Greene's wellhead protection, flowback and
well testing services augment KLX's frac rental and
flowback product lines
Transaction Highlights
- Highly complementary product and service offering with common
culture focused on performance, safety and returns
- Expected to be accretive to KLX on all financial metrics
- Meaningful annualized cost synergies, which we believe are
achievable within twelve months
- Deleveraging transaction
- Enhances combined company's ability to effect further industry
consolidation
HOUSTON, March 8,
2023 /PRNewswire/ -- KLX Energy Services Holdings,
Inc. (NASDAQ: KLXE), ("KLX" or the "Company") announced today it
has acquired all of the equity interests of Greene's Energy Group,
LLC ("Greene's"), including $1.7
million in cash remaining with Greene's, in an all-stock
transaction. The total consideration for the acquisition consisted
of the issuance of approximately 2.4 million shares of KLX common
stock, par value $0.01 per share,
subject to customary post-closing adjustments, with an implied
enterprise value of approximately $30.3
million based on a 30-day volume weighted average price
("VWAP") as of March 7, 2023 and less
acquired cash. Following the closing of the transaction, former
shareholders of Greene's hold approximately 14.7% of the fully
diluted common stock of the Company.
Greene's is a leading provider of wellhead protection, flowback
and well testing services. The acquisition of Greene's, which is
expected to be accretive to KLX in 2023, augments the KLX frac
rental and flowback offering, providing KLX with a broader presence
in the Permian and Eagle Ford basins.
Commenting on the acquisition, Chris
Baker, KLX President and Chief Executive Officer, stated,
"We are pleased to welcome Greene's exceptional management team and
talented employees to KLX. Greene's has an excellent industry
reputation and fits naturally within KLX's Southwest segment
supporting both Permian and Eagle Ford operators. Greene's has a
strong unlevered balance sheet, reporting unaudited $68.0 million in revenue, $5.3 million in net income and $14.7 million in Adjusted EBITDA in 2022. Going
forward, we expect the legacy Greene's platform to generate 2023
revenue and Adjusted EBITDA of $70.0
million to $75.0 million and
$18.0 million to $20.0 million (inclusive of synergies),
respectively.
"Additionally, this transaction is deleveraging for KLX and is
expected to be accretive to KLX on all financial metrics," added
Baker. "We expect $2.0 million to
$3.0 million in annualized cost
synergies within twelve months and believe this further enhances
KLX's ability to effect industry consolidation as we continue to
focus on increasing returns and enhancing shareholder value."
Adam Doyle, President of
Greene's, said, "We believe KLX and Greene's will form a strong
partnership based on a common culture focused on safety, execution,
customer service and returns. We believe the combined company is
better positioned to serve the Greene's customer base and support
the team members with the addition of KLX's best in-class
diversified offerings."
KLX's legal advisor was Vinson & Elkins LLP. Greene's legal
advisor was Sidley Austin LLP. Simmons Energy, a Division of
Piper Sandler, acted as Greene's
financial advisors for the transaction.
Transaction Details
Total consideration for the Greene's Acquisition consisted of
the issuance of approximately 2.4 million shares of KLX common
stock, subject to customary post-closing adjustments (the "Stock
Consideration"), with an implied enterprise value of approximately
$30.3 million based on a 30-day VWAP
as of March 7, 2023 and less acquired
cash. Following the closing of the transaction, former shareholders
of Greene's hold approximately 14.7% of the fully diluted common
stock of the Company.
In connection with the Greene's Acquisition, the Company entered
into a Registration Rights and Lock-Up Agreement, dated as of
March 8, 2023, with Greene's Holding
Corporation, the direct parent of Greene's (the "Seller"), pursuant
to which the Company must file a shelf registration statement upon
the request of the Seller and certain of its affiliates to register
the shares comprising the Stock Consideration. The Seller and
certain of its affiliates will also have the right to demand that
the Company undertake an underwritten offering of shares comprising
the Stock Consideration so long as the minimum market price of the
shares to be included in the offering is $30.0 million, subject to certain other
limitations. In addition, the Seller and certain of its affiliates
will have certain "piggyback" rights if the Company or certain
other holders of the Company's common stock undertake an
underwritten offering, subject to customary cutbacks.
Additionally, the Seller agreed, subject to certain customary
exceptions, not to, directly or indirectly, sell, offer or agree to
sell, or otherwise transfer, or loan or pledge, through swap or
hedging transactions, or grant any option to purchase, make any
short sale or otherwise dispose of 66 2/3% of the shares comprising
the Stock Consideration for specified periods of time ranging from
six to twelve months following the closing of the transaction.
About KLX Energy Services
KLX is a growth-oriented provider of diversified oilfield
services to leading onshore oil and natural gas exploration and
production companies operating in both conventional and
unconventional plays in all of the active major basins throughout
the United States. The Company
delivers mission critical oilfield services focused on drilling,
completion, production, and intervention activities for technically
demanding wells from over 50 service and support facilities located
throughout the United States.
KLX's complementary suite of proprietary products and specialized
services is supported by technically skilled personnel and a broad
portfolio of innovative in-house manufacturing, repair and
maintenance capabilities. More information is available at
www.klxenergy.com.
About Greene's Energy Group
Headquartered in Houston,
Greene's provides differentiated completion services for blue-chip
oil and gas operators across the Permian and Eagle Ford basins.
Greene's proprietary wellhead protection tool protects wellhead
equipment from highly abrasive, high pressure frac fluid, allowing
its customers to complete wells in a more cost-effective manner
with reduced non-productive time, shorter job lengths and lower
repair costs, while maximizing employee safety. In addition,
Greene's is a significant provider of well testing services,
offering a comprehensive suite of services, including scope of
completion, advanced production testing and hydrostatic
testing.
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information to investors. This
release includes forward-looking statements that reflect our
current expectations, projections and goals relating to our future
results, performance and prospects. Forward-looking statements
include all statements that are not historical in nature and are
not current facts, including with respect to the Greene's
transaction described above. When used in this news release, the
words "believe," "expect," "plan," "intend," "anticipate,"
"estimate," "predict," "potential," "continue," "may," "might,"
"should," "could," "will" or the negative of these terms or similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such
identifying words. These forward-looking statements are based on
our current expectations and assumptions about future events and
are based on currently available information as to the outcome and
timing of future events with respect to, among other things: our
operating cash flows; the availability of capital and our
liquidity; our ability to renew and refinance our debt; our future
revenue, income and operating performance; our ability to sustain
and improve our utilization, revenue and margins; our ability to
maintain acceptable pricing for our services; future capital
expenditures; our ability to finance equipment, working capital and
capital expenditures; our ability to execute our long-term growth
strategy and to integrate our acquisitions; our ability to
successfully develop our research and technology capabilities and
implement technological developments and enhancements; and the
timing and success of strategic initiatives and special projects,
as well as our ability to integrate the business of Greene's and
realize the expected benefits of the Greene's acquisition.
Forward-looking statements are not assurances of future
performance and actual results could differ materially from our
historical experience and our present expectations or projections.
These forward-looking statements are based on management's current
expectations and beliefs, forecasts for our existing operations,
experience, expectations and perception of historical trends,
current conditions, anticipated future developments and their
effect on us and other factors believed to be appropriate. Although
management believes the expectations and assumptions reflected in
these forward-looking statements are reasonable as and when made,
no assurance can be given that these assumptions are accurate or
that any of these expectations will be achieved (in full or at
all). Our forward-looking statements involve significant risks,
contingencies and uncertainties, most of which are difficult to
predict and many of which are beyond our control. Known material
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, risks associated with the following: a decline in
demand for our services, declining commodity prices, overcapacity
and other competitive factors affecting our industry; the cyclical
nature and volatility of the oil and gas industry, which impacts
the level of exploration, production and development activity and
spending patterns by oil and natural gas exploration and production
companies; a decline in, or substantial volatility of, crude oil
and gas commodity prices, which generally leads to decreased
spending by our customers and negatively impacts drilling,
completion and production activity; inflation; increases in
interest rates; the ongoing conflict in Ukraine and its continuing effects on global
trade; supply chain issues; and other risks and uncertainties
listed in our filings with the U.S. Securities and Exchange
Commission, including our Current Reports on Form 8-K that we file
from time to time, Quarterly Reports on Form 10-Q and Annual Report
on Form 10-K. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise, except as
required by law.
Non-GAAP Measures
This release includes Adjusted EBITDA. This metric is a
"non-GAAP financial measure" as defined in Regulation G of the
Securities Exchange Act of 1934. Due to the forward-looking nature
of the non-GAAP financial measure presented in this release,
reconciliations of the non-GAAP financial measure to its most
directly comparable GAAP measure is not available without
unreasonable efforts. This is due to the inherent difficulty of
forecasting the timing or amount of various reconciling items that
would impact the most directly comparable forward-looking GAAP
financial measure, that have not yet occurred, are out of our
control and/or cannot be reasonably predicted. Accordingly, such
reconciliations are excluded from this release. Forward-looking
non-GAAP financial measures provided without the most directly
comparable GAAP financial measures may vary materially from the
corresponding GAAP financial measures.
Adjusted EBITDA is a supplemental non-GAAP financial measure
that is used by management and external users of our financial
statements, such as industry analysts, investors, lenders and
rating agencies. Adjusted EBITDA is not a measure of net earnings
or cash flows as determined by GAAP. We define Adjusted EBITDA as
net earnings (loss) before interest, taxes, depreciation and
amortization, further adjusted for (i) goodwill and/or long-lived
asset impairment charges, (ii) stock-based compensation expense,
(iii) restructuring charges, (iv) transaction and integration costs
related to acquisitions, (v) costs incurred related to the COVID-19
pandemic and (vi) other expenses or charges to exclude certain
items that we believe are not reflective of ongoing performance of
our business. Adjusted EBITDA is used to calculate the Company's
leverage ratio, consistent with the terms of the Company's ABL
Facility.
We believe Adjusted EBITDA is useful because it allows us to
more effectively evaluate our operating performance and compare the
results of our operations from period to period without regard to
our financing methods or capital structure. We exclude the items
listed above in arriving at Adjusted EBITDA because these amounts
can vary substantially from company to company within our industry
depending upon accounting methods and book values of assets,
capital structures and the method by which the assets were
acquired. Adjusted EBITDA should not be considered as an
alternative to, or more meaningful than, net income as determined
in accordance with GAAP, or as an indicator of our operating
performance or liquidity. Certain items excluded from Adjusted
EBITDA are significant components in understanding and assessing a
company's financial performance, such as a company's cost of
capital and tax structure, as well as the historic costs of
depreciable assets, none of which are components of Adjusted
EBITDA. Our computations of Adjusted EBITDA may not be comparable
to other similarly titled measures of other companies.
Greene's Energy
Group, LLC
Reconciliation of
Consolidated Net Income to Adjusted EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Twelve Months
Ended
|
|
December 31,
2022
|
Net income
|
$
5.3
|
Income tax
expense
|
0.2
|
Interest income,
net
|
(0.1)
|
Operating
income
|
5.4
|
Restructuring
charges
|
0.6
|
One-time
benefits
|
(0.1)
|
Adjusted operating
income
|
5.9
|
Depreciation
|
5.0
|
Intangible
amortization
|
3.8
|
Adjusted
EBITDA
|
$
14.7
|
Contacts:
|
KLX Energy
Services
|
|
Keefer M. Lehner, EVP
& CFO
|
|
832-930-8066
|
|
IR@klxenergy.com
|
|
|
|
Dennard Lascar Investor
Relations
|
|
Ken Dennard / Natalie
Hairston
|
|
(713)
529-6600
|
|
KLXE@dennardlascar.com
|
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SOURCE KLX Energy Services Holdings, Inc.