TETRA’s gas compression arm to make $825M acquisition

HOUSTON – A unit of TETRA Technologies said Sunday it will pay $825 million in cash for a West Texas firm that owns one of the largest fleets of natural gas compressors in the nation.

The deal could make TETRA affiliate Compressco Partners, a small player in the growing U.S. market for pumping gas from aging wells, a rival to Houston’s Exterran Partners and other large U.S. compressors, in terms of energy-pumping horsepower.

Buying Midland’s Compressor Systems, owner of the fourth-largest U.S. gas compression fleet, according to industry estimates, would boost Compressco’s horsepower by nearly sixfold, the company said.

“We think the scalability and size is something that’s extremely attractive,”  TETRA Technologies chairman, president and chief executive Stuart Brightman told investors in a call early Monday. “It gives us a broader offering and makes us a full-service compression company as we go forward.”

The deal, Brightman said, would open up and expand several markets for Compressco in U.S. shale plays and abroad, as Compressor Systems sells units in international markets and offers maintenance on its equipment in the United States.

Compressco would be able to pump hydrocarbons out of low-pressure wells, push them through pipelines and capture gas vapor at production sites, Brightman told investors. The deal is expected to close early next month.

Gas compressors are high-horsepower pieces of pumping equipment typically used to boost the pressure that moves natural gas from wellheads to pipelines and on to other pieces of energy infrastructure, like refineries.

Houston’s Exterran Partners owns the largest U.S. fleet of oil and gas compressors with 3.3 million horsepower, after recent acquisitions from Chesapeake Energy, according to a recent company presentation.

Compressor Systems owns more than 275 compression units and collected $311 million in revenue in the 12 months before March. After the deal, Compressco’s fleet would, all told, be capable of more than 1 million horsepower of pressure. One horsepower is enough to lift 16.5 tons by one foot in one minute.

The Midland firm’s units range in pumping power from 20 horsepower to more than 2,300 horsepower. Combined with Compressco’s equipment, three other firms would still have bigger U.S. compression fleets, according to Exterran.

But calling Compressco the fourth-largest firm in the U.S. gas compression business would understate its potential, given the synergies in service offerings, top-shelf management combinations and other fruits the deal will bear, Brightman told investors.

“We’ll have a basket of services no one else can really touch,” he said.

The firm said the acquisition would enable Compressco’s board to consider raising its quarterly cash distributions to investors by 12 percent to 14 percent. Master limited partnerships like Compressco, which is indirectly owned by the Woodlands-based oil field services firm TETRA Technologies, typically send a large amount of their cash to investors.

Compressco also expects to shuffle its top management roles after the deal. Ron Foster, Compressco’s president, will serve as chief marketing officer while Compressor System’s president, Tim Knox, will run the combined entity, the firm said.

Compressco said it would get part of the capital for the deal from raising $400 million on the stock market and $350 million in corporate debt, though it will draw some of the money from its $400 million credit facility.

After the deal, TETRA’s stake in the company may fall to 46 percent, though it will still own all of Compressco’s general partner.

“We like the markets that Compressor Systems plays in,” Brightman said. “We think the combination is going to be very attractive. It’s very important that we blend together.”

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