Houston-based Patterson-UTI Energy Inc. (PTEN) plans to expand its pressure pumping services for hydraulic fracturing (fracing) operations in the Barnett and Eagle Ford shales, and in the Permian Basin, after striking a $237.7 million cash deal with Key Energy Services Inc.
Key, also based in Houston, would retain other businesses in its Production Services segment, including its coiled tubing operations. The transaction is scheduled to be completed in September.
“In addition to the geographic expansion, the acquired businesses provide strong operating personnel, as well as high quality equipment that is very complementary to our existing energy service businesses,” said PTEN CEO Douglas J. Wall.
The pressure pumping equipment to be acquired totals 214,400 hp, which includes 184,400 hydraulic hp (hhp) for fracturing operations and 30,000 hp used for cementing, acidizing and nitrogen stimulation. Around 80% of the hydraulic horsepower is comprised of “quintuplex pumps that are ideally suited for shale frac work,” PTEN said.
PTEN also is purchasing Key’s wireline business, which includes 26 units that operate in the same areas as the pressure pumping assets, and units in the Bakken and Marcellus shales. Of the 26 wireline units, 22 are less than five years old, PTEN noted.
Universal Well Services Inc., PTEN’s existing pressure pumping subsidiary, which operates in the Appalachian region and provides fracturing services in the Marcellus Shale, currently has 205,100 hp, including 144,000 hhp.
The Key acquisition would bring PTEN’s total pressure pumping operations to 419,500 hp. About 50,000 hp of the equipment being acquired is currently on order and expected to be delivered over the next nine months.
PTEN has “sufficient financial resources to complete the acquisition with cash on hand, said Chairman Mark S. Siegel, but “we have entered into an additional credit agreement to provide added financial flexibility.” The new credit agreement allows PTEN to borrow up to $250 million to fund the acquisition through Oct. 30, but Siegel said the company “may not ultimately borrow under this new facility.”
Key said the pressure pumping and electric wireline businesses contributed $50.9 million and $123.0 million, respectively, in revenue in the first three months of this year. The businesses also delivered $2.5 million in operating income for the quarter; they lost a combined $72.9 million in 2009.
“In evaluating the growth and consolidation opportunities in our core well intervention services business and international expansion efforts, we determined that the capital in our pressure pumping and electric wireline businesses could be more effectively deployed in many of the other areas of potential opportunity before us today,” said Key CEO Dick Alario.
“We are not selling our coiled tubing business, as it is a primary focus area of our well intervention growth strategy. We intend to continue to evaluate growth opportunities, both organic and via acquisition, in our core businesses to enhance shareholder value. We believe that this transaction helps us to accelerate that strategy.”
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