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Kentz Corporation (KENZ)

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Monday 09 December, 2013

Kentz Corporation

Proposed Acquisition of Valerus Field Solutions

RNS Number : 9998U
Kentz Corporation Ltd
09 December 2013
 



 

Kentz Corporation Limited ("Kentz", the "Company")

Proposed acquisition of Valerus Field Solutions

London, 9 December 2013 - Kentz Corporation Limited (LSE: KENZ), the holding company of the Kentz engineering and construction group, announces the proposed acquisition of the Valerus field solutions business ("Valerus FS") for US$435 million in cash, subject to a working capital adjustment, payable in cash at Completion (the "Acquisition").

 Key Highlights

·      Valerus FS is a US-based integrated oil and gas surface facility solutions provider which provides a full suite of products and services from the well head to the pipeline as well as an integrated services capability

 

·      The Acquisition is consistent with Kentz's strategy of establishing itself as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide. In particular, the Acquisition is expected to deliver the following principal benefits:

§ increased exposure to high value, high margin contracts further up the value chain;

§ expanded offering through the addition of 665 employees including 198 personnel with demonstrable experience in gas handling and processing;

§ diversified and expanded operational footprint with Valerus FS strongly positioned in the US onshore oil and gas market, including shale gas, a new market for Kentz;

§ increased exposure to Latin American markets with Valerus FS' established presence in Brazil, Mexico, Colombia and Venezuela;

§ an increased ability to leverage and enhance existing EPC capabilities and differentiators in onshore oil and gas processing facilities;

§ the potential to offer integrated solutions for clients and bid on contracts, where previously the Group would not have been able to due to the specific range of capabilities required;

§ an increased focus on mid-sized modular projects expected in gas plants and EPF;

§ a strong, diversified client base with over 60 per cent. of Valerus FS' work being from repeat clients, only a few of which are current Kentz customers; and

§ increased opportunities for Kentz by providing services to the outsourced portion of Valerus FS' projects.

 

Financial Highlights

·      In the year ended 31 December 2012, Valerus FS reported EBITDA of US$51.5 million on revenue of US$492.9 million. Valerus FS has experienced strong year-on-year revenue growth historically and this trend is expected to continue in 2014.  Outlook for 2014 is positive with 60 per cent. of projected 2014 revenues under contract

 

·      The Acquisition is expected to be earnings enhancing for Kentz in the first full financial year of ownership and is expected to generate a return on investment exceeding the Group's pre-tax cost of capital[1]

 

·      The Acquisition will be satisfied by full draw down on a new US$400 million term loan with the balance satisfied from either Kentz's existing cash resources or a new multi-currency US$160 million revolving loan facility

·      The Acquisition is conditional on the approval of Kentz's shareholders. It is expected that the Company will post a circular to shareholders today with details of the Acquisition and giving notice of the Extraordinary General Meeting expected to be held at The Great Room, Central Court, 25 Southampton Buildings, London WC2A 1AL at 10.00 a.m. on 2 January 2014 (the "Circular"). The Circular will be made available at www.Kentz.com 

 

·      Kentz has received an irrevocable undertaking from Kerbet Limited, its largest shareholder, to vote in favour of the Resolution to be proposed at the Extraordinary General Meeting

 

Christian Brown, Chief Executive Officer of Kentz commented: "We have achieved exceptional organic growth since listing in 2008. We have also highlighted our desire to expand our offering through selective acquisition that creates shareholder value. The Board of Kentz believes that, consistent with our strategy, the acquisition of Valerus Field Solutions will help to establish Kentz as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide. It also provides us with a significant presence in the growing US market."

 

Presentation and conference call

A presentation and conference call for analysts and investors will be held at 10:30 a.m. this morning at The Great Room, Central Court, 25 Southampton Buildings, London WC2A 1AL and on the number below:

UK & International Number:          +44 (0) 20 3139 4830

Participant Pin Code                       46041779#

A replay facility will be made available later today for 7 days on:

UK Toll Number:                          +44 (0) 20 3426 2807

Audio Playback Reference           644311#

A webcast will be available from:

http://cache.merchantcantos.com/webcast/webcaster/4000/7464/16532/31281/Lobby/default.htm 

This summary should be read in conjunction with the full text of this announcement.

Investec Bank plc ("Investec") is acting as financial adviser and sponsor to Kentz on the Acquisition.

Ends

 

 

For further information see the Kentz website www.Kentz.com or contact:

 

Kentz Corporation Limited

Investors: Ronan Tyrrell

 

+44 (0)20 3159 4004

[email protected]

 

Media: Paul Youens

 

+44 (0)20 3159 4003

[email protected]

 

Investec Bank plc (Financial Adviser and Sponsor)

Chris Sim

Duncan Williamson

George Price

Symmie Swil

 

+44 (0)20 7597 5970

Tavistock Communications (Public Relations)

Simon Hudson

Mike Bartlett

Emily Fenton

+44 (0)20 7920 3150

 

 

About Kentz

Kentz is a global engineering specialist solutions provider, which serves a blue-chip client base in the oil and gas, petrochemical and mining and metals sectors. It is listed on the London Stock Exchange (symbol: KENZ). In the year ended December 2012, the company generated revenues of US$1.56 billion and profit before tax of US$104.8 million.

Kentz has over 14,500 employees in 30 countries. Its three main business lines are; engineering, procurement and construction services; construction; and technical support services. Kentz delivers mechanical, electrical, controls and instrumentation engineering, construction and management services safely and on time throughout the world, including in some of the most remote locations on earth.

 

Certain statements contained in this announcement constitute "forward-looking statements". In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "prepares", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Kentz Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Kentz Group's present and future business strategies and the environment in which the Kentz Group will operate in the future. These forward-looking statements speak only as at the date of this announcement. Except as required by the FCA, the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the London Stock Exchange, applicable law or relevant regulation, the Kentz Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Kentz's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

Investec Bank plc, which is authorised in the United Kingdom by the PRA and regulated by the FCA and the PRA, is acting exclusively for the Company as sponsor, financial adviser and broker in connection with the Acquisition and no one else in connection with the Acquisition and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Acquisition or any matters or arrangements referred to or contained in this announcement. This announcement is the sole responsibility of the Company. Investec Bank plc, accepts no responsibility or liability whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement including its accuracy, completeness or verification or for any other statement made or purported to be made in connection with the Company or the Acquisition, and nothing in this document is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Investec Bank plc, accordingly, to the fullest extent permitted by law, disclaims all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

 

 

 

 



 

 

Proposed acquisition of Valerus Field Solutions

Introduction

The Company announces today that it has entered into an agreement with the Seller to acquire Valerus FS. The sale and purchase agreement is conditional and provides for a total consideration of US$435 million (£266.5 million) to be paid in cash subject to an adjustment for working capital at Completion. The Acquisition is on a cash-free-debt-free basis with the Valerus Group's existing debt being retained by the Seller following Completion.

Valerus FS is a US-based integrated oil and gas surface facility solutions provider which provides a full suite of products and services from the well head to the pipeline as well as an integrated services capability. Valerus FS is currently part of the Valerus Group, which is controlled and majority owned by TPG.

The Acquisition is of sufficient size relative to the Group to constitute a Class 1 transaction under the Listing Rules and is therefore conditional on, among other things, the approval of the Shareholders at the Extraordinary General Meeting to be held at 10.00 a.m. on 2 January 2014.

Kentz has received an irrevocable undertaking from Kerbet Limited, which, as at 6 December 2013, being the last practicable date prior to the publication of this announcement, held 15,875,000 voting Shares, representing approximately 13.30 per cent. of the Company's current issued share capital (including 7,937,500 Shares in which the Chairman is interested), to vote in favour of the Resolution to be proposed at the Extraordinary General Meeting.

Background to and Reasons for the Acquisition

Kentz is an engineering and construction business operating principally within the global oil and gas services sectors. It serves a blue-chip client base and focuses on consistent performance in safety, systems applications and fast-track project delivery. The Group delivers tailored solutions through a wide range of engineering and construction services using a global network of offices. The Group's operations are arranged within three Global Business Units: Engineering, Procurement and Construction ("EPC"); Construction ("Construction"); and Technical Support Services ("TSS").

The Group's strategy has been to build on its core competencies and to globalise and widen its service offerings. Since 31 December 2007, Kentz has achieved 370 per cent. growth in backlog to the end of June 2013, 163 per cent. growth in earnings per share and has significantly expanded its operational footprint. To date this track record of growth has been achieved through the organic growth of the business. However, the Group has also indicated a desire to expand its offering through selective acquisition, should it be able to secure such an acquisition which it believes would create shareholder value. In this regard, during the course of 2012 when it re-evaluated its overall strategy, the Group specifically identified the broadening of its ability to provide EPC services for medium sized onshore process facilities. The specific aims of the EPC strategy were to build process EPC capability globally, grow capabilities in telecoms and non-process infrastructure, enhance engineering capability and increase the addressable market in the Middle East, Americas and Australasia.

Since 2012, Kentz has reviewed a number of potential strategic acquisitions that could provide access to more complex projects and increase the Group's exposure to higher margin contracts further up the value chain, with the goal of establishing Kentz as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide.

The upstream market is driven by sustained demand for both petroleum and natural gas. Natural gas production in particular is projected to grow by over 2 per cent. annually through 2030 according to projections by BP and Exxon Mobil, compared to less than 1 per cent. for liquids. This demand will be met by growing gas production through increases in shale gas (unconventional) production, which according to BP will more than treble between 2011 and 2030. According to ICF International's assessment, roughly 240 gas processing plants with over 32 bcfd of processing capability will be required through 2035 at a cost of over US$20 billion. In addition to shale gas growth, there is expected to be continued expansion of mostly conventional gas production in areas outside of North America. These trends should lead to a continued growth in the demand for facilities to produce and process natural gas globally. As a result, the Directors believe the annual capital expenditure of Valerus FS' client base, which is currently approximately US$130 billion, is expected to grow by approximately 11 per cent. by 2018. This growth could create an addressable market for Valerus FS in onshore facilities markets of approximately US$36 billion by 2018.

The Acquisition will enable the Group to broaden its offering and services to capture more of this growing market in medium-sized onshore gas processing facilities and related infrastructure such as compression systems and engineered production equipment. Over a third of future gas processing projects are expected to fall between 60mmcfd - 500mmcfd in size, the key focus of Valerus FS' business. The Board believes Valerus FS offers an attractive opportunity to gain entry to this rapidly growing market. In addition, the Board is confident the Acquisition will provide significant strategic, operational and financial benefits to the Group, including the following:

·        increased exposure to high value, high margin contracts further up the value chain;

·        expanded offering through the addition of 665 employees including 198 personnel with demonstrable experience in gas handling and processing;

·        diversified and expanded operational footprint with Valerus FS strongly positioned in the US onshore oil and gas market, including shale gas, a new market for Kentz;

·        increased exposure to Latin American markets with Valerus FS' established presence in Brazil, Mexico, Colombia and Venezuela;

·        an increased ability to leverage and enhance existing EPC capabilities and differentiators in onshore oil and gas processing facilities;

·        the potential to offer integrated solutions for clients and bid on contracts, where previously the Group would not have been able to due to the specific range of capabilities required;

·        an increased focus on mid-sized modular projects expected in gas plants and EPF;

·        a strong, diversified client base with over 60 per cent. of Valerus FS' work being from repeat clients, only a few of which are current Kentz customers; and

·        increased opportunities for Kentz by providing services to the outsourced portion of Valerus FS' projects.

The Board believes that the acquisition of Valerus FS will help to establish Kentz as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide.

Information on Valerus FS

Valerus FS is a US-based integrated oil and gas surface facility solutions provider which provides a full suite of products and services from the well head to the pipeline as well as integrated services capability. Valerus FS is currently part of the Valerus Group, which is controlled and majority owned by TPG.

Focusing on early production systems and gas processing projects, Valerus FS provides front-end, conceptual design, procurement and project and construction management services. These services are supported by seven manufacturing facilities focused on high value and on time delivery. These facilities procure materials and components and fabricate and assemble products. Direct control of product quality and extensive supply chain management capabilities enable Valerus FS to compete in the market.

Valerus FS has supported customers with projects in more than 25 countries. It has operational offices in Houston and Tulsa, sales offices serving the major natural gas basins in the United States and six international sales offices. Valerus FS is strategically located in the most prolific shale plays in the United States. In the year ended 31 December 2012, approximately 57 per cent. of revenues were from the United States, 32 per cent. from Latin America, 10 per cent. from the Middle East and 1 per cent. from Australasia. Overall staff numbers total 665, including 198 personnel with demonstrable experience in gas handling and processing.

Clients include Marathon, Cardon, BHP, Pemex, Apache, Kinder Morgan, Hess, Enbridge, Targa, Eneva, Atlas Energy, EOG and Chesapeake as well as one of the major international oil companies. In 2012, 52 per cent. of revenues were derived from midstream companies, 26 per cent. from major oil companies and 22 per cent. from local and national oil companies.

Valerus FS generated a gross margin of 19.6 per cent. in the year to 31 December 2012, up from 10.4 per cent in the prior year, following a refocusing of the product portfolio and significant investment in headcount and systems in 2011, which temporarily reduced margins. Valerus FS is organised into four business units:

·        Compression Systems - designs, engineers and fabricates compression units, for well head gas lift, midstream gas gathering systems and pipeline booster stations, a key high margin market where Kentz does not have a presence. The business unit represented 46 per cent. of revenues in 2012 of which approximately 59 per cent. was backlog based and 41 per cent. was book and burn work.

·        Production Equipment - provides well head production solutions for a wide range of oilfield applications. The business unit represented 21 per cent. of revenues in 2012 of which approximately 21 per cent. was backlog based and 79 per cent. was book and burn work.

·        Processing & Treating - designs, engineers and fabricates cryogenic gas plants, amine treaters, refrigeration plants and NGL fractionation units on a standalone basis or for use in integrated services projects. The business unit represented 10 per cent. of revenues in 2012 of which approximately 88 per cent. was backlog based and 12 per cent. was book and burn work.

·        Integrated Services - provides engineering, design, project management, construction management and installation services for large integrated gas processing and treating projects with a focus on higher margin projects. The business unit represented 23 per cent. of revenues in 2012, all of which was backlog based in nature.

 

Valerus FS' key differentiators include:

·        its ability to provide a one-stop solution to meet each client's specific demands;

·        its extensive in-house process, applications and design engineering capabilities to support the development of its systems;

·        its full suite of products and services from the well head to the pipeline;

·        its effective global business development network, with a key presence in the United States, Latin America, Middle East and South East Asia;

·        its growing portfolio of reference projects with key domestic and international clients; and

·        its speed to market through standardised modular equipment designs, supported with extensive supply chain management capability and direct control over product quality and timing.

Valerus FS' strategic focus is to continue to develop its capability to provide integrated solutions with an emphasis on flexible modular designs, in addition to expanding its full-field and complete well-pad capability. Valerus FS' strategy focuses on higher value-add engineered products within compression and integrated services, alongside new opportunities to grow its ability to serve the liquids market globally.

Principal Terms of the Acquisition

Kentz and the Kentz Acquisition Entities have entered into a conditional sale and purchase agreement to acquire the Target Group, which comprises the field solutions business of the Valerus Group, for a total consideration of US$435 million (£266.5 million) to be paid in cash subject to an adjustment for working capital as of Completion. The Acquisition is on a cash-free-debt-free basis with the Valerus Group's existing debt being retained by the Seller following Completion.

The Acquisition is conditional upon, amongst other things:

(i)       the approval of Shareholders, which is to be sought at the Extraordinary General Meeting;

(ii)      no material adverse effect (as will be more fully described in the Circular) having taken place between the signing of the Acquisition Agreement and Completion as a result of a breach by the other party of any representation and warranty;

(iii)     the expiration of the applicable waiting period under the HSR Act. Kentz and the Seller made all applicable filings under the HSR Act on 26 November 2013. The parties are required to observe a 30 day waiting period prior to completing the Acquisition which may be terminated early or extended 30 days after filing, unless extended by the US government; and

(iv)      completion of the Valerus Group reorganisation pursuant to the business separation agreement (as will be more fully described in the Circular).

If the Shareholders do not pass the Resolution by 5.00 p.m. UK time on 2 January 2014, or if the Board changes its recommendation that Shareholders should vote in favour of the Resolution, then the Seller will have the right to terminate the Acquisition Agreement. If either such termination right is exercised, Kentz must pay the Seller a break fee equal to US$ 8.7 million (£5.33 million). The Seller may also terminate the Acquisition Agreement if Kentz or one of the Kentz Acquisition Entities is in breach of a representation, warranty or covenant contained in the Acquisition Agreement or Employee Matters Agreement and the breach is not cured prior to Completion. In such an instance, payment of the break fee will not be required.

The Acquisition Agreement contains warranties that, in terms of scope, are customary for a transaction of this nature. In terms of recourse, Kentz and the Seller have agreed to indemnify each other for losses suffered after Completion as a result of (i) the breach by the other party of representations and warranties or covenants made by such party in the Acquisition Agreement, or (ii) liabilities retained or assumed by the other party. The indemnification obligations of the Seller are subject to a number of limitations, including; with respect to breaches of non-fundamental representations and warranties, a minimum requirement of $50,000 per claim, a "deductible" of US$4.35 million (£2.67 million) and a liability cap of US$43.5 million (£26.65 million).

The Seller and its affiliates are also subject to non-competition and non-solicitation covenants whereby they are prohibited from competing in the field solutions business anywhere in the United States, Mexico, Columbia, Venezuela, Brazil or the United Arab Emirates or soliciting the employment of the field solutions employees of the Enlarged Group for a period of two years immediately following Completion, subject to certain exceptions set out in the Circular.

 

Business Separation

Prior to Completion, the Seller will complete a reorganisation of the Valerus Group's structure, the details of which have been agreed with Kentz. This will cause the assets and liabilities of the US-based business of Valerus FS to be transferred into U.S. Newco, one of the subsidiaries of the Valerus Group that will be acquired by the Kentz Acquisition Entities pursuant to the Acquisition. Following Completion, entities that comprise the Target Group will be indirectly wholly owned subsidiaries of Kentz.

All Valerus Group personnel who are integral to Valerus FS will be offered employment with U.S. Newco.

Transition Services and Other Acquisition - Related Agreements

It is proposed that, following Completion, the Seller will provide U.S. Newco and the Kentz Acquisition Entities with certain administrative, accounting, budgeting and forecasting services based on a pre-determined fee schedule for periods ranging from three to six months.

It is also proposed that, following Completion, U.S. Newco will provide the Seller with certain information technology, facilities, accounts payable, accounts receivable, human resources, employee benefits, payroll and other support services based on a pre-determined fee schedule for periods ranging from six months to one year.

Upon Completion of the Acquisition, U.S. Newco and the Seller will enter into additional transaction documents, including a master alliance agreement and a compressor supply agreement, which will be more fully described in the Circular.

Financing of the Acquisition

A debt structure comprising a term facility and a revolving loan facility (together, the "Facility Agreement") has been negotiated with Barclays Ireland Bank PLC, Lloyds Bank plc, BNP Paribas Fortis SA/NV, DNB Bank ASA and HSBC Bank Middle East Limited and amounts to US$560 million. The Facility Agreement is dated 9 December 2013 and is structured as: (i) a multicurrency term loan facility of US$400 million (the "Term Loan"); and (ii) a multicurrency revolving loan facility of US$160 million (the "RCF"). The Facility Agreement has a term of four years and five months and is on current market terms, with an initial margin of 2.25 per cent. per annum until the first covenant test. The applicable margin will thereafter range between 1.75 per cent. and 2.50 per cent. dependent on the Enlarged Group's net debt to EBITDA ratio. The Term Loan is available for the acquisition of the Target Group and the RCF is available for the general corporate purposes of the Enlarged Group, including any excess acquisition costs. The Board currently intends to hedge the Enlarged Group's interest rate exposure following Completion.

The consideration for the Acquisition will be satisfied by full drawdown of the Term Loan, with the balance satisfied from either Kentz's existing cash resources or drawdown on the RCF. The Board believes the RCF will provide the Company with the operational flexibility to fund further growth opportunities going forward.

Financial Effects of the Acquisition

For the year ended 31 December 2012, Valerus FS generated EBITDA of US$51.5 million on revenues of US$492.9 million. At 31 December 2012, Valerus FS had net assets of US$46.7 million and gross assets of $184.1 million.

For the purposes of preparation of the financial information on Valerus FS, an approximation has been made when allocating central selling, general and administrative costs and therefore these amounts are not necessarily representative of the amounts that may arise in the future.

On a standalone basis, the Acquisition is expected to be earnings enhancing for Kentz in the first full financial year of ownership and is expected to generate a return on investment exceeding the Group's pre-tax cost of capital. However, no statement in this announcement or the Circular should be interpreted to mean that the future earnings per share of the Enlarged Group will necessarily match or exceed the historical published earnings per share of Kentz.

As at 30 June 2013, Kentz had net assets of US$306.3 million. Transaction costs are anticipated to be approximately US$5 million and will be expensed in the Company's income statement in the year ending 31 December 2013. An unaudited pro forma statement of net assets illustrating the effect of the Acquisition and the drawdowns under the Facility Agreement on the Group's net assets as at 30 June 2013, as if they had been undertaken at that date, will be set out in the Circular. This information is unaudited and has been prepared for illustrative purposes only. It shows that the impact of the Acquisition, the drawdown of some of the available funds under the Facility Agreement and the Acquisition would have led to a pro forma movement in net assets from US$306.3 million to US$301.3 million as at 30 June 2013.

The Directors expect pro forma net debt to be approximately US$262.6 million on Completion, which is expected to reduce significantly by the end of the first full financial year after Completion. The Board considers that the level of debt following the Acquisition is appropriate in the context of the earnings of the Enlarged Group, and that based on those earnings the Group will be in a position to repay the Term Loan (as described above), maintain its dividend policy and generate further surplus cash for operational growth.

Current Trading, Trends and Prospects

As announced on 18 November 2013 the Group saw strong order intake of US$1.8 billion in the first ten months of the year driven by increased bidding activity in the first half of 2013, with backlog of US$3.0 billion at the end of October 2013, of which US$1.225 billion is on a fixed cost basis and US$1.775 billion is on a cost plus basis. Since 18 November 2013, the Group has continued to trade in line with management's expectations and, as previously stated, Kentz anticipates results to be weighted towards the second half of the year. The Group has in excess of 60 per cent. of orders for 2014 under contract as at the date of this announcement, providing a great deal of confidence for further growing the business in 2014.

Valerus FS has experienced strong year-on-year revenue growth historically and the Board is confident this trend will continue in 2014. Valerus FS' business is a combination of backlog driven and book and burn work and as a result of contracts won in 2013, 60 per cent. of projected revenues for the 2014 financial year are under contract. A significant portion of this is from the Processing & Treating business unit and Integrated Services business unit, both of which are primarily backlog driven and key drivers of growth for Valerus FS. At the end of 2013, backlog is expected to be approximately US$398 million. Valerus FS' backlog is considered low risk by the Board due to its high degree of standardised solutions and control of procurement risk through management of manufacturing and front end engineering.



 

GLOSSARY

 

"backlog"

backlog consists of the estimated revenue from orders on hand for which a letter of award has been received for the EPC, Construction and TSS global business units, at any given time, less sales booked against those orders up to that date. Backlog is not an audited measure. Other companies may calculate the measure differently;

 

"bcfd"

 

billion cubic feet per day; typically used to measure a volume of gas;

"book and burn"

 

orders that are received and filled quickly, generally in a period of less than 3 months;

"cost plus"

a cost plus contract, also termed a cost reimbursement contract; where the contractor is paid for all of its allowed expenses to a set limit plus additional payments to allow for a profit;

 

"EPC"

engineering, procurement and construction; a type of service where one company engineers the facility, procures the necessary equipment and materials, and constructs the project;

 

"EPCM"

engineering procurement and construction; management services; a type of service where one company engineers the facility, procures the necessary equipment and materials, and manages a construction or multiple construction contractors, but does not self-perform the actual construction of the facility;

 

"EPF"

early production facility; typically a smaller oil and/or gas plant brought on stream before the main or larger production facility;

 

"field solutions market"

includes a comprehensive suite of products and EPC services that enable efficient oil and gas production both in the US and globally. Services include compression systems, oil and gas production equipment, oil and gas processing and treating including NGL extraction;

 

"mmcfd"

million cubic feet per day; typically used to measure a volume of gas;

 

"NGL"

natural gas liquids are low molecular weight hydrocarbons such as ethane, propane and butane recovered from natural gas;

 

"proppant"

used in hydraulic fracturing to hold open the newly created fractures; typically sand, ceramic pellets or other small incompressible particles;

 

"TSS"

Technical Support Services business unit within Kentz, providing range of services for capital projects from front-end and detailed engineering, project and construction management, through to completions and commissioning; and

 

"well-pad"

well-pad is a group of wells that share common processing facilities such as separators, gathering pipelines etc.

 

 



 

 

DEFINITIONS

The following terms have the following meanings throughout this announcement unless the context otherwise requires:

 

"Acquisition"

the proposed acquisition of Valerus FS as described in this announcement and the Circular

 

"Board" or "Directors"

the directors of the Company as at the date of this announcement

 

"Completion"

completion of the Acquisition in accordance with the terms of the Acquisition Agreement;

 

"Enlarged Group"

the enlarged Kentz Group, following Completion;

 

"Extraordinary General Meeting"

the extraordinary general meeting of the Company to be convened for 10.00 a.m. on 2 January 2014 (or any adjournment of it);

 

"Facility Agreement"

the new term facility and revolving loan facility of US$560 million dated 9 December 2013 and arranged by Barclays Bank PLC, Lloyds Bank PLC, BNP Paribas, DNB NOR Bank ASA and HSBC Bank Middle East Limited;

 

"HSR Act"

the US Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended;

 

"Investec"

Investec Bank plc;

 

"Kentz Acquisition Entities"

Kentz U.S. Holdings Inc., Kentz Management Limited and Kentz do Brasil Servicos de Suporte Tecnico E Projetos Industria;

 

"Kentz" or the "Company"

Kentz Corporation Limited;

 

"Kentz Group" or the "Group"

Kentz and its subsidiary undertakings from time to time;

 

"Resolution"

the resolution to be set out in the Notice of Extraordinary General Meeting;

 

"Seller"

Valerus Compression Services, LP;

 

"Shareholder"

a registered holder of Shares;

 

"Shares"

ordinary shares of 1p each in the capital of the Company;

 

"Target Group"

U.S. Newco; Valerus Solucoes de Energia Ltda.; Valerus Compression Services de Columbia Ltda.; Valerus Eastern Hemisphere FZE; Valerus Services C.C.A.; Valerus Mexico VIP Holdings S de RL de CV; and Valerus Integrated Projects de Mexico S de RL de CV

"TPG"

TPG Capital L.P.;

 

"UK" or "United Kingdom"

the United Kingdom of Great Britain and Northern Ireland;

 

"US" or "United States"

the United States of America;

 

"US dollars" or "US$"

the lawful currency of the United States of America;

 

"U.S. Newco"

Valerus Field Solutions L.P.;

 

"Valerus FS"

Valerus Field Solutions, the business being acquired pursuant to the Acquisition; and

 

"Valerus Group"

the Valerus business comprising the compression systems and the field solutions business, the holding company of which is the Seller.

 

 



[1] This should not be interpreted to mean that the future earnings per share of the Enlarged Group will necessarily match or exceed the historical published earnings per share

 

of Kentz


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
ACQLIFIRFSLAIIV

a d v e r t i s e m e n t