Quality Distribution buys Wylie Bice Trucking, RM Resources

May 16, 2012
Quality Distribution Inc announced more oilfield-related tank truck fleet acquisitions. The newest purchases are fleets that operate in the Bakken oil and gas shale region

Quality Distribution Inc announced more oilfield-related tank truck fleet acquisitions. The newest purchases are fleets that operate in the Bakken oil and gas shale region.

Wholly-owned subsidiaries of Quality Distribution have entered into definitive agreements to acquire the operating assets of Wylie Bice Trucking LLC and the operating assets and rights of RM Resources LLC for an aggregate purchase price of $79.3 million, plus potential additional consideration of $19.0 million, if certain future operating and financial performance criteria are satisfied. The transactions are expected to close by the end of the second quarter, subject to customary closing conditions. Headquartered in Killdeer ND Wylie Bice Trucking is a provider of transportation services to the unconventional oil and gas industry within the Bakken shale region, primarily hauling fresh water, flowback, and production water, and crude oil for numerous energy customers. The flowback and production water Wylie Bice Trucking hauls is primarily disposed of utilizing four existing salt water injection wells owned and operated by RM Resources.

"The acquisition of Bice and RM represents the single-most significant step in expanding and diversifying our energy logistics business," says Gary Enzor, Quality Distribution’s chief executive officer. "The Bice and RM operations are top-tier transportation and disposal well providers in the fast growing Bakken shale region, and we are confident that we can build on their already solid platform. This transaction also supports our strategy to broaden our reach into key oil-rich shales. When we combine this Bakken acquisition with our existing Eagle Ford shale presence, Quality's energy logistics business will be more diversified and balanced between oil producing fields and our predominantly gas producing presence in the Marcellus shale. We are confident these transactions will further strengthen our customer offering, as we are fast becoming a water and oil hauling logistics solutions provider across multiple shales on a more national scale."

On a combined basis for its most recent fiscal year ended December 31, 2011, Bice and RM had revenues of approximately $106.0 million and Adjusted EBITDA of approximately $12.7 million. Adjusted EBITDA excludes approximately $0.9 million of charges not expected to recur. Quality expects the collective acquisitions to be accretive to earnings beginning in the third quarter of 2012.

The transactions are structured as asset acquisitions, and aggregate consideration will be paid to the sellers as follows: (i) $49.0 million in cash at closing; (ii) a $21.3 million 5-year subordinated seller note bearing interest at a 5% fixed rate; and (iii) $9.0 million in unregistered shares of Quality common stock. An additional $19.0 million may be payable in cash one year after the anticipated closing date, contingent upon the collective businesses meeting certain future operating and financial performance criteria.

Wylie C Bice, president of Wylie Bice Trucking, stated: "We believe that Quality is an ideal partner for us and we are excited about joining the team. Opportunities in the Bakken shale continue to grow, and combining with Quality provides us with access to growth capital and enables us to leverage their capabilities to capitalize on this dynamic market."

Bice operates two trucking terminals in North Dakota utilizing approximately 500 drivers, making it one of the largest haulers of fresh and disposal water and oil in the Bakken shale. Bice is principally an asset light business as the company primarily utilizes independent contractors who own their own equipment. RM Resources has four existing disposal wells and is expected to add another well prior to the anticipated closing of the acquisitions; RM is required to deliver a sixth well within six months of the anticipated closing date, adding significant disposal capacity.