Author Topic: EXTN - Exterran Corporation  (Read 1745 times)

jmp8822

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EXTN - Exterran Corporation
« on: November 05, 2015, 10:14:47 AM »
Exterran Corporation (EXTN) was spun off yesterday from its parent Exterran Holdings, which has been renamed Archrock, Inc (AROC). EXTN is worth approximately $33 per share, while it is trading at about $14 per share.

Exterran Corporation has three business lines, Natural Gas Compression (Contract Operations), Product Sales (Fabrication), and Aftermarket Services. The current market cap is about $500 million ($14/share X 35 million shares outstanding), with net debt of about $525 milion, enterprise value of approximately $1.025 billion.

Complemented by historical stability, fourth quarter Contract Operations revenue guidance is estimated at $115 million. Total 2015 Contract Operations revenue should be approximately $465 million (average of approximately  $116 million per quarter).

Product Sales revenue for 2015 should be approximately $1.22 billion, while second-half 2015 revenue will only be approximately $500 million of the total.

Aftermarket Services 2015 revenue should be approximately $125 million.

EBITDA at Exterran Corporation should be approximately $55 million in fourth quarter, while 2015 EBITDA should be about $265 million (average of approximately  $66 million per quarter).  EBITDA has fallen almost exclusively due to the Product Sales business.  The business has low margins, which have been compressed further in recent quarters. This has driven EBITDA in this business to roughly zero.

Exterran should maintain annualized EBITDA of approximately $200+ million, despite the depressed commodity environment. This EBITDA would be almost exclusively produced by the Contract Operations business. There is high EBITDA upside in a commodity recovery, as evidenced by the company's $85 million of EBITDA in first quarter 2015, boosted by Product Sales EBITDA in the quarter.

The Contract Operations business should be valued at approximately 3.5-4X sales, or 7.5-8.5X EBITDA, for a base-value of about $1.5 billion. Peers are trading at a minimum of 7.5X Contract Operations EBITDA. Product Sales and Aftermarket Services should be valued at about 0.15X sales, or $180 million in today's environment, with upside to $500+ million as EBITDA returns with commodity prices.

Valuing the company at an enterprise value of $1.68 billion ($525 million net debt) leads to a market cap of $1.155 billion, and a share price of $33 versus the current  $14 per share.

These multiples are based on current trading prices and enterprise values of comparable companies, including CCLP, APLP and USAC. The three companies mentioned are structured as MLPs, with a General Partner entitled to incentive distribution rights.

CCLP (CSI Compressco, L.P.) is perhaps the best comparable company to show the valuation disconnect in the market.

CCLP's roughly $1 billion enterprise value is backed by $130 million of annualized EBITDA (7.7X EBITDA, 3.4X Contract Operations sales). CCLP has the same three business lines as EXTN and nearly the same amount of debt and enterprise value. However, EXTN has $200 million in EBITDA instead of $130 million, Contract Operations sales of $115 million per quarter instead of $73 million, Aftermarket Services sales $27 million instead of $7 million, and Product Sales revenue of $250 million instead of $50 million.


wjsco

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Re: EXTN - Exterran Corporation
« Reply #1 on: January 21, 2016, 03:43:54 PM »
So EXTN and CCLP are comps...is APLP just a contractor? I don't understand why both APLP and extn exist...they do the same thing, and were controlled by the same people, right?

jmp8822

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Re: EXTN - Exterran Corporation
« Reply #2 on: January 21, 2016, 03:57:56 PM »
So EXTN and CCLP are comps...is APLP just a contractor? I don't understand why both APLP and extn exist...they do the same thing, and were controlled by the same people, right?

Archrock, Inc. (AROC) is the General Partner of Archrock Partners (APLP).

Exterran (EXTN) was spun-off from Archrock, Inc. (Archrock, Inc. used to be named Exterran Holdings, but the spinoff took the name of the old parent). EXTN is the international compression assets that Archrock, Inc. used to hold at the parent. The remaining Archrock, Inc. holds North American compression assets and units of APLP.

Now that EXTN has been spun-off, EXTN's product sales business provides product to AROC/APLP just as they would to any other customer.