ESP Resources Surges on Acquisition Agreement
ESP Resources Inc. (ESPI) shares jumped more than five percent after it reached an agreement on the purchase price and material terms to acquire Turf Chemistry.
ESP Resources Inc. [[ESPI.OB]], an oil and gas company headquartered in Scott, LA, reached an agreement on the purchase price and material terms to acquire Turf Chemistry, Inc today. The company intends to move quickly and finalize a definitive acquisition agreement after completing its due diligence. The acquisition will double ESP Resources’ operational footprint, while it aggressively expands during the remainder of 2009 and 2010.
Turf Chemistry, based in Mission, TX, reported unaudited revenues in excess of $1 million in 2008, while its senior management has more than 40 years of experience in the oil and gas industry production petrochemical business. Founded in 2006, the company supplies production chemicals, drilling chemicals, waste remediation chemicals, cleaners, and waste treatment chemicals for a variety of oil field applications.
Meanwhile, ESP Resources’ wholly owned subsidiary, ESP Petrochemicals, is a manufacturer, blender, distributor, and marketer of specialty chemicals and analytical services to the oil and gas industry. The company supplies retail and wholesale specialty chemicals for a variety of oil field applications including production, drilling, waste remediation, cleaning and water treatment. The company’s senior management has over 100 years of combined operating experience.
Last quarter, ESP Resources reported sales of $569,093 but reported a net loss of $328,810 due to general and administrative expenses eating into profits. However, the company’s balance sheet remains healthy with $62,751 in cash and $2.65 million in assets compared to liabilities of only $1.77 million. The company will likely be forced to raise additional debt or equity funding in order to sustain its operations, but it is diligently working towards profitability.
In the end, the Turf Chemicals acquisition makes a lot of sense for ESP Resources. The combined entity will have a much larger footprint in the petrochemical industry, while it could also help ESP Resources reach profitability more quickly. However, prudent investors may want to see how this all plays out before investing, as the company will likely be forced to raise additional funds.
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