Exterran Holdings, Inc. Will Be a Pure-Play U.S. Compression Services
Business
Investor Conference Call Scheduled For November 17, 2014, at 10:00
a.m. ET
HOUSTON--(BUSINESS WIRE)--Nov. 17, 2014--
The board of directors of Exterran Holdings, Inc. (NYSE:EXH) announced
today that it has unanimously authorized management to pursue a plan to
separate the company's international contract operations, international
aftermarket services and global fabrication businesses into a
standalone, publicly traded company (SpinCo), resulting in two
independent companies.
Upon completion of the transaction, Exterran Holdings (RemainCo) will be
a pure-play U.S. compression services business. RemainCo will hold
interests in Exterran Partners, L.P. (NASDAQ:EXLP), which include the
sole general partner interest and certain limited partner interests that
together currently represent a 37 percent ownership interest in Exterran
Partners, as well as all of the incentive distribution rights in
Exterran Partners. In addition, RemainCo will own and operate the
remaining U.S. contract operations and U.S. aftermarket services
businesses currently owned by Exterran Holdings. The operations of
Exterran Partners will not be affected by the transaction.
SpinCo’s businesses will consist of Exterran Holdings’ current
international contract operations and aftermarket services businesses,
with operations in Latin America and parts of the Eastern Hemisphere,
and its global fabrication business.
"This transaction is an extension of our efforts to enhance the
performance and unlock the value of all the businesses in the Exterran
Holdings portfolio and is consistent with the board of directors'
commitment to create long-term, sustainable shareholder value," said
Brad Childers, Exterran Holdings’ President and Chief Executive Officer.
"We believe creating two separate entities, each focused on its unique
performance improvement and growth initiatives, will further enhance the
competitive position of each business in the U.S. and global oil and gas
production infrastructure markets. This transaction will help ensure
that each business has the management focus, financial strength and
flexibility to pursue its own independent strategic priorities," he
added.
"RemainCo will be a pure-play U.S. compression services business with
strong, stable cash flows from the distributions received from its
general partner interests, including the associated incentive
distribution rights, and limited partner interests in Exterran Partners
and from the remaining businesses it will own. With limited capital
requirements and limited debt at the parent level, RemainCo is expected
to be well-positioned to return a significant portion of its stable cash
flow to investors in the form of a recurring dividend. RemainCo
anticipates continuing to pursue value-creating growth opportunities at
Exterran Partners, including organic growth, third party acquisitions
and sales of additional contract operations assets from RemainCo to
Exterran Partners, in order to continue to grow cash flow and dividends
over time,” Childers said.
“SpinCo will also be well-positioned for long-term success, as a company
that will benefit from the global energy infrastructure build-out
through its international services and global fabrication businesses. We
believe SpinCo’s strong cash flow profile coupled with an attractive
balance sheet will enable it to pay a recurring dividend to its
shareholders. SpinCo expects to continue focusing on growing its
international contract operations business and pursuing growth in the
fabrication and sale of our products in both the U.S. and international
markets," Childers concluded.
Benefits of the Transaction
Exterran Holdings believes that there are significant benefits to the
simplified, separate companies resulting from this transaction,
including:
RemainCo:
-
Tailored Growth Strategies – exclusive focus on growing the U.S.
services businesses, including organic growth, third party
acquisitions and sales by RemainCo of additional U.S. contract
operations assets over time to Exterran Partners;
-
Stable Cash Flows – fee-based natural gas contract compression
business generates stable cash flows;
-
Efficient Return of Capital to Shareholders – expect to return a high
percentage of cash flow in the form of a dividend given the limited
capital requirements and limited debt at the parent level;
-
Shareholder Alignment – appeals to investors looking for a pure-play
yield investment with significant exposure to the U.S. energy
infrastructure redevelopment; and
-
Valuation – expected to be valued on a dividend yield basis,
consistent with other publicly traded general partners, unlocking
value for shareholders.
SpinCo:
-
Tailored Growth Strategies – greater focus on profitable growth in
strategic markets; poised to benefit from the continued build-out of
global energy infrastructure and the redevelopment currently underway
in North America;
-
Cash Flow Generation – stable cash flows from its international
services businesses and limited capital expenditures in its
fabrication business are expected to allow for cash flow generation to
support a continued return of capital to shareholders in the form of a
dividend;
-
Financial Flexibility – cash flow generation and low leverage allow
for investment in value-creating international contract operations
projects;
-
Expanded Product Customer Base – the separation will enable SpinCo to
expand its potential fabricated compressor sales customer base to
include companies in the U.S. contract compression business that have
historically been Exterran Holdings’ competitors;
-
Attractive Returns – investments in international contract operations
projects typically are sold with attractive rates of return and
favorable contract durations; and
-
Shareholder Alignment – appeals to investors interested in investing
in the accelerating growth in the international and U.S. energy
infrastructure build-out.
Financing and Capital Structure
SpinCo is expected to be distributed with an amount of long-term debt
equivalent to the amount of long-term debt held at the Exterran Holdings
parent level immediately prior to the transaction, and SpinCo will
provide these borrowed funds to Exterran Holdings or its subsidiaries on
or before closing. Exterran Holdings is expected to pay off its
long-term debt at closing with those funds and, as a result, RemainCo is
expected to have no leverage at the parent level immediately following
the transaction. The structure of the transaction is not expected to
impact Exterran Partners’ long-term debt, all of which is anticipated to
remain in place immediately following the transaction. As of September
30, 2014, Exterran Holdings had $737.7 million of long-term debt
outstanding at the parent level, and Exterran Partners had $1,220
million of long-term debt outstanding. SpinCo will also retain the
rights to the receivables relating to the prior sales of Exterran
Holdings’ assets in Venezuela. These receivables currently total
approximately $159 million, due in quarterly installments over the next
two years.
The transaction is expected to result in the technical termination of
Exterran Partners on the date of the transaction for U.S. federal income
tax purposes. The technical termination will not affect Exterran
Partners’ classification as a partnership or otherwise affect the nature
or extent of its “qualifying income” for U.S. federal income tax
purposes. Exterran Partners’ taxable year for all unitholders during the
year the transaction is consummated is expected to end on the date of
the transaction and may result in a deferral of depreciation deductions
that would otherwise be allowable in computing the taxable income of
Exterran Partners’ unitholders. It is expected that any deferral of
depreciation deductions could result in increased taxable income to
certain unitholders in the year the transaction is consummated.
Dividend Policy
Exterran Holdings’ current dividend is $0.15 per share of common stock
on a quarterly basis, a rate of $0.60 per share on an annualized basis.
The dividend policies for RemainCo and SpinCo will be evaluated and
announced for each company prior to completion of the transaction.
Executive Management Teams and Boards of Directors
Upon completion of the transaction, RemainCo and SpinCo will each have
its own independent executive management team and board of directors.
The board of directors of Exterran Partners’ managing general partner,
including its conflicts committee, is anticipated to remain in place,
with potentially some change in management representation on the board
of directors post-transaction. Exterran Holdings is in the process of
identifying the individuals who will be appointed to serve as executive
officers and directors of each company and will provide information
regarding these individuals in the future.
Employees
Exterran Holdings does not expect the transaction will result in
significant job reductions among its current workforce of approximately
10,000 employees. The company does not anticipate any significant
changes to the benefits it offers employees.
Transaction Details and Next Steps
Under the planned spin-off transaction, Exterran Holdings shareholders
will retain their current shares of Exterran Holdings stock and receive
a pro-rata dividend of shares of stock in SpinCo. The actual number of
SpinCo shares that will be distributed to Exterran Holdings shareholders
will be determined prior to closing the transaction. Exterran Holdings
expects to incur one-time charges related to the transaction, which will
be quantified as the transaction progresses. The completion of the
spin-off will be subject to market conditions, the receipt of an opinion
of counsel as to the tax-free nature of the transaction, completion of a
review by the U.S. Securities and Exchange Commission of a Form 10 to be
filed by SpinCo, the execution of separation and intercompany agreements
and final approval of the Exterran Holdings board of directors. The
spin-off will not be subject to a shareholder vote. Exterran Holdings
expects that the spin-off of SpinCo, if consummated, will take place
during the second half of 2015. While Exterran Holdings is committed to
the spin-off, there can be no assurance that any transaction will
ultimately be consummated and there can be no assurance of the terms or
timing of such transaction if it is consummated. Exterran Holdings may,
at any time and for any reason until the proposed transaction is
complete, abandon the separation or modify or change the terms of the
spin-off.
Advisors
Goldman, Sachs & Co. is acting as sole financial advisor and Latham &
Watkins LLP is serving as legal advisor to Exterran on the transaction.
Conference Call and Investor Presentation
Exterran Holdings will conduct a conference call regarding the
transaction on Monday, Nov. 17, 2014, at 10:00 a.m. Eastern Time. To
listen to the call via a live webcast, please visit Exterran’s website
at www.exterran.com
(http://www.media-server.com/m/p/j3bkojcy).
The call will also be available by dialing 800-446-2782 in the United
States and Canada, or +1-847-413-3235 for international calls. Please
call approximately 15 minutes prior to the scheduled start time and
reference Exterran conference call number 38493088.
The slideshow that accompanies this presentation will be available on
Exterran’s website concurrently with the conference call. The conference
call will be available for replay within two hours following the
conclusion of the call until Dec. 17, 2014. The webcast replay can be
accessed on Exterran’s website and the telephonic replay can be accessed
by dialing 888-843-7419 in the United States and Canada, or
+1-630-652-3042 for international calls and entering the access code
38493088#.
About Exterran Holdings
Exterran Holdings, Inc. is a global market leader in full service
natural gas compression and a premier provider of operations,
maintenance, service and equipment for oil and gas production,
processing and transportation applications. Exterran Holdings serves
customers across the energy spectrum—from producers to transporters to
processors to storage owners. Headquartered in Houston, Texas, Exterran
has approximately 10,000 employees and operates in approximately 30
countries. Exterran Holdings owns an equity interest, including all of
the general partner interest, in Exterran Partners, L.P., a master
limited partnership, the leading provider of natural gas contract
compression services to customers throughout the United States. For more
information, visit www.exterran.com.
Forward-Looking Statements
All statements in this release (and oral statements made regarding the
subjects of this release) other than historical facts are
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements rely on a number of assumptions concerning future events and
are subject to a number of uncertainties and factors, many of which are
outside Exterran Holdings’ control, which could cause actual results to
differ materially from such statements. Forward-looking information
includes, but is not limited to: Exterran Holdings’ plan to conduct a
separation of certain of its businesses. the possibility that the
proposed transaction will be consummated and the timing of its
consummation, the expected benefits from the proposed transaction, the
expected financial position and indebtedness levels of SpinCo and
RemainCo following the proposed transaction, the expected dividend
policies and dividend levels of SpinCo and RemainCo following the
proposed transaction, the impact of the proposed transaction on
employees and customers, the composition of the respective management
teams and boards of directors of SpinCo and RemainCo following the
consummation of the proposed transaction, the financial and operational
strategies of SpinCo and RemainCo following the proposed transaction and
their respective ability to successfully effect those strategies,
Exterran Holdings’ expectations regarding future economic and market
conditions, SpinCo’s and RemainCo’s financial and operational outlook
and ability to fulfill that outlook and demand for SpinCo’s and
RemainCo’s products and services and growth opportunities for those
products and services.
While Exterran Holdings believes that the assumptions concerning future
events are reasonable, it cautions that there are inherent difficulties
in predicting certain important factors that could impact the future
performance or results of its business. Among the factors that could
cause results to differ materially from those indicated by such
forward-looking statements are actions by governmental and regulatory
authorities; delays, costs and difficulties associated with the proposed
transaction; local, regional, national and international economic and
financial market conditions and the impact they may have on Exterran
Holdings, SpinCo, RemainCo and their respective customers; availability
and terms of any financing associated with the proposed transaction;
changes in tax laws that impact master limited partnerships; conditions
in the oil and gas industry, including a sustained decrease in the level
of supply or demand for oil or natural gas or a sustained decrease in
the price of oil or natural gas; Exterran Holdings’ ability to timely
and cost-effectively execute larger projects; changes in political or
economic conditions in key operating markets, including international
markets; any non-performance by third parties of their contractual
obligations; changes in safety, health, environmental and other
regulations; and the performance of Exterran Partners.
These forward-looking statements are also affected by the risk factors,
forward-looking statements and challenges and uncertainties described in
Exterran Holdings’ Annual Report on Form 10-K for the year ended
December 31, 2013, and those set forth from time to time in Exterran
Holdings’ filings with the Securities and Exchange Commission, which are
available at www.exterran.com.
Except as required by law, Exterran Holdings expressly disclaims any
intention or obligation to revise or update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Source: Exterran Holdings, Inc.
Exterran Holdings, Inc.
Susan Moore, 281-836-7398 (Media)
David
Oatman, 281-836-7035 (Investors)