Kodiak Gas Services Inc. (Kodiak) and CSI Compressco LP (CSI Compressco) have executed a definitive merger agreement under which Kodiak will acquire CSI Compressco in an all-equity transaction valued at approximately US$854 million, including the assumption of US$619 million of net debt, based on the closing price of Kodiak’s stock on December 18, 2023.
The addition of CSI Compressco’s fleet will give Kodiak the largest contract compression fleet in the industry with 4.3 million revenue-generating horsepower, while also extending Kodiak’s service offerings deeper into the natural gas value chain through CSI Compressco’s treating, gas cooling, and aftermarket services businesses.
Under the terms of the merger agreement, CSI Compressco unitholders will receive 0.086 shares of Kodiak common stock for each CSI Compressco common unit owned. The combined company will have an “Up-C” structure at closing, and CSI Compressco unitholders meeting certain requirements will have the ability to elect to receive 0.086 limited liability company units representing economic interests in Kodiak’s operating subsidiary (along with an equal number of shares of non-economic voting preferred stock of Kodiak) for each CSI Compressco common unit they hold. Each such unit will be redeemable at the option of the holder for one share of Kodiak common stock (along with cancellation of a corresponding share of preferred stock), following a six-month post-closing lock-up and subject to certain conditions. Upon closing, CSI Compressco unitholders will own approximately 14% of the combined company on a fully diluted basis.
The transaction is expected to close in the second quarter of 2024, subject to certain regulatory approvals and other closing conditions.
“I am excited to announce the acquisition of CSI Compressco, a highly accretive and leverage-neutral transaction that we believe will unlock significant value for both Kodiak shareholders and CSI Compressco unitholders,” said Kodiak’s CEO Mickey McKee noted. “The increased scale provided by the industry’s largest contract compression fleet will allow Kodiak to continue to provide the highest level of service in the industry to our customers, many of which are themselves undergoing consolidation. dividend, all while living within free cash flow.”
McKee continued, “John Jackson and his team have done a remarkable job of transforming CSI Compressco in the nearly three years since CSI Compressco’s general partner was acquired by Spartan Energy Partners LP. The CSI Compressco management team has demonstrated a tremendous track record of improving fleet utilization, increasing EBITDA, and reducing leverage by focusing on large horsepower, infrastructure applications in premier basins in the US, consistent with Kodiak’s core operating philosophy. We look forward to continuing these efforts as we combine these companies and welcome the talented employees of CSI Compressco into the Kodiak family.”
Headquartered in Montgomery, Texas, Kodiak is one of the largest contract compression services providers in the continental United States with a fleet of over 3.2 million horsepower. Kodiak focuses on providing contract compression services to oil and gas producers and midstream customers in high–volume gas gathering systems, processing facilities, multi–well gas lift applications and natural gas transmission systems.
Headquartered in The Woodlands, Texas, CSI Compressco provides compression services and equipment for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage. In addition, CSI Compressco offers a variety of natural gas treating services. CSI Compressco’s contract services business includes a fleet of approximately 4800 compressor packages providing approximately 1.2 million in aggregate horsepower, utilizing a full spectrum of low-, medium- and high-horsepower engines. CSI Compressco’s aftermarket business provides compressor package reconfiguration and maintenance services. CSI Compressco’s customers comprise a broad base of natural gas and oil exploration and production, midstream, transmission, and storage companies operating throughout many of the onshore producing regions of the United States, as well as Mexico, Canada, Argentina, and Chile.
