SPAC Led By Former Schlumberger CEO To Form Midstream Services Company

Sentinel Energy Services Inc. (NASDAQ: STNL), an energy-focused special purpose acquisition company led by a former CEO of Schlumberger Ltd. (NYSE: SLB), is merging with midstream services company Strike LLC based in The Woodlands, Texas.

The merger of the SPAC with Strike is set to create the largest pure-play pipeline infrastructure and integrity services provider with a total enterprise value of about $854 million and operations in most major producing basins of the onshore U.S. The combined entity, named Strike Inc., is also expected to begin trading on the New York Stock Exchange under the new ticker “STRK”.

Following its IPO in November 2017, Sentinel began its search for attractive assets that would benefit from Gould's and Shivram's operating experience, industry connections and approach to business—Chairman Andrew Gould and CEO Krishna Shivram—both of whom have had a decades-long career with Schlumberger.

Gould had a 36-year career with Schlumberger, retiring as chairman and CEO in 2012, after which he was chairman of BG Group for four years until its sale to Royal Dutch Shell Plc (NYSE: RDS.A). Shivram had a 25-year career with Schlumberger, with his last role as vice president and treasurer. In 2013, he joined Weatherford International Plc (NYSE: WFT) as the CFO and was then appointed interim CEO in 2016 until his departure in 2017.

Gould said he believes the proposed business combination of Sentinel with Strike will address the “rapidly growing market” for pipeline and facilities infrastructure and integrity services.

“Strike is uniquely positioned to take advantage of this trend,” he said in a statement. “We have been impressed by the dedication and dynamism of the Strike management team and their focus on long-term customer relationships across the U.S. We look forward to working with them to continue to grow the business both in the U.S. and other geographies.”

Following the merger’s closing, the business will continue to be led by Strike's current CEO and one of its founding partners, Steve Pate, together with his existing management team. Gould will serve as the chairman of the company’s seven-member board, which will also include Shivram and Pate as well as Charles Leykum, Lee Gardner, Marc Zenner and Jon Marshall.

Founded in 2003 by CEO Pate and his partners, Strike operates in most major energy basins in the U.S. The company provides full lifecycle pipeline infrastructure services, including new construction, make-ready, testing, inspection, maintenance, repairs, rehabilitation, upgrades, facility construction and reconnection.

From 2007-2017, Strike generated compound annual revenue growth of more than 35% with estimated 2018 revenues of $1.8 billion. The company is controlled by a group of investment funds managed by OEP Capital Advisors LP.

“As we seek to scale, expand and add to our successes, this merger allows us to do so as a publicly traded entity with a strong balance sheet, access to capital markets, and with distinguished leaders like Andrew and Krishna joining our team,” Pate said in a statement. “We are excited about Strike's next phase of growth and the opportunities that lie ahead.”

As part of the proposed business combination, Sentinel agreed to acquire a majority interest in Strike Capital LLC, which owns and operates Strike. Existing Strike shareholders, including Strike management and OEP are expected to retain significant ownership in the combined entity.

Sentinel has also obtained investments to enhance Strike’s balance sheet following the acquisition. These include commitments for a $150 million PIPE investment with a $110 million cash commitment by Fidelity Management and Research Co. and a $40 million investment by the SPAC’s sponsor, CSL Capital Management LP, as well as a cash commitment of $22 million and the contribution of a midstream pipeline services business, Invacor, valued at $18 million.

Sentinel said it expects to complete the business combination in first-quarter 2019, subject to approval by the SPAC’s shareholders and other customary closing conditions. Prior to completion of the business combination, Sentinel is expected to re-domesticate from the Cayman Islands to Delaware.

Citigroup Global Markets Inc. is sole private placement agent, financial adviser and capital markets adviser to Sentinel. Winston & Strawn LLP is the company’s legal counsel. J.P. Morgan Securities LLC is financial adviser to Strike and Jones Day is the company’s legal counsel.