Weatherford appoints new CFO

Weatherford has appointed Keith Jennings as its new CFO, replacing Christian Garcia, who resigned in June after six months.

Mr Jennings joins from Calumet Specialty Products Partners, where he was CFO. He only joined that company in October 2019. Prior to that, he was at Eastman Kodak. He also spent seven years as VP and Treasurer at Cameron International, leaving a few months after its takeover by Schlumberger.



Calumet is based in Indianapolis, so Weatherford is giving Mr Jennings a relocation allowance of $150,000. His base salary will be $500,000 and he will receive another $500,000 as a sign-on bonus. The sign-on bonus will be repayable if Mr Jennings leaves within a year.

Weatherford filed for bankruptcy in July 2019 and emerged on December 13, 2019. Debt was reduced from $8.0 billion to $2.2 billion with the bondholders owning 94% of the equity of the newly reorganized company.  Shortly after emerging from bankruptcy, the company took out a $450 million asset-based credit line.

As part of its efforts to shore up its finances, last week Weatherford secured an agreement with the noteholders that they would buy $500 million of new notes due 2024 at 8.75% interest. In return, the company would use those proceeds to pay off the credit agreement that was only entered into in December 2019.

This helps alleviate a problem facing Weatherford since the pandemic. Its international operations have proved more resilient than the domestic markets, but its borrowing base is weighted towards North America. The company faced a declining collateral base but Wells Fargo and Deutsche Bank, the agents for the credit facility, refused to discuss any material covenant modifications.

SEC filing – Weatherford CFO appointment

Industrial blank check company files for IPO

Industrial Tech Acquisitions has filed for a $60 million Initial Public Offering (IPO). The company is a SPAC (Special Purpose Acquisition Company), otherwise known as a blank check company. In other words, it doesn’t have any commercial operations.



The company has its head office in the Galleria area and its CEO is Scott Crist. He has founded, run and exited a number of businesses in the technology, telecommunications and industrial sectors.

Mr Crist is currently the CEO of Osprey, a company that provides remote surveillance and analysis to the energy sector. Rather unusually, in September 2019, he swapped CEO jobs with Mark Slaughter, the CEO of INET , a telecommunications and networking company. The companies were not affiliated with each other and didn’t have common investors. They did, however, share office space in Houston.

The CFO is Greg Smith. He was the founder, CEO and CFO of ERF Wireless. It is a company that provides high-speed broadband for mission-critical applications in energy, banking and hospitals. He also served as CFO for Industrial Networks, between 2017 and 2020, where he worked with Mr Crist

Not surprisingly, Industrial Tech Acquisitions is seeking to buy a technology business operating in the industrial or energy area. This includes software, mobile and IoT (Internet of Things) applications, cloud communications and ultra-high bandwidth services. Targets would have am enterprise value of between $250 million and $500 million.

The company has 21 months from the closing of the IPO to finalize an acquisition, though that could be extended by a maximum of 9 months, if they are close to a deal.

Maxim Group LLC is the sole bookrunner on the deal.

SEC Filing – S-1 Industrial Tech Acquisitions

 

Mother and stepson sent to prison for $7 million bank fraud

Leyla Wydler and her stepson, Carlos Wydler, have been sent to prison following their conviction by a jury in March 2017. The mother was sentenced to 11 years in June, the step-son got 7 years today.

Leyla Wydler was the owner of several Houston-area businesses including Globan Mortgage Company, Casa Milagro and First Milagro. In 2007, Farmers and Merchants Bank of Long Beach, a California Bank, hired Carlos Wydler. He was in charge of the bank’s credit card department.



Leyla would sent credit card applications to the bank, Carlos would approve the requests for high credit lines, but would ‘advance’ the entire credit line to the borrower via wire or check. Leyla would take a fee from the borrowers’ loan proceeds. The scheme ran for about a year.

The mother and stepson were developing a real estate project in Houston and used the proceeds to finance investors in their project.

Leyla Wydler skimmed more than $1.4 million from loan proceeds. Carlos Wydler approved approximately $600,000 more in unauthorized loans to family members. More than half of the Texas borrowers run through the Wydler-family business in Houston defaulted on their loans. The bank sustained a loss of nearly $7 million.

The defendants were convicted of conspiracy, bank fraud, false statements on credit applications, wire fraud and mail fraud. Carlos Wydler was also found guilty on six counts of misapplication of bank funds.

Carlos Wydler was ordered to pay $6.8 million in restitution. Leyla Wydler was ordered to pay $6 million.

https://www.justice.gov/usao-sdtx/pr/former-banker-and-mortgage-broker-sent-prison-defrauding-california-bank

LNG company replaces CFO

https://www.flickr.com/photos/royluck/3628833456

Cheniere LNG – Sabine Pass – Roy Luck

Cheniere Energy has appointed Zach Davis as its new CFO. He replaces Michael Wortley, who steps down from the role, effective immediately. Mr Wortley will remain employed through the end of the month.

Cheniere is based in downtown Houston and was the pioneer in developing Liquified Natural Gas (LNG) for export. It currently has a market capitalization of $13 billion.



Mr Davis joined the company in 2016 as the VP of Finance and Planning and was promoted to Senior VP, Finance in February 2020. Prior to joining Cheniere, he held energy investment banking and finance roles at Credit Suisse, Marathon Capital and HSH Nordbank.

Mr Davis will receive a salary of $500,000. He also received a restricted stock grant for the same amount that vests over three years.

Mr Wortley, 43, has been CFO since January 2014 when the market cap of the company was about $10 billion. He joined Cheniere in 2005. He will receive:

  • a cash severance bonus of $2,857,000 when he leaves.
  • a cash payment of $1,946,000, payable in February 2021.
  • one year’s salary ($715,000) to be paid over the next year.
  • $75,000 transitional allowance for health insurance or other associated expenses.
  • Vesting of restricted stock and performance stock awards that were scheduled to vest in 2021 and 2022. At the current stock price, I think these are worth around $5.5 million.

SEC filing – Cheniere CFO change

Houston man charged with spending COVID relief funds on Lamborghini

Lee Price III, who lives in NW Houston, has been charged with fraudulently obtaining more than $1.6 million in Paycheck Protection Program (PPP) loans. He allegedly spent the money on having a good time, including $233,337.60 on a 2019 Lamborghini Urus.

In case you are thinking that you read about this case last week, no, that was a Florida man who used his PPP funds to buy a $318,000 Lamborghini Huracan.



According to the criminal complaint, Price has a felony conviction for forgery (2010) and for robbery (2010). He is also currently a defendant in Harris County, where he is charged with the felony offense of tampering with a government record.

Price purported to be an executive of Price Enterprise Holdings, Price Logistics Services and 713 Construction LLC. Although these entities exist, they have never filed with the Texas Workforce Commission. That means they have not hired employees or paid unemployment taxes.

PPP applications

Price made six applications for PPP funds. However only two were funded, namely;

  • $937,500 by Radius Bank, Boston
  • $752,452 by Harvest Small Business Finance in California.

For the loan financed by Harvest, Price filled out the forms using the name of an elderly man who had died a month before. On this application, Price had an unnamed co-conspirator, who received $250,000 of the funds received.

Wine, women and song (…and an office lease)

According to the complaint, the day he received the funds from Radius, Price bought a $14,000 Rolex watch. The day after, he bought the Lamborghini. The following days saw him spent $700 at a liquor store, $2,000 at a strip club and $2,500 at two Houston night clubs. Later Price paid $100,000 as a deposit on a property in north Houston. He also spent $108,000 on a lease of new business office space (!) in Memorial City.

For the funds received from Harvest, the complaint alleges Price bought a 2020 Ford F-350 for $85,000 and leased a luxury apartment in midtown Houston. $85,000 was also withdrawn in cash.

Price is charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions.

Price becomes the third Houston-area man to be charged with fraud in connection with PPP loans. A Funeral Director was charged in June. A 29-year old man (same age as Price) was charged in July.

https://www.justice.gov/usao-sdtx/pr/houston-entrepreneur-charged-spending-covid-relief-funds-improper-expenses-including

CEO steps down at Electrical Contractor

Gary Matthews has resigned as the CEO of IES Holdings, Inc. He was in the role for 18 months. He has also resigned from the Board of Directors. Jeff Gendell, Chairman of the Board, and effectively the majority shareholder, has been appointed interim CEO.



IES has its head office in the Galleria area. It provides electrical contracting and other infrastructure services to a variety of end markets. It has approximately 5,400 employees.

The company is doing reasonably well currently. For its most recent quarter, it had revenues of $291 million and an operating profit of $9.2 million. It had record backlog and most importantly, a net cash balance of $15 million.

Resigned or pushed out?

It is not clear whether Mr Matthews resigned or was pushed out. The company issued a press release quoting Mr Gendell as saying ‘As we planned for the future, Gary determined that this was the appropriate time for a leadership transition’.  Mr Matthews left the company on July 31 and the company appointed an interim CEO, so it’s not a planned leadership transition! I guess Mr Matthews fell out with the Chairman.

Severance

The company didn’t state whether Mr Matthews would get a severance or what would happen to his outstanding stock awards. In fact the most recent proxy statement didn’t include a table listing potential payments in the event of a departure of an executive. Previous proxy statements filed by IES have.

The previous CEO, Robert Lewey, who stepped down in March 2019,  got a cash severance payment of $875,000 that comprised of one years salary ($523,000) and a pro-rated bonus for the year.

Mr Matthews, who joined the company from Morgan Stanley Capital Partners, had a base salary of $650,000. As of September 2019, he had about $1.6 million in equity that had not vested.

SEC filing — IES CEO transition

 

Oilfield Services company appoints new CFO

Flotek Industries has appointed Mike Borton as its new CFO. He replaces Elizabeth Wilkinson, who left in June. The company, which has its head office in NW Houston, develops and supplies oilfield chemicals. The company recently acquired JP3, data analytics business for $34 million.

Mr Borton was recently the CFO at Dynasty Sports and Entertainment, a Boca Raton-based data analytics company from April 2019 to July 2020. Prior to that, he was the CFO at a couple of SaaS (Software-as-a-service) companies.



;

Mr Borton will be relocating back to Houston. Earlier in his career, he spent five years as Group Controller at Landmark Graphics, during which the business was acquired by Halliburton. He will receive a one-time relocation allowance of $25,000.

The salary of Mr Borton will be $340,000, and he will eligible for a target annual bonus of 80% of base salary. If he is terminated without cause, he will receive a severance amount of 12 months’ worth of base salary.

The share price of the company (currently $1.38) has recently recovered such that the company has regained compliance with the listing standards of the New York Stock Exchange.

SEC Filing – Flotek Borton appointment

 

 

Offshore Drilling Contractor files for bankruptcy

Noble Corporation has filed for Chapter 11 bankruptcy in the Southern District of Texas. Technically, the company has its head office in London, but, operationally, the company is run from its Sugar Land offices.

Noble has a fleet of 12 drillships and semisubmersibles and 12 jackup rigs, largely focused on ultra deepwater. Of the 12 floaters, five are cold-stacked while four of the jackup rigs are warm-stacked. [Warm-stack means the rig is in port with a crew ready to go, cold-stack means the rig is being stored at minimum expense].



Agreement with Bondholders

Noble has agreement with two ad hoc groups of the largest bondholders. Combined, they represent about 50% of $3.4 billion of unsecured debt outstanding. They need to get approval from two-thirds of the bondholders for the plan to be effective.

Under the proposed plan, the unsecured debt will be cancelled and exchanged for, effectively, 86% of the equity in the reorganized company. The bondholder have also agreed to invest $200 million of new capital in the form of new second lien notes. 10% of the new equity will be reserved for a management incentive plan. Existing shareholders will get 4% of the new equity.

A new $675 million secured revolving credit facility will also be provided by the current syndicate of credit facility lenders. The borrowings on the current facility are $550 million.

Unsecured trade creditors will be paid in full.

CEO and CFO transition

In February, Noble promoted Robert Eifler from Senior VP, Commercial to CEO, replacing Julie Robertson, who became Executive Chairman. Unusually, Ms Robertson (who has been with the company since 1979) got a lump sum payment of $3.75 million as part of the transition, even though she wasn’t leaving the company.

That CEO transition promptly triggered a CFO transition. Stephen Butz, who had only joined the company in December 2019, resigned in March. He got to keep $450,000 of his $1.1 million sign-on bonus. Mr Butz had replaced Adam Peakes who had left in September 2019 with a $1 million severance.

The current CFO is Richard Barker, who joined from Moelis & Company, an investment bank. He was awarded cash retention bonuses of $725,000 and $575,000, to be paid in December 2020 and December 2021 respectively.

SEC filing – Noble Corp bankruptcy

 

Houston tax preparers indicted for false filing of tax returns

Two Houston-area woman have been indicted on 32 counts related to the false filing of tax returns.

Rita Rogers and Joi Lin Hunt owned Caliente Xpress Tax Service in Sharpstown, Houston. The business started in 2014. At its peak, the business had 12 employees.



According to the indictment, they allegedly prepared returns for customers for the 2013-2016 tax years that included false schedules on 1040 forms. These claimed company losses for customers who did not own any businesses and had no such expenses.

The indictment further alleges Hunt and Rogers did not inform customers that the 1040 forms were being prepared on their behalf. Although the taxpayers would collect the refunds, Caliente Xpress charged fees ranging from $300 to $600 to prepare the return.

During the 2013-2016 tax years, Hunt and Rogers prepared 2,613 tax returns, according to the indictment. 98% received refunds, totaling $13.5 million. For 66% of these, Caliente allegedly claimed fictitious expenses on a Schedule 1040.

It appears that, during 2016, taxpayers started getting letters from the IRS that their 2013 or 2014 tax return was under audit. An undercover IRS Special Agent later visited the business in February 2017, posing as a taxpayer needing a return prepared. Rogers initially prepared a correct tax return that reported a tax due to the IRS. She then, allegedly prepared another return, claiming false expenses and a refund due. Hunt transmitted the return to the IRS.

If convicted, both face up to five years imprisonment and a possible $250,000 maximum fine.

Caliente Xpress indictment

https://www.justice.gov/usao-sdtx/pr/two-houston-area-tax-preparers-indicted

KLX Energy Services and Quintana complete merger

Photo by Joshua Doubek

The merger between two publicly-traded oilfield service companies, Quintana Energy Services (QES) and KLX Energy Services (KLXE), has been completed. The all-stock deal was first announced in May 2020.

KLXE is based in Florida while QES’s head office is in downtown Houston. KLXE is a leading provider of completion, intervention and production services. QES’s primary services include directional drilling, snubbing, coiled tubing, wireline services and pressure pumping.



The merger allows the companies to rationalize their fleets of coiled tubing and wireline assets. Before the merger was announced, QES had decided to repurpose its recently-idled pressure pumping units to support its coiled tubing fleet. The merger helps that objective.

The combined company takes the KLX Energy name and keeps the KLXE ticker symbol. However, the head office will remain in Houston.

Consideration

The combined company had proforma revenues for the three months ended April 30, 2020 of $176 million and an operating loss before impairment of $36.5 million. KLXE shareholders got 59% of the combined company, QES 41%. The preliminary valuation of the QES equity at March 31 was $46.9 million, considerably below its net asset value of $112.9 million.

According to the merger proxy statement, QES has long held the view that consolidation in the oilfield services sector was necessary. They identified KLXE as a possible merger partner in the fall of 2019. At that time QES was in discussions to acquire another unnamed company. They first approached KLXE in March 2020.

Management of combined company

Interestingly, QES initially suggested that then-CEO of KLXE, Amin Khoury and Thomas McCaffrey, then CFO of KLXE take the same roles in the combined company for one year. After that, QES CEO Chris Baker and QES CFO Keefer Lehner would take the top jobs.  Unfortunately, Mr Khoury had to resign suddenly in April for personal family health reasons. Mr McCaffrey was appointed CEO of KLXE.

As a result, Mr Baker immediately became the CEO of the combined group and Mr Lehner the CFO. To alleviate possible concerns of the KLXE shareholders Mr McCaffrey has been appointed to the combined Board and will chair the integration committee.

The company expects to generate $40 million in synergies. This will primarily be achieved by  rationalizing the Florida corporate office and the combining the KLXE and QES Houston-area locations. There’s also some overlap of field offices.