In the first day of trading under its new name, Nuverra Environmental Solutions Inc (NYSE:NES) proved two things. First, the company proved that its growth by acquisition strategy wasn’t going away with the old name. Second, it proved that it could make good on its promise to move into solid waste disposal. Both were accomplished after the company found an ideal asset to add to its burgeoning portfolio of environmental solutions.
This latest acquisition, Ideal Oilfield Disposal, is a greenfield oil-field disposal landfill located in North Dakota. Nuverra Environmental Solutions Inc (NYSE:NES) has always said that it sees solid waste disposal as the next logical step for the company as it grows is portfolio of full-cycle environmental solutions for the oil and gas industry. While no financial terms were disclosed, the deal is expected to be accretive to earnings and add about $18 million-$20 million in annual revenue.
Currently, the site isn’t operational and the company anticipates that it will need to spend an additional $6 million-$8 million in capital this year to bring the facility on line. Once it is operational, the 60-acre site has a permitted capacity of over 1.7 million cubic yards of airspace which Nuverra Environmental Solutions Inc (NYSE:NES) believes can be expanded to 5.8 million cubic yards in the future.
What you might be wondering is why Nuverra Environmental Solutions Inc (NYSE:NES) is buying a landfill. You can’t think of this facility as something akin to a Waste Management, Inc. (NYSE:WM) residential waste facility. This is a specialized facility to be a permanent solution for the drill cuttings from drilling an oil and gas well.
You don’t hear too much about drill cuttings; there are currently a variety of disposal methods such as burial pits or land farming that are used to dispose of these cuttings. However, because these cuttings can contain naturally occurring radioactive material, salt, and other harmful substances, energy companies need to handle these materials with care. Further, because of the radiation levels that can be emitted by these cuttings, a traditional landfill like those of Waste Management, Inc. (NYSE:WM) won’t work because the levels can be high enough to trigger a landfill’s radiation sensor.
Nuverra Environmental Solutions Inc (NYSE:NES)’s disposal solution takes the risk of handling these cuttings out of the hands of drillers; it can offer this solution as part of its full-cycle, closed-loop, environmental solution. Further, as environmental regulations surrounding solid waste from drill sites change, Nuverra will be at the forefront of providing solutions to its customers. This first facility, which is located in the Bakken, gives Nuverra an important additional service to offer its customers in the region.