Nine Energy Divests Production Segment to Brigade

Houston-based Nine Energy Service, Inc. has sold its Production Solutions segment to Brigade Energy Services LLC for $17 million in cash. The deal includes Nine’s fleet of 107 workover rigs, ancillary equipment and real estate associated with its 13 operating facilities throughout the U.S.

“We are pleased to announce the divestiture of our well services business to Brigade. Brigade’s sole focus on excellence in the well service space, coupled with the Brigade management team’s strong leadership capability, gives us comfort our team will be in good hands,” Nine’s President and CEO, Ann Fox, said in a statement.

“This transaction makes Nine a pure-play, asset-light completions company with differentiated technology and service offerings. With the closing of the transaction, our employee base will decrease by approximately 24 percent, while simultaneously lowering capital expenditures. We expect this transaction to be accretive to net income, ROIC and Adjusted EBITDA margin going forward.”

Brigade’s Chief Executive Officer, Justin Bliffen, commented, “We believe this transaction solidifies Brigade as the largest privately-held well services provider in the U.S., enabling us to more rapidly scale up alongside our growing customer demand, while unlocking substantial synergies and economies of scale.”

Bruce Morgan, who had previously served as Nine’s President, Production Solutions, will become President, Administration and Operations, where he will report to David Crombie, Nine’s Chief Operating Officer and Executive Vice President.

Nine has operating facilities in the Permian, Eagle Ford, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and throughout Canada.

“Earnings headwinds and investor disinclination to own energy names with optically lofty debt balances drove painful equity performance for NINE of late, but the sale of Production to Brigade Energy Services reinforces our belief that this management team is intent on making the right strategic moves,” analysts at Tudor Pickering Holt & Co. wrote in a Sept. 3 research note.

“While deal size won’t likely fire folks up, we believe the transaction is EPS, ROIC, and EBITDA margin accretive, plus it allows NINE to focus on its core completions-oriented businesses (C. Tools, Coiled Tubing, Wireline). To frame the margin accretion, gross margins for NINE’s Completions business were ~24 percent in 2018 vs. just 14 percent for Production. Importantly, the deal also eliminates ~24 percent of NINE’s employee base while only reducing revenue by ~10 percent...accretion indeed.”

To contact the author, email bertie.taylor@rigzone.com