Weatherford CEO Mark McCollum ‘left the company’ on Sunday June 7, just five days before the (virtual) annual shareholding meeting. Mr McCollum was up for re-election as a director. His candidacy has now been withdrawn.
The timing of the departure and the curt press release issued by the company suggests there is a back story that’s not public yet.
According to the company, Mr McCollum’s departure was not the result of any dispute or disagreement with the company on any matter relating to the Company’s accounting practices or financial statements.
Search for new CEO
Mr McCollum was appointed CEO in April 2017. He was previously the CFO at Halliburton. Current CFO Christian Garcia, who joined the company in January (and who also happens to be a former CFO at Halliburton) and COO Karl Blanchard will lead the company on an interim basis, while the Board conducts a search for new CEO.
The company did not disclose the amount of the severance package for Mr McCollum and it’s not easy to figure out. The company did say that he was terminated ‘without cause’ and that he would be entitled to benefits and compensation under pre-existing compensation plans.
When the company emerged from bankruptcy in December 2019, that was considered a change of control. Therefore Mr McCollum is entitled to 3x base salary plus average annual cash bonus of the last three years. Mr McCollum’s base salary is $1 million, so that’s a $3 million severance payment. That’s the easy part.
For cash bonuses, Mr McCollum received $279,167 in 2017 and $579,600 in 2018. For 2019, he received a $2 million cash retention bonus in April 2019 and $3.368 million paid in cash instead of restricted stock awards (because the stock price was so low). An amendment filed after the company emerged from bankruptcy stated that the 2019 cash bonuses are excluded in calculating the average annual bonus.
Averaging the $279k (grossed up for a full year) and the $580k, amounts to approximately $476,000. So it appears that severance relating to the bonus will be $1.4 million. Of course, Mr McCollum gets to keep his $2 million retention bonus.
But wait, there’s more! Mr McCollum will also be entitled to a pro-rated target annual bonus for 2020. According to the proxy, the Board hasn‘t yet determined what the target is yet due to the uncertainty in the oil and gas markets.
So the severance for Mr McCollum appears to be at least $4.4 million.
Also leaving the company is Christina Ibrahim, Executive VP and General Counsel. Ms Ibrahim will also get 3x base salary and annual bonus. That amounts to at least $2.9 million.
There are rumors that Weatherford could be forced into bankruptcy again. The company entered Chapter 11 in July 2019 and exited in December, having reduced debt by $6.7 million. Unfortunately they still have $2.7 billion in debt and the recent downturn may mean a breach of covenants soon. The company has apparently hired restructuring law firm Paul Weiss.