Category Archives: Oilfield Services

Kodiak Gas completes IPO below expected price range

Leave a reply

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

Houston oilfield companies to merge in $5.4 billion transaction

Leave a reply

 

Patterson-UTI Energy (‘PTEN’) and Nextier Oilfield Solutions have agreed to merge in an all-stock deal that values the combined business at $5.4 billion. Both companies have their headquarters in Houston.



PTEN shareholders will hold 55% of the combined business, which will retain the Patterson-UTI name. Senior executives at PTEN (Curtis Huff – Chair, Andy Hendricks – CEO and Andrew Smith – CFO) will hold the same roles in the combined business. Robert Drummond, CEO of Nextier, will become Vice Chair of the Board. Kenneth Puchei, the CFO of Nextier, will become the Chief Integration Officer.

PTEN is historically known for its land-based contract drilling. It is also the number 7 player in the North American pressure pumping market. Nextier is number 5 in that market, and the combined business will jump to number 2, behind only Halliburton in frac horspower. Nextier also has wireline and well construction services in its portfolio of operations.

There has been an increasing trend in recent years for customers who buy PTEN’s contract drilling services to also buy pressure pumping services from then. This acquisition will help reinforce that trend.

The companies expect to generate annualized savings of $200 million in cost savings and operational synergies within 18 months of the close, which is expected in Q4 of 2023.

Patterson was formed in 1978 and went public in a $5 million IPO in 1992. It merged with UTI Energy in 2001.

Nextier was formed from the merger of Keane Energy and C&J Energy Services in 2019. Keane started in Pennsylvania in 1973 and went public in 2017. C&J founded in 1997 in Robstown, TX and went public in 2011.

SEC filing – PTEN Nextier merger

Expro to pay $8m to settle Angola bribery allegations

Leave a reply

Expro Group has settled with the SEC over allegations that Frank’s International paid bribes to Angolan officials between 2008 and 2014. Expro merged with Frank’s in 2021 in a deal that valued Frank’s at $742 million.

Expro has agreed to pay $4.2 million which represents the profits made by Frank’s on the Angolan contracts after Frank’s completed its IPO in 2013. In addition, Expro will pay $0.8 million in interest and $3 million in penalties.



Frank’s primarily supplied tubular services and technology used in deepwater drilling. Starting in 2007, it tried to increase its business with the ultimate end customer, Sonangol, the state-owned Angolan oil producer. Initially, Sonangol directed Frank’s customer to use a competitor to Frank’s that made a bigger investment in Angola.  But a senior Sonangol executive said they could change its mind if Frank’s established a consulting company and paid five percent of the value of the contract to the consulting company for the benefit of high-ranking Sonangol officials.

Instead of creating a consulting company, Frank’s hired an agent in Angola in November 2007 without a contract in place. The first payment was made in January 2008. Towards the end of 2008, the Frank’s CFO and Chief Accounting Officer started asking questions about the commission payments, which, at that point, amounted to $688,000. The regional senior management then approved a back-dated contract.

In 2011, a new agency agreement was created. This provided for a 10% sales commission, although only 2.2% was actually paid in commissions, with the rest being used for bribes.

Between 2008 and 2014, Frank’s paid the Angolan agent approximately $5.5 million from Frank’s Angolan Operations, a portion of which was paid to the senior Sonangol executive. Frank’s received at least $4,176,858 in post-IPO net profits from its contracts with oil companies where Sonangol was the ultimate customer and for which the Sonangol executive possessed decision-making authority.

Frank’s self-reported the issue to the SEC and Department of Justice in 2016 and Expro made a reserve of $8 million, that was recorded as an additional liability on the acquisition of Frank’s.

 

https://www.sec.gov/litigation/admin/2023/34-97381.pdf

 

Houston Drilling Tools company to be taken public by SPAC

Leave a reply

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

Leave a reply

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

Leave a reply

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

Leave a reply

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

Leave a reply

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

Leave a reply

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

Leave a reply

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