Category Archives: Oilfield Services

Diamond Offshore fails to attract satisfactory takeover offers

Diamond Offshore will remain independent after failing to attract any satisfactory takeover offers. The company had put itself up-for-sale back in August and hired Goldman Sachs as its financial advisor.



The offshore driller owns four drillships and nine semisubmersibles. It exited bankruptcy in April 2021, having converted $2 billion of debt into equity. Its stock is not currently publicly-traded.

As part of the sale process, the company approached four offshore drilling companies that had sufficient scale to acquire Diamond and were not in bankruptcy (isn’t that all of them?).

  • Company A submitted an indicative offer that was deemed inadequate. When asked to raise their bid, they walked away.
  • Companies B, C and D submitted indicative bids that were deemed worthy of further engagement. After commencing limited due diligence, companies B and C backed out.
  • In November, in light of various communications from Company D, the independent committee appointed by Diamond decided it would cease discussions with Company D.

Litigation with largest shareholder

Interestingly, back in July, Avenue Capital Management, a hedge fund that is the largest shareholder of Diamond with a 17% shareholding, sued the company. It was trying to force the company to hold an annual meeting, at which Avenue would put forward its own nominees for directors. The company and Avenue settled the lawsuit in August. As part of the settlement, the company disclosed details of the proposed takeover offers to Avenue.

In November 2021, Avenue delivered to the company a purported list of nominees for the next annual meeting. The company notified Avenue that the nominations were invalid because they were not in accordance with the bylaws. After a second settlement agreement with Avenue in December, the litigation and the nominees proposed by Avenue were withdrawn.

AGM in January

An annual meeting of stockholders will now take place on January 21,2022. There are three directors up for re-election, namely;

  • Adam Peakes – former CFO at Noble
  • Patrick Lowe – former COO at Ensco (now part of Valaris)
  • John Hollowell – former CEO of Shell Midstream.

All three were part of the four-person independent committee that was set up to explore strategic alternatives.

SEC filing – Diamond Offshore takeover discussions

 

 

Houston water logistics company to be acquired

[UPDATE 02-23-22 – The deal has now closed.]

Select Energy Services has agreed to acquire another Houston-based company, Nuverra Environmental Services for $45 million in an all-stock transaction. In addition, Select will also assume $20 million of debt that Nuverra has.



Both companies are involved in the water treatment, recycling and disposal of water and chemicals produced on onshore shale basins in the US. Nuverra primarily operates in Bakken, Haynesville and the Marcellus basins.

The signs have been there that Nuverra was preparing itself to be sold, namely;

  • The company moved its head office from Arizona to Houston in August 2021.
  • Eric Bauer was hired in April 2020 on a three-year contract as interim CFO. He has an investment banking background.
  • Two investment firms (Gates and Ascribe) own 85% of the equity following the company’s bankruptcy reorganization in 2017.

Pat Bond was appointed CEO in April 2021. He abruptly left in September. Current chairman and former CEO Charles Thompson took over as CEO again.

Nuverra has revenues of approximately $100 million and has only generated an operating profit once (in 2014) in the past 11 years. In its bankruptcy reorganization, the company converted more than $400 million of debt into equity. Since exiting bankruptcy, Nuverra has cumulative losses of $225 million.

The transaction is expected to close in the first quarter of 2022.

https://www.prnewswire.com/news-releases/select-energy-services-enters-into-definitive-agreement-to-acquire-nuverra-environmental-solutions-and-closes-on-the-acquisition-of-the-us-onshore-assets-of-hb-rentals-301443074.html

Dril-Quip appoints new CFO

Dril-Quip has appointed Kyle McClure as its new CFO. He replaces Raj Kumar, who resigned last month to become the CFO at Kirby Corp.



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Dril-Quip is a manufacturer of highly engineering drilling and production equipment. It has a market capitalization of $660 million (which includes $375 million of cash).

Mr. McClure joins from Airswift, a private global workforce solutions company, where he had been CFO since June 2019. Prior to that, he was CFO at Frank’s International (recently taken over by Expro) from March 2017 until June 2019.

At Frank’s, Mr. McClure replaced Jeff Bird who resigned in early 2017 to take the CFO position at Dril-Quip. Mr. Bird was recently appointed the CEO at Dril-Quip. Mr. Kumar also worked at Frank’s for Mr. Bird before joining Dril-Quip.

Mr. Bird and Mr. McClure also worked together for about a year at Houston-based Ascend Performance Materials where Mr. Bird was CFO and Mr. McClure was Treasurer.

Mr. McClure will receive a base salary of $400,000 and a cash sign-on bonus of $200,000. He also receives $1 million of equity awards that will vest over three years and $700,000 that will vest in 2024, subject to performance by the company.

SEC filing – Dril Quip McClure appointment

Noble to merge with Maersk Drilling in a $3.4 billion stock deal

Noble Corporation, based in Sugar Land, has agreed to merge with Maersk Drilling in an all-stock transaction worth $3.4 billion. Maersk has its head office in Denmark and is listed on the Copenhagen stock exchange.



The combined company will have 20 floater rigs and 19 jackup rigs that can operate in harsh environments such as the North Sea. The fleet will be the second largest behind Valaris, though Transocean is the largest offshore operator by revenue.

Noble is taking an active role in the consolidation of companies in the offshore drilling market. Having exited bankruptcy in February 2021, it acquired Pacific Drilling for $357 million in an all-stock transaction in March 2021.

The shareholders of Noble and Maersk will each own 50% of the combined business. The company will keep the Noble name and will continue to be based in Houston.

Noble Chairman, Chuck Sledge, will become Chair of the combined company, while Noble CEO, Robert Eifler, takes the combined CEO role. Claus Hemmingsen, Chairman of Maersk, will be one of the three directors designated by Maersk. Noble will appoint three directors in addition to Mr. Sledge.

Other positions on the executive leadership team are to determined. Richard Barker is the CFO of Noble. He joined in March 2020  and has an investment banking background. The current CFO of Maersk is Houston-based Christine Morris. She joined in January of this year. Ms. Morris was previously CFO at BJ Services and Head of Financial Planning and Analysis at Halliburton.

The company expects to achieve $125 million in annual cost synergies within two years. The Maersk office in Copenhagen will be scaled down significantly. However, the Maersk Stavanger office in Norway will become the hub for North Sea operations.

The deal is expected to close in mid-2022.

SEC filing – Noble Maersk merger

 

 

Energy transition SPAC completes $175 million IPO

Pyrophyte Acquisition Corp has completed its $175 million initial public offering (IPO). The blank check company has its head office in the River Oaks area of Houston.

The company is seeking targets involved in energy transitions. That could mean renewable power generation, energy storage, zero-emission transportation, carbon capture or zero/low-carbon industrial applications.



The chairman of the company is Dr. Bernard Duroc-Danner. In 1987 he was hired to start up the oilfield services business of EVI. 47 acquisitions later, he retired as Chairman and CEO of Weatherford in 2016. In 2018, he co-founded a start-up of an artificial intelligence software company with applications in wind renewable energy.

Sten Gustafson is the CEO. From 2012 to 2014 he was the CEO of ERA Group, the Houston-based helicopter company that was spun out of Seacor in 2013. Since 2018, he was served as the Chairman of Golden Energy Offshore, a Norwegian operator of offshore service vessels.

The CFO is Thomas Major who spent ten years at NOV, including five as Director of Corporate Development.

The company is the fourth Houston-based SPAC or blank check company to go public since the beginning of last week. You can read about the others here and here.

https://www.globenewswire.com/news-release/2021/10/26/2321254/0/en/Pyrophyte-Acquisition-Corp-Announces-Pricing-of-175-Million-Initial-Public-Offering.html

 

Oilfield water company completes IPO

Aris Water Solutions has completed its initial public offering (IPO). It raised $214 million at $13 per share. That price was below the IPO range of $16-$18 per share. The company has its head office in the Memorial City area.



The company is involved in gathering, transporting and handling produced water generated from oil and natural gas production. In addition, it develops and operates recycling facilities to treat and recycle produced water. The company has 640 miles of produced water pipeline, 48 water handling facilities and 10 recycling facilities. These facilities are located in the Permian Basin.

The business (technically, the predecessor company, Solaris Midstream) was formed in 2016 by Bill Zartler, founder and Executive Chairman. Trilantic Capital and Yorktown Energy Partners backed the company. Mr. Zartler is also the founder and CEO of Solaris Oilfield Infrastructure, which went public in 2017.

For the six months to June 2021, the company had revenues of $103 million.

The CEO is Amanda Brock. She is the former CEO of Water Standard and served as the President of the Americas for Azurix, a business spun out of Enron in 1999.

Brenda Shroer is the CFO. She joined the company as an employee in June 2021 but has been on the board since July 2019. At that time she was the CFO of Concho Resources. Concho took a 20% stake in Aris in July 2019 when it sold produced water assets to the company for $330 million. Concho was acquired by ConocoPhillips earlier this year.

Aris SEC registration statement

 

Expro completes merger with Frank’s International

Frank’s International and Expro have completed their all-stock merger. The deal was originally announced in March. The business has a combined enterprise value of $3 billion.



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.

Although, it was billed as a merger, effectively it is Expro who have taken over. The publicly-traded entity is now called ‘Expro Group Holdings’. Frank’s is being kept as a brand name.

Expro shareholders ended up owning 65% of the combined business. Expro CEO Mike Jardon and CFO Quinn Fanning (ex CFO of Tidewater) took over the same roles in the combined business.

In October 2019, the Board of Directors at Frank’s decided that they needed to merge with a large scale partner in order to diversify and achieve scale. In May 2020, they first approached Expro, another unnamed privately-held oilfield services company, and two publicly-traded oilfield services companies.

Frank’s Executive Management

Frank’s CEO Michael Kearney has been appointed Chairman of the Board. Melissa Cougle has stepped down as CFO, though she remains with the company as an employee.

CEO Kearney won’t receive any severance [Update 4-1-22 – Actually he got $3.6 million according to the proxy] but his restricted stock awards will vest fully ($8.6 million). Ms. Cougle will be eligible for a cash severance of $1.6 million (2 time base plus target bonus) [Update – she got $2 million]. Her restricted stock will also vest ($1.6 million).

Deal negotiations

The deal with Expro took a long time to reach agreement because of the complicated nature in which Frank’s went public in 2013. As part of that IPO, Mosing Holdings, on behalf of the family that controlled Frank’s at the time, entered into a Tax Receivable Agreement (TRA) whereby most of the future benefits from changes in taxable basis would go to Mosing Holdings and not the company.

Initially, as calculated in the TRA, Mosing Holdings would have received a cash payment of $68 million as a result of the deal. That was a major sticking point with Expro. They ended up settling the TRA for $15 million.

SEC filing – Expro Franks merger completion

 

CFO resigns from drilling equipment manufacturer

Luca Pacioli – the father of accounting

Raj Kumar, CFO of Dril-Quip, has resigned, effective November 1, 2021, to take another opportunity. [UPDATE 10-4-21 He’s joining Houston-based Kirby Corp as CFO]. The company has engaged an executive search firm to conduct a search for his replacement.



Dril-Quip is based in NW Houston and manufactures offshore drilling and production equipment. It has revenues of $340 million and a market capitalization of $892 million (partly driven by a net cash balance of $370 million).

Mr. Kumar joined Dril-Quip in June 2017 as its Treasurer and was promoted to CFO in May 2020, succeeding Jeff Bird who became COO (and is now the CEO). Prior to that he spent two years at Frank’s International, another Houston drilling company, where he worked for Mr. Bird, who was the CFO at Frank’s at the time.

Mr. Kumar started his career in investment banking in Malaysia before joining Dell and later transferring to Austin. He has also worked for LyondellBasel and FMC Technologies.

SEC filing – Dril-Quip Kumar resignation

Diamond Offshore COO and CFO walk away with severance

Diamond Offshore COO Ron Woll and CFO Scott Kornblau have resigned, taking advantage of ‘walkaway severance rights’ put in place following the company’s exit from bankruptcy in April 2021.



The offshore driller has its head office in west Houston and owns four drillships and eight semisubmersibles. It exited Chapter 11 bankruptcy in April 2021, having converted $2 billion debt into equity. For 2020, it had revenues of $733 million and its shares currently trade over-the-counter.

In May, the company appointed Bernie Woolford as its new CEO and in August, the company put itself up-for-sale.

Dominic Savarino has been promoted to be CFO. He is currently Chief Accounting Officer and Tax Officer. Mr. Savarino joined the company in 2017, the same year that Mr. Kornblau became CFO (initially in an interim capacity). He will receive an increase in base salary from $400,000 to $440,000. Mr. Woll won’t be replaced and his duties will be assumed by other senior executives.

Severance

The severance plan that was put in place in April allowed senior executives to resign voluntarily by September 20, 2021 and claim severance benefits because the bankruptcy was deemed a change-in-control.

Mr. Woll will receive severance of one year’s salary ($515,630) and 2021 target bonus (70% of salary or $360,941). Mr. Kornblau will also get one year’s salary ($435,000) and 2021 target bonus (50% of salary or $217,500).

For each of 2018, 2019 and 2020 Mr. Woll received a $750,000 cash retention bonus. In addition he also received cash bonuses in 2020 of $1.4 million as the company was unable to grant long-term equity awards because of the bankruptcy.

Likewise, Mr. Kornblau received cash bonuses in 2020 of $0.6 million.

CEO departure

As part of the emergence from bankruptcy, Marc Edwards, the previous CEO, left with a lump-sum cash severance of $6 million. He had also received $1.5 million retention bonus in each of 2018 and 2019.  In 2020, he also received cash bonuses of $5.8 million.

For the two plus months ended 30 June, post-bankruptcy, the company had a net cash outflow from operations of $66 million. For a company not generating cash, it has spent a lot of money on cash bonuses and severances for senior executives.

SEC filing – Diamond Offshore CFO

ION Geophysical puts itself up-for-sale

Poseidon

ION Geophysical, based in west Houston, has put itself up-for-sale. The company has hired Tudor Pickering Holt to assist in the evaluation of a range of strategic alternatives including outright sale, sale of assets and debt financing.



The stock price jumped from $1.50 to $1.94 in after-hours trading. That gives it a market capitalization of $62 million.

Traditionally, the company has provided seismic services to the offshore oil and gas market. More recently, it has been trying to diversify into providing mission-critical subscription offerings and engineering services offshore (like a maritime equivalent of an air traffic control system).

The company has revenues of about $77 million, but it is still losing money even at the EBITDA level. It hasn’t made an annual operating profit since 2014.

Debt restructuring

In April, it completed a debt restructuring (code name Project Poseidon). It exchanged $121 million of debt due in December 2021 with $116 million of new notes due December 2025. $7 million of the old notes remain outstanding. The new notes also have a right to convert to equity at a $3 conversion price.

The company also completed a $42 million equity raise. $8 million of the cash was used to pay the costs associated with the debt issuance. $17 million was paid to the debt holders as part of the exchange.

Chinese influence wanes

The largest shareholder is Gates Capital Management, who own 16.4%. They also own $70 million of the new loan notes.

The third largest shareholder at 5.5% is BGP, a seismic contractor that is a subsidiary of China National Petroleum Corporation. However, that ownership percentage is about half of what it used to be.

For many years, the company operated a joint venture with BGP. However, in March 2020, the company announced it had agreed to sell its 49% stake in the joint venture for $12 million. It didn’t say to whom and the deal still hasn’t closed 18 months later.

https://ir.iongeo.com/news-releases/news-release-details/ion-initiates-review-strategic-alternatives