Category Archives: E&P

Another Houston E&P company files for bankrutpcy

Rosehill Resources, which has its head office in west Houston, has filed for bankruptcy in the Southern District of Texas. At the beginning of the month, the company had stated it had a pre-packaged plan agreed with most of its creditors.



History of the company

The company operates in the Delaware Basin, a sub-basin of the Permian Basin where it had 15,785 gross acres. It currently operates or owns working interests in 133 oil and gas wells, though, back in March, it announced the suspension of all drilling and completion activity for the rest of 2020. The company was formed in 2017 when KLR Energy Acquisition, a blank check company, acquired Tema Oil & Gas in a deal valued at $445 million.

Amounts owed

At the time of filing, the company owed $226 million on a revolving credit facility. In March the company had drawn $340 million on the revolving credit facility, however it monetized all its hedges for $88 million to pay the balance down. The company also owed  $106 million on second lien 10% Secured Notes due January 2023. The notes are owned by EIG Management Company or its affiliates, an investment firm.

The main terms of the bankruptcy plan are

  • The Secured Noteholders will get 68.60% of the equity in the reorganized company
  • The Secured Noteholders and Tema have agreed to provide a $17.5 million debtor-in-possession financing facility. In return they will get 25.84% of the equity.
  • Tema will get 4% of the equity. This is because, at the time of sale, it had a tax receivable that Rosehill agreed to collect on its behalf, for a 10% administrative fee. At the time of filing, this was valued at $89 million.
  • The Preferred Series A stock holders will get 1.48%, provided none of the stock holders objects to the plan.
  • A new revolving credit facility of $235 million will be put in place.
  • All unsecured creditors will be paid in full

Rosehill Chapter 11

Chevron to acquire Noble Energy for $5 billion

Chevron has agreed to buy Houston-based Noble Energy for $5 billion in an all-stock deal. The price is $10.38 per share. Including debt, the deal values Noble at $13 billion.

The price represents a premium of nearly 8% over the closing price on Friday. However it is considerably lower than the 52-week high of $27.31.



Noble’s primary assets are in the Eastern Mediterranean sea (Israel and Cyprus).  These will fit well with Chevron’s assets in Egypt. Noble also has 92,000 contiguous net acres in the Permian which are next to Chevron’s acreage. Noble also has 336,000 of net acres in the DJ Basin in Colorado. This would be a new onshore basin for Chevron.

Chevron will also acquire Noble’s 63% stake in publicly-traded Noble Midstream Partners.

Chevron expects to generate annualized operating and cost synergies of $300 million, though there were no details of how this is broken out.

The deal represents the first major acquisition by Chevron since it decided not to get into a bidding war with Occidental last year for Anadarko. Chevron did, however, walk away with a $1 billion termination fee from that contest.

Severance payments

The executive management of Noble will receive large payments if they are terminated becasue of a change of control. Chairman and CEO David Stover will receive a severance payment of $8.2 million, representing 2.99 times base salary and target annual bonus. He will also get close to $10 million in pro-rated bonuses and stock that vests. Likewise COO Brent Smolik will get a $4 million cash severance and another $5 million in pro-rated bonuses and stock vesting. The figures for CFO Ken Fisher are $1.2 million and close to $3 million, respectively.

The deal is expected to close in the fourth quarter of 2020.

SEC filing – Chevron to acquire Noble Energy

 

ConocoPhillips CFO to retire after 39 years at the company

Don Wallette, the CFO of ConocoPhillips, is retiring effective August 31, 2020. He will be replaced by Bill Bullock, currently the President, Asia Pacific and Middle East.

Mr Wallette retires after 39 years with the company. He joined Phillips Petroleum in 1981 as a staff drilling engineer in Houston. He was appointed to the CFO position in February 2016 after stints in Russia and as President, Asia Pacific.



The company has the second-largest market capitalization of a Houston-area company ($46 billion), behind only Crown Castle. And Mr Wallette is the only the CFO of a Houston-area public company with a base salary of over $1 million.

Mr Wallette has a defined benefits retirement plan worth $2.6 million. He also has a Key Employee Supplemental Retirement Plan that was worth $23.6 million at December 31, 2019. The Supplemental Plan will be paid out as a lump sum cash payment six months after Mr Wallette retires.

In his current role Mr Bullock has a base salary of $717,000. He joined ConocoPhillips in 1986 and has had spells in many different parts of the company. Like Mr Wallette, he has a bachelor’s degree in Chemical Engineering (from Texas A&M). Mr Bullock also has a Master’s degree in business administration with an emphasis in finance from Oklahoma City University.

SEC filing – ConocoPhillips CFO

Houston E&P company files for bankruptcy

Yuma Energy has filed for bankruptcy. It becomes the first publicly-traded Houston-based E&P company to file since the recent oil price crash.

The company has its head office in the Galleria area. Historically operations were focused on SE Texas and Louisiana, though it does have some acreage in the Permian basin.  For the nine months ended September 30, it had revenues of only $7 million and a net loss of $6 million (ignoring impairments).

The company intends to liquidate its assets within 90 days.

The company has been struggling for some time. Eighteen months ago, it hired an investment banking firm to advise the company of strategic alternatives. In March 2019, it hired Anthony Schnur as its Chief Restructuring Officer and interim CEO.

In September 2019, the company thought they had found a solution when Red Mountain Capital Partners bought the outstanding debt of $35 million with the intent of converting most of the debt to common stock. Unfortunately, the stock conversion piece of the deal unraveled in March as the deterioration in market conditions caused Yuma to breach its covenants.

Anthony Schnur resigned from his positions with the company. He recently joined Ankura Consulting Group, who were promptly hired by the company as its financial advisor!

https://www.prnewswire.com/news-releases/yuma-energy-inc-files-for-chapter-11-protection-301041610.html

Occidental Petroleum appoints new CFO

Robert Peterson has been appointed the new CFO of Occidental Petroleum. He replaces Cedric Burgher, who will transition to another role in the company. Mr Burgher joined the company in May 2017.

Mr Peterson joined the company in August 2014 as President of OxyChem, the chemical subsidiary of the company. Most recently he was VP of Permian Strategy. Mr Peterson holds a Bachelor’s degree in Mechanical Engineering and an MBA in Corporate Finance from the University of Florida.



Changes coming thick and fast

The changes are coming thick and fast at Oxy. It’s been barely a week since the company reached a truce with activist investor, Carl Icahn by agreeing to add three new Icahn designated directors to the Board. The company also brought back former CEO Stephen Chazen as its new Chairman.

In its proxy statement filed on April 1, the company disclosed that Oscar Brown, Senior VP Strategy, Business Development and Supply Chain, was no longer with the company. He played a substantial role in the acquisition of Anadarko. For that, he received a $1.2 million cash bonus (which was more than Mr Burgher’s bonus). The company has not filed the required 8-K with the SEC, so the terms of his departure are not known.

No compensation details were given for Mr Peterson. Last week, the company reduced the salaries for all executive officers to $250,000. Mr Burgher was making $765,000.

New severance agreements

The company also filed new severance terms for executive officers yesterday. Prior to the amendment, the company did not have formal arrangements with them. If Mr Burgher were to be let go before December 2021, severance would be 1.5 times base salary in effect on March 1, 2020 plus 1.5 times actual annual bonus. A pro-rata bonus for the year would also be paid.

Were CEO Vicki Hollub to leave, it would be 2 times base salary as of March 1, 2020 (2x $1.33 million) plus 2 times bonus.

SEC filing – Occidental CFO

Houston companies reduce salaries for senior executives

In recent days, a few public companies in the Houston have announced salary reductions for senior executives as they battle with the economic downturn. The changes are temporary though most haven’t set a timetable for when they will be restored. A summary of the changes announced for the CEO and CFO officers is set out in the table below.

A shout-out to Cactus, an oilfield services company, who were the first to announce changes.

[UPDATE 4/3/2020 – Since publishing this article, other companies have implemented reductions including Stage Stores (25%), NCS Multistage (20%), Target Hospitality (20%), Flotek (10%) and Team (10%)].

A couple of other comments

Occidental : All Executives had their salaries capped at $250,000. Furthermore, it appears that Oxy cut the salaries of all US employees making over $76,000 by 30%. It appears those making less got cut by 20%. Legacy Anadarko employees appear to have only got cut 4.9% to avoid breaching contracts in last year’s disastrous merger. That’s really going to help mesh the company cultures!

Group 1 Automotive : 3,000 US employees are furloughed for a 30-day period, with an option for a second 30-day period. 2,800 UK employees are furloughed for an initial period of 21 days. That’s about 40% of their workforce.

SEC filing – Group 1 Automotive

https://www.thelayoff.com/occidental-petroleum

 

CompanyPositionNameOld salary $000New salary $000% reduction
CactusCEOScott Bender30015050%
CactusCFOStephen Tadlock33526820%
Group 1 AutomotiveCEOEarl Hesterberg1,15057550%
Group 1 AutomotiveCFOJohn Rickel63050420%
Luby'sCFOScott Gray34217150%
Nabors IndustriesCEOTony Petrello1,7501,40020%
Nabors IndustriesCFOWilliam Restrepo65052020%
Occidental PetroleumCEOVicki Hollub1,25025080%
Occidental PetroleumCFOCedric Burgher72525066%
Superior Energy ServicesCEODavid Dunlap85068020%
Superior Energy ServicesCFOWesty Ballard44037415%
US Physical TherapyCEOChris Reading80048040%
US Physical TherapyCFOLarry McAfee51033235%

Katy man sentenced to 70 months in Venezuela bribery case

Alfonso Gravina of Katy, TX was sentenced to 70 months in prison for his role in a Venezuela bribery scheme and obstruction of justice. He was also ordered to pay restitution to the IRS of $214,949. He had previously paid restitution of $590,446.



Mr Gravina was employed as a purchasing manager at Petroleos de Venezuela S.A (PDVSA) in Houston. In December 2015, he pleaded guilty to accepting $590,000 in bribes between 2007 and 2014 from Abraham Shiera and Roberto Rincon in order to steer contracts to their companies.

Rincon lived in The Woodlands. He pleaded guilty in 2016. At the time of his arrest, the government alleged he controlled 108 bank accounts including three Swiss accounts that had over $100 million in deposits. He had been awarded $750 million in contracts from PDVSA between 2010 and 2013. Shiera lived in Florida. Both Shiera and Rincon await sentencing.

After his plea in 2015, Gravina met periodically with agents from Homeland Security Investigations. Gravina admitted that, during interviews with the government, he concealed facts about bribe payments to officials at Citgo Petroleum Corporation (a Houston-based subsidiary of PDVSA). At the same time, he provided details about the government’s investigation to a co-conspirator, including about the topics discussed during Gravina’s meetings with the government. This passing of information led to the destruction of evidence and to the co-conspirator’s attempt to flee the United States in July 2018.

Including Gravina, Rincon and Shiera, to date, the Justice Department has announced charges against 26 individuals, 20 of whom have pleaded guilty in connection with the investigation.

https://www.justice.gov/opa/pr/texas-businessman-sentenced-70-months-prison-role-venezuela-bribery-scheme-and-obstruction

Small Houston-based E&P company agrees to reverse takeover

Camber Energy (market cap $9 million), has agreed to a reverse takeover of privately-held Viking Energy. Both are E&P companies with their head offices in Houston. Camber is based downtown while Viking is in west Houston.



Currently the agreement is a non-binding letter of intent. The parties aim to sign a definitive agreement by February 17, 2020. Camber will issue shares with the Viking Energy shareholders owning 85% of the combined group post-closing.

Viking owns oil and gas leases in Texas, Louisiana, Mississippi and Kansas. It owns a working interest in 58 conventional producing wells in Texas and Louisiana. The company also has an interest in 30 salt water disposal wells. In October 2019, Viking agreed to buy another 123 wells in Texas and Louisiana for $40 million in cash. That deal has not yet closed and the merger with Camber is contingent on that acquisition closing. [UPDATE 02/06/2020 The deal has now closed for $46.3 million – revised cash flows and reserve information led to the change in price].

Back in July 2019, Camber entered into a merger agreement with Lineal Star Holdings, a private company involved in pipeline construction and integrity services. Camber ended up unwinding the transaction at the end of 2019 because the post-merger combined company was unable to meet the listing standards of the NYSE American.

Camber Energy used to be called Lucas Energy and went public in 2006. It’s had a troubled past. The strangest event was in October 2011 when the then-CEO made an acquisition for $22 million without telling the Board or making it public. The issue only came to light a year later when the seller sued for payment that was due in November 2012.

Viking Energy was the subject of my most bizarre post of 2019. In September 2019, the SEC announced fraud charges against a former CEO for creating a fake CFO.

SEC filing – Camber Viking merger

 

 

Shale well completions fall sharply in December

The number of wells drilled but not completed (DUCs) fell to 7,573 in December 2019, the lowest level since October 2018. This is according to the latest Drilling Productivity Report from the Energy Information Administration (EIA). The report covers key onshore unconventional (shale) plays.

The number of DUCs has fallen by 900 since May 2019.

More significantly completions fell sharply to 1,086 in December 2019, down 320 from the peak in the summer. Some of the downturn is due to E&P operators being under pressure to be cash-flow positive in 2019, so I would expect some modest rebound in Q1 2020. However, the likes of Halliburton and Schlumberger have announced significant reductions in pressure pumping capacity. That suggests a significant rise in completions is unlikely any time soon.

Note that, in August 2019, Spears & Associates published a podcast (EP125) ‘Mythical Beasts’ that cast doubt on the number of wells drilled but not completed. They point out flaws in the EIA methodology and have estimated that the number of DUCs is overstated by about 3,000. They conclude that there isn’t really a backlog of wells being held back by the E&P companies.

The EIA is projecting production of 9,178,000 barrels per day (bpd) for January. That’s up 33,000 on December’s number. For February, the projected rise is even lower (22,000 bpd). This suggests oil production from the unconventional shale plays is about to stall out.

https://www.eia.gov/petroleum/drilling/

Callon completes $750 million takeover of Carrizo

Callon Petroleum has completed its takeover of fellow Houston E&P operator, Carrizo Oil and Gas. The combined companies own 200,000 net acres in the Permian and Eagle Ford basins. As a result of the deal, Carrizo’s shares have been delisted.



The deal was originally announced in July 2019. At that time Callon had a market cap of $1.46 billion and Carrizo $1 billion. At deal close, the market caps were $1 billion and $750 million respectively.

As originally announced, the deal called for Carrizo shareholders to receive 2.05 shares of Callon stock for every share held. However Paulson & Co, a shareholder with a 10% stake, complained that Callon was paying a premium for Carrizo which was ‘unwarranted’. In October and November, ISS and Glass Lewis, two proxy advisory firms, recommended that Callon shareholders vote against the deal.

As a result, later in November, the terms were revised down to 1.75 shares of Callon stock. In addition, under the original terms, Callon management (the acquirer) were eligible for severance benefits as a result of the merger. The revised agreement removed these benefits.

Callon expects to save between $110 million and $170 million from combining the companies. Corporate overhead account for $35 million and $45 million, with the rest coming from operational synergies.

Carrizo had started talking to potential merger targets in the summer and fall of 2018. They did not hold their first meeting with Callon until January 2019.

All the executive officers of Carrizo stepped down as a result of the merger. The top five executives will receive severance payments of $26 million, of which $15 million is cash, the rest vested equity.

Greg Conaway, the Chief Accounting Officer of Carrizo (and not one of the top five executives) has been appointed to the same position at Callon.

SEC filing – Callon Carrizo merger