Archrock, Inc. (AROC – Free Report) has announced a definitive agreement to acquire Natural Gas Compression Systems (NGCS) in a $357 million cash and stock transaction. This acquisition strengthens its position as a leading provider of natural gas compression services in the United States.
Archrock believes that adding NGCS’ large-horsepower and electric compression assets will expand their customer relationship amid strong demand for natural gas and compression. The acquisition will not only strengthen its footprint in the Permian Basin but will also provide it with an opportunity to align its resources with some profitable and high-demand market segments. The operations and capabilities of NGCS and Archrock are highly complementary and their customers and employees are expected to benefit from the combined scale, experience and financial strength.
Necessary Approvals and Key Terms of Deal
The transaction, unanimously approved by Archrock’s board of directors, is set to close in the second quarter of 2025, subject to regulatory approvals.
Archrock will finance the $298 million cash portion with the available capacity under its ABL credit facility and issue up to 2.312 million new Archrock shares to the sellers to complete the deal.
Key Benefits of the Deal
The combined entity will have an increased compression capacity of over 4.5 million operating horsepower, enhancing its ability to serve growing demand. NGCS has a strong presence in the Permian Basin that will increase Archrock’s capacity in the area by 10%, reaching approximately 2.5 million horsepower. Additionally, the merger will increase the company’s electric motor drive compression horsepower to approximately 815,000. The deal is also expected to be immediately accretive to Archrock’s earnings per share and dividend cash flow by the end of 2025.
AROC’s Zacks Rank and Other Key Picks
Houston-based Archrock is a provider of natural gas contract compression services as well as a supplier of aftermarket services for compression equipment. Currently, AROC flaunts a Zacks Rank #1 (Strong Buy).
Investors interested in the energy sector might look at some other top-ranked stocks like Delek Logistics Partners, LP (DKL – Free Report) , Prairie Operating Co. (PROP – Free Report) and CrossAmerica Partners LP (CAPL – Free Report) . Delek Logistics, Prairie Operating and Cross America currently sport a Zacks Rank #1 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Delek Logistics Partners owns, operates, acquires and constructs crude oil and refined products logistics and marketing assets. The Zacks Consensus Estimate for DKL’s 2025 earnings indicates 34.45% year-over-year growth.
Houston-based Prairie Operating is an independent energy company engaged in the development and acquisition of proven, producing oil and natural gas resources principally in the United States. The Zacks Consensus Estimate for PROP’s 2025 earnings indicates 327.62% year-over-year growth.
Allentown, PA-based CrossAmerica Partners LP engages in the wholesale distribution of motor fuels, consisting of gasoline and diesel fuel, and owns and leases real estate used in the retail distribution of motor fuels. CAPL’s expected earnings per share (EPS) growth rate for the next quarter is 25%, which aligns favorably with the negative industry rate of 3.73%.
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