Archrock, a US-based natural gas infrastructure company, has finalised a definitive agreement to acquire Total Operations and Production Services (TOPS) for $983m.  

The purchase will be made through a combination of cash and stock, with Archrock issuing approximately 6.87 million new shares and intending to fund the $826m cash portion with equity and debt. 

TOPS is engaged in providing contract gas compression services in the Permian Basin.  

It is a portfolio company of investment funds managed by Apollo Global Management. 

It will bring approximately 580,000hp of predominantly young electric motor drive compression assets to Archrock.  

This acquisition is expected to enhance Archrock's position in contract compression in the US, increasing its operating horsepower by 30% in the Permian Basin. 

With this deal, Archrock's pro forma operating horsepower is anticipated to reach approximately 4.1 million, and its pro forma enterprise value will exceed $6bn.  

The company's assets in the Permian Basin will represent about 52% of its total operating horsepower, and its electric compression horsepower will increase to around 648,000. 

Furthermore, the acquired assets from TOPS are projected to generate around $136m of third quarter 2024 annualised adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), not accounting for any expected synergies.  

Brian Green will continue to lead TOPS following the closure of the transaction. Archrock plans to maintain a presence in Midland, Texas, with no planned changes to the TOPS organisation, personnel or operations. 

Green said: “We are excited to join together with Archrock during an important time for our company and our industry. 

“TOPS’ horsepower is contracted with blue-chip customers in the Permian Basin, making the addition of our electric motor business highly strategic and complementary for Archrock.” 

Archrock president and CEO Brad Childers said: “Our acquisition of TOPS is an exciting opportunity to expand and diversify our contract compression operations, increase sustainability and create significant value for Archrock shareholders.  

“This transaction will accelerate the meaningful progress we have made advancing our strategy of high-grading our fleet, improving profitability, expanding our operations in basins with strong long-term growth prospects and helping our customers achieve their emissions reduction goals.” 

The board of directors of Archrock has unanimously approved the transaction, which is expected to close by the end of 2024, pending customary regulatory approvals and other closing conditions. 

In 2023, the Permian Basin achieved a production output of 5,790 thousand barrels of oil per day (mbd) and 19,315 million cubic feet per day (mmcfd) for crude oil and natural gas, respectively, according to a report of GlobalData.

This increase in production can be attributed to robust international demand, notably from China and India. Projections indicate that, with the global market's consistent requirement for hydrocarbons, the Permian Basin is expected to experience a compound annual growth rate (CAGR) exceeding 4% for crude oil and 6% for natural gas production from 2024 to 2028.

Furthermore, the Permian Basin shale play has seen significant investment activity, with over 32 transactions exceeding a combined value of $1bn recorded between the first quarter of 2021 and the second quarter of 2024.

Within the broader context of the North American oil and gas sector, the first quarter of 2024 alone witnessed 99 mergers and acquisitions (M&A) deals, culminating in a total deal value of $57.2bn, as chronicled in GlobalData’s Deals Database.