Author Archives: Andrew Jowett

About Andrew Jowett

Andrew Jowett is a Chartered Accountant who qualified with PricewaterhouseCoopers in the UK. He has worked for 20 years in the US, primarily in the Oilfield Services sector for companies large and small, public and private-equity backed. One thing most of them had in common was a lack of controls and procedures. Andrew is currently the CFO of a PE-backed manufacturing company in Houston. He is also the chair of the Houston chapter of the Financial Executives Network Group (FENG) which is a voluntary networking organization for CFO’s, Controllers, Treasurers and other senior finance executives. The FENG has over 50,000 members with chapters in every major US city and some internationally too.

Sunnova Energy appoints new CFO

Sunnova Energy International has appointed Eric Williams as its new CFO. He replaces Rob Lane, who will leave the company on June 30.



Sunnova provides solar power systems and other related products such as chargers and energy storage through a network of dealers and partners. Typically, Sunnova funds the initial investment of a system and generates revenue from leasing or power contracts with the customer. The company has its head office in the Greenway Plaza area of Houston.

Mr. Williams was the CFO at Diversified Energy Company, an E&P operator based in Alabama, between July 2017 and September 2023.

Mr. Williams will receive a base salary of $475,000 and a one-time restricted stock and options grant worth $1.25 million. He will also receive up to $100,000 in relocation assistance. He started his career with PricewaterhouseCoopers in Alabama. Mr. Williams later spent 7 years at Houston-based Callon Petroleum, ending up as Director of Investor Relations.

The new CFO will be busy as Sunnova has gross debt of $7.8 billion, which is more than ten times its revenue. Cash flow from operations has been an outflow of at least $130 million in each of the past five years.

At the beginning of May, Sunnova announced it was seeking advice from Moelis & Co about its debt options. There has been no updates since.

SEC filing – 8-K Sunnova appoints new CFO

 

Noble to acquire Diamond Offshore for $1.7 billion

Noble Corporation has agreed to buy Diamond Offshore for $1.67 billion. Both companies operate in offshore drilling. Diamond has its head office in west Houston, while Noble is in the process of moving its head office from Sugar Land to the Westchase area of Houston.



The consideration split is 64% stock and 36% cash (or approx $600 million cash consideration), with Diamond shareholders projected to own about 15% of the combined company. Noble is also taking on Diamond’s debt of $550 million.

The key assets for Diamond are 4 deepwater drillships and 1 semi-submersible that can operate in harsh environments. In addition, the company has 5 other older semi-submersibles.

Second time a charm

Diamond entered Chapter 11 bankruptcy in April 2020 and exited a year later, having converted $2 billion of debt into equity. The company put itself up for sale in August 2021, but in January 2022 it announced it would remain independent after failing to attract any satisfactory takeover offers.

Diamond Offshore CEO Bernie Wolford has previously worked for Noble for over 28 years, over two separate stints. It’s also the second time he has been CEO of a company acquired by Noble as he was also CEO of Par Pacific until its acquisition in April 2021.

Noble acquisitions

Noble, which exited its own bankruptcy in February 2021, has been the leading consolidator in the offshore drilling sector. In addition to Par (bought for $358 million), it acquired Maersk Drilling in October 2022 for $2 billion.

Noble expects to realize $100 million in cost synergies. mostly through SG&A savings. The deal is expected to close by the first quarter of 2025.

It’s the latest in a series of merger announcements involving Houston-based public companies;

Investor Presentation – Noble – Diamond

CFO of Carriage Services steps down after 16 months

Kian Granmayeh is to step down as CFO of Carriage Services (‘CSV’) after less than 16 months at the company. CSV appointed Kathryn Shanley, the Chief Accounting Officer, as its interim CFO. Ms. Shanley only joined the company in March, though she spent many years at Service Corporation International (‘SCI’).



SCI is the market leader in deathcare products, having a market share of around 15%. CSV is a distant second, with a 2-3% market share, along with Park Lawn, a Toronto-based company. SCI, CSV and the US-headquarters of Park Lawn, are all based in Houston.

Park Lawn made a preliminary all-cash offer for CSV in June 2023 that was ultimately rejected by the company. Although the deathcare business generates strong cash flows, CSV has high leverage as it has acquired a lot of businesses in recent years. The company has decided to remain independent and improve profitability through organic growth and automation of back office processes.

CSV has engaged an executive search firm to ‘help identify a Chief Financial Officer with the financial sophistication necessary to drive and execute on the Company’s long-term strategic growth plan’.

Mr. Granmayeh joined CSV in March 2023 from Tellurian, a Houston-based public company that is trying to build an LNG export terminal.

What is strange is that the SEC filing states that Mr. Granmayeh informed CSV that he would resign from his position as CFO, effective July 1, 2024. He and the company have negotiated a new separation agreement that has lower benefits than the one he negotiated when he joined the company.

Under the new agreement, Mr. Granmayeh receives;

  • One year’s salary ($500,000) to be paid over the next year
  • Lump sum payment of $250,000
  • Monthly consultant fee of $20,000 to be paid over the next six months

Under his original agreement when he joined, were Mr. Granmayeh to have been terminated without cause, he would have received;

  • Two years’ salary to be paid over the next two years
  • Pro-rata Target Annual bonus (Target is 100% of base)
  • 100% vesting of outstanding awards of restricted stock and stock options

SEC filing – 8-K Granmayeh release

 

ConocoPhillips to buy Marathon Oil for $22.5 billion

ConocoPhillips has agreed to buy Marathon Oil for $22.5 billion, including $5.4 billion of net debt in an all-stock deal. Both companies have their head offices in west Houston.

The companies have adjacent acreage in the Eagle Ford, Bakken and the Permian Basins. Marathon also has assets in Oklahoma and Equatorial Guinea.

Both companies were part of Standard Oil until its breakup into 34 companies in 1911, following a Supreme Court Ruling. The descendant of Marathon (‘MRO’) started life as an amalgamation of a number of Ohio-based oil producers in 1887, before being acquired by Standard Oil in 1889. The descendant of Conoco (‘COP’) was founded in Utah in 1875 as Continental Oil and Transport Company and was bought by Standard Oil in 1884.

COP has identified $500 million of annualized savings from the deal. Half of that will come from the elimination of duplicate general and administrative expenses. $150 million of savings is expected from the optimization of operating and commercial costs. The remaining $100 million will come from reduced capital costs.

As a result of the deal, COP is increasing its ordinary dividend by 34% once the deal closes. It is also increasing its annualized share buybacks from $5 billion to $7 billion.

In March, MRO announced that CFO Dane Whitehead would be retiring on July 1. Rob White, the Controller and Chief Accounting Officer, was promoted to CFO, effective May 1. With today’s announcement, Mr. Whitehead has agreed to delay his retirement until the deal is closed. He will be an Executive VP and Advisor to the CEO.

The deal is expected to close in the four quarter of 2024.

Investor Presentation

Houston oilfield services company appoints new CFO

Jay Nutt has been appointed CFO of Cactus Inc, a publicly-traded oilfield services company with its head office in the Memorial City area of Houston. The company has a market capitalization of $4 billion.



Stephen Tadlock, the previous CFO, was appointed CEO of the company’s Spoolable Technologies segment in October 2023. At that time, the company appointed Alan Keifer as the interim CFO. Mr. Keifer, a former Chief Accounting Officer at Baker Hughes, had been providing consulting services to the company since February 2023.

In March, Donna Anderson, the Chief Accounting Officer of Cactus, resigned to take the same position at Bristow Group, another Houston oilfield services company.

Mr. Nutt has plenty of experience in oilfield services. In 2018 he was appointed CFO of Apergy as it became a publicly-traded company carved out of Dover Corporation. When Apergy merged with the Champion Nalco business of Ecolab in 2020 to form ChampionX, he became the CFO of the combined business. He left ChampionX in 2021.

Prior to that, Mr. Nutt spent nearly 30 years at FMC in its various forms. Early on, when FMC was a conglomerate, he spent time in both the Food Processing Equipment and Gold divisions. He joined the oilfield services division in 2001 as it was being spun off as FMC Technologies. He stayed on for a year after its merger with Technip in 2017.

Mr. Nutt will receive a base salary of $450,000.

SEC filing – Cactus CFO appointment

SilverBow Resources to be acquired for $2.1 billion

SilverBow Resources, a Houston-based E&P company, has agreed to be acquired by Crescent Energy, also based in Houston, for $2.1 billion. Combined, they will have the second largest production in the Eagle Ford Basin, behind EOG.



SilverBow, has been trying to fight off a takeover by its largest shareholder, Kimmeridge Energy Management. Kimmeridge had effectively offered $34 a share, whereas Crescent’s offer is $38 a share.

SilverBow was formerly known as Swift Energy, which filed for bankruptcy in December 2015. After the company emerged from bankruptcy in April 2016, it changed its name to SilverBow and went public the following year.  The company has taken on a lot of debt as it embarked on an aggressive acquisition and capex program. That attracted the ire of Kimmeridge.

Crescent was formed in December 2021 from the merger of Contango Oil, a publicly-traded company and Independence Energy, a private company. Crescent is controlled by KKR, a large investment firm.

The transaction is structured as an all-stock transaction, though SilverBow shareholders can elect $38 per share cash alternative (up to a maximum total cash consideration of $400 million). Crescent shareholders will own between 69% and 79% of the combined company. The current management of Crescent will run the combined company, which will also retain the Crescent name.

Crescent expects to generate between $65 million and $100 million in cost savings, through cost of capital advantages and elimination of overheads. The companies have many adjacent properties in the Eagle Ford which should also drive savings.

 

Investor Presentation

Vroom CFO to step down following restructuring

Vroom, the former high-flying online car retailer, has announced that CFO Bob Krakowiak is stepping down. He will be replaced by Agnieszka Zakowicz, the Senior VP and principal accounting officer. Mr. Krakowiak is not leaving the company as he has been nominated to the Board of Directors.



Vroom went public via a $468 million IPO in June 2020 and, at one point later that year, its market capitalization reached $8.2 billion. It currently has a market cap of $23 million.

The company relocated from Manhattan to Houston in 2022 in a bid to cut costs. Back in January, it announced it was winding down its e-commerce vehicles and closing its one physical dealership, Texas Direct Auto, in Stafford. It will concentrate on auto financing and its vehicle analytics company.

In early April, the company had announced it had completed the restructuring. However, its proforma financials of the ongoing business show that the company still has some serious difficulties.

For 2023, the ongoing business had revenues of $206 million and generated a loss from operations of $6 million. The company will still have net debt of $490 million and stockholders’ equity of $160 million. That equity figure includes $132 million of intangibles.

Mr. Krakowiak, who has been CFO since September 2021, will receive a severance equal to 12 month’s base salary. Conveniently, the company just bumped his salary from $565,000 to $650,000 in March 2024.

Ms. Zakowicz joined the company in January 2019 as Senior Director of Accounting Policy. Prior to that, she spent 18 years at PricewaterhouseCoopers.

SEC filing – 8-K Vroom CFO steps down

Sunnova CFO to step down

Rob Lane, the CFO of Sunnova International, will be leaving the company. He will leave on the earlier of June 30, 2024 or the appointment of a new CFO. The company has engaged a retained search firm to find his successor.



Sunnova provides solar power systems and other related products such as chargers and energy storage through a network of dealers and partners. Typically, Sunnova funds the initial investment of a system and generates revenue from leasing or power contracts with the customer. The company has its head office in the Greenway Plaza area of Houston.

The company started in 2013 and its operating losses have increased along with its revenues in recent years. In 2023, the company had revenues of $720 million and an operating loss of $243 million. An operating cash flow outflow of $238 million was swamped by a further $2.5 billion in cash used for investing activities.

Maturing debt wall

The problem for the company is that it has gross debt of $7.8 billion, with $2.3 billion of that due to mature before the end of 2025. Rising interest rates have created a double whammy with debt servicing costs rising and revenues growing more slowly as customers become more reluctant to take out leases.

According to a report in Bloomberg on May 1, the company is receiving advice from Moelis & Co on its balance sheet options.

Severance

Mr. Lane joined Sunnova as CFO in May 2019 and guided the company through its Initial Public Offering a couple of months later. He joined from Spark Energy, another Houston-based public company.

CEO John Berger, who also joined the company just before the IPO agreed with Mr. Lane that now was a logical time for a CFO transition. Mr. Lane will receive a severance of six months salary and a target annual bonus.

SEC filing – 8-K Sunnova CFO resigns

 

US Silica to be taken private by Apollo for $1.85 billion

US Silica, based in Katy, is to be taken private by Apollo. The deal values the company at $1.85 billion. The price being offered is $15.50, which represents an 18.7% premium to US Silica’s closing share price of $13.06 on April 25.



The company primarily produces silica which is used as a proppant in fracking. It also produces diatomaceous earth which is used as a filtration product in various industries. The company has revenues of $1.5 billion.

Long storied history

The company traces its roots to two companies over 120 years old. The first is Pennsylvania Glass Sand Company, founded in 1894 to mine sand from the Oriskany formation in West Virginia. It was acquired by ITT in 1968 and then by RTZ Corporation (now Rio Tinto) in 1987. The second is Ottawa Silica Company, founded in 1900 in Illinois. RTZ acquired the company in 1986 and merged it with Pennsylvania Glass Sand the following year to form US Silica.

4 PE owners in 16 months!

RTZ sold US Silica in 1995 for $120 million, which began a series of PE owners for the company. First up was D George Harris and Associates, who bought the business from RTZ. The eponymous founder died in 2007 and, shortly after, US Silica was sold to Harvest Partners for $200 million. Less than one month later, Harvest flipped it to Harbinger Capital Partners for $300 million. In turn, Harbinger sold the business 15 months later for $337 million to Golden Gate Capital.

Golden Gate took the business public in 2012 in an IPO that valued the business at $900 million.

The business moved its corporate headquarters from Maryland to Katy, TX in 2018.

The agreement with Apollo includes a 45-day “go-shop” period that will expire at 12:01 AM ET on June 10, 2024, which permits U.S. Silica and its financial advisor to actively initiate, solicit and consider alternative acquisition proposals from third parties.

Long- serving CFO Don Merril was terminated in October 2023. Kevin Hough, Corporate Controller, has been interim CFO.

https://www.prnewswire.com/news-releases/us-silica-holdings-inc-to-explore-strategic-alternatives-for-industrial–specialty-products-isp-segment-301394507.html

 

Houston Personal Injury lawyer indicted in $2.4m fraud

Houston attorney, Clyde Moore, known in his advertisements as ‘Car Wreck Clyde’, has been indicted for defrauding injured clients of settlement funds. His office manager, Mark Broussard, was also indicted. The estimated amount of the fraud was $2.4 million.



Moore is a personal injury lawyer. He and Broussard obtained cases by making cash payments to tow truck drivers, repair shop employees and others who would refer car-wreck cases to the firm. According to 2020 civil lawsuit filed by a client, the going rate was $1,000 for a ‘normal’ car accident and $1,500 for a commercial accident.

The scheme ran from 2012 to 2021 and was simple in nature. Moore’s injured clients would obtain medical treatment under a Letter or Protection from Moore’s firm through which Moore agreed to pay the bills of the medical providers. Moore would send these bills to insurers with demands for settlement. However, Moore had agreed lower reduced fees with certain medical providers. His firm would pocket the difference, rather than pass it onto the clients.

Moore, Broussard and three unnamed employees kept detailed ledgers of the amounts being skimmed. Moore would pay the three employees bonuses, based on their share of the skimmed proceeds. The civil lawsuit alleged the bonus paid to the employees was 3% of the amount skimmed.

Dispute between the parties

Interestingly, the case appears to have arisen from a dispute between Moore and Broussard. They were old friends, and Moore hired Broussard in 2012. They formed a partnership where Broussard was to be paid 50% of the net revenues on cases where he did the majority of the pre-litigation work, and 3% of revenues on all other cases.

The partnership broke down in 2017 over a dispute over what Broussard was allegedly owed. Broussard filed a lawsuit that resulted in a mediated settlement agreement that would pay Broussard $660,404. He alleges that Moore made only two payments and then defaulted on the promissory note. Broussard filed a new suit in 2022 to enforce the agreement.

Possible penalties

For conspiracy to commit mail fraud, Moore and Broussard face up to five years in federal prison and a possible $250,000 maximum fine. Moore is also charged with an additional count of mail fraud which carries a maximum prison sentence of up to 20 years and a possible $250,000 fine.

https://www.justice.gov/usao-sdtx/pr/houston-personal-injury-attorney-and-employee-indicted-defrauding-injured-clients-0