What happened
Shares of Core Laboratories (CLB +0.00%) sank today, down by 9% as of 2:30 p.m. EST, after the company announced a secondary offering. Core Laboratories is looking to raise $60 million.
So what
The deal will be conducted as an at-the-market (ATM) offering, with distribution partner banks selling shares into the market at prevailing prices. Like all stock offerings, this one will be dilutive to existing shareholders. The company, which provides services to the oil and gas industry, had approximately 44.5 million shares outstanding at last count.
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Core Laboratories intends to use the net proceeds from the offering for general corporate purposes, which could include capital expenditures and paying down debt. The amount of cash that the company might raise will depend on how many shares it ultimately sells and at what prices.
Now what
Core Laboratories notes in the offering prospectus that it had $123 million in outstanding borrowings under its revolver. That credit facility has a total capacity of $225 million, and the company can increase that by up to $50 million if necessary.
The company has been working to pay down debt by allocating its free cash flow toward debt repayment. Free cash flow was $18.5 million in the third quarter, and Core Laboratories reduced its net debt load by $16.2 million last quarter.
"We continue to project Core Lab will remain profitable, compliant with the financial covenants under our debt agreements, and generate free cash flow, which will continue to be focused on reducing debt for the foreseeable future," CFO Chris Hill commented on the last earnings call.
