A Nabors Industries’ blank-check company will combine with e2Companies, a grid solutions and on-site power generation company, that will take the “virtual utility” company public, the companies said Feb. 12.

e2 offers uninterruptible, prime power generation fueled by natural gas that is paired with energy storage. The company estimates its pro forma equity value will be approximately $1 billion.

The transaction, anticipated to close in the third quarter, is expected to provide approximately $400 million in gross proceeds to the new public company—inclusive of approximately $331 million of cash held in Nabors’ special purpose acquisition corporation, Nabors Energy Transition Corp. II (NETD).

The transaction values e2 at a pre-money equity value of $500 million, “providing an attractive entry point for NETD shareholders,” the company said. “It also implies a pro forma enterprise value of the new public company of approximately $770 million.”

The merger comes as oilfield service companies are increasingly searching for ways to provide on-site power solutions for E&Ps in the oil patch. Companies such as ProPetro Holding Corp. recently launched its first new organic service line in a decade to provide transportable, natural gas-fired power generation. Similarly, Liberty Energy has focused on power generation that expands to data centers while developing a portable electric frac fleet and the capacity to generate electricity onsite using natural gas.

Nabors itself entered into an collaborative agreement with e2Companies in December to provide integrated power solutions in energy markets, including electrifying oil and gas operations and reducing emissions.

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e2 said its offerings go beyond the oilfield. Current and past customers include Nabors, Liberty Mutual, FedEx, GEICO, Cleveland Clinic and Case Western Reserve University, among others.

e2 markets itself as the creator of the energy industry’s first virtual utility—an AI-based platform that delivers integrated hardware and software solutions for on-site power generation, energy storage, distribution and improved energy cost economics to power critical industries such as manufacturing, data centers, oil and gas and healthcare.

Nabors said e2 provides full power solutions including:

  • Isolated grid power;
  • Running prime power or in sync with public utility with continuous power conditioning and uninterruptable supply;
  • Instantaneous load shifting between the grid and multi-source local power including diesel, gas, solar, wind, geothermal, hydrogen or nuclear;
  • AI-based cost optimization regulating power draws from the grid at peak pricing times; and
  • Supplying the grid with power on demand, offering further cost optimization.

“Most importantly, e2's solutions can function behind-the-meter without requiring a grid connection interconnect agreement,” Nabors said in a Feb. 12 press release. “This feature enables mission-critical industries—such as data centers, manufacturing, oil and gas, and healthcare—to benefit from reliable, on-site power generation and storage. Whether used as primary power or in sync with public utility, these solutions deliver significant cost savings and emissions reductions.”

Data center power

e2 said its technology addresses challenges arising from the international growth of data centers, including meeting the volatile power demand and hyper dynamic processing ability of new AI chips, “positioning the company to benefit from the AI data center boom.”

Whether the company can scale up to meet hyperscaler demands remains an open question.

TPH&Co. analyst Jeff LeBlanc said the company’s flagship R3Di system generates up to 1 megawatt (MW) using a natural gas generator paired with energy storage. The system is sold directly to the customer with e2 also generating revenue through either 15-year services contracts or contracts of the same length in which the company retains ownership of the asset.

“Within the original press release and prospectus, financials were limited to disclosing that FY’24 revenue was ~$28.7MM with a backlog of ~$3.8B through signed agreements,” LeBlanc said. “Though not explicitly stated, disclosure of contracted products and solutions deployed or to be deployed at ~165 sites globally (~490 assets) suggests a preliminary estimate of their asset base at 165-490MW.”

e2Companies R3Di on-site power unit
(Source: Business Wire)

However, LeBlanc said “at first blush, we are reticent to assume that the size of their solution is appropriate for hyperscalers,” but TPH sees applications for distributed power with the company’s collaboration with Nabors.

e2’s existing management team will continue to lead the company following the completion of the transaction. No existing e2 shareholders or management will receive cash—other than payment of certain fees to e2 management—as part of the deal. They will roll 100% of their equity holdings into the new public company. e2’s management team, primary shareholders and NETD’s sponsor and affiliates have committed to customary share lock-ups.

James Richmond, e2’s executive chairman and CEO, said that electric power demand is rising rapidly across a variety of sectors in the economy, including data centers, industrials and oil and gas, that exceed historical highs and are on pace to outstrip supply.

“As companies globally electrify their operations to meet decarbonization goals, our power solutions solve the critical issues of grid resiliency and reliability that have become a focal point for ensuring business continuity,” Richmond said. “Our business combination with NETD and strategic collaboration with Nabors will accelerate the deployment of our integrated power solutions to address the grid instability challenges that have emerged as a result of this growing supply and demand imbalance.”

Nabors President, CEO and Chairman Anthony Petrello, who is also president and CEO of NETD, said e2 has “clear, value-creating application in the oilfield sector. We will be working together to drive market penetration of e2’s portfolio.”

Petrello said e2 is “uniquely positioned” to capitalize on market tailwinds related to data centers and the rise in electrification.

“We believe the business combination with NETD will further accelerate e2’s growth and deliver long-term shareholder value while furthering Nabors’ commitment to ‘Energy Without Compromise’ and support of companies on the cutting edge of advanced energy technology,” he said.

e2Companies will trade on NASDAQ under the ticker symbol “VUTL.”

Vinson & Elkins LLP is acting as legal adviser to NETD. Haynes & Boone LLP is acting as legal adviser to e2. Milbank LLP is acting as legal adviser to Nabors.

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