September 04, 2012 at 15:26 PM EDT
Fracking Water Treatment Company Expands
Heckmann has operations in the Marcellus, Eagle Ford, and Utica shales, but with this acquisition it will now have access to the Bakken...
Today, wastewater treatment company Heckmann Corp. (NYSE: HEK) got a big boost.
Back in August, company shares plummeted 22% when CEO Richard Heckmann refused to provide earnings forecasts to Wall Street.
But on Tuesday afternoon, shares were up 42.19% to $3.83 after the company announced it was acquiring Power Fuels Inc., a North Dakota-based wastewater treatment company with involvement in the Bakken.
Pennsylvania-based Heckmann is already involved in fracking in the big shale plays including the Marcellus shale, Utica shale, and the Eagle Ford shale. It doesn't have access to the Bakken, however, one of the biggest shale plays in North America, and Power Fuels will give it that access.
The company provides water to drilling companies, which require millions of gallons of water per well. It also treats the wastewater that remains after fracking.
The acquisition will bring the company's total heavy-duty trucks to 1,300, its frac tanks to 3,800, its rail cars to 200, its fluid handling, solid-waste tanks and other equipment to 2,000, and its disposal wells to 45.
Heckman is offering $125 million in cash and 95 million shares of common stock valued at $2.96. It will also assume $150 million in Power Fuels' debt, bringing the deal to $381 million in cash and stock.
The company will ultimately have 3,000 employees and 20,000 customers, including Hess Corp. (NYSE: HES), Statoil ASA (NYSE: STO), Whiting Petroleum Corp. (NYSE: WLL), and Denbury Resources Inc. (NYSE: DNR).
Richard Heckmann, who had received his fair share of criticism from frustrated analysts, believes he will be vindicated with this announcement.
From the Wall Street Journal:
“I do think there will be some people with egg on their face because they've been screaming at me about what an idiot I am,” Mr. Heckmann said in an interview.
Heckmann originally wanted to announce the merger before the earnings release, but it took longer than estimated to work out the deal. He did not want to mislead investors with an earnings release that didn't include the deal.
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Heckmann Corp., which had been heavily focused on natural gas, is beginning to switch its focus to oil- and liquids-rich basins instead, attempting to make up for the low natural gas prices. Though natural gas will still account for around 60% of the company's business, this move will certainly help.
“This transaction makes Heckmann the largest pure-play company handling frac fluids with 2013 revenues likely nearing $1 billion,” [Credit Suisse analyst Hamzah] Mazari wrote in a note to clients.
“Significant operational control” given to Power Fuels partly led to “a cheap acquisition prices,” he said.
“The company is paying 3.4 times earnings before interest, taxes, depreciation, and amortization (EBITDA) for Power Fuels, which is an attractive price,” Mazari said.
Earlier this year, Heckmann also acquired Thermo Fluids Inc., a company that collects and recycles oil.
That's all for now,
Energy & Capital's modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends. For more on Brianna, see her editor's page.
Fracking Water Treatment Company Expands originally appeared in Energy and Capital. Energy and Capital, a free daily newsletter, offers practical investment analysis in the new energy economy.
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