USA: Deep Down inc Enters New JV

Deep Down, Inc. , an oilfield services company specializing in products and services for the deepwater and ultra-deepwater oil and gas industry, today announced the formation of a new joint venture, Cuming Flotation Technologies, LLC (the “JV”) with an affiliate of York Capital Management (“York”), for the purpose of combining the operations of Cuming Corporation and Deep Down’s Flotation Technologies subsidiary as of December 31, 2010.

Under the terms of the joint venture agreement with York, Deep Down contributed the assets and liabilities of Flotation Technologies Inc. into a new entity, Flotation Tech, LLC (“Flotec”) plus $1.4 million in cash to the JV in exchange for a 20% equity interest, and York contributed $22.35 million in cash in exchange for an 80% interest. The cash contributions will be used to partially fund the acquisition of Cuming Corporation by the JV, with York providing a bridge loan to fund the balance of the $42 million purchase price and to provide working capital. To fund its cash contribution to the JV, Deep Down issued 20 million shares of common stock to York at $0.07 per share for total proceeds of $1.4 million. This issuance of stock was substantially offset by the return of 18 million shares of common stock previously issued in connection with the Cuming acquisition.

As an important part of this transaction, Deep Down has entered into two agreements with the JV. Under a Management Services Agreement, Deep Down will provide certain technical, administrative and management services to the venture on a cost reimbursable basis. Secondly, a Sales and Service Agreement will provide a platform for Deep Down, Cuming Corporation and Flotec to combine their product and service offerings to better serve the worldwide market.

The JV is expected to generate more than a $100 million of revenues for the year ended December 31, 2011. Deep Down will use the equity method of accounting to recognize its proportionate share of the earnings of the JV.

Deep Down’s CEO, Ron Smith, commented, “This joint venture allows Deep Down and its shareholders to participate in the benefits of combining our flotation technologies business with Cuming Corporation, without the dilutive impact of financing the acquisition through the issuance of a large amount of equity. We believe York will make a strong partner that is supportive of our objective of creating a global leader in syntactic foam products and services primarily for the offshore oil and gas markets. The benefits of combining these manufacturing operations, as well as the additional opportunities stemming from the other agreements, will create significant value for our shareholders.”

Source:Deep Down Inc , January 4, 2011

Share this article

Follow Offshore Energy Today

2 thoughts on “USA: Deep Down inc Enters New JV”

Comments are closed.

Events>

<< Nov 2019 >>
MTWTFSS
28 29 30 31 1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 1

Offshore Energy Exhibition and Conference (OEEC) 2020

Offshore Energy addresses the technical, operational and commercial challenges associated with future sector growth.

read more >

Jobs>

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreEnergyToday.com, you'll reach countless professionals in the sector. For more information, click below...

apply

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreEnergyToday.com, you'll reach countless professionals in the sector. For more information, click below...

apply