National Energy Services Reunited Corp., a national, industry-leading provider of integrated energy services in the Middle East and North Africa (MENA) and Asia Pacific, has entered into an agreement on Feb. 13 to acquire Sahara Petroleum Services Co. S.A.E. (SAPESCO), the largest indigenous oilfield services company in Egypt with operations across the MENA region.
Once completed, the transaction will result in NESR becoming a significant player in the Egyptian oil and gas industry, where it does not operate presently. This transaction will also add industrial and chemical services, which service the midstream and downstream sectors, to its portfolio. Furthermore, SAPESCO’s existing upstream well services contracts in Saudi Arabia, UAE, Libya and Kuwait will be a net addition to NESR’s contract portfolio.
Under the terms of the agreement, NESR will acquire all issued and outstanding shares of SAPESCO in a cash and stock transaction. The transaction is comprised of $27 million in cash paid to shareholders at closing and issuance of NESR shares in two tranches as earn-outs at a minimum price of $10.00 per share based on a portion of 2019 EBITDA and performance metrics, using a multiple of up to 4.35. The total company estimated 2019 adjusted EBITDA is approximately $20 million.
The $27 million cash component of the acquisition, as well as $22 million long term debt repayment, will be funded with cash from NESR’s balance sheet and the existing revolving credit facility. Post-closing, NESR will also assume approximately $8 million of short-term debt from an existing local facility. The acquisition is expected to be completed by March 31, 2020, subject to standard regulatory approvals and satisfaction of customary closing conditions.
“This acquisition marks the entry of NESR into the growing and successful Egyptian oil and gas industry,” Sherif Foda, chairman and CEO of NESR, said. “With SAPESCO’s long-standing reputation in the market for best in class equipment, talented workforce, performance and safety, we are confident we will continue to benefit through the combined growth of our business.”
Amended agreements allow the company to move reduced volumes of Permian crude on existing pipelines.
Japanese trading house Sumitomo bought a 30% stake in the project in 2010 from Rex Energy Corp., which went bankrupt in 2018. The project is now 70% owned and operated by PennEnergy Resources.
The remainder of the year’s deals will likely involve gas assets (while prices are good) and could come to include the low cost supply areas in the Texas and Louisiana Haynesville. Barring a miraculous rally, oil looks likely to remain the New Coke of commodities.