Exterran: Q3 Results and Archrock Dividend
Exterran Holdings, Inc. and Exterran Partners, L.P. announced today certain preliminary third-quarter 2015 financial results. The preliminary results announced by Exterran Holdings are those generated by the businesses it will retain after completion of the previously announced separation as well as the businesses it intends to distribute.
– Exterran Holdings, Exterran Partners and Exterran Corporation expect strong third-quarter results of operations
-Exterran Holdings, Inc., to be renamed Archrock, Inc., expects to increase its quarterly dividend 25% sequentially to $0.1875 for the fourth quarter ending December 31, 2015, to be paid in February 2016
– Archrock, Inc. intends to increase its quarterly dividend at a rate of 15% per annum through 2017
In November 2014, Exterran Holdings announced that it intends to separate its international contract operations, international aftermarket services and global fabrication businesses into a standalone, publicly traded company named Exterran Corporation. Upon completion of the spin-off, Exterran Holdings, which will continue to own and operate its contract operations and aftermarket services businesses in the United States, will be renamed Archrock, Inc., and Exterran Partners, L.P. will be renamed Archrock Partners, L.P.
Exterran’s and Exterran Partners’ full financial results for the third quarter 2015 are not yet available and are subject to finalization by management and review by Exterran’s independent auditors. Set forth below are certain preliminary estimates of the results of operations that Exterran Holdings and Exterran Partners expect to report for the third quarter 2015. Exterran’s and Exterran Partners’ actual results may differ materially from these preliminary estimates due to the completion of their financial closing procedures, final adjustments and other developments that may arise before the financial results for the third quarter are finalized.
In addition, Exterran Holdings currently expects Archrock, Inc.’s selling, general and administrative expense to be $33 million to $38 million in the first quarter 2016, the first full quarter for which post-separation financial statements will be available.
Exterran Holdings also expects that Archrock, Inc. will pay a dividend of $0.1875 per share in February 2016. This expected dividend would be 25 percent higher than the dividend Exterran Holdings has already declared to be paid on October 30, 2015. After the separation, Archrock, Inc. expects to pass through to its shareholders a substantial portion of the after-tax distributions it receives from its ownership interest in Archrock Partners. Additionally, Archrock, Inc. intends to target an annual dividend growth rate of 15 percent through 2017.
The expected February 2016 dividend payment and all future amounts and payment dates of quarterly cash dividends will be subject to the determination and approval of the Board of Directors. The decision by the Board of Directors whether to pay any future dividends and the amount of any such dividends will be based on, among other things, Archrock, Inc.’s financial position, results of operations, cash flows, capital requirements, restrictions under its credit agreements and requirements of applicable law.
Exterran Holdings’ parent level (excluding Exterran Partners) debt outstanding was approximately $681 million as of September 30, 2015. In connection with the spin-off, Exterran Holdings anticipates that Exterran Corporation initially will borrow under its new credit facility and transfer an amount of proceeds to Exterran Holdings which, when taken together with the proceeds from borrowings under the Archrock credit facility as described below, will enable Exterran Holdings to repay all of its existing indebtedness.
Archrock, Inc.’s indebtedness under its credit facility upon the closing of the spin-off is currently expected to be approximately $160 million after reflecting (1) the impact of the dividend to be paid on October 30, 2015 (2) the reduction in debt for the receipt in October 2015 of $19.1 million from PDVSA GAS relating to the 2012 sale of Exterran’s Venezuelan subsidiary’s previously nationalized assets and (3) the redemption of Exterran Holdings’ $350 million of outstanding 7.25% Senior Notes due 2018. In the fourth quarter, Archrock, Inc. expects to incur additional borrowings under its credit facility of approximately $10 million to $15 million to finance expenses related to the completion of the spin-off that are not reflected in the above amounts. The amount of indebtedness of Exterran Partners will not be impacted by the separation.
At October 23, 2015, subsidiaries of Exterran Corporation were due approximately $79 million of additional principal payments from the previously announced sales of nationalized Venezuelan assets. In connection with the spin-off, Exterran Corporation’s subsidiary will transfer to an Archrock subsidiary the right to receive an amount equal to the payments made on those remaining receivables as they are received from the Venezuelan state-owned oil company. If any additional payments are received prior to the spin-off, Archrock, Inc.’s expected indebtedness upon closing of the spin-off would be reduced by a corresponding amount. Additionally, in connection with the spin-off, a subsidiary of Exterran Corporation will transfer to a subsidiary of Archrock the right to receive $25 million upon Exterran Corporation’s completion of certain qualified unsecured debt or equity issuances and repayment in full of the term loan portion of Exterran Corporation’s credit facility after the spin-off. Exterran Corporation will use its commercially reasonable efforts to complete such a capital raise on or before the maturity date of its term loan or as soon as practicable thereafter.
As of September 30, 2015, on a pro forma basis after giving effect to the spin-off, Exterran Corporation would have had outstanding indebtedness of approximately $520 million. In addition, subsequent to September 30, 2015 and prior to the completion of the spin-off, Exterran Corporation expects to incur additional borrowings of between $25 million and $30 million to finance expenses related to the completion of the spin-off.
