Archrock Announces Closing of $700 Million of Senior Notes Offering

Rhea-AI Summary

Archrock (NYSE: AROC) has announced the closing of a $700 million senior notes offering by its subsidiary, Archrock Partners. The notes, due in 2032, carry a 6.625% interest rate. The proceeds will primarily fund the acquisition of Total Operations and Production Services, , and a tender offer for up to $200 million of Archrock Partners' existing 6.875% senior notes due 2027. Any remaining funds will be used for general corporate purposes, potentially including debt repayment.

The notes were offered privately to qualified institutional buyers and non-U.S. persons, in compliance with Securities Act regulations. This offering is not registered under the Securities Act and is subject to certain restrictions on resale and transfer.

Positive

• Successful closing of a $700 million senior notes offering
• Funds acquisition of Total Operations and Production Services,
• Potential reduction of higher-interest debt through tender offer
• Opportunity for debt repayment and improved financial flexibility

Negative

• Increased long-term debt with new $700 million note issuance
• Higher interest expense with 6.625% rate on new notes

Insights

Financial Analyst

Archrock's successful $700 million senior notes offering is a significant financial move with multiple implications. The 6.625% interest rate for 2032 maturity seems competitive in the current market. This capital raise will primarily fund the acquisition of Total Operations and Production Services, , potentially expanding Archrock's market presence and operational capabilities. The tender offer for up to $200 million of existing 2027 notes at 6.875% suggests a proactive debt management strategy, likely aimed at optimizing the company's debt structure and potentially reducing interest expenses. The flexibility to use remaining proceeds for general corporate purposes, including debt repayment, indicates prudent financial management. However, investors should monitor how this increased debt load impacts Archrock's balance sheet and future financial flexibility.

Legal Expert

The private offering structure of these senior notes under Rule 144A and Regulation S is a common approach for expedited capital raising without the lengthy SEC registration process. This method restricts initial sales to qualified institutional buyers and non-U.S. persons, potentially limiting liquidity but allowing for faster execution. The explicit disclaimers about the notes not being registered under the Securities Act are standard legal precautions to prevent unintended public distribution. Investors should note that these unregistered securities may have resale restrictions, potentially affecting their liquidity in the secondary market. The company's careful wording around the use of proceeds and the acquisition demonstrates compliance with securities laws and provides transparency to investors, which is important for maintaining market trust.

Market Research Analyst

Archrock's strategic move to acquire Total Operations and Production Services, signals a potential market expansion in the energy services sector. This acquisition, funded by the new notes offering, could strengthen Archrock's competitive position and possibly lead to increased market share. The energy services market, particularly in natural gas compression, is evolving with increasing focus on efficiency and environmental considerations. Archrock's investment suggests confidence in the sector's future growth. The company's ability to secure $700 million in financing also indicates strong investor confidence in its business model and growth prospects. However, the success of this strategy will depend on effective integration of the acquired assets and the overall performance of the energy sector. Investors should closely monitor post-acquisition synergies and any shifts in Archrock's market positioning following this significant financial and operational move.

HOUSTON, Aug. 26, 2024 (GLOBE NEWSWIRE) -- Archrock, Inc. (NYSE: AROC) (“Archrock”) today announced the closing of the previously announced private offering by Archrock Partners, L.P. (“Archrock Partners”), a wholly-owned subsidiary of Archrock, of $700 million aggregate principal amount of 6.625% senior notes due 2032 (the “Notes”). Archrock Partners Finance Corp. (“Finance Corp.” and, together with Archrock Partners, the “Issuers”), a wholly-owned subsidiary of Archrock Partners, is the co-issuer of the Notes. Archrock intends to use the net proceeds from the offering of the Notes to fund a portion of the cash consideration for the previously announced acquisition of 100% of the issued and outstanding membership interests of Total Operations and Production Services, LLC (the “Acquisition”), to fund the previously announced tender offer to purchase for cash up to an aggregate principal amount of $200 million of the Issuers’ 6.875% senior unsecured notes due 2027 and to pay related fees and expenses. Archrock intends to use any remaining net proceeds for general corporate purposes, which may include the repayment of indebtedness, including a portion of the outstanding borrowings under Archrock’s revolving credit facility.

The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the rules promulgated thereunder and applicable state securities laws. The Notes will be offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

About Archrock

Archrock is an energy infrastructure company with a primary focus on midstream natural gas compression and a commitment to helping its customers produce, compress and transport natural gas in a safe and environmentally responsible way. Headquartered in Houston, Texas, Archrock is a premier provider of natural gas compression services to customers in the energy industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment. For more information on how Archrock embodies its purpose, WE POWER A CLEANER AMERICA, please visit www.archrock.com.

About Archrock Partners

Archrock Partners is a leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the United States. Archrock owns all of the limited and general partnership interests in Archrock Partners.

Forward-Looking Statements

All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside Archrock or Archrock Partners’ control. Forward-looking information includes, but is not limited to, statements regarding the intended use of net proceeds from the proposed offering.

While Archrock and Archrock Partners believe that the assumptions concerning future events are reasonable, they caution that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: local, regional and national economic conditions and the impact they may have on Archrock Partners’ and its customers; conditions in the oil and gas industry, including the level of production of, demand for or price of oil or natural gas; changes in safety, health, environmental and other regulations; the financial condition of Archrock Partners’ customers; the failure of any customer to perform its contractual obligations; and the performance of Archrock.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Archrock’s Annual Report on Form 10-K for the year ended December 31, 2023, as amended by Amendment No. 1 on Form 10-K/A, Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and those reports set forth from time to time in Archrock’s filings with the Securities and Exchange Commission, which are available at www.archrock.com. Except as required by law, Archrock and Archrock Partners expressly disclaim any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.

SOURCE: Archrock, Inc.

For information, contact:

Archrock, Inc.

INVESTORS Megan Repine VP of Investor Relations 281-836-8360 investor.relations@archrock.com

MEDIA Andrew Siegel / Jed Repko Joele Frank 212-355-4449

FAQ

What is the purpose of Archrock's (AROC) $700 million senior notes offering?

The primary purpose is to fund the acquisition of Total Operations and Production Services, , finance a tender offer for up to $200 million of existing notes, and potentially repay other debts or fund general corporate purposes.

What is the interest rate and maturity of Archrock's (AROC) new senior notes?

The new senior notes have an interest rate of 6.625% and are due in 2032.

How were Archrock's (AROC) new senior notes offered to investors?

The notes were offered privately to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S of the Securities Act.

Are Archrock's (AROC) new senior notes registered under the Securities Act?

No, the notes are not registered under the Securities Act and are subject to restrictions on resale and transfer.