Archrock subsidiary plans senior notes sale for acquisitions

Energy infrastructure company Archrock, Inc. (NYSE: NYSE:AROC) announced Monday that its wholly-owned subsidiary, Archrock Partners, L.P., along with Archrock Partners Finance Corp., is planning to offer $500 million in senior notes due in 2032.

The offering is subject to market conditions and other factors.

The proceeds from the sale are earmarked for the acquisition of Total Operations and Production Services, LLC, a transaction previously disclosed by the company. The remaining funds, if any, will be used for general corporate purposes, which may include repaying debt under Archrock's revolving credit facility.

This debt offering is not contingent on the completion of the acquisition, nor is the acquisition dependent on the success of the notes sale. The senior notes will not be registered under the Securities Act of 1933, as amended, and will be available only to certain institutional buyers and non-U.S. persons outside the United States.

Archrock, headquartered in Houston, Texas, specializes in midstream natural gas compression and aftermarket services. Its subsidiary, Archrock Partners, is known for providing similar services to clients in the oil and natural gas industry across the United States.

Archrock reported net income saw a substantial increase, reaching $34 million, up from $25 million in the same quarter of the previous year. Additionally, Archrock's adjusted EBITDA rose by 15% to $130 million.

One notable development is Archrock's strategic acquisition of TOPS, a similar contract compression company, for $983 million. This acquisition is expected to strengthen Archrock's market position and boost earnings and dividends.

Despite a slight cool down in dry gas plays, Archrock's majority presence in liquids-rich areas, particularly the Permian, and its pricing power are anticipated to continue driving positive business performance.

Analysts note that Archrock maintains a strong financial position with a leverage ratio of 3.2x, and the forecast for $20-25 million in earnings remains unchanged. The company plans to increase pricing on most of its fleet over the next 18 months. The acquisition of TOPS is projected to fortify Archrock's market presence and increase earnings.

InvestingPro Insights

As Archrock, Inc. (NYSE:AROC) navigates through its strategic financial maneuvers, including the offering of senior notes and the acquisition of Total Operations and Production Services, LLC, real-time metrics and insights from InvestingPro provide a deeper understanding of the company's financial health and market position.

InvestingPro Data indicates that Archrock has a market capitalization of approximately $3.2 billion, illustrating its significant presence in the midstream natural gas compression sector. The company's P/E ratio stands at 21.44, suggesting that investors are willing to pay a premium for its earnings. This valuation is supported by a strong revenue growth of 15.61% over the last twelve months as of Q2 2024, indicating a robust expansion in its business operations.

One of the InvestingPro Tips highlights Archrock's sustained dividend payments over the last 11 years, which may be particularly attractive to income-focused investors. Additionally, the company's shares have experienced a substantial return of 50.85% over the past year, signaling strong investor confidence and market performance.

It's important to note that Archrock is trading at a low P/E ratio relative to its near-term earnings growth, an insight that could be of interest to value investors looking for growth at a reasonable price. For those considering a deeper dive into the company's financials and future prospects, InvestingPro offers a total of 9 additional tips, available at https://www.investing.com/pro/AROC, which could further inform investment decisions.

For investors and analysts following Archrock, these insights and data points provide a snapshot of the company's financial stability and growth potential as it continues to serve the oil and natural gas industry in the United States.

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