Other than the following items, there have been no material changes or updates to the risk factors previously disclosed in our 2023 Form 10-K.
Risks Related to the TOPS Acquisition
We may not consummate the TOPS Acquisition.
The TOPS Acquisition is subject to the satisfaction or waiver of customary closing conditions, and we cannot assure you that the TOPS Acquisition will be consummated in the anticipated time frame or at all. If one or more of the closing conditions are not satisfied, the TOPS Acquisition may not be completed. Some of these conditions are beyond our control, and we may elect not to take actions necessary to satisfy these conditions or to ensure that the TOPS Acquisition is not otherwise terminated. In addition, the purchase and sale agreement contains certain termination rights for both parties which, if exercised, will also result in the TOPS Acquisition not being consummated.
If the TOPS Acquisition is delayed, terminated or consummated on terms different than those described in the purchase and sale agreement, the market price of our common stock may decline to the extent that the price of our common stock reflects a market assumption that the TOPS Acquisition will be consummated on the terms described in the purchase and sale agreement or at all. Further, a failed transaction may result in negative publicity or a negative impression of us in the investment community and may affect our relationships with our business partners and the value of our common stock.
Under certain specified circumstances in which the purchase and sale agreement is terminated pursuant to its terms, Archrock ELT may be required to pay sellers a termination fee equal to $30.0 million or, in certain circumstances, sellers may be required to pay Archrock ELT a termination fee equal to $20.0 million. If the purchase and sale agreement is terminated under such circumstances, the termination fee Archrock ELT may be required to pay under the purchase and sale agreement may require us to use available cash that would have otherwise been available for general corporate purposes and other uses.
We may not be able to achieve the expected benefits of the TOPS Acquisition. We may also encounter significant
difficulties in integrating TOPS.
Even if we consummate the TOPS Acquisition, we may not be able to achieve the expected benefits of the TOPS Acquisition. There can be no assurance that the TOPS Acquisition will be beneficial to us. We may not be able to integrate the assets acquired in the TOPS Acquisition without increases in costs or other difficulties. The integration of a business is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating our business practices and operations with the business practices and operations of TOPS. The integration process may disrupt our business and, if implemented ineffectively, would restrict the full realization of the anticipated benefits from the TOPS Acquisition. The failure to meet the challenges involved in integrating TOPS and to realize the anticipated benefits of the TOPS Acquisition could have an adverse effect on our business, results of operations, financial condition and prospects, as well as the market price of our common stock. The challenges of integrating the operations of acquired businesses include, among others:
| ● | difficulties with the integration of the business of TOPS and workforce following the TOPS Acquisition; |
| ● | conditions in the oil and natural gas industry, including the level of production of, demand for or price of oil or natural gas; |
| ● | our reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies; |
| ● | changes in economic or political conditions, including terrorism and legislative changes; |
| ● | the inherent risks associated with our operations, such as equipment defects, impairments, malfunctions and natural disasters; |
| ● | the risk that counterparties will not perform their obligations under our financial instruments; |
| ● | the financial condition of our customers; |
| ● | our ability to timely and cost-effectively obtain components necessary to conduct our business; |
| ● | employment and workforce factors, including our ability to hire, train and retain key employees; |
| ● | our ability to implement certain business and financial objectives, such as: |
| ● | winning profitable new business; |
| ● | growing our asset base and enhancing asset utilization; |
| ● | integrating acquired businesses; |
| ● | generating sufficient cash; and |
| ● | accessing the capital markets at an acceptable cost; |
| ● | liability related to the use of our services; |
| ● | changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures; |
| ● | the effectiveness of our control environment, including the identification of control deficiencies; and |
| ● | our level of indebtedness and ability to fund our business. |
Many of these factors are outside of our control, and any one of them could result in increased costs and liabilities, decreases in the amount of expected revenue and earnings, and diversion of management’s time and energy, which could have a material adverse effect on our business, financial condition and results of operations. Further, additional unanticipated costs may be incurred in the integration of the acquired business.
The market price of our common stock may decline as a result of the TOPS Acquisition if, among other things, the integration of the properties to be acquired in the TOPS Acquisition is unsuccessful or transaction costs related to the TOPS Acquisition are greater than expected. The market price of our common stock may decline if we do not achieve the perceived benefits of the TOPS Acquisition as rapidly or to the extent anticipated by us or by securities market participants or if the effect of TOPS Acquisition on our business, results of operations or financial condition or prospects is not consistent with our expectations or those of securities market participants.
Any acquisitions we complete, including the TOPS Acquisition, are subject to substantial risks that could reduce our ability to make distributions to our common stockholders.
Even if we do make acquisitions that we believe will increase the amount of cash available for distribution to our common stockholders, these acquisitions, including the TOPS Acquisition, may nevertheless result in a decrease in the amount of cash available for distribution to our common stockholders. Any acquisition, including the TOPS Acquisition, involves potential risks, including, among other things:
| ● | the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate; |
| ● | our inability to obtain satisfactory title to the assets we acquire; and |
| ● | the occurrence of other significant changes, such as impairment of long-lived assets, asset devaluation or restructuring charges. |
