Category Archives: E&P

Earthstone Energy to be acquired for $4.5 billion

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Earthstone Energy, based in The Woodlands, has agreed to be acquired by Permian Resources in an all-stock transaction worth $4.5 billion. The executives of PR will run the combined business from its headquarters in Midland. Earthstone’s shareholders will get 27% of the combined business.

[UPDATE – 11-01-23 The deal has been completed.]



Both companies operate exclusively in the Permian Basin. Combined they will have 403,000 net acres and run 11 drilling rigs. They will be the sixth largest producer in the Permian.

Earthstone was formed in 1969 as Basic Earth Science Systems. Initially, it was based in Denver and operated in Montana and North Dakota of the Bakken. The company changed its name to Earthstone Energy in 2010 and went public the following year.

In December 2014, Oak Valley Resources, a Houston-based company completed a reverse takeover of Earthstone for $138 million.  Oak Valley founder and CEO Frank Lodzinski is now the Chairman of Earthstone.

The history of Permian Resources starts with Colgate Energy Partners. It was formed in 2015 with backing from private equity firms Pearl Energy Investments and NGP. Colgate went public in September 2022, via a merger with Centennial Resource Development. The combined company was renamed Permian Resources.  Centennial was originally taken public in 2016 by a SPAC founded by Mark Papa, who built EOG Resources and was backed by Riverstone.

In June, Earthstone agreed to buy a two-thirds interest in Novo Oil and Gas for $1 billion. Novo is a Delaware Basin E&P operator, backed by EnCap Investments. In 2022, it made three separate acquisitions for $1.5 billion.

Permian is targeting $175 million of cost synergies, mainly through lower drilling costs. The savings include $30 million for general and administrative costs or 50% of Earthstone’s current cash G&A costs.

Earthstone compensation

I tried to determine what payouts would be due to the senior management of Earthstone in the event they left as a result of the takeover. Unfortunately, unlike most of their peers, the company didn’t publish a summary compensation table for that event. However, CEO Robert Anderson would get 3x base salary and bonus (about $3.9 million), while other executives would get 2x (about $2.1 million each).

Interestingly, most of the unvested stock held by the Earthstone management vests (or has vested) this year. That’s worth around $15 million for Mr. Anderson and around $8 million or so for each of the other executives.

The deal is expected to close by the end of 2023.

SEC filing – Investor Presentation

 

Oxy promotes Sunil Mathew to be its new CFO

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Occidental Petroleum (‘Oxy’) has promoted Sunil Mathew to be its new CFO. He replaces Rob Peterson, who has been appointed Executive Vice President of Occidental Chemical (‘OxyChem’).

Oxy has its head office in Greenway Plaza in Houston and has a market capitalization of $56 billion.



Mr. Mathew joined the company in 2004 in Qatar and moved to the US three years later. He is currently the VP of Strategic Planning, Analysis and Business Development. He was promoted to this role in April 2020, the same time that Mr. Peterson was appointed CFO. Mr. Mathew holds  a Bachelors degree in Electronics Engineering and a MBA.

Mr. Peterson joined OxyChem in 1996 and served as its President from 2014-2017. He has a Bachelor’s degree in Mechanical Engineering and a MBA.

Oxy plans to build 100 direct-air carbon capture plants by 2035. In his new role, Mr. Peterson will be in charge of operational readiness for Oxy’s first such plant, which is located in West Texas.

At the time of their appointments in April 2020, Oxy was under a lot of stress. It had acquired Anadarko for $36 billion in August 2019. But the debt it took on and the collapse in oil prices due to Covid, led to activist investor, Carl Icahn, calling it ‘one of the worst disasters in financial history’. Mr. Peterson was appointed CFO a week after Oxy and Mr. Icahn reached a truce.

How times have changed. Oxy was the best performing stock in the S&P 500 in 2022 and it has halved its long-term debt from $39 billion to $19 billion.  Last week, the stock of Icahn Enterprises plunged 30% after the company disclosed that the SEC was investigating the company following allegations by a short seller that the company was inflating the value of its investments.

SEC filing – 8-K Oxy Mathew CFO

Houston E&P CFO leaves after less than seven months

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Kristen McWatters, CFO of Battalion Oil and Gas, has resigned less than seven months after being appointed. She handed in her resignation on August 2 and left two days later. Her duties will be covered by Matt Steele, the CEO and the other members of the finance department.



The company is based in NW Houston and has working interests in approximately 40,000 net acres in the Delaware Basin. Its market capitalization is currently $136 million. It also has $230 million of debt that carries an interest rate of over 12%.

The company was formerly known as Halcon Resources. It went into bankruptcy in August 2019. The company emerged in October 2019, having eliminated over $750 million of debt. In return, the debt holders got 91% of the newly reorganized equity. It changed its name to Battalion in January 2020.

In her resignation letter, Ms. McWatters did not give a reason for her departure, though she did say it was not the result of any disagreement with the Company on any matter relating to how the Company has operated, its policies or its practices, including its controls or financial related matters.

The SEC filing made no mention whether severance would be paid. If it were, it would be $150,000 or six months’ severance.

Ms. McWatters was appointed to the role on January 22 and she reported to then-CEO Rich Little.  About six weeks later, Mr. Little was replaced as CEO, leaving with a $1 million severance. The new CEO, Mr. Steele, was appointed with a lower base salary than Ms. McWatters.

SEC filing – 8-K – Battalion Oil CFO resignation

ExxonMobil officially moves its head office to Spring, TX

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Gary Coronado/Houston Chronicle

ExxonMobil has officially changed the location of its headquarters from Irving to Spring with an 8-K filing with the SEC on July 5. Exxon has a market capitalization of $417 billion and therefore becomes the largest company in the Houston-area, as measured by market cap. Its market cap is over three times the next largest (ConocoPhillips at $125 billion).



The company announced back in January 2022 that it would be relocating its corporate offices to its campus in Spring sometime in 2023.

Exxon moved its head office from Manhattan to Irving in 1989. The campus in Irving, built in 1996, was 365,000 square feet and housed 250 employees, who were offered relocation packages. In December 2022, the company sold the offices and 290 acres of land (of which 200 were undeveloped) to an Austin-based developer, Capital Commercial Investments.

Jones Lang LaSalle, who brokered the sale, have been hired to market the office building to companies looking to relocate to the Dallas-Fort Worth area. The development plans of Capital Commercial for the rest of the property are not yet known.

Construction on the campus in Spring began in 2011 when oil was over $100 a barrel. It was completed in 2015, when oil was below $60. It is based on 385 acres and officially houses 10,000 employees. The campus is currently appraised at $990 million.

As a side note, when a company changes its corporate office, it doesn’t have to file a document with the SEC. It just starts using the new address with its next filing. The Exxon filing happened to be a Regulation FD disclosure on upcoming earnings considerations.

W&T Offshore appoints new CFO

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W&T Offshore has appointed Sameer Parasnis as its new CFO, replacing Janet Yang, who left last month as she was relocating to another city for family reasons.

The company has its head office in the Galleria area of Houston. It holds working interests in 47 offshore fields in the Gulf of Mexico. It has a market capitalization of $540 million.

Mr. Parasnis joins from Stifel investment bank where he was Managing Director of the Energy and Natural Resources team. He joined Stifel in 2016, then spent a year at Texas Pacific Land Trust, before rejoining Stifel in the same role in 2020. He started his career at Reliance Industries in India before joining Citigroup in consumer banking. He transitioned to investment banking with Credit Suisse in Houston.

Mr. Parasnis will receive a base salary of $450,000. Target annual cash bonus will be 85% of base and target long-term incentive compensation will be 300% of base.

SEC filing – W&T Offshore new CFO

 

 

Coterra hires CFO from another Houston company

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Coterra Energy (market cap $19 billion) has appointed Shane Young as its new CFO. He replaces Scott Schroeder, who is retiring, effective September 30, 2023. Mr. Young joins from another Houston-based E&P company, Talos Energy (market cap $2 billion). In turn, Talos has promoted Sergio Maiworm from VP Finance, Investor relations and Treasurer to be its new CFO.



Coterra was formed from the merger of Cabot Oil and Gas and Cimarex in October 2021. Mr. Schroeder joined Cabot in 1995 as Assistant Treasurer and became CFO in 2014.

Mr. Young will a base salary of $620,000. He also receives a cash bonus of $100,000, a one-time long-term restricted stock grant valued at $2 million and a one-time long-term performance grant of $2 million.

Mr. Young had been CFO at Talos since May 2019, though he also had a spell as CFO between December 2014 and September 2015. He left after his first stint to join Cobalt International Energy and then Sheridan Production. He started his career as an investment banker with Morgan Stanley and Goldman Sachs.

Mr. Maiworm joined Talos in April 2018 as its Director of Finance and Investor Relations and added the Treasurer role when Mr. Young rejoined in May 2019. Mr. Maiworm has also worked as an investment banker (with Deutsche Bank). He has also worked at Shell, Transocean and ION Geophysical. He started his career at Deloitte and Touche.

Mr. Maiworm will receive a base salary of $425,000. He will also receive restricted stock and performance stock worth a total of $350,000 that will vest over the next three years.

Coterra Energy – 8-K filing – new CFO

Talos Energy – 8-K filing – new CFO

 

 

Former McDermott CEO and CFO settle with the SEC

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David Dickson and Stuart Spence, former CEO and CFO of McDermott International respectively, have settled charges with the Securities and Exchange Commission without admitting or denying responsibility.

The charges pertain to the project cost overruns on the Cameron LNG project in 2018. In short, the SEC alleges that Dickson and Spence issued misleadingly optimistic information in its Q2 2018 earnings release regarding the project cost and schedule.



Dickson and Spence approved a $490 million loss estimate at completion to be used in its Q2 2018 financial results, even though the initial draft estimated loss was $1.1 billion.

The Cameron LNG project was actually awarded to Chicago Bridge and Iron (‘CB&I’) and Chiyoda, its joint venture partner, in 2014 as a $6 billion fixed price contract  In December 2017, McDermott and CB&I agreed to combine in a $6 billion transaction. The deal closed in May 2018.

According to the SEC, in Q1 2018, prior to the merger being completed, the project cost team within CB&I initially forecast a loss of $438 million on the project. However this was challenged by CB&I management and the loss was reduced to $160 million, which was the number used in CB&I’s Q1 results, its last quarterly results as a public company.

In late June 2018, the project cost team in CB&I emailed Dickson and Spence a new forecast on the project that showed projected losses of $1.25 billion, an increase of over $1 billion in two months.

Dickson and Spence expressed skepticism with the loss forecast as they sought to use a less costly execution by reducing the number of employees and contractors on the project from 11,400 to around 9,000 or so. In addition, the JV partner also expressed doubts about the size of the forecast loss.

An executive at CB&I came up with an alternative loss forecast of $490 million that was developed outside the normal project cost controls and procedures. The company also prepared various scenarios that should losses would range from $702 million to $1.7 billion. Despite this, Dickson and Spence signed off on the $490 million loss to be used in its Q2 numbers. In the earnings release, they didn’t disclose that their revised execution plan increased the risk that the project would be delayed.

Dickson agreed to pay a penalty of $100,000 and Spence $40,000.

McDermott ended up booking losses of $1 billion on the project in 2018 and 2019. The company filed for bankruptcy in February 2020. Spence resigned as CFO in November 2019 while Dickson stepped down as CEO in June 2021.

McDermott, Dickson and Spence, along with former CB&I CEO Patrick Mullen, are still being sued in the Southern District of Texas in a class action lawsuit by investors (led by the Public Employees’ Retirement System of Mississippi). That case appears to be in the discovery stage.

https://www.sec.gov/enforce/34-97740-s

Small E&P company adds CFO

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US Energy (market cap $37 million) has appointed Mark Zajac as its new CFO. Ryan Smith, who had been CFO since May 2017, was appointed CEO in December 2019. He had been combining the two roles since then.



The company has its head office just west of the Galleria area. Historically it had interests in the Williston Basin, North Dakota and South Texas. However, in 2022 it completed a deal for about $100 million where the sellers sold their properties in the Permian and the Mid-Continent in return for an 80% equity stake in US Energy. The company has since made a couple of smaller bolt-on acquisitions.

Mr. Zajac retired from KPMG in February 2021 where he was a Partner and National Audit Industry Leader for Oil and Gas. He will receive a base salary of $255,000.

SEC filing – 8-K US Energy CFO

Amplify Energy appoints new CFO

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Amplify Energy has appointed Jim Frew as its new CFO. He replaces Jason McGlynn who resigned last month to become the CFO at Monarch Bioenergy.



Amplify Energy was formed in 2019 from the all-stock merger of Tulsa-based Midstates Petroleum and what was Memorial Production Partners. It has its head office in downtown Houston.

The company primarily operates mature wells in Oklahoma and East Texas, though last week it announced that it had received the required regulatory approvals to restart its operations in offshore Southern California. See my post last month for the background on this.

Previously, Mr. Frew worked for Linn Energy between 2011 and 2018 in Business Development and as VP of Marketing and Midstream. He was the CFO of Riviera Resources, which was spun out of Linn, from August 2018 to October 2020. Linn Energy grew rapidly by acquisitions between 2007 and 2014 before filing for bankruptcy in 2016 with debts of over $8 billion. Riviera ended up selling all its assets and liquidating itself (outside bankruptcy) in 2020.

Mr. Frew and Martyn Willsher, the Amplify CEO, worked together at JM Huber earlier in their careers. Most recently, Mr. Frew was a Partner in Sentinel Petroleum, a privately-held operator of wells in the Western Anadarko Basin of Oklahoma.

Last month, Amplify appointed Dan Furbee as its new COO. He, too, was a partner in Sentinel Petroleum and also worked at Linn Energy and Riviera Resources.

Mr. Frew will receive a base salary of $364,000

SEC filing – Amplify Energy – new CFO

CFO of W&T Offshore to leave

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Janet Yang, CFO of W&T Offshore, has resigned, effective May 11, 2023 as she is relocating to another city for family reasons. Trey Hartman, currently Chief Accounting Officer, has been appointed interim CFO. The company will conduct a permanent search for her successor.



W&T Offshore holds working interests in 47 offshore fields in the Gulf of Mexico. It has a market capitalization of $741 million.

Ms. Yang joined the company in December 2008 as a Finance Manager. She was appointed Acting CFO in August 2018. Her position became permanent three months later.

Mr. Hartman joined the company in April 2021 and was promoted to his current role in May 2022. He has previously been the Controller at Sheridan Production and Halcon Resources (that company appointed a new CEO this week) and Assistant Controller at Petrohawk (before and after its takeover by BHP).

SEC filing – WTI CFO departure