore geotechnical drilling and dam remediation services.

Easternwell employs over 800 people across Australia and operates 65 rigs, with blue chip customers such as BHP Billiton, Cameco, Chevron, Rio Tinto, Santos and Woodside. Existing Easternwell senior management are expected to continue in the business and are rolling over a proportion of their equity in Easternwell into Transfield Services shares. Easternwell will report as part of the Transfield Services Australian and New Zealand business unit.

This transaction represents Transfield Services’ latest initiative in delivering its strategy to build on its existing service offering by providing more technical and niche services in targeted end markets. The acquisition strengthens Transfield Services’ position as one of Australia’s leading oil & gas service providers. Importantly, it offers Transfield Services earlier engagement with clients in the asset lifecycle. Easternwell also deepens Transfield Services exposure to growth opportunities within Australia’s expanding resources sector, such as in iron ore, conventional oil & gas and CSG.

Transfield Services Managing Director and Chief Executive Officer, Peter Goode, said:

“This acquisition is consistent with our stated strategic objective to expand our services and capabilities into adjacent sectors and to pursue higher value work.”

“Acquiring Easternwell enables Transfield Services to build out its existing suite of operations and maintenance services to include higher margin technical services.”

“The transaction will also enhance our ability to secure incremental downstream work and offer our clients a more integrated end-to-end service capability across the entire asset lifecycle, particularly in the oil & gas and minerals sectors.”

Continuing, Chief Executive Officer for Easternwell, Troy Campbell, said: “Easternwell has established a strong reputation and track-record in operating in remote locations, as well as developing long term customer relationships and a quality asset base. We are excited by this opportunity to join forces with Transfield Services and build on Easternwell’s existing position as the leading player to capture the growth opportunities in the sector.”

For the financial year ending in June 2011, pro forma sales and EBITDA for Easternwell are expected to be $267 million and $76 million respectively. This compares to $68 million in pro forma EBITDA for FY2009 and $50 million in pro forma EBITDA for FY2010. EBITDA contribution to Transfield Services for the 6 months ending in June 2011 is expected to be over $40 million.

The transaction is expected to be earnings per share accretive (pre amortisation) for Transfield Services. This is on a pro forma illustrative basis taking into consideration the impact of specific growth opportunities with new and existing blue chip customers. These growth opportunities relate to the award of near-term contracts and initiatives that are well progressed and have the potential to contribute an additional $30 million in pro forma EBITDA, and which require incremental capital expenditure of $83 million through to 30 June 2012.

Operational update

Transfield Services’ outlook remains solid, reflected in a record pipeline of A$29.0 billion in current opportunities and A$2.2 billion of work secured year-to-date to 13 December 2010. The Company began the year with forward contracted revenue (inclusive of contract renewal options) of A$13.9 billion.

As a result, Transfield Services’ Board today reiterated that, subject to no further deterioration in economic conditions, it is targeting mid-single digit percentage growth for FY2011 NPAT (normalised to exclude one-off significant items), based on FY2010 normalised NPAT of $96 million. Similar to previous years, earnings will be weighted to the second half of FY2011, although this weighting will be more pronounced than in the recent past. First half EBITDA is expected to contribute c.35%-38% to the full year.

This announcement has been prepared for publication in Australia and may not be released or distributed in the United States. This announcement does not constitute an offer of securities for sale in the United States or any other jurisdiction. Any securities described in this announcement may not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933 or an exemption from registration.

Editors note

About Transfield Services

• Transfield Services is a leading international provider of operations, maintenance, asset management and project management services.
• Over 85 percent of the Company’s services are delivered under long-term contracts and relationships with key clients.
• Transfield Services has a robust pipeline of work developing in oil and gas, power, defence, transport and social infrastructure, providing continuing diversification for the business.

About Easternwell

• Easternwell is a leading Australian well servicing and well construction business, with a large ancillary services capability
• Headquartered in Queensland, it currently operations 65 rigs and employs over 800 people across Australia