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.

Midstream LP to be taken private by PE firm

Evolve Transition Infrastructure LP is to be taken private by its General Partner. The GP will purchase the common units it doesn’t already own and the units will be delisted from the NYSE in mid-February. Evolve currently has a market cap of $11 million.

[Update 02-16-24 – The deal has been completed.]

The GP and its affiliates are owned by Stonepeak Partners, an infrastructure private equity firm. Combined they own 81.6% of the common units.



The primary asset of the business is a gathering system with 160 miles of gathering pipelines and four processing facilities It is located in the Eagle Ford basin.

The business went public as Constellation Energy Partners in 2006. At that time, it owned coalbed methane wells in Alabama. In 2015, Stonepeak invested in the business by helping it acquire the gathering system from Sanchez Energy for $346 million. The E&P assets were sold off and the business was renamed Sanchez Production Partners.

Sanchez Energy filed for bankruptcy in 2019, though the LP remained out of bankruptcy. However, the LP suffered cash flow issues and Stonepeak took full control of the GP in 2020. The remaining members of the Sanchez family exited the company, which was renamed to Evolve.

Evolve becomes the second Houston-area company in 2024 to announce plans to delist. Last week, the Chairman of Via Renewables said he would take the company private.

SEC filing – 8-K – Evolve going private

 

Apache to acquire Callon for $4.5 billion

APA Corporation (formerly known as Apache) has agreed to acquire Callon Petroleum in an all-stock transaction that values Callon at $4.5 billion. The proforma ownership will be 81% APA and 19% Callon. Both companies have their corporate offices in Houston.



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. In addition, they believe that they can save $40 million in interest costs from having a lower interest on debt.

Assuming the employment of the Callon executive officers is terminated after the deal goes through, they will be entitled to large compensation payments. According to the last annual proxy, CEO Joe Gatto will receive compensation worth $16.9 million (3x base salary and target bonus). The other four officers will receive a combined $22 million (2x base salary and target bonus for each named officer).

The transaction is expected to close in the second quarter of 2024.

SEC filing – 8-K APA Callon acquisition

Via Renewables to be taken private by Chairman

Via Renewables, an independent retail energy services company is to be taken private by Chairman and CEO Keith Maxwell for $11 per share. The price values Via at $70 million and is a 20% premium to the 30 day average price.



The company, which has its head office in west Houston, operates in 20 states and has approximately 337,000 residential customers. Mr. Maxwell founded the company, then known as Spark Energy, in 1999 and took it public in 2014.

Last year was a rough one for the company as volatility in natural gas prices impacted its profitability in 2022 which caused the dividend to be suspended in April 2023. Prior to the recent run up, the stock price was down about 75% from its peak in early 2023.

Mr. Maxwell directly or indirectly owns 66% of the common stock, so the deal has a strong chance of going through. The added twist is that a majority of the holders of the stock, not owned by Mr. Maxwell and the directors, also have to approve the deal.

The deal was negotiated on behalf of the company by a Special Committee of its Board of Directors with the assistance of independent financial and legal advisors. According to the company, the Special Committee is comprised by ‘entirely disinterested and independent directors’.

While that is technically true, two of the three independent directors have historical ties to Mr. Maxwell, who was previously the Chairman and CEO of Marlin Midstream. Amanda Bush is a former CFO at both Via and Marlin, while Nick Evans is a former director of Marlin.

The agreement provides for a ‘go-shop’ period of 30 days where the Special Committee will be permitted to seek competing offers from third parties.

The transaction is expected to close in the second quarter of 2024.

SEC filing – 8-K – Via Renewables

CFO of Space Infrastructure company resigns

Erik Sallee, the CFO of Intuitive Machines (‘LUNR’), has resigned for personal reasons. Steven Vontur, the current Controller, will serve as the interim CFO while the company conducts a search for a permanent CFO.



LUNR is based in Clear Lake, near NASA and is developing products for space exploration. The company was taken public by a SPAC in February 2023.

Mr. Sallee is based in California and the company said he was pursuing other business opportunities in that state. Before joining IM, he was the Corporate Controller for Blue Origin. Prior to that he worked for Raytheon.

The company’s first launch is scheduled for mid-February with the spacecraft landing on the moon about a week after launch. A competing private company, Astrobotic, is set to make its first launch on January 8. Its craft takes a more indirect route to the moon, so both may land around the same time. Both missions are related to NASA’s Artemis program, which intends to put astronauts back on the moon.

LUNR’s stock has a wild ride since going public. It began trading at $10, rose to $136 later that month before crashing back down to $12 in March 2023, despite no news from the company. The stock currently trades at $2.53.

Revenues miss projections

In its investor presentation as part of going public, the company projected its revenue would be $291 million in 2023 and $759 million in 2024. In its latest quarterly report, revenues for the nine months to September 2023 were $49 million. All three of its main contracts were loss-making, with total cost of sales of $71 million for the same period.

At the end of September 2023, the company had backlog of $135 million. That doesn’t include anything from NASA OMES 3 space orbital program. The contract, which began in late 2023, is projected to be worth $719 million over five years and has been awarded to the joint venture LUNR has with KBR.

Nauticus Robotics, another nearby company with strong connections to NASA is also looking for a new CFO.

SEC filing 8-K – Intuitive Machines CFO

 

 

Kodiak to acquire CSI Compressco for $854 million

Kodiak Gas Services, based in Montgomery, TX, has agreed to buy CSI Compressco LP, based in The Woodlands. The deal is an all-stock transaction that values CSI at $854 million (including the assumption of $619 million of net debt).

That represents $1.65 per CSI stock unit. For most of 2023 the units have been priced around $1.20 to $1.40. At the beginning of December, the price spiked to $2 per unit.



The transaction creates the largest contract compression fleet in the US with 4.3 million revenue-generating horsepower. Compression is used in various parts of the Energy industry such as compressing natural gas to the required pressures used in processing facilities or pressurizing gas lift systems for field-wide reinjection to lift oil.

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).

Kodiak went public in June 2023 in a $256 million IPO. The company currently has a market cap of $1.5 billion.

Kodiak is projecting $20 million of annualized cost savings from the acquisition, though no details were given about the savings

The transaction is expected to close in Q2 2024.

https://ir.kodiakgas.com/news-events/press-releases/detail/18/kodiak-gas-services-inc-to-acquire-csi-compressco-lp-in

 

Marie Myers appointed CFO at Hewlett Packard Enterprises

Marie Myers has been appointed CFO of Hewlett Packard Enterprise (‘HPE’). She replaces Tarek Robbiati, who resigned in August to become the CEO at RingCentral. Ms. Myers joins the company from HP Inc where she was CFO. Interim CFO Jeremy Cox will revert back to his previous role of Corporate Controller.



HP and HPE were part of the same company until they split in 2015. HP (market cap $31 billion) concentrates on consumer products and printers, whereas HPE (market cap $21 billion) focuses on enterprise-facing hardware and cloud business.

Ms. Myers is a native of Australia and started her career with the Department of Trade and Industry and Treasury. She moved to Houston to finish her MBA and then joined Compaq (acquired by HP in 2002). She left HP in 2018 to become the CFO at UiPath, a robotic process automation company, before rejoining just over a year later. Ms. Myers was appointed CFO of HP in 2021.

At HP, Ms. Myers had a base salary of $780,000. At HPE, she will have a salary of $850,000 (same base as Mr. Robbiati). She will also receive a cash sign-on bonus of $1 million (paid half now, half in 12 months).

SEC filing 8-k HPE CFO appointment

Long-serving CFO at EOG Resources to retire

EOG Resources has appointed Ann Janssen as its new CFO. She replaces Tim Driggers, who is retiring from EOG in 2024. Ms. Janssen takes over on January 1, 2024 with Mr. Driggers serving as an advisor to the company.



EOG has its head office in downtown Houston and is one of the largest independent oil and gas producers in the US . (Independents only produce, they don’t own refining or marketing assets). The company has a market cap of $69 billion.

Mr. Driggers, 61, joined the company in 1995 and has been CFO since July 2007. Ms. Janssen, 58, also joined in 1995 and has been the Chief Accounting Officer since February 2018. Her base salary will be $600,000.

Laura Distefano has been promoted to Chief Accounting Officer. She joined the company this year and serves as the VP of Accounting. Prior to that, she was an Audit Partner in Houston at both BDO and Deloitte.

The company also announced the promotion of Jeff Leitzell from VP, Exploration and Production to Chief Operating Officer. He has been with the company for 15 years. Current COO, Billy Helms, will serve as President of EOG.

SEC filing – 8-k – EOG CFO

Steel framing manufacturer raises $10 million in IPO

Inno Holdings, based in Brookshire, has completed its Initial Public Offering (IPO). The company raised $10 million by offering 2.5 million shares at $4, the low end of the range.

Inno primarily produces cold-formed steel framing products. The company argues that using steel instead of wood allows buildings to be constructed in a modular or off-site manner. Inno generates revenue from the sale of metal studs, tracks and wall panels as well as engineering services and on-site structure framing work.



CEO DK Liu formed Inno in 2019. His family has been involved in industrial machinery production for three generations. Since moving to the US in 2012 he has been involved in real estate development.

CFO Solomon Li was appointed in July 2023 and is based in the company’s office in Diamond Bar, California. Prior to that, he worked for  JP Morgan Chase. The previous CFO was Wes Twigg, based in Oregon. He joined in January 2023 but resigned in July.

For the nine months ended June 30, revenues were only $502k, down from $3.5 million in the corresponding period in 2022. The big revenue drop was due to a decline in construction activity and the size of contracts. However, the company estimates it has $15 million to $20 million in backlog as of June 30, 2023.

If the lack of revenue to June 2023 wasn’t bad enough, the company incurred bad debt expenses of $1.3 million. The collection issues were with multiple customers and for a variety of reasons. Losses before taxes were $3 million in the nine months to June 2023, compared to a loss of $556k in the prior corresponding period.

The stock of Inno will trade under the ticker INHD.

S-1 filing – Inno Holdings

 

 

Co-founder Charif Souki ousted at Tellurian

Charif Souki is out as Executive Chairman of Tellurian and has been replaced by fellow co-founder, Martin Houston. Mr. Souki was a co-founder of Cheniere, the pioneer in LNG export before being ousted in 2015 after falling out with activist investor Carl Icahn.

Tellurian has been struggling recently and it recently warned that its financial situation raises substantial doubt that the company can continue as a going concern. Its share price is trading below $1 and the company has a market cap of $475 million.



Tellurian is trying to build an LNG export plant in Driftwood, Louisiana and needs about $13 billion in financing to do so. At one point the company had LNG sale and purchase agreements in place with Shell, Vitol and Gunvor. All have fallen through as they were conditional on Tellurian obtaining financing. Basically, the company missed its chance while interest rates were low.

The press release issued by the company is a little misleading. it states that Mr. Souki will not hold any managerial responsibilities but that he remains a member of the Board of Directors. That’s true, but the SEC filing states that Mr. Souki will be entitled to severance and once he signs that agreement, he will no longer be on the Board.

We will see if Mr. Houston and CEO Octavio Simoes can now sign some deals and get the financing in place with Mr. Souki out of the way.

Back in May, Tellurian appointed a new CFO.

Severance Package

According to the most recent annual proxy statement, Mr. Souki will receive a cash severance of around $7.7 million. That is calculated as 2x base salary of $1.2 million, plus 2x target bonus of $1.8 million, plus pro-rata target bonus for 2023. In addition, long-term incentives will be settled in cash. They were worth $5.1 million at December 31, 2022 , but about half that now, due to the decline in the price of the stock.

[Update 12-21-23 – The company has filed an updated 8-K. Mr. Souki will receive a cash severance of $6.4 million, a lump sum payment of $1 million, a pro-rated bonus for 2023 (amount to be determined), plus the transfer of certain travel-related benefits to Mr. Souki that will cost the company $600,000.]

So, overall, Mr. Souki will receive a total severance package of around $10 million.

SEC filing – 8-k – Souki ouster

 

 

Crown Castle CEO out following letter from activist investor

Jay Brown is out as CEO of Crown Castle (CCI) after 7½ years in the role and 24 years at the company.  His departure will be effective January 16, 2024. Anthony Melone, a member of the Board of Directors has been appointed interim CEO, while the company conducts a search.

CCI 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.



Mr. Brown’s ouster comes 10 days after activist investor, Elliott Management called for changes at the company. Following feedback from investors, analysts and current and former employees, Elliott sent another letter to the Board just this morning. In it, they said;

‘Jay Brown’s severe underperformance as a CEO has made the prospect of his departure his greatest moment of outperformance.’

The main criticism from Elliott concerns the lack of return on the amount of money Crown Castle has spent on its fiber business. Elliott are right on this. If you look at the last annual report, the Towers segment had an operating profit of $3.5 billion on assets of $22.2 billion. The Fiber division had an operating profit of $1.1 billion on assets of $16 billion. Now that Mr. Brown is out, expect the company to perform a strategic review of the Fiber business.

Today’s letter also noted that one day after the initial letter sent to the Board, the company announced that the COO of the underperforming Fiber business would be made COO of the Tower business as well.

Long-time CFO, Dan Schlanger, announced in October that he will leave the company in March 2024. [Update 01-24-24 Mr. Schlanger is staying with the company].

Severance Package

Mr. Brown will receive a severance of 1x base salary ($1.06 million), plus target bonus (175% of base), plus actual bonus for 2023 (which won’t have been paid by the time he leaves in  January), plus prorated target bonus for 2024 (approx $80k). Restricted stock will also vest. According to the latest proxy statement, the total severance would have been valued at $10.2 million at December 31, 2022.

 

NRG Energy

This is the second recent success that Elliott has in ousting a Houston-area CEO.  On November, 20, Mauricio Gutierrez, CEO of NRG Energy, announced his departure from the company. Elliott first took a stake in NRG in 2017 and forced the company to refocus with some success. It exited the investment in late 2017 with a return of over 100%. Mr. Gutierrez incurred the wrath of Elliott when it bought Vivint, a home security business in March 2023 for $2.6 billion. Elliott disclosed a 13% stake in NRG in May.

Phillips 66

Elliott has also recently taken aim at a third Houston company, Phillips 66. It argues that the refinery margins are considerably lower than those of its peers.

SEC filing – Crown Castle CEO departure