2010-07-28-2010-07-26-2010-10-04

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
$227.2MM
Description

Aquired total of 10 coiled tubing units, 34 workover rigs, 123 vacuum trucks, 10 salt water disposal wells, three drilling rigs and a well-site construction business.

Key Energy Services Inc., Houston, (NYSE: KEG) has closed its acquisition of certain subsidiaries and associated assets of oilfield services company OFS Energy Services LLC, held by ArcLight Capital Partners LLC, for approximately $227.2 million.

The deal consisted of $75.6 million in cash and 15.8 million Key Energy Service shares. Key Energy Service shares are currently trading at $9.58. OFS Energy now holds approximately 11% of Key's outstanding shares.

The acquisition includes eight coiled-tubing units (with two additional units scheduled for delivery this year), 34 workover rigs, 123 vacuum trucks, 10 salt water disposal wells, three drilling rigs and a well-site construction business. The OFS subsidiaries employ approximately 880 workers and operate in the Haynesville, Barnett and Woodford shales, and Permian Basin markets under the Davis, Swan and Quail brands.

During the first half of 2010, the OFS businesses generated approximately $81 million revenue and $17 million EBITDA (earnings before interest, taxes, depreciation and amortization). Second quarter revenue increased 21% sequentially, generating 37% incremental EBITDA margins. The revenue increase was partly associated with the delivery of an additional large diameter coiled tubing unit during the second quarter. Key anticipates this transaction to be accretive to earnings and cash flow per share in 2010 and 2011.

Key chairman, president and chief executive Dick Alario says, "In addition to complementing our existing rig and fluids management businesses, closing this transaction will result in Key having a total of 41 coiled tubing units, two-thirds of which are large diameter units. This will represent a total fleet increase of 78% since the beginning of 2010, allowing us to effectively double our presence in the major shale markets. We view the OFS businesses as well-regarded companies, each with a reputation for high-quality services and excellent customer relationships, and we look forward to welcoming the employees of Davis, Swan, and Quail into the Key family."

Dan Revers, ArcLight managing partner, says, "We thank our management and employees for their hard work and commitment to the business and its customers since OFS was founded in 2006. We believe Key to be an ideal partner for the continued success and expansion of OFS' business due to Key's strong balance sheet, enviable safety record and complementary services. Key is well positioned to provide value-added services to the onshore oil and gas markets both domestically and increasingly in international areas, and we look forward to being a shareholder."

Tudor, Pickering, Holt & Co. was advisor to Key Energy Services. Simmons & Co. International was advisor to OFS Energy Services and ArcLight Capital Partners.