Keane Group buys Trican’s U.S. business for $250 million

Keane Group is buying the U.S. unit of a Canadian oil field services firm, the Houston company said Tuesday, seeking to grow even as the oil crash hammers the drilling industry.

Keane’s CEO and chairman, James Stewart, said the small oil field company will more than double in size through the deal to acquire the pressure pumping business of Calgary-based Trican Well Services. Keane will also look for additional future acquisitions, Stewart said.

The two companies revealed that they were in advanced negotiations in mid-January. Keane will pay $200 million in cash and give Trican a 10 percent stake in the shares of privately held Keane Group Holdings in the deal valued at$247 million. The companies expect to close by mid-March.

Stewart said Keane has a strong balance sheet and is well positioned to survive in a world of “lower for longer” oil prices for at least two more years before the industry rebounds. The Trican deal will double Keane’s employee count from 550 to 1,100, including 100 workers in Houston. Stewart said Keane will more than triple its hydraulic fracturing, or fracking, capacity from 300,000 horsepower to more than 950,000 horsepower available for dispatch. Keane will grow from seven to 25 hydraulic fracturing teams.

“We’ve been a small, well-capitalized completion services company,” Stewart said. “And now is a good time to consolidate. We’re in a unique position … to potentially roll up more companies.”

Although much of the focus is on Houston-based Halliburton buying Baker Hughes and Schlumberger acquiring Cameron International, Stewart said it is inevitable the sector will see lots of consolidation apart from just the biggest companies with oil priced from $30-$40 a barrel.

New York-based Cerberus Capital Management bought Pennsylvania-based Keane in 2011 and moved the headquarters to Houston. As such, Keane’ strongest position is in the Marcellus shale in the Pennsylvania area. But Keane also has grown in Texas’ Permian Basin and North Dakota’s Bakken shale.

The Trican deal will open up opportunities for Keane in the Eagle Ford Shale in South Texas and parts of Oklahoma and Kansas, while further strengthening Keane in the Permian Basin in West Texas and the Bakken Shale in North Dakota.

“As the market rebounds, we’ll be well positioned,” Stewart said, especially noting all the “untapped potential” still remaining in the Permian.

Stewart declined comment when asked whether there are plans to take Keane public.

In a previous note, Houston-based Tudor, Pickering, Holt & Co. said the deal could be a “win-win” with Trican retrenching back to its core Canadian pressure pumping market, and Keane catapulting into the “land of U.S. pressure pumping big boys.”

As for Trican, CEO Dale Dusterhoft said in a prepared statement that the proceeds will largely go toward debt reduction.

“The retained equity interest and additional economic interests in Keane provide Trican with upside leverage to a recovery in the U.S. pressure pumping sector and alignment with Keane’s high quality, proven management team and platform,” Dusterhoft added.

Trican bought Denton-based Liberty Pressure Pumping for $256 million in 2007 and then moved the business to Houston. Just like all other services companies, Trican was hit by the oil slump and eliminated nearly 140 Odessa-based jobs last year.

 

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