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CanElson Announces Contract For New $8 Million Bi-Fuel Drilling Rig

CanElson Drilling Inc. has announced a long-term contract for a new $8 million bi-fuel (natural gas and diesel) drilling rig.

President and CEO Randy Hawkings stated, 'Given our modern fleet of deep capacity drilling rigs and our growing bi-fuel capability on our drilling rigs we expect to continue outperforming the industry and contracting new build rigs as we move forward.'

The new CanElson bi-fuel drilling rig will have three diesel engines capable of operating on a combination of natural gas and diesel fuel or on diesel fuel only, in the event that natural gas is either unavailable or becomes uneconomic. In bi-fuel mode, natural gas displaces a significant amount of the diesel fuel that would otherwise be consumed. CanElson expects that the displacement of diesel fuel will result in significant fuel cost savings for bi-fuel drilling rigs.

The new bi-fuel drilling rig will be the second new rig with bi-fuel capacity to be assembled by CanElson at its facility in Nisku, Alberta. The first new build bi-fuel rig (Rig #32 in CanElson's fleet) was delivered last month. The new rig (Rig #34) is scheduled for delivery in December.

For each of the new bi-fuel rigs, CanElson's wholly owned subsidiary, CanGas Solutions Inc., is investing approximately $200,000 for bi-fuel capability. This $200,000 bi-fuel investment is incremental to the $7.8 million it costs for a diesel fuel drilling rig (excluding top drive).

CanElson's investment in each of its two new bi-fuel rigs is underpinned by long term committed contracts. CanElson will arrange to truck compressed natural gas (CNG) to the bi-fuel rigs using trailers owned by CanGas.

As previously disclosed, CanElson is also assembling two additional rigs (Rig #33 and Rig #35), both for delivery to West Texas under long term contracts with producers there. Rig #33 is scheduled for delivery in October and Rig #35 is scheduled for delivery in January.

Beyond that, CanElson has ordered long lead items for another new rig (Rig #36). Pending a signed contract, construction of Rig #36 is possible in Q1, 2013. CanElson continues to require committed contracts prior to full assembly of additional rigs.

CanElson's capital program will be financed out of cash flow and existing debt facilities with financial capability for additional growth and maintaining dividend payments.

CanElson operates contract drilling rigs in Canada, the U.S. and Mexico for oil and natural gas exploration and development companies. CanElson also assembles new drilling rigs at a facility in Nisku, operates contract oil and gas service rigs in Mexico, and operates a CNG transportation and related services business. CanGas, is a Calgary-based CNG transport company and a North American leader in the development and utilization of containerized natural gas transport.

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