Cypress Energy Partners (NYSE: CELP) said Feb. 23 it will pay $52.6 million in a dropdown acquisition for the rest of services company Tulsa Inspection Resources (TIR).
TIR is a pipeline inspection business that CELP jointly owned with its sponsor, Cypress Energy Holdings (CEH). CELP purchased the remaining 49.9% stake for CEH and other owners.
The dropdown stands to add an additional $7.5 million in annual EBITDA to CELP, an additional 35% versus Baird Energy’s 2015 estimates.
Cypress purchased its controlling interest in TIR for $52.5 million, according to a January 2014 Securities and Exchange Commission filing.
CELP management expects the additional TIR stake will help offset declines in CELP’s in saltwater disposal and environmental services division due to lower prices, volumes and drilling activity, said Peter C. Boylan III, chairman, president and CEO, in a news release.
TIR inspects full pipeline systems, including process plants, pump and compressor station terminals and tanks.
TIR also:
- Inspects gas gathering systems and related facilities.
- Inspects public utility distribution systems.
- Provides full service integrity department.
TIR had a solid 2014 and early indications look promising for 2015, given regulatory requirements and long lead time nature of new projects, Boylan said.
"Although the current energy market environment continues to be volatile, we continue to evaluate a number of interesting acquisition opportunities while remaining very disciplined," he said. "We believe our methodical and thoughtful approach to potential acquisition opportunities served us well relative to others. We remain focused on building a great company that will create long term value and distributable cash flow growth for our unit holders.
"Lower commodity prices will create some attractive opportunities for us in 2015 and beyond,” he added.
The deal included interest in Tulsa Inspection Resources – Nondestructive Examination LLC and Tulsa Inspection Resources Holdings LLC. It was funded through CELP’s credit facilities.
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