HOUSTON: Archrock Inc. (NYSE: AROC) has entered into a definitive agreement to acquire Total Operations and Production Services, LLC (TOPS) including approximately 580,000 horsepower of predominantly young electric motor drive compression assets, in a cash-and-stock transaction valued at $983 million.

Total Operations and Production Services is a leading provider of contract gas compression services for the Permian Basin and portfolio company of investment funds managed by affiliates of Apollo Global Management Inc. (Apollo).

“Our acquisition of TOPS is an exciting opportunity to expand and diversify our contract compression operations, increase sustainability and create significant value for Archrock shareholders,” said Brad Childers, President and Chief Executive Officer of Archrock Inc.

“This transaction will accelerate the meaningful progress we’ve made advancing our strategy of high-grading our fleet, improving profitability, expanding our operations in basins with strong long-term growth prospects and helping our customers achieve their emissions reduction goals. With the addition of TOPS’ highly-utilized and young asset base, electric motor drive equipment capacity and deep electrical engineering expertise, we will enhance Archrock’s positioning and ability to meet growing demand for lower carbon solutions.

We are buying a rapidly growing business with a substantial and contracted backlog. The transaction is expected to be more than 10% accretive to earnings per share and more than 20% accretive to cash available for dividend per share in 2025, and will enable us to continue investing in our business while increasing shareholder returns and maintaining a strong balance sheet.”

Childers continued, “We have deep admiration for the TOPS team and the innovative company, brand and culture that they’ve built. We look forward to welcoming TOPS to the Archrock family, expanding our presence in the Permian Basin, and working together to pursue our shared mission of delivering energy to help power a cleaner America.”

“We are excited to join together with Archrock during an important time for our company and our industry,” said Brian Green, Chief Executive Officer of TOPS. “TOPS’ horsepower is contracted with blue-chip customers in the Permian Basin, making the addition of our electric motor business highly strategic and complementary for Archrock. We look forward to joining the Archrock team and working together to serve more customers across the country while driving continued growth and value creation.”

Compelling Strategic and Financial Benefits

• Enhances Archrock’s position in contract compression in the U.S., with pro forma operating horsepower of approximately 4.1 million and a pro forma enterprise value exceeding $6 billion.
• Increases Archrock’s Permian Basin compression capacity by 30% to approximately 2.2 million operating horsepower, with the Company’s assets in the Permian Basin representing approximately 52% of its total operating horsepower.
• Increases Archrock’s electric compression horsepower to approximately 648,000.

Acquired assets are expected to generate approximately $136 million of third quarter 2024 annualized adjusted EBITDA, exclusive of any anticipated synergies. Purchase price represents a transaction multiple of 7.3x third quarter of 2024 annualized adjusted EBITDA.

Under the terms of the agreement, Archrock will issue approximately 6.87 million new Archrock common shares to the sellers. In addition, Archrock intends to fund the $826 million cash portion of the total consideration with a combination of equity and debt, and with an approach consistent with the Company’s stated target leverage ratio range of between 3.0 times and 3.5 times.

Following close of the transaction, TOPS will continue to be led by Brian Green. Archrock is committed to maintaining a dedicated presence in Midland, Texas, and no changes to the TOPS organization, personnel or operations are planned.

The transaction has been unanimously approved by the Board of Directors of Archrock and is expected to close by the end of 2024, subject to customary regulatory approvals and other closing conditions.