KLX Energy Services Holdings, Inc. (“KLXE” or the “Company”)
(NASDAQ: KLXE) and Quintana Energy Services, Inc. (“QES”)
(NYSE: QES) have successfully completed the all-stock merger
transaction that was announced on May 3, 2020. The combined company
will continue under the name KLX Energy Services Holdings, Inc.
In conjunction with the closing of the merger,
QES shares ceased trading on the New York Stock Exchange prior to
the market open on July 28, 2020, and KLXE remains listed on the
Nasdaq Global Select Market under the symbol “KLXE.” At the time of
the closing, the holders of QES received 0.0969 shares of KLXE
common stock in exchange for each share of QES common stock held.
On July 26, 2020, the Company’s Board of Directors approved a 1 for
5 reverse stock split to stockholders that became effective at
12:01 a.m. on July 28, 2020. KLXE and QES stockholders own
approximately 59% and 41%, respectively, of the equity of the
combined company on a fully-diluted basis. The closing follows
approval of the merger transaction by both KLXE and QES
stockholders at stockholder meetings held on July 24, 2020.
“We are pleased to complete the previously
announced merger of KLX Energy Services and Quintana Energy
Services, bringing together two companies with tremendous strengths
and capabilities that make us uniquely equipped to support our
blue-chip customers during this unprecedented time,” said
Christopher J. Baker, President and CEO of the combined
company. “As a premier provider of completion, production and
intervention, and drilling solutions, KLXE will continue to focus
on operational excellence across its broad product and service
offerings as it supports and expands its portfolio of proprietary
technologies that provide a competitive advantage. Looking ahead,
the Company expects to pursue strategic, accretive consolidation
opportunities that further strengthen the Company’s competitive
positioning and capital structure, drive efficiencies, accelerate
growth, and create long‑term stockholder value.”
Tom McCaffrey, former President and CEO of KLXE
and a continuing KLXE Board member, said, “This transaction
culminates an accelerated yet extensive process by the management
and boards of both companies to enhance stockholder value. The
company will be rationalizing two of the largest fleets of coiled
tubing and wireline assets, which will dramatically reduce future
capital spending and facilitate the pull-through of KLXE’s
asset-light services. This transaction positions the Company to
better weather the current storm and, ultimately, to grow on a
significantly reduced capital expenditure budget. I look forward to
chairing the Board’s Integration Committee to provide oversight of
the integration and synergy realization plan, which is expected to
generate at least $40 million in annualized cost savings within 12
months as management aligns common roles, processes and systems
throughout each function and region in the Company. We are
confident that KLXE will be on the leading edge of the recovery
once our operations and support functions are fully integrated and
aligned.”
Financial Synergies
Excluding the impact of the estimated $40
million of annualized cost synergies from the merger, the combined
companies’ fiscal year 2019 pro forma revenues were more than $1
billion, and adjusted EBITDA was $106 million. Pro forma for
the combination, KLXE has an improved liquidity and capital
structure with approximately $117 million of cash1 and an undrawn
$100 million revolving credit facility, of which approximately $95
million was available1. The merger is expected to be significantly
accretive to free cash flow per share. Importantly, the combined
company has a strong balance sheet to support critical ongoing
business initiatives as well as the pursuit of additional
value-creating consolidation opportunities within the oilfield
service industry.
Operational Synergies
The combined organization has a highly talented
workforce with a commitment to safety, performance, customer
satisfaction, and profitability. Complementary to being the
foremost U.S. provider of large diameter coiled tubing services,
the Company also offers an industry-leading portfolio of
asset-light products and services to its blue-chip customers across
all major onshore oil and gas basins in the United States. The
Company is now able to streamline operational support and
technology advancements across a broader suite of service
offerings. Finally, through its increased scale and product and
service offerings designed to meet the needs of customers
throughout the lifecycle of the well, KLXE is expected to generate
cross-selling opportunities that allow for an increased share of
customer spend.
Leadership and Structure
KLXE will operate under the executive leadership
of QES’s legacy management team, including Christopher J. Baker,
President and Chief Executive Officer, and Keefer M. Lehner, EVP
and Chief Financial Officer. The Board of Directors is comprised of
nine directors, with five legacy KLXE directors and four legacy QES
directors. John Collins, current Chairman of the Board of KLXE,
will continue to serve as Chairman, and Tom McCaffrey, former
President and CEO of KLXE, will continue to serve on the Board and
as chair of its Integration Committee. Additional leadership
biographies will be available on the Company’s website,
www.klxenergy.com. KLXE’s corporate headquarters is now located in
Houston, Texas.
Additional Resources
For more information on the combination, please
view the initial announcement and presentation here:
Announcement:
https://investor.klxenergy.com/news-releases/news-release-details/klx-energy-services-and-quintana-energy-services-combine-all
Presentation:
https://investor.klxenergy.com/static-files/6014c6f9-5bdc-44dc-b81b-bb92b8b08d36
Advisors
Goldman Sachs & Co. LLC served as exclusive
financial advisor to KLXE and Freshfields Bruckhaus Deringer US LLP
served as legal counsel.
Tudor, Pickering, Holt & Co. served as
exclusive financial advisor to QES and Skadden, Arps, Slate,
Meagher, & Flom LLP served as legal counsel.
About KLX Energy Services
KLX Energy Services is a leading US onshore
provider of mission critical oilfield services focused on
completion, production and intervention, and drilling activities
for the most technically demanding wells. KLX Energy Services’
experienced and technically skilled personnel are supported by a
broad portfolio of specialized tools and equipment, including
innovative proprietary tools developed by KLXE’s in-house R&D
team. KLX Energy Services supports its broad customer
base on a 24/7 basis from over 50 service facilities located
throughout the major onshore oil and gas producing regions
of the United States. More information is available at
www.klxenergy.com.
____________1 Cash balance is presented based on
respective Q1 2020 quarter end for KLXE (April 30, 2020) and QES
(March 31, 2020), net of the repayment of the QES credit facility,
and availability is also presented based on the respective Q1 2020
quarter end for KLXE and QES adjusted for the repayment of the QES
credit facility.
Contacts:
Keefer M. Lehner, EVP & Chief Financial
Officer832-930-8066IR@KLXEnergy,com
Dennard Lascar Investor RelationsKen Dennard /
Natalie Hairston713-529-6600KLXE@dennardlascar.com
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Some of these forward-looking statements can
be identified by the use of forward-looking words such as
“believes,” “expects,” “may,” “will,” “should,” “seeks,”
“approximately,” “intends,” “plans,” “estimates,” “projects,”
“strategy,” or “anticipates,” or the negative of those words or
other comparable terminology. Such forward-looking statements,
including those regarding the transaction between KLXE and QES,
involve risks and uncertainties. The combined company’s experience
and results may differ materially from the experience and results
anticipated in such statements. The accuracy of such statements is
subject to a number of risks, uncertainties and assumptions
including, but not limited to, the following factors: (1) the
ability of KLXE to achieve the benefits anticipated from the
business combination; (2) litigation relating to the transaction;
(3) risks that the transaction disrupts the current plans and
operations of KLXE; (4) the ability of KLXE to retain and
hire key personnel; (5) competitive responses to the transaction;
(6) unexpected costs, charges or expenses resulting from the
transaction; (7) potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
transaction; (8) the combined company’s ability to achieve the
synergies expected from the transaction, as well as delays,
challenges and expenses associated with integrating the combined
company’s existing businesses; and (9) legislative, regulatory and
economic developments. Other factors that might cause such a
difference include those discussed in KLXE’s filings with the SEC,
which include its Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K and in the joint proxy
statement/prospectus included in the registration statement on Form
S-4 filed in connection with the transaction. For more information,
see the section entitled “Risk Factors” and the forward-looking
statements disclosure contained in KLXE’s and QES’s Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q and in other filings.
The forward-looking statements included in this communication are
made only as of the date hereof and, except as required by federal
securities laws and rules and regulations of the SEC, KLXE
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Non-GAAP Financial Measures
This press release includes “Adjusted EBITDA.”
Adjusted EBITDA is a supplemental non-GAAP financial measure that
is used by management and external users of our financial
statements, such as industry analysts, investors, lenders and
rating agencies.
Adjusted EBITDA is not a measure of net income
or cash flows as determined by GAAP. We define Adjusted EBITDA as
net income (loss) plus income taxes, net interest expense,
depreciation and amortization, impairment charges, net (gain) loss
on disposition of assets, stock based compensation, transaction
expenses, rebranding expenses, settlement expenses, severance
expenses, restructuring expenses, impairment expenses and equipment
stand-up expense.
We believe Adjusted EBITDA is useful because it
allows us to more effectively evaluate our operating performance
and compare the results of our operations from period to period
without regard to our financing methods or capital structure. We
exclude the items listed above in arriving at Adjusted EBITDA
because these amounts can vary substantially from company to
company within our industry depending upon accounting methods and
book values of assets, capital structures and the method by which
the assets were acquired. Adjusted EBITDA should not be considered
as an alternative to, or more meaningful than, net income as
determined in accordance with GAAP, or as an indicator of our
operating performance or liquidity. Certain items excluded from
Adjusted EBITDA are significant components in understanding and
assessing a company’s financial performance, such as a company’s
cost of capital and tax structure, as well as the historic costs of
depreciable assets, none of which are components of Adjusted
EBITDA. Our computations of Adjusted EBITDA may not be comparable
to other similarly titled measures of other companies. The
presentation of Adjusted EBITDA in this press release should not be
construed as an inference that future results will be unaffected by
unusual or non-recurring items.
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