Solaris Oilfield Infrastructure, Inc. (NYSE: SOI) (“Solaris” or
the “Company”), today announced that it has entered into a
definitive agreement to acquire Mobile Energy Rentals LLC (“MER”),
a premier provider of distributed power solutions serving the
energy and commercial & industrial (“C&I”) end-markets, for
a purchase price of $200 million. Transaction consideration
includes $60 million of cash and the issuance of approximately 16.5
million shares of Solaris Class B common stock to MER’s founders
and management team, who will join Solaris post-closing.
Transaction Highlights and Strategy
- Scale, end-market diversity, and contractual profile:
Entry into critical distributed power infrastructure solutions
provides access to multiple, high-growth end-markets; pro forma
business mix expected to be >50% distributed power
infrastructure, supported by a robust contract profile and a
diverse set of end-markets and customers
- Compelling valuation: Initial purchase multiple of 4.0x
run-rate contracted Adjusted EBITDA*; MER’s third quarter 2024
Adjusted EBITDA is forecasted to be approximately $12 million - $13
million, representing annualized run-rate Adjusted EBITDA of
approximately $50 million; majority of MER’s asset base currently
under contract with a leading provider of artificial intelligence
computing solutions
- Attractive capital redeployment opportunity: MER’s
existing power generation asset base of 153 MW is currently
fully-utilized; the fleet is expected to grow to 478 MW by the end
of the third quarter of 2025** through the purchase of additional
mobile turbines for approximately $308 million and is expected to
be deployed at similar return profiles across a diverse customer
base
- Experienced and aligned management team: MER’s founders
and management team will be fully-integrated into Solaris
post-closing, leveraging their long and successful track-record of
managing power solutions across a range of end-markets; following
the closing of the transaction, MER’s founders and management will
own, in aggregate, approximately 27% of Solaris’ outstanding
shares
- Synergies with our business: Operational synergies are
available to the combined platform via Solaris’ engineering,
manufacturing, field service, commercial and corporate
infrastructure
- Committed to growing shareholder value: Conservative pro
forma financial profile, with <2.0x leverage* at closing on a
run-rate basis with further deleveraging as new power generation
equipment is placed into service; committed to maintaining the
current $0.48/share annualized dividend, which has been paid for 23
consecutive quarters
- Aligned ownership: After the closing of the transaction,
management, insiders and MER’s founders and management team will
collectively own >50% of Solaris’ total outstanding shares,
creating further alignment between Solaris and its
shareholders
Founded in 2022 and based in Houston, Texas, MER provides
configurable sets of primarily natural-gas powered mobile turbines
and ancillary equipment to energy, data center and other C&I
end-markets. MER’s solutions provide reliable and cost-effective
power where grid infrastructure may not be available or is
unreliable.
Solaris’ Chairman and Chief Executive Officer Bill Zartler
commented, “We are excited to welcome the MER team to Solaris and
expand our mobile infrastructure solutions offering. MER’s
solutions complement our all-electric offering and provide access
to new end-market opportunities, including oil and gas production,
midstream and downstream activities as well as various C&I
applications. As we evaluate the ‘electrification of everything’
and computing power growth needs, we believe reliable power access
will become a growing challenge that larger scale, distributed
power generation assets are well-positioned to address. Together
with MER, we will continue to build on the ten plus years of
innovation and leading service quality delivery across our business
lines.”
John A. Johnson, MER’s founder and co-owner, commented, “We look
forward to joining the Solaris team. We are proud of the market
position that we have built at MER and are excited to continue
scaling the business. We recognize significant value in Solaris’
existing offering, including a complementary field service team
that is skilled in mobilizing and commissioning electric equipment,
as well as engineering and manufacturing capabilities that can
provide synergies for our business. Additionally, the ability to
leverage Solaris’ existing corporate and support infrastructure
allows us to focus on growing our operations and satisfying the
needs of our customers. I’m excited to have the support of the
Solaris team as we embark on the distributed power growth
opportunity that we believe is still in its nascent stages.”
Zartler and Johnson jointly commented, “We have strategically
secured significant additional turbine capacity for delivery
through the third quarter of 2025 that we believe will position us
to address the growing power bottlenecks that are unfolding during
a period of pronounced power demand growth and supply chain
tightness.”
Transaction Financing
At closing, Solaris will fund $60 million of cash to MER’s
shareholders and reimburse MER for certain deposits and payments
made for the purchase of additional turbines and ancillary
equipment. Solaris intends to use a combination of debt financing
and free cash flow generated from the current Solaris business to
fund the cash due at closing, as well as the acquisition of
approximately $308 million of turbines on-order to be delivered
through the end of the third quarter of 2025. Solaris has secured
committed financing from Banco Santander, Texas Capital Securities,
and Woodforest National Bank in the form of a $300 million 364-day
senior secured bridge term loan facility. Solaris expects to secure
permanent financing prior to closing, and is currently exploring
numerous financing avenues, including longer duration term debt and
equipment financing.
Transaction Timing and Approvals
Solaris’ Board of Directors has approved the MER acquisition.
The transaction is subject to a shareholder vote, receipt of
regulatory approvals, and other customary closing conditions.
Solaris anticipates the transaction to close by the end of the
third quarter of 2024.
Renaming to Solaris Energy Infrastructure, Inc.
Concurrent with the closing of the transaction, Solaris Oilfield
Infrastructure, Inc. (NYSE: SOI) intends to rename the Company
Solaris Energy Infrastructure, Inc. (NYSE: SEI), which the Company
believes more closely aligns with the opportunity to provide an
expanded solutions offering to address growing power demand from
multiple end-markets, including, but not limited to, the
oilfield.
Q2 2024 Financial Update
As of the date of this news release, Solaris has not finalized
its financial results for the second quarter of 2024. However,
based on preliminary information, Solaris expects second quarter
revenue to be between $70 million and $75 million and Adjusted
EBITDA to be between $20 million and $21 million for the second
quarter of 2024. During the second quarter, Solaris repaid $14
million of debt, ending the quarter with $11 million of net
debt.*
These preliminary estimates are derived from the Company’s
internal records and are based on the most current information
available to management. These estimates are preliminary and
inherently uncertain. The Company’s normal reporting processes with
respect to the foregoing preliminary estimates have not been fully
completed. The Company’s independent auditors have not completed an
audit or review of such preliminary estimates. During the course of
the Company’s and its auditors’ review on these preliminary
estimates, they could identify items that would require adjustments
and which could affect the final results. Any such adjustments
could be material. These preliminary estimates should not be viewed
as indicative of the Company’s financial condition or results as of
or for any future period. Actual results could differ from the
estimates, trends and expectations discussed herein, and such
differences could be material.
Conference Call and Additional Materials
Solaris will host a conference call on Wednesday, July 10, 2024,
at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss the
acquisition. An investor presentation regarding the transaction can
also be found in the Investor Relations section of the Company’s
website at http://www.solarisoilfield.com.
To join the conference call from within the United States,
participants may dial (844) 413-3978, or for participants outside
of the United States (412) 317-6594. Participants are encouraged to
log in to the webcast or dial in to the conference call
approximately ten minutes prior to the start time. To listen via
live webcast, please visit the Investor Relations section of the
Company’s website.
An audio replay of the conference call will be available shortly
after the conclusion of the call and will remain available for
approximately seven days. It can be accessed by dialing (877)
344-7529 within the United States or (412) 317-0088 outside of the
United States. The conference call replay access code is 2285472.
The replay will also be available in the Investor Relations section
of the Company’s website shortly after the conclusion of the call
and will remain available for approximately seven days.
Footnotes:
*
Non-GAAP financial measure. Please see
“About Non-GAAP Measures” below.
**
33 MW of investment plan purchases have
been paid for and received to-date.
About Solaris Oilfield Infrastructure, Inc.
Solaris Oilfield Infrastructure, Inc. (NYSE: SOI) provides
mobile equipment that drives supply chain and execution
efficiencies in the completion of oil and natural gas wells.
Solaris’ patented systems are deployed across oil and natural gas
basins in the United States. Additional information is available on
our website, www.solarisoilfield.com.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Examples of forward-looking statements include, but are
not limited to, Solaris’s proposed transaction with the
equityholders of MER, Solaris’s ability to consummate the
transaction, the benefits of the transaction and Solaris’s future
financial performance following the transaction, as well as
Solaris’s financing plans, strategy, future operations, financial
position, estimated revenues, and losses, projected costs,
prospects, plans and objectives of management, and the other risks
discussed in Part I, Item 1A. “Risk Factors” in our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2024 and Part
I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for
the year ended December 31, 2023, each filed with the U.S.
Securities Exchange Commission (the “SEC”). Solaris’ SEC filings
are available publicly on the SEC’s website at www.sec.gov.
Forward-looking statements are based on our current expectations
and assumptions regarding our transaction with MER, our business,
the economy and other future conditions. Because forward-looking
statements relate to the future, by their nature, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. As a result, our actual results may
differ materially from those contemplated by the forward-looking
statements. Factors that could cause our actual results to differ
materially from the results contemplated by such forward-looking
statements include, but are not limited to the factors discussed or
referenced in our filings made from time to time with the SEC.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
Factors or events that could cause our actual results to differ may
emerge from time to time, and it is not possible for us to predict
all of them. We undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by law.
Additional Information About the Proposed Transaction and
Where to Find It
In connection with the proposed transaction, the Company will
file a proxy statement with the SEC. Additionally, the Company will
file other relevant materials with the SEC in connection with its
proposed transaction with the equityholders of MER. The materials
to be filed by the Company with the SEC may be obtained free of
charge at the SEC’s web site at www.sec.gov. Investors and security
holders of the Company are urged to read the proxy statement and
the other relevant materials when they become available before
making any voting or investment decision with respect to the
proposed transaction because they will contain important
information about the transaction and the parties to the
transaction.
Participants in the Solicitation
The Company, MER and their respective directors, executive
officers, other members of their management and their employees,
under SEC rules, may be deemed to be participants in the
solicitation of proxies of Company stockholders in connection with
the proposed transaction. Investors and security holders may obtain
more detailed information regarding the names, affiliations and
interests of certain of the Company’s executive officers and
directors in the solicitation by reading the Company’s Definitive
Proxy Statement on Schedule 14A for its 2024 Annual Meeting of
Stockholders, which was filed with the SEC on April 4, 2024, and
the proxy statement and other relevant materials filed with the SEC
in connection with the transaction when they become available.
Information concerning the interests of the Company’s and Mobile
Energy Rentals LLC’s participants in the solicitation, which may,
in some cases, be different than those of the Company’s
stockholders generally, will be set forth in the proxy statement
relating to the transaction when it becomes available.
No Offer or Solicitation
This press release is for informational purposes only and does
not constitute an offer to sell or the solicitation of an offer to
buy any securities, or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
About Non-GAAP Measures
In addition to financial results determined in accordance with
generally accepted accounting principles in the United States
(“GAAP”), this news release presents non-GAAP financial measures.
Management believes that Adjusted EBITDA, leverage (net debt to
annualized Adjusted EBITDA) and net debt (total debt less cash and
cash equivalents) provide useful information to investors regarding
the Company’s financial condition and results of operations because
they help facilitate analysis of operating performance. In
particular, we view Adjusted EBITDA as an important indicator of
performance. We define EBITDA as net income, plus (i) depreciation
and amortization expense, (ii) interest expense and (iii) income
tax expense, including franchise taxes. We define Adjusted EBITDA
as EBITDA plus (i) stock-based compensation expense and (ii)
certain non-cash items and extraordinary, unusual or non-recurring
gains, losses or expenses.
Although management believes the aforementioned non-GAAP
financial measures are good tools for internal use and the
investment community in evaluating Solaris’ overall financial
performance, the foregoing non-GAAP financial measures should not
be considered as a substitute for or superior to other measures of
financial performance prepared in accordance with GAAP. However, no
reconciliations of these non-GAAP measure to their most directly
comparable GAAP measures are 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 measures,
that have not yet occurred, are out of our control and/or cannot be
reasonably predicted given we have not completed any reporting
processes for the periods presented.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240709800442/en/
Yvonne Fletcher Senior Vice President, Finance and Investor
Relations (281) 501-3070 IR@solarisoilfield.com
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