Archrock, Inc. current report, 25 March 2012

Full document

Business Context and Reporting Period

This Form 8-K is filed by Exterran Holdings, Inc. (now Archrock, Inc.) on March 25, 2012. The report discloses the completion of a sale of assets related to joint ventures in Venezuela that were previously nationalized.

Key Financial Metrics

  • Transaction Proceeds: Total consideration received is approximately $112.4 million ($37.6 million initial cash payment + $74.8 million remaining).
  • Cash Received at Closing: Approximately $37.6 million.
  • Deferred Payments: Approximately $74.8 million payable in periodic cash installments through the first quarter of 2016.
  • Historical Impairment: The company recognized an impairment of approximately $90 million in the first quarter of 2009 regarding these investments.
  • Ownership Interests: 33.3% in WilPro El Furrial and 30% in WilPro PIGAP II.

Material Changes

The primary material change is the monetization of previously impaired assets. The joint ventures sold their assets to PDVSA Gas, S.A. Following the sale, the joint ventures and an affiliate of The Williams Companies, Inc. agreed to suspend a previously filed arbitration proceeding against Venezuela, contingent upon full payment of the purchase price.

Outlook, Risks, and Contingencies

  • Arbitration Status: The sale does not affect a separate arbitration proceeding filed by the company's subsidiary, Universal Compression International Holdings, S.L.U. (UCIH), regarding other assets nationalized in 2009.
  • Forward-Looking Statements: Management notes that proceeds and the outcome of the UCIH arbitration are subject to uncertainties and factors outside the company's control.
  • Risk Factors: Investors are directed to the Annual Report on Form 10-K for the year ended December 31, 2011, for a comprehensive list of risk factors.

Investor Verification Checklist

  • Verify the schedule and security of the $74.8 million in deferred payments due through 2016.
  • Confirm the status and potential recovery value of the separate UCIH arbitration claim against Venezuela.
  • Review the specific terms of the suspension of the WilPro arbitration to understand conditions for reinstatement.
  • Assess the impact of the $37.6 million cash inflow on the company's immediate liquidity position.