STW Resources Holding Corp. (OTC QB: STWS) has announced its planned acquisition of Black Pearl Energy LLC that installs liners and has introduced floating evaporation covers for freshwater frack pits to the oil industry. Black Pearl has been in business for four years operating primarily in the Permian Basin where it has established a broad customer base and reputation for quality. Black Pearl's synergies with STW are throughout most divisions and will immediately be accretive to the company's revenues. STW Resources plans to operate Black Pearl as a wholly owned subsidiary.
In a non-binding agreement, STW will pay $1.95 million for 100% of Black Pearl. The parties are working on a definitive agreement and expect to close the transaction by the end of September 2014. STW will pay the purchase price as follows: 21% cash, 37% earn-out over three years and 42% in stock (priced at $0.30 per share). The transaction is subject to customary closing conditions, including availability of audited financials for Black Pearl, and therefore it is possible that the transaction may not occur by the end of September or at all.
In 2013, Black Pearl's revenues were $6.4 million with net cash flow of approximately $750,000. For the period ending June 30, 2014, Black Pearl's revenues are tracking at $5.5 million, an annualized increase of approximately 67% over 2013 revenues. STW believes through their integration of the Black Pearl operations, revenues will track an aggressive growth rate and net margins can be significantly increased. On closing of the acquisition, STW will file audited Black Pearl financials for two years and pro-forma financials demonstrating consolidated balance sheets and statements of operations.
Both companies are based in Midland, Texas.
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