Four months after Chevron acquired Noble Energy, it has submitted a non-binding proposal to acquire all the publicly-held common units of Noble Midstream Partners LP (‘NBLX’).
Chevron already owns 62.5% of NBLX, through its acquisition of Noble Energy. It is also the biggest customer of NBLX, with about 60% of revenues generated from Chevron. So the deal is going through, it’s just a question at what price.
Chevron’s proposal was $12.47 per common unit, which meant no premium to the closing price on February 4. NBLX’s price ended up at $13.30 the following day, suggesting the market expects Chevron to sweeten the pot. A year ago, the units were trading at $22 per unit.
This continues the trend of publicly-traded MLP’s being reabsorbed into their former parent companies. Other Houston-area examples in recent years are;
SEC filing – Chevron – Noble Midstream proposal
[UPDATE March 2, 2021 – Deal has now been completed and TC Pipelines has been delisted].
Houston-based TC Pipelines, LP is to be acquired by TC Energy which controls the General Partner that manages TCP. TC Energy also owns 24% of the common units of master limited partnership.
This is part of a trend in recent years where MLPs have been taken back in-house. Once owners and investors realized that MLPs were not really like a risk-free utility, the cost of capital rose and the attractions of being publicly-traded faded.
The deal values TCP at $1.68 billion or $31 per common unit. The 52-week high was $41. Once again, minority unit holders will feel aggrieved that the controlling owner has chosen to act when the stock price has been depressed. However, the offer price does represent a rise from the $27.31 that TC Energy originally proposed back in October.
TCP was formed by TransCanada in 1998 and went public the following year in a $275 million Initial Public Offering. The company has interests in 6,300 miles of natural gas pipelines, mainly in the Great Lakes region and the Pacific Northwest.
The deal is expected to close around the end of the first quarter of 2021.
Michael Pearl, the CFO of Western Midstream Partners, will be leaving the company, although the company didn’t say when! Michael Ure, the current CEO, is taking over the CFO duties until a successor is identified.
Western Midstream is a master limited partnership that went public in 2008 as a subsidiary of Anadarko. It’s now owned by Occidental, following its takeover of Anadarko last year. It has its head office in The Woodlands.
Mr Pearl joined Anadarko in 2004. He was the CFO of the general partner of Western Midstream for two years straddling the IPO. After that, he held senior financial roles in Anadarko until he became the CFO of Western Midstream in October 2019. His base salary was $455,000.
In August 2019, ahead of his proposed appointment, Mr Pearl entered into a retention agreement that provided for three cash payments of $261,000 each, to be paid in February 2020, August 2020 and February 2021. If he was terminated without cause, the unpaid amounts would vest. In signing the retention agreement, Mr Pearl waived his right to additional severance payments.
SEC filing – Pearl departure
Buckeye Partners has been delisted after its takeover by IFM Global Infrastructure Fund was completed. The $6.5 billion deal was originally announced in May 2019.
The original Buckeye Pipe Line Company was founded in 1886 as part of Standard Oil and became a publicly-owned independent company in 1911 after Standard Oil was broken up. In 1964, the company was acquired by a subsidiary of the Pennsylvania Railroad. In 1986, it was reorganized into a master limited partnership (MLP) and went public the same year.
Buckeye has 6,000 miles of pipeline and 115 liquid petroleum products terminals in the US and the Caribbean. In 2018, it had revenues of $4.1 billion. The company has its head office in Greenway Plaza.
Breakup of Standard Oil
Standard Oil was established by John D Rockefeller and Henry Flagler in 1870. In 1911 the Supreme Court ordered it to be broken up into 34 smaller companies. This included;
- Standard Oil of New Jersey – later merged with Humble Oil to become Exxon
- Standard Oil of New York – later merged with Vacuum to become Mobil
- Standard Oil of California – renamed as Chevron.
- The Ohio Oil Company – renamed as Marathon.
Background to the deal
In early 2018, the Board of the partnership decided to pursue strategic alternatives given that publicly-traded MLPs were out-of-fashion with investors. The company had discussions with various interested parties through May 2019.
IMF agreed to pay $41.50 per unit, all in cash. That represented a premium of 27.5% over the closing price of the partnership units prior to the announcement.
Equity awards vest
Equity options have vested on completion of the transaction and will be settled in cash. That means that CEO Clark Smith will receive $16.9 million and CFO Keith St. Clair $5.6 million. 7 other members of the executive management team will receive between $2.2 million and $4.8 million each.
If senior executives are also terminated as a result of the merger, they will also receive severance (annual salary plus target annual cash bonus). For CEO Smith that would be $2 million, for St. Clair that would be $1.2 million. The deal closed Friday without any terminations in the senior management group.
You can see the updated list of Houston-area public companies here
SEC filing – Buckeye takeover
Michael Pearl has been appointed as the new CFO of the general partner of Western Midstream Partners.
Occidental fully owns the general partner stake and around 55% of the limited partner units. The company gained ownership following its takeover of Anadarko earlier this year. Western Midstream has a market cap of $10.3 billion and has its head office in The Woodlands.
Mr Pearl joined Anadarko in 2004 and served in various leadership positions such as Director of Tax, Treasurer, Corporate Controller and Senior VP of Investor Relations. He started his career at Ernst & Young.
Mr Pearl replaces Jaime Casas who has been appointed the VP and Treasurer of Occidental.
The company also announced the appointment of Catherine Green as the Chief Accounting Officer of the general partner of Western Midstream. She joined Anadarko in 2001 and started her career with Grant Thornton in the United Kingdom and Houston.
After its takeover of Anadarko, Occidental planned to sell Western Midstream to reduce debt. Or least sell enough of a stake so that it didn’t have to consolidate the $7.5 billion debt that Western Midstream carries.
Earlier this month, according to Reuters, Occidental shelved plans to sell Western Midstream because Western’s market value has dropped by 18% since July 30 and Occidental doesn’t want to sell at too low a price.
You can see the complete list of Houston-area publicly-traded companies here.
SEC filing – Western Midstream CFO
Noble Midstream Partners has appointed Thomas Christensen as the CFO of the General Partner. He was appointed interim CFO in July 2019 and has been the Chief Accounting Officer since August 2016.
Noble Midstream has a market cap of $960 million and is based in NW Houston. It was spun off from its parent company, Noble Energy, in September 2016. That was when MLP partnerships going public was in vogue.
Noble Midstream Partners still gets 57% of its total revenues from Noble Energy, who still own a 45% partnership interest in them.
According to a report in Bloomberg in early August, The Williams Companies, based in Tulsa, and New York PE firm, Global Infrastructure Partners, are working on a possible offer for the company.
The previous CFO, John Bookout resigned to pursue another opportunity in July. He was followed out the door by CEO, Terry Gerhart, and COO, John Nicholson, the following month. They resigned on August 9 to ‘pursue other business opportunities’. Brent Smolik, currently the COO of Noble Energy, was appointed CEO of the General Partner.
SEC filing – Noble appointment of CFO
Stabilis Energy has completed its reverse takeover of American Electric Technologies (AETI) that was originally announced in January 2019. Andy Puhala, the CFO of Stabilis, becomes the CFO of the combined group. He was formerly the CFO of AETI between January 2013 and September 2015.
AETI, a provider of power delivery systems to the Energy sector, is based in Bellaire. It sold off its main US business in August 2018, leaving it with just an operation in Brazil and a joint venture in China. Stabilis has acquired the business for $10.2 million
Stabilis Energy is a small-scale producer and distributor of Liquefied Natural Gas (LNG). Small scale facilities typically produce 50,000 to 500,000 gallons a day. The product is usually used within 500 miles of the production facility in locations not near a natural gas pipeline. Stabilis has one facility located between San Antonio and Corpus Christi that produces 120,000 gallons a day.
The company has its head office in west Houston. For the year ended December 2018, the proforma business had revenues of $45 million.
Stabilis is owned by Casey Crenshaw, who has also been a director and shareholder of AETI since 2012. The share exchange agreement will leave the former owners of Stabilis owning 89% of the combined company. Existing AETI shareholders will own the remaining 11%.
Immediately after the transaction was completed, the company received a delisting notice from Nasdaq because it neither has a minimum of 1 million publicly-held shares nor a minimum market value of $15 million for the publicly-held shares. That’s due to Casey Crenshaw owning 88% of the combined company. The company plans a hearing with Nasdaq
The company will now be known as Stabilis Energy Inc and will trade under the ticker symbol ‘SLNG’.
John Bookout, the CFO of Noble Midstream Partners, has resigned to pursue another (as yet undisclosed) opportunity. The resignation was effective June 28, 2019.
Noble Midstream (market cap $1.35 billion) was formed in 2014 and spun off by its parent company, Noble Energy, in an Initial Public Offering in September 2016. It operates midstream assets in the Delaware Basin of the Permian and the DJ Basin in Colorado. It has its head office with Noble Energy in NW Houston.
Noble Midstream Partners still gets 57% of its total revenues from Noble Energy, who still own a 45% partnership interest in them.
This Reuters report from April indicated that the company had been put up for sale by Noble Energy. In early May, the company indicated that a strategic review was taking place but there have been no public announcements since then.
Mr Bookout became the CFO in October 2015, having joined Noble in July 2014.
Thomas Christensen has been appointed interim CFO. He has been the Chief Accounting Officer since August 2016. He previously worked in the Treasury Department of Noble. Mr Christensen joined Rosetta Resources in September 2009 which Noble acquired in July 2015.
Mr Bookout’s father, John F Bookout III is a Partner at Apollo Global Management. He was recently elected a non-executive director at McDermott International.
Noble Midstream Partners – SEC filing
Eric Kalamaras, CFO of American Midstream, will step down from his role no later than December 31, 2019.
American Midstream is in the process of being taken private by ArcLight, a PE firm that already owns 51% of the company. The offer of $5.25 per common unit represents an acquisition price of $285 million. The transaction is expected to close during the second quarter.
American Midstream was formed in 2009 and went public in 2011. It moved its head office from Denver to west Houston in 2016. The company made a lot of acquisitions, mainly financed by debt.
Mr Kalamaras has been CFO since July 2016. He has a base salary of $300,00. For his severance package he will receive 12 months’ base salary, plus a pro-rated cash bonus. Last year’s bonus was $260,000.
All phantom stock units that Mr Kalamaras holds will vest at $5.25 per unit. This will amount to $662,366 at December 31, 2019. In addition, in August 2018, Mr Kalamaras, along with other senior executives, was awarded a special cash retention award that will also vest upon termination. For Mr Kalamaras this amounts to $623,712.
Lynn Bourdon, the CEO, recently left with a large payout
As a reminder during 2018 the company:
- filed its annual report late on April 1, 2019 due to going concern issues as its $522 million revolving credit facility matures in September 2019.
- filed its 2nd quarter report late due to its head office being closed to due to a water leak.
- reported material weaknesses in its internal controls over financial reporting. That was the 5th year in a row that the company reported material weaknesses.
- failed to obtain financing for its $818 million planned merger with Southcross Holdings (announced in October 2017). As a result, American Midstream had to pay a $17 million termination fee.
- Slashed its quarterly distribution by 75% in order to preserve cash flow. This caused the price of the stock units to drop from $11.55 to $6 in July.
Lynn Bourdon, Chairman and CEO of American Midstream, has resigned from all his positions ahead of its $285 million deal to go private. That transaction was engineered by ArcLight Capital Partners who currently owns 51%.
Mr Bourdon has been CEO since December 2015. One of his first acts was to move the head office from Denver to the Westchase area of Houston. Mr Bourdon made several acquisitions after he was appointed, in a bid for growth. In early 2017 ArcLight also effectively merged American Midstream with another larger affiliated company, JP Energy.
Annual report filed late
The rapid growth from a series of smaller deals and the head office relocation taxed the controls and systems of the company, the big deal effectively broke the company.
The company recently filed its 10-K late. The audited financials raised going concern issues due to a $515 million credit agreement expiring in September 2019 and material weaknesses in internal controls.
Mr Bourdon will receive the following compensation
- Cash payment of $1.2 million, being 1 x base salary + 1 x target bonus
- Cash payment of $1.74 million for unvested phantom stock units
- Cash payment equivalent to 12 months of COBRA
The unvested phantom stock units were only granted in April 2018. The $1.74 million is on top of approximately $0.8 million of units that vested earlier this year. Note that the transaction to go private is not considered a change-of-control as ArcLight already owns 51%. Otherwise, the payments to Mr Bourdon would have been greater.
In 2018 Mr Bourdon also received a cash bonus of $500,000 and a cash retention award payment of $1.2 million.
When Mr Bourdon was appointed in December 2015, the stock price was $7 per unit. It is being taken private at $5.25 per unit. The company was paying a quarterly dividend of 41.25 cents until it was slashed to 10 cents in July 2018.