Category Archives: E&P

Two Houston-area companies get taken over

The number of Houston-area public companies fell by two today as APA completed its acquisition of Callon Petroleum while Kodiak Gas Services closed its deal to buy CSI Compressco. Both acquirers are also based in the Houston-area.



Background to the APA deal

APA (formerly known as Apache) announced its deal for Callon in early January.  The all-stock transaction valued the target at $4.5 billion. 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.

Callon first had informal merger discussions back in November 2021 with an unidentified publicly-traded E&P operator and continued to have such discussions with various other parties throughout 2022 and 2023.

APA first came into the picture in September 2023 when it engaged financial advisors to review potential transactions. The first contact between the CEOs occurred in October. In the end, APA were competing with another unidentified publicly-traded E&P operator before APA sweetened its proposal on December 29.

SEC filing – 8-K – Completion of Callon acquisition

Background to the Kodiak deal

Kodiak’s $854 million all-stock transaction was announced just before Christmas. 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).

Ever since Spartan took over, they have been looking to do a deal that would reduce leverage and increase CSI’s scale. It held informal discussions with various parties from January 2021 until September 2023. Kodiak’s CEO initially contacted the CEO of CSI in May 2023 with a view to Kodiak merging into CSI as a pathway for Kodiak to go public.  Instead, Kodiak decided to perform a standalone IPO which it completed in July 2023.

Discussions between the parties paused while Kodiak went through its first quarter as a public company, but began again in September 2023. The deal wasn’t announced until December primarily because the advisors took awhile to figure out the most efficient structure to minimize the tax issues surrounding the CSI partnership.

SEC filing – 8-K – Completion of CSI acquisition

You can see the complete list of Houston-area public companies here.

 

 

Marathon Oil appoints new Chief Financial Officer

Marathon Oil, based in west Houston, has appointed Rob White as its new CFO, effective May 1, 2024. He replaces Dane Whitehead, who told the company he intends to retire on July 1.



Marathon Oil was originally part of Standard Oil, controlled by John Rockefeller.  In 1911, the US Supreme Court ruled that Standard Oil be dissolved and split into 34 companies. One of those companies was The Ohio Oil Company, which was later renamed as Marathon Oil.

In 2011, the refining and marketing assets were spun off into a separate entity called Marathon Petroleum (MPC). That company is based in Ohio.

Marathon has a market cap of $14 billion. It has a relatively small presence in the Permian Basin (12% of revenues). Most of its production comes from the Eagle Ford (40%) and Bakken (35%) basins. The Eagle Ford Basin, in particular, produces relatively more gas than oil. As a result of these factors, Marathon trades at a lower multiple than its peers.

Mr. White joined the company in 1991 and has served as the VP, Controller and Chief Accounting Officer since March 2022. He will receive a base salary of $500,000.

Zach Dailey has been promoted to VP, Controller and Chief Accounting Officer, to replace Mr. White. Mr. Daily joined Marathon in 2015 and is currently the VP, Internal Audit. Mr. White also held that position before becoming the CAO. Prior to joining Marathon, Mr. Dailey worked at Linn Energy, Berry Petroleum and Morgan Keegan. Mr. Dailey will receive a base salary of $350,000.

Mr. Whitehead, 62, joined Marathon as its CFO in March 2017. Prior to that, he was CFO of EP Energy Corp for 5 years.

SEC filing – 8-K – Marathon CFO

Sable Offshore completes deal for California offshore field

Flame Acquisition Corp, a SPAC (Special Purpose Acquisition Corp) has completed the acquisition of assets from ExxonMobil and has been renamed Sable Offshore.

Sable has bought the Santa Ynex oilfield that consists of 3 offshore platforms located in federal waters, 12 miles off the coast near Santa Barbara and an onshore processing facility at Las Flores Canyon.



The offshore field had to stop production in 2015. A corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American were the owners of the pipeline at the time.

The deal was originally announced in November 2022. At that time, Sable agreed to pay ExxonMobil $643 million. Most of this was being financed by a $625 million loan from ExxonMobil. The loan had a 10% interest rate. It would not be repaid until the earlier of January 2027 or 180 days after production is restarted. Start of production was targeted for January 2024.

Under the revised terms of the loan, Sable has now agreed to pay Exxon $989 million. This includes $140 million of accrued interest and $187 million of property expenses incurred by ExxonMobil since the deal was announced. The loan from ExxonMobil has increased to $764 million (original $625 million plus accrued interest).

Sable now expects costs to restart production to be $197 million, up from the $172 million at the time of the original announcement. The company is now targeting production to start in Q3 2024.

If production does not restart by January 2026, ExxonMobil has the right to take back the assets.

Management

The company is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable Permian. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

Flame completed its $287 million IPO in February 2021. Originally, the company had until March 2023 to complete or deal or liquidate. As part the approvals to get extensions to complete the deal by February 2024, shareholders holding $230 million of stock exercised their right to redemption.

8-K – Sable Offshore completes deal

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

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

Earthstone Energy to be acquired for $4.5 billion

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

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

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

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

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