Kodiak Gas Services Slips as EQT Sells $336 Million Stake
The gas compression firm plans to repurchase 1 million shares as its private equity backer continues a gradual exit, selling 10 million shares at $33.60 apiece.
Shares of Kodiak Gas Services, Inc. (NYSE: KGS) edged lower in Tuesday trading after a major stockholder affiliated with private equity firm EQT announced the sale of a $336 million block of shares.
The offering consists of 10 million shares priced at $33.60 each, a slight discount to the stock's recent trading levels. While Kodiak itself is not issuing new stock or receiving any proceeds, the company simultaneously announced its intention to repurchase 1 million shares from the offering, a move valued at $33.6 million. The stock traded down approximately 0.7% to $33.89 by mid-morning.
The seller, Frontier TopCo Partnership, L.P., is an affiliate of EQT Infrastructure. This transaction is the latest in a series of orderly sales by the private equity backer to reduce its stake following Kodiak's public listing. EQT previously orchestrated sales of KGS stock in May and September, systematically reducing its ownership to under 23% prior to this latest offering, according to regulatory filings.
Such gradual exits by private equity sponsors are common and often interpreted by the market as a portfolio management strategy rather than a reflection of the underlying company's fundamentals. The company's decision to execute a concurrent buyback under its existing repurchase program reinforces this view, signaling management's confidence in the intrinsic value of its shares.
The market's muted reaction to the news reflects a broader context of strong performance for the natural gas compression provider. Despite the slight dip on Tuesday, Kodiak's stock has gained over 14% in the past three months. The offering price of $33.60 is well above the stock's 52-week low of $28.09.
Wall Street analysts appear to share a bullish outlook, even as a major shareholder reduces its position. The consensus analyst rating on KGS is a "Strong Buy," with an average 12-month price target of $44.18, suggesting a potential upside of more than 30% from the offering price. Recent upward revisions to earnings per share estimates for fiscal year 2025 further bolster the positive sentiment surrounding the company's operational outlook.
Kodiak operates one of the largest contract compression fleets in the United States, providing critical infrastructure for oil and gas producers. The completion of the offering, which is being underwritten by Goldman Sachs & Co. LLC and expected to close by November 13, will increase the company's public float. This can lead to improved trading liquidity and a broader base of institutional investors over time, removing the overhang of a concentrated private equity position.
For investors, the focus now shifts back to Kodiak's fundamental performance in the energy services sector and its ability to capitalize on the sustained demand for natural gas infrastructure.