Houston-based NexTier Oilfield Solutions plans to acquire Alamo Pressure Pumping in a $268 million deal that is expected to close by the end of the month.
Founded in 2017, Alamo is a Midland, Texas-based pressure pumping company operating exclusively in the Permian Basin, mostly within the Midland Basin portion.
"The acquisition of Alamo accelerates and magnifies the impact of our next-generation technology strategy, providing NexTier with significant opportunities for deploying gas-powered equipment and complimentary integrated solutions into a market with high and increasing demand," said NexTier President and CEO Robert Drummond. "Combined, we will operate the third-largest base of active hydraulic horsepower across the U.S. and the largest base of next-generation equipment in the Permian, improving our scale with highly utilized fleets for an efficient customer base."
NexTier will gain nine highly utilized, primarily CAT Tier IV, young hydraulic fracturing fleets. The combined company will own 46 hydraulic fracturing fleets totaling approximately 2.5 million horsepower and is expected to operate 17 fleets in the Permian Basin. The deal also gives NexTier the largest deployed fleet capable of being fueled by low-emission natural gas, NexTier said.
Alamo President and CEO Joe McKie will continue to lead the Alamo division and report directly to Drummond. Alamo's Midland Basin focus complements NexTier's position in the Delaware Basin portion of the Permian, and the companies have complementary customer bases with little overlap.
"We are impressed with Alamo's performance and their successful track record in the Midland Basin," Drummond said. "Therefore, other than enhancement by our last-mile logistics, NexHub and digital tools, operational integration will be minimal."
The deal's value includes $100 million in cash; the issuance of 26 million shares of NexTier's common stock, representing about 10.7% of the combined company; NexTier's assumption of certain existing liabilities, including $38 million of equipment obligations; and $30 million of post-closing services to be provided to Alamo E&P. The deal also includes potential earn-out payments if Alamo achieves certain EBITDA levels through year-end 2022. NexTier estimates it will achieve $10 million of annualized cost savings within six months of the deal closing.
"NexTier remains focused on maintaining a strong financial position with attractive cash, liquidity and leverage positions," said Kenny Pucheu, executive vice president and CFO of NexTier. "Today's acquisition accelerates our path to free cash flow generation in early 2022. With no near-term debt maturities, we expect to drive cash flow back onto the balance sheet through expanded Tier IV Dual Fuel capacity and anticipated higher utilization.
"This transaction is a win-win, as it immediately expands our gas-powered equipment capacity, accelerating speed to market by avoiding the significant time lag associated with organically growing our low-carbon fleet, with added benefit of not increasing market capacity," Pucheu added. "In sum, we are acquiring a highly utilized base of next generation equipment at an attractive relative valuation, upholding our commitment to delivering value to shareholders."
King & Spalding LLP is serving as NexTier's legal advisor, while Piper Sandler & Co. is serving as its financial advisor. Kirkland & Ellis LLP is serving as legal advisor to Alamo.
