Category Archives: E&P

Small E&P company adds CFO

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

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

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

Battalion Oil appoints new CEO

Battalion Oil has appointed Matt Steele as its new CEO, replacing Rich Little who leaves after nearly four years in the role.



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 $108 million. Unfortunately, it also has $182 million of net debt that carries an interest rate of over 12.5%.

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.

The new CEO, Mr. Steele, founded Bruin E&P Partners in 2015. The company bought Halcon’s Bakken assets in 2017 for $1.4 billion. It filed for Chapter 11 bankruptcy in July 2020. Mr. Steele left when the company was sold to Enerplus in March 2021 for $465 million.

Mr. Steele will receive a base salary of $250,000, considerably lower than his predecessor ($500,000) and new CFO, Kristen McWatters, ($300,000) who joined in January. He will also receive the opportunity to earn unspecified incentive compensation bonuses.

Mr. Little will receive a severance payment of $1 million.

SEC filing – 8-K Battalion Oil CEO

CFO at Amplify Energy resigns

Luca Pacioli – the father of accounting

Jason McGlynn has resigned as CFO of Amplify Energy, effective March 17, 2023. He had been the CFO for just over two years, following the promotion of Martin Willsher from CFO to CEO. The company made no mention of its plans for a replacement.



[According to LinkedIn, Mr. McGlynn is now the CFO at Monarch Bioenergy. The company is a PE-backed joint venture between Smithfield Foods and Roeslein Alternative Energy that converts methane emissions from hog manure into natural gas].

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. Mr. McGlynn joined Midstates in 2013 as its VP of Strategic Planning, Investor Relations and Treasury.

Although the business mainly focuses on mature assets, mainly in Oklahoma and East Texas/North Louisiana, it has been in the news in the past couple of years for a pipeline it operated in offshore California that ruptured in October 2021.

The rupture occurred four miles offshore from Newport Beach and caused 588 barrels of oil to leak. A Coast Guard investigation concluded that two ships, the MSC Danit and COSCO Beijing, had sheltered in San Pedro Bay, ahead of a January 2021 storm. The winds and the waves from the storm caused the ships’ anchors to drag across the seafloor and damage the pipeline.

Last week, the companies that operated the ships, agreed to pay Amplify $96.5 million to settle all claims. During 2022, the company settled claims against it by;

  • the Federal Government ($7.1 million fine and reimbursement of $5.8 million of costs)
  • State of California ($4.9 million fine)
  • a Class action lawsuit ($50 million settlement)

In total, Amplify estimates that it has incurred total costs of $120 million to $140 million, though it has received $87 million (through September 2022) from its insurance carriers. In addition the company has also received $46 million insurance proceeds related to the approved loss of production income.

The company is now in the process of repairing the pipeline. Before it can resume operations, it has to comply with requirements of the corrective action order of The Pipeline and Hazardous Materials Safety Administration (PHMSA), which is part of the US Department of Transportation.

SEC filing – McGlynn resignation

 

Houston E&P operator to be acquired for $2.5 billion

Ranger Oil, based in Houston, has agreed to be acquired by Calgary-based Baytex Energy for $2.5 billion or $44.36 per share. The price includes $650 million of debt.



Baytex has most of its E&P operations in Canada but it does have a 25% working interest in 78,000 acres in the Eagle Ford basin in South Texas. Ranger is a pure-play Eagle Ford operator with a gross acreage of 189,000 acres.

A third of the price price will be paid in cash, the rest in stock. Baytex shareholders will end up owning about 63% of the combined business and Ranger shareholders 37%.

The Baytex management team, led by CEO Eric Greager, who only joined the company in October, will run the combined business. However, Baytex intends to add one senior operational leader to the leadership team and retain the Ranger teams in Houston.

Ranger was formerly known as Penn Virginia Corporation. The company entered bankruptcy proceedings in 2016 and eliminated $1.1 billion in debt (converted to equity). During Chapter 11, it moved its head office from Philadelphia to Houston.

In October 2018, Denbury Resources announced it would buy Penn Virginia for $1.7 billion, including $400 million in cash. The deal collapsed in March 2019, as the then major shareholders of Penn Virginia thought the deal undervalued the company.

Juniper Capital invested $188 million in Penn Virginia in November 2020 and became the largest shareholder with a 60% stake (now down to 54%). The following year the company bought Lonestar Resources for $370 million and renamed the combined company as Ranger Oil.

In November 2022, Reuters reported the Ranger had put itself up for sale following large deals for other operators in the Eagle Ford.

The deal is expected to close in Q2 2023.

Baytex Investor Presentation – Ranger

Battalion Oil appoints new CFO

Battalion Oil has appointed Kristen McWatters as its new CFO, effective January 26, 2023. She replaces Kevin Andrews, who has agreed to stay on until April 13 in an advisory role. Mr. Andrews had been the CFO since August 2020.

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 $193 million.



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.

Ms. McWatters was previously the CFO at Goodrich Petroleum, a similar E&P company to Battalion. Goodrich went into Chapter 11 in 2016, she joined as Assistant Controller in 2017. The company regained its listing in April 2017 and Ms. McWatters became CFO in December 2020. She left after Goodrich was taken private by Encap Investments in a $480 million deal.

For the past few months, Ms. McWatters has been interim Chief Accounting Officer at Perella Weinberg Partners, a publicly-traded investment bank. Perella, through its subsidiary, TPH, happened to advise Goodrich on its sale transaction.

Ms. McWatters will receive a base salary of $300,000. No severance arrangements were disclosed for Mr. Andrews in the filing announcing Ms. McWatters’ appointment. According to the last proxy, Mr. Andrews is entitled to a payment of $500,000 if his employment is terminated without cause.

SEC filing 8-K Battalion CFO

 

 

 

 

Black Stone Minerals CFO to depart

Jeff Wood, the President and CFO of Black Stone Minerals (BSM), is leaving the company at the end of February. Evan Kiefer, currently VP, Finance and Investor Relations, will become interim CFO upon Mr. Wood’s departure.

BSM has its head office in downtown Houston and is one of the largest owners and managers of oil and gas mineral rights in the USA. It has a market capitalization of $3.5 billion.

Mr. Wood joined the company in 2016 and added the additional duties of President two years later. It is not clear why Mr. Wood is leaving. The company has been performing well. It tends to hedge a big percentage of its production. That makes sense as it is primarily held as a yield stock, but does come in for occasional criticism for leaving money on the table when oil and gas prices rise rapidly, like they did earlier in 2022.

The 8-K filed with the SEC states that the company and Mr. Wood will be negotiating a severance agreement. That’s interesting because Mr. Wood already has a severance agreement in place. That would pay him 1x base salary ($358,000), plus target annual bonus (100%) plus pro-rata bonus for the year of termination. Restricted stock would also vest under the current agreement.

Mr. Kiefer joined the company in October 2013 as an analyst and was promoted to VP two years ago.

SEC 8-K filing – CFO departure

Coterra to pay $16 million to improve water quality

PHOTO: ALEX BRANDON/ASSOCIATED PRESS

Houston-based Coterra Energy has agreed to pay $16.29 million to build a public water system for the township of Dimock in rural Pennsylvania. The company pleaded no contest to charges that it polluted residents’ water wells with methane and other contaminants. It did agree to pay a fine of $444,000 to the Pennsylvania Department of Environmental Protection.

By pleading no-contest, a defendant doesn’t admit guilt but accepts the punishment given by the court. A guilty plea could have been used as an admission of liability in any related civil cases, whereas a no-contest plea has no bearing in civil cases.



The new water treatment plant will take about 3 years to build. Coterra also agreed to pay the water bills for the next 75 years for impacted homeowners (about 20 in all).

Coterra was formed a year ago from the merger of Cabot Oil & Gas (based in Houston) and Cimarex Energy (based in Denver).

The Pennsylvania Attorney General (and soon-to-be Governor), Josh Shapiro charged Cabot in June 2020 following a grand jury investigation. Cabot began drilling in and around Dimock in 2006, and according to testimony given at the investigation, residents’ water soon turned black or orange and was often bubbling. A water well even exploded in January 2009.

The issue first gained national prominence In 2010 when Gasland, an HBO documentary, showed residents of Dimock lighting their tap water on fire.

Experts at the grand jury investigation testified that they believed the wellbore integrity was compromised by poor cementation in some of the wells that were drilled, allowing methane and other contaminants to escape into the groundwater.

Cabot had always denied the allegations, stating that the area around Dimock has a long history of methane in surface and ground water. The grand jury heard testimony that Cabot never tested for methane in its pre-drill sampling and so did not establish a methane baseline for what is known as “Swamp gas”. Other experts showed testified that the contamination far exceeded ‘normal’ local levels.

Cabot made a confidential settlement with thirty plus Dimock families in 2012 following the filing of a federal lawsuit by the families.  It settled with two more families in 2017.

In its most recent quarterly report filed on November 4, Coterra stated that it is “vigorously defending itself against such charges; however, the proceedings could result in fines or penalties against the Company. At this time, it is not possible to estimate the amount of any fines or penalties, or the range of such fines or penalties, that are reasonably possible in this case”.

The company had operating profits of $1.5 billion in the third quarter, so a settlement of $16 million is not material.

The same day as the quarterly earnings announcement, the company also stated that CEO Thomas Jorden would become Executive Chairman as well, effective January 2023. He replaces Dan Dingles. Pre-merger, Mr. Jorden was the Cimarex CEO and Mr. Dingles was the Cabot CEO. That succession plan was put in place at the time of the merger.

Mr. Dingles, who was appointed CEO of Cabot in 2002, will receive a $9.6 million payment, once he leaves, as a result of the change-in-control.

https://www.attorneygeneral.gov/taking-action/ag-shapiro-announces-plea-public-water-line-construction-for-victims-of-cabot-oil-gas/

 

 

Houston SPAC buys California assets from Exxon

Flame Acquisition Corp, a Houston-based SPAC (Special Purpose Acquisition Corp) has agreed to buy the Santa Ynez oilfield from ExxonMobil. The business will be renamed Sable Offshore. (Technically, Exxon are selling the business to Sable Offshore, a company set up by Mr. Flores last year. In turn, Flame are buying Sable Offshore).



Flame completed its $250 million IPO in February 2021. 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.

The Santa Ynez oilfield 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 after a corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American (a separate company to Plains Exploration and Production)  were the owners of the pipeline at the time. In 2020, Plains were fined $60 million in relation to the spill.

Last month, ExxonMobil bought the pipeline from Plains and has now agreed to sell it to Sable, who will be responsible for repairing and maintaining the pipeline.

The assets are being acquired for $643 million. However, most of this is being financed by Exxon who are issuing a $623 million loan to Sable. The loan has a 10% interest rate and will not be repaid until the earlier of 5 years or 180 days after production is restarted. I

Sable is targeting a production start date for the Santa Ynez field of January 2024 and is estimating it will cost $172 million to repair the pipeline and get the offshore platforms ready. That money will effectively come from the cash that Flame raised in its IPO. Sable is also looking to raise a further $300 million in equity to provide it with cash reserves in case of delays.

Sable believes that they can repair the pipeline quickly by following the processes outlined in the the consent degree that Plains agreed to in its March 2020 settlement. It’s not clear to me how or whether the Californian state authorities can object or delay the repairs.

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

[EDITED 11-10-22 to make clear that Plains Exploration and Production, the former employer of Mr. Flores, is a separate company from Plains All-American).

Flame – Investor Presentation