Natural Gas Services Group Acquires Flatrock Compression in $120 Million Deal

A major compression acquisition is giving one service provider a larger footprint in two of the nation's busiest oil and gas basins. The deal also adds substantial electric-driven compression capacity.

(P&GJ) — Natural Gas Services Group (NGS) has acquired compression provider Flatrock Compression Holdings for $120 million, expanding its presence in the Permian Basin and Eagle Ford while adding significant large-horsepower and electric-driven compression capacity.

The transaction includes $110 million in cash and $10 million in newly issued NGS common stock.

Flatrock operates a rental compression fleet totaling approximately 86,000 horsepower, with a large portion consisting of high-horsepower and electric motor-driven units. The fleet is currently about 95% utilized by horsepower, according to NGS.

NGS said the acquisition broadens its customer base, adds several large customers and increases operational density in two of the country's most active oil and gas producing regions.

CEO Justin Jacobs said Flatrock has built a strong compression business with a reputation for operational execution and customer service.

"The acquisition expands our footprint in the Permian Basin and Eagle Ford, adds customer diversification and strengthens our position in large-horsepower and electric-driven compression," Jacobs said. He added that the transaction is expected to be immediately accretive to key financial metrics.

Flatrock CEO B.J. Ellis said the combined company will benefit from increased scale and expanded capabilities.

"We believe NGS is the right partner to build on the foundation we've established and create additional growth opportunities for customers and employees," Ellis said.

In conjunction with the acquisition, NGS increased its credit facility from $400 million to $500 million while retaining an accordion feature that could expand total commitments to $600 million, subject to lender approval.

The company said the acquisition was completed at an implied multiple of approximately 6.2x Flatrock's annualized adjusted EBITDA and expects the transaction to support future growth while maintaining a pro forma leverage ratio of roughly three times.