Category Archives: Oilfield Services

Long-time Schlumberger CFO steps down

Long-time Schlumberger CFO Simon Ayat has announced he is stepping down, effective January 22, 2020. He will be replaced by Stephane Biguet, who is currently the VP of Finance for the company.



Mr Ayat joined Schlumberger in 1982 and has been its CFO for the past twelve years. He has a base salary of $1 million, the largest base salary of Houston-area CFOs. After he steps down as CFO he will serve as Senior Strategic Adviser to the company for a period of two years. Mr Ayat will continue to receive his salary and his stock options will continue to vest. He will also be awarded more performance stock options in January 2020.

His exit contract mirrors that given to former CEO Paal Kibsgaard who left the CEO position in July 2019. There had been rumors in the press circulating since last year that Mr Ayat intended to step down. My guess is that he agreed to stay on, pending the CEO transition to Olivier Le Peuch.

Mr Biguet joined the company in 1995 and has served in various financial roles at the company. He will receive a base salary of $770,000

 

SEC filing – Schlumberger – Ayat

 

 

CFO of Frac sand company resigns

Laura Fulton, CFO of Hi-Crush, has resigned, effective 31 December 2019, to pursue another career opportunity.

Hi-Crush has its head office in the Galleria and is a provider of proppant and logistics solutions to the oil and gas industry in North America.



The company went public in 2012 and rode the boom and bust in the fracking industry. At its peak it had a market capitalization of over $1.3 billion. The company currently has a share price of $0.70 and a market capitalization of $69 million.

Ms Fulton has been the CFO since April 2012, joining just prior to the Initial Public Offering. She is also a non-executive director at Targa Resources. Before Hi-Crush she worked at AEI, an energy infrastructure company, and LyondellBasell (for 12 years).

Phil McCormick, VP of Finance, has been appointed as the new CFO. He joined the company in August 2018. Prior to that, he held several positions over nine years at KBR, including Treasurer. He also worked at LyondellBasell for 11 years. Mr McCormick started out at Coopers and Lybrand.

Mr McCormick will receive a base salary of $300,000. Instead of an annual bonus for 2020, he will also receive a retention bonus of $250,000 that will be paid in the summer of 2021.

SEC filing – Hi-Crush

Houston hospitality company gets delisting notice

Photo by Jason Woodhead

Civeo Corporation has been notified by the New York Stock Exchange that it is non-compliant with its listing standards. The company’s share price has fallen below $1 for the past 30 days.

Civeo has its head office in downtown Houston. The company provides workforce accommodation services to the oil and gas and mining industries. It has operations in Canada (66% of revenues), Australia (24%) and the US (10%). The company has a market capitalization of $145 million.



The company’s problems stem from its spin off from Oil States International in May 2014 . The spin-out saddled it with $775 million in debt. Given the collapse in oil prices later that year it was perfect timing by Oil States! Total debt is currently $391 million with a debt to adjusted EBITDA just over 4.0.

Just last month, the company promoted Carolyn Stone to be its CFO. She replaced Frank Steininger. He is staying on at the company as Executive VP of Strategic Initiatives until he retires in March 2020.

The company has notified the NYSE that it intends to cure the deficiency and restore its compliance with the listing standards. In general, a company has six months to regain compliance.

Back in February 2016, the company received a delisting notice because the share price had been below $1. Within a few weeks, shares climbed back above $1 and the company regained compliance.

SEC filing – Civeo listing non-compliance

McDermott appoints new Chief Accounting Officer

McDermott International has appointed Dale Suderman as its new Chief Accounting Officer. He replaces Chris Krummel who was promoted to the CFO position earlier this month.



Mr Suderman joined McDermott in July 2016 as its Senior Director of Financial Planning and Analysis. Prior to joining the company, he was at Direct Energy from 2009 onwards. Unusually Mr Suderman has worked for PricewaterhouseCoopers, Arthur Andersen and Ernst & Young.

Mr Suderman will receive a base salary of $285,000. He will also receive a retention bonus equal to 75% of his annual salary. This is on the same terms as the other retention bonuses granted in October 2019 (a third now, a third when the Tranche B is funded – likely Dec 2019, and the rest when Tranche C is funded – likely early Q1 2020).

[UPDATE 12-2-19 Tranche B has now been funded]

McDermott keeps making headlines for all the wrong reasons. In early November there were reports that construction on its new headquarter building stopped after the company fell behind $14.2 million on payments to its general contractor.

Last week the company defended its participation in a huge petrochemical project in Russia. It stated it was in full compliance with the law and did not breach international sanctions against Moscow. Shell pulled out of the same project in April. According to Reuters, one factor behind Shell’s decision was that Gazprom had suddenly brought in another partner with links to businessman Arkady Rotenberg who is on a U.S. sanctions blacklist.

McDermott’s share price is currently $0.80 cents (market cap $145 million).

SEC filing – McDermott CAO appointment

Marine vessel fabricator appoints new CEO

Gulf Island Fabrication

Richard Heo has been appointed the new CEO of Gulf Island Fabricators. He replaces Kirk Meche who stepped down in October.



The company is a fabricator of marine vessels with facilities in Houma and Lake Charles, Louisiana. It has its head office in west Houston and a market capitalization of $68 million.

The company has struggled in recent years as the market for offshore vessels has shrunk. The company is trying to diversify into onshore fabrication and other areas where project management skills are needed (such as offshore wind).

Prior to joining, Mr Heo was the Senior VP of North, Central and South America for McDermott International. He had previously served as VP of Fabrication Services for CB&I.

Mr Heo will receive a base salary of $487,000. He also receive an initial grant of 100,000 restricted stock units that will vest over 3 years (current price $4.47).

SEC filing – HEO appointment

 

Weatherford appoints new CFO

Christoph Bausch, CFO of Weatherford International, has resigned effectively immediately. He will be replaced by Christian Garcia, who will begin his new role on January 6, 2020.

Weatherford entered bankruptcy proceedings in July 2019. It is nearing an exit from Chapter 11 that will reduce debt by $6 billion. The bondholders will own 94% of the restructured company. 5% will be set aside for a management incentive plan. Existing shareholders will own the other 1%.



Mr Bausch has been CFO since April 2017. He will receive a severance package of $650,000 (one year’s salary) and a pro-rated bonus for 2019 (not sure how much this will be). Note also that he received a cash retention bonus of $1.3 million in April 2019.

Mr Garcia has been the CFO at Michigan-based Visteon Corporation for the past three years. However, prior to that, he spent ten years at Halliburton including 18 months as interim CFO. In fact, he replaced Mark McCollum, the current CEO of Weatherford, as CFO during Halliburton’s ill-fated proposed merger with Baker Hughes (2015-2016).  At the time of the proposed merger, Mr McCollum was appointed Chief Integration Officer. After the merger fell apart, Mr MCollum was reappointed CFO at Halliburton before becoming the CEO at Weatherford in March 2017.

Mr Garcia will receive a base salary of $675,000 and a one-time sign-on bonus of $500,000. He will also receive a long-term equity award of $2,000,000 that will vest over three years. These will be granted once the company emerges from Chapter 11.

SEC filing – Weatherford CFO

 

McDermott CFO resigns after worse than expected results

McDermott International has announced the resignation of CFO Stuart Spence, effectively immediately. Chris Krummel, currently the Chief Accounting Officer, has been promoted to the CFO position.



It’s been approximately two weeks since the company announced that it had obtained $1.7 billion in additional financing (at 12% interest rates) to tackle its liquidity crisis. In the same press release, the company also announced that the senior management were granted retention bonuses. Mr Spence was granted $1.3 million, with a third of that payable immediately.

McDermott announced third quarter results even worse than forecast last month in its refinancing presentation. Free cash flow for the quarter was a negative $146 million compared with negative $86 million in the presentation.

The SEC filing by the company makes no mention of the severance package, if any, that would be granted to Mr Spence. If he has truly resigned voluntarily he would be required to repay the retention bonus already paid out.

Interestingly, the company has signed contracts with the senior executives that only spell out severance payments in the event of a change in control. There is no formal provision for severance in the event of an involuntary termination without cause. When the predecessor to Mr Spence left in 2014 he received a lump sum payment of $640,000. His salary at the time was $515,000.

Mr Krummel joined the company in October 2016. He was previously the Chief Accounting Officer of Cameron International. No compensation was disclosed for Mr Krummel.

[Update 11-13-19 : McDermott has filed another 8-K. Mr Spence will receive a severance of $866,666.67. That’s the balance of the $1.3 million retention bonus not already paid out. His restricted stock units will also vest. They are valued at less than $100,000 with the stock price currently at 67 cents. His deferred consideration will also fully vest (worth approx $70,000).

Mr Krummel will be paid $600,000 a year.]

SEC filing – McDermott CFO resignation

Oilfield Services company misses interest payment as bankruptcy looms

Photo by Joshua Doubek

[Update 11-27-19:  Shares have now been delisted because the market cap has been below $15 million for 30 days]

Key Energy Services has announced that it has engaged Moelis & Company as its financial advisor and Sullivan & Cromwell as its legal advisor to analyze various strategic alternatives. The company also elected not to pay interest on its $250 million term loan. The interest was due October 18, 2019. This caused a default on the loan.



On October 29, the company entered into forbearance agreements with its lenders in which the lenders agreed not to exercise any rights related to the loan default until the earlier of December 6, 2019 or the occurrence of certain early termination events.

Key operates the largest well service rig fleet in the US. It also provides fishing and rental tools, coiled tubing and fluid management services. It is based in downtown Houston.

For the six months ended June 30, 2019, the company had revenues of $222 million and a net loss of $42 million. At that date, it only had $6 million in equity.

2016 Bankruptcy

Key entered into a pre-packaged bankruptcy agreement in October 2016. As part of that deal, its $1 billion of debt was reduced to $250 million (due in December 2021). The term loan had an average interest rate during 2018 of 12.42%. No wonder the company is seeking strategic alternatives!

Big loss for Platinum Equity

$338 million of the original debt was owned by Platinum Equity, a large PE firm based in Beverley Hills. After the restructuring, Platinum ended up with 50% of the equity of Key. After emerging from Chapter 11, the total equity of the company was valued at $252 million. The current market capitalization is $10 million (47 cents per share). So Platinum is sitting on a big loss. Even their $2.75 million annual advisory fees are now in jeopardy. Platinum subsequently acquired $30 million of the term loan so they will have some say in the restructuring.

Goldman Sachs stake

Back in May, Goldman Sachs disclosed it owned 1.5 million shares, or 7.5% of the company. The shares were acquired between February and April 2019. At the time Goldman said it planned to engage with Key’s management and board to discuss issues including corporate structure, board compensation, dividend policy and transactions such as asset sales or mergers “as a means of enhancing stockholder value”. In June, Goldman disclosed it had reduced its stake to 4.4%.

Robert Drummond, the CEO at the time of the bankruptcy, left in May 2018 to become the CEO of Keane Group. They have just merged with C&J Energy Services. Later that year, Key tried to merge, in an all-stock deal with Basic Energy of Dallas. Basic rejected the merger offer.

SEC Filing – Key Energy loan default

Oilfield service companies complete merger

Two Houston-based oilfield companies, C&J Energy Services and Keane Group, have completed their merger. When the deal was originally announced in June 2019, the merger was valued at $1.5 billion. At completion, the companies were worth about $1 billion. The shareholders of each company will own 50% of the equity in the combined company.



The combined group will now be called Nextier Oilfield Solutions and have a stock ticker ‘NEX’. The board will consist of 12 directors, six designated by each party. The chairman is Patrick Murray (ex Chairman of C&J) and the CEO is Robert Drummond (ex CEO of Keane). The C&J CFO, Jan Kees van Gaalen becomes the combined group’s CFO. Greg Powell, the Keane CFO, becomes Chief Integration Officer.

For the six months ended June 30, 2019, C&J had revenues of $1 billion and adjusted EBITDA of $102 million. Keane’s figures were $849 million and $147 million respectively.

Synergies

The companies expect to achieve $100 million in cost synergies within 12 months. $45 million will come from sales, general and administrative expenses. $45 million will come from reduced material spend with $10 million of savings from consolidating real estate.

Mr Powell will serve as the Chief Integration Office for the earlier of (i) 18 months or (ii) the date at which the company achieves $100 million in annualized savings. He is eligible for a performance bonus of $2.6 million upon the achievement of specified performance criteria tied to the realization of synergies.

Background to the deal

In July 2017, Murray, the C&J chairman first met with Scott Wille, a director of Keane and employee of Cerberus to discuss the potential benefits of consolidation in the oilfield services sector. (Cerberus is the PE firm that bought Keane in 2011 and took it public in January 2017).

In the middle of 2018, Keane had discussions with another unnamed competitor about a business combination. When that deal fell apart, discussions with C&J began in earnest in November 2018. Keane briefly resurrected discussions with the unnamed competitor in early 2019 before deciding the merger with C&J was the better deal.

The deal almost fell apart at the end of May 2019 due to C&J’s insistence that it have a 52% / 48% equity split. It was resolved by C&J giving its shareholders a special pre-merger dividend $1 followed by a 50/50 split.

 

SEC filing – completion of merger

 

Monaco-based brothers plead guilty to bribery scheme

Cyrus Ahsani and Saman Ahsani, CEO and COO of Monaco-based Unaoil, have pleaded guilty in a scheme to make millions of dollars in bribe payments to officials in multiple countries. The countries included Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.



Guilty plea in March

The pair pleaded guilty in the Southern District of Texas back in March, but the Department of Justice only announced the news today. It’s not clear why there has been a delay. However it does answer the question of why the United Kingdom’s Serious Fraud Office suddenly dropped its fraud investigation into Unaoil back in June.

Cyrus and Saman Ahsani are set for sentencing April 20, 2020.

Companies involved

Unaoil is an intermediary company that provided services for multinational companies operating in the energy sector. The information sheet lists two companies specifically;

  • Rolls Royce plc (paid £170 million in fines to the UK authorities in 2017, specifically related to Unaoil)
  • SBM Offshore NV (paid $475 million in fines worldwide in 2017 – some related to Brazil which don’t involve Unaoil)

A further 25 companies are unnamed, of which 5 have their head office in Houston.

Many of these companies have been named through previous press reports. They include;

  • TechnipFMC (paid SEC $5m to settle bribery allegations in Iraq)
  • KBR (allegedly paid Unaoil over $10 million to help it win contracts in Kazahkstan. DOJ and SEC investigations still ongoing)
  • Baker Hughes (investigation ongoing)
  • Weatherford
  • Cameron
  • Core Labs (investigation closed – no action taken)

Other companies involved include Honeywell, ABB, Samsung and Hyundai.

Downfall

Unaoil’s downfall started as a result of a 2013 court case involving an Australia company, Leighton Holdings. It had entered into an agreement with Unaoil with the aim of securing a $500 million Iraq pipeline contract but later referred the deal to the police for possible bribery.

Nick McKenzie, an Australian journalist started following the case and was soon contacted by a whistleblower who gave him a hard drive containing 10 years’ worth of internal Unaoil emails.

You can read the investigative report by The Age newspaper here

Ahsani charges filed by DOJ

https://www.justice.gov/opa/pr/oil-executives-plead-guilty-roles-bribery-scheme-involving-foreign-officials