4440 Brittmoore Road
Company Perspectives:
Safety. We, at Universal Compression, must protect the safety of ourselves, our co-workers, our customers, and our suppliers before all else.
Service. Universal Compression is a "service company." Our mission is simply to help our customers improve their performance by supplying the very best compression services in the world. Integrity. At Universal Compression, we will conduct our business in a manner that will always reflect a high standard of ethics. We are committed to being fair and honest in all our dealings.
Universal Compression, Inc. rents, maintains, and operates a fleet of compressors used to pressurize natural gas pipelines. It owns one of the largest rental fleets in the United States, and has been developing its international business in Argentina, Venezuela, Canada, and the Pacific Rim. International operations accounted for 28 percent of revenues in 2003.
Compression equipment is used to boost the pressure of natural gas as it is being gathered, processed, and distributed. Universal Compression has grown to a leading position in the rental market for compression equipment in part through acquiring a series of related businesses over the years. In early 2003, Universal's compressor fleet numbered 7,400 units providing 2.3 million horsepower. The individual compressors ranged in size from 100 to 5,000 horsepower, allowing Universal to serve a wide spectrum of users.
Origins of Tidewater Compression Services
Tidewater Inc.'s origins date back to the South Coast Gas Company, formed in 1954. Tidewater had the world's largest fleet of vessels dedicated to supporting the offshore oil industry. By the late 1980s, the company's compression business was worth $50 million a year. At this time, Minstar Inc., a group led by a Minneapolis investor, launched an unsuccessful takeover bid for Tidewater Inc. After that failed, Minstar offered to buy Tidewater's compression business alone, also without success.
Compressors are a requirement for gathering and moving natural gas through pipelines; more compressors are needed as the pressure falls in aging wells. In the early 1990s, more natural gas producers began turning to rental companies to meet their compression needs. According to Universal Compression's prospectus, these companies accounted for one-quarter of the natural gas field compression market in 1996. Most natural gas producers, transporters, and processors owned their own equipment, though the rental market expanded at a rate of 8 percent a year in the 1990s.
A couple of small acquisitions were made in the summer of 1993. Tidewater bought Santa Fe, Texas-based Allison Production Services' 26 compressors and acquired a fleet numbering 113 units from BJC Operating Co. of Shreveport, Louisiana. This brought Tidewater's fleet to 954 units.
Tidewater acquired Halliburton Compression Service for $205 million in 1994. The Halliburton business had revenues of $50 million a year in North America. Soon after, Brazos Gas Compressing Company was added. The two purchases together added 287,000 horsepower to the fleet, bringing its total to 480,000 horsepower. This gave TCS the largest rental fleet of natural gas compressors in the United States. Tidewater then spent a couple of years consolidating these acquisitions and improving utilization rates of the acquired companies in line with its own.
TCS posted net income of $7.8 million on revenues of $113.9 million in the fiscal year ended March 31, 1997. In 1997, Tidewater decided to sell off subsidiary Tidewater Compression Services (TCS) in order to focus on its much larger marine support business. It boasted the world's largest fleet of offshore oil service vessels, 750 in all. TCS accounted for only about a seventh of Tidewater Inc.'s total revenues.
1998 Formation of the Company Followed by Public Offering in 2000
Castle Harlan, a New York merchant bank, formed TW Acquisition Corporation on December 12, 1997, to acquire Tidewater Compression Services, Inc. After the $350 million acquisition, completed on February 20, 1998, TCS was merged with TW Acquisition Corporation and renamed Universal Compression, Inc.
In the fiscal year ended March 31, 1998, revenues for the business slipped to $108.8 million and the company recorded a net loss of $3.2 million. The company owned one of the largest rental fleets in the United States, and was developing its international business in Argentina, Venezuela, Canada, and the Pacific Rim. As of June 1998, Universal Compression had 37 units providing 21,000 horsepower deployed in the markets. Its total fleet consisted of 2,700 units providing 512,000 horsepower. The company had more than 500 customers.
Universal posted a net loss of $2.4 million on sales of $129.5 million in the fiscal year ended March 31, 1999. Soon, it was looking to raise new capital to pay down some of its debt, which then amounted to about $350 million. The market for compressor-related stocks was good in 2000, reported the Houston Business Journal.
Universal Compression completed an initial public offering (IPO) on the New York Stock Exchange in June 2000. Universal raised $154 million in the IPO.
In September 2000, Universal Compression acquired Gas Compression Services Inc. (GCSI) for $12 million in cash and $46 million in Universal stock, plus $53 million in assumed debt and operating leases. GCSI was based in Traverse City, Michigan.
More Acquisitions in 2001
Two more companies were acquired in February 2001: Weatherford Global Compression Services, L.P. and ISS Compression, Inc, the parent of IEW Compression, Inc. The purchase of Weatherford International Ltd.'s compression business doubled Universal's size, adding 950,000 horsepower to the fleet, making it the second largest oilfield compression company after Hanover Compressor of Houston. As a result of the deal, Weatherford International gained a 48 percent holding in Universal, worth $412 million, making it Universal's majority shareholder.
Universal paid $15 million cash for IEW, which had revenues of about $19.5 million a year. IEW brought Universal a strong presence in the Gulf of Mexico. Universal paid $707.3
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