Key Energy Services Inc. (NYSE: KEG) said June 13 it closed the sale of its frack stack and well testing assets to Covenant Testing Technologies LLC for $23.7 million.

Covenant plans to add the acquired assets to its existing fleet of flowback and well testing equipment in the Permian to meet the basin’s increasing demand, said John Cavitt, Covenant CEO.

Covenant, an affiliate of NGP-backed Catapult Energy Services Group, agreed to pay $19 million in cash and issue roughly $4.7 million of convertible preferred equity interest in the company for the assets.

Key, which plans to use the sale proceeds for general corporate purposes, is essentially selling its Edge Oilfield Services LLC business it acquired in 2011, said Luke M. Lemoine, an oilfield services analyst for Capital One Securities.

“While the deal seems minor, it does add to KEG’s … liquidity of $109 million ($83 million cash and $26 million in borrowing capacity) and helps the company focus more on its production-related businesses,” Lemoine said.

The divested assets contributed about 16% of revenue to Key’s fishing and rental services segment in first-quarter 2017, according to a company press release.

“These assets will service the growing demand of our customers in the Permian Basin and will position Covenant as one of the largest pure-play well flow management businesses in the U.S.,” Cavitt said in a statement. “We are honored to have Key as an equity partner and are grateful for a smooth, accretive transaction for both parties.”

Key expects a $17 million gain from the asset sale. The company said it doesn’t anticipate paying any cash taxes associated with the gain.

Robert Drummond, Key’s president and CEO, said the divestiture represents a milestone in its continued effort to dispose of noncore assets “to position the company as a leading production services provider in the U.S.”

Key provides a range of well intervention services with operations in major onshore oil and gas producing regions of the continental U.S. and internationally in Russia. The company is the largest onshore, rig-based well servicing contractor based on the number of rigs owned, the release said.

Founded in 2013, Covenant provides flowback and well testing services with operations in the Permian Basin and Niobrara Shale. Simmons & Co. International, energy specialists of Piper Jaffray, was exclusive financial adviser to Covenant in the transaction.

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