Good news and bad news. Bad news first. TFI sale will not be resolved by end of August as originally planned. Sounds like VeroLube wants to reduce cash payment by $30 million and increase stock payment by some unstated amount. If NES goes with this new plan, the new close would be the end of September. Alternatively, NES may have another interested party, as they aren't bound to a sale with VeroLube after the end of August.
Good news is that the Company's business is improving in the Shale Solutions Segment, particularly in the Bakken Shale area.
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Nuverra Environmental Solutions (NES) (“Nuverra” or “the Company”) today provided an update on the status of its previously announced agreement to divest Thermo Fluids, Inc. (“TFI”), as well as an interim update on key initiatives.
TFI Sale Update
Nuverra has been informed by representatives of VeroLube USA, Inc. (“VeroLube”) and its financial advisor that VeroLube is proposing a reduction in the purchase price for TFI from the previously agreed total of $175 million to a revised total purchase price of $145 million. Nuverra was further informed that the proposed revised purchase price of $145 million would include a stock component that may be greater than the previously agreed upon $10 million. VeroLube has proposed a revised transaction closing date of September 30, 2014.
VeroLube and its financial advisor informed Nuverra that they have finalized the debt component of their financing strategy, and believe they could finalize the equity component in the next several weeks.
Nuverra is currently evaluating the revised VeroLube proposal. The exclusivity period with VeroLube, which prohibits Nuverra from negotiating with other interested parties, ends on August 29, 2014.
Interim Update
Nuverra also provided mid-quarter business commentary and an update on certain strategic initiatives. As previously disclosed, the Company undertook an initiative in the second quarter of 2014 to rationalize revenue, which resulted in some lost revenue in the second quarter with the anticipation that revenue growth would re-commence as the effect of price increases, stronger customer relationships in certain basins, and a revised business mix took effect.
Based on actual unaudited July results and preliminary unaudited interim results in August, the Company has seen an increase in activity in its core Shale Solutions Segment sequentially relative to the second quarter. Revenues in the Shale Solutions Segment in July increased in excess of 10% relative to average monthly revenue in the second quarter, with a more pronounced increase in the Bakken Shale area. The Company has also continued to see strong growth in disposal volumes, and a gradual improvement in rental activity following late second quarter weakness in the Bakken Shale area.
The Company has advanced contractual discussions on the pipeline project discussed in its second quarter earnings release, and remains on track to open its solid treatment facility in the Bakken Shale in the fourth quarter of 2014.
The Company’s TFI segment, which had been impacted this year by a fire which shut down the re-refinery that is one of TFI’s largest contracted offtake partners, has seen business improve, as the re-refinery re-opened in July and is currently forecasted to operate at full capacity in September. While seasonality can impact the business, Adjusted EBITDA for the segment in the month of July reached its best levels of the year, supported by strong collection volumes as well as improved margins due to the sale of more product to the newly re-opened re-refinery.
The mid-quarter information provided herin is based upon preliminary, unaudited financial results and is not indicative of future performance for the remainder of the fiscal quarter. The Company undertakes no obligation to publicly update or revise the mid-quarter information provided herein.
