Category Archives: Downstream

Tellurian appoints Investment Banker as its new CFO

Tellurian has appointed Simon Oxley as its new CFO. He replaces Kian Granmayeh, who resigned in March to become the CFO at Carriage Services, another Houston company. Khaled Sharafeldin, who was interim CFO, reverts back to previous role of Chief Accounting Officer.

Tellurian is trying to build an LNG export plant in Driftwood, Louisiana and needs about $13 billion in financing to do so. It had agreements in place last year with Shell and Vitol for each to buy 3 million metric tons a year. Those deals fell apart.  It’s only deal currently is a similar-sized deal with Gunvor. However, Gunvor can walk away anytime as Tellurian missed a February deadline to secure financing.

It seems that higher interest rates and the tightening credit markets are causing the banks to push for more equity funding in the project. Tellurian has said it is seeking equity partners willing to invest about $2 billion to $2.5 billion.

Mr. Oxley is based in London and is the Managing Director and Co-Head of Oil & Gas Investment Banking for Europe, Middle East and Africa at Barclays Investment Bank. In that role, he led a number of liquified natural gas (LNG) related transactions. That experience will be invaluable for Tellurian. Mr. Oxley has a Chemical Engineering degree from Edinburgh University.

Mr. Oxley will receive a base salary of $525,000. He also receives 200,000 shares of common stock (current trading price $1.32). He will also receive a grant of 200,000 shares of restricted stock that will vest upon a final investment decision for Driftwood.

It’s not clear whether Mr. Oxley will relocate to Houston. I guess he will remain in London in the short term as the company has upcoming deadlines. Last month, Tellurian said it entered into a binding letter of intent (sounds like an oxymoron) with an unnamed institutional investor for the sale and leaseback of 800 acres at Driftwood for $1 billion.  However, the deal is contingent on Tellurian securing financing commitments for Phase 1 by July 14.

The land at Driftwood was bought for $52 million and construction-in-progress was $351 million at March 31, 2023. So it’s understanding that the sale-leaseback is contingent on the project getting financed.

SEC filing – 8-K Oxley appointment

Tellurian CFO steps down

Kian Granmayeh, CFO of Tellurian, has resigned, effective March 10, 2023. Khaled Sharafeldin, the company’s Chief Accounting Officer, will serve as interim CFO.

[Update – One hour after the Tellurian announcement, another Houston company, Carriage Services, announced that it had hired Mr. Granmayeh as its CFO].

Mr. Granmayeh has been the CFO for 3 years. He began at Tellurian as a consultant to the CFO in January 2019 and was appointed as Director of Special Projects in July 2019 and Director of Investor Relations as month later. Prior to joining Tellurian, he worked at Apache.

Mr. Granmayeh will receive severance payments of $525,000, equivalent of one year’s salary. This will be paid over 12 months. He will forfeit all outstanding equity awards and long-term cash-based awards, except for 174,942 restricted stock units issued in January 2022. At that time they were valued at $3.38 each (or $591,304). The current share price is $1.49.

No details were given on what bonus, if any, Mr. Granmayeh received this year for 2022 performance. That will be disclosed in the annual proxy, to be filed next month.

Mr. Sharafeldin has served as the Chief Accounting Officer since January 2017. Prior to that, he worked at Cheniere as its Director of Internal Audit (correction – he was VP of Internal Audit)

Mr Souki’s margin calls

Since I wrote about the non-exec drama last month, the company has disclosed that CEO, Charif Souki, has had to sell more than 15.5 million shares (60% of his holding in Tellurian) to cover a 2017 real estate loan.  This isn’t the first time Mr. Souki has had to sell shares to cover a margin call. In fact, shortly before Mr. Granmayeh’s initial appointment in 2020, he had to sell 18 million shares. Presumably, the loan is related to a ranch in Aspen that Mr. Souki owns. It covers 800 acres and 8 houses. It was originally put up for sale for $220 million in May 2020.

Currently, Tellurian is trying to build an LNG export plant in Driftwood, Louisiana. In September 2022, Shell canceled an agreement to buy 3 million metric tons a year. At the same time, Tellurian canceled a similar-sized deal with Vitol.

Gunvor Contract

That leaves just one deal with Gunvor Singapore. That original deal included clauses that Tellurian had to have issued an unconditional notice to proceed to Bechtel, the EPC contractor for the facility by December 31, 2022 and that Tellurian had to have secured the necessary financing by the same date. That date has been extended twice, in one month increments to February 28, 2023. Gunvor and Tellurian can jointly agree on a new date. If there is no agreement, either party can terminate the deal. There has been no word on the current status.

SEC filing – Tellurian CFO

Drama at Tellurian as two non-execs resign

Driftwood LNG – Artist Illustration – Tellurian

Two non-executive directors have resigned on the same day at Tellurian, the company co-founded by Charif Souki in 2016 after he was ousted from Cheniere Energy in 2015.

Officially, Claire Harvey resigned for personal reasons and James Bennett resigned due to an increase in other time commitments. Tellurian rather spoiled the official explanation by stating that ‘based on their short tenure on the Board and the feedback they provided at Board meetings, it is the company’s opinion that neither was ever comfortable with the risk profile and strategic direction of the company.”

Ms. Harvey joined the Board in December 2021 and is the President of ARM Resources LLC, the upstream oil and gas division of ARM Energy Holdings. She was formerly the CEO at Gryphon Oil and Gas, another PE-backed E&P company.

Mr. Bennett joined the Board in September 2021 and is the former CEO of Sandridge Energy.

Composition of the Board

Ms. Harvey and Mr. Bennett, make up two of the seven independent directors on the Board. Although the other five are considered independent under NYSE governance listing standards, all have close ties to Mr. Souki. Three are former executives at Cheniere, one is a partner at a law firm that has represented the company in the past and one co-founded an investment firm that put seed money into Cheniere.

Status of Driftwood

Tellurian has been trying to develop an LNG terminal facility (“Driftwood”), near Lake Charles.  In September 2022, Shell canceled an agreement to buy 3 million metric tons a year. At the same time, Tellurian canceled a similar-sized deal with Vitol. That leaves just one deal with Gunvor Singapore.

Without contracts in place, Tellurian is having difficulty in obtaining the funding for Driftwood. Mr. Souki had stated in March 2022 that agreements would be signed and the final investment decision would be made in April 2022.  The construction cost of Driftwood is now expected to cost $13.6 billion, with $8 billion or so coming from debt and $5 billion – $6 billion coming from equity. Given that the current market capitalization is $1 billion, that will mean a large dilution for existing shareholders.

Mr. Souki’s compensation

Mr. Souki is well paid. He has a base salary of $1.2 million. In 2021, he also received nearly $19 million in non-equity incentive plan compensation. Of this, $3.6 million was an annual bonus. The rest were long-term incentives. Unusually, one-third of this vested immediately.

In setting the bonuses, the Compensation committee referred to increase in stock price from $1.28 to $3.08 during 2021 as well as the the signing of the contracts with Shell, Vitol and Gunvor.  The stock price of Tellurian is now $1.93 and the Shell and Vitol contracts are canceled, so it will be interesting to see the bonuses for 2022 when the proxy statement is published in April.

Neither Ms. Harvey nor Mr. Bennett were members of the Compensation committee.

Ousted at Cheniere

Cheniere first started exporting LNG in 2016. Mr. Souki was ousted in 2015 following a battle with activist investor, Carl Icahn. Mr. Souki received a severance package worth $54 million.  He also received compensation of $58 million in 2012 and $142 million in 2013. Cheniere now has a current market capitalization of $37 billion, so Mr. Souki has definitely created value. It’s just that he likes to be paid upfront.

SEC filing – Tellurian non-execs resigning

Sugar Land petrochemical company taken private for $247 million

The company manufactures specialty petrochemical products and waxes from its two plants in Silsbee, TX (30 miles north of Beaumont) and Pasadena, TX. It has revenues of $300 million.

The company was originally formed in 1967 as the Arabian Shield Development Company. The company’s original intent was to develop a copper and zinc mine in southwestern Saudi Arabia. It went public in 1972 and continued to raise funds to develop the mine.

In 1987, the company made its first acquisition in the US by buying the facility in Silsbee. By 2006, the company hived off the Saudi mine into a joint venture as it realized it would cost more than anticipated to complete it. The mine eventually started commercial production in 2012.

In 2015, the company changed its name to Trecora Resources. Its sold its 33% stake in the mine JV in 2019 for $70 million.

In late 2020, the company, with the help of its adviser, Guggenheim Securities, began exploring a merger-of-equals transaction in which Trecora would be the acquiror. However, in late summer 2021, after spending nearly $5 million in fees, the Board pulled out of the proposed transaction.

Also, in 2021, two separate activist shareholders, not acting in concert, amassed a combined 20% stake in the company. Both were critical of the Board and management’s strategy for the company. Both believed the company should put itself up for sale.

The company did just that in October 2021. It contacted 72 financial and strategic acquirers. After a formal bidding process, Balmoral won out, paying 11.4 times 2021 adjusted EBITDA.

All the officers of the company are staying on in their roles.

[06-30-22 – UPDATE Trecora filed an 8-K with the SEC.  CEO Patrick Quarles has left the company to be replaced by new hire, Brad Crocker, who is currently the CEO of another portfolio company of Balmoral.  Mr. Quarles will get a golden parachute payment of cash and equity worth $4.4 million.]

SEC filing – Trecora taken private

LNG services company completes IPO

Excelerate Energy has completed its initial public offering by raising $384 million. The company  offered 16 million shares at $24 per share. This was at the high end of the range of $21 to $24 and values the company at over $2.5 billion.

The company originally filed back in January, but war in Ukraine has increased interest in LNG.

Excelerate, which has its head office in The Woodlands, provides flexible LNG infrastructure solutions, primarily in emerging markets. The company has a fleet of 10 Floating Storage Regasification units (FSRU).

Natural gas is cooled to approximately -160C at the source of production to reduce its volume down for transportation on an LNG carrier. The LNG needs to be brought back to its gas state at the area of consumption. One option is to have an LNG facility constructed on land, another is to do it offshore using a FSRU. The latter is often cheaper and quicker, especially in emerging markets.

Excelerate was formed in 2003 by George Kaiser, a Tulsa-based investor who is also the majority owner in BOK Financial Corporation (which also operates under the brands of Bank of Oklahoma and Bank of Texas).

For the 12 months ended September 2021, the company had revenues of $658 million. Currently the company has eight contracts in place for delivering regasified LNG to customers in Argentina, Brazil, Bangladesh, Israel, Pakistan and the UAE.

Steven Kobos has been the CEO of Excelerate since March 2018 and served as its counsel for the previous 11 years. Dana Armstrong is the CFO. She joined in April 2020 and was previously the CFO at Scientific Drilling.

S-1 filing – Excelerate Energy

Chemical company to spend $118 million to reduce air pollution at three Texas plants

Chevron Phillips has agreed to spend $118 million to reduce harmful air pollution at three Texas plants, including one in the Houston-area. The company has also agreed to pay $3.4 million in a civil penalty. This is part of a settlement reached with the Justice Department.

Chevron Phillips is a joint venture between Chevron and Phillips 66 that has its head office in The Woodlands. The company was formed in 2000 by merging the chemical operations of the two companies. In 2021 the company had revenues of $14 billion

The three plants are Cedar Bayou in Baytown, Sweeney and Port Arthur.

Flare Stack controls absent

Companies are allowed to vent gases in a flare stack as a control device in a petrochemical plant. Combustion of the gases must occur in the flare stack. For that reason, the flares must have monitoring equipment. Many flares use steam to assist in combustion by promoting turbulence in a flare’s flame. The steam-to-vent gas ratio must be calculated. Too much steam snuffs out the flame, and too little causing excessive smoke. In either case, air pollutants escape.

The Justice Department alleges that the company regularly ‘oversteamed’ the flares, allowing harmful gases (including benzene) to escape.

The company has agreed to install a gas recovery system, by September 2023, at Cedar Bayou that will allow the gases to be recycled, instead of being combusted in a flare. At the other two plants, ChevonPhillips will amend its air quality permits to limit the flow of gas at selected flares. The company will also create waste minimization plans at all three sites.

In October last year, in a similar settlement, LyondellBasel agreed to spend $50 million to reduce flaring at six facilities, including four in the Houston area.

LyondellBasel to spend $50 million to settle pollution allegations

LyondellBasel has agreed to spend $50 million to reduce air pollution at six petrochemical plants, including four in the Houston area.

This is part of a settlement with the Department of Justice and the Environmental Protection Agency (EPA) to resolve allegations that the company failed to operate and maintain flaring. The company also agreed to pay a civil penalty of $3.4 million.

Two of the plants are in Channelview (North and South Facilities) and two are in La Porte (Acetyls and Equistar facilities). The others are in Corpus Christi and Clinton, Iowa.

Flare Stack controls absent

Companies are allowed to vent gases in a flare stack as a control device in a petrochemical plant. Combustion of the gases must occur in the flare stack. For that reason, the flares must have monitoring equipment. Many flares use steam to assist in combustion by promoting turbulence in a flare’s flame. The steam-to-vent gas ratio must be calculated. Too much steam snuffs out the flame, and too little causing excessive smoke. In either case, air pollutants escape.

The EPA alleged that, since 2009, the company

  • made modifications to the stacks without getting the necessary permits
  • failed to install or properly operate flow monitors
  • failed to have sufficient controls to maintain the steam-to-vent gas ratios within specifications
  • operated the flares with excessively high steam content

The EPA singled out the Channelview facilities as subjecting the surrounding area to especially high particulate matter, ozone, toxic cancer risk and respiratory hazard.

One year to install controls

The company has agreed to install the monitoring and control systems within one year. This includes a fenceline monitoring system at each of the plants.

It has also agreed to minimize the amount of waste gas that it sends to the flares. It must submit its initial waste gas minimization plan to the EPA within one year. This includes a root cause analysis of what’s causing the waste gas. An updated plan, taking into account reductions identified as part of the root cause analysis is due within two years.

2007 consent decree

Back in 2007, the company settled other pollution allegations with the DOJ. That settlement covered seven plants in total, including four on the list today. The company paid a penalty of $2.5 million and spent $125 million to reduce air, water and hazardous waste violations.

The settlement comes two weeks after the company pledged net zero emissions by 2050.

In 2020, the company made an operating profit of $2 billion (before impairments). Between 2016-2019, the company had an operating profit of between $4 billion and $5.5 billion each year.


Sugar Land refiner appoints new CFO

Dane Neumann has been promoted to CFO at Sugar Land-based CVR Energy. He was the VP of Finance and Treasury until he was appointed interim CFO in August following the departure of Tracy Jackson.

CVR operates two refineries in Kansas and Oklahoma as well as related pipelines and infrastructure. The company has a market capitalization of $1.9 billion, up $600 million since  Ms. Jackson resigned. That’s because, in September, the Environmental Protection Agency (EPA) proposed big cuts to US biofuel blending requirements. This benefits oil refiners at the expense of farmers. Analysts speculate that CVR will re-instate regular dividends once the change is finalized.

Mr. Neumann joined CVR in June 2018 and also worked for Andeavor and its affiliates from March 2011 until June 2018. He will receive a base salary of $400,000.

The predecessor to Ms. Jackson was Susan Ball. She resigned last week from her position as the CFO of Team Inc.

SEC filing – CVR Energy – new CFO

CFO at Sugar Land refiner steps down

Tracy Jackson has resigned as CFO of Sugar Land-based CVR Energy, with immediate effect. She is replaced, on an interim basis, by Dane Neumann, VP – Finance and Treasurer.

No reason was given for Ms. Jackson’s departure and no severance details were disclosed. [UPDATE 08-25-21 – The company filed an update. Ms. Jackson will get $789,000 through August 2024.]. However, there is clearly some turmoil at the company, as Matthew Bley also resigned last month as the Chief Accounting Officer. Ms. Jackson joined CVR in 2018 from San Antonio-based Andeavor. Mr Bley joined the same day and had worked with Ms. Jackson at Andeavor.

CVR operates two refineries in Kansas and Oklahoma as well as related pipelines and infrastructure. Activist investor, Carl Icahn, owns 72% of CVR, which has a market capitalization of $1.3 billion.

Until recently CVR also owned a 15% stake in Delek, a convenience store fuel retailer. Mr. Icahn lost a recent proxy battle with Delek when his three proposed board nominees failed to get elected. As a result, in June, CVR issued a special dividend of $492 million comprising $241 million in cash and the remainder in shares of Delek.

Mr. Neumann joined CVR in June 2018 and also worked for Andeavor and its affiliates from March 2011 until June 2018.

Jeffrey Conaway has been appointed Chief Accounting Officer, replacing Mr. Bley. He joined the company in August 2020, having previously been with Patterson-UTI Energy

SEC filing – CVR refining – CFO steps down

Huntsman looks internally for its new CFO

Huntsman Corporation, based in The Woodlands, has appointed Phil Lister as its new CFO. He replaces Sean Douglas, who resigned in April to take a senior leadership position with The Church of Jesus Christ of Latter-day Saints.

Mr. Lister is currently the VP of Corporate Development, a role he has been in since May 2019. He has spent his entire career with the company or its predecessors. He started out his career with ICI in the UK, shortly before it was acquired by Huntsman in 1999.

No compensation was disclosed for Mr. Lister, other than he will receive an initial equity award of $610,000 that will vest over three years. By comparison, Mr. Douglas had a base salary of $650,000.

SEC filing – Huntsman appoints new CFO