Houston SPAC to take biofuels refinery company public

Port Westward, Oregon

Industrial Tech Acquisitions II, a Houston SPAC, has agreed to take NEXT Renewables Fuels public in a transaction worth $530 million. NEXT, founded in 2016, is also based in Houston. Upon closing, the business will be renamed NXTClean Fuels.

NXT is in the process of developing a 50,000 barrel-per-day refinery in Port Westward, Oregon that will produce renewable diesel (‘RD’) and sustainable aviation fuel (‘SAF’).

Renewable Diesel

Renewable diesel is made from feedstock products such as vegetable oils, animal fats, used cooking oil and distillers corn oil. It uses the same source oils and fats as biodiesel. However, the refining process is different from biodiesel. The process is more capital-intensive, but RD is chemically equivalent to petroleum diesel and can be transported in petroleum pipelines.

Likewise, the refining process to make SAF is similar to regular jet fuel, except for the source feedstocks.

Construction of refinery

NXT expects the permitting of the Port Westward refinery to be granted by late 2023 with initial operations starting in mid-2026. The construction cost is currently $2.7 billion. (NXT’s own website shows a start date of 2024 and a construction cost of $2 billion, though this date and cost appear to be from June 2021).

The company aims to select an EPC (Engineering, Procurement and Construction) Contractor by the end of the year. Fluor is the frontrunner, as they have performed the engineering work so far for the company.

Supply and Offtake Agreements

NXT has an agreement with BP, who will supply 100% of the feedstocks for at least 5 years. It also has offtake agreements with Shell and Chevron. United Airlines, through its venture arm, has invested an initial $2.5 million in NXT. This investment could rise to $37.5 million, assuming certain milestones are met.

Forecast revenues

In its first full year of operation in 2027, the company is projecting revenues of $3 billion and EBITDA of $1 billion.  Half of the revenue will be generated from the sale of credits that arise from the Renewable Fuel Standard, enacted by Congress in 2005.

In the transaction, NXT will have an enterprise value of $530 million. It will also have $156 million of cash on its balance sheet.

Management

The CEO of NXT is Christopher Efird, an entrepreneur and investor who has led, or co-led the investment into 29 growth stage businesses. Many of those later went public.

David Kane, based in Las Vegas, currently serves as the CFO of NXT, though his title is Senior VP and Controller.  He has been the CFO at a number of small and medium sized companies in California and Nevada.

2nd SPAC run by Scott Crist

Industrial Tech Acquisitions II went public in January 2022. It raised $173 million and is the 2nd SPAC run by Scott Crist. The first SPAC took Arbe Robotics public in October 2021. Arbe is an Israeli company developing 4D automotive imaging radar. Arbe’s shares are trading at $4.00, compared to $8 when it went public.

SEC filing – Investor Presentation

Houston SPAC buys California assets from Exxon

Flame Acquisition Corp, a Houston-based SPAC (Special Purpose Acquisition Corp) has agreed to buy the Santa Ynez oilfield from ExxonMobil. The business will be renamed Sable Offshore. (Technically, Exxon are selling the business to Sable Offshore, a company set up by Mr. Flores last year. In turn, Flame are buying Sable Offshore).



Flame completed its $250 million IPO in February 2021. The company is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable Permian. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

The Santa Ynez oilfield consists of 3 offshore platforms located in federal waters 12 miles off the coast near Santa Barbara and an onshore processing facility at Las Flores Canyon.

The offshore field had to stop production in 2015 after a corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American (a separate company to Plains Exploration and Production)  were the owners of the pipeline at the time. In 2020, Plains were fined $60 million in relation to the spill.

Last month, ExxonMobil bought the pipeline from Plains and has now agreed to sell it to Sable, who will be responsible for repairing and maintaining the pipeline.

The assets are being acquired for $643 million. However, most of this is being financed by Exxon who are issuing a $623 million loan to Sable. The loan has a 10% interest rate and will not be repaid until the earlier of 5 years or 180 days after production is restarted. I

Sable is targeting a production start date for the Santa Ynez field of January 2024 and is estimating it will cost $172 million to repair the pipeline and get the offshore platforms ready. That money will effectively come from the cash that Flame raised in its IPO. Sable is also looking to raise a further $300 million in equity to provide it with cash reserves in case of delays.

Sable believes that they can repair the pipeline quickly by following the processes outlined in the the consent degree that Plains agreed to in its March 2020 settlement. It’s not clear to me how or whether the Californian state authorities can object or delay the repairs.

If production does not restart by January 2026, ExxonMobil has the right to take back the assets.

[EDITED 11-10-22 to make clear that Plains Exploration and Production, the former employer of Mr. Flores, is a separate company from Plains All-American).

Flame – Investor Presentation

 

Magnolia Oil & Gas promotes from within for CFO role

Magnolia Oil & Gas has promoted Christopher Stavros from CFO to CEO.  Brian Corales becomes the CFO, having previously been VP, Investor Relations. The promotion for Mr. Stavros was announced on September 21, two days before founder and CEO, Stephen Chazen, died.

Magnolia has its head office in Greenway Plaza and operates wells in South Texas around Giddings and in Karnes County. It has a market capitalization of $5.6 billion.

The company began as a SPAC (Special Purpose Acquisition Company) formed by Mr. Chazen (ex-CEO of Occidental Petroleum). Mr. Stavros worked with Mr. Chazen at Oxy for 12 years, eventually becoming the CFO, before leaving in 2017.  The SPAC acquired the South Texas properties from Enervest, a PE firm, in 2018 for $2.7 billion and Mr. Stavros became CFO of Magnolia at that point.

Enervest remains the largest shareholder in Magnolia at 18%. Mr. Chazen owned 3% at the time of his death.

Mr. Corales joined Magnolia in November 2018. Prior to that, he had spent many years in investment banking including Johnson Rice & Co and Scotia Howard Weil. He will receive a base salary of $367,500.

SEC filing – 8-K Magnolia CFO appointment

Baker Hughes appoints new CFO

Nancy Buese has been appointed CFO of Baker Hughes. She replaces Brian Worrell, who will stay on with the company as an advisor through Q2 2023.

The company has revenues of $21 billion and a market capitalization of $25 billion.



Baker Hughes recently announced a reorganization that would reduce its four reporting segments into two. Oilfield Services and Oilfield Equipment were combined into one while Turbomachinery & Energy Technology and Digital Solutions were combined into the other. The company expects to save $150 million as a result.

Ms. Buese was the CFO of Newmont Corporation, a Denver-based gold miner, from October 2016 until last month. Prior to that, she was the CFO at MarkWest Energy Partners for 10 years, a midstream company. When it was acquired by MPLX, a publicly-traded MLP owned by Marathon, she became the CFO of MPLX.

Ms. Buese will receive a base salary of $900,000. She will also receive a cash sign-on bonus of $2 million and an award of restricted stock units worth $5 million, that will vest over 3 years. In 2023, she will also be eligible for long-term incentive awards with a current annual target of $3.5 million.

Mr. Worrell has been the CFO of Baker Hughes since it was combined with GE’s oil and gas division in 2017 (it became independent of GE in 2019). Prior to that, he served as CFO of GE Oil and Gas between 2014 and 2017. He began with GE in 1992 and is based in London.

No details of any severance arrangements with Mr. Worrell were disclosed.

SEC filing – Baker Hughes CFO

Conn’s CEO ousted after a year

Chandra Holt, CEO of Conn’s, a Woodlands-based retailer of furniture and electronics, is out after just over a year in the role. She is replaced on an interim basis by Norm Miller, a current Director and the former CEO. No reason was given for her departure.



Conn’s operates 158 retail stores located in 15 states. However, the key to whether the company performs is its Credit Segment. The average credit score of its customers is around 600. This is considered subprime. For the year ended January 2022, the average interest rate it charged on its credit financing was between 18% and 36%. 51% of its product sales were financed in-house, 28% were financed through a third party. Only 21% of purchases were made with cash or credit card.

For the last couple of years revenue was boosted by stimulus spending. Now, with higher inflation, gas prices and interest rates, it is no surprise to find that Conn’s is struggling once again. The stock price has dropped from $27 a year ago to under $7 now. The market capitalization is currently $184 million.

Ms. Holt joined in August 2021 from Walmart, where she led the US eCommerce business and had been the COO of SamsClub.com. Prior to Walmart, she held various leadership roles at Walgreens and Target.

Ms. Holt’s tenure has proved costly for the company. When she joined she received;

  • a base salary of $1 million.
  • a sign on equity award with a grant date value of $6 million that would have vested over 3 years.
  • a pro-rated 2022 equity award with a grant date value of $1.4 million, vesting over 3 years
  • a relocation allowance of $330,526

She also received a cash bonus of $2.2 million for the year-ended January 2022 as the company maxed out on its Executive bonus plan.

As a result of her termination, Ms. Holt will receive her salary for the next 24 months, plus a pro-rata bonus for 2022.

The equity awards will continue to vest through the severance period, which means they will be fully vested by the end of it. About a third of the awards were based on the future performance of the company, so they may not be granted at all. And with the collapse in the stock price, they are currently worth about 30% of the original value.

For these keeping score, that’s $5.7 million cash compensation in 14 months (not including whatever bonus is paid for this year).  Plus stock worth $7.4 million at the time of award.

Mr. Miller, who only stepped down as Executive Chairman in April, will receive a monthly salary of $210,000. He also received restricted stock worth $1 million and will continue to receive quarterly grants worth $750,000 while he is interim CEO. The stock will vest after one year. In case you are wondering, he received a $1 million salary and a $3 million cash bonus last year .

SEC – 8-k – Holt termination

 

 

BP to acquire renewable gas company for $4.1 billion

BP has agreed to acquire Houston-based Archaea Energy for $26 per share in an all-cash deal that values Archaea at $4.1 billion, including $800 million of debt. The deal values the company at 20 times the expected 2023 EBITDA.



Archaea develops, constructs and maintains renewable natural gas facilities (RNG) that capture waste emissions from landfills and converts them into low-grade fuels and electricity. It currently has 13 of them. The company also has 33 landfill gas to electric facilities, some of which were added after a recent acquisition.

The company is based in the Galleria area and was taken public in September 2021 by a SPAC based in Pennsylvania, Rice Acquisition Corp.  The SPAC actually acquired Archaea LLC for $347 million and Aria Energy LLC for $680 million, with the combined business being renamed Archaea Energy. So, its a tremendous return for its investors.

It is not surprising that they have been acquired by a traditional oil and gas company. Due to high oil prices, they are generating lots of cash, but are under tremendous pressure to invest in anything but traditional oil and gas.

The company appointed Brian McCarthy as its new (old) CFO in August 2022.

The deal is expected to close by the end of 2022.

SEC filing – Archaea – BP

New CFO at NCS Multistage

NCS Multistage has appointed Michael Morrison as its new CFO and Treasurer. He replaces Ryan Hummer, who has been promoted to CEO following the retirement of Robert Nipper, the founder of the company. Mr. Nipper will remain on the Board.



NCS manufactures products used in the fracking of horizontal wells. It has revenues of $135 million and a market capitalization of $65 million.

The company has its head office in NW Houston and went public in April 2017 at the $17 per share. The current share price of $26 sounds good until you realize there was a 1-for-20 reverse stock split in 2020. In other words, on a like-for-like basis, the stock has dropped from $340 at IPO to $26 now.

Mr. Morrison was, until recently, the CFO at ION Geophysical, another Houston oilfield services company.  He joined that company in 2002 and became CFO in February 2020. Ion filed for bankruptcy protection in April 2022, due to continued ongoing weakness in the seismic sector.

Mr. Morrison will receive a base salary of $325,000.

8-K filing – NCS Multistage CFO

Carriage Services CFO to depart by end of year

Ben Brink, the CFO of Carriage Services Inc, has announced he will be leaving at the end of the year to pursue other opportunities. The company has begun a search for a new CFO. Mr. Brink will assist the new CFO in a consulting capacity for the first six months of 2023.



Carriage Services is a leading provider of funeral and cemetery services and merchandise in the United States. Carriage operates 169 funeral homes in 26 states and 31 cemeteries in 11 states. The company has a market capitalization of $473 million.

Mr. Brink, who is 41, began his career at International Paper. He joined Carriage in 2009 as a Cash Manager and was promoted to CFO in 2015.

Chairman and CEO Mel Payne issued a very effusive press release praising Mr. Brink’s contributions to the company’s recent development. In the press release, the CEO stated that he offered Mr. Brink a severance payment of $1 million in cash or 30,000 shares (worth $965,000 at Friday’s close). Mr. Brink chose to take the shares.

SEC filing – 8-K Carriage CFO

Former manager of Prairie View Credit Union indicted for embezzlement

Gloria Hall, who was the Manager of Prairie View Credit Union (“PVCU’) for 20 years, has been indicted on charges of embezzlement. PVCU was founded in 1937 to serve the Prairie View A&M University and surrounding community.

The discovery of the alleged fraud resulted in the National Credit Union Administration liquidating PVCU (assets $3 million) and forcing a merger with Cy-Fair Federal Credit Union (assets $340 million) earlier this year.



Hall joined PVCU as a loan officer in 1988, but left in 1990 to work for the University. She returned in 2000 as manager of the credit union.

During her 20 years as manager, PVCU did not offer online banking and do not have an ATM. Hall single-handedly approved all loans and personally communicated with major account holders. She controlled access to all books and records and controlled the information provided to the PVCU Board of Directors.

From 2010 to August 2020, Hall utilized 34 member accounts, mostly belonging to elderly members, to carry out various fraudulent schemes. She allegedly created 58 false loans in the names of relatives and friends and transferred $791,000 from elderly credit union members to those relatives and friends. When loans were due, she would create more false loans to repay the amounts due. It’s not clear from the indictment how much of the $791,000 was lost.

Between November 2017 and September 2019, Hall also allegedly embezzled  $211,563 from two elderly account holders and transferring the monies to other account holders. Between 2016 and 2020 she also allegedly withdrew $76,772 from account holders and used the money for her personal benefit.

The National Credit Union Administration estimated total losses to be $200,000.

Hall is charged with three counts of embezzlement by a credit union employee and one count of making false entries in the financial records of the credit union.

If convicted, Hall faces up to 30 years in prison and a possible $1 million maximum fine.

https://www.justice.gov/usao-sdtx/pr/former-manager-prairie-view-federal-credit-union-indicted-embezzlement-charges

Houston Space Infrastructure company to go public

Intuitive Machines (‘IM’), a Houston space infrastructure company, has agreed to be taken public by Inflection Point Acquisition Corp, a Manhattan-based SPAC.

The company is located near NASA and has recently been awarded a number of contracts with NASA’s Artemis program, which aims to return astronauts to the Moon by 2024.



IM is involved in 4 main segments

  • Lunar landing vehicles
  • Lunar data services
  • Orbital services (e.g. satellite servicing, debris removal)
  • Space infrastructure (power plants, human habitation systems)

IM was founded in 2013 by CEO Stephen Altemus, Kam Ghaffarian and Tim Crain.

  • Mr. Altemus is the former Deputy Director of NASA’s Johnson Space Center.
  • Mr. Ghaffarian is the Chairman of IM and has co-founded a number of space companies, including NASA contractor Stinger Ghaffarian Technologies, which was sold to KBR for $355 million in 2018.
  • Dr. Crain is IM’s Chief Technology Officer and worked at NASA for 12 years.
  • CFO Erik Sallee joined in April 2021 and was formerly the Corporate Controller at Blue Origin.

The company expects to have $102 million of revenue this year and has $153 million in backlog for 2023. The big jump is in 2024 when revenues are projected to be $759 million and the business will make a small EBITDA profit.

The transaction values the business at $815 million enterprise value (2.8 x 2023 revenue) and will leave the business with $338 million cash on hand to fund growth.

The deal is expected to be completed in the first quarter of 2023.

Just last week, Nauticus Robotics, another Houston company with strong NASA connections, was taken public by a SPAC.

Intuitive Machines – Investor Presentation