CALGARY, ALBERTA--(Marketwire - Oct. 11, 2012) -
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Unless otherwise indicated all financial figures are in Canadian dollars
Gibson Energy Inc. ("Gibson"), (TSX:GEI), is pleased to announce that it has entered into a definitive agreement (the "Agreement") for the acquisition of all of the issued and outstanding common stock of the parent holding company of OMNI Energy Services Corp. ("OMNI") for US$445 million (the "Acquisition"). The purchase price assumes that OMNI will have working capital of US$43.5 million, no debt and no cash at closing. OMNI is a privately held provider of environmental and production services to the oil and gas industry and is based in Carencro, Louisiana. OMNI has a strong competitive position in most major oil and liquids focused areas in the United States (including, but not limited to, the U.S. Bakken, Granite Wash, Eagle Ford, Tuscaloosa Marine, Mississippi Lime and the Gulf of Mexico) with a significant focus on environmental and production-related activities. OMNI adds 1,091 employees to the Gibson team, including strong management and operations groups.
Gibson is also pleased to announce that it intends to increase its quarterly dividend rate to $0.26 per common share upon the close of the Acquisition, representing a 4% increase from the prior quarterly rate and resulting in a new annualized dividend of $1.04.
In connection with the Acquisition, Gibson has agreed to sell, on a bought deal basis, an aggregate of 15,840,000 subscription receipts at a price of $22.10 per subscription receipt for gross proceeds of approximately $350 million (approximately $403 million if the 15 percent over-allotment option is exercised in full). The subscription receipts will be offered through a syndicate of investment dealers co-led by BMO Capital Markets and RBC Capital Markets, with BMO Capital Markets acting as sole bookrunner.
"Gibson's business strategy is to leverage and expand our integrated asset base and partner with high quality customers to capture synergies while providing shareholders with strong growth along with a stable and growing dividend. This acquisition, along with the recently announced Hardisty Terminal expansion, allows us to continue the realization of those strategic goals." said Stewart Hanlon, President and Chief Executive Officer of Gibson. "OMNI broadens Gibson's footprint in most of the major U.S. liquids focused basins, provides the scale we believe is required to grow the environmental services business in North America, expands upon the Palko Environmental Ltd. acquisition in December of 2011 and adds new customers in the U.S. to whom we can promote the rest of the Gibson product suite. We are witnessing first hand, industry trends including increasing water-based horizontal well fracs, higher residual water production and increased environmental and regulatory scrutiny and are extremely excited about the opportunities the OMNI acquisition affords in light of these trends. OMNI comes with a strong management team, a significant growth profile and a substantial opportunity to expand the current Gibson suite of offerings to new geographies as well as to OMNI's current customers."
OMNI is expected to generate approximately US$80 to US$82 million in pro forma adjusted EBITDA in 2012. Accordingly, if the Acquisition had occurred at the beginning of 2012, it would have been accretive to budgeted distributable cash flow per common share by approximately 18 percent in 2012.
"As we increasingly diversify our service offering, we strengthen our confidence in the growth and stability of Gibson's operating cash flows across various commodity cycles. This increased confidence is reflected in today's 4% increase to the dividend." said Don Fowlis, Gibson's Chief Financial Officer. "The $350 million subscription receipt offering announced today, along with cash on our balance sheet and capacity under our revolving credit facility, provides financing certainty for this acquisition. We remain committed to a strong balance sheet. This strong balance sheet is expected to provide us with the financial flexibility to fund our recently announced Hardisty Terminal expansion, as well as other growth opportunities across our businesses."
Expansion of the complementary environmental services and fluid handling business
- The Acquisition fits within Gibson's current strategy of expanding its integrated asset base to provide synergistic offerings to customers and builds upon the Palko Environmental Ltd. acquisition in December 2011, while providing the scale to expand its environmental services and fluid handling business (including water treatment) into the U.S. market.
- The Acquisition provides an avenue by which to benefit from current industry trends such as increased environmental and regulatory scrutiny, increased fluids production and services intensity associated with more complex multi-stage, water-based frac horizontal drilling and increased production and drilling for oil and liquids.
- Due to the integrated nature of the Gibson business model, the addition of OMNI has the potential to drive additional benefits for Gibson's Truck Transportation, Terminals & Pipelines and Marketing segments as OMNI related fluids could be trucked through existing Gibson infrastructure and potentially injected into one of Gibson's existing pipeline injection stations in the U.S.
Expands upon a solid footprint in the U.S. with exposure to key U.S. hydrocarbon basins
- The Acquisition provides a sizable footprint and scale to continue building momentum in the U.S., a market with approximately three times more oil and gas production than the Canadian market.
- The Acquisition provides increased scale in key U.S. oil and liquids rich basins such as the U.S. Bakken, Granite Wash, Eagle Ford, Tuscaloosa Marine and Mississippi Lime and introduces a new geographic platform in the offshore Gulf of Mexico.
- The addition of OMNI expands Gibson's U.S. customer base significantly beyond its current relationships, adding names such as Anadarko Petroleum Corporation, Exxon Mobil Corporation, Petrohawk Energy Corporation, EOG Resources, Inc. and others.
- Historically, Gibson's U.S. presence has been focused on oil hauling, injection stations and marketing. The Acquisition will provide the Company with multiple service offerings in the U.S. and a platform to help facilitate further expansion.
Synergistic fit with existing Gibson businesses providing a platform for growth
- The geographic footprint of the OMNI platform is very complementary with Gibson's existing business in the U.S.
- The Acquisition will provide opportunities to leverage OMNI's solid U.S. relationships and multi-product sales force to promote the current Gibson suite of services to existing OMNI customers in the U.S. and vice versa.
- The increased U.S. footprint and nature of the OMNI service offering should provide significant market intelligence and a first mover advantage into all of the latest plays, helping Gibson establish a presence for its entire platform.
Demonstrated historical growth and strong platform for future growth focused on environmental services and fluid handling
- Based on expected pro forma adjusted EBITDA for 2012, OMNI has demonstrated a historical compound annual growth rate of approximately 30% since 2010, achieved with a constrained balance sheet and limited access to external capital.
- Gibson's greater access to capital should provide increased growth by unlocking available expansion opportunities that could not be undertaken by OMNI under historical financial constraints.
- The majority of currently planned OMNI capital expenditures are focused on environmental services and fluid handling.
- The fragmented U.S. environmental services market provides a sizeable opportunity for consolidation through which to add both complementary services and new geographies.
- OMNI's proprietary technology suite provides a significant opportunity to expand the current OMNI service offerings into Canada including, potentially, the high growth oil sands sector.
Significantly positive financial impact
- OMNI is expected to generate approximately US$80 to US$82 million in pro forma adjusted EBITDA in 2012. Accordingly, if the Acquisition had occurred at the beginning of 2012, it would have been accretive to budgeted distributable cash flow per common share by approximately 18 percent in 2012.
- The addition of OMNI's logistics-intensive, capital-light business should result in Gibson's dividend payout as a percentage of distributable cash, inclusive of the dividend increase, to decrease from current levels.
Increase to Dividend
Following the successful completion of the proposed Acquisition, Gibson intends to increase its quarterly dividend rate from $0.25 per common share per quarter (or $1.00 annualized) to $0.26 per common share per quarter (or $1.04 annualized) representing a 4.0% increase. This increase reflects management's confidence in the significant operational and financial strength of Gibson as well as cash flow stability across various commodity cycles going forward.
The proposed Acquisition is subject to customary approvals including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Both the Board of Directors of Gibson and of OMNI have approved the transaction. Closing is expected to occur on or about October 31, 2012.
Subscription Receipt Offering
Gibson has agreed to sell, on a bought deal basis, an aggregate of 15,840,000 subscription receipts at a price of $22.10 per subscription receipt for gross proceeds of approximately $350 million. The subscription receipts will be offered through a syndicate of investment dealers co-led by BMO Capital Markets and RBC Capital Markets, with BMO Capital Markets acting as sole bookrunner. Gibson has also granted the underwriters an option to purchase, in whole or part, up to an additional 2,376,000 subscription receipts for a price of $22.10 per subscription receipt to cover over-allotments, if any, until 30 days following the closing of the offering. If the over-allotment option is exercised in full, gross proceeds from the offering will be approximately $403 million. Each subscription receipt will entitle the holder thereof to receive, without payment of additional consideration or further action, upon closing of the Acquisition and upon satisfaction of certain escrow release conditions, one common share of Gibson plus an amount equal to the dividends Gibson declares on the common shares, if any, for record dates which occur during the period from and including the closing date of the offering to, but not including, the date of issuance of the common shares issuable on the deemed exercise of the subscription receipts, net of any applicable withholding taxes.
The net proceeds from the sale of the subscription receipts will be held by an escrow agent pending receipt of all approvals required to finalize the Acquisition and fulfillment or waiver of all other outstanding conditions precedent to closing the Acquisition. In the event such approvals and conditions are not satisfied prior to January 31, 2013 or if the Agreement is terminated prior to such time, or Gibson advises the underwriters or discloses to the public that it does not intend to proceed with the Acquisition of OMNI, the holders of the subscription receipts will be entitled to receive an amount equal to the full subscription price thereof plus their pro rata share of the interest earned on the escrowed funds, net of any applicable withholding taxes.
The subscription receipts will be offered in all provinces and territories of Canada by way of a short form prospectus. The offering is subject to the receipt of all necessary regulatory and stock exchange approvals. Closing of the offering is expected to occur on or about October 29, 2012.
Neither the subscription receipts nor the common shares have been nor will be registered under the United States Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in the United States or any jurisdiction in which such offer, solicitation or sale would be unlawful.
Description of OMNI
OMNI is based in Carencro, Louisiana, and provides environmental and production services to the oil and gas industry in the U.S. The company is a privately held portfolio company of an affiliate of Wellspring Capital Management, LLC. OMNI has a strong competitive position in most major oil and liquids focused areas in the U.S., including the U.S. Bakken, Granite Wash, Eagle Ford, Tuscaloosa Marine, Mississippi Lime and the Gulf of Mexico, with a significant focus on environmental services, production related business, and oil and liquids based activity. OMNI's core environmental services and fluid handling and production services businesses comprise approximately 74% of OMNI's 2012 estimated pro forma adjusted EBITDA before corporate expenses. These core businesses are focused on increasingly complex and non-discretionary compliance, maintenance and safety needs of exploration and production companies.
Environmental Services and Fluid Handling
OMNI provides a broad range of environmental services and fluid handling packages to meet the needs of its customers both onshore in key oil and liquids rich basins and offshore in the Gulf of Mexico. OMNI's environmental services portfolio includes:
- Transportation, disposal and processing of drilling and production waste such as fluids and cuttings.
- Comprehensive fluid service packages, including drilling support packages (from supply, transport and handling equipment to removal), as well as cleaning packages (supply, training and support of custom fluid vacuum units).
OMNI's environmental services are typically non-deferrable with a mandated frequency of service and carry with them significant regulatory barriers and permitting costs. As a result, OMNI generates high margins and significant repeat business with its largest customers who value the efficiency, reliability and safety that OMNI provides. Importantly, OMNI offers these services both individually and as a complete turn-key package that increases uptime and reduces complexity for its customers.
OMNI's production services business provides exploration and production companies with critical services that ensure uptime and consistent operation of producing wells. Specialized services range from the inspection and repair of above-ground well-pumping units to the pressure and temperature testing of producing wells. OMNI maintains a strong position in the U.S. Bakken and has the flexibility to migrate services to other basins. The production services OMNI provides are a natural extension of its environmental fluid transport and disposal well service lines, which target both drilling and production related activities.
OMNI also provides a range of exploration support services, including exploratory drilling services offered individually or as a bundled, outsourced project management package. OMNI also offers an accommodations business in the U.S. Bakken which is very complementary to OMNI's production services business.
A PDF location map showing the location of the Gibson and OMNI sites is available at: http://media3.marketwire.com/docs/GIBMAP.pdf.
BMO Capital Markets is acting as exclusive financial advisor with respect to the Acquisition. BMO Capital Markets has advised Gibson's Board of Directors that it is of the opinion that, as of the date hereof, the consideration offered for OMNI pursuant to the transaction is fair from a financial point of view, to Gibson. Bennett Jones LLP is acting as Canadian legal advisor and Latham & Watkins LLP is acting as U.S. legal advisor to Gibson with respect to the Acquisition.
Conference Call Advisory
Gibson will host a conference call to discuss the Acquisition today at 2:00 p.m. MT (4:00 p.m. ET). A presentation will be available prior to the conference call at http://www.gibsons.com.
The conference call dial-in numbers are:
- Local (Toronto): 416-641-6150
- Toll free from Canada and the U.S: 800-952-5114
- International (anyone dialing in from Europe should dial '00' first): 800-6578-9818
- Participant Pass Code: 6175479#
The call will also be recorded for playback and available until October 26, 2012, using the following dial in process:
- 905-694-9451 or 800-408-3053
- Pass code: 6667653#
Gibson is one of the largest independent midstream energy companies in Canada and a major participant in the crude oil transportation business in the United States, and is engaged in the movement, storage, blending, processing, marketing and distribution of crude oil, condensate, natural gas liquids, and refined products. Gibson transports hydrocarbons by utilizing its integrated network of terminals, pipelines, storage tanks, and truck fleet located throughout western Canada and the United States. Gibson is also involved in the processing, blending and marketing of hydrocarbons, provision of water disposal and oilfield waste management services and is the second largest retail propane distribution company in Canada.
Certain statements contained in this press release constitute forward-looking information and statements (collectively, "forward-looking statements") including, but not limited to, business objectives, expected growth, results of operations, performance, the increase to the dividend, business projects and opportunities and financial results and specifically the offering of the subscription receipts, including the use of proceeds and anticipated closing thereof, the acquisition of OMNI, including the expected closing date thereof, the aggregate cash consideration payable in connection therewith and the anticipated sources of funding thereof, the anticipated benefits of the acquisition of OMNI, the expected returns and contributions to cash flow and pro forma adjusted EBITDA therefrom, the expected impact of the OMNI acquisition on Gibson's dividend payout as a percentage of distributable cash flow, OMNI's estimated pro forma adjusted EBITDA compound annual growth rate from 2010 to 2012E, the amount of estimated 2012 pro forma adjusted EBITDA of OMNI attributable to OMNI's core environmental services and fluid handling and production services business and the anticipated indebtedness to be incurred under the credit facility in connection with the acquisition. These statements relate to future events or Gibson's future performance. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "contemplate", "continue", "estimate", "expect", "intend", "propose", "might", "may", "will", "shall", "project", "should", "could", "would", "believe", "predict", "forecast", "pursue", "potential" and "capable" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although Gibson believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. Gibson's actual results could differ materially from those anticipated in these forward-looking statements as a result of regulatory decisions, competitive factors in the industries in which Gibson operates, prevailing economic conditions and other factors, including those listed above, many of which are beyond the control of Gibson. The forward-looking statements contained in this press release represent Gibson's expectations as of the date hereof, and are subject to change after such date. Gibson disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.
Financial outlook information contained in this press release about prospective results of operations, including estimated 2012 pro forma adjusted EBITDA and estimates related thereto, financial position or distributable cash flow is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this press release should not be used for the purposes other than for which it is disclosed herein.
This press release contains references to pro forma adjusted EBITDA and distributable cash flow, all of which are financial measures that are not recognized under International Financial Reporting Standards ("IFRS") or United States generally accepted accounting principles ("US GAAP") and do not have a standardized meaning under IFRS or US GAAP. These measures provide additional information that management believes is meaningful regarding OMNI's operational performance. Pro forma adjusted EBITDA as it is used in relation to OMNI consists of consolidated net income before interest expense, income taxes, depreciation, amortization, stock based compensation expense, impairment, management fees and adjustments that are considered non-recurring in nature including the pro forma effect of acquisitions by OMNI that took place in the period referenced as if the acquisitions by OMNI took place at the beginning of the period in which such acquisitions occurred. EBITDA has limitations as an analytical tool, and investors should not consider this item in isolation, or as a substitute for an analysis of OMNI's results as reported under IFRS or U.S. GAAP, as applicable.
This press release also contains references to distributable cash flow of Gibson. Distributable cash flow is used to assess the level of cash flow generated from ongoing operations and to evaluate the adequacy of internally generated cash flow to fund dividends. Changes in non-cash working capital are excluded from the determination of distributable cash flow because they are primarily the result of seasonal fluctuations in product inventories or other temporary changes. Maintenance capital expenditures are deducted from distributable cash flow as they are ongoing recurring expenditures.