Archrock to acquire Natural Gas Compression Systems Inc.
- Business includes approximately 351,000 horsepower (hp), comprised of 316,000 operating hp and a 35,000 hp backlog of contracted new equipment
- Aligns with Archrock’s focus on large hp compression with blue-chip customers
- Complements and deepens Archrock’s existing operations in the Permian Basin
- Expands Archrock’s electric motor drive compression capabilities as customer demand for low-carbon solutions continues to grow
- The $357-MM transaction is expected to be immediately accretive to Archrock’s earnings per share and cash available for dividend per share
Archrock Inc. and Natural Gas Compression Systems Inc. (NGCSI), a high-quality provider of contract gas compression services, have entered into definitive agreements under which Archrock will acquire NGCSI and NGCSE Inc. (collectively “NGCS”), in a cash and stock transaction valued at approximately $357 MM.
“We’re excited to announce our agreement to acquire NGCS, which further enhances our position as a premier provider of natural gas compression services in the United States,” said Brad Childers, President and Chief Executive Officer of Archrock. “With the addition of NGCS’s portfolio of high-quality, large horsepower and electric compression assets, we are increasing our scale and expanding customer relationships as demand for natural gas and compression remains robust. Additionally, by deepening our operational footprint in the premier Permian Basin and other key regions, we will continue to align our resources with profitable, high-demand market segments. We have been disciplined about transforming our portfolio by investing in attractive, high-return opportunities, and believe that this transaction will enable us to build on these efforts and drive durable, profitable growth for Archrock shareholders.”
Childers continued, “As with Archrock, we recognize that NGCS’s success starts with its dedicated, highly talented employees. We have a successful integration track record and are enthusiastic about welcoming the NGCS team into the Archrock family as we work together to maximize uptime for our customers and to power a cleaner America.”
“Archrock shares our commitments to safety, operational excellence and putting the customer first,” said A.J. Yuncker, President and Chief Executive Officer of NGCSI. “NGCS and Archrock have highly complementary operations and capabilities, and we believe our customers and employees will benefit from Archrock’s scale, experience and financial strength.”
Compelling strategic and financial benefits include:
- Increases total operating hp: Together, Archrock and NGCS will have pro forma operating hp of > 4.5 MM.
- Expands presence in Permian Basin and other key oil and gas regions: 71% of NGCS’s compression hp is operating in the Permian Basin; the combination is expected to increase Archrock’s Permian Basin compression capacity by 10%, to approximately 2.5 MM hp.
- Enhances capacity to serve growing demand for lower carbon solutions: NGCS’s operating electric motor drive compression equipment totaling approximately 78,000 hp are complementary to Archrock’s growing electric motor drive compression operations and increases Archrock’s electric motor drive compression hp to approximately 815,000.
- Immediate accretion: The transaction is expected to be immediately accretive to Archrock’s earnings per share and cash available for dividend per share by the end of 2025.
- Compelling multiple: The purchase price represents a transaction multiple of less than 7.0x expected run-rate of annualized July 2025 adjusted EBITDA, exclusive of any anticipated synergies.
Transaction, leadership and closing details. Under the terms of the agreement, Archrock intends to fund the $298-MM cash portion of the total consideration with available capacity under its ABL credit facility. Archrock will issue up to 2.312 MM new Archrock common shares to the sellers to fund the remaining transaction value. The transaction funding approach is consistent with Archrock’s stated target leverage ratio range of between 3.0 times and 3.5 times.
The transaction has been unanimously approved by the board of directors of Archrock and is expected to close in 2Q 2025, subject to customary closing conditions.
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