The buyout marks Centre Partners’ first transaction in the energy sector. Founded in 1986, Centre Partners’s portfolio of previous and existing investments is made up largely of consumer-related companies like ubiquitous tuna canner Bumble Bee Seafoods and Uno Restaurant Holdings Corp.
Gray is a far cry from any of these. The Levelland, Texas-based company provides services to the domestic energy exploration and production (E&P) market, with a specific focus on natural gas. Gray specializes in cased-hole wireline services, which entails the utilization of trucks outfitted with wirelines, or cables, that can be used to lower various tools and instruments into and out of energy-producing wells.
Simply put, natural gas wells can be compared to elevator shafts, but instead of having different floors, they have multiple production zones located at different depths. Any time a well operator wants to determine the overall status of production, or which specific zones are active, they need to use a wireline to get the real-time data back to the surface.
Centre Southwest Managing Director Kent Sweezey said that in this day and age, when there is more and more pressure for domestic well operators to maximize production of new and existing wells, wireline services are being employed by well operators on a more frequent basis.
“Because about 90% of the supply of domestic natural gas is pretty much from U.S. sources—unlike oil, which is largely imported—the upstream E&P guys are looking to ways to enhance production to meet demand,” Sweezey said.
Over the past two years, Gray has grown organically and through two acquisitions, resulting in four new district locations in Texas and greenfield operations in New Mexico and Oklahoma.
“At this point in time there are a lot of opportunities for Gray to add to its capacity and geographic presence.” Sweezey said.
Sweezey said the lion’s share of equity to support this deal came from Centre Partners’s vintage-2003 Centre Capital Investors IV LP, which raised approximately $780 million. Centre Southwest Partners, meanwhile, which was founded in 2004, is a fundless sponsor that puts up equity from its founding partners Sweezey and Todd Tomlin.
While this is Centre Partners’s and Centre Southwest’s first time completing a buyout together, it is not their first time attempting a joint venture. On April 28, 2005, the two firms partnered up, signed a letter of intent and gained exclusivity provisions to acquire Black Warrior Wireline Corp., a Columbus, Miss.-based oil and gas services company. However, according to a statement issued by Black Warrior last August, a definitive merger agreement between it and the two private equity firms could not be reached.