CEO: Electric drive portfolio key for Archrock acquisition

Strategic mergers are nothing new in the oil and gas industry and, if anything, the last year-plus has seen a strong uptick in acquisitions across the marketplace.

In early September, Enverus Intelligence Research (EIR) released a report that found that upstream consolidation deals totaled $250 billion in the previous 12 months.

One strategic move this year involved Archrock, a leading provider of natural gas compression services, and Total Operations and Production Services (TOPS), the Midland, Texas, based provider of contract gas compression services for the Permian Basin.

The US$983 million cash and stock deal acquisition marks a significant step forward for Archrock, reinforcing its commitment to sustainable energy practices and positioning itself as a leader in electric motor-driven compression, said Brad Childers, Archrock’s CEO.

“With this accretive transaction, we are adding a young fleet that deepens Archrock’s compression operations in the Permian Basin and establishes our leadership position in electric motor drive compression,” Childers said.

Childers expressed his enthusiasm for the acquisition during a recent interview with COMPRESSORtech2 magazine. He emphasized that Total Operations and Production Services brings a wealth of assets and expertise to Archrock’s existing operations.

“We are acquiring what we believe is the premier electric motor-driven compression company out there,” Childers said. “With about 580,000 horsepower in their fleet, the integration of Total Operations and Production Services’s assets aligns perfectly with Archrock’s strategic goals.”

The acquisition is not merely about expanding Archrock’s asset base; it is also about enhancing operational capabilities.

“We get not just a great fleet of young, highly utilized assets generating solid cash flow, but we also gain a management team that is at the forefront of electric motor-driven compression,” Childers said.

This synergy is expected to significantly bolster Archrock’s operational scale and efficiency.

Expanding into the Permian Basin

A focal point of the acquisition is the expansion into the Permian Basin, one of the leading oil-producing regions in the United States. Archrock’s existing operations in the Permian will now account for over half of its total operating footprint, a move that Childers believes will enable the company to better serve its clients and capitalize on the region’s growth potential.

“The Permian Basin is a critical area for oil and natural gas production. We see sustained growth in oil production there for many years to come, and this acquisition allows us to leverage that growth,” Childers said.

The transition to electric motor-driven systems not only enhances operational efficiency but also addresses increasing demands for sustainable energy solutions in the industry.

The Push for Decarbonization

Decarbonization has become a pressing concern for energy companies, and Archrock is no exception. Childers revealed that their clients are increasingly seeking ways to reduce their carbon footprints, prompting Archrock to prioritize sustainability in its operations.

“The industry is focused on decarbonizing hydrocarbons. Our goal is to ensure that methane stays in the pipe and doesn’t escape into the atmosphere,” he explained.

Through the electrification of more of its assets, Archrock aims to minimize greenhouse gas emissions associated with traditional combustion-driven compressors. This aligns with the broader industry trend toward adopting cleaner technologies. By implementing electric motor-driven solutions, Archrock not only meets regulatory standards but also responds to customer demands for more sustainable operations.

Future Acquisition Strategies

While the focus is currently on the integration of Total Operations and Production Services, Childers hinted at future acquisition strategies.

“Typically, we keep our cards close to our chest regarding future acquisitions, but I can share that we are continually looking for opportunities that align with our strategy,” he stated.

Previous successful acquisitions, such as Elite Compression Services in 2019, have set a precedent for Archrock’s approach, which emphasizes high-quality assets and long-term viability.

Childers reiterated the importance of being selective in future deals. “We’re going to be picky and demanding. If we can find similar asset packages that complement our operations and enhance our cash flows, we’ll definitely consider them,” he said.

Total Operations and Production Services (TOPS), based in Midland, Texas, provided contract gas compression services for the Permian Basin.

Industry Outlook

The natural gas compression industry is at a pivotal moment, with growing demand driven by increased natural gas production and a surge in liquefied natural gas (LNG) exports. Childers expressed optimism about the future, stating, “It’s a tremendous time to be in the compression business. The growth in natural gas production to support LNG demand presents a stable growth environment for us.”

He emphasized Archrock’s robust customer base and financial flexibility, which position the company favorably to meet the evolving needs of the energy market. “We are ideally positioned to support our customers’ growth in both oil and gas sectors,” Childers added.

In addition to traditional compression services, Archrock is actively investing in innovative technologies to further its sustainability goals. Childers highlighted the development of tools designed to detect and remediate methane leaks quickly, as well as the introduction of the Carbon Hawk—a product aimed at capturing methane discharges from blowdowns and packing.

These initiatives underscore Archrock’s commitment to not only enhancing operational efficiency but also promoting environmental responsibility. By investing in such technologies, Archrock is paving the way for a more sustainable future in hydrocarbon production.

Archrock’s acquisition of Total Operations and Production Services signifies a bold move toward embracing sustainability while reinforcing its position as a leader in the natural gas compression industry. With a strong focus on decarbonization and innovative solutions, Archrock is well-positioned to navigate the challenges of an evolving energy landscape. As the demand for cleaner energy solutions continues to grow, the integration of electric motor-driven compression systems is expected to play a crucial role in shaping the future of the industry.

The path forward looks promising for Archrock, and as they integrate Total Operations and Production Services’s assets and expertise, the company is set to lead the charge toward a more sustainable and efficient energy sector.