Intervale Capital Sells Ulterra Drilling Technologies to ESCO Corporation


Cambridge, MA  – Intervale Capital, a private equity firm focused on the oilfield services industry, has sold Ulterra Drilling Technologies, L.P. (“Ulterra” or the “Company”) to ESCO Corporation for $325 million in cash, subject to customary closing adjustments. Headquartered in Fort Worth, Texas, Ulterra manufactures and rents matrix and steel-body polycrystalline diamond compact (PDC) bits and drilling optimization tools for use in all the major oil and gas basins in the U.S. Ulterra also has a growing international footprint with operations in Canada, Latin America, the Middle East and North Africa.

Intervale invested in Ulterra at the time of the Company’s acquisition of Canada-based United Diamond (“United”) in December 2007. From May 2005 to December 2007, Ulterra was controlled by one of Intervale’s predecessor entities, Cherington Capital. Intervale and Ulterra recruited an experienced management team of drill bit specialists, including current President & CEO Johnny Everett, who joined the Company in 2005. The United acquisition provided Ulterra with an industry-leading steel-body PDC bit product line, which the Company has since successfully expanded throughout the U.S.

Between 2005 and 2012, the Company grew revenues from $46 million to $188 million, representing a 22% compounded annual growth rate. Ulterra expanded its operations from a regional bit company focused exclusively on North Texas to a dominant player of national scale with operations in the Permian Basin, Bakken Shale, Eagle Ford Shale, Haynesville Shale, Marcellus Shale, Rocky Mountains, Fayetteville Shale, Granite Wash, and Mississippi Lime. Over that time period, Ulterra expanded its manufacturing capacity in Fort Worth, and is recognized by customers as having the most modern drill bit manufacturing facility in the industry.

Charles Cherington, Managing Partner at Intervale Capital, commented, “We are very happy to turn Ulterra over to ESCO, a well-regarded and growing industry partner, and to achieve an attractive return for our investors. We have the highest respect for Johnny Everett and the rest of the Ulterra management team. Management worked alongside Intervale to transform Ulterra from a regional, roller cone-focused drill bit player into the fastest growing PDC bit manufacturer in the world.”

Johnny Everett, Ulterra’s President & CEO, commented, “We are excited to accelerate Ulterra’s growth internationally through ESCO’s global footprint and to facilitate ESCO’s expansion into oil and gas markets. This transaction makes perfect strategic sense for both companies, and is a great outcome for Ulterra’s employees and shareholders.”

The acquisition is expected to close on or around August 31, 2012, upon satisfaction of customary closing conditions and early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The Ulterra sale is the second exit from Intervale’s first fund, which closed on $280 million in 2008. Intervale is actively investing out of its second fund, through which it acquired oilfield cementing specialist Allied Oil and Gas Services in December 2011.

Fulbright & Jaworski L.L.P. acted as legal advisor to Ulterra. Baker Botts, Wells Fargo Securities, and Ernst & Young acted as advisors to ESCO Corporation.

About Intervale Capital:
Intervale Capital is an energy-focused private equity firm, with headquarters in Cambridge, Massachusetts, and an office in Houston, Texas, investing exclusively in middle-market energy services and manufacturing companies and related technologies.

About ESCO Corporation:
Headquartered in Portland, Oregon, ESCO is an independent designer, developer and manufacturer of highly engineered wear parts and replacement products used in surface mining, infrastructure development, power generation, aerospace and industrial applications. The company operates in 21 countries on six continents, including an expansive network of 30 manufacturing locations and 40 sales and distribution facilities.

About Ulterra Drilling Technologies, L.P.:
Ulterra Drilling Technologies, L.P. (“Ulterra” or the “Company”) is the fastest growing manufacturer of polycrystalline diamond compact (“PDC”) drill bits in the world according to Spears & Associates. The Company designs, manufactures and rents steel-body and matrix PDC drill bits used in oil and gas well construction primarily in the U.S. and Canadian markets. The Company also offers proprietary stick-slip reduction tools to enhance drilling operations. Ulterra has a broad North American presence with strong positions in most key U.S. unconventional plays (primarily shales, tight sands and carbonates). In addition, Ulterra is expanding internationally with locations in Mexico, Colombia, Saudi Arabia, Egypt, the United Arab Emirates, and Oman.

Tuan D. Tran
Vice President
Intervale Capital
(617) 401-8405

Source: Intervale Capital