Category Archives: Oilfield Services

Houston Drilling Tools company to be taken public by SPAC

Drilling Stabilizer

Drilling Tools International (‘DTI’), which has its head office in the Westchase area of Houston, is being taken public by ROC Energy Acquisition Corp, a Dallas-based SPAC. The transaction values the business at $319 million.



DTI manages and maintains over 65,000 rental tools and drilling equipment across 22 service and distribution centers in North America and Europe. Its main machine and repair center is in Broussard, Louisiana.

The business was founded in 1984 as Directional Rentals. In 2012, Hicks Equity Partners, also based in Dallas, acquired the business. Since then, the business has made 7 acquisitions and revenue has grown to an expected $164 million in 2023.

Adjusted EBITDA for 2023 is forecast to be $58 million (35%). That’s a misleading metric for any rental business that has high capex needs. Free cash flow, defined as EBITDA less capex is forecast to be $19 or 11%.

The transaction will leave DTI with no debt and $217 million of cash on the balance sheet to fund future acquisitions.

Wayne Prejean has been the CEO at DTI since 2013. He has a long career in directional drilling companies. In 1999, he founded Wildcat Services before selling it to National Oilwell Varco in 2004. Mr. Prejean stayed with NOV after the sale.

David Johnson joined as CFO, also in 2013. He has been the CFO at a number of drilling companies prior to that.

ROC went public in December 2021 in a $150 million IPO. Its original intention was to focus on non-operated oil and gas properties (i.e. where the E&P company owns the well but does not manage the operations of the well).

ROC may have had to pivot after Granite Ridge Resources, a business that owns non-operated assets, was taken public in October 2022 by a rival SPAC chaired by Paul Ryan, the former speaker of the House of Representatives. Since going public, Granite’s stock is down 30%

The transaction is expected to close in the second quarter of 2023.

DTI – Investor Presentation

 

 

Flotek CEO steps down

Flotek Chairman and CEO, John Gibson, is out after three years at the struggling specialty chemicals company. He is replaced, on an interim basis, by Harsha Agadi, a non-executive board director.



The company has its head office in NW Houston and has been losing money at an EBITDA level since 2016. Its share price is $1.52 and is has a market cap of $104 million. In February 2022, Flotek agreed to supply ProFrac Holdings high volume, low margin chemicals in return for convertible notes.  Revenues in Q3 2022 were $46 million, over three times larger than Q3 2021. Profac now owns 51% of Flotek.

Mr. Gibson joined the company in January 2020. Four months later, the company paid $36 million (including $25 million in cash) for an oilfield data analytics company.  The purchase price included $17.5 million of goodwill and $12.9 million of intangible assets. Four months after the acquisition, the company wrote down those assets by $24.2 million. The remaining goodwill was written off in 2021.

Mr. Gibson will receive a cash severance of $1.5 million. As part of the agreement, Mr. Gibson has agreed to forfeit all of his outstanding options and unvested restricted stock units.

Mr. Agardi has been on the Board since 2020. He has been the CEO at a publicly-traded insurance claims company, Friendly’s Ice Cream and Church’s Chicken. Whilst interim CEO, he will receive a salary of $50,000 a month.

Dispute with former CEO

The company is also in dispute with John Chisholm, the CEO prior to Mr. Gibson. In December 2021, the company conducted an internal investigation into his activities during the period 2014 to 2018. The company found evidence of related party transactions/self-dealing, inappropriate personal expenses, and general corporate waste.

Flotek’s board engaged a third party to review the findings of the investigation. After the third-party review, the company concluded that its current and historical financial statements can be relied upon, that proper action had been taken, and that no members of current management were implicated in any way.

Mr. Chisholm filed a countersuit against the company as he has not been paid his remaining severance of $0.4 million.

That severance hadn’t been paid because, in 2019, the IRS notified the company had it had not properly withheld certain employment taxes in 2014  (Mr. Chisholm provided his services through a management company). The amount involved is $1.8 million. Mr. Chisholm had indemnified the company, but it is Flotek who has to pay the IRS first and then recoup the money from Mr. Chisholm.

New CFO last month

Flotek appointed a new CFO, Bond Clement, just last month.

[Full Disclosure – I worked at Flotek between 2006-2009 and still own a small number of shares]

SEC filing – Flotek CEO out

Weatherford appoints new CFO after long search

Weatherford International has appointed Arun Mita as its new CFO. He replaces Keith Jennings, who left in July 2022.

Mr. Mita joins from Mitsubishi Power Americas where he has been CFO since 2014. Before that, he spent 14 years at Siemens in the US and Germany. He started his career at Price Waterhouse in India before moving to the US with KPMG. He will relocate from Orlando.

Mr. Mita will receive a base salary of $525,000 and a cash sign-on bonus of $410,000. He will also receive long-term incentives worth $1.7 million. 40% will vest over 3 years, the rest will vest after 3 years, subject to the achievement of performance metrics.

It should be noted that Mr. Jennings joined in September 2020 with a similar package (including sign-on bonus and relocation assistance) before leaving with a severance of over $1 million (1x base plus target annual bonus plus pro-rated target bonus). Mr. Jennings started six weeks before Girish Saligram joined as CEO.

The business has improved its performance in the past year as the oilfield sector has recovered. In the third quarter, revenues and adjusted EBITDA were up about 20% year-on-year. That allowed the business to flip from net losses before taxes to net profits.  In that time, net debt is virtually unchanged at around $1.2 billion, but the leverage ratio has dropped from 3.3 times a year ago to 1.8 times at September 2022.

Unlike certain competitors, Weatherford has not pulled out of Russia and generates 6%-7% of its revenues in Russia. In its Q1 filing for the first quarter of 2022, the company disclosed that its net assets in Russia were $106 million. That jumped to $168 million at the end of Q2. In Q3, the company did not disclose the amount of net assets in Russia.

SEC filing – 8-K Weatherford CFO Jan 2023

 

Flotek appoints new CFO

Flotek Industries, a specialty chemicals company, has appointed Bond Clement as its new CFO. He replaces Mike Borton, who left in May 2022.

Seham Carson, the Corporate Controller, had been interim CFO since Mr. Borton left. She is expected to remain with the company in a senior financial role.

Flotek has been losing money at an EBITDA level since 2016. Its share price is $1.13 and is has a market cap of $82 million. Earlier this year, Flotek agreed to supply ProFrac Holdings high volume, low margin chemicals in return for convertible notes.  Revenues in Q3 2022 were $46 million, over three times larger than Q3 2021. Profac now owns 51% of Flotek.

Mr. Clement joins from Donovan Marine, a privately-held distributor of recreational marine products where he had been CFO since September 2021. Prior to that, he spent 17 years at PetroQuest Energy, an E&P company. He was CFO for 12 years.

PetroQuest was publicly-traded until 2018. High debt forced the company into bankruptcy in November of that year. It emerged from bankruptcy three months later, having shed $292 million in debt.

Mr. Clement will receive a base salary of $400,000 and a sign-on bonus of $50,000. He will also get $50,000 to relocate from Lafayette, LA to Houston.

SEC 8-K filing – Flotek CFO appointment

Baker Hughes appoints new CFO

Nancy Buese has been appointed CFO of Baker Hughes. She replaces Brian Worrell, who will stay on with the company as an advisor through Q2 2023.

The company has revenues of $21 billion and a market capitalization of $25 billion.



Baker Hughes recently announced a reorganization that would reduce its four reporting segments into two. Oilfield Services and Oilfield Equipment were combined into one while Turbomachinery & Energy Technology and Digital Solutions were combined into the other. The company expects to save $150 million as a result.

Ms. Buese was the CFO of Newmont Corporation, a Denver-based gold miner, from October 2016 until last month. Prior to that, she was the CFO at MarkWest Energy Partners for 10 years, a midstream company. When it was acquired by MPLX, a publicly-traded MLP owned by Marathon, she became the CFO of MPLX.

Ms. Buese will receive a base salary of $900,000. She will also receive a cash sign-on bonus of $2 million and an award of restricted stock units worth $5 million, that will vest over 3 years. In 2023, she will also be eligible for long-term incentive awards with a current annual target of $3.5 million.

Mr. Worrell has been the CFO of Baker Hughes since it was combined with GE’s oil and gas division in 2017 (it became independent of GE in 2019). Prior to that, he served as CFO of GE Oil and Gas between 2014 and 2017. He began with GE in 1992 and is based in London.

No details of any severance arrangements with Mr. Worrell were disclosed.

[UPDATE 12-02-22. The company filed an updated 8-K. Mr. Worrell will get a severance of $2.6 million (18 months’ base salary) plus $1.25 million average bonus. He also gets a consulting contract that pays $100,000 a month. That will last for up to 18 months, though the company can terminate after six months].

SEC filing – Baker Hughes CFO

New CFO at NCS Multistage

NCS Multistage has appointed Michael Morrison as its new CFO and Treasurer. He replaces Ryan Hummer, who has been promoted to CEO following the retirement of Robert Nipper, the founder of the company. Mr. Nipper will remain on the Board.



NCS manufactures products used in the fracking of horizontal wells. It has revenues of $135 million and a market capitalization of $65 million.

The company has its head office in NW Houston and went public in April 2017 at the $17 per share. The current share price of $26 sounds good until you realize there was a 1-for-20 reverse stock split in 2020. In other words, on a like-for-like basis, the stock has dropped from $340 at IPO to $26 now.

Mr. Morrison was, until recently, the CFO at ION Geophysical, another Houston oilfield services company.  He joined that company in 2002 and became CFO in February 2020. Ion filed for bankruptcy protection in April 2022, due to continued ongoing weakness in the seismic sector.

Mr. Morrison will receive a base salary of $325,000.

8-K filing – NCS Multistage CFO

CFO promoted to CEO at Oilfield Services company

Ryan Hummer, CFO of NCS Multistage Holdings, has been appointed CEO, effective November, 1, 2022. He replaces Robert Nipper, the company’s co-founder, who is stepping down, though Mr. Nipper will remain on the Board. The company described it as part of their normal succession planning.

The company manufactures highly engineered products used in fracking and the majority of its sales are in Canada. It has its head office in NW Houston.  The company was formed in 2006 and went public in April 2017 with an IPO stock price of $17 per share. Soon after, its market cap rose over $1 billion, before crashing in late 2019. The current market cap is $78 million.

The company is looking at both internal and external candidates to replace Mr. Hummer.

Mr. Hummer has an investment banking background and joined the company in July 2014 as VP of Corporate Development. He was later promoted to CFO in November 2016.

Mr. Hummer will receive a base salary of $450,000. That’s a considerable bump on both his previous salary as CFO ($250,000) and Mr. Nipper’s ($300,000).

SEC filing – NCS Multistage CEO

 

 

 

US Well Services to be acquired by ProFrac

US Well Services Nyx Clean Fleet® Frac Unit – patented PowerCube delivers true redundancy power to two separate electric motors and pumps.

[Update Nov 1 2022 – The deal has now closed]

US Well Services has agreed to be taken over by ProFrac in an all-stock deal that values the equity at around $93 million.

USWS, based in the Galleria, was founded in 2012 and was taken public for $274 million by a SPAC in November 2018. It currently operates five electric frac fleets and one diesel unit.



USWS also has about $265 million in debt. This includes $110 million of convertible loan notes. As part of the deal, ProFrac will issue stock worth $177 million to eliminate these notes. ProFrac also intends to refinance the remaining long-term debt.

Just last month, USWS announced leadership changes that resulted in Kyle O’Neil being promoted from CFO to CEO.

ProFrac just went public in May 2022 via a $288 million IPO. It has its head office in Willow Park, west of Fort Worth.  With the acquisition, ProFrac will leapfrog Liberty Oilfield and Nextier become the second largest pressure pumper by horsepower, behind only Halliburton.

ProFrac was founded by the Dan and Farris Wilks in 2016. Prior to that, they created Frac Tech in 2002 which the brothers sold in 2011 for $3.5 billion. Dan and Farris are not on the Board of ProFrac. However, Matt, son of Dan, is Executive Chairman, while Ladd, son of Farris, is CEO.

ProFrac, through an affiliate, already owned 13% of USWS. It acquired its stake in 2021. At the same time, ProFrac also paid $22.5 million to USWS for licenses to build three electric frac fleets. Under that agreement ProFrac also expected to pay USWS $22.5 million a year, over the next four years, for additional licenses. With the acquisition of USWS, ProFrac will no longer have to pay those additional fees.

ProFrac also expects to generate $35 million in synergies in 2023. $13 million of this will come from the elimination of duplicate corporate and field overheads, while $12 million will result from reduced repair and maintenance costs (primarily by using in-house manufacturing facilities). $5 million each will arise from supply chain synergies and reduced maintenance capex.

ProFrac also owns 23% of Flotek Industries, another struggling Houston oilfield services company.  In addition, companies affiliated with the Wilks brothers also own 7% of Nextier and 9% of ProPetro Holdings, another pressure pumper. They also took Carbo Ceramics private in March 2020.

The deal for USWS is expected to close in the fourth quarter.

Investor Presentation

Ranger Energy replaces its CFO

Ranger Energy Services has replaced its CFO, Brandon Blossman, with Melissa Cougle, effectively immediately.



Ranger went public in August 2017 at $14.50 per share, giving it a market capitalization of $215 million.  At that time, its primary business was workover rigs.  The company has since made acquisitions in wireline. It also acquired the assets of Basic Energy Services out of bankruptcy in September 2021 for $36.65 million.

Its current share price is $10.29 and the company has a market capitalization of $259 million. It has its head office in the Westchase district of Houston.

Mr Blossman was appointed CFO in June 2018 after spending many years at Tudor Pickering, an energy investment bank. He will continue to be paid for six months after his departure. Mr. Blossman will also receive accelerated vesting of 20,899 shares of restricted stock

Ms. Cougle was the CFO at Frank’s International from May 2019 until November 2021, leaving shortly after its takeover by Expro Group. Prior to that, she was CFO at National Energy Services Reunited, another Houston-based publicly-traded oilfield services company, from May 2018 to May 2019.

She will receive a base salary of $400,000. That’s considerably more than Mr. Blossman was making ($303,000).

In September 2021, the company appointed Stuart Bodden as its CEO, replacing Darron Anderson who left three months earlier.

Amazingly, it was the second time that Mr. Bodden had succeeded Mr. Anderson. Mr. Bodden joined from Express Energy where he had been CEO since 2016. He was hired at Express after Mr. Anderson left to take the job at Ranger. Express Energy was a portfolio company of Apollo Management until it was sold for a big loss in 2020.

SEC filing – Ranger appoints Cougle as CFO

Weatherford CFO is out after less than two years

Keith Jennings, CFO of Weatherford International, is out after less than two years with the company. His last day will be July 31. The company has begun an executive search for his replacement.



Weatherford filed for bankruptcy in July 2019, emerged in December 2019 and relisted its shares on Nasdaq in June 2021. At the time of the relisting, its share price was $12.81. It is now $31, giving it a market capitalization of over $2 billion.

The company still has over $2 billion in net debt, but it has had some success in moving away on high volume, low margin business. This is evidenced by its gross margin percentage of 27%  being the highest since 2011.

Mr Jennings joined from Calumet Specialty Products Partners in September 2020, where he was CFO.  Earlier in his career he spent seven years as VP and Treasurer at Cameron International, leaving a few months after its takeover by Schlumberger.

Six weeks after Mr. Jennings started, Girish Saligram was appointed CEO.

Mr. Jennings had a base salary of $500,000. He will receive a cash severance of almost $1.8 million (1.5 times base salary and target bonus, plus pro-rated bonus for 2022). In addition, according to the annual proxy filed last month, $5 million of restricted stock awarded to Mr. Jennings will also vest.

Calumet is based in Indianapolis, so Weatherford gave Mr Jennings a relocation allowance of $150,000. He also received $500,000 as a sign-on bonus.

SEC filing – Jennings departure