Exterran Partners, L.P.
), the limited partnership of the oilfield services provider,
Exterran Holdings, Inc.
) announced that it has entered into a deal to buy natural gas
compression assets from a subsidiary of
Chesapeake Energy Corporation
), MidCon Compression, L.L.C. The contract is valued at around $135
Investors responded positively to the news, as a result of which
units of Exterran Partners gained 3.1% to close at $28.14. Exterran
Holdings shares also gained about 3%, closing at $44.42.
The assets under sale include 162 compression units, which are
expected to add about 110,000 horsepower to the partnership's
existing capacity. Most of these units currently provide service to
BHP Billiton Petroleum in the Fayetteville Shale in Arkansas under
a 5-year contract. On closure of this deal, the agreement with BHP
will be reassigned to Exterran Partners.
The agreement is expected to close in the third quarter of the year
and will likely be financed by Exterran Partners' revolving credit
Management at Exterran Partners stated that this transaction is
expected to be immediately accretive to the partnership's cash
flow. Hence, it intends to propose to the board of its managing
general partner an increase in distribution for unitholders by 2
cents, on an annualized basis. The new distribution, if approved,
would be applicable from the quarter in which this transaction
closes. Exterran Partners currently pays cash distribution of 53.75
cents per unit or $2.15 annualized.
Exterran Partners has struck several similar deals with the
Chesapeake subsidiary. In Apr 2014, the partnership completed the
acquisition of 337 compression units from the subsidiary for
approximately $360 million, adding about 440,000 horsepower to its
Currently, Exterran Partners has a Zacks Rank #3 (Hold), while
Exterran Holdings has a Zacks Rank #4 (Sell). Meanwhile, one can
consider better-ranked players from the oilfield services industry
C&J Energy Services, Inc.
), which sports a Zacks Rank #1 (Strong Buy).
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CHESAPEAKE ENGY (CHK): Free Stock Analysis
EXTERRAN HLDGS (EXH): Free Stock Analysis
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