Houston-based Archrock Inc., a pure-play natural gas midstream operator in the Lower 48, agreed Monday to acquire 430,000 hp from Elite Compression Services in a cash-and-stock trade.
Under terms of the agreement, Archrock is paying Elite, a portfolio company of JDH Capital Co., an estimated $410 million total, including $205 million in cash and 21.7 million common shares. In conjunction with the transaction, Harvest Midstream Co. would acquire 80,000 hp from Archrock for $30 million.
“The assets being acquired from Elite are highly utilized, predominantly large-horsepower compression units, more than 80% of which are contracted for more than three years with blue-chip customers,” CEO Brad Childers said.
“In addition, this transaction adds basin density in our core areas, with more than 70% of the units deployed in the Eagle Ford and South Texas region, and the concurrent sale of noncore equipment further standardizes our asset portfolio.”
The transactions, said Childers, “support our ability to achieve our stated financial targets, including reducing our leverage to below four times in 2020, growing our dividend between 10% and 15% annually through 2020, and maintaining dividend coverage of more than two times through 2020.”
Archrock also is appointing to its board Hilcorp Energy Co. founder and Executive Chairman Jeffery D. Hildebrand. Hilcorp, considered one of the largest privately owned exploration and production companies in the United States, is affiliated with JDH and Harvest.
JDH was established to manage the assets of Hildebrand and his family. Harvest operates crude and natural gas midstream assets across the Lower 48 and Alaska.
Hildebrand said Archrock and Elite have provided oilfield services for Hilcorp for several years, adding the companies have “sufficient scale, experience and capabilities to grow with us over time…
“I am also excited to serve on the Archrock board, and look forward to working with the company to further advance Archrock’s strategy as both a board member and substantial owner.”
The acquisition and pending sale transactions are expected to be completed by the end of September.
For Archrock, Citi is acting as financial adviser and Latham & Watkins is legal adviser. For JDH Capital and Elite, Intrepid Partners LLC is financial adviser and Kirkland & Ellis is legal adviser.