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Foreign Investors Eyeing Stake in Frac Tech, Sources Say

Texas-based Frac Tech Services LLC, a hydraulic fracturing (fracking) specialist, apparently is in talks to sell a stake in the company to one of three foreign oil giants for $2 billion-plus and also is close to completing joint ventures (JV) to work overseas on unconventional oil and gas prospects, sources told NGI's Shale Daily on Thursday.

Frac Tech, with corporate offices in Fort Worth and Cisco, TX, is considered the fourth largest provider of fracking services in the United States after Halliburton Co., Schlumberger Ltd. and Baker Hughes Inc. The company is run by former Chesapeake Energy Corp. CFO Marc Rowland (see Shale Daily, Oct. 14, 2010). Chesapeake also owns close to 30% of the company.

According to information confirmed by two sources, China National Offshore Oil Corp., known as CNOOC Ltd., as well as China Petrochemical Corp. (Sinopec) and Saudi Arabian Oil Co. (Saudi Aramco) are said to be competing to buy a 20-30% interest in the company.

Frac Tech also is said to be close to securing fracking projects with Saudi Aramco, Sinopec and Spain's Repsol YPF for joint ventures in the Middle East, China and Argentina.

Barclays Capital was hired to advise on a sale, which is scheduled to be completed before the end of February. Bank of America, Citigroup, Credit Suisse and Goldman Sachs have been hired to underwrite an initial public offering to raise more than $1.15 billion, which is scheduled for the second half of 2012. The company in late 2010 indicated that it would launch an IPO this year (see Shale Daily, Dec. 17, 2010). A filing by the company showed that its net income was $192,208 in 3Q2011 and assets totaled $1.59 million.

At the end of September Frac Tech was providing fracturing services in 12 areas: Aledo, Bryan, Longview, Odessa and Pleasanton, TX; Artesia, NM; Elk City, OK; Minot, ND; Shreveport, LA, Vernal, UT; and Washington and Williamsport, PA.

Joining up with CNOOC could be a comfortable fit for the Chesapeake-backed Frac Tech. Chesapeake has two JVs in place with the Chinese producer in the U.S. onshore. In one transaction completed earlier this year CNOOC gained a one-third interest in Chesapeake's 800,000 net acres in the Niobrara Shale, specifically the Denver-Julesburg and Powder River basins in northeast Colorado and southeast Wyoming. The partners also came to terms in 2010 for CNOOC to buy a one-third stake in 600,000 net acres in the Eagle Ford Shale (see Shale Daily, Oct. 12, 2010).

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