Vivakor, an operator, acquirer and developer of clean energy technologies and environmental solutions, signed a definitive membership interest purchase agreement to acquire Endeavor Crude, Meridian Equipment Leasing, CPE MidCon, Equipment Transport and Silver Fuels Processing (collectively the Endeavor entities) from Jorgan Development and JBAH Holdings, an affiliate of James Ballengee, Vivakor’s CEO.
The Endeavor Entities operate in the midstream segment of the oil industry, which targets oil logistics, gathering and storage, including crude oil and produced water trucking and disposal services, and also operate a crude oil pipeline gathering system and pipeline injection stations.
Vivakor expects to benefit from the expected synergies these acquisitions will create. In addition, each of the material businesses have 10-year take or pay contracts with White Claw Crude, an affiliate of Jorgan, which began on Jan. 1, that provide minimum revenue levels. In the crude oil and produced water trucking business, the Endeavor Crude contract with White Claw Crude guarantees a volume of 75,000 barrels of crude oil be transported each day. The pipeline gathering contract with CPE MidCon guarantees a minimum pipeline throughput revenue of $200,000 per month. For the to be acquired Silver Fuels Processing (SFP) injection stations, minimum contract guarantees call for 200,000 barrels per month of throughput at $0.275 per barrel. Additionally, SFP is in the process of constructing a new station located in the Permian Basin that is expected to add an additional 30,000 barrels per month for a new minimum of 230,000 barrels per month.
Under the terms of the MIPA, which was unanimously approved by the board of directors of each party (Ballengee recused himself from voting in his capacity as chairman of the board of Vivakor), upon a successful closing, Vivakor would acquire 100% of the Endeavor entities for $120 million, consisting of (i) shares of Vivakor common stock to be valued at an above market price of $1 per share in an amount to not exceed 19.99% of the total number of Vivkaor’s pre-transaction issued and outstanding shares of common stock and shall not result in, taking into consideration common stock presently owned by Jorgan or its related parties, owning in excess of 49.99% of the common stock issued and outstanding on a post-closing basis; and (ii) shares of non-voting, 6% cumulative, Series A convertible preferred stock. Additional contingent consideration of up to $49 million, payable in Vivakor Series A convertible preferred stock, will be payable to Jorgan in the event the Endeavor entities generate 2024 EBITDA in an amount greater than $12 million. Conversely, in the event the Endeavor entities fail to generate a minimum of $12 million in 2024 EBITDA, up to $49 million of the purchase price consideration paid in the form of Series A convertible preferred stock will be subject to return by Jorgan to Vivakor for cancellation.
The closing of the acquisition is subject to, among other things, completion of due diligence satisfactory to the parties; delivery of audited financials for the periods ended Dec. 31, 2022 and 2023 for the Endeavor entities; Vivakor’s receipt of a satisfactory fairness opinion to the underlying transaction; approval under the Hart Scott Rodino Act; and other customary closing conditions. Vivakor is currently targeting the acquisition to close by the end of the fiscal quarter ending June 30.
“We are excited to bring all of these operations and assets together under one roof at Vivakor,” Ballengee said. “We believe there are strong synergies between the business segments which will allow Vivakor to more completely capture the value chain and expect to be able to streamline operations that should result in significant cost efficiencies. Of note, the proposed transaction requires no cash, is risk mitigated due to the 10-year take or pay contracts, and most importantly, will provide Vivakor with positive free cash flow to support ongoing growth and current operations. We look forward to moving this acquisition toward closing by the end of June and will continue to update our valued shareholders and the financial community as we move this transaction toward a successful close.”
