“Fortress Proppants could close on USD 30m capital raise within a month, CEO says”
Fortress Proppants, a privately held oil and gas proppants company, is in negotiations to raise USD 30m in equity and debt to build a resin-coating facility, but is open to additional approaches, said Tony Little, co-founder, president and CEO.
The Calgary-based company is in negotiations with an undisclosed private investor and moving towards closing in as soon as a month, said Little, speaking on the sidelines of the Infocast Tuscaloosa Marine Shale E&P Summit in Houston last week. The company is still entertaining additional approaches, however, he said. Fortress is open to terms on equity and debt structure, he said.
Fortress previously retained an advisor to help raise capital, but was not able to complete a raise. The company is now handling the raise by itself, Little said. The company uses Fasken Martineau for its legal advice in Canada, and Butler Snow for legal advice in the US, he said.
Fortress currently sells frac sand secured through a 20-year agreement with Mississippi-based Magnolia Frac Sand, said Little. The company seeks capital to construct a resin-coating plant located next to Magnolia’s sand mine in Natchez, Mississippi, in order to produce higher-margin resin-coated proppants, he said.
Frac sand and ceramic proppants are used to improve performance of oil and gas wells that have been hydraulically fractured.
Fortress sought to raise capital about 18 months ago, but found fundraising conditions much more difficult, Little said. Publicly traded frac sand companies have performed well, increasing investor interest in the niche, he said.
Emerge Energy Services went public as a master limited partnership (MLP) in May 2013, and was the top performing IPO of the year, according to published reports. Its market capitalization is USD 2.42bn and has a forward P/E ratio of 28.58. US Silica has a market capitalization of USD 2.88bn and a forward P/E ratio of 26.91. Hi-Crush Partners has a market capitalization of USD 2.09bn and a forward P/E ratio of 17.89.
Fortress already ships sand to upstream operators in the Tuscaloosa Marine Shale, Eagle Ford and Utica oil regions. Higher-margin resin-coated proppant will broaden the number of markets the company can profitably serve, Little said. The plant would take a year to build, and Fortress aims to be in operation by 2015, he said.
Arthur Wright, Shad Sumrow, Cole Bredthauer, and Mike Lii of Thompson & Knight LLP represented Fortress.