Calfrac Shareholders: Ten Important Things to Keep in Mind

CISCO, TX, Sept. 28, 2020 /CNW/ -A In response to the press release issued by Calfrac Well Services Ltd. ("Calfrac") (TSX: CFW) this morning, Wilks Brothers, LLC ("Wilks") offers ten key points for shareholders to keep in mind when considering Calfrac's Amended Management Transaction and Wilks' Premium Offer.
Calfrac Shareholders: Ten Important Things to Keep in Mind

Actions Speak Louder Than Words. Forced by Wilks' actions to amend the Management Transaction, Calfrac has admitted that shareholders were in fact entitled to much more value than they were being offered in the first iteration of the transaction; value that Calfrac insiders and a self-selected group of unsecured creditors attempted to appropriate for themselves. Shame on them.

Cash is King and Gimmick - Free. A Wilks' Premium Offer of $0.18 cash per Calfrac Share still provides shareholders with the highest and best value for their shares when compared with the amended Management Transaction. A Calfrac had an opportunity to amend their Management Transaction and beat Wilks' Premium Offer. A That task was simple. Their failure to do so speaks volumes. The amended Management Transaction offers a convoluted option to shareholders that is shackled by gimmicks and hard caps, which results in no more than $0.12 in cash per Calfrac Share, and pales in comparison to the $0.18 in cash per Calfrac Share that will paid directly to Shareholders by Wilks under the Wilks' Premium Offer. The advertised $0.15 per share under the amended Management Transaction will likely never happen.

The Power Rests with the Shareholders. A The Wilks' Premium Offer option has wrestled the power back into Shareholders' hands to decide their own fate.A  A direct path to a premium recovery requires that Shareholders vote down the amended Management Transaction and that the CBCA Court denies approval of the transaction at the final order hearing.A A subsequent CCAA filing by Calfrac will not affect the Wilks' Premium Offer. A To be clear, in order to remove any doubt as to the availability of the value offered by the Wilks' Premium Offer to shareholders, if the Management Transaction is not approved by shareholders and the CBCA Court denies approval of the transaction at the final order hearing, Wilks confirms that it will waive its condition that the Management Transaction be terminated.

Follow the Yellow Brick Road. The Wilks' Premium Offer is the ONLY transaction that offers a premium recovery to Shareholders AND is actionable.A  The Wilks' Premium Offer does NOT require approval by Calfrac, its creditors or the Court. A The Wilks' Premium Offer is made directly to Shareholders and is a contract between Wilks and Shareholders.

Hope is Not a Strategy.A  No amount of Calfrac chest thumping will change the fact that the Amended Management Transaction will likely never be implemented.A  As structured, the transaction is conditional, and requires the consent of Second Lien Lenders, which will not be provided. A Any attempt to side-step this requirement will be the subject of extensive litigation in the Courts. In addition, the Amended Management Transaction requires final Court approval, costly amendments and waivers from the first lien lenders (which have not yet been agreed to) and is also subject to a lengthy list of additional conditions precedent.A  Even if somehow the amended Management Transaction was implemented, the history of similar CBCA arrangements is not good: many have ended up in CCAA protection within months of completion, wiping out any remaining shareholder value. Mr. Mathison apparently thinks hope is a strategy telling the Globe and Mail on September 24, 2020 "you have to be a little bit of an optimist and hope that things improve in the industry". By contrast, the clearer path for Shareholders to a guaranteed recovery, entirely outside of the risks of the Court process, is the Wilks' Premium Offer.

Clear and Present Danger. Both independent proxy advisory firms, Institutional Shareholder Services, Inc. and Glass Lewis & Co. have recommended that shareholders vote AGAINST the Management Transaction. Notably, immediately following the announcement of the Amended Management Transaction, analysts at Cormark Securities Inc. were quick to point out that the Amended Management Transaction continues to fall short of the value offered by Wilks and that "a?¦with our expectation that pressure pumping will take several years to recover, we would expect Calfrac to enter into CCAA within 12-18 months should the management offer succeed." A The experts have spoken, the amended Management Transaction is a bad deal for Calfrac and its stakeholders.

Management Gets the Gold Mine. Shareholders get the Shaft. One of the matters that shareholders are being asked to vote on at the postponed meeting is a new "Omnibus Incentive Plan", a comprehensive suite of management incentives, which will replace the out-of-the-money incentives they have been granted and currently hold. So, in effect, management is asking to be rewarded for bringing the company to the verge of bankruptcy and massively diluting its loyal shareholder base. A This demonstrates an absolute disregard for shareholders' interests.

Options Create Value. A Calfrac is disingenuous in stating that the amended Management Transaction is the only transaction available. This is not a Hobson's choice. A The Wilks' Premium Offer creates options and the great thing about options is that they create value (See point 1). Calfrac can bury its head in the sand and pretend the Wilks' Premium Offer does not exist, but Calfrac cannot deny Shareholders the opportunity to earn the greatest premium on their investment.

Shareholders Will Not be Threatened into Submission. Calfrac has now embarked on a direct campaign of attempting to threaten its shareholders with a CCAA filing and the promise of reduced recoveries if the amended Management Transaction is not approved in the CBCA process. This coercion will not work because a CCAA filing does not change the fact that the availability of the Wilks' Premium Offer does not depend on what Calfrac says or does next.

This is Not a War. This is a Rescue Mission. What has been obscured by Calfrac's rhetoric and the flurry of litigation is that this is a debate about value, fairness and the best way to restructure Calfrac so that it can thrive in a highly competitive environment. In an interview with the Globe & Mail on Friday, September 24, 2020, Matt Wilks said that "If he'd [Mr. Mathison] put his guns down then we could do a lot of good for the stakeholders of Calfrac together". Matt Wilks meant it.

Calfrac Shareholders:A  The only path to protect your interests today is by voting AGAINST the Management Transaction. Vote the BLUE Proxy AGAINST the Management Transaction. Click here for voting instructions or learn more at The deadline to submit your BLUE proxy is October 13, 2020 at 11:59 p.m. MST.
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