Sanjel Corp., the privately held energy services provider, plans to issue up to $400-million (U.S.) of debt, according to a filing that provides extensive and previously undisclosed financial and operating details about the family-owned multinational company.
According to the preliminary prospectus, Sanjel, owned by Calgary’s MacDonald family, generated revenue of $1.5-billion (Canadian) in its fiscal 2014, putting it third in its category of Canadian oil and gas well-cementing and pressure-pumping firms, behind Trican Well Service Ltd., which had sales of $2.1-billion last year, and Calfrac Well Services Ltd., with $1.5-billion. Trican and CalFrac are publicly traded.
Until now, little has been known about the inner financial and business workings of the company, despite its sizable presence in Canada and elsewhere. It has become an important provider of hydraulic fracturing services as the North American energy industry has tapped increasing volumes of oil and gas trapped in shale formations.
Proceeds from Sanjel’s bond issue will be used mostly to repay other debt facilities, according to the filing. The coupon rate has yet to be set. Norway’s Pareto Corp. is the sole manager and bookrunner for the offering. Sanjel spokeswoman Vivienne Allen was not immediately available for comment on the offering.
Sanjel was founded in 1982 by Don MacDonald, the company’s chairman. It has main offices in Calgary, Houston, Denver, Dubai and Mexico City, and employs 4,100 people. His son, Darin MacDonald, is the company’s president and chief executive, having worked at the business for 23 years. The two have equal financial control over the family’s holdings, which include energy businesses, real estate assets and capital and technology units.
The company derived $517-million, more than a quarter of its revenue, from Canadian cementing and hydraulic fracturing operations last year, according to the prospectus. Almost $925-million, more than 60 per cent of the total, came from U.S. operations. Of the remainder, Sanjel generated $50-million of revenue from the Middle Eastern operation and $6-million from Latin America.
Its largest customers are well-known Canadian and U.S. industry players, especially those developing shale resources, including SM Energy Co., Continental Resources Inc., Arc Resources Ltd., Bonavista Energy Corp., Newfield Exploration Co., Husky Energy Inc. and Encana Corp. It has more than 300 clients, but said that 10 account for 65 per cent of its revenue.
Among the list of risks spelled out for potential buyers of the bonds, the prospectus says Denver-based SM Energy is Sanjel’s largest customer, accounting for 21 per cent of sales; that contract is due to expire next year.
In the fiscal year ended April 30, the company had net income of $13-million, more than double profit of $6.1-million in the previous year. Materials and operating costs were higher in the most recent year, according to the document.
This year, Sanjel expects revenue to increase by 24 per cent to $1.86-billion, and net income to rise more than fivefold to $66.5-million.
The debt issue is scheduled to close June 19.
Editor’s note: An earlier online version of this story stated an incorrect amount for Sanjel Corp. revenue in fiscal 2014, and an incorrect division of revenue among company operations. It also understated Sanjel's net income for the fiscal year ended April 30, and the company's expectations for revenue this year. In addition, net income for the fiscal year ended April 30 was compared to the previous year, not 2012 as originally stated.