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Frank's International Bid For Well Specialist Blackhawk Designed to Increase 'Rig Time'

Houston-based Frank's International NV agreed Friday to buy crosstown well construction specialist Blackhawk Group Holdings Inc. in a transaction estimated to be worth $321 million.

Frank's is buying the parent company of Blackhawk Specialty Tools LLC from Bain Capital Private Equity, which acquired the business in 2013. Blackhawk, founded in 2008, provides specialty cementation tools, mostly devoted to well construction and well intervention services. Most of its operations are concentrated in the U.S. and Mexican Gulf of Mexico and in the Lower 48 states.

The transaction would augment Frank's global tubular running oilfield services (OFS) business, which now works in 60 countries with 3,000 employees, adding a high margin product to increase its "time on the rig," CEO Gary Luquette said during a conference call Friday morning. Anytime a business can expand its offerings to customers is a bonus, he said.

"We know what we're good at, and there's big wide, wide world inside the well construction space,” said Luquette, who formerly was the exploration chief for Chevron North America Exploration and Production Co. (see Daily GPI, June 6, 2013). “We can think of a number of opportunities to add assets or to add companies that keep us pretty close to what we're really good at and what Blackhawk is really good at." The acquisition is a "logical extension...close to what we run or clamp-on that we run. It's also informed by customers, in terms of what they are looking at in terms of packaging or products or services."

Last year Frank’s agreed to buy crosstown competitor Timco Services Inc. to expand its U.S. OFS business, particularly in the Eagle Ford Shale and Permian Basin (see Shale Daily, March 12, 2015). More deals could be in the offing.

"We plan to string together the pearls to make the necklace that ultimately we want to make," Luquette said. "We want to make sure that we capture some of the cost programs that we announced,shore up our balance sheet and make sure on a cash basis we pay as we go..." But management of the old-line company, established in 1938, is "convinced" there are other potential acquisitions ready to be scooped up.

Currently, 70% of Blackhawk's topline business is in the offshore market, mostly floater equipment, with the remainder land-based, Luquette said. With penetration in 60 countries, Frank's would be able to offer Blackhawk's products a much larger stage.

"Similar to Frank's, Blackhawk has a reputation for combining exceptional service with an innovative portfolio of technology that delivers consistent value to customers," Luquette said. "Together we will continue to offer the same reliable service customers expect, while furthering customer relationships with new products and services across the Frank's global footprint.

"Joining Blackhawk's cementing tool expertise with Frank's global tubular running services franchise will allow us to offer customers worldwide a more integrated suite of best-in-class products and services to address their well construction needs across all environments from land to shelf to deepwater."

No financial details were provided, but Luquette said that based on historical numbers over the last four or five years, Blackhawk has had "around 10% to 15% of Frank's revenue." During 2Q2016, Frank's reported a net loss of $31 million (minus 20 cents/share) on revenue of $121 million.

Frank's agreed to pay Bain $150 million in cash, repay about $80 million in Blackhawk debt and provide 12.8 million shares of common stock. Based on Frank's closing price on Thursday, the transaction is valued at about $321 million.

"Joining the Frank's global family is the next step in continuing the expansion of Blackhawk's industry leading specialty products and equipment," CEO Billy Brown said. "Combining Frank's and Blackhawk is the right strategic move at the right time, providing customers the same exceptional service with a broader platform to accelerate future growth."

The transaction is expected to be completed by the end of the year.

The downturn in the OFS sector may bottom this year, researchers with Douglas-Westwood said last Monday (see Shale Daily, Oct. 3). According to their calculations, OFS capital expenditures should increase 10% year/year between 2016 and 2020, reading $186 billion in 2020. The strongest growth is expected in North America, seen increasing on average by 19% every year.

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