UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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by the Registrant ☒
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Preliminary
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Confidential,
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Under Rule 14a-12
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NATIONAL
ENERGY SERVICES REUNITED CORP.
(Name
of Registrant as Specified in Its Charter)
(Name
of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Fee
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of its filing.
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(1)
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Amount
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Form,
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Filing
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Date
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On
November 21, 2017, National Energy Services Reunited Corp. (the “Company”) held a previously announced
conference call with respect to their proposed acquisitions of Gulf Energy SAOC (“Gulf Energy”) and National Petroleum
Services (“NPS”). Below is a transcript of such conference call, which is being filed herewith pursuant to Rule
14a-12.
National
Energy Services Reunited Corp. Acquisitions Conference Call
November 21, 2017
Corporate
Participants:
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Steve
Calk,
Alpha IR Group
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Sherif
Foda,
Chairman and Chief Executive Officer
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PRESENTATION
Operator:
Good
day everyone, and welcome to today’s call. Today’s call is being recorded. I will now pass the call to Steve
Calk with NESR.
Steve
Calk:
Good
morning everyone and thank you for joining our call. With me today is Sherif Foda, Chairman and Chief Executive Officer
of NESR. In today’s conference call, we’ll be discussing estimated EBITDA and other such non-GAAP financial measures.
Please note the cautionary statements about these terms in our November 12 press release about the NESR acquisitions, as well
as in the slides we filed on November 16 and November 20, both of which are available via our website and the SEC. In addition,
we’ll be making numerous forward-looking statements; note that our actual results could differ materially from those forward-looking
statements for a variety of reasons, many of which are beyond our control. We undertake no obligation to correct or update these
forward-looking statements, whether as a result of new information, future events or otherwise, and refer everyone to our more
robust forward-looking statements disclaimer in our SEC filings.
In
today’s call we will provide an overview of the transaction, followed by a 15 minute Q&A session. We ask that participants
limit themselves to one question so that we can address as many participants as possible.
It’s
now my pleasure to hand the call to Sherif Foda. Sherif?
Sherif
Foda:
Thank
you, Steve.
Let
me begin by saying that we are very excited about this transaction. It creates a regional oilfield service leader in the
Middle East and North Africa. It provides a platform to accelerate growth and bring new technology into the region. It combines
experienced Management team with deep sector expertise and a successful track record. It brings together a diverse and strategic
group of large institutional investors. It forms the first and only NASDAQ-listed national oilfield service company in
MENA region.
As
we discussed during our IPO, we have spent considerable time looking at the wide variety of opportunities around the world. In
the energy service space, we saw the best opportunity in the Middle East, where the market remains fragmented, demand is strong,
and the customer are seeking alternatives.
The
proposed acquisition of NPS and Gulf Energy will provide us with an opportunity to create a sizable player in the market. With
the combined expertise of the three Companies, we believe we can pull the trigger.
As
stand-alone companies, NPS and Gulf Energy outperformed most of their peers through the recent downturn, and have prepared themselves
for solid growth over the next few years.
Our
approach will be to aggressively accelerate and build on the track record and market positioning.
Noting
that the transaction is subject to shareholder and regulatory approval, and that more detail is available in our presentation,
let me review a few key terms.
Hundred
per cent of Gulf Energy shareholder will be converting at $10 per share, including SCF Partners, Gulf Energy founders, and other
smaller investors.
For
the NPS transaction, we have agreed to pay majority consideration in cash and the remaining in equity. The cash portion will be
funded by $229 million from the SPAC, $150 million from a major investor at an agreed premium of $11.24 a share. The remaining
$63 million will be funded by another pipe investor who again agreed to invest at the same premium of $11.24 a share. This
is very unique to our structure.
I
would like to also highlight that we have sourced $100 million as a backstop to any redemption, and we have $60 million from the
IPO which is not redeemable. Effectively, as of now, we have a backstop of about 70% of the initial $229 million of the IPO. We
don’t believe that we will have any issue closing the transaction once we get the appropriate approvals.
To
summarize, in this whole transaction, we have approximately nine large institutions involved. Most of these are rolling over all
or a portion of their holdings to NESR. Several smaller investors are joining them in rolling their stakes in Gulf Energy or NPS
into NESR stock. Some of these investors have also executed lock-up provisions as a sign of their commitment of the combined Company.
As
you see, we have quite a diverse and committed group of investors.
On
timing, we expect to file the proxy some time in early December, and will seek to close as soon as we have the necessary approvals.
Coming
to the acquisitions, let me give you some more additional background.
Gulf
Energy is one of the major service provider in Oman, with significant market share in its main business lines. Two-third of their
portfolio focus on drilling technologies, and one-third in production services. The structure of contracts in Oman generally are
longer-term, and they are commonly five to seven years. Gulf Energy has a very high percentage of its revenue base secured for
the next few years.
NPS
is significantly diversified in terms of geography, and nicely complements Gulf Energy positioning. The majority of their business
is in production and completions. NPS is very strong in Saudi, Iraq, Algeria, and other countries in the region and is recognized
as one of the premier service provider who can compete with the majors in these countries. They have continually gained market
share over the last few years, and they have a very strong portfolio of contracts.
As
a combined Company, they complement each other in the portfolio of services they provide and the geographies they serve.
We
will be strategically placed to expand a full complement of service offering across the region, and will have significant cost
and revenue synergies even without any incremental acquisitions.
Together,
we will be the largest regionally-focused OFS player. We believe we are at the start of a journey where we will be able to grow
this Company significantly.
Now
turning to valuation. We believe our deal is highly discounted to where the market is trading, and what all of the estimates are
for 2018. On a trading multiple basis, our peers trade at 10 times 2018 EBITDA, compared to 5.4 times for our transaction. Conservatively
speaking, our transaction multiple is at least 40% discounted from where the peers trade.
As
you see on the slides, in terms of past growth performance, EBITDA margins, leverage, NESR would have clear differentiation, and
on key metrics outperforms the entire peer group. While pretty much all of our public peers have contracted in the last three
years, both NPS and Gulf Energy have actually grown during the recent downturn.
Now,
if I look back at what we promised in our IPO, I believe we have satisfied every promise we made to our investors.
Our
proposed transaction is in the high-growth MENA region. We plan to have strong market share by leveraging our deep region expertise,
solid client contacts, and by the injection of technology into the region, we are looking at innovative solutions to benefit our
clients.
On
a macro level, the cost of production in the Middle East is the lowest in the world, and service cost is a fraction of the production
cost: low single digit dollars in terms of service cost per barrel. If you contrast this to North America where completion service
cost are about two-thirds of the cost per barrel, you can appreciate the advantage we have.
Furthermore,
there are lot of technology companies in the U.S. who have been unable to introduce their newest technologies in the region. With
our position, knowledge, experience, and presence in the U.S., we will provide a platform for these companies to introduce their
path-breaking technologies to the Middle East market.
Post
transaction, NESR will be servicing virtually all of the clients in the region. This includes all the major national and international
oil companies. This is important in that it will allow us to cross-sell different segment in countries where we have a footprint
from either NPS or Gulf Energy.
One
of the reason these two Companies have grown and successfully expanded their core markets is because of their entrepreneurial
spirit. We want to keep that DNA of both Companies intact. That is why we have ensured that we have continuity in the leadership
at both Companies.
Our
vision is to be the national flagship carrier of service to our clients. We want to manufacture in the region, employ the future
generation, inject technology, and help our esteemed customers achieve their goal of more than 50% in country value. Today, this
number is anywhere from 10% to 20%, depending on the geography and the technology.
Out
of the gate, we will be the leading regional oil field services player. Even without additional acquisition, we believe
we will outperform most in the market. We have a vision of creating some thing extraordinary which will not only provide
superior returns to our investors but also will have a lasting impact on the region with in-country value and employment opportunities.
We
also have a strong ethic to help our clients achieve their goals.
We
have very aggressive growth plans, both organically and inorganically, and we’ll be supplementing our existing portfolio
of services with additional technology offerings.
We
believe that we have capitalized on the right opportunity, at the right time, in the right place, and we are at the beginning
of an exciting journey.
With
this, I would like to open the call for any question.
Operator:
Thank
you. If you’d like to ask a question, please signal by pressing star, one on your telephone key pad. If you’re
using a speakerphone, please make sure your mute function is turned off, to allow your signal to reach our equipment. Please limit
your self to one question. Again, that’s star, one to ask a question, and we’ll pause for just a moment to allow
every one an opportunity to signal for questions.
We’ll
take our first question from Greg Colman with National Bank Financial.
Greg
Colman:
Thanks
very much, and thanks for taking my question.
When
I look at the growth ambitions that you’ve outlined in your presentation from 2017 to 2022, the bulk of the list is what
you’re referring to as drilling technology. Can you give us additional color as to what you mean by drilling technology, and why
you have so much confidence in it being the sizable lift in your five-year growth plan?
Sherif
Foda:
Thanks,
Greg. What we have, we have as I said in our remarks, we have a complementary offering between the two Companies, and into the
different geographies. What we are planning to do is to have a lot of the strength of the drilling technology portfolio of Gulf
Energy implemented in some of the geography of NPS. In addition, we have a very unique technology that we are going to address
later on, after the de-SPAC process, and introduce this to the region and be able to have a significant growth over the next three
years.
Operator:
That
will conclude today’s question-and-answer session. I’d like to turn the call back over to Sherif for any additional
or closing remarks.
Sherif
Foda:
Thank
you very much. On behalf of the entire NESR/Gulf Energy/NPS team, thank you again for joining us. We are all very excited about
this transaction and look forward to announcing the closing in the coming weeks. Thank you.
Operator:
That
does conclude today’s conference. Thank you for your participation, you may now disconnect.
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