HOUSTON, Aug. 4, 2021 /PRNewswire/ -- NexTier
Oilfield Solutions Inc. (NYSE: NEX) ("NexTier" or the "Company")
today announced that it has reached an agreement to acquire 100% of
the ownership interests of Alamo Pressure Pumping, LLC
("Alamo") for a transaction
valuation of approximately $268
million, as further described below. The transaction is
expected to be completed by August 31,
2021, subject to customary closing conditions and
approvals.
Consolidating 2 leading providers of low carbon well
completion solutions in the Permian Basin
- Adds 9 highly utilized, primarily CAT Tier IV, young hydraulic
fracturing fleets to NexTier's asset base
- Fortifies NexTier as the leader in CAT Tier IV Dual Fuel
technology
- Enables accelerated access to tight and growing next generation
market without adding market capacity
- Accelerates path to positive free cash flow generation at
attractive purchase multiple
- Expects to capture minimum $10
million annualized cost synergies within 6 months of
closing
- Provides significant pull-through opportunities via established
integrated completions offering
- Maintains strong and flexible balance sheet with $272 million estimated pro-forma liquidity and no
near-term debt maturities
- Retains Alamo's key leadership
& current operational teams intact with Alamo CEO reporting
directly to NexTier CEO
- Aligns with low-cost, low-carbon ESG strategy and advances
NexTier's sustainability journey
Management Commentary
"The acquisition of Alamo
accelerates and magnifies the impact of our next generation
technology strategy, providing NexTier with significant
opportunities for deploying gas-powered equipment and complimentary
integrated solutions into a market with high and increasing
demand," said Robert Drummond,
President & Chief Executive Officer of NexTier. "Combined, we
will operate the third largest base of active hydraulic horsepower
across the U.S. and the largest base of next generation equipment
in the Permian, improving our scale with highly-utilized fleets for
an efficient customer base. We are impressed with Alamo's performance and their successful track
record in the Midland basin.
Therefore, other than enhancement by our last-mile logistics,
NexHub and digital tools, operational integration will be minimal.
Joe McKie, the Alamo President and
CEO, will continue to lead the Alamo division of NexTier and report directly
to me."
"NexTier remains focused on maintaining a strong financial
position with attractive cash, liquidity, and leverage positions,"
said Kenny Pucheu, Executive Vice
President and Chief Financial Officer of NexTier. "Today's
acquisition accelerates our path to free cash flow generation in
early 2022. With no near-term debt maturities, we expect to drive
cash flow back onto the balance sheet through expanded Tier IV Dual
Fuel capacity and anticipated higher utilization. This
transaction is a win-win, as it immediately expands our gas-powered
equipment capacity, accelerating speed to market by avoiding the
significant time lag associated with organically growing our low
carbon fleet, with added benefit of not increasing market capacity.
In sum, we are acquiring a highly utilized base of next generation
equipment at an attractive relative valuation, upholding our
commitment to delivering value to shareholders."
Alamo Pressure Pumping Overview
Alamo, founded in 2017 and
headquartered in Midland, Texas,
is a leading Permian pressure pumper based on next generation
horsepower and active fleets. Acquired assets include 9 hydraulic
fracturing fleets comprised of 460,000 horsepower, approximately
92% of which is Tier IV DGB capable. Alamo operates exclusively in the Permian
Basin and primarily out of Midland. Alamo achieved $68
million of EBITDA in 2020i.
Transaction Details
The transaction valuation is approximately $268 million, which includes (i) cash
consideration of $100 million (ii)
the issuance of 26 million shares of NexTier's common stock, (iii)
the assumption by the Company of certain existing liabilities,
including $38 million of equipment
obligations, and (iv) $30 million of
post-closing services to be provided to Alamo E&P. The Purchase
Agreement also provides for (a) potential earn-out payments,
payable in the event Alamo
achieves certain EBITDA levels through year-end 2022, (b) Tier II
equipment upgrade payments (determinable following completion of
upgrades), and (c) various purchase price adjustments. The common
stock issuable as part of the closing reflects an ownership by
sellers of approximately 10.7% of the pro-forma Company, and is
subject to certain lock-up provisions.
The transaction valuation of approximately $268 million reflects approximately $582 per horsepower for 460,000 horsepower of
primarily next-gen equipment. In addition, assuming $80 million of Alamo achieved EBITDA in 2022i,
reflecting the threshold for earn-out payments to occur, the
transaction valuation reflects an estimated multiple of
approximately 3.4x.
For further details on the transaction terms, see NexTier's
Current Report on Form 8-K filed today with the SEC.
Transaction & Combined Company Highlights
Combined, NexTier will own 46 hydraulic fracturing fleets
totaling approximately 2.5 million horsepower, with the largest
deployed fleet capable of being fueled by low-emission natural gas
in the market today. The addition of Alamo's highly utilized next generation
focused fleets fortifies NexTier's leadership position in this
market niche where demand continues to outpace supply.
Alamo's focus on the
Midland Basin is highly
complementary to NexTier's significant position in the Delaware Basin, providing intra-basin
diversification and establishing NexTier as a leading completions
provider in one of the most prolific basins in the world. On a
combined basis, NexTier expects to operate 17 hydraulic fracturing
fleets in the Permian Basin post-closing.
The Company forecasts $10 million
of annualized cost synergies to be achieved within 6 months of
transaction closing. Alamo's CAT
Tier IV equipment, streamlined operations, and single-basin focus
are highly compatible with NexTier and allows for seamless
integration into NexTier's platform. Alamo has a highly complementary customer base
with limited overlap, enabling the expansion of NexTier's
integrated completions solutions. Pro-forma for the closing cash
portion of the purchase price, NexTier maintains a strong balance
sheet position, including estimated $272
million of total liquidity as of June
30, 2021, comprised of $250.4
million in cash plus $121.6
million of availability under our ABL credit facility as of
June 30, 2021, less the $100 million in cash to be paid at closing, and
no near-term debt maturities.
Advisors
King & Spalding LLP is serving as NexTier's legal advisor,
while Piper Sandler & Co. is
serving as its financial advisor. Kirkland & Ellis LLP is
serving as legal advisor to Alamo.
About NexTier Oilfield Solutions
Headquartered in Houston,
Texas, NexTier is an industry-leading U.S. land oilfield
service company, with a diverse set of well completion and
production services across the most active and demanding
basins. Our integrated solutions approach delivers efficiency
today, and our ongoing commitment to innovation helps our customers
better address what is coming next. NexTier is differentiated
through four points of distinction, including safety performance,
efficiency, partnership and innovation. At NexTier, we
believe in living our core values from the basin to the boardroom,
and helping customers win by safely unlocking affordable, reliable
and plentiful sources of energy.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
that are subject to risks and uncertainties and are made pursuant
to the safe harbor provisions of Section 27A of the Securities Act
of 1993, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended. Where a forward-looking statement expresses or
implies an expectation or belief as to future events or results,
such expectation or belief is expressed in good faith and believed
to have a reasonable basis. The words "believe," "continue,"
"could," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," "should," "may," "will," "would" or the negative thereof
and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements are
only predictions and involve known and unknown risks and
uncertainties, many of which are beyond the Company's control.
Statements in this press release regarding NexTier, Alamo and the combined company that are
forward-looking, including projections as to the Company's 2021
guidance and outlook information, projections as to the
anticipated benefits of the proposed transaction, the impact of the
proposed transaction on NexTier's and Alamo's business and future financial and
operating results, the amount and timing of synergies from the
proposed transaction, and the closing date for the proposed
transaction, are based on management's estimates, assumptions and
projections, and are subject to significant uncertainties and other
factors, many of which are beyond NexTier's and Alamo's control. These factors and risks
include, but are not limited to, (i) the competitive nature of the
industry in which NexTier and Alamo conduct their business, including
pricing pressures; (ii) the ability to meet rapid demand shifts;
(iii) the impact of pipeline capacity constraints and adverse
weather conditions in oil or gas producing regions; (iv) the
ability to obtain or renew customer contracts and changes in
customer requirements in the markets NexTier and Alamo serve; (v) the ability to identify,
effect and integrate acquisitions, joint ventures or other
transactions; (vi) the ability to protect and enforce intellectual
property rights; (vii) the effect of environmental and other
governmental regulations on NexTier and Alamo operations; (viii) the effect of a loss
of, or interruption in operations of, one or more key suppliers,
including resulting from inflation, COVID-19 resurgence, product
defects, recalls or suspensions; (ix) the variability of crude oil
and natural gas commodity prices; (x) the market price (including
inflation) and availability of materials or equipment; (xi) the
ability to obtain permits, approvals and authorizations from
governmental and third parties; (xii) NexTier's and Alamo's ability to employ a sufficient number
of skilled and qualified workers; (xiii) the level of, and
obligations associated with, NexTier's and Alamo's indebtedness; (xiv) fluctuations in
the market price of NexTier's stock; (xv) the duration (including
resurgences), impact and severity of the COVID-19 pandemic and the
response thereto, including the impact of social distancing,
shelter-in-place or shutdowns of non-essential businesses and
similar measures imposed or undertaken by governments, private
businesses or others, and the possibility of increased inflation,
travel restrictions, lodging shortages or other macro-economic
challenges as the economy emerges from the COVID-19 pandemic; and
(xv) other risk factors and additional information. In addition,
material risks that could cause actual results to differ from
forward-looking statements include: the inherent uncertainty
associated with financial or other projections; the effective
integration of Alamo's businesses
and the ability to achieve the anticipated synergies and
value-creation contemplated by the proposed transaction; and the
timing of the closing of the proposed transaction, including the
risk that the conditions to the transaction are not satisfied on a
timely basis or at all and the failure of the transaction to close
for any other reason; the risk that a consent or authorization that
may be required for the proposed transaction is not obtained or is
obtained subject to conditions that are not anticipated;
unanticipated difficulties or expenditures relating to the
transaction, the response or retention of customers and vendors as
a result of the announcement and/or closing of the transaction; and
the diversion of management time on transaction-related issues. In
addition, material risks that could cause actual results to differ
from forward-looking statements include: the inherent uncertainty
associated with financial or other projections; the effective
integration of Alamo's businesses
and the ability to achieve the anticipated synergies and
value-creation contemplated by the proposed transaction; and the
timing of the closing of the proposed transaction, including the
risk that the conditions to the transaction are not satisfied on a
timely basis or at all and the failure of the transaction to close
for any other reason; the risk that a consent or authorization that
may be required for the proposed transaction is not obtained or is
obtained subject to conditions that are not anticipated;
unanticipated difficulties or expenditures relating to the
transaction, the response or retention of customers and vendors as
a result of the announcement and/or closing of the transaction; and
the diversion of management time on transaction-related issues. For
a more detailed discussion of such risks and other factors, see the
Company's filings with the Securities and Exchange Commission (the
"SEC"), including under the heading "Risk Factors" in Item 1A of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, available on the
SEC website or www.NexTierOFS.com. The Company assumes no
obligation to update any forward-looking statements or information,
which speak as of their respective dates, to reflect events or
circumstances after the date hereof, or to reflect the occurrence
of unanticipated events, except as may be required under applicable
securities laws. Investors should not assume that any lack of
update to a previously issued "forward-looking statement"
constitutes a reaffirmation of that statement.
Investor Contact:
Kenneth Pucheu
Executive Vice President - Chief Financial Officer
Marc Silverberg
Partner (ICR)
marc.silverberg@icrinc.com
i Non-GAAP Financial Measures. This presentation
makes reference to earnings before interest, income taxes,
depreciation and amortization (EBITDA) in relation to the business
NexTier is acquiring (Alamo).
Alamo historical financial
information: Audited 2020 consolidated financial statements were
provided by seller as part of the transaction's diligence. While
these financials were prepared on a consolidated basis with the
exploration and production business of the seller, EBITDA as to
Alamo refers only to the pressure
pumping business that NexTier is acquiring. References to Alamo
Achieved EBITDA in relation to discussions on earn-out, is
referring to Achieved EBITDA as defined in the purchase agreement
and related transaction documents. Reconciliations of
forward-looking non-GAAP financial measures to comparable GAAP
measures are not available due to the challenges and
impracticability with estimating some of the items, particularly
with estimates for certain contingent liabilities, and estimating
non-cash unrealized fair value losses and gains which are subject
to market variability and therefore a reconciliation is not
available without unreasonable effort.
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SOURCE NexTier Oilfield Solutions