Orbital Infrastructure files for bankruptcy

Orbital Infrastructure Group logo

Orbital Infrastructure Group has filed for Chapter 11 bankruptcy. The company, based in the Galleria, has been struggling for a while. It has negative equity of $155 million and $306 million of debt obligations.

The company was formed in Colorado in 1998 to develop thermal management solutions. In 2008, it moved its head office to Oregon with the acquisition of a business that manufactured power supplies, transformers and industrial controls. It began trading on the NASDAQ in 2012. In 2022, OIG had revenues of over $300 million but has made operating losses for the past 10 years.

OIG moved its head office to Houston in 2020, following the appointment of Jim O’Neill as its CEO. He spent 17 years at Houston-based Quanta Services, including five years as CEO before leaving in March 2016. After his appointment, the company pivoted to energy infrastructure services.

Losses galore

At the time of his appointment in 2019, the company had no debt! However, there have been a series of disastrous missteps.

  • The company bought Reach Construction, a start-up utility-scale solar construction contractor in April 2020 for $11 million. The business was loss-making and lost $4 million in its first nine months after acquisition. The company then made the decision to scale up the business to take on larger projects.
  • In October 2021, the company formed a joint venture to complete two fixed-price solar energy projects in Alabama and Arkansas. For 2022, Orbital’s share of the losses were $54 million! In April 2023, the company agreed to pay its JV partner an additional $34 million so that the partner could finish the projects. The $34 million has not yet been paid and is part of the $306 million debt obligations.
  • In November 2021, the company bought Front Line Power Construction for $219 million, mostly paid in debt ($105 million) and loan notes ($86 million). The assets acquired included $70 million of goodwill and $108 million of intangible assets.
  • While the performance of Front Line has been reasonably good, the solar panel project losses triggered a large decline in Orbital’s stock price in 2022. In turn, that triggered a goodwill impairment that caused all the Front Line goodwill to be written off.
  • The company made four other acquisitions in 2021 and 2022. While they performed okay, they undoubtedly caused management distractions. The stock price reduction also caused another $26 million goodwill impairment.
  • The legacy gas systems business in the UK was sold in 2021, resulting in an impairment of $9 million.
  • An unnamed customer, one of OIG’s largest and most profitable, started its purchases from OIG in 2023 as concerns over the financial stability of the company mounted.

Front Line Power and Gibson Telecoms (one of the 2021 acquisitions) are in the process of being sold and are not part of the bankruptcy proceedings.

Well-paid executives

For a relatively small company, OIG has some highly paid executives.

  • Mr. O’Neil has a base salary of $800,000.
  • William Clough, Executive Chairman and former CEO, is paid $850,000
  • CFO Nick Grindstaff gets $650,000. Mr. Grindstaff also gets a yearly guaranteed bonus of 100% of base salary.

SEC filing – bankruptcy


Earthstone Energy to be acquired for $4.5 billion

Earthstone Energy, based in The Woodlands, has agreed to be acquired by Permian Resources in an all-stock transaction worth $4.5 billion. The executives of PR will run the combined business from its headquarters in Midland. Earthstone’s shareholders will get 27% of the combined business.

Both companies operate exclusively in the Permian Basin. Combined they will have 403,000 net acres and run 11 drilling rigs. They will be the sixth largest producer in the Permian.

Earthstone was formed in 1969 as Basic Earth Science Systems. Initially, it was based in Denver and operated in Montana and North Dakota of the Bakken. The company changed its name to Earthstone Energy in 2010 and went public the following year.

In December 2014, Oak Valley Resources, a Houston-based company completed a reverse takeover of Earthstone for $138 million.  Oak Valley founder and CEO Frank Lodzinski is now the Chairman of Earthstone.

The history of Permian Resources starts with Colgate Energy Partners. It was formed in 2015 with backing from private equity firms Pearl Energy Investments and NGP. Colgate went public in September 2022, via a merger with Centennial Resource Development. The combined company was renamed Permian Resources.  Centennial was originally taken public in 2016 by a SPAC founded by Mark Papa, who built EOG Resources and was backed by Riverstone.

In June, Earthstone agreed to buy a two-thirds interest in Novo Oil and Gas for $1 billion. Novo is a Delaware Basin E&P operator, backed by EnCap Investments. In 2022, it made three separate acquisitions for $1.5 billion.

Permian is targeting $175 million of cost synergies, mainly through lower drilling costs. The savings include $30 million for general and administrative costs or 50% of Earthstone’s current cash G&A costs.

Earthstone compensation

I tried to determine what payouts would be due to the senior management of Earthstone in the event they left as a result of the takeover. Unfortunately, unlike most of their peers, the company didn’t publish a summary compensation table for that event. However, CEO Robert Anderson would get 3x base salary and bonus (about $3.9 million), while other executives would get 2x (about $2.1 million each).

Interestingly, most of the unvested stock held by the Earthstone management vests (or has vested) this year. That’s worth around $15 million for Mr. Anderson and around $8 million or so for each of the other executives.

The deal is expected to close by the end of 2023.

SEC filing – Investor Presentation


Houston midstream company to be acquired for $7.1 billion

Energy Transfer has agreed to acquire Crestwood Equity Partners in an all-stock transaction that values Crestwood at $7.1 billion enterprise value.

Crestwood is a midstream company that primarily has gathering and processing assets in the Williston Basin in the Bakken, the Delaware Basin in the Permian, and, to a lesser extent, the Powder River Basin in Wyoming. The company was formed in 2001 and went public in 2013 following a merger with Inergy Midstream.

In the past couple of years, the company has been streamlining its portfolio, selling assets in the Marcellus and Barnett shale basins and buying Oasis Midstream (Williston Basin) for $1.7 billion in February 2022.  It has its head office in downtown Houston.

ET has its head office in Dallas and is a much bigger company. Its market capitalization is $39 billion, compared to just $2.8 billion for Crestwood.

ET believes it can achieve cost synergies of $40 million a year. In addition, it should be able to refinance the debt acquired in the deal at a lower interest rate.

The Crestwood executive management are in line for big change-of-control payments, assuming they are terminated as a result of the deal. Bob Phillips, Chairman and CEO, who joined Crestwood in 2007, will receive $20 million. This includes the value of accelerated stock units. The other five senior executives will get a combined $36 million.

The deal is expected to close in Q4 2023.

Investor Presentation


Oxy promotes Sunil Mathew to be its new CFO

Occidental Petroleum (‘Oxy’) has promoted Sunil Mathew to be its new CFO. He replaces Rob Peterson, who has been appointed Executive Vice President of Occidental Chemical (‘OxyChem’).

Oxy has its head office in Greenway Plaza in Houston and has a market capitalization of $56 billion.

Mr. Mathew joined the company in 2004 in Qatar and moved to the US three years later. He is currently the VP of Strategic Planning, Analysis and Business Development. He was promoted to this role in April 2020, the same time that Mr. Peterson was appointed CFO. Mr. Mathew holds  a Bachelors degree in Electronics Engineering and a MBA.

Mr. Peterson joined OxyChem in 1996 and served as its President from 2014-2017. He has a Bachelor’s degree in Mechanical Engineering and a MBA.

Oxy plans to build 100 direct-air carbon capture plants by 2035. In his new role, Mr. Peterson will be in charge of operational readiness for Oxy’s first such plant, which is located in West Texas.

At the time of their appointments in April 2020, Oxy was under a lot of stress. It had acquired Anadarko for $36 billion in August 2019. But the debt it took on and the collapse in oil prices due to Covid, led to activist investor, Carl Icahn, calling it ‘one of the worst disasters in financial history’. Mr. Peterson was appointed CFO a week after Oxy and Mr. Icahn reached a truce.

How times have changed. Oxy was the best performing stock in the S&P 500 in 2022 and it has halved its long-term debt from $39 billion to $19 billion.  Last week, the stock of Icahn Enterprises plunged 30% after the company disclosed that the SEC was investigating the company following allegations by a short seller that the company was inflating the value of its investments.

SEC filing – 8-K Oxy Mathew CFO

CFO of HPE resigns to take CEO job at RingCentral

Tarek Robbiati, CFO of Hewlett Packard Enterprise (‘HPE’), is leaving to become CEO of RingCentral, with effect from August 25. Jeremy Cox, Corporate Controller & Chief Tax Officer, has been appointed interim CFO while the company conducts a search for a permanent replacement.

RingCentral is based in Silicon Valley, which is where HPE had its headquarters until it moved to Spring, TX in 2020. RingCentral has a market cap of $3.7 billion, compared to HPE’s $22 billion. The company provides enterprise cloud communications, collaboration and contact center solutions, primarily through subscription services.

RingCentral CEO Vlad Shmunis founded the company in 1999 and is transitioning to Executive Chairman. To make run for Mr. Robbiati, Mo Katibeh, COO for the past 18 months, is leaving the company.

Mr. Robbiati became a non-executive director of RingCentral in January of this year.

Diverse Background

Mr. Robbiati was appointed CFO of HPE in August 2018. He holds both Italian and Lebanese citizenship and is fluent in six languages. He has a degree in Nuclear Physics and Electronics from Ecole Nationale Supérieure d’Ingénieurs, Caen, France and an MBA from the London Business School.

Mr. Robbiati started his career as an R&D Engineer for Schlumberger in France but has mostly worked in Telecoms in UK, Australia and Hong Kong. He was CEO of FlexiGroup, an Australian financial services group, before becoming the CFO of Sprint in 2015.

Conventional Background

Mr. Cox has been with HPE or its predecessors since 2008 and has a more orthodox background. He has a degree from Texas Tech. Most of his experience has been in Tax. He was promoted to Corporate Controller a year ago.

SEC filing – 8-K Robbiati resignation

Houston E&P CFO leaves after less than seven months

Kristen McWatters, CFO of Battalion Oil and Gas, has resigned less than seven months after being appointed. She handed in her resignation on August 2 and left two days later. Her duties will be covered by Matt Steele, the CEO and the other members of the finance department.

The company is based in NW Houston and has working interests in approximately 40,000 net acres in the Delaware Basin. Its market capitalization is currently $136 million. It also has $230 million of debt that carries an interest rate of over 12%.

The company was formerly known as Halcon Resources. It went into bankruptcy in August 2019. The company emerged in October 2019, having eliminated over $750 million of debt. In return, the debt holders got 91% of the newly reorganized equity. It changed its name to Battalion in January 2020.

In her resignation letter, Ms. McWatters did not give a reason for her departure, though she did say it was not the result of any disagreement with the Company on any matter relating to how the Company has operated, its policies or its practices, including its controls or financial related matters.

The SEC filing made no mention whether severance would be paid. If it were, it would be $150,000 or six months’ severance.

Ms. McWatters was appointed to the role on January 22 and she reported to then-CEO Rich Little.  About six weeks later, Mr. Little was replaced as CEO, leaving with a $1 million severance. The new CEO, Mr. Steele, was appointed with a lower base salary than Ms. McWatters.

SEC filing – 8-K – Battalion Oil CFO resignation

Struggling nutrition company appoints new finance leader

Guardion Health Sciences has promoted Katie Cox to be its Chief Accounting Officer. She replaces Jeffrey Benjamin, who has resigned. The CAO role is the most senior financial position in the company.

Guardion is a clinical nutrition company. Its main product is Viactiv, a line of supplement chews for bone health. The company is based in the Greenway Plaza area of Houston, having moved its head office from San Diego in 2021. It has a market capitalization of $10 million.

Disastrous Acquisition

Guardion is suffering from a disastrous acquisition made in June 2021. It paid $26 million in cash for the business that owned Viactiv. The product is sold in retailers such as Walmart and Target. Starting in late 2021, the company experienced supply chain issues that resulted in a lack of inventory at the retailers. In fact, the company ended up paying $83,000 in out-of-stock fees to the retailers in 2022.

At the end of 2021, Guardion wrote off $12 million in goodwill related to the acquisition because its market cap was below the carrying value of its assets. In 2022, it wrote off $10 million, the value of intangible assets that it had acquired.

Change of Control clause

Ms. Cox joined the company in June 2022 as the Head of Financial Planning and Analysis. Prior to that, she spent nearly three years as Director of FP&A at Catalent Pharma Solutions and ten years as a Finance Manager in a subsidiary of Baxter International.

Ms. Cox will receive a base salary of $225,000. She will also get a $50,000 retention bonus immediately following a Change of Control transaction. She will get another $50,000 if the Change of Control transaction doesn’t happen by December 31, 2023.

Craig Sheehan, the Chief Commercial Officer, recently entered into a bonus agreement with a similar bonus structure except his refers to either a Change of Control transaction or the sale of the Viactiv brand.

Jeffrey Benjamin was appointed CAO in August 2021, following the departure of CFO Andrew Schmidt. Mr. Benjamin joined the company in April 2021.


In June, CEO Bret Scholtes stepped down as CEO after two-and-a-half years in the role. The company appointed Jan Hall as its new CEO. Ms. Hall has worked for Johnson & Johnson and Coca-Cola and most recently was CEO of M2 Ingredients.

SEC filing – 8-K – Guardion CAO

Crown Castle to cut headcount by 15% and close offices

Crown Castle, based near the Galleria, has announced it will cut its headcount by 15% (approx 750 jobs). It will also discontinue installation services as a product offering within its Tower segment. The company will incur one-time restructuring charges of approximately $70 million (mostly severance).

In addition, the company said it would consolidate office space and incur a charge of $50 million. That’s for accruing remaining lease obligations and writing off leasehold improvements. The company didn’t publicly disclose which offices were affected but an anonymous post on ‘TheLayoff.com’ stated that 13 regional offices were closing. That post also said that, if employees in those offices didn’t work for that specific region, they would have to move to Houston or leave the company.

Crown Castle has said that the mobile phone operators have slowed down tower construction activity by 50% in the second quarter as they complete the major part of their 5G investment roll-out.

The company owns and operates 40,000 large cell towers, 120,000 small cells and 85,000 miles of fiber. The company has revenues of around $7 billion, 90% of which comes from the rental of its infrastructure.

The other 10% of revenue comes from Tower Services with about 55% of that from Site preparation and 45% from installation services. It is the latter that is being discontinued. Unlike the rental business that has high margins under long-term contracts, services have lower margins (~30%) and volumes are more volatile.

Elliott Management

Back in 2020, activist investor Elliott Management took aim at Crown Castle, believing that it had under-performed because it invested heavily in Fiber, which had a return on capital of 3%. It also said the board was too insular. At the time, 8 of the 11 non-executive directors had served for at least 13 years and included two former CEOs.

Elliott launched its campaign with great fanfare in June 2020 and Crown Castle quickly responded by replacing three of its non-execs. However, the company didn’t make any other major changes and Elliott appeared to quietly drop its campaign soon thereafter.

At that time, Crown Castle’s market capitalization was $71 billion. It is currently $47 billion.  The company’s largest customer is T-Mobile. Its long-term growth prospects took a hit following the merger of T-Mobile and Sprint as the combined customer required less tower rentals.

That leads me to wonder if Elliott will come knocking on the door again, like they did recently with another Houston company, NRG. The Fiber business still earns a single digit return that is below the company’s cost of capital.

For good measure, today the company also announced two new non-exec directors. That will mean 5 out of 12 will have been appointed in the past three years.

SEC filing – 8-K – Restructuring


Academy promotes from within for CFO role

Academy Sports and Outdoors, based in Katy, has promoted Carl Ford, Senior VP, Finance to be its CFO. He replaces Michael Mullican, who was appointed President of the company at the beginning of June.

Academy went public in September 2020 with an IPO share price of $13. It now trades at $57, though that is about $10 off its 52-week high as comparable net sales in its latest quarter were down 7% . It currently has 269 stores in 18 states.

Mr. Ford joined the company in January 2019. Prior to joining the company, he spent 15 years at Belk, a department store chain based in Charlotte, NC, ending up as the VP of Financial Planning and Analysis. He started his career at Deloitte and Touche.

Mr. Ford will have a base salary of $500,000 and will receive equity awards valued at $1 million, which are a mixture of time and performance-based restricted stock units.

Mr. Ford’s promotion is the latest of a series of changes at the company. Back in April, Ken Hicks, who had been CEO since May 2018, announced he would transition to Executive Chairman, effective June 1. In turn, Steve Lawrence, the Chief Merchandising Officer, was promoted to CEO. Matt McCabe, Senior VP, General Merchandise Management of Footwear, was promoted to Mr. Lawrence’s role.

Mr. Mullican’s role as President covers Strategic planning, logistics & supply chain, legal, compliance, and risk management functions.

Sec filing – 8-K Academy CFO

ExxonMobil officially moves its head office to Spring, TX

Gary Coronado/Houston Chronicle

ExxonMobil has officially changed the location of its headquarters from Irving to Spring with an 8-K filing with the SEC on July 5. Exxon has a market capitalization of $417 billion and therefore becomes the largest company in the Houston-area, as measured by market cap. Its market cap is over three times the next largest (ConocoPhillips at $125 billion).

The company announced back in January 2022 that it would be relocating its corporate offices to its campus in Spring sometime in 2023.

Exxon moved its head office from Manhattan to Irving in 1989. The campus in Irving, built in 1996, was 365,000 square feet and housed 250 employees, who were offered relocation packages. In December 2022, the company sold the offices and 290 acres of land (of which 200 were undeveloped) to an Austin-based developer, Capital Commercial Investments.

Jones Lang LaSalle, who brokered the sale, have been hired to market the office building to companies looking to relocate to the Dallas-Fort Worth area. The development plans of Capital Commercial for the rest of the property are not yet known.

Construction on the campus in Spring began in 2011 when oil was over $100 a barrel. It was completed in 2015, when oil was below $60. It is based on 385 acres and officially houses 10,000 employees. The campus is currently appraised at $990 million.

As a side note, when a company changes its corporate office, it doesn’t have to file a document with the SEC. It just starts using the new address with its next filing. The Exxon filing happened to be a Regulation FD disclosure on upcoming earnings considerations.