Category Archives: E&P

Houston E&P SPAC goes public in $150 million IPO

CENAQ Energy Corp, a SPAC (otherwise known as a blank check company) based in the Galleria area, has completed its $150 million Initial Public Offering. It intends to buy E&P assets in North America.



Chairman John Connally is a veteran of many E&P companies such as Nuevo Energy (acquired by Plains Exploration for $945 million in 2004). Interestingly, he is also the Chairman of  Texas South Energy. This is an E&P company that trades over-the-counter and is based in the same office suite as CENAQ. In July, the Securities and Exchange Commission (SEC) revoked the registration of Texas South as the company hadn’t filed any quarterly or annual reports since March 31, 2019.

As an aside, one of the reasons for the delay was because LBB Associates was the auditor to Texas South. They had to resign in early 2020 as the majority partner, Carlos Lopez, was barred by the SEC for professional misconduct in a case unrelated to Texas South.

The CEO of CENAQ is Russell Porter. He spent 18 years at Gastar Energy. He resigned as CEO in February 2018 and received a severance payment of $3.5 million. In November 2018, Gastar filed for bankruptcy with $342 million of assets and $454 million of debt. It exited Chapter 11 three months later, having converted $350 million of debt into equity. The company was later sold to Chisholm Oil and Gas, based in Tulsa.

Mike Mayell is the CFO of CENAQ. He also serves as the CEO of Texas South. Mr. Mayell co-founded Meridian Resource and was its COO until 2008. Meridian was sold to Alta Mesa in 2009 for $27 million.

Houston area SPACS

CENAQ becomes the 13th blank check company based in the Houston area. You can see the complete list of Houston-area public companies here.

I’ve taken a couple of the blank check companies off the list recently as they have taken businesses public.

NewHold Investment has now taken Evolv Technologies public in a $1.3 billion transaction. Evolv is a security screening company based in Boston.

Landcadia Holdings III has now taken The Hillman Group public in a $2.6 billion transaction. Hillman, based in Cincinnati, distributes fasteners and work gear to Lowe’s, Home Depot and Walmart.

SEC filing – CENAQ IPO

ExxonMobil appoints outsider as its new CFO

ExxonMobil has appointed Kathryn Mikells as its new CFO. She replaces Andrew Swiger, who has been the CFO since 2013. Mr Swiger is retiring in September after a 43-year career with the company. Exxon has a mandatory retirement age of 65.



The company has its corporate office in Irving, TX , though it has a large presence in Houston. It is unusual for Exxon to appoint an outsider for a senior executive position but it has been under pressure from activist shareholders recently (more on that below). Ms. Mikells is the first woman appointed to the Executive leadership team at Exxon.

Ms. Mikells has a diverse background. For the past four plus years, she has been based in London as the CFO of Diageo PLC, the drinks manufacturer. Ms. Mikells announced her resignation in January as she planned to return to the US.

Prior to that, she was CFO at Xerox (2013-2015), ADT (2012-2013) and Nalco, a chemicals company (2010-2011).  She worked at United Airlines in Chicago for 16 years, where she ended up as CFO. When United merged with Houston-based Continental Airlines in 2010 she lost out on the CFO position of the combined group to Continental CFO Zane Rowe.

Ms. Mikells will receive a base salary of $1.1 million.

Activist Investor

In June, an activist investor, Engine No 1, won three seats on the Board of Exxon, despite the objections of the company and its CEO, Darren Woods. The hedge fund, which only owns 0.02% of Exxon’s stock, argued that the company did not have a coherent plan for a transition to cleaner energy sources. It also argued that the company was too insular and needed outside perspectives. Other investors backed the hedge fund, mainly because Exxon’s recent financial performance has been shocking.

Poor financial performance

In the first decade of this century, Exxon had around $20 billion of net cash and was making a return on capital in excess of 25% a year. Now, net debt is nearly $50 billion and returns have fallen below 5%. As an example, the $41 billion acquisition of XTO Energy, a natural gas producer, in early 2010 was overpriced and ill-timed (the CEO at the time was Rex Tillerson).

Back in June, a report in Bloomberg stated that Exxon planned to reduce its headcount in the US offices by 5-10% annually for the next three to five years.

SEC filing – ExxonMobil CFO appointment

 

 

 

 

Southwestern Energy appoints new CFO

Southwestern Energy, based in Spring, has appointed Carl Giesler as its new CFO. He replaces Julian Bott, who died suddenly in January 2021. Michael Hancock, who has been interim CFO, will continue as VP – Finance and Treasurer.



Southwestern has a market capitalization of $3.7 billion. It is primarily a natural gas producer that has all its operations in Pennsylvania, Ohio and West Virginia. However, in June, it announced a deal to acquire Indigo Natural Resources for $2.7 billion. Indigo is a natural gas producer with operations in the Haynesville Basin in Louisiana.

Mr. Giesler joins from SandRidge Energy, where he had been CEO since April 2020. Co-incidentally, Mr. Bott was CFO at SandRidge prior to joining Southwestern.

Mr. Giesler was CEO of Jones Energy (from July 2018 to January 2020) and Miller Energy Resources (from September 2014 to July 2018). Both Jones and Miller Energy filed for bankruptcy during Mr. Giesler’s tenure. SandRidge is publicly-traded but has been struggling for a number of years. So, Mr. Giesler’s roles as CEO have all had a very heavy financial focus.

Mr. Giesler will receive a base salary of $525,000 and a one-time cash signing-on bonus of $500,000, to be paid on the one year anniversary of his employment.

SEC filing – Southwestern CFO appointment

Houston E&P company appoints London-based CFO

Vaalco Energy has appointed Ron Bain as its new CFO. He replaces Elizabeth Prochnow who retired in March.

Vaalco is based in the Westchase area of Houston and has a market capitalization of $182 million. Its main revenue is from offshore Gabon in West Africa. It also has an undeveloped block in offshore Equatorial Guinea.

Mr Bain will be based out of the London office. He was previously the CFO at Eland Oil & Gas Plc where he worked alongside CEO George Maxwell, who was appointed in April. Eland was an E&P company primarily focused on Nigeria.

Mr Bain previously worked for Baker Hughes and led the financial integration planning for the merger of Baker Hughes and GE Oil and Gas. Prior to that he was the regional accounting director for Europe, Africa and Russia for Baker Hughes.

Mr Bain will receive a base salary of $330,000.

SEC filing – Vaalco appoints Bain as CFO

E&P company to be based in Houston after $5.7 billion merger

Independence Energy and Contango Oil and Gas have agreed to merge in all-stock transaction with an enterprise value of $5.7 billion.



Independence is an E&P business built and managed by KKR, a global investment firm. It consists of upstream oil and gas assets in North America, including those in the Permian, Eagle Ford, Rockies, Denver Julesburg and Barnett basins, as well as mineral and royalty interests and midstream infrastructure.

Contango operates in the Permian, Mid-Continent and Rockies areas. In October 2020, it moved its head office from Houston to Fort Worth, following its merger with Mid-Conn. Contango has made four acquisitions in the past 18 months and has a similar philosophy to KKR’s Energy Real assets team.

The Independence shareholders will own 76% of the combined business, Contango shareholders will own 24%. The combined business will be based in Houston with a new name.

The KKR Energy Real assets team will run the business, led by David Rockecharlie (CEO) and Brandi Kendall (CFO). They will remain employees of KKR. John Goff, the chairman of Contango, will be the chairman of the combined group.

The business is being positioned to be a leading consolidator in the US E&P sector and it will be KKR’s primary platform for pursuing upstream oil and gas opportunities. Unusually, the combined business, even as a public company, will be paying KKR a management fee of $53.3 million per annum plus 1.5% per annum of the net proceeds from all future issuances of equity securities.

The transaction is expected to close late in the 3rd quarter or early in the 4th quarter.

SEC filing – KKR Energy and Contango merger

 

Houston E&P company to merge with rival in $17 billion transaction

Cabot Oil and Gas, based in west Houston, has agreed to merge with Cimarex, based in Denver, in an all-stock transaction. The combined business will have an enterprise value of $17 billion. Cabot shareholders will own 49.5%, Cimarex 50.5% of the combined company.



Cabot has its operating assets in the Marcellus basin in NE USA, while Cimarex operates in Permian and Mid-Continent basins.

The combined company will be based in Houston with a new (as yet undetermined) name. Back office functions of Cimarex in Tulsa and Denver will be relocated to Houston.

Cimarex CEO Thomas Jorden will be the CEO of the combined company and will relocate to Houston. Dan Dingles, CEO of Cabot, will be the Executive Chairman until no later than December 2022. Cabot CFO Scott Schroeder will be the CFO of the combined group.

The Cabot management team have some rich change-of-control provisions. According to the most recent proxy statement CEO Dingles would be eligible for a payout of $40.6 million. Under the new employment agreement that Mr. Dingles has signed, he will be eligible for this payout when he steps down as Chairman.

Schroeder, the CFO who is staying on, has a change-of control package worth $19.3 million. Mark Burford, the CFO of Cimarex, has a change-of control package worth $7.9 million.

The companies are targeting $100 million of estimated annual G&A cost synergies. The markets have reacted badly to the proposed deal as there is no operational field overlap with Cabot primarily producing gas and Cimarex oil. The stock of both companies down more than 5% each.

The deal is expected to close in the fourth quarter.

SEC filing – Cabot – Cimarex merger

 

Callon Petroleum appoints new CFO

Callon Petroleum has appointed Kevin Haggard as its new CFO. He replaces Jim Ulm, who announced in March that would be retiring. Mr. Ulm will continue in an advisory role to assist with the CFO transition.



The company is an E&P company focused on the Permian and Eagle Ford Basins and it has its head office in the Westchase area of Houston. The company currently has a market capitalization of $1.9 billion. However, it has debt of $3 billion, so its stock price is very sensitive to the price of oil.

Between 2016 and October 2020, Mr. Haggard was the VP and Treasurer of Noble Energy. At that point, Noble was acquired by Chevron. Prior to Noble, he held senior financial roles at other E&P companies. He started his career as an investment banker with Credit Suisse.

Mr. Haggard will receive a base salary of $450,000.

As an aside, Correne Loeffler, who was VP, Finance and Treasurer at Callon between April 2017 and July 2019, was recently appointed the CFO at The Howard Hughes Corporation.

SEC filing – Callon Haggard CFO appointment

Houston oil and gas investor admits to fraud

Chris Bentley, who founded Bellatorum Resources in 2016, has shut the business and admitted to fraud. Based in Spring, TX, Bentley raised about $31 million from 150 wealthy individuals to buy mineral rights in Texas shale fields.



Unusually, he sent an email on April 9 to the investors admitting to acquiring ‘bad’ and ‘non-arms length’ deals, overspending on corporate overheads and failing to hire professionals to advise him. He has turned himself into authorities, though he has not been charged with anything yet.

Bentley is a former Marine, who became a landman (someone who negotiates to acquire oil and gas or mineral leases) in 2014. Only two years later, he started his own investment fund. In all, he raised eight funds. For the last fund, Bentley aimed to raise $100 million. He admitted that he was trying to raise funds to pay distributions on his earlier funds. Instead he only raised a couple of million. Much of that money was spent on expenses.

It’s not clear whether Bentley used the funds to enrich himself. However, it appears that all the $31 million raised has been lost.

https://finance.yahoo.com/news/exclusive-texas-energy-fund-shuts-102813500.html

 

E&P company to move senior management to London as CEO steps down

Vantage Jackup rig – offshore Gabon

Cary Bounds, CEO has stepped down as CEO of Vaalco Energy. He will be replaced by non-executive director, George Maxwell, who resides in London.



Vaalco is based in the Westchase area of Houston and has a market capitalization of $130 million. Its main revenue is from offshore Gabon in West Africa. It also has an undeveloped block in offshore Equatorial Guinea. So, the CEO being based in London makes sense.

Last month, the company announced that CFO Elizabeth Prochnow would be retiring and that it would be conducting a search for her replacement. The new CFO will also be based in London. For now, it appears the head office will remain in Houston as most of the shareholders are based in the US.

Mr. Maxwell joined the Board last year. He has worked for both E&P companies with African operations (Eland Oil & Gas, Addax Petroleum) and oilfield service companies (ABB Oil & Gas). He’s also worked in Nigeria, Geneva and Houston. Mr. Maxwell will receive a base salary of $450,000.

Mr. Bounds had been CEO since December 2016. He leaves with a cash severance of $1,164,500 and $95,000 for attorney fees. He also exercised his stock appreciation rights and employee stock options, making $1.5 million in profit.

SEC filing – Vaalco CEO

E&P company appoints new CFO as it relocates to The Woodlands

Ring Energy has appointed Travis Thomas as its new CFO as it relocates its head office from Midland to The Woodlands. Former CFO Randy Broaddrick, who had been CFO since 2012, elected not to relocate from Tulsa, Oklahoma, where the accounting office was based.



Ring is an E&P operator with properties in the Permian Basin. It has revenues of $108 million and a market capitalization of $245 million. In February 2019 it acquired assets in the Permian Basin for $300 million from Wishbone Energy Partners. $28 million of the consideration came through issuance of new equity at $6.20 per share, the rest came from a revolving line of credit.

Prior to the acquisition from Wishbone, the company had been conservatively run with little long-term debt. In February 2018, one year prior, it issued new stock at $14 per share. High debt and a declining share price is not good for management and shareholders and both Lloyd Rochford (Chairman and co-founder) and Kelly Hoffman (CEO) stepped down in September 2020.

New CEO and dissident shareholders

Paul McKinney was appointed CEO. He spent 23 years at Anadarko (hence The Woodlands connection) and 6 years at Apache. More recently he was CEO at Yuma Energy from April 2017 to January 2019 and at Sandridge Energy for 11 months in 2019.

Those short stints raised the ire of Dr. Simon Kukes, a 11% shareholder , who stated that Mr. McKinney was too connected to the old Board and was overpaid ($480,00 base salary). Dr. Kukes is the CEO of Pedevco, another E&P company headquartered in Houston, with properties in the Permian Basin.

CFO compensation

Mr. Thomas joined the company in October 2020 as its VP of Finance. Prior to that, he was the Chief Accounting Officer and Treasurer at Paradox Resources, a private E&P company with its head office in downtown Houston. Mr. Thomas will receive a base salary of $290,000. His predecessor had a base salary of $195,000.

I’ve added Ring Energy to the list of Houston-area public companies. You can see the complete list here.

SEC filing – Ring Energy CFO appointment