Category Archives: Oilfield Services

Noble to acquire Diamond Offshore for $1.7 billion

Noble Corporation has agreed to buy Diamond Offshore for $1.67 billion. Both companies operate in offshore drilling. Diamond has its head office in west Houston, while Noble is in the process of moving its head office from Sugar Land to the Westchase area of Houston.



The consideration split is 64% stock and 36% cash (or approx $600 million cash consideration), with Diamond shareholders projected to own about 15% of the combined company. Noble is also taking on Diamond’s debt of $550 million.

The key assets for Diamond are 4 deepwater drillships and 1 semi-submersible that can operate in harsh environments. In addition, the company has 5 other older semi-submersibles.

Second time a charm

Diamond entered Chapter 11 bankruptcy in April 2020 and exited a year later, having converted $2 billion of debt into equity. The company put itself up for sale in August 2021, but in January 2022 it announced it would remain independent after failing to attract any satisfactory takeover offers.

Diamond Offshore CEO Bernie Wolford has previously worked for Noble for over 28 years, over two separate stints. It’s also the second time he has been CEO of a company acquired by Noble as he was also CEO of Par Pacific until its acquisition in April 2021.

Noble acquisitions

Noble, which exited its own bankruptcy in February 2021, has been the leading consolidator in the offshore drilling sector. In addition to Par (bought for $358 million), it acquired Maersk Drilling in October 2022 for $2 billion.

Noble expects to realize $100 million in cost synergies. mostly through SG&A savings. The deal is expected to close by the first quarter of 2025.

It’s the latest in a series of merger announcements involving Houston-based public companies;

Investor Presentation – Noble – Diamond

Houston oilfield services company appoints new CFO

Jay Nutt has been appointed CFO of Cactus Inc, a publicly-traded oilfield services company with its head office in the Memorial City area of Houston. The company has a market capitalization of $4 billion.



Stephen Tadlock, the previous CFO, was appointed CEO of the company’s Spoolable Technologies segment in October 2023. At that time, the company appointed Alan Keifer as the interim CFO. Mr. Keifer, a former Chief Accounting Officer at Baker Hughes, had been providing consulting services to the company since February 2023.

In March, Donna Anderson, the Chief Accounting Officer of Cactus, resigned to take the same position at Bristow Group, another Houston oilfield services company.

Mr. Nutt has plenty of experience in oilfield services. In 2018 he was appointed CFO of Apergy as it became a publicly-traded company carved out of Dover Corporation. When Apergy merged with the Champion Nalco business of Ecolab in 2020 to form ChampionX, he became the CFO of the combined business. He left ChampionX in 2021.

Prior to that, Mr. Nutt spent nearly 30 years at FMC in its various forms. Early on, when FMC was a conglomerate, he spent time in both the Food Processing Equipment and Gold divisions. He joined the oilfield services division in 2001 as it was being spun off as FMC Technologies. He stayed on for a year after its merger with Technip in 2017.

Mr. Nutt will receive a base salary of $450,000.

SEC filing – Cactus CFO appointment

Schlumberger to buy ChampionX for $7.8 billion

Schlumberger (‘SLB’) has agreed to buy ChampionX for $7.8 billion in an all-stock transaction. ChampionX has its head office in The Woodlands.



ChampionX was formed in 2020 from the merger of Apergy Corporation (itself a spinoff from Dover Corporation) and the upstream division (aka Nalco Champion) of Ecolab. Apergy was primarily involved in Artificial Lift, while Nalco Champion primarily manufactured oilfield chemicals.

In 2023, ChampionX had revenues of $3.8 billion. Two-thirds came from Chemicals, a quarter from Artificial Lift and the rest from Drilling Products and Reservoir Chemical Technologies. The company has 7,300 employees in 38 countries.

SLB, which has a market cap of $79 billion, believes that ChampionX’s focus on production will reduce its cyclical exposure from the drilling side of the business. From a customer’s perspective, E&P companies treat drilling as capex, while production costs are operating expenses.

ChampionX also helps SLB increase its presence in North America. Currently, SLB generates only 21% of its revenues from that region. Compare that to its main rival, Halliburton, which derives 46% of its revenues from North America.

SLB expects to generate $400 million in annual savings by 2027 from eliminating duplicate G&A overheads, reduced operating costs and supply chain optimization.

SLB expects the deal to close in late 2024.

Investor Presentation – SLB ChampionX

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.

 

 

Innovex abandons IPO to merge with Dril-Quip

Dril-Quip, a publicly-traded company, is to merge with PE-backed Innovex. Both companies are in oilfield services, and both have their head office in Houston.



It is an all-stock transaction with Dril-Quip shareholders owning 52% of the combined company. However, the company will be renamed Innovex International and the Innovex CEO and CFO will hold those roles in the combined company. Innovex had filed to go public in January 2024.

Dril-Quip has a market capitalization of $825 million and revenues of $478 million and adjusted EBITDA of $59 million. Innovex has revenues of $556 million and adjusted EBITDA of $132 million.

Complementary overlap of products

Dril-Quip was formed in 1981 and went public in 1997. It started out producing oilfield equipment to be used offshore (either subsea or on offshore platforms). In 2023, it purchased a Canadian wellhead business for $80 million to increase its onshore presence.

Innovex was formed in 2016 through the merger of three oilfield service companies that were separately owned by Intervale Capital. The companies were primarily involved in downhole tools and products, mostly onshore. Innovex has made a number of acquisitions since to increase its offshore and international presence. Intervale renamed itself to Amberjack Capital Partners in 2021.

Dril-Quip has its corporate office in NW Houston while Innovex is based in Humble. The company expects to achieve $30 million in synergy cost savings through removing duplicate corporate functions, manufacturing optimization and supply chain savings.

The new management

Adam Anderson will be the CEO of the combined business. He was the CEO of one of the three companies that merged to form Innovex. Kendal Reed, CFO of Innovex since 2019, will be CFO of the combined business. Prior to joining Innovex, he worked at Amberjack, the PE-firm and Piper Sandler investment bank.

Dril-Quip Executive Payout

Dril-Quip CEO Jeff Bird and CFO Kyle McClure don’t have roles in the combined business and will receive large payments following the change of control. The annual proxy statement for 2023 has not yet been released. According to the proxy filed for 2022, Mr. Bird would have been paid a package worth $10.2 million (assuming a termination date of December 31, 2022). For Mr. McClure, the equivalent figure was $4.8 million.

The deal is expected to close in the third quarter.

Investor Presentation – Dril-Quip Innovex

 

Select Water Solutions replaces its CFO

Select Water Solutions, based in the Galleria area, has appointed Chris George as its CFO. He replaces Nick Swyka, who is leaving the company at the end of the month.



Select provides water management and chemical solutions to the oil and gas industry. The company originally began operations in 2007 as Peak Oilfield Services. Then called Select Energy Services, it went public in 2017 through an IPO. The business has revenues of $1.6 billion and a market cap of just under $1 billion.

Founder John Schmitz served as the CEO until its merger with Rockwater Energy Solutions in late 2017. He returned as CEO in January 2021 after the ouster of the previous CEO, who came over from Rockwater.

Mr. George joined Select in January 2012 and served in roles such as Treasury and Investor Relations. He was promoted to VP, Corporate Development, Investor Relations & Sustainability in January 2022. He started his career at UBS Investment Bank.

Mr. Swyka joined the company as CFO in May 2018. He was previously the Director of Investor Relations and Corporate Development at Nabors Industries. He will receive one years’ severance ($360,000), a target bonus for 2024 ($288,000), a bonus for 2023 ($263,779) and pro-rated bonus for 2024. Certain equity awards will also vest. At the end of 2022, these were valued at approximately $678,000. All in, that’s a severance package of around $1.6 million.

SEC filing – 8-K – Select Water CFO

Kodiak to acquire CSI Compressco for $854 million

Kodiak Gas Services, based in Montgomery, TX, has agreed to buy CSI Compressco LP, based in The Woodlands. The deal is an all-stock transaction that values CSI at $854 million (including the assumption of $619 million of net debt).

That represents $1.65 per CSI stock unit. For most of 2023 the units have been priced around $1.20 to $1.40. At the beginning of December, the price spiked to $2 per unit.



The transaction creates the largest contract compression fleet in the US with 4.3 million revenue-generating horsepower. Compression is used in various parts of the Energy industry such as compressing natural gas to the required pressures used in processing facilities or pressurizing gas lift systems for field-wide reinjection to lift oil.

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).

Kodiak went public in June 2023 in a $256 million IPO. The company currently has a market cap of $1.5 billion.

Kodiak is projecting $20 million of annualized cost savings from the acquisition, though no details were given about the savings

The transaction is expected to close in Q2 2024.

https://ir.kodiakgas.com/news-events/press-releases/detail/18/kodiak-gas-services-inc-to-acquire-csi-compressco-lp-in

 

Subsea Robotics company terminates contract of CFO

Nauticus Robotics has terminated the contracts of CFO Rangan Padmanabhan and Chief Legal and Administrative Officer Dilshad Kasmani. The company did not give a reason, but they did say it was not for cause, meaning the two men will be entitled to severance.

Nauticus, based in Webster, was taken public by a SPAC (Special Purpose Acquisition Corporation) in September 2022. The company is developing tetherless, autonomous electric-powered robots that can be controlled by staff onshore.

As with many SPACs, the share price has plunged since going public at $10 per share. It now trades at $1.10.

The company is in the process of acquiring 3D at Depth, a subsea laser LiDAR inspection and data services company for $34 million in stock.

Victoria Hay has been appointed interim CFO. She will receive cash compensation of $30,000 a month and was also granted 40,000 restricted stock units that will vest on the earlier of her termination or one year from the date of grant. Mrs. Hay has been provided consulting services since the start of the year. She spent 13 years in various roles at Weatherford International, mostly recently as Senior Director – Global Accounting and Reporting Services.

Mr. Padmanabhan was appointed CFO in May 2022. He spent many years at Solaris Asset Management and is a graduate of Rice University. Neither his salary nor his severance package has yet been disclosed publicly.

SEC filing – Nauticus CFO termination

US Silica Holdings CFO departs after 10 years

U.S. Silica Holdings CFO Don Merril has been terminated without cause, with immediate effect. Kevin Hough, VP and Corporate Controller, has been appointed interim CFO. Mr. Hough had previously told the company that he intends to retire in 2024, so the company is performing a search for a new CFO.



U.S. Silica has its head office in Katy, Texas. It primarily produces silica which is used as a proppant in fracking. It also produces diatomaceous earth which is used as a filtration product in various industries. The company has a market capitalization of $1 billion.

Mr. Merril joined the company in 2012 and became its CFO the following year. The company has said it is still negotiating the terms of the separation agreement with Mr. Merrill.

According to the annual proxy, Mr Merril would normally be entitled to one years salary ($440,000) and acceleration of unvested stock ($2.6 million at December 31, 2022). Unusually, there’s no mention of a payment of an annual bonus in the event of a termination. For 2022, Mr. Merril received a cash bonus of nearly $600,000.

[UPDATE 11-24-23 – In an 8-K filing, the company said Mr. Merril will receive a bonus for 2023 to be paid in early 2024. That’s in addition to the $440k and the vesting of the time-based restricted stock. The performance-based restricted stock will vest once the results of the company have been certified].

SEC filing – 8-K – US Silica CFO departure

 

Kodiak Gas completes IPO below expected price range

Kodiak Gas Services, based in Montgomery, TX, has completed its $256 million Initial Public Offering (IPO). Its stock is now listed on the NYSE under the symbol ‘KGS’. It offered 16 million shares at $16 per share, well below the proposed range of $19-$22.



The company operates gas compression services, mostly in the Permian and Eagle Ford basins in Texas. In 2022 it had revenues of $708 million, adjusted EBITDA of $399 million and net income of $106 million. The business is capital-intensive business and spent $48 million on maintenance capex and $211 million on growth capex last year.

Kodiak was founded in 2011 and backed by the Stephens Group, an Arkansas-based PE firm until 2019 when EQT Partners, a Swedish-based investment firm, acquired a majority stake in the business.

Management

David Marrs and Mickey McKee co-founded Kodiak in 2011. Mr. Marrs served as the CEO until shortly after the investment by EQT. Mr. McKee has been the CEO since then.

John Griggs has been the CFO at Kodiak since January 2023.  Previously, he held various CFO roles at PE-backed companies.  He also worked at CSL Capital Management, a Houston-based PE firm, for three years. Ewan Hamilton, who was the CFO for nearly seven years prior to the appointment of Mr. Griggs, remains at the company as Chief Accounting Officer.

High Debt

It was intended that the monies raised in the IPO would be used to repay $314 million of a term loan that carries interest of almost 12%. Given that the IPO price was well below the proposed price, the amount of debt repayment will be lower

Prior to the IPO, the company had borrowings of $2.75 billion. In addition to the repayment,  $700 million (the remaining balance of the term loan) was to be transferred to Kodiak’s parent, leaving $1.75 billion of debt on the books post-IPO. The $700 million was based on the proposed IPO range and may change given the lower IPO price.

In case you feel sorry for the parent having to take back $700 million of debt, don’t. In 2022, the  company paid a $838 million distribution to its parent that was mostly funded by increasing the balance on the term loan.

SEC filing – S-1 Kodiak

https://www.prnewswire.com/news-releases/kodiak-gas-services-inc-prices-initial-public-offering-301866415.html