Archrock makes major acquisition

A Total Operation and Production Services (TOPS) compression installation. Archrock said it will acquire TOPS for US$983 million. (Image: TOPS)

Archrock said it will acquire Total Operations and Production Services (TOPS), a leading provider of contract gas compression services for the Permian Basin.

Archrock will acquire TOPS, including approximately 580,000 hp of predominantly young electric motor drive compression assets, in a cash-and-stock transaction valued at US$983 million.

“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 CEO of Archrock. “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.”

Archrock said the acquisition enhances its 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. It also 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. The move also increases Archrock’s electric compression horsepower to approximately 648,000.

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.