RPC Inc. (RES), a provider of oilfield services such as pressure pumping, has been considering selling itself and hired Goldman Sachs Group Inc. (GS) for advice, said three people with knowledge of the matter.
RPC picked Goldman Sachs after interviewing several investment banks in the past few weeks, said the people, who spoke on condition of anonymity because the information is private. The company, based in Atlanta, has a market capitalization of $2.87 billion.
A sale would help brothers Randall and Gary Rollins, who together own more than half of the stock, profit from surging demand for services that help drillers unlock natural gas and oil trapped in shale rock formations. RPC shares have more than quintupled since February 2009.
The company may be attractive because of its work in such shale formations as the Marcellus and Eagle Ford, John Lawrence, a vice president at Tudor Pickering Holt & Co. LLC in Houston, said in a telephone interview.
“If you want to add presence to North America, it’s already pretty well established,” said Lawrence, who has an “accumulate” rating on RPC shares and doesn’t own any.
Sharon Lennon, RPC’s head of investor relations and corporate communications, said in an e-mail that she declined to comment because the company’s policy is not to respond to market rumors. A Goldman Sachs spokeswoman declined to comment.
Global companies such as Exxon Mobil Corp. (XOM) and BHP Billiton Ltd. (BHP) are expanding their holdings in U.S. shale formations, buying companies that drill using a new combination of techniques to exploit deposits that were previously thought to be unrecoverable.
The U.S. Energy Information Administration estimates the country has 2,543 trillion cubic feet of recoverable gas resources, an increase of more than 50 percent from the estimate a decade ago, because of projected increases in shale formations.
RPC gets about half its sales from pressure pumping, including from hydraulic fracturing, or fracking. In fracking, companies inject water, chemicals and sand under high pressure to release the gas from shale. The company had record revenue of $1.1 billion in 2010 and will more than double that amount by 2012, according to the average of 9 analysts’ sales estimates compiled by Bloomberg.
RPC’s work also includes rental tool operations and a coiled tubing business used in well maintenance. Potential buyers may include a large company such as Schlumberger Ltd. (SLB) or smaller ones such as Patterson-UTI Energy Inc. (PTEN) or Complete Production Services Inc. (CPX), Lawrence said. Foreign buyers such as Archer Ltd. or Asian companies also may be interested, he said.
The scramble for shale is driving many of the industry’s biggest takeovers, including Exxon Mobil’s $31 billion takeover of XTO Energy Inc. last year and BHP’s pending deal to buy Petrohawk Energy Corp. (HK) for $12.1 billion. Both those sellers have holdings in U.S. shale formations and expertise on how to develop them.
Services companies are also combining to meet the demand. In 2010, Baker Hughes Inc. (BHI), the world’s third-largest oil services company, bought BJ Services Co. for $5.5 billion to expand in pressure pumping.
In the last major purchase of a services company, a group led by Temasek Holdings Pte., Singapore’s state-owned investment company, agreed in April to buy a 70 percent stake in Cisco, Texas-based Frac Tech Services Inc., controlled by brothers Dan and Farris Wilks. The group paid $3.5 billion for the stake, the Wall Street Journal reported in May.
RPC was once part of Rollins Inc., founded by O. Wayne Rollins, the father of Randall and Gary. Rollins spun off RPC in 1984 and is now focused on pest control, including through its Orkin subsidiary.
Randall Rollins, whose age was given as 79 in a proxy filing earlier this year, is chairman of both companies. The brothers have a controlling stake in both.
RPC fell 8 cents $19.37 as of 4:15 p.m. in New York Stock Exchange composite trading. The New York Stock Exchange Energy Index fell 8.1 percent, the largest drop since Dec. 1, 2008.
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