Transaction Highlights
• Acquisition of downhole technology provider with broad portfolio of patented completion tools
• Market-leading dissolvable frac plug technology with proven track-record of success and market penetration
• Positions Nine as a premier provider of differentiated technology and conveyance with ability to service the entire addressable North American completion tool market
• Transaction improves profitability metrics, long-term returns on capital and free cash yield while reducing capital and labor intensity
HOUSTON--(BUSINESS WIRE)--
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
announced today that it has entered into a definitive agreement to
acquire Magnum Oil Tools International, LTD. (“Magnum”), a
market-leading downhole technology provider serving the global oil and
gas industry for over a decade. Magnum has a broad offering of
proprietary downhole completions products, including dissolvable and
composite frac plugs, as well as a number of other patented consumables.
The Magnum partnership solidifies Nine as one of the premier providers
of completion focused technology combined with excellence in both
service execution and conveyance capability. Magnum provides Nine with a
strong, first-mover advantage in the dissolvable frac plug market due to
its extensive track record of successful market penetration and
positions Nine as a leading provider of differentiated isolation tools
with the ability to service the entire addressable frac plug market.
Magnum brings a proven ability to design, engineer and commercialize
applicable and reliable downhole technologies, as well as stay ahead of
industry trends. Nine expects the addition of Magnum’s portfolio of
completion tools to be well suited to help operators reduce risk and
cycle times as completions continue to become more complex with longer
laterals, more stages and mega-well pads.
“We could not be more thrilled to partner with Magnum. At Nine, we
constantly focus on adding differentiated technology to our portfolio of
completion tools to enable operators to more reliably and effectively
complete the horizontal wellbores of tomorrow. The evolution of
technology in the oil field demands a team with a demonstrated track
record and ability to transform their offerings and think-forward. This
particular team is exceptional. Magnum will propel Nine to a more
balanced profile of completion tools, creating excellent barriers to
entry while simultaneously building a business that is less labor and
less capital intensive and more free cash flow generative,” said Ann G.
Fox, Nine’s President and Chief Executive Officer. “This will allow us
to navigate a very difficult labor market and supports our approach of
blending capital intensity, helping us provide more sustainable
through-cycle returns for our shareholders. We believe the combination
of capabilities within Nine and Magnum creates a unique and
differentiated oil field service platform and we will be able to
leverage strengths from both sides to provide better service for our
customers and accelerate profitable growth moving forward,” said Fox.
“At Nine, our culture is always top-of-mind to ensure we pick the right
and best teams to partner with. Lynn and his team’s entrepreneurial
mindset, innovation and approach to running a business should fit
seamlessly with the rest of the Nine team,” concluded Fox.
“We are honored to join the team at Nine and see this as a great next
step for Magnum’s business evolution,” said Lynn Frazier, Chief
Executive Officer and founder of Magnum. “The combination of Nine and
Magnum made sense as we looked for the right partner with alignment in
our culture and priorities. Together, we will be able to offer superior
technology and service to our customers and provide an excellent
environment for our employees to develop and help grow the company.”
Total upfront transaction consideration of $493 million consists of a
combination of approximately $334 million of cash, as well as 5 million
shares of Nine common stock (valued at $159 million, based on a 30-day
value weighted average price as of 10/12/18). The terms of the purchase
agreement also include the potential for additional future contingent
payments. Magnum does not have any debt. The Company intends to fund the
cash purchase price with the net proceeds of a notes offering announced
concurrently with the announcement of this acquisition, borrowings under
a new credit facility and cash on hand.
The transaction is subject to antitrust approval and other customary
closing conditions. The purchase agreement contains customary
representations and warranties, covenants, indemnification and
termination provisions.
J.P. Morgan Securities LLC acted as exclusive financial advisor to Nine
and Kirkland & Ellis LLP acted as legal counsel in the transaction. FMI
acted as exclusive financial advisor to Magnum and Porter Hedges LLP
acted as legal counsel in the transaction.
Conference Call Information
Nine will host a conference call to discuss the acquisition on Monday,
October 15, 2018 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). The
presentation slides can be accessed from the Company's website at www.investor.nineenergyservice.com.
Participants may join the live conference call by dialing U.S. (Toll
Free): (877) 524-8416 or International: (412) 902-1028 and asking for
the “Nine Energy Service Call”. Participants are encouraged to dial into
the conference call ten to fifteen minutes before the scheduled start
time to avoid any delays entering the conference call. For those who
cannot listen to the live call, a telephonic replay of the call will be
available through October 29, 2018 and may be accessed by dialing U.S.
(Toll Free): (877) 660-6853 or International: (201) 612-7415 and
entering the passcode of 13684099.
About Nine Energy Service
Nine Energy Service is an oilfield services company that offers
completion and production solutions throughout North America. The
Company brings years of experience with a deep commitment to serving
clients with smarter, customized solutions and world-class resources
that drive efficiencies. Strategically located throughout the U.S. and
Canada, Nine continues to differentiate itself through superior service
quality, wellsite execution and cutting-edge technology. Nine is
headquartered in Houston, Texas with operating facilities in the
Permian, Eagle Ford, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus,
Utica and throughout Canada.
For more information on the Company, please visit Nine’s website at nineenergyservice.com.
About Magnum Oil Tools
Magnum Oil Tools is a market-leading downhole technology provider
serving the global oil and gas industry for over a decade. Magnum has a
broad offering of proprietary downhole completions products including
dissolvable and composite frac plugs and a number of other patented
consumables. Magnum is headquartered in Corpus Christi, TX with
operating facilities in the Permian, SCOOP/STACK, Bakken, Niobrara,
Haynesville, Marcellus, Utica and Canada.
For more information on the company, please visit Magnum’s website at
magnumoiltools.com.
Forward Looking Statements
The foregoing contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are those
that do not state historical facts and are, therefore, inherently
subject to risks and uncertainties. Forward-looking statements also
include statements that refer to or are based on projections, uncertain
events or assumptions. The forward-looking statements included herein,
including those related to the Company’s acquisition of Magnum and
potential securities offering, are based on current expectations and
entail various risks and uncertainties that could cause actual results
to differ materially from those forward-looking statements. Such risks
and uncertainties include, among other things, the general energy
service industry risks; volatility of crude oil and natural gas
commodity prices; a decline in demand for the Company’s services,
including due to declining commodity prices; the Company’s ability to
implement price increases or maintain pricing of the Company’s core
services; the loss of, or interruption or delay in operations by, one or
more significant customers; the loss of or interruption in operations of
one or more key suppliers; the adequacy of the Company’s capital
resources and liquidity; the Company’s ability to implement new
technologies and services; the incurrence of significant costs and
liabilities resulting from litigation; the loss of, or inability to
attract, key personnel; and other factors described in the “Risk
Factors” and “Business” sections of the Company’s Annual Report on Form
10-K for the year ended December 31, 2017 and the subsequently filed
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers
are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date hereof, and, except as required by law,
the Company undertakes no obligation to update those statements or to
publicly announce the results of any revisions to any of those
statements to reflect future events or developments.

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Nine Energy Service, Inc.
Heather Schmidt, 281-730-5113
Director,
Investor Relations and Marketing
[email protected]
Source: Nine Energy Service, Inc.