Category Archives: E&P

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

 

Magnolia Oil & Gas promotes from within for CFO role

Magnolia Oil & Gas has promoted Christopher Stavros from CFO to CEO.  Brian Corales becomes the CFO, having previously been VP, Investor Relations. The promotion for Mr. Stavros was announced on September 21, two days before founder and CEO, Stephen Chazen, died.

Magnolia has its head office in Greenway Plaza and operates wells in South Texas around Giddings and in Karnes County. It has a market capitalization of $5.6 billion.

The company began as a SPAC (Special Purpose Acquisition Company) formed by Mr. Chazen (ex-CEO of Occidental Petroleum). Mr. Stavros worked with Mr. Chazen at Oxy for 12 years, eventually becoming the CFO, before leaving in 2017.  The SPAC acquired the South Texas properties from Enervest, a PE firm, in 2018 for $2.7 billion and Mr. Stavros became CFO of Magnolia at that point.

Enervest remains the largest shareholder in Magnolia at 18%. Mr. Chazen owned 3% at the time of his death.

Mr. Corales joined Magnolia in November 2018. Prior to that, he had spent many years in investment banking including Johnson Rice & Co and Scotia Howard Weil. He will receive a base salary of $367,500.

SEC filing – 8-K Magnolia CFO appointment

BP to acquire renewable gas company for $4.1 billion

BP has agreed to acquire Houston-based Archaea Energy for $26 per share in an all-cash deal that values Archaea at $4.1 billion, including $800 million of debt. The deal values the company at 20 times the expected 2023 EBITDA.



Archaea develops, constructs and maintains renewable natural gas facilities (RNG) that capture waste emissions from landfills and converts them into low-grade fuels and electricity. It currently has 13 of them. The company also has 33 landfill gas to electric facilities, some of which were added after a recent acquisition.

The company is based in the Galleria area and was taken public in September 2021 by a SPAC based in Pennsylvania, Rice Acquisition Corp.  The SPAC actually acquired Archaea LLC for $347 million and Aria Energy LLC for $680 million, with the combined business being renamed Archaea Energy. So, its a tremendous return for its investors.

It is not surprising that they have been acquired by a traditional oil and gas company. Due to high oil prices, they are generating lots of cash, but are under tremendous pressure to invest in anything but traditional oil and gas.

The company appointed Brian McCarthy as its new (old) CFO in August 2022.

The deal is expected to close by the end of 2022.

SEC filing – Archaea – BP

Houston E&P appoints new CEO and CFO

Epsilon Energy, based in Greenspoint area of North Houston, has appointed a new CEO and CFO.

Jason Stabell is replacing the retiring Mike Raleigh as CEO while Andrew Williamson replaces Lane Bond as CFO.

Mr. Stabell and Mr. Williamson worked together for many years at Merlin International, LLC, an E&P business with its primary operations in Egypt. The business was sold in 2019 to a SOCO International, a UK-listed company. Mr. Stabell stayed on as a consultant until 2021 while Mr. Williamson became the Corporate Development Manager at a small E&P company.

Epsilon primarily owns properties in the Marcellus basin in Pennsylvania. A few years ago, it started acquiring acreage in the Anadarko Basin in Oklahoma. However it is not the operator of those wells. The company has revenues of $48 million and a market capitalization of $130 million.

The departing executives were among the lowest paid executives for their positions. Mr. Raleigh, who had been CEO since 2013, had a base salary of $150,000, though between 2018-2020 he did not take a salary. He will receive a severance of $150,000 plus $480,000 in lieu of equity awards for 2021 and 2022.

Mr. Bond, who had been CFO since 2012 and is also retiring, had a base salary of $200,000. He will receive no severance, but will receive a pro-rata bonus for 2022 of $37,500. However, he will be engaged as a consultant until March 2023 at a monthly rate of $16,667.

Incoming CEO Stabell will have a base salary of $300,000 while Mr. Williamson will have a base of $230,000.

SEC filing – Epsilon Energy CEO CFO change

 

Murphy Oil CFO to retire

David Looney, CFO of Murphy Oil, has announced his retirement, effective June 30, 2022. He will be replaced by Tom Mireles, who is currently Senior VP of Technical Services.



Murphy Oil has a market capitalization of $5.6 billion. It is the 5th largest producer in the Gulf of Mexico and also has producing assets in onshore Canada and the Eagle Ford shale basin. The company also owns exploratory blocks or interests in Australia, Brazil, Brunei, Mexico and Vietnam.

In 2020, it moved its head office from El Dorado, Arkansas to the Memorial City area.

Mr. Looney, who is 64, joined the company as its CFO in 2018. Mr. Mireles joined the company in 2005 and has held various roles such as Senior Manager of Planning and Business Development and Senior VP in both Eastern and Western hemispheres.

Mr. Mireles will receive a base salary of $500,000.

E&P companies to combine in $6 billion transaction

[UPDATE 07-07-22 The deal has now been completed. Combined group is now called Chord Energy].

Two E&P companies, Oasis Petroleum and Whiting Petroleum are merging in a $6 billion deal, including debt. Oasis is based in downtown Houston, while Whiting has its head office in Denver. The combined company will have its head office in Houston and will have a new, yet-to-be-determined name. The Denver office will remain open for the foreseeable future.



Both companies have their main operations in the Williston Basin of North Dakota, Montana and Saskatchewan. (The Bakken is the main oil-producing rock formation of the Basin, but there are others). In terms of acreage, the deal combines the number 3 and 4 players into the largest operator in the Basin, ahead of Continental Resources and ConocoPhillips.

Both companies filed for pre-packaged bankruptcies in 2020. Whiting filed first, in April 2020 and exited in September 2020, having converted $2.4 billion of debt into equity. Likewise, Oasis filed in September 2020 and exited three months later. It converted $1.9 million of debt into equity.

After exiting bankruptcy, Oasis sold its Permian Basin acreage for more than $400 million and bought assets in the Williston Basin from Diamondback Energy for $745 million.

Management

Both companies have CEOs who were appointed after exiting Chapter 11. Lynn Peterson, the CEO of Whiting, was appointed in September 2020. He will become Chairman of the combined company. Danny Brown, CEO of Oasis, joined in April 2021. Previously, he was head of US onshore operations for Anadarko. Mr. Brown will be the CEO of the combined company.

Longtime Oasis CFO Michael Lou will be the CFO of the combined company.

Transaction structure

The deal is a combined stock and cash deal. Oasis is the surviving entity and its shareholders will get a special dividend of $15 a share. Whiting shareholders will get 0.5774 shares of Oasis and $6.25 in cash for each share of Whiting they own. Once the deal closes later this year, Whiting shareholders will own about 53% of the combined company.

The company expects to achieve savings of $65 million by the end of 2023. $30 million will come from administrative savings, the rest will come from operational cost synergies.

Oasis – Whiting Investor Presentation

Goodrich Petroleum to be taken private by Encap Investments

Goodrich Petroleum, an E&P company based in downtown Houston, is to go private after agreeing to be acquired by an affiliate of Encap Investments for $23 per share. Including the assumption of debt, the transaction is valued at $480 million.



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Goodrich was formed in 1975 and went public via a reverse takeover of Patrick Petroleum in 1995. The company primarily owns gas producing wells in the Haynesville Basin.

The company filed for bankruptcy in 2016 during which lenders wrote off $426 million in debt in exchange for most of the equity in the successor company.

Encap Investments is a Houston-based investment firm. It will buy Goodrich using a $7 billion fund raised in 2017.

The offer price represents an approximately 7% premium to the closing price of the stock on November 19, 2021. Certain stockholders have agreed to support the deal. In addition, there is $32.5 million of 13.5% loan notes that can convert to equity at $21.33. Taking the conversion into account, more than 50% of shareholders support the deal.

The deal is expected to close in December 2021.

[UPDATE 11-23-21 Gen IV Investments who were the second largest shareholder (~12%) sold their shares to EnCap. Frankin, the largest shareholder (15%) and Anchorage Capital Group (10%) tendered their shares in support, in addition to the senior management (12%). These percentages exclude the shares that their parties own from the convertible notes.]

SEC filing – Goodrich going private