Source Energy Services Ltd. has entered into an asset purchase to acquire a Northern White proppant mine in Blair, Wis., two large frac sand terminals located in Chetwynd and Fort Nelson, British Columbia, and exploration rights to more than 3,600 acres of land in the Peace River Valley of Alberta from certain affiliates of Preferred Proppants LLC.
The consideration for the acquisition includes $80 million in cash, subject to closing and post-closing adjustments.
The transaction:
• Increases Source’s expected 2018 Northern White proppant production capacity to 4.8 million metric tons per annum (mmtpa) including the addition of 1.0 mmtpa of low-cost production from the Blair II Facility.
• Enables expected enhanced margins on acquired assets by redirecting volumes through Source’s integrated mine to wellsite model.
• Provides additional frac sand that can be used to continue to expand Source’s offering.
• Increases the coverage of Source’s WCSB terminal network by adding two large-scale frac sand terminals in British Columbia.
• Secures an opportunity to develop a local frac sand mine and processing facility suited for supplying sand to the Montney region.
• Provides significant cash flow per share accretion in 2018 while reducing Source’s debt leverage ratios.
The acquisition is consistent with Source’s strategy of expanding its Northern White proppant processing capacity and its integrated terminal network, to meet the increasing proppant needs of its customers in the WCSB. The acquisition will immediately expand Source’s logistics network and increase the company’s ability to provide reliable and timely delivery of proppant to its customers.
Brad Thomson, president and CEO of Source, stated, “The Acquisition provides Source with a package of assets that nicely complements our existing facilities and immediately enables us to increase the level of service we provide to our customers. From the production facilities at Blair to the rail assets and the western Canadian terminals, the entire Preferred package fits like a glove. With this acquisition, we’ll continue to meet the growing demand we’re witnessing in the WCSB. We’re excited about the acquisition and the opportunity to work with the employees that will be joining us from Preferred.”