Frac Tech files for expanded $1.15 billion IPO

SAN FRANCISCO Fri Sep 9, 2011 3:56pm EDT

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SAN FRANCISCO (Reuters) - Frac Tech International wants to raise up to $1.15 billion in an initial offering of stock that will give investors a chance to back the booming development of oil and gas resources through hydraulic fracturing.

Frac Tech, which helps exploration and production companies perform "frac" jobs and also produces the necessary equipment and materials, first filed for an IPO in December 2010 but withdrew that plan in May.

The quickly growing company, partly owned by Chesapeake Energy Corp (CHK.N), submitted plans with U.S. regulators on Friday to raise $1.15 billion -- up from the $690 million it filed for last year.

It is run by Marcus Rowland, Chesapeake's former chief financial officer who took over as Frac Tech chief executive in May, while Chesapeake CEO Aubrey McClendon sits on the board.

In its Securities and Exchange Commission filing, the Fort Worth, Texas-based company said Bank of America Merrill Lynch, Goldman Sachs, Citigroup and Credit Suisse would underwrite the IPO.

According to the filing, the company had 2010 revenue of $1.29 billion. First-half 2011 revenue was nearly $1.1 billion, up 143 percent from a year earlier. Adjusted earnings before interest, tax, depreciation and amortization totaled $453.5 million in the first half, up 178 percent.

KEEPING BUSY

The company believes it is the third-largest fracking services provider by capacity in the United States, where demand has surged in the past two years as U.S. hydrocarbon producers responded to rising oil prices by drilling more.

"Since November 2009, all of our hydraulic fracturing units have been continuously deployed, other than during routine maintenance periods," Frac Tech said in the filing.

U.S. environmentalists and politicians have raised serious concerns about the safety of fracking, which involves blasting sand and chemical-laced water into shale rock formations to release oil and gas. The primary concerns about the technology surround the potential for drinking water contamination.

Frac Tech devoted several paragraphs in its filing to the potential for stricter regulation of its operations. The industry insists the fracking process is well established and safe.

Frac Tech did not reveal how many shares it will sell in the IPO or their expected price, but said it intends to list on the New York Stock Exchange. The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO can be different.

The issuing entity in the offering will be known as FTS International Inc, which will use the proceeds to reduce debt.

Chesapeake owns about 30 percent of the company, while 40 percent is held by Maju Investments, an affiliate of Singaporean sovereign wealth fund Temasek Holdings TEM.UL.

Another big backer is RRJ Capital, the private equity firm of one of Asia's best-known dealmakers, Richard Ong, who is the brother of senior Temasek executive Charles Ong. RRJ's Senja Capital holds about 11 percent of Frac Tech.

Cowboy Investment, owned by sovereign wealth fund Korea Investment Corp, is a Cayman Islands-based fund that holds 7 percent of Frac Tech.

Major customers include Chesapeake, Anadarko Petroleum Corp (APC.N), El Paso Corp EP.N, Marathon Oil Corp (MRO.N), BHP Billiton's (BHP.AX) Petrohawk, Range Resources Corp (RRC.N) and Exxon Mobil Corp's (XOM.N) XTO Energy.

(Reporting by Braden Reddall in San Francisco, Aditi Sharma in Bangalore and Anna Driver in Houston; Editing by Sayantani Ghosh, John Wallace and Bernard Orr)

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