Category Archives: Downstream

LyondellBasell CFO to retire

Thomas Aebischer, CFO of LyondellBasell, has decided to retire on December 31, 2019. The company, based in downtown Houston, intends to appoint a new CFO before the end of the year.

Mr Aebischer, a Swiss national, joined as CFO in January 2016. In 2018, his base salary of $763,000 was the 8th largest of public company CFOs in the Houston area. (You can see the list at  https://www.andrewjowett.net/houston-public-companies/). His total compensation was $4.6 million. This included a $1.4 million cash bonus.

In January 2016, the market cap of LyondellBasell was $40 billion, it’s now $29 billion.



The company has entered into an Employment Transition Agreement with Mr Aebischer. This will result in a $250,000 payment on his retirement and an additional $250,000 to be paid in 12 equal monthly installments following his retirement. The company also stated that the Transition Agreement ‘confirms Mr Aebischer’s general rights on retirement’.

According to the annual proxy, upon retirement, all stock awards vest pro-rata, based on the same calculations as in the case of a termination without Cause. For Mr Aebischer, they were valued at $3.8 million at December 31, 2018. Right now, that value will be lower as the stock price is down about 10% since the start of the year.

The Transition agreement will be filed with the quarterly report for quarter ended June 30, 2019.

SEC filing

Cheniere sues former CEO and founder

https://www.flickr.com/photos/royluck/3628833456

Sabine Pass – Roy Luck

Cheniere has sued its former CEO and co-founder, Charif Souki, for conspiring to work with a friend, Martin Houston, to set up a competitor, Tellurian, while still employed at Cheniere. The suit was filed in Harris County. It alleges breach of fiduciary duty, fraudulent transfer, and tortious interference with Cheniere’s collateral rights.

Cheniere and Tellurian are both based in downtown Houston.

History of Cheniere

Cheniere originally started in 1996 as a natural gas driller. In 2004, it switched strategies and began to build a Liquified Natural Gas (LNG) terminal to import natural gas. The facility opened in 2008 just prior to a fracking boom that caused a glut of natural gas in the US. In 2010, the company decided to convert the terminal to export natural gas instead. The company then spent $18 billion on the facility in Sabine Pass, Louisiana. The first train become operational in May 2016.

After 21 years, the company made a profit for the first time in 2017. It now has a market capitalization of nearly $17 billion.

Souki $142 million compensation 

Souki served as the CEO of Cheniere from 2002 to 2015. He became infamous in 2013 for earning $142 million in total compensation (due to $133 million in stock awards). In August 2015, activist investor Carl Icahn took an 8% stake and won two board seats as he felt the stock was undervalued because Souki wanted to expand Cheniere into other areas of the energy business rather than concentrate on completing the LNG trains at Sabine Pass.

The board voted to replace Souki as CEO on December 12, 2015. Souki eventually resigned as a director in February 2016.

Friendship with Martin Houston

Charif Souki first started working with Martin Houston when the latter was the COO of BG Group plc. Back in 2011, BG became the first customer of the export terminal when it signed a 20-year LNG sale and purchase agreement with Cheniere.

In January 2014 Houston left BG and formed Parallax Enterprises. He approached Souki in mid-2014 about jointly pursuing mid-scale liquefaction projects. In December 2014, Souki gave another Houston-controlled company a consulting contract worth $100,000 a month.

At Souki’s direction, Cheniere commenced negotiations with Parallax regarding a potential arrangement for joint development of two liquefaction plants in Louisiana. Cheniere loaned Parallax $46 million through short-term secured loan notes. The money was lent before Cheniere and Parallax had agreed and signed a letter of intent.

The loan note became due on December 11, 2015, the day before Mr Souki was fired. It’s not clear from the lawsuit if this was a major factor in his firing. Parallax has still not repaid any monies to Cheniere.

Allegations in the lawsuit

Two weeks after Mr Souki was fired and while he was still employed as a director, Houston formed a new entity that, Cheniere alleges Mr Souki agreed to invest in. Two weeks after he left as a director, Souki and Houston announced the formation of Tellurian in February 2016. The company is building one of the two liquefaction plants mentioned above.

Tellurian was initially in the same office space as Parallax. The lawsuit also alleges that Tellurian took over Parallax’s server, thereby gaining access to all the work performed on the liquefaction projects, developed using the $46 million that Cheniere had lent.

Another allegation in the lawsuit is Tellurian raised more than $250 million in private placements using work performed at Parallax and funded by Cheniere.

Tellurian went public in March 2017 through a reverse takeover. It has a market capitalization of $2.4 billion.

Cheniere Souki lawsuit

 

 

Houston energy company appoints new CFO

Adams Resources & Energy (AE) has appointed Tracy Ohmart as its Chief Financial Officer and Treasurer. Adams is publicly-traded with a market capitalization of $184 million and has its head office in the Galleria area of Houston. The company is primarily engaged in crude oil marketing and transportation.

Mr Ohmart was most recently with Horn Solutions and prior to that was CFO of United Bulk Terminals, a privately-held subsidiary of a German company. He was the Assistant Controller at Southwestern Energy from 2010 to 2012.

Mr Ohmart replaces Josh Anders who resigned in March 2018 after 15 months in the role to become the CFO at Samson Resources, a Tulsa-based onshore E&P company that emerged from Chapter 11 in March 2017. Interestingly Mr Anders also worked at Southwestern Energy (from 2012 to 2016) before joining Adams.

No details of compensation have yet been disclosed, but Mr Anders had a base salary of $300,000 in 2017.

Interim CFO Sharon Davis will revert back to her previous role of COO and Chief Accounting Officer.

 

 

Houston CFO moves – week ending 30 March

Josh Anders, CFO of Adams Resources & Energy (market cap $183 million) resigned, effective mid-April 2018 to take a position at an unnamed upstream E&P company. He had been at the company only 15 months. His predecessor retired after 31 years at the company! The company appointed Sharon Davis as the interim CFO. She is currently the Chief Accounting Officer.

Nic Graham, CFO of Houston Wire & Cable (market cap $254 million) announced his intention to retire in 2018. The company is conducting a search for his replacement. Mr Graham is 65 and has been the CFO since 1997.

LyondellBasell (market cap $42 billion) has appointed Jacinth Smiley as Chief Accounting Officer. Most recently she was the CFO for the North American Region and Integration leader at GE Oil & Gas. She replaces Mike Sumruld who left at the beginning of October to become the CFO at Parker Drilling.

Padam Pandit has rejoined Mahindra North America as its CFO. Having spent 7 years at Mahindra USA (primarily a tractor distributor), most recently he was the Controller for the US Rigs aftermarket business unit of National Oilwell Varco. Mahindra is part of an publicly traded Indian group of companies.

 

Houston CFO moves – week ending March 23

Susan Ball has resigned as CFO & Treasurer of CVR Energy Inc, a publicly-traded refining company with its head office in Sugar Land.  More details can be found in my blog post here

Mark Cashiola, the CFO of C&J Energy Services, resigned with immediate effect and left with a cash payment of $2.2 million. He had been the CFO for 2 years. Mike Galvan, the current Chief Accounting Officer, was appointed interim CFO. More details here.

In a job swap at Flotek Industries, a specialty chemical business (market cap $350 million), CFO Richard Walton was appointed Chief Accounting Officer and Matthew Marietta, the Senior VP of Corporate Development and Investor Relations was appointed Executive Vice President of Finance and Corporate Development. Mr Marietta will serve as the Company’s principal financial officer. He joined the company in March 2017.

This is the second time this has happened with Mr Walton.  Back in May 2015, Rob Schmitz was promoted to the CFO position and Mr Walton became CFO Emeritus. When Mr Schmitz retired in February 2017, Mr Walton took over the CFO role again.

Meggen Rhodes resigned as the CFO of SMG Indium Resources after 6 months. No replacement was named. The company, based in the Galleria, is traded over the counter and has a market capitalization of about $7 million. The company was a cash shell until it acquired MG Cleaners, an oilfield services business in September 2017.

Connie Cook announced she will retire as the VP of Accounting of Trecora Resources, effective May 2018. She held the CFO role from January 2011 to October 2016 prior to the appointment of Sami Ahmad as CFO. Christopher Groves has been appointed as Corporate Controller in her place. He was previously the Controller at Capital Technologies.  Trecora (market cap $315 million) manufactures petrochemicals and has its head office in Sugar Land.

Sugar Land CFO resigns

Susan Ball, the CFO of Sugar Land-based refiner, CVR Energy Partners (market cap $2.7 billion) has resigned, effective April 17, 2018. In addition she has also resigned as the CFO and Treasurer of CVR Energy, the general partner of CVR Refining, LP and the general partner of CVR Partners.

No reason was given for her departure and no interim replacement has been named.

Ms Ball had been CFO & Treasurer since August 2012 and joined the company in October 2007. She had a base salary of $425,000 in 2016.

In the 2016 proxy filed last year, there were 5 executive officers named – CEO, CFO, VP of Operations, Chief Commercial Officer and General Counsel. With Ms Ball’s departure, 4 of the 5 executive officers have resigned or retired since August 2017. Only John Walter, General Counsel, the most junior in age and salary remains.

Famous businessman and investor Carl Icahn owns more than 80% of CVR Energy.

CVR made a big bet on Renewable Fuel Credits (known as renewable identification numbers or RINs).  Companies that refine fuel are required to blend biofuels into gasoline. Those that meet their obligations generate RIN credits which they can sell to smaller merchant refiners that don’t have the capacity to blend biofuels into gas. Icahn effectively made a bet that the Trump administration would scrap RINs. It hasn’t done so and the company has suffered., incurring an expense of $249 million for RINs in 2017.

In November, the US Attorney’s office for the Southern District of New York issued a subpoena to the company and Mr Icahn seeking information on the Renewable Fuel Standard and Mr Icahn’s role as an advisor to President Trump. Mr Icahn became an unpaid advisor in December 2016 and left his role in August 2017 following questions of conflicts of interest

 

 

Sugar Land company gets subpoena from the feds

CVR Energy, a refiner with its head office in Sugar Land, has received a subpoena from the US Attorney’s Office for the Southern District of New York.

CVR is controlled by Icahn Enterprises and the feds are trying to find information on whether Carl Icahn, a former adviser to President Trump, tried to influence changes to the federal government’s renewable fuel program that would directly benefit CVR Energy.

According to Bloomberg , Mr Icahn wanted the Environmental Protection Agency (EPA) to alter the way it administers the Renewable Fuel Standard, a program that requires refiners to use biofuel. Under the current structure, refiners that have relatively little or no blending infrastructure must buy compliance credits known as “renewable identification numbers” to make up for their shortages. Icahn has argued that market was “rigged” in favor of big oil companies.

Amid climbing RIN prices and compliance costs last year, Mr Icahn began pushing the EPA to relieve refiners of their obligation to fulfill the mandate, potentially shifting it to fuel blenders instead. Once Icahn was named an adviser, prices for the renewable fuel credits began a two-month decline, eventually losing almost half their value by the end of March.

The effect on CVR can be shown in the following table which shows the cost/(credit) of buying these credits by quarter.

Cost of Credit 2017 2016
Q1 ($6.4) $43.1
Q2 $105.6 $51.0
Q3 $64.3 $58.3

As the table shows, CVR got a benefit of about $60 million in Q1, but this appears to have reversed out in Q2. The feds will want to know whether any shareholder profited from the swings and whether any inside information was used.

Mr Icahn ended his role as an unpaid adviser to President Trump in August and the EPA caved to legislators from the corn states and didn’t make any changes to the program.

In its recent 10-Q filing, the company stated that it is ‘cooperating with the request and are providing information in response to the subpoena. The U.S. Attorney’s office has not made any claims or allegations against us or Mr. Icahn. We maintain a strong compliance program and, while no assurances can be made, we do not believe this inquiry will have a material impact on our business, financial condition, results of operations or cash flows’.

Sugar Land CEO resigns after activist pressure

 

Ted Owen, CEO of Sugar Land-based Team Inc (market cap $402 million) has resigned as CEO and director less than a week after activist shareholder, Engine Capital LP sent a letter demanding changes including a new CEO. The company is a provider of specialty industrial services for high pressure/temperature systems and vessels used in the refining, petrochemical and power industries.

Gary Yesavage, a current board member who joined at the start of this year, has been appointed interim CEO while an external search begins for a replacement.

Engine Capital argues that since Mr Owen took over as CEO in December 2014, he has overseen a large deterioration in shareholder value as a result of overpaying for two large acquisitions and the inability to integrate them effectively. It also argues that EBITDA margins of 5% are half that of competitors.

Team Inc acquired Qualspec (based in Torrance, CA) in July 2015 for $256 million and Furmanite (based in Houston) in November 2015 for $282 million. As a result revenues in 2016 grew by 29% or $270 million over the previous year. However the company stated in its annual report that they were unable to quantify the year-on-year revenue impact of the acquisitions.

At the end of 2013, the company decided to implement a new ERP system (Microsoft Dynamics AX). Between then and March 2017 when they went live, they spent $44.5 million on a new system. However in the recent Q2 earnings call, Greg Boane, the CFO, admitted that they were only 70% implemented across North America (which accounts for 85% of total revenues) and that they are still working through implementation issues as it pertains to the two acquired companies.

Prior to becoming CEO, Mr Owens was the company’s CFO. The press release didn’t discuss the terms of Mr Owen’s departure and no filing has yet been made with the SEC. However, according to the company’s proxy, Mr Owens is eligible to 18 months’ severance ($862,500) upon involuntary termination by the company.

My take: Unless you are a large company with an established track record in acquisitions (i.e proven dedicated teams and processes for integration), making two large acquisitions within rapid succession is a recipe for disaster. That is compounded by the fact that the Furmanite corporate office always had a poor reputation in Houston. I am also amazed at the number of companies that believe implementing a new ERP system by itself will solve all their problems. For an implementation to succeed, you have to address the underlying operational processes and procedures. Without standardization ahead of time, any new ERP system is doomed to major cost and time overruns.

UPDATE 9/19/2017: Team, Inc has now filed the 8-K detailing the separation agreement. Mr Owen will remain an employee until the end of the year. He will then receive a severance payment of $985,000. Half of the severance will be paid in January, the rest will be paid over 36 months. In addition Mr Owen will be paid $50,000 a month as a consultant from Jan 2018 to July 2018. Mr Owen’s 24,054 restricted stock options will continue to vest until June 2018. These are worth over $330,000 at today’s stock price.

The new interim CEO will also be paid $50,000 a month.

Team, Inc announces leadership changes

Recent Houston CFO moves

Stewart Information Services (market cap $850 million, a title company based in the Galleria area) has appointed David Hisey as its new CFO, Secretary and Treasurer, replacing Allen Berryman who announced his retirement earlier in the year. Mr Hisey was previously acting CFO for Prospect Mortgage, CFO for Nationstar Mortgage and CFO for Fannie Mae. He will receive a base salary of $450,000.

 

Energy XXI Gulf Coast Inc appointed Tiffany (“T.J”) Thom as its CFO, replacing Hugh Menown who had been interim CFO. The company is an E&P producer that operates in Texas and Louisiana and offshore (shallow water) Gulf of Mexico. It has its head office in downtown Houston and a market cap of $360 million.

Most recently, Ms Thom has been CFO of KLR Energy Acquisition Corp, a blank check co that recently merged with Tema Oil & Gas to form Rosehill Resources. She also worked at EPL Oil & Gas for many years which was acquired by Energy XII’s predecessor company in June 2014. The debt that Energy XXI took on in that acquisition and the poor job they did in integrating the two businesses were two of the main causes of Energy XXI entering bankruptcy in April 2016.

Ms Thom’s appointment is only for six months as earlier this year the company engaged Morgan Stanley to assist with strategic alternatives. She will be paid $60,000 a month.

 

NextDecade Corp (market cap $1 billion, a LNG developer based in The Woodlands) has appointed Eric Garcia as its Chief Accounting Officer. He was previously an Audit Managing Director with KPMG.

American National Insurance Co (market cap $3 billion, based in Galveston) announced that CFO & Treasurer John Dunn has left the company with immediate effect.  Timothy Walsh, who joined the company in 1995 was promoted to the CFO position.

Earthstone Energy (market cap $200 million, an E&P company based in The Woodlands) has appointed Mark Lumpkin as its new CFO. He joins from RBC Capital Markets.

Cardtronics (market cap $1.2 billion, based in West Houston) has announced that CFO & COO Edward West has been appointed as the new CEO, effective 1 Jan 2018, replacing Steven Rathgaber, who is retiring. A search for a new CFO is underway.

Paragon Offshore Ltd, which recently merged from bankruptcy has announced a new management team. Jay Swent, previously Chairman of the Board, has been named President and CEO. Lee Ahlstrom has been appointed CFO, having served in that role, on an interim basis, since November 2016. Paragon is a provider of offshore drilling rigs. Technically, it is has its head office in the Cayman Islands, but it has its operational head office in West Houston.

Two companies in The Woodlands now have public listings

Two companies based in The Woodlands now have public listings, one via an Initial Public Offering (IPO), one via a reverse takeover.

Venator Materials, the paint-pigment maker owned by Huntsman Corporation (also based in The Woodlands) raised $454 million in its IPO. Huntsman sold a 21% stake for $20 each, at the bottom end of the $20-$22 marketed price range. That gives the company a market capitalization of $2.1 billion, the 10th largest IPO in the US this year.

In 2016 Venator had revenues of $2.3 billion, EBITDA of $140 million and a net loss of $77 million. The company will use the proceeds of the IPO and the issuance of $750 million of new debt to pay inter-company debt owed to Huntsman.

 

NextDecade, a private-equity backed company based in The Woodlands completed its reverse takeover of Harmony Merger Corp, a special purpose acquisition company, based in New York. The transaction was valued at $1 billion.

In May 2016 NextDecade filed an application with the US Federal Energy Regulation Commission (FERC) to construct an LNG export plant in Brownsville, TX. It expects to begin construction in 2018 and generate revenues in 2022. The company also intends to build a 137-mile long pipeline from the Agua Dulce gas hub (west of Corpus Christi) to the terminal in Brownsville.

The company hasn’t signed any binding contracts with customers yet. Construction won’t proceed until they make significant progress on this.