Keane Group, Inc. (“Keane” or the “Company”) Has Announced it has placed orders for approximately 150,000 newbuild hydraulic horsepower, (frac pumps) representing three additional hydraulic fracturing fleets, which will increase its position as a leading provider of completions services in the U.S.
“Supply and demand fundamentals for U.S. oil and gas well completions remain highly constructive for quality completions service providers,” said James Stewart, Chairman and Chief Executive Officer of Keane. “Favorable conditions have continued to improve throughout the year, and robust 2018 capital budgets announced by producers in recent weeks have amplified and validated the growing demand for our services, which remains in excess of supply. This visibility, coupled with additional pricing improvements, provide the firmness of demand and favorable economics we require to deploy newbuild capital and further our growth trajectory.
Given the deployment of all of our previously idled horsepower in 2017, and our partnership with the largest and most efficient customers, we are well positioned to preemptively extend our growth and capitalize on a tightening supply chain. In response, we made the strategic decision to place orders for three additional Tier 4 hydraulic fracturing fleets and wireline trucks, which we expect to deploy in the Permian Basin in response to strong demand. Once delivered, these additional fleets will increase our total hydraulic horsepower to more than 1.3 million, with nearly 800,000 hydraulic horsepower in the Permian Basin concentrated in the Delaware Basin.”
“Improving market signals throughout 2017 have resulted in customer discussions regarding committed newbuild fleets with pricing that now satisfies our margin requirements and capital return thresholds,” said Greg Powell, President and Chief Financial Officer of Keane. “We are in advanced discussions with both existing and new customers and expect to execute dedicated agreements for the new fleets by the end of the first quarter of 2018. Further, our established relationships with component and assembly providers have allowed us to optimize newbuild cost and secure beneficial delivery dates, with two fleets expected to be delivered and deployed by the end of the second quarter of 2018, and a third by the end of the third quarter of 2018.
We expect these newbuilds to initially generate annualized Adjusted Gross Profit per fleet of greater than $20 million, representing attractive payback economics consistent with our strategic plan. Total capital expenditures for the three fleets will be approximately $115 million, or approximately $770 per hydraulic horsepower, and we intend to fund such capital expenditures out of cash on hand and expected cash flow from operating activities, as 20% of the cost is due on signing with the balance due upon delivery. This favorable price per hydraulic horsepower is driven by our established supplier relationships, timing of orders, as well as technological advancements to optimize our wellsite footprint. We expect that growth from these newbuilds, in addition to the profitability for our existing 26 fleets, will generate attractive cash flow in 2018. We remain committed to assessing all potential opportunities to maximize shareholder value over the near and long-term, including organic growth, acquisitions, capital return and debt repayment.”
About Keane Group, Inc.
Headquartered in Houston, Texas, Keane is one of the largest pure-play providers of integrated well completion services in the U.S., with a focus
Keane Group, Inc. (“Keane” or the “Company”) today announced that it has placed orders for approximately 150,000 newbuild hydraulic horsepower, representing three additional hydraulic fracturing fleets, which will increase its position as a leading provider of completions services in the U.S.
“Supply and demand fundamentals for U.S. oil and gas well completions remain highly constructive for quality completions service providers,” said James Stewart, Chairman and Chief Executive Officer of Keane. “Favorable conditions have continued to improve throughout the year, and robust 2018 capital budgets announced by producers in recent weeks have amplified and validated the growing demand for our services, which remains in excess of supply. This visibility, coupled with additional pricing improvements, provide the firmness of demand and favorable economics we require to deploy newbuild capital and further our growth trajectory. Given the deployment of all of our previously idled horsepower in 2017, and our partnership with the largest and most efficient customers, we are well positioned to preemptively extend our growth and capitalize on a tightening supply chain. In response, we made the strategic decision to place orders for three additional Tier 4 hydraulic fracturing fleets and wireline trucks, which we expect to deploy in the Permian Basin in response to strong demand. Once delivered, these additional fleets will increase our total hydraulic horsepower to more than 1.3 million, with nearly 800,000 hydraulic horsepower in the Permian Basin concentrated in the Delaware Basin.”
“Improving market signals throughout 2017 have resulted in customer discussions regarding committed newbuild fleets with pricing that now satisfies our margin requirements and capital return thresholds,” said Greg Powell, President and Chief Financial Officer of Keane. “We are in advanced discussions with both existing and new customers and expect to execute dedicated agreements for the new fleets by the end of the first quarter of 2018. Further, our established relationships with component and assembly providers have allowed us to optimize newbuild cost and secure beneficial delivery dates, with two fleets expected to be delivered and deployed by the end of the second quarter of 2018, and a third by the end of the third quarter of 2018. We expect these newbuilds to initially generate annualized Adjusted Gross Profit per fleet of greater than $20 million, representing attractive payback economics consistent with our strategic plan. Total capital expenditures for the three fleets will be approximately $115 million, or approximately $770 per hydraulic horsepower, and we intend to fund such capital expenditures out of cash on hand and expected cash flow from operating activities, as 20% of the cost is due on signing with the balance due upon delivery. This favorable price per hydraulic horsepower is driven by our established supplier relationships, timing of orders, as well as technological advancements to optimize our wellsite footprint. We expect that growth from these newbuilds, in addition to the profitability for our existing 26 fleets, will generate attractive cash flow in 2018. We remain committed to assessing all potential opportunities to maximize shareholder value over the near and long-term, including organic growth, acquisitions, capital return and debt repayment.”
Headquartered in Houston, Texas, Keane is one of the largest pure-play providers of integrated well completion services in the US, with a focus on complex, technically demanding completion solutions. Keane’s primary service offerings include horizontal and vertical fracturing, wireline perforation and logging, engineered solutions, and cementing, as well as other value-added service offerings.
Keane went public early this year after expanding in 2016 through the acquisition of Calgary-based Trican Well Services’ pressure pumping business.
Corporate headquarters
5825 North Sam Houston Parkway West, Suite 600
Houston, TX 77086
281.929.0370