In conjunction with the closing of the merger, QES shares ceased trading on the New York Stock Exchange prior to the market open on July 28, 2020, and KLXE remains listed on the Nasdaq Global Select Market under the symbol "KLXE." At the time of the closing, the holders of QES received 0.0969 shares of KLXE common stock in exchange for each share of QES common stock held. On July 26, 2020, the Company's Board of Directors approved a 1 for 5 reverse stock split to stockholders that became effective at 12:01 a.m. on July 28, 2020. KLXE and QES stockholders own approximately 59% and 41%, respectively, of the equity of the combined company on a fully-diluted basis. The closing follows approval of the merger transaction by both KLXE and QES stockholders at stockholder meetings held on July 24, 2020.
"We are pleased to complete the previously announced merger of KLX Energy Services and Quintana Energy Services, bringing together two companies with tremendous strengths and capabilities that make us uniquely equipped to support our blue-chip customers during this unprecedented time," said Christopher J. Baker, President and CEO of the combined company. "As a premier provider of completion, production and intervention, and drilling solutions, KLXE will continue to focus on operational excellence across its broad product and service offerings as it supports and expands its portfolio of proprietary technologies that provide a competitive advantage. Looking ahead, the Company expects to pursue strategic, accretive consolidation opportunities that further strengthen the Company's competitive positioning and capital structure, drive efficiencies, accelerate growth, and create long-term stockholder value."
Tom McCaffrey, former President and CEO of KLXE and a continuing KLXE Board member, said, "This transaction culminates an accelerated yet extensive process by the management and boards of both companies to enhance stockholder value. The company will be rationalizing two of the largest fleets of coiled tubing and wireline assets, which will dramatically reduce future capital spending and facilitate the pull-through of KLXE's asset-light services. This transaction positions the Company to better weather the current storm and, ultimately, to grow on a significantly reduced capital expenditure budget. I look forward to chairing the Board's Integration Committee to provide oversight of the integration and synergy realization plan, which is expected to generate at least $40 million in annualized cost savings within 12 months as management aligns common roles, processes and systems throughout each function and region in the Company. We are confident that KLXE will be on the leading edge of the recovery once our operations and support functions are fully integrated and aligned."
Financial Synergies
Excluding the impact of the estimated $40 million of annualized cost synergies from the merger, the combined companies' fiscal year 2019 pro forma revenues were more than $1 billion, and adjusted EBITDA was $106 million. Pro forma for the combination, KLXE has an improved liquidity and capital structure with approximately $117 million of cash1 and an undrawn $100 million revolving credit facility, of which approximately $95 million was available1. The merger is expected to be significantly accretive to free cash flow per share. Importantly, the combined company has a strong balance sheet to support critical ongoing business initiatives as well as the pursuit of additional value-creating consolidation opportunities within the oilfield service industry.
Operational Synergies
The combined organization has a highly talented workforce with a commitment to safety, performance, customer satisfaction, and profitability. Complementary to being the foremost U.S. provider of large diameter coiled tubing services, the Company also offers an industry-leading portfolio of asset-light products and services to its blue-chip customers across all major onshore oil and gas basins in the United States. The Company is now able to streamline operational support and technology advancements across a broader suite of service offerings. Finally, through its increased scale and product and service offerings designed to meet the needs of customers throughout the lifecycle of the well, KLXE is expected to generate cross-selling opportunities that allow for an increased share of customer spend.
Leadership and Structure
KLXE will operate under the executive leadership of QES's legacy management team, including Christopher J. Baker, President and Chief Executive Officer, and Keefer M. Lehner, EVP and Chief Financial Officer. The Board of Directors is comprised of nine directors, with five legacy KLXE directors and four legacy QES directors. John Collins, current Chairman of the Board of KLXE, will continue to serve as Chairman, and Tom McCaffrey, former President and CEO of KLXE, will continue to serve on the Board and as chair of its Integration Committee. Additional leadership biographies will be available on the Company's website, www.klxenergy.com. KLXE's corporate headquarters is now located in Houston, Texas.
Additional Resources
For more information on the combination, please view the initial announcement and presentation here:
Announcement:
https://investor.klxenergy.com/news-releases/news-release-details/klx-energy-services-and-quintana-energy-services-combine-all
Presentation:
https://investor.klxenergy.com/static-files/6014c6f9-5bdc-44dc-b81b-bb92b8b08d36
Advisors
Goldman Sachs & Co. LLC served as exclusive financial advisor to KLXE and Freshfields Bruckhaus Deringer US LLP served as legal counsel.
Tudor, Pickering, Holt & Co. served as exclusive financial advisor to QES and Skadden, Arps, Slate, Meagher, & Flom LLP served as legal counsel.
About KLX Energy Services
KLX Energy Services is a leading US onshore provider of mission critical oilfield services focused on completion, production and intervention, and drilling activities for the most technically demanding wells. KLX Energy Services' experienced and technically skilled personnel are supported by a broad portfolio of specialized tools and equipment, including innovative proprietary tools developed by KLXE's in-house R&D team. KLX Energy Services supports its broad customer base on a 24/7 basis from over 50 service facilities located throughout the major onshore oil and gas producing regions of the United States. More information is available at www.klxenergy.com.
1 Cash balance is presented based on respective Q1 2020 quarter end for KLXE (April 30, 2020) and QES (March 31, 2020), net of the repayment of the QES credit facility, and availability is also presented based on the respective Q1 2020 quarter end for KLXE and QES adjusted for the repayment of the QES credit facility.
Contacts:
Keefer M. Lehner, EVP & Chief Financial Officer
832-930-8066
IR@KLXEnergy,com
Dennard Lascar Investor Relations
Ken Dennard / Natalie Hairston
713-529-6600
KLXE@dennardlascar.com
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