HOUSTON - Archrock, Inc. (NYSE:AROC), a leading natural gas compression services provider, announced today the initiation of a public offering of 11 million shares of common stock. The company also plans to give underwriters a 30-day option to purchase up to an additional 1.65 million shares.
The proceeds from this offering are designated to partially fund the acquisition of Total Operations and Production Services, LLC (TOPS), an arrangement that was previously disclosed. Archrock aims to utilize the offering's net proceeds, along with cash on hand, borrowings under its revolving credit facility, and potentially other debt financings, to cover the cash portion of the purchase price for TOPS.
Archrock has clarified that the completion of the TOPS transaction is not contingent upon the success of the stock offering, nor is the offering dependent on the acquisition's finalization. If the acquisition does not proceed, the company has stated that the funds raised will be allocated for general corporate use.
The offering is being managed by several financial institutions, including J.P. Morgan, Evercore ISI, Wells Fargo Securities, and Citigroup, acting as the underwriters.
Archrock is headquartered in Houston, Texas, and is recognized for its commitment to providing midstream natural gas compression services across the United States. The company emphasizes safe and environmentally responsible operations in its mission to help customers produce, compress, and transport natural gas.
The shares in this offering will be sold pursuant to an effective shelf registration statement on Form S-3 previously
In other recent news, Archrock, a leading natural gas compression services company, has announced a significant acquisition and robust financial performance. Archrock has agreed to acquire Total Operations and Production Services (TOPS) in a $983 million deal, expected to close by the end of 2024. This acquisition, inclusive of approximately 580,000 horsepower of electric motor drive compression assets, is projected to be immediately accretive to Archrock's earnings and dividends per share.
Simultaneously, Archrock reported a substantial increase in Q1 2024 net income, climbing to $41 million from $16 million in the same period last year. This strong financial performance has led the company to raise its full-year adjusted EBITDA guidance. The acquired assets from TOPS are anticipated to generate roughly $136 million of Q3 2024 annualized adjusted EBITDA, excluding any expected synergies.
In light of these developments, RBC Capital has upgraded its price target for Archrock from $21.00 to $22.00, maintaining an outperform rating. RBC Capital attributes this adjustment to robust market dynamics in the natural gas compression sector, and Archrock's potential to improve pricing and utilization rates. These recent developments highlight Archrock's strategic advancements and underscore its potential for future growth.
InvestingPro Insights
Archrock, Inc. (NYSE:AROC) is navigating through a significant period with its latest public offering aimed at funding the acquisition of TOPS. In light of these developments, a glance at the company's financial health and market performance through InvestingPro's lens offers investors a comprehensive perspective.
InvestingPro Data highlights that Archrock has a market capitalization of $3.65 billion, indicating its substantial presence in the industry. The company's P/E ratio stands at 28.29, suggesting a valuation that investors are willing to pay for its earnings. Moreover, Archrock has shown a robust revenue growth of 17.17% in the last twelve months as of Q1 2024, which is a testament to the company's expanding operations and market reach.
An InvestingPro Tip points out that Archrock's stock has been trading at a low P/E ratio relative to its near-term earnings growth, which could be an attractive point for value investors considering the company's growth prospects. Additionally, the company has been able to maintain dividend payments for 11 consecutive years, which may appeal to income-focused investors, especially in the current economic environment where steady dividends are prized.
Investors interested in a deeper dive into Archrock's performance and potential can access more InvestingPro Tips by visiting https://www.investing.com/pro/AROC. There are 14 additional tips available that can provide further guidance on the company's stock movements and financial standing. For those looking to leverage the full suite of analytics and insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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