Kodiak Gas Services, based in Montgomery, TX, has completed its $256 million Initial Public Offering (IPO). Its stock is now listed on the NYSE under the symbol ‘KGS’. It offered 16 million shares at $16 per share, well below the proposed range of $19-$22.
The company operates gas compression services, mostly in the Permian and Eagle Ford basins in Texas. In 2022 it had revenues of $708 million, adjusted EBITDA of $399 million and net income of $106 million. The business is capital-intensive business and spent $48 million on maintenance capex and $211 million on growth capex last year.
Kodiak was founded in 2011 and backed by the Stephens Group, an Arkansas-based PE firm until 2019 when EQT Partners, a Swedish-based investment firm, acquired a majority stake in the business.
David Marrs and Mickey McKee co-founded Kodiak in 2011. Mr. Marrs served as the CEO until shortly after the investment by EQT. Mr. McKee has been the CEO since then.
John Griggs has been the CFO at Kodiak since January 2023. Previously, he held various CFO roles at PE-backed companies. He also worked at CSL Capital Management, a Houston-based PE firm, for three years. Ewan Hamilton, who was the CFO for nearly seven years prior to the appointment of Mr. Griggs, remains at the company as Chief Accounting Officer.
It was intended that the monies raised in the IPO would be used to repay $314 million of a term loan that carries interest of almost 12%. Given that the IPO price was well below the proposed price, the amount of debt repayment will be lower
Prior to the IPO, the company had borrowings of $2.75 billion. In addition to the repayment, $700 million (the remaining balance of the term loan) was to be transferred to Kodiak’s parent, leaving $1.75 billion of debt on the books post-IPO. The $700 million was based on the proposed IPO range and may change given the lower IPO price.
In case you feel sorry for the parent having to take back $700 million of debt, don’t. In 2022, the company paid a $838 million distribution to its parent that was mostly funded by increasing the balance on the term loan.