Archrock to acquire shale gas compressor company for $410M

By Archrock | June 25, 2019

 Archrock, Inc. has entered into a definitive agreement to acquire substantially all assets of Elite Compression Services LLC, a portfolio company of JDH Capital Co., including approximately 430,000 of predominately large-horsepower compression assets for total consideration of $410 million. The transaction will be funded with approximately $205 million of cash and approximately 21.7 million newly issued Archrock common shares to the seller.  In conjunction with the transaction, Harvest Midstream Co. will acquire approximately 80,000 active and idle compression horsepower from Archrock for $30 million in cash. Archrock’s board of d irectors has appointed energy industry veteran Jeffery Hildebrand, executive chairman and founder, of Hilcorp Energy Co., which is affiliated with JDH Capital and Harvest Midstream, to Archrock’s board upon closing of the transactions. 

“We are excited to announce the acquisition of Elite’s excellent contract compression operations in a transaction that will immediately benefit Archrock shareholders through accretive earnings and cash flow growth,” said Brad Childers, president and CEO of Archrock. “The assets being acquired from Elite are highly utilized, predominantly large-horsepower compression units, more than 80 percent of which are contracted for more than three years with blue-chip customers. We expect the acquired assets to generate approximately $55 million of annualized adjusted EBITDA, inclusive of $5 million in annualized cost synergies. In addition, this transaction adds basin density in our core areas, with more than 70 percent of the units deployed in the Eagle Ford and South Texas region, and the concurrent sale of non-core equipment further standardizes our asset portfolio. We believe these transactions support our ability to achieve our stated financial targets, including reducing our leverage to below 4.0x in 2020, growing our dividend between 10 percent and 15 percent annually through 2020, and maintaining dividend coverage of more than 2.0x through 2020.” 

“Archrock and Elite have been fantastic service providers of ours for many years, and we are pleased to be partnering with a company that is aligned with our strategy of natural gas production growth and best in class midstream operations.  They have sufficient scale, experience and capabilities to grow with us over time,” said Jeff Hildebrand. “Further, I am very proud of the extraordinary effort and leadership Jerry Blackmon and the management team at Elite have exhibited since the company was formed.  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.”