Matlin & Partners Acquisition Corporation (NASDAQ: MPAC) is a special purpose acquisition company incorporated in March 2016 to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
The company recently announced that MPAC and U.S. Well Services, LLC (“USWS”‘) a high-quality provider of hydraulic fracturing services and market leader in electric-powered fracturing, would enter into a merger and contribution agreement whereby USWS will combine with MPAC to become a publicly listed company with an anticipated initial total enterprise value of approximately $588 million. The proposed business combination is subject to customary closing conditions, including regulatory approvals and the approval of MPAC stockholders. The combination is expected to be completed in the fourth quarter of 2018.
Key synergies of the merger:
- Creates one of the first publicly traded oilfield service companies with all-electric hydraulic fracturing capabilities using its proprietary technology, Clean Fleet®
- Enables U.S. Well Services to expand its fleet size to 17 spreads with approximately 800,000 hydraulic horsepower
- Secures a $135 million PIPE commitment at $10.00 per share from leading institutional investors led by Crestview Partners
- The total enterprise value of $588 million or 2.6x 2019 projected adjusted EBITDA
- U.S. Well Services to be led by a strong existing and expanded management team
- Conference call scheduled for July 16, 2018, at 11:00 a.m. Eastern Time to discuss the business
Matlin & Partners’ Investment Thesis:
As per management, this combination with USWS represents a significant opportunity in a provider of electric-powered hydraulic fracturing services with disruptive technology and considerable growth potential.
The capital being provided through this business combination will support USWS’ efforts to build on the advantages of its Clean Fleet® technology to drive growth through increased fleet deployments while strengthening the company’s balance sheet and positioning the company for long-term success. MPACU’ confidence in the business is shared by existing stockholders and USWS management, who are rolling 100% of their equity to participate in the potential upside of the combination.
About Clean Fleet Technology: Clean Fleet® technology is proven to successfully reduce emissions by 99%, dramatically decrease sound pollution and generate operational cost savings upwards of 90% of fuel costs. This technology is the first fully electric, fully mobile well stimulation system powered by natural gas in the industry.
About USWS: U.S. Well Services, provides high-pressure, hydraulic fracturing services in unconventional oil and natural gas basins. Both its conventional (diesel) and Clean Fleet® (electric) hydraulic fracturing fleets are among the most reliable and highest performing fleets in the industry, with the capability to meet the most demanding pressure and pump rate requirements in the industry.
USWS operates in many of the active shale and unconventional oil, and natural gas basins of the United States and its clients benefit from the performance and reliability of equipment and personnel. Specifically, all of USWS’ fleets operate on a 24-hour basis and have the ability to withstand the high utilization rates that result in more efficient operations.
Latest Quarter Financial position:
Revenues and Profitability: The company is a still at a nascent stage of operations and yet to demonstrate an established track record of revenue and profitability along with efficient capital management.
Liquidity: At the end of March 31, 2018, the Company had cash and cash equivalents of $482,694.
Financials of USWS (all figures in millions):
Key risk factors and potential stock drivers:
- MPAC is an early stage company with no operating history and no revenues. The outlook over the near to medium term is dependent on company’ ability to achieve a sustainable increase in the revenue and profitability.
- Because of its limited resources and the competition for business combination opportunities, it may be difficult for MPAC to complete its upcoming initiatives without any time and cost overruns. Any significant overruns could adversely impact the business and financial risk profile of the company.
- MPAC’ ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain crucial for the company.
- On Tuesday, July 24thth, 2018, MPAC closed at $10.03, on an above average volume of 14,192 shares exchanging hands. Market capitalization is $94.152 million.
- In the past 52 weeks, shares of MPAC have traded as low as $9.65 and as high as $10.03
- The present support and resistance levels for the stock are at $9.75 & $10.45 respectively.
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