DEFA14A: Flotek Industries Acquires Mobile Power Generation Assets from ProFrac, Securing $160 Million Revenue Backlog

Flotek Industries acquires power generation assets from ProFrac for $105 million, securing a six-year lease agreement expected to generate $160 million in revenue and immediate earnings accretion.

Summary

• Flotek Industries acquired mobile power generation assets and related intellectual property from ProFrac GDM for $105 million.
• The acquisition includes digitally enhanced mobile natural gas conditioning and distribution units.
• Flotek entered into a six-year dry lease agreement with ProFrac GDM for the acquired assets.
• The lease agreement provides for fixed rates for the first five years and prevailing market rates for the sixth year.
• 22 assets will be placed into rental service immediately, with 8 additional units expected to be added throughout the second half of 2025.
• The transaction is expected to provide a $160 million revenue backlog.
• Flotek expects approximately $14 million in rental revenue during 2025, a 60% increase in segment revenue compared to 2024.
• Beginning in 2026, annual revenue under the lease agreement is expected to total $27.4 million.
• The consideration includes a $40 million secured promissory note with a five-year term and a 10% annual interest rate.
• The consideration also includes a warrant to purchase 6 million Flotek shares.
• Flotek plans to hold a special shareholder meeting to approve the issuance of shares to convert the warrant before the end of July 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with specific financial benefits and strategic advantages for Flotek. The management comments and transaction details suggest a well-planned and mutually beneficial agreement.

Positives

• The acquisition provides Flotek with an entry point into the rapidly growing mobile power generation sector.
• The transactions are expected to provide stable cash flow attributable to Floteks high-growth Data Analytics segment.
• The transactions are expected to be accretive to Floteks shareholders.
• The acquisition leverages Floteks proprietary technology to provide a turnkey solution for the oil and gas sector and diversified end-markets.
• The acquisition and expansion into remote power generation provides a scalable platform to offer new products and services to additional customers.

Risks

• The success of the acquisition depends on the ability to integrate the acquired assets and realize the anticipated benefits.
• The accuracy of revenue and operating income estimates is subject to market conditions and other factors.
• Shareholder approval is required for the issuance of shares related to the warrant.

Future Outlook

Flotek expects the transactions to provide stable cash flow attributable to its high-growth Data Analytics segment and to be accretive to its shareholders. The company plans to offer new products and services to additional customers in the fast-growing remote power generation market.

Management Comments

• Ryan Ezell, Floteks Chief Executive Officer, said, 'We are pleased to announce these transformative agreements, providing us with an entry point to the rapidly growing mobile power generation sector. Our innovative, real-time measurement technologies are integrated into the Acquired Assets, safeguarding critical power generation fleets and measuring fuels for custody transfer. Importantly, we believe these transactions provide stable cash flow attributable to our high-growth Data Analytics segment and will be accretive to our shareholders while honoring our commitment to maintaining a low leverage profile.'
• Matt Wilks, Executive Chairman of ProFrac, said, 'These transactions represent an evolutionary step forward in our business relationship with Flotek. By leveraging cutting-edge intellectual property, these asset integrity management solutions provide industry-leading gas quality assurance capabilities to customers while providing a platform for future growth as we partner with Flotek to explore applications of this technology across other industry verticals. Importantly, these transactions strengthen our financial flexibility and our ability to optimally manage our purchase obligations under the Chemicals Supply Agreement in place with Flotek.'

Industry Context

The announcement reflects a trend of energy companies diversifying their offerings and leveraging technology to improve efficiency and sustainability. Flotek's expansion into mobile power generation aligns with the increasing demand for behind-the-meter power solutions across various industries.

Comparison to Industry Standards

• It is difficult to compare this specific transaction to industry standards without knowing the exact details of the assets acquired and the terms of the lease agreement.
• However, similar transactions in the energy services sector typically involve assessing the value of the acquired assets based on their revenue-generating potential and the strategic fit with the acquiring company's existing business.
• Comparable companies in the mobile power generation space include Aggreko and APR Energy, which provide temporary power solutions to various industries.
• The revenue multiples and EBITDA margins generated by these companies can be used as benchmarks to evaluate the financial performance of Flotek's acquired assets.

Related Party Transactions

• The acquisition involves a transaction between Flotek and ProFrac, which may be considered a related-party transaction due to existing business relationships.

Stakeholder Impact

• Shareholders: The transaction is expected to be accretive to Floteks shareholders.
• Customers: The acquisition allows Flotek to offer a more comprehensive solution to its customers.
• Employees: The acquisition may create new opportunities for Floteks employees.

Next Steps

• Flotek will place 22 assets into rental service immediately.
• Flotek will add 8 additional units throughout the second half of 2025.
• Flotek will hold a special shareholder meeting to approve the issuance of shares to convert the warrant before the end of July 2025.
• Flotek will discuss the transactions in more detail during its earnings conference call on May 7, 2025.

Key Dates

Keywords

Flotek, ProFrac, acquisition, mobile power generation, lease agreement, data analytics, revenue, warrant, energy, oil and gas