KLX Energy Services from the KLX/Boeing Merger


(02 Sep 2018) This future oil and gas drilling and producing company may be an opportunity for the individual seeking exposure to the oil and gas industries. Management moves indicate extreme confidence in this new company. Lacking positive cash flows make it a high risk investment. However, current pre-spinoff prices appear to limit the downside potential.

Parent Ticker: KLXI

Announced Record Date: 03 Sep 2018

Announced Distribution Date: 14 Sep 2018

Anticipated Ticker: KLXE


"KLX Energy Services will be an independent provider of completion, intervention and production services to the major onshore oil and gas producing regions of the United States, including the Southwest Region (the Permian Basin and Eagle Ford Shale), the Rocky Mountains Region (the Bakken formation, Williston, DJ, Uinta and Piceance Basins and Niobrara Shale) and the Northeast Region (the Marcellus and Utica Shales as well as the Mid-Continent STACK and SCOOP and Haynesville), serving the leading companies engaged in the exploration and development of North American onshore conventional and unconventional oil and natural gas reserves."

Parent Child comparison

The parent company, KLXE was a leading producer of aerospace compnents. This portion of the business is being acquired by Boeing. The leftover business will be the oil and gas servicing business KLXE.

Spin Ratio

.4 shares of KLXE for each share of KLXE prior to the spin/merger.

Cash Flows and Operating Earnings

Cash flows from operations was -$21.6 Million during the year ended January 2018. Operating Losses were -23.7 Million over the same period.

Cash Position

KLX Energy's pro forma balance sheet shows it will have $50 Million in cash and equivalents upon separation.

Revenue Projections

KLX Energy had $320 Million in revenues last year. As a company based in the oil and gas mining industry these are likely very cyclical in nature with stabilization occurring post 2016 energy price lows.

Dividend Policy

KLX Energy does not state that it will pay a dividend post spinoff.

Management Actions

The CEO and CFO are foregoing cash compensation for the first four years of operations for 5% and 3% of the company respectively.

Activist Investor Activity

Activist investor activity appears unreported.

Peer Comparison

After comparing KLXE to 38 peers, the expected value of this company is extremely erratic due to its lack of positive cash flows or positive operating earnings. The erratic range is somewhere between 0 and $58/share using EV/operating cash flows and EV/operating earnings comparisons.


The KLXE spinoff is part of the Boeing merger. A great payout for the managers of the previous company. Notably, the leadership of the former company are cashing out and following this new line of business with actions to become major shareholders of the new company. Although the risk is higher with this company due to absent positive cash flows, the management moves indicate that they expect this company to be very lucrative over the next few years. Market pricing as of 01 Sep 2018 indicates that this company should price at ~$21.09/share*. Entrants should consider that price and management's confidence when purchasing this company.

*The Boeing merger provides shareholders with a cash payout of $63/share. The spinoff provides .4 shares for each existing share of the current company. The 21.09/share price is found by simply calculating .4/1.4 = .2857 x (73.84 {share price as of COB 8/31/2018}) = 21.096. The price of the company with the spinoff is 10.84 higher than the payout, perhaps a purchase prior to the the spinoff will return a quick boost in price.

SEC Reports

24 Aug 2018, FORM10-12B/A