THE WOODLANDS, Texas, March 23, 2020 (GLOBE NEWSWIRE) -- Apergy Corporation (“Apergy” or “the Company”) (NYSE: APY) today announced a set of immediate actions that the Company is taking in response to the significant decline in oil prices due to the outcome of OPEC+ meeting in early March 2020, as well as market volatility arising from the COVID-19 pandemic.
The Company’s announced actions immediately reduce operating costs and capital spending to align to the expected decline in business activity levels. Annual operating cost savings from the initial restructuring plans are estimated to be in excess of $65 million and the initial actions include:
- reduction in total Apergy headcount
- company-wide salary reductions, including 25% reduction in CEO’s base salary
- $50 million reduction in capital expenditures and investment in ESP leased assets compared to 2019 spending levels
- facility rationalization and elimination of non-essential expenses.
“Consistent with our ‘top box’ value creation framework, the Apergy portfolio was built to withstand challenging environments in the oil and gas industry,” said Sivasankaran “Soma” Somasundaram, President and Chief Executive Officer. “Our production-focused artificial lift and digital products are critical components in maintaining production from existing wells and support more efficient operations for customers. We have implemented an initial set of actions which immediately reduces both our operating expenses and capital costs. These actions are part of our comprehensive contingency plan that is designed to maintain profitability and cash flow to meet all obligations even in environments much more severe than the 2015 / 2016 downturn. Our actions and plans will enable us to continue to generate strong free cash flow similar to previous downturns. We are continuing to monitor market developments and prepared to take additional actions as necessary. Our dedicated team remains focused on delivering outstanding customer service.”
ChampionX Transaction Update
Apergy today also provided an update on the upcoming merger with ChampionX which is expected to close before the end of Q2-2020.
Soma Somasundaram continued, “Our combined Apergy and ChampionX team has made significant progress on integration planning as we work together towards closing. Our work on integration planning has further reinforced the attractiveness of this combination. We chose a strategic partner in ChampionX that has similar business attributes to Apergy, and also brings advantages given its scale, diversified base of customers, and geographies served. With ChampionX we expect to navigate the current downturn as a larger, more resilient, and more global production-optimization solutions provider.” i
Douglas M. Baker, Jr., Chairman and CEO of Ecolab, also commented, “The current market dislocation in the oil and gas sector does not diminish the strategic and capital structure logic of the Apergy-ChampionX merger. While this is an extraordinary time, and above all both organizations are focused on the health and well-being of their employees, we continue to believe the transaction provides strategic benefits for shareholders.”
Liquidity and Leverage
On March 20, 2020 Apergy had approximately $35 million of cash on hand and approximately $240 million of available revolving commitments under its revolving credit facility.
Apergy has no near-term debt maturities. The Company’s $250 million revolving credit facility matures in May 2023, its $265 million Term Loan B facility matures in May 2025, and its $300 million Senior Notes mature in May 2026. At December 31, 2019, long-term debt net of unamortized discounts and issuance costs was $559.8 million, and cash and cash equivalents was $35.3 million. Net Debt to EBITDA at December 31, 2019 was 2.1x.
At close of the transaction with ChampionX, pro forma net debt is expected to be approximately $1.0 billion, including a new term loan of $537 million to fund a one-time cash payment to Ecolab. ChampionX and Bank of America executed a term loan facility commitment letter pursuant to which Bank of America has committed to provide the term loan financing, subject to customary conditions. The combined company will have access to an enlarged $400 million revolving credit facility with estimated liquidity at close of approximately $437 million, including cash on hand. Pro Forma Net Debt to EBITDA for the ChampionX merger at December 31, 2019 is estimated to be 1.7x before synergies, and 1.5x including $75 million of expected cost synergies.
About Apergy
Apergy is a leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Apergy's products provide efficient functioning throughout the lifecycle of a well - from drilling to completion to production. Apergy’s Production & Automation Technologies offerings consist of artificial lift equipment and solutions, including rod pumping systems, electric submersible pump systems, progressive cavity pumps and drive systems and plunger lifts, as well as a full automation and digital offering consisting of equipment and software for Industrial Internet of Things (“IIoT”) solutions for downhole monitoring, wellsite productivity enhancement, and asset integrity management. Apergy’s Drilling Technologies offering provides market leading polycrystalline diamond cutters and bearings that result in cost effective and efficient drilling. To learn more about Apergy, visit our website at http://www.apergy.com.
