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Archrock to acquire Elite Compression

Published by , Editorial Assistant
Hydrocarbon Engineering,

Archrock, Inc. has announced that it has entered into a definitive agreement to acquire substantially all assets of Elite Compression Services, a portfolio company of JDH Capital Co., including approximately 430 000 of predominately large-horsepower compression assets for a total consideration of US$410 million. The transaction will be funded with approximately US$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 US$30 million in cash. Archrock’s Board of Directors has appointed energy industry veteran Jeffery D. Hildebrand, Executive Chairman and Founder, of Hilcorp Energy Co., which is affiliated with JDH Capital and Harvest Midstream, to Archrock’s Board of Directors 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 utilised, predominantly large-horsepower compression units, more than 80% of which are contracted for more than three years with blue-chip customers. We expect the acquired assets to generate approximately US$55 million of annualised adjusted EBITDA, inclusive of US$5 million in annualised cost synergies. 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 non-core equipment further standardises 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% and 15% 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.”

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Downstream news Downstream contract news North America downstream news