St. Paul-based Ecolab is shaking up its business organization. The water and energy services giant on Tuesday revealed its plan to spin off its Upstream Energy business into a stand-alone publicly-traded company.
Ecolab’s Upstream Energy business currently operates under the company’s energy segment. It consists of both an oil field chemicals production arm, and the WellChem drilling and well completion chemistry arm. From both lines of business, Upstream Energy generated $2.4 billion in total sales in 2018.
Ecolab, however, will retain its Downstream business, which serves refineries and petrochemical plants.
The spin off, in part, was prompted by the “increasingly different operating disciplines and expertise” required to run the Upstream business compared to Ecolab’s other businesses, said company CEO and chairman Douglas Baker Jr.
“The proposed spin-off transaction will create two best-in-class stand-alone companies with distinct business models and increased market focus,” says Baker. “[We] believe both companies will have a sharper focus which enhances executional discipline… we know these are critical factors in driving sustained growth.”
As its own business, Ecolab hopes its Upstream business will further its status as a market-leading global provider of oil and gas production, drilling, and completion products and services for both onshore and offshore activities. Generally speaking, 80 percent of Upstream’s sales came from oil field production. The remaining 20 percent derived from drilling and well completion.
Baker points to the growth of the unconventional onshore market, in particular, as a driver of the Upstream business’ evolution and notes the spin-off will help Upstream keep pace with that and all areas of the oil and gas markets.
“Our businesses are already performing well. The spin-off is designed to make a good situation even better,” says Baker.
A new name for the Upstream company, its leadership team, the market its stock will trade on, and its ticker symbol are still in the works, Ecolab said. The completion of the spin-off is expected to occur by mid-year 2020.