White Eagle Partners Issues Letter to Board of Tesco Corporation

Criticizes Management's Spending Plans on Tubular Services and Acquisitions

Calls on the Board Instead to Commit to Material Stock Buy-backs

NEW YORK--()--White Eagle Partners, LLC ("White Eagle"), a shareholder of Tesco Corporation (NASDAQ: TESO) (the "Company"), sent a letter today to the Company's Board of Directors criticizing management's proposed plans which suggest spending $250 million in capex in tubular services over the next five years and an additional $250 million for acquisitions. The letter calls on the Board instead to institute a meaningful share buy-back plan in the near term.

Full text of the letter follows:
September 9, 2014

Board of Directors
Tesco Corporation
3993 West Sam Houston Parkway North
Suite 100
Houston TX 77043-1221

Attn:     Mr. Michael Sutherlin, Chairman
Board of Directors


We were pleased to see the announcement of Mr. Quintana's planned resignation as President and CEO of Tesco Corporation. While we appreciated his work on the operational side, we were very disappointed with his flawed plans for the Company. And we are particularly concerned with your announcement that we should expect "consistency in strategy" under Mr. Assing's management, who you indicate played a key role in the development of your current growth strategy.

We believe that your proposed plan, which suggests $650 million in capital to be deployed over the next five years ($250 million for capex in tubular services, $250 million for acquisitions, $100 million for share buy-backs and $50 million towards dividends) is flawed in a number of respects. The problems are as follows:

First of all, the tubular services division is currently operating at a rate notably below its capacity of 1800 jobs per quarter. The proposed exorbitant investment in this division (1/3 of Tesco's current enterprise value) is therefore unjustifiable, especially if it is to be accompanied by acquisitions.

Second, we believe that the Company has the necessary assets and industry position to continue to out-pace market growth, and we question an aggressive acquisition strategy by a management with a limited track record in this area. We believe the execution risks far outweigh the highly speculative returns.

Finally, we have on repeated occasions asked the Company for a meaningful program to return cash to investor, especially in light of your irresponsibly under-levered balance sheet. A cash-generative company like Tesco should not, at a time of historically low interest rates, hold a net cash position. Our three previous letters have demonstrated the basic mechanics and very positive financial implications of a meaningful share buy-back. The Company should be able to allocate at least $300 million to this end and remain under-levered, and a reasonable leverage level of 2 times net debt to EBITDA would allow you to repurchase over half of the Company’s enterprise value.

Further, management expects the Company to achieve $2.50 in EPS by 2018, which at current PE multiples suggest a price target north of $50 per share. If you believe your own projections, you would inevitably realize that the best allocation of capital is toward a share buy-back.

We believe that the stock’s lackluster performance immediately after the announcement of management’s grand strategic presentation (only reversed recently with announcement of Mr. Quintana’s departure) conveys a message that you must not ignore. We urge you to institute a meaningful share buy-back plan of at least $150 million between now and your next annual meeting, which should still leave the company in a net cash position. And we believe you must take this action immediately, in the best interests of all of your shareholders, while your stock is still substantially undervalued.

Should you fail to modify your plans to take account of our suggestions, which we believe to be the best way to maximize shareholder value, we intend to pursue all appropriate shareholder actions to hold you accountable.


A. James Rasteh
White Eagle Partners


White Eagle is a global, value-oriented investment advisory firm that invests in companies with a leading position in their industry or country of operations, strong margins and growth prospects, and compelling valuation. Where appropriate, White Eagle works with the management team and boards of its invested companies to create value for shareholders.


White Eagle, LLC
James Rasteh, 212-388-1221