Category Archives: E&P

Mineral rights CFO departs after short stint

Evan Kiefer, CFO and Treasurer of Black Stone Minerals, has stepped down with immediate effect.  He has been replaced by Taylor DeWalch as CFO and Dawn Smajstrla as Treasurer.

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 $3.3 billion. The production underlying the mineral rights is primarily gas and the company hedges the majority of its production. As a result, its share price is not very volatile (52 week range is $14.88 – $18.55).



What’s strange about the announcement is that Mr. Kiefer spent 8 months as interim CFO, but only 7 months as the permanent CFO! Mr. Kiefer joined BSM (technically, the General Partner of BSM) in 2013 as a Financial Analyst. He was appointed interim CFO in March 2023 after the departure of Jeff Wood. He was made permanent CFO in October 2023.

Mr. Kiefer will receive severance of

  • cash payment of $601, 775 (1x annual salary of $250,000 plus 1x target bonus of $250,000, plus pro-rated bonus for 2024)
  • accelerated vesting of 3,628 common units (worth approx $50,000)
  • accelerated vesting of 12,179 performance units ($200,000)
  • elimination of employment-based forfeiture restrictions on 50,893 performance units ($815,000)

Mr. DeWalch joined the company in February 2023 as Director, Strategy & Asset Development. He is a Petroleum Engineer by training and previously worked in engineering roles at Anadarko, Unitex Oil & Gas and Callon Petroleum. Mr. DeWalch is the son of Mark DeWalch, a non-exec director of the company, who has a background in finance and banking. DeWalch Jr. will receive a base salary of $310,000.

Ms. Smajstrla joined BSM in 2015 as the Chief Accounting Officer. She also worked at Anadarko, as well as Goodrich Petroleum and Lime Rock Resources.

SEC filing – 8-K Black Stone CFO severance

ConocoPhillips to buy Marathon Oil for $22.5 billion

ConocoPhillips has agreed to buy Marathon Oil for $22.5 billion, including $5.4 billion of net debt in an all-stock deal. Both companies have their head offices in west Houston.

The companies have adjacent acreage in the Eagle Ford, Bakken and the Permian Basins. Marathon also has assets in Oklahoma and Equatorial Guinea.

Both companies were part of Standard Oil until its breakup into 34 companies in 1911, following a Supreme Court Ruling. The descendant of Marathon (‘MRO’) started life as an amalgamation of a number of Ohio-based oil producers in 1887, before being acquired by Standard Oil in 1889. The descendant of Conoco (‘COP’) was founded in Utah in 1875 as Continental Oil and Transport Company and was bought by Standard Oil in 1884.

COP has identified $500 million of annualized savings from the deal. Half of that will come from the elimination of duplicate general and administrative expenses. $150 million of savings is expected from the optimization of operating and commercial costs. The remaining $100 million will come from reduced capital costs.

As a result of the deal, COP is increasing its ordinary dividend by 34% once the deal closes. It is also increasing its annualized share buybacks from $5 billion to $7 billion.

In March, MRO announced that CFO Dane Whitehead would be retiring on July 1. Rob White, the Controller and Chief Accounting Officer, was promoted to CFO, effective May 1. With today’s announcement, Mr. Whitehead has agreed to delay his retirement until the deal is closed. He will be an Executive VP and Advisor to the CEO.

The deal is expected to close in the four quarter of 2024.

Investor Presentation

SilverBow Resources to be acquired for $2.1 billion

SilverBow Resources, a Houston-based E&P company, has agreed to be acquired by Crescent Energy, also based in Houston, for $2.1 billion. Combined, they will have the second largest production in the Eagle Ford Basin, behind EOG.



SilverBow, has been trying to fight off a takeover by its largest shareholder, Kimmeridge Energy Management. Kimmeridge had effectively offered $34 a share, whereas Crescent’s offer is $38 a share.

SilverBow was formerly known as Swift Energy, which filed for bankruptcy in December 2015. After the company emerged from bankruptcy in April 2016, it changed its name to SilverBow and went public the following year.  The company has taken on a lot of debt as it embarked on an aggressive acquisition and capex program. That attracted the ire of Kimmeridge.

Crescent was formed in December 2021 from the merger of Contango Oil, a publicly-traded company and Independence Energy, a private company. Crescent is controlled by KKR, a large investment firm.

The transaction is structured as an all-stock transaction, though SilverBow shareholders can elect $38 per share cash alternative (up to a maximum total cash consideration of $400 million). Crescent shareholders will own between 69% and 79% of the combined company. The current management of Crescent will run the combined company, which will also retain the Crescent name.

Crescent expects to generate between $65 million and $100 million in cost savings, through cost of capital advantages and elimination of overheads. The companies have many adjacent properties in the Eagle Ford which should also drive savings.

 

Investor Presentation

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