Bronco Drilling Company has entered into a joint venture and revolving credit facility. The Company and Carso Infraestructura y Construccion, S.A.B. (CICSA) have entered into a joint venture to provide oil and gas drilling and workover services in Mexico and Latin America through the Company’s formerly wholly-owned subsidiary, Bronco Drilling MX, S. de R.L. de C.V. (Bronco MX). The Company sold to CICSA 60% of its ownership interest in Bronco MX for cash consideration of approximately $30 million. The assets of Bronco MX consist of six drilling rigs, ancillary equipment and profits to two current drilling contracts with PEMEX, all of which were contributed to Bronco MX by the Company in connection with the formation of the joint venture. The Company has also agreed to contribute to the joint venture three additional drilling rigs currently drilling in Mexico at the completion of those contracts.

The Company has also entered into a $75 million revolving credit facility with Banco Inbursa S.A., Institucion de Banca Multiple, Grupo Financiero Inbursa (“Banco Inbursa”), a portion of the proceeds from which were used to retire all of the indebtedness that was outstanding under the Company’s existing credit facility. The remainder of the revolving credit facility will be used for working capital and general corporate purposes. The Company’s obligations under the revolving credit facility are guaranteed by the Company’s domestic subsidiaries and are secured by a first priority lien on substantially all of the assets of the Company and its domestic subsidiaries. Draws under the facility will bear interest at 5.80% over LIBOR. The facility contains customary covenants for facilities of this type, including a financial covenant that allows for a maximum total leverage ratio of 3.50 to 1.00. The facility matures in September 2014.

In connection with these transactions, the Company issued to Banco Inbursa a detachable warrant which is exercisable for up to 5.44 million shares of the Company’s common stock. The warrant has a three-year term, and the exercise price under the warrant is equal to $6.50 per share from the closing date to the first anniversary of the closing date, $7.00 per share following the first anniversary of the closing date through the second anniversary of the closing date, and $7.50 per share following the second anniversary of the closing date through the third anniversary of the closing date. The number of shares that can be acquired upon exercise of the warrant is subject to certain limitations.

CICSA and Banco Inbursa are related parties of Inmobiliaria Carso, S.A. de C.V., which owns approximately 15% of the issued and outstanding shares of common stock of the Company.

Frank Harrison, the Chairman and Chief Executive Officer of the Company, stated, “We are extremely pleased to have completed these transactions and solidified our partnership with a robust strategic and financial partner. These transactions simultaneously strengthen our balance sheet and enhance our ability to continue our international expansion.”

Antonio Gomez, the Chief Executive Officer of CICSA, stated, “Through our association with Bronco Drilling we will be able to expand and enhance the activities of our affiliate GSM, in the oil and gas drilling services currently provided to PEMEX.”

Tags: Bronco Drilling Co. Inc.