Category Archives: Oilfield Services

Weatherford applies to relist its shares on Nasdaq

Weatherford International plc has applied to have its share listed on the Nasdaq Exchange. The stock used to trade on the NYSE until they were delisted in April 2020 for having too low a share price.



Weatherford entered Chapter 11 bankruptcy in July 2019 and exited in December 2019, having converted $7.6 billion of debt into equity. With hindsight, it left bankruptcy proceedings too soon as its business was ravaged by the pandemic.

In 2020, revenues were $3.7 billion, a drop of 26% on the prior year. It made an operating loss of $1.5 billion. The losses included a goodwill write off of $239 million, which was all the goodwill created in the fresh-start accounting when it emerged from bankruptcy. There was also impairment of $814 million on intangible assets ($155 million), fixed assets ($571 million) and right-of-use assets ($88 million). Again these were values determined in the fresh-start accounting.

When Weatherford exited Chapter 11 in December 2019, it had shareholders’ equity of $2.9 billion and long-term debt of $2.1 billion. One year later, it now has equity of $937 million and long-term debt of $2.6 billion.

While the Business suffered, the Executives didn’t…

Weatherford has had a reputation for paying large severances while performing poorly. The registration statement continues that trend by disclosing;

  • ex-CEO Mark McCollum (left June 2020) received $4.6 million in severance. For good measure, he also received $780,000 in cash bonuses in 2020.
  • COO Karl Blanchard retired in February 2020. The bankruptcy was deemed a change-of-control under his contract so he gets 3 x base salary (3 x $700,000) plus 1 x average bonus for the past 3 years. It’s hard to tell what the average bonus is. He didn’t get any bonuses in 2018 or 2019 but got $2.2 million in bonuses for his interim CEO position in the 2nd half of 2020. He was also paid $672,955 in 2020 for cash bonuses in lieu of stock options.
  • Stuart Fraser, Chief Accounting Officer, is leaving March 31, 2021. He has the same change-of-control clause as Mr. Blanchard. Mr. Fraser gets 2 x base (2 x $425,000) plus average annual bonus. He also got $270,938 in 2020 for cash bonuses in lieu of stock options.
  • Mark Swift, former President of the Western Hemisphere, left in March 2020 with a $1.4 million severance.

Weatherford employed 17,200 at December 2020, down nearly 7,000 from the prior year.

Weatherford new CEO is Girish Saligram, appointed in September 2020. Keith Jennings was appointed as CFO the previous month.

SEC filing – Weatherford Nasdaq listing

Noble Corporation acquires Pacific Drilling in all-stock transaction

Noble Drilling has agreed to acquire Pacific Drilling in all-stock transaction. Noble has its operational headquarters in Sugar Land while Pacific is based in west Houston.



The shareholders of Noble will own 75% of the combined company. It currently operates 19 drilling rigs, while Pacific operates 7. However, Noble said it plans to sell the Bora and Mistral rigs that are currently idle.

There’s little overlap in the customers or the territories between the companies. Pacific currently has three rigs running, one in the US Gulf of Mexico (for Murphy), one in West Africa and one in the Mexican side of the Gulf of Mexico (both for Petronas). Noble is not currently operating in the latter two territories.

Both companies have recently exited bankruptcy protection. Noble filed for Chapter 11 in July 2020. $3.4 billion of unsecured debt was exchanged for 86% of the newly reorganized company and the company exited in February 2021.

Pacific filed in November 2020 for the second time in three years. It emerged from bankruptcy on December 31, 2021. Bondholders exchanged $1.1 billion of debt for 91.5% of the equity in the new company.

Neither company has stock that is currently traded, so no value of the transaction was disclosed. I would expect Noble to re-list in the near future. Noble is forecasting at least $30 million of annual synergies. The combined company will be run from Sugar Land.

The transaction is expected to close in April 2021.

Investor Presentation – Noble acquires Pacific Drilling

CEO and CFO of Superior Energy leave with large severances

The CEO and CFO of Superior Energy Services have left the company with large severances just six weeks after the company exited Chapter 11 bankruptcy.



Superior, based in downtown Houston, announced back in September 2020 that it intended to file for a pre-packaged bankruptcy. It did not actually file until December. The company converted $1.3 billion of debt into equity as part of the restructuring.  At the time of filing, the company had negative shareholders’ equity of $250 million. The stock of the company had previously been delisted because the negative equity breached NYSE listing standards.

Overpriced Acquisition

The company’s debt problem stems all the way back to October 2011 when it agreed to buy Complete Production Services for $2.9 billion. It paid $553 million in cash and issued stock for the rest. As part of the deal financing, in December 2011, it issued $800 million of unsecured senior notes, due 2021, to repay $650 million of debt that Complete owed. The other $500 million of notes were also, effectively, issued in 2011, though they were refinanced in 2017.

Severance

David Dunlap had been CEO since 2010. He leaves with a payment of $3.7 million. This represents two times base salary plus target annual bonus plus pro-rated target annual bonus for 2021.

Westy Ballard, who was appointed the CFO in March 2018, receives $1.7 million on the same terms as Mr. Dunlap.

Cash retention bonuses

Prior to the filing in September 2020, the old Board paid cash retention bonuses (as advances) to Mr. Dunlap ($3.1 million) and Mr. Ballard ($1.1 million).  Today’s filing does not make clear whether the severance payments are in addition to the retention bonuses or instead of them. Unfortunately, the company didn’t file the waiver and release agreements that would have cleared this up.

Michael McGovern, the newly-appointed Chairman of the Board, was appointed the interim CEO, while the company conducts a search. James Spexarth, the Chief Accounting Officer, becomes interim CFO.

SEC filing – Superior Energy CEO CFO exit

 

 

Tidewater promotes from within for CFO position

Tidewater has promoted Sam Rubio to be its Chief Financial Officer. He is currently the Chief Accounting Officer and replaces Quintin Kneen, who was promoted from CFO to CEO in September 2019.  At the time the company said that the Board intended to conduct a search for a new CFO.



Tidewater provides offshore marine support and transportation services to the offshore energy industry. In 2020 it had revenues of almost $400 million and it currently has a market capitalization of $577 million. It moved its head office from New Orleans to Houston in 2018, shortly after exiting Chapter 11 bankruptcy.

In late 2018, Tidewater acquired GulfMark Offshore for $385 million. Mr. Rubio had been appointed the CFO of GulfMark a few months earlier in 2018. He joined GulfMark in 2005 and became its Chief Accounting Officer in 2008.

No new financial compensation for Mr. Rubio was disclosed.

SEC filing – Tidewater Rubio appointment

Houston oilfield service companies combining in $3 billion transaction

Two Houston-based oilfield service companies, Expro Group and Frank’s International are combining in an all-stock transaction worth about $3 billion.



Technically, Expro has its head office in the Reading, UK but its CEO and CFO are based in Houston. Similarly, Frank’s has its official head office in The Netherlands but its operational head office is in west Houston. Frank’s is publicly-traded, while Expro was a UK public company until it was taken private by a private equity consortium in 2008. Expro later filed for a pre-packaged Chapter 11 bankruptcy in December 2017.

Expro is a leading provider of well flow optimization solutions, while Frank’s is a leader in tubular running and other services related to well construction. The combined business had revenues of about $1.1 billion in 2020.

Expro in charge

Although it has been billed as a merger, it is Expro that is taking over Frank’s. Expro shareholders will own 65% of the combined business and the Expro CEO Mike Jardon and the Expro CFO Quinn Fanning (ex CFO of Tidewater) will take over those roles in the combined business. The business will be renamed Expro Group, though Frank’s will be kept as a brand name.

In 2020, Expro made $98 million adjusted EBITDA on $675 million revenue. Frank’s only had EBITDA of $9 million on $390 million revenue. Frank’s went public in 2013 and has been  dysfunctional ever since. When current CEO Mike Kearney was appointed to that role in September 2017, he was the fourth CEO in three years. Likewise, Melissa Cougle became the third CFO in just over four years when she was appointed in May 2019.

Frank’s CEO becomes Chairman

Mr. Kearney will become Chairman of the combined group. As a result of him giving up the CEO position, all his outstanding equity awards will vest. The company didn’t quantify the amount but it is likely to be worth a few million.

There was no word on the fate of Ms. Cougle or the other executive officers of Frank’s.

The companies expect to realize annualized savings of $70 million, with $40 million from support and indirect costs and $10 million from rationalizing facilities.

The deal is expected to close in the third quarter.

Expro – Frank’s Investor Presentation

MRC Global appoints new CEO

MRC Global has appointed Rob Saltiel as its new CEO. He replaces Andrew Lane, who announced plans to retire in May 2020. Mr. Lane has been the CEO since 2008.

MRC is a global distributor of pipes, valves and fittings to all segments of the energy industry (E&P, midstream including gas utilities, and downstream). The company, formerly known as McJunkin Red Man, was founded 100 years ago and has its headquarters in downtown Houston. It went public in 2012 and has a market capitalization of $778 million.



Mr. Saltiel was formerly the CEO of Key Energy Services.  He was in that role for just 16 months, leaving in December 2019, just ahead of a bankruptcy filing. He did, however, leave with a $2.5 million severance. Prior to that, he was the CEO of Atwood Oceanics from 2009 to 2017.

Mr. Saltiel will receive a base salary of $825,000. He also receives $1.65 million in restricted stock units that will vest over three years and the same amount in performance stock units. These will vest after three years, subject to the performance of the stock price.

Mr. Lane will receive the equivalent of his pro-rated annual salary ($900,000) through the end of the year, his original planned retirement date. Instead of a severance payment, the Board awarded Mr. Lane 600,000 restricted stock units worth almost $6 million.

Kelly Youngblood is the CFO of MRC. He was appointed in September 2019.

SEC filing – MRC Global new CEO

Baker Hughes has legal troubles on two fronts

Baker Hughes filed its annual report at the end of last week and disclosed legal troubles on two different fronts. The company is one of the big three US oilfield services company. It has its head office near George Bush Intercontinental Airport.

In December 2020, the Company received notice that the Securities and Exchange Commission (SEC)  is conducting a formal investigation into whether the company sold products and services on projects impacted by U.S. sanctions.



The company is cooperating with the SEC and providing requested information. The Company has also initiated an internal review with the assistance of external legal counsel regarding internal controls and compliance related to U.S. sanctions requirements.

Baker Hughes didn’t disclose any more details. However, Reuters reported that the company and 17 other firms had recently quit working on Russia’s Nord Stream 2 gas pipeline to avoid being sanctioned for it.

FCPA issues

The company has been fined by the SEC before for breaches of the Foreign Corrupt Practices Act (FCPA). In 2007, it paid $23 million in relation to bribes in Kazakhstan. It also paid a $10 million fine as its actions in Kazakhstan breached an earlier 2001 cease-and-desist order related to bribes paid in Indonesia.

BMC lawsuit

The other legal issue relates to its new helix logo. In December 2019, Houston-based BMC Software sued Baker Hughes. It alleged that Baker’s logo infringed on a trademark that BMC holds (see its logo below). The lawsuit is still ongoing.

BMC the global leader in software solutions for IT (PRNewsFoto/BMC)

Normally, most customers wouldn’t confuse a software company and an oilfield services company. However, Baker Hughes announced an alliance with Microsoft in November 2018 to bring ‘enterprise artificial intelligence solutions to the energy industry’. As a result, BMC argues that the new logo is likely to ’cause confusion, mistake and deception, among consumers, the public and the trade’.

BMC Complaint against Baker Hughes

 

 

 

Three former Houston public companies exit bankruptcy

In the past few days, three Houston-area companies that were publicly-traded have exited Chapter 11 bankruptcy.



Francesca Holdings, the boutique retailer, filed for bankruptcy in December. It auctioned off its assets to TerraMar Capital and Tiger Capital. Together they bought the assets for $18 million in cash plus $1.25 million due at the end of the year. They plan to keep open 275 stores out of a total of 461.  The company appointed a wind-down officer to liquidate the remaining assets.

Cindy Thomason, the CFO of Francesca Holdings, has been appointed the CFO of the newco that is operating the ongoing stores.

Superior Energy Services also filed for bankruptcy in December, though it announced a Restructuring Support Agreement three months earlier. The oilfield services company converted $1.3 billion of debt into equity. It exited Chapter 11 free of debt and $242 million in cash. A new Board of Directors was appointed, but the existing management team was retained.

Prior to filing, the old Board agreed pay $7.3 million in retention bonuses to the six executive officers of the company. CEO David Dunlap got $3.2 million, while CFO Westy Ballard got $1.1 million. The bonuses will be paid in September 2021.

Noble Holding Corporation, the drilling contractor, filed in July 2020. The company technically has its head office in London but its operational headquarters are in Sugar Land. $3.4 billion of unsecured debt was exchanged for 86% of equity in the newly-reorganized company. The company leaves Chapter 11 with $216 million of second lien notes and $178 million drawn on a new $675 million revolving credit facility.

As with Superior, a new Board of Directors was appointed but the existing management team was retained. However, former CEO and Executive Chairman Julie Robertson resigned. She received a $3.75 million lump sum payment when she transitioned to the Chairman position in March 2020.

SEC filing – Francesca Holdings Ch 11 exit

SEC filing – Superior Energy Ch 11 exit

SEC filing – Noble Corp Ch 11 exit

TETRA Technologies sells most of its interests in CSI Compresso

TETRA Technologies has sold most of its interests in CSI Compresso for $30.7 million. As a result, Compresso will no longer be consolidated in the results of Tetra. Both companies are publicly-traded and based in The Woodlands.



TETRA is mainly involved in completion fluids. It’s also the largest producer of Calcium Chloride which has many non-oilfield uses such as de-icing products. CSI Compresso provides compression services and equipment for natural gas and oil production.

The buyer of TETRA’s stake is Spartan Energy Partners, a PE-backed company, also based in The Woodlands. Spartan provides gas treatment, compression and processing solutions. Tetra will retain an 11% stake in CSI Compresso.

New management at CSI Compresso

TETRA’s CEO and CFO also held the same roles at CSI Compresso. They have resigned from the latter to be replaced by John Jackson, CEO of Spartan and Jonathan Byers, Head of Corporate Development at Spartan. Mr. Byers joined Spartan in 2010. Prior to that. he worked at Price Gregory and SCF Partners.

In connection with the sale, TETRA will continue to supply accounting, IT and other back office services to CSI Compresso for up to one year.

Compresso debt weighing down TETRA

TETRA and CSI Compresso always seemed an odd mix as the asset and capital structure required for the businesses are very different. Prior to the sale, TETRA had $843 million of debt, of which $637 million related to CSI Compresso. Even though there were no cross default provisions or cross guarantees on the debt, management felt the high debt levels weighed down TETRA’s stock price.

The deal brings to a close one of the more poorly-timed transactions in oilfield history. TETRA had a relatively small compression division until it agreed to buy Compressor Systems for $825 million in cash in July 2014. At the time, West Texas crude oil prices were over $100 a barrel. Oops.

SEC filing – TETRA sale of CSI Compresso

As an aside, Bloomberg published an article in October 2020 that stated that Calcium Chloride produced in TETRA’s Finland factory was being shipped to Peru, smuggled into Ecuador and used in cocaine production by Columbian drug lords. Not the non-oilfield diversification that TETRA was looking for! Bloomberg didn’t allege that TETRA had done anything wrong.

 

CFO steps down at oilfield services company

Jay Nutt has stepped down as CFO of ChampionX, with effect from February 1, 2021. He is replaced by Ken Fisher, a non-executive director and former CFO of Noble Energy, until its acquisition by Chevron last year.



ChampionX was formed , in June 2020, from the all-stock merger of Apergy and the Champion division of Ecolab. Apergy is primarily involved in Artificial Lift while Champion primarily manufactured oilfield chemicals.

Mr. Nutt was the CFO of Apergy prior to the merger. He joined the company in March 2018, just before Apergy was spun off from Dover Corporation. Prior to that, he was the Corporate Controller at TechnipFMC (who announced a CFO change of their own last week).

Because of the merger last June, Mr. Nutt’s resignation is deemed a ‘termination for good reason’ following a change of control. That means he will get a cash payment of $1.7 million (2x base salary plus 2x annual bonus). In addition, all his restricted stock will vest. At the time of the merger, that was valued at another $1.7 million. Mr. Nutt will also be retained as a consultant through June 2021 at $40,833 a month.

Mr. Fisher joined the board of Apergy in April 2018.  He became the CFO of Noble Energy in 2009. Prior to that, he was at Shell and General Electric. Mr. Fisher will receive a base salary of $590,000.

SEC filing – ChampionX CFO change