Lubbock-based service company Service Compression has received a vote of confidence with a significant upsizing of its asset-based loan credit facility. The facility, led by J.P. Morgan, has been upsized 50% to a total commitment of $300 million.
“This $95 million upsize, led by J.P. Morgan, underscores the strength of our platform and the significant opportunities we see in the market,” said CEO Rhett Newberry. “All the capital will go to help develop compressor infrastructure in the Permian Basin.”
Newberry estimated the company has 350,000 of compression horsepower, 70% of which is deployed in the Permian Basin. Over the next five years, he said Service’s compressors will be predominantly located in the Permian. Demand has grown because the compressors can used in conjunction with artificial lift, so demand has grown alongside production. Yet, he said it can be difficult to get capital.
So, the agreement to upsize the credit facility “spoke well of the industry and our company. We have amazing people top to bottom.” Accessing power in the Permian is a big problem, he said, and the rising cost can also be an issue. He said a lot of the compressor units are electric but others can run on field gas. “We’re very bullish on both. There’s demand for both,” Newberry said. “What’s interesting to me is that, in order to produce electricity, we need natural gas.”
As electricity demand continues to soar, whether through population growth, the electrification of oil field equipment or the arrival of bitcoin mining and artificial intelligence data centers, “we will be a critical piece of power demand,” Newberry said. In addition to J.P. Morgan, the company’s equity partners include Warburg Pincus and Masked Rider Capital.