Solaris Oilfield Infrastructure , Inc. (NYSE:SOI), a player in the oil and gas field machinery and equipment industry, has entered into a material definitive agreement, according to a recent filing with the Securities and Exchange Commission. On Monday, Solaris disclosed that its subsidiary, Solaris Oilfield Infrastructure, LLC, provided a loan of $29.75 million to Mobile Energy Rentals LLC (MER) to facilitate the purchase of power generation equipment.
The loan, dated July 30, 2024, is intended to cover progress payments owed to an equipment manufacturer as per the existing purchase orders. This financial move comes after Solaris's announcement on July 10, 2024, regarding a Contribution Agreement to acquire all outstanding equity interests of MER. The acquisition deal includes a payment of $60 million and the issuance of $140 million in units of Solaris Oilfield Infrastructure, LLC, based on a volume-weighted average price of Solaris's Class A common stock.
The loan is secured by a broad range of MER's assets and carries an interest rate of 10%, with a due date of December 6, 2024, unless called earlier. Upon the successful closing of the acquisition, the loan will be canceled and offset against the payments due for the purchase orders.
This strategic financial arrangement is poised to enhance Solaris's position in the industry by expanding its asset base and potentially bolstering its market offerings. The company's forward-looking statements suggest a positive outlook on the completion of the transaction, although they acknowledge the inherent risks and uncertainties that could affect future results.
In other recent news, Solaris Oilfield Infrastructure has reported significant developments. The company has recently expanded its portfolio with the strategic acquisition of Mobile Energy Rentals (MER). This acquisition is seen as a growth opportunity, allowing Solaris to tap into the expanding mobile power generation market. The company also reported Q1 2024 financial results, revealing a revenue of $68 million, adjusted EBITDA of $23 million, and free cash flow of $14 million. Despite projected flat North American land activity and a 5-10% decrease in frac crews, Solaris plans to capitalize on industry trends such as consolidation, efficiency, and electrification. Piper Sandler maintained its Overweight rating on Solaris stock, following the announcement of the MER acquisition. The firm believes that this acquisition will help Solaris Oilfield Infrastructure navigate the complex landscape of the oil and gas industry.
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