Schlumberger to buy ChampionX for $7.8 billion

Schlumberger (‘SLB’) has agreed to buy ChampionX for $7.8 billion in an all-stock transaction. ChampionX has its head office in The Woodlands.



ChampionX was formed in 2020 from the merger of Apergy Corporation (itself a spinoff from Dover Corporation) and the upstream division (aka Nalco Champion) of Ecolab. Apergy was primarily involved in Artificial Lift, while Nalco Champion primarily manufactured oilfield chemicals.

In 2023, ChampionX had revenues of $3.8 billion. Two-thirds came from Chemicals, a quarter from Artificial Lift and the rest from Drilling Products and Reservoir Chemical Technologies. The company has 7,300 employees in 38 countries.

SLB, which has a market cap of $79 billion, believes that ChampionX’s focus on production will reduce its cyclical exposure from the drilling side of the business. From a customer’s perspective, E&P companies treat drilling as capex, while production costs are operating expenses.

ChampionX also helps SLB increase its presence in North America. Currently, SLB generates only 21% of its revenues from that region. Compare that to its main rival, Halliburton, which derives 46% of its revenues from North America.

SLB expects to generate $400 million in annual savings by 2027 from eliminating duplicate G&A overheads, reduced operating costs and supply chain optimization.

SLB expects the deal to close in late 2024.

Investor Presentation – SLB ChampionX

Two Houston-area companies get taken over

The number of Houston-area public companies fell by two today as APA completed its acquisition of Callon Petroleum while Kodiak Gas Services closed its deal to buy CSI Compressco. Both acquirers are also based in the Houston-area.



Background to the APA deal

APA (formerly known as Apache) announced its deal for Callon in early January.  The all-stock transaction valued the target at $4.5 billion. Callon is a Permian pure-play with 119,000 net acres in the Delaware Basin and 26,000 acres in the Midland Basin. That dovetails nicely with APA’s Permian basin assets. APA has 84,000 acres in the Delaware Basin and 197,000 in the Midland Basin. The company also has producing assets in Egypt and the North Sea.

APA estimates that they can save $55 million from eliminating duplicate general and administrative expenses and $55 million from operating efficiencies in the Permian.

Callon first had informal merger discussions back in November 2021 with an unidentified publicly-traded E&P operator and continued to have such discussions with various other parties throughout 2022 and 2023.

APA first came into the picture in September 2023 when it engaged financial advisors to review potential transactions. The first contact between the CEOs occurred in October. In the end, APA were competing with another unidentified publicly-traded E&P operator before APA sweetened its proposal on December 29.

SEC filing – 8-K – Completion of Callon acquisition

Background to the Kodiak deal

Kodiak’s $854 million all-stock transaction was announced just before Christmas. CSI was formed in 2000 and went public in 2008. Until January 2021, CSI was effectively controlled by Tetra Technologies, another Houston-area public company. Tetra sold its interest to Spartan Energy Partners, a PE-backed private company, for $30.7 million (plus the elimination of $622 million of net debt).

Ever since Spartan took over, they have been looking to do a deal that would reduce leverage and increase CSI’s scale. It held informal discussions with various parties from January 2021 until September 2023. Kodiak’s CEO initially contacted the CEO of CSI in May 2023 with a view to Kodiak merging into CSI as a pathway for Kodiak to go public.  Instead, Kodiak decided to perform a standalone IPO which it completed in July 2023.

Discussions between the parties paused while Kodiak went through its first quarter as a public company, but began again in September 2023. The deal wasn’t announced until December primarily because the advisors took awhile to figure out the most efficient structure to minimize the tax issues surrounding the CSI partnership.

SEC filing – 8-K – Completion of CSI acquisition

You can see the complete list of Houston-area public companies here.

 

 

Innovex abandons IPO to merge with Dril-Quip

Dril-Quip, a publicly-traded company, is to merge with PE-backed Innovex. Both companies are in oilfield services, and both have their head office in Houston.



It is an all-stock transaction with Dril-Quip shareholders owning 52% of the combined company. However, the company will be renamed Innovex International and the Innovex CEO and CFO will hold those roles in the combined company. Innovex had filed to go public in January 2024.

Dril-Quip has a market capitalization of $825 million and revenues of $478 million and adjusted EBITDA of $59 million. Innovex has revenues of $556 million and adjusted EBITDA of $132 million.

Complementary overlap of products

Dril-Quip was formed in 1981 and went public in 1997. It started out producing oilfield equipment to be used offshore (either subsea or on offshore platforms). In 2023, it purchased a Canadian wellhead business for $80 million to increase its onshore presence.

Innovex was formed in 2016 through the merger of three oilfield service companies that were separately owned by Intervale Capital. The companies were primarily involved in downhole tools and products, mostly onshore. Innovex has made a number of acquisitions since to increase its offshore and international presence. Intervale renamed itself to Amberjack Capital Partners in 2021.

Dril-Quip has its corporate office in NW Houston while Innovex is based in Humble. The company expects to achieve $30 million in synergy cost savings through removing duplicate corporate functions, manufacturing optimization and supply chain savings.

The new management

Adam Anderson will be the CEO of the combined business. He was the CEO of one of the three companies that merged to form Innovex. Kendal Reed, CFO of Innovex since 2019, will be CFO of the combined business. Prior to joining Innovex, he worked at Amberjack, the PE-firm and Piper Sandler investment bank.

Dril-Quip Executive Payout

Dril-Quip CEO Jeff Bird and CFO Kyle McClure don’t have roles in the combined business and will receive large payments following the change of control. The annual proxy statement for 2023 has not yet been released. According to the proxy filed for 2022, Mr. Bird would have been paid a package worth $10.2 million (assuming a termination date of December 31, 2022). For Mr. McClure, the equivalent figure was $4.8 million.

The deal is expected to close in the third quarter.

Investor Presentation – Dril-Quip Innovex

 

SEC charges 17 individuals in $300m Crypto Ponzi scheme

The SEC has charged 17 individuals with running a $300 million Crypto Ponzi Scheme that targeted the Latino community. The company involved, CryptoFX LLC, and many of the individuals are based in Houston.



The individuals behind CryptoFX are Maurico Chavez and Giorgio Benevenuto. Chavez founded the company in 2020, while Benevenuto assisted Chavez in operating it. The SEC filed an emergency action to halt the scheme in September 2022. They appointed a Receiver over the company and the assets of Chavez and Beneventuo.

The Receiver reported that the company had raised at least $300,000 from over 40,000 predominantly Latino investors across the US. CryptoFX’s market trading generated only $2.6 million in trading profits.

The Founders

Chavez and Benevenuto are not charged in this indictment as they already settled with the SEC in 2023. They agreed to pay back their ill-gotten gains with interest, and a civil penalty. The SEC will determine the amounts later.

In the complaint against Chavez and Benevenuto, the SEC alleged that they diverted $8 million of investor funds to a real estate development company that they owned. The SEC also allege that they diverted a further $6.4 million to homebuilders and related professional companies for the purchase and development of multiple properties. In addition, Chavez is alleged to have spent $1.4 million on personal spending, including $181,996 for his stay at the luxury Post Oak Hotel.

The current Defendants

The current SEC complaint alleges that, from May 2020 to October 2022, the 17 individuals from Texas, California, Louisiana, Illinois and Florida, acted as leaders of the CryptoFX network. They solicited investors by promising returns ranging from 15% to 100%. Instead of placing investor funds into a trading program, CryptoFX and the defendants mostly used the funds to pay returns to existing investors.

CryptoFX operated a commission structure where the defendants got a 7% commission on all investments they brought in, plus 3% of all funds solicited by their first-tier investors.

Combined, the 17 defendants earned nearly $5.2 million from commissions from the scheme. Ismael Zarco Sanchez, of Conroe, earned $2.1 million, while four others earned over $400,000 each.

Sanchez is alleged to have told an investor to wire his investment of $260,000 directly to Chicago Title of Texas. Sanchez was in the process of buying a house in Conroe for $1 million.

Two of the individuals, who earned a combined $62,000 have already agreed to settle with the SEC.

https://www.sec.gov/news/press-release/2024-35

 

 

 

Civeo Corporation CFO leaves with immediate effect

Carolyn Stone, CFO of Civeo Corporation, has left the company with immediate effect. Barclay Brewer, the Company’s VP and Controller, has been appointed interim CFO. The company has begun a search for a permanent CFO.



Civeo, based in downtown Houston, provides temporary and long-term accommodations, primarily in the Canadian Oil Sands and Australian natural resource regions. The company has revenues of $700 million and a market capitalization of $365 million. It was spun off from Oil States International in 2014.

Ms. Stone worked as a consultant to Oil States prior to the spin off and was appointed Controller of Civeo after the company went public. She became the CFO in November 2019. Earlier in her career, she worked for PricewaterhouseCoopers, Dynegy and Synagro Technologies.

Interestingly, Civeo is one of the few public companies where the executives have employment contracts that only address severance payment terms in the event of a termination of employment following a change-of-control or due to death or disability. They do not address termination without cause and without a change-of-control.

Nevertheless, Ms. Stone has negotiated a severance package where she will receive $690,467. That seems to be approximately one year’s salary ($425,000) and target annual bonus (70% of salary). She also receives $423,650 in cash which represents the value of equity options forfeited upon termination. Finally, she will receive $20,000 to cover outplacement services.

Civeo – 8-K – Stone departure

Civeo – 8-K revised – Stone severance

 

 

Select Water Solutions replaces its CFO

Select Water Solutions, based in the Galleria area, has appointed Chris George as its CFO. He replaces Nick Swyka, who is leaving the company at the end of the month.



Select provides water management and chemical solutions to the oil and gas industry. The company originally began operations in 2007 as Peak Oilfield Services. Then called Select Energy Services, it went public in 2017 through an IPO. The business has revenues of $1.6 billion and a market cap of just under $1 billion.

Founder John Schmitz served as the CEO until its merger with Rockwater Energy Solutions in late 2017. He returned as CEO in January 2021 after the ouster of the previous CEO, who came over from Rockwater.

Mr. George joined Select in January 2012 and served in roles such as Treasury and Investor Relations. He was promoted to VP, Corporate Development, Investor Relations & Sustainability in January 2022. He started his career at UBS Investment Bank.

Mr. Swyka joined the company as CFO in May 2018. He was previously the Director of Investor Relations and Corporate Development at Nabors Industries. He will receive one years’ severance ($360,000), a target bonus for 2024 ($288,000), a bonus for 2023 ($263,779) and pro-rated bonus for 2024. Certain equity awards will also vest. At the end of 2022, these were valued at approximately $678,000. All in, that’s a severance package of around $1.6 million.

SEC filing – 8-K – Select Water CFO

Marathon Oil appoints new Chief Financial Officer

Marathon Oil, based in west Houston, has appointed Rob White as its new CFO, effective May 1, 2024. He replaces Dane Whitehead, who told the company he intends to retire on July 1.



Marathon Oil was originally part of Standard Oil, controlled by John Rockefeller.  In 1911, the US Supreme Court ruled that Standard Oil be dissolved and split into 34 companies. One of those companies was The Ohio Oil Company, which was later renamed as Marathon Oil.

In 2011, the refining and marketing assets were spun off into a separate entity called Marathon Petroleum (MPC). That company is based in Ohio.

Marathon has a market cap of $14 billion. It has a relatively small presence in the Permian Basin (12% of revenues). Most of its production comes from the Eagle Ford (40%) and Bakken (35%) basins. The Eagle Ford Basin, in particular, produces relatively more gas than oil. As a result of these factors, Marathon trades at a lower multiple than its peers.

Mr. White joined the company in 1991 and has served as the VP, Controller and Chief Accounting Officer since March 2022. He will receive a base salary of $500,000.

Zach Dailey has been promoted to VP, Controller and Chief Accounting Officer, to replace Mr. White. Mr. Daily joined Marathon in 2015 and is currently the VP, Internal Audit. Mr. White also held that position before becoming the CAO. Prior to joining Marathon, Mr. Dailey worked at Linn Energy, Berry Petroleum and Morgan Keegan. Mr. Dailey will receive a base salary of $350,000.

Mr. Whitehead, 62, joined Marathon as its CFO in March 2017. Prior to that, he was CFO of EP Energy Corp for 5 years.

SEC filing – 8-K – Marathon CFO

Husband illegally profits $1.8 million from wife’s M&A deal

Tyler Loudon, a Houston resident, has pleaded guilty to insider trading. He made $1.8 million in illegal profits from the purchase and sale of stock market shares.



Loudon’s wife was an associate manager in M&A working for BP. While working from home in December 2022, Loudon learned that BP was negotiating a deal to buy TravelCenters of America, a US publicly-traded company. Loudon purchased a series of options for TravelCenters in December, January and February, without telling his wife.

BP announced the $1.3 billion deal in mid-February 2023. Loudon promptly exercised the options, netting a profit of $1,763,522.

Loudon finally confessed to his wife in April 2023. She immediately notified BP what had happened.

As part of the plea agreement, Loudon has agreed to forfeit the profits. At his sentencing hearing, scheduled for May 17, he faces up to five years in prison and a possible maximum $250,000 fine.

Loudon’s wife no longer works for BP. She joined another Houston-area company in 2023.

https://www.justice.gov/usao-sdtx/pr/insider-trading-husband-illegally-profits-17m-after-using-wifes-private-company

Sable Offshore completes deal for California offshore field

Flame Acquisition Corp, a SPAC (Special Purpose Acquisition Corp) has completed the acquisition of assets from ExxonMobil and has been renamed Sable Offshore.

Sable has bought the Santa Ynex oilfield that 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. A corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American were the owners of the pipeline at the time.

The deal was originally announced in November 2022. At that time, Sable agreed to pay ExxonMobil $643 million. Most of this was being financed by a $625 million loan from ExxonMobil. The loan had a 10% interest rate. It would not be repaid until the earlier of January 2027 or 180 days after production is restarted. Start of production was targeted for January 2024.

Under the revised terms of the loan, Sable has now agreed to pay Exxon $989 million. This includes $140 million of accrued interest and $187 million of property expenses incurred by ExxonMobil since the deal was announced. The loan from ExxonMobil has increased to $764 million (original $625 million plus accrued interest).

Sable now expects costs to restart production to be $197 million, up from the $172 million at the time of the original announcement. The company is now targeting production to start in Q3 2024.

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

Management

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.

Flame completed its $287 million IPO in February 2021. Originally, the company had until March 2023 to complete or deal or liquidate. As part the approvals to get extensions to complete the deal by February 2024, shareholders holding $230 million of stock exercised their right to redemption.

8-K – Sable Offshore completes deal

Sterling Infrastructure CFO to retire in 2024

Ron Ballschmiede, the CFO of Sterling Infrastructure, has announced he plans to retire sometime in 2024. No replacement has yet been named.



The company has its head office in The Woodlands. It is involved in the construction of infrastructure (eastern US), transportation (western US) and residential and commercial buildings (Texas and Phoenix). The company has a market capitalization of $2.6 billion.

Mr. Ballschmiede, 68, joined the company as CFO in November 2015. Prior to that, he was the CFO at Chicago Bridge and Iron Company (later taken over by McDermott International).

Since he joined, the company has tripled revenues to almost $2 billion and doubled its employees to 3,200. The stock has increased over ten-fold.

In the company’s press release, Joe Cutillo, the CEO of Sterling, said “We have a succession plan in place. Ron will stay on as CFO until his successor is named and will continue thereafter to ensure a smooth transition.” (AJ comment – If you have a succession plan in place, why didn’t you announce his successor?)

SEC filing – 8-K Sterling CFO to retire