OKLAHOMA CITY, July 20, 2014 /PRNewswire/ -- Compressco
Partners, L.P. (Compressco or the Partnership) (NASDAQ: GSJK) today
announced that Compressco has entered into a definitive agreement
to purchase all the outstanding shares of Compressor Systems, Inc.
(CSI) for $825 million in cash,
subject to working capital and other adjustments.
This acquisition is expected to increase Compressco's total
horsepower offering from approximately 187,000 to over 1,045,000,
and will allow Compressco to utilize an expanded range of
compressor packages (from 20 HP units to 2,370 HP units) for
compression services to customers. It is anticipated that this
expansion of Compressco's service offerings will allow the
Partnership to participate in the compression market at a broader
level.
CSI, founded in 1971 and based in Midland, Texas, is the largest privately held,
full service natural gas compression provider in the U.S. CSI
fabricates, sells, and maintains natural gas compressors and
provides compression services that cover the entire natural gas
production and transportation cycle to a broad customer base. CSI
owns one of the largest fleets of natural gas compression equipment
in the United States, with over
275 units in the 1,000 horsepower and larger range. In addition,
CSI fabricates and sells engine-driven oilfield fluid pump systems
primarily for the international market.
For the twelve months ended March 31,
2014, CSI's aggregate revenues were $311 million, and EBITDA was $82.3 million.
Compressco has obtained committed financing to complete the
transaction, which is expected to close in early August. However,
it is currently anticipated that financing will include
Compressco's issuance of approximately $400
million of public equity and $350
million of publicly-rated senior notes, with the balance
being drawn from a $400 million
revolving credit facility. TETRA Technologies, Inc. (TETRA), the
indirect 100% owner of Compressco's general partner, expects to
purchase common units in the equity offering and make contributions
to maintain its approximate 2% general partner interest in an
aggregate amount of up to $40
million.
Ronald J. Foster, President of
Compressco Partners, remarked, "I am thrilled to announce the
acquisition of CSI. The combined company will bring together two
industry leaders, each with a strong reputation for "Best in Class"
service, that will provide value-driven services for our customers,
generate strong returns for unit holders, and continue to provide a
safe, long-term work environment for employees. The acquisition
will create a complementary portfolio of compressor units and
services to address a wide range of applications targeting the oil,
liquids and natural gas markets in both domestic and international
areas."
Mr. Foster continued, "Our stated strategy of "scale through
growth" by pursuing parallel paths of organic growth and M&A
opportunities is greatly advanced by this transformative
transaction. We are excited to broaden our existing services to
include production enhancement at the wellhead, vapor recovery at
production facilities, gas-lift artificial lift in completion and
production, and infrastructure compression for midstream and
downstream customers. The combined management talent of the two
companies will be a "game changer" in the compression industry,
given the breadth of experience in all facets of providing world
class customer service. Part of the strategic rationale for this
transaction includes the creation of synergies of between
$5 million and $10 million on an
annualized basis beginning in 2015, from factors such as:
- critical mass and cash flow stability;
- complementary fleet and services including common
infrastructure;
- broad range of compression service applications from 20HP –
2,370HP;
- increased market exposure through broad product offerings in
shale basins;
- leveraged opportunities for geographic expansion in the U.S.
and internationally; and
- significant manufacturing, engineering and technology
opportunities.
"Looking forward, the combined organization will be led by
Tim Knox, CSI's current President. I
will take on the role of Senior Vice President and Chief Marketing
Officer, and James Rounsavall will
serve as Chief Financial Officer. We believe that this blending of
the current CSI and Compressco leadership will provide continuity
for both organizations, while retaining valuable institutional
knowledge and industry experience. When we have completed this
acquisition, the combined management teams across TETRA, Compressco
and CSI will be managing a world-class global enterprise that will
create value for both TETRA and Compressco shareholders.
"Based on a number of specific assumptions, Compressco
management expects to be able to recommend to its Board of
Directors a 12-14% increase in the cash distribution per
outstanding common unit attributable to the quarter ending
December 31, 2014 (the first full
quarter following the acquisition), compared to the $0.4525 distribution per outstanding unit, or
$1.81 per outstanding unit on an
annualized basis, attributable to quarter ended June 30, 2014. To meet the strong demand for
compression services, following the acquisition, Compressco expects
to grow capital expenditures to between $90
and $100 million in 2015, which will provide incremental
revenues and is expected to facilitate additional increases in cash
distributions. Compressco currently expects to maintain a coverage
ratio of 1.2 times distributable cash flow to distributions,
consistent with our past practices."
Following the transaction, it is currently expected that TETRA's
ownership of the Partnership will be reduced to approximately 46%.
TETRA will maintain 100% ownership of the Partnership's general
partner, and will continue to consolidate the results of Compressco
in its financial statements.
TETRA and Compressco Partners will host a conference call to
discuss the acquisition on Monday, July 21,
2014 at 9:30 am Eastern Time.
Stuart M. Brightman, TETRA's
President and Chief Executive Officer, Ron
Foster, Compressco's President, Elijio V. Serrano, TETRA's Chief Financial
Officer and James Rounsavall,
Compressco's Chief Financial Officer, will host the call. The phone
number for the call is 877/870-4263. The conference will also be
available by live audio webcast and may be accessed through the
Compressco Partners website at www.compressco.com.
Compressco Partners is a provider of compression-based
production enhancement services, which are used in both
conventional wellhead compression applications and unconventional
compression applications, and in certain circumstances, well
monitoring and sand separation services. Compressco Partners
provides services to a broad base of natural gas and oil
exploration and production companies operating throughout many of
the onshore producing regions of the
United States. Internationally, Compressco Partners has
significant operations in Mexico
and Canada and a growing presence
in certain countries in South
America, Europe, and the
Asia-Pacific region. Compressco
Partners is managed by Compressco Partners GP Inc., which is an
indirect, wholly owned subsidiary of TETRA Technologies, Inc.
(NYSE: TTI).
Forward Looking Statements
This press release includes certain statements that are deemed
to be forward-looking statements. Generally, the use of words such
as "may," "expect," "intend," "estimate," "projects," "anticipate,"
"believe," "assume," "could," "should," "plans," "targets" or
similar expressions that convey the uncertainty of future events,
activities, expectations or outcomes identify forward-looking
statements. These forward-looking statements include statements
concerning: Compressco's Partners' ability to consummate the
proposed acquisition; the expected timing of the closing of the
acquisition; Compressco Partners' anticipated financing of the
proposed acquisition and its ability to finance the acquisition;
anticipated benefits and growth of Compressco Partners following
the proposed acquisition, including increases in cash distributions
per unit; financial guidance, estimated distributable cash,
estimated earnings, earnings per unit, and statements regarding
Compressco Partners' beliefs, expectations, plans, goals, future
events and performance, and other statements that are not purely
historical. These forward-looking statements are based on certain
assumptions and analyses made by Compressco Partners in light of
its experience and its perception of historical trends, current
conditions, expected future developments and other factors it
believes are appropriate in the circumstances. Such statements are
subject to a number of risks and uncertainties, many of which are
beyond the control of Compressco Partners including the ability of
Compressco Partners to successfully integrate the operations of CSI
and the ability to realize the anticipated benefits of the proposed
acquisition. Investors are cautioned that any such statements are
not guarantees of future performances or results and that actual
results or developments may differ materially from those projected
in the forward-looking statements. Neither Compressco's independent
auditors, nor any other independent accountants or experts have
expressed any opinion or any other form of assurance related to the
Partnership's estimates of increased cash available for
distribution or their achievability, but in the view of Compressco
management, these estimates were prepared on a reasonable basis,
reflect the best currently available information and represent, to
the best of management's knowledge and belief, Compressco's
expected course of action. However, this information is not
fact and this statement should not be regarded as a representation
by Compressco that it will pay such increased cash distributions.
Some of the factors that could affect the Partnership's actual
results and the ability of Compressco Partners to increase its cash
distributions per common unit as described above are described in
Compressco Partners' Annual Report on Form 10-K for the year ended
December 31, 2013, as well as other
risks identified from time to time in its reports on Form 10-Q and
Form 8-K filed with the U.S. Securities and Exchange Commission.
Compressco Partners undertakes no obligation to update or revise
any forward-looking statement to reflect new information or
events.
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SOURCE Compressco Partners, L.P.