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Keane Group’s IPO: Is the Timing Right?

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Keane Group’s IPO: Is the Timing Right? PART 1 OF 6

Keane Group: A New Kid on the Oilfield Services Block

Keane Group’s IPO

On January 20, Keane Group’s (FRAC) stock started trading on the market. It started trading at $22. This news followed Keane Group’s initial public offering (or IPO) of 26.76 million shares priced at $19.00 per share for gross proceeds of ~$408 million. Of the total shares issued, 15.7 million shares were offered by Keane Group while 11.06 million shares were offered by selling stockholders. FRAC will not receive any proceeds from the sale of stockholder shares.Keane Group: A New Kid on the Oilfield Services Block

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How does Keane want to spend the IPO proceeds?

Keane Group disclosed that it plans to spend ~$149 million of the ~$250 million in net proceeds it received to pay down its debt. On September 30, 2016, FRAC’s long-term debt was ~$269 million. It will use the remainder for “general corporate purposes.”

In October 2016, FRAC’s oilfield services industry peer Mammoth Energy Services (TUSK) completed its IPO and raised $103 million.

An overview of Keane Group

Keane group, founded in 1973, is an oilfield equipment and services (or OFS) provider. It provides well completion and hydraulic fracturing services. On November 30, 2016, the company had 23 hydraulic fracturing fleets and eight wireline trucks. Its services are spread across unconventional tight oil shales, including the Permian Basin, the Marcellus Shale, the Utica Shale, the SCOOP/STACK Formation, and the Bakken Formation. Completion services accounted for nearly 90% of FRAC’s revenues in 9M16.

Oilfield service companies like Nabors Industries (NBR) and TechnipFMC (FTI) are also active in the US shales. NBR is 0.3% of the SPDR S&P MidCap 400 ETF (MDY).

How did Keane Group grow?

  • From 2010 to 2014, Keane Group added seven hydraulic fracturing fleets.
  • In April 2013, it acquired Calmena Energy Services’ wireline technologies division.
  • In December 2013, it acquired Ultra Tech Frac Services’ assets. This move enabled Keane Group to gain a foothold in the Permian Basin.
  • In March 2016, it acquired Trican Well Service’s US oilfield service operations. This move enabled Keane Group to establish itself as an integrated well completion service provider with 944,250 hydraulic horsepower in fracturing capacity.

Series overview

We’ll discuss Keane Group’s revenue, earnings, and drivers in this series. We’ll also discuss the recent equity issuances in the oilfield equipment and services (or OFS) industry and Wall Street’s expectations for these companies.

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