Zefiro Closes Acquisition: Set to Boost Annual Revenue by Over USD $10 Million

I saw that you guys have won something like 37% of Ohio's infrastructure project funding. What is it about Zefiro that makes the company stand out so much for it to win all of these government contracts? You know, Rich, it's a scale thing. Um this industry for a very long time, particularly in the orphan well space, has been severely underfunded. And so, the contractors and vendors that are able to do this somewhat very bespoke work, um often cleaning up legacy wells from the 1800s, uh it's been small and fragmented to this point. And so, what we're seeing with the Infrastructure Investment and Jobs Act funding of $4.7 billion is it's just totally flipped the supply demand uh dynamics on their head. >> [music] >> We have some breaking news. Zefiro announced they just closed a $4.3 million USD equipment acquisition deal, which will instantly give them an operating presence in five new states. Zefiro has been unstoppable for the past several months. Over the past two fiscal quarters, they have had over 22 million in revenue and more than 3.8 million in adjusted EBITDA. Not only that, over the past 6 months, their stock price went up by over 76% at the time of filming this video. But, here's why the equipment acquisition news is so exciting. By adding this equipment to its fleet, Zefiro expects it will increase its annual revenue by at least $10 million USD per year. So, how are they going to do it? We have Zefiro's senior vice president of corporate development, Luke Plants here to explain it to us. Luke, nice to have you on. Rich, thank you for having me. Pleasure to speak with you today. Hey, my pleasure. Glad you're here, and we're excited to learn more about Zefiro methane corp. And my first question is, let's start off with this. Can you tell us a bit about what your role is in the Zefiro organization? Sure. So, uh I was actually brought into Zefiro as a result of an earlier acquisition that the company did back in 2023 of Plants & Goodwin, which is a family business that I was third generation in. I still run that business as its CEO today, which focuses primarily on all of the environmental services work that Zefiro does, shutting down old oil and gas wells. Um but, on the flip side, for Zefiro, I also um am working in corporate development. So, always looking for these exciting uh acquisition or merger opportunities that are out there. And uh yeah, some exciting news on that front as uh we're we're now uh on the backside of a a pretty sizable transaction. Absolutely, and it's very impressive. So, you work directly with Zefiro's top management then? That's correct. Yes, so I'm I'm involved in all of the day-to-day management decisions and setting the uh strategic vision for how the how the company will continue to grow and uh become the largest uh decommissioning company for for the oil field in North America. Fantastic. And just before we talk about this acquisitions news, I saw that you guys have won something like 37% of Ohio's infrastructure project funding. What is it about Zefiro that makes the company stand out so much for it to win all of these government contracts. You know, Rich, it's a scale thing. Um this industry for a very long time, particularly in the orphan well space, has been severely underfunded. And so, the contractors and vendors that are able to do this somewhat very bespoke work, um often cleaning up legacy wells from the 1800s, uh it's been small and fragmented to this point. And so, what we're seeing with the Infrastructure Investment and Jobs Act funding of $4.7 billion, is it's just totally flipped the supply-demand uh dynamics on their head. And so, because we were early, and because we've been really investing in people and equipment uh for the last 55 years, um we are we are just at a certain scale that while other capacity gets dried up uh very quickly as these funds uh sort of hit the open market, uh we're able to continue to take on additional workload, additional capacity, and you're seeing that reflected in our win rate. Yeah, and your win rate is extremely impressive, which we mentioned. Okay, let's talk about this asset acquisition now, which is also extremely important. Why don't you give me the elevator pitch about this deal, and why it's significant? So, yeah, we're acquiring the assets of a company called Viking Well Service, uh out of Ohio. And I've been watching Viking for several years now. Um they've had they had really great growth, um and they they were operating in states that we traditionally didn't operate in, especially in the Midwest, like Michigan, Illinois, Indiana, Iowa. Um and so, uh why when this deal came together, it just seemed very hand-in-glove for us. They didn't share any of our core customers, so there was almost an immediate bolt-on uh of customers that we can we can acquire who have used uh this equipment and some of these crews in the past. It it is not a a It's not a foregone conclusion that integration is always the easiest thing on the back end of an acquisition, but because this geography is sort of contiguous to where we already operate, we think that the bolt-on effects of this are going to be sort of immediately recognizable. The synergies are going to be immediately realized. The revenue is going to be immediately realized. And so it's just not very often that you get an opportunity like this that that comes across the desk that allows you to immediately bolster the company by 20 to 30%. 20 to 30%. Wow, that seems like a monumental shift for the company. Can you tell us a bit about the different pieces of equipment and what they do? Yeah, so ultimately at the at the the the core of all of this is the the service rig. So a a service rig is a mobile unit that sort of functions like a crane, allows you to do work in wells, you know, thousands of feet below surface. And so there's a lot of ancillary support equipment that comes along with that, but the core of the abandonment plug and abandonment project is the service rig itself. So we'll be adding five more of those rigs to our fleet as well as a lot of other support equipment that comes along with that, the pumps, the trucks to move things around, various handling tools and equipment to be able to remove casing out of these wells. So a lot of a lot of things that we already have in the core business, but now just more of it. And in the press release it said you expect this new equipment can generate at least 10 million USD in new revenue on top of what the company is already earning. Can you walk us through how you arrived at that number? Sure. So, we have fairly good internal data around what we would expect each rig to to generate as revenue at a reasonable utilization rate, and that sort of matched up with what we have done historically at at Zefiro. Um but we've also at the the targets previous financial records, and they've shown that they can consistently generate 10 million plus of revenue as well. So, sort of coming at this from two different angles, the number feels very attainable to me. That's exciting. You also mentioned how this can help to de-risk customer concentration. What exactly does that mean? So, this business tends to have only a handful of really good credit-worthy oil and gas customers that you can work for. And while the revenue and the profitability working for those customers can be very healthy, there may only be four or five of them in any specific geographic location that meets your core customer criteria. And so, all that it takes is one of those customers to say, "You know, we're going to slow down our plans for this year on the plugging side," and it can be a real hit to the the revenue stream of your company. So, by being able to onboard, you know, five, six, seven additional customers that meet these criteria that we try to work for at Zefiro, we just make not only the revenue go up, the profitability go up, but we de-risk the the chance that any one customer going a different direction or slowing down their program has real impacts on Zefiro's financial statements. Those financial statements just seem like they keep getting better. So, now let's talk about the expansion angle. With this acquisition, you'll be enhancing your presence in New York, Ohio, Pennsylvania, and West Virginia. But, there are five new states as well, you said. Tell us about how that will work. Yeah, so along with the assets, we will be bringing over some of the management team and some of the employees from the old company that we will be acquiring. And so, it's it's just a lot of relationships, right? These are not the sorts of opportunities that just come up organically, not without significant [clears throat] effort, resources, and a very long sales cycle to try to do this on one's own. So, by leveraging a lot of those prior relationships and work history and case studies that was done by the target company in previous years, we see this as a real exciting opportunity to be able to expand into these states where previously we would not have been an incumbent. And so, we we sort of have have been able to position ourselves to be that incumbent now and be the most reputable service provider in not only the Appalachian Basin, but also in the Midwest. That's absolutely incredible. Acquisitions always are great for investors, and growth into new markets also typically means more revenue. So, before this, Zefiro was already one of the largest pluggers of oil and gas wells in the USA. How would you say this acquisition improves Zefiro's overall position in terms of market share? Yeah, so it's it's hard to find the data on who really competes against us in this space now as it stood. And so by just continuing to add a bigger presence both geographically, but also from an asset perspective, we're we're definitely separating ourselves from the pack. Now, whether that means we're the number one, the number two, the number three, I couldn't actually tell you, but we are in that conversation right now. And I think with uh you know, sort of more opportunities in our pipeline right now, I think I think the the prospect of us being number one is not too far away. It's absolutely incredible watching this story grow. We feel that this is a very undervalued, underappreciated, underexposed opportunity for investors. Thank you for joining us on Rich TV, Zefiro's senior vice president of corporate development, Luke Plants. Thanks for the time, Rich. Look forward to picking this up again in the future. Absolutely. Keep up the great work. And if you're not winning, you're probably not watching. We're bringing the winners, CEO interviews, breaking news, trending topics in the world of finance, and we bring it to you first. Thank you for watching everybody. Luke, thank you for joining us. And for everyone that's watching, have yourselves a great day. Zefiro is a US environmental services company focused on strategically addressing methane [music] emissions. Its fully integrated core operations include plugging oil and gas [music] wells and measuring methane leaks. Follow them on LinkedIn for all the up-to-date info.