Category Archives: Uncategorized

Shell to acquire rest of Shell Midstream in $1.9 billion transaction

Shell has agreed to acquire all of the common units of Shell Midstream Partners it did not already own for $15.85 a unit, in cash. The transaction is worth $1.9 billion. Shell currently owns 68.5% of the common units.

Back in February, Shell had offered $12.89 for each common unit in a zero-premium bid.

Many years ago, Master Limited Partnerships were in vogue and it was the fashion for E&P companies to spin off their midstream assets into publicly-traded MLPs. Shell were fashionably late in that they only spun off Shell Midstream for $23 per unit in October 2014, right before the crude oil price crash.

That crash laid bare the claim that MLPs had low risks and therefore low cost of capital. In addition, the tax rules changed in 2018 reducing the benefits of MLPs. Most publicly-traded MLPs have already been taken private by their sponsor. Why pay a dividend of 8% on a MLP when you can bring it inhouse by borrowing at 5%?

The transaction has been approved by the Conflicts Committee but most minority investors remain unhappy as they believe that the deal undervalues the company, particularly as some of the midstream assets were damaged by Hurricane Ida in 2021.

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

SEC filing – Shell to acquire Shell Midstream Partners

Houston CFO leaves after 10 months with $3 million severance

Eric Javidi, CFO of Archaea Energy, is leaving after ten months with a $2.95 million cash severance. In addition, six weeks ago, the company gave him stock worth $3.6 million that is now fully vested.

No reason was given for his departure. The company has started a search process for his replacement.

Archaea develops, constructs and maintains renewable natural gas facilities (RNG) that capture waste emissions from landfills and converts them into low-grade fuels and electricity.

The company is based in the Galleria area and was taken public in September 2021 by a SPAC based in Pennsylvania, Rice Acquisition Corp.  The SPAC actually acquired Archaea LLC for $347 million and Aria Energy LLC for $680 million, with the combined business being renamed Archaea Energy. The stock is trading at around $18, similar to the price when the deal closed.

As an aside, the Rice family are the majority owners of both the SPAC and Archaea LLC.

Mr. Javidi joined Archaea in April 2021, the same month that the deal with the SPAC was announced. He was previously the CEO of Southcross Holdings and a Managing Director at Kayne Anderson Capital. Both companies are primarily involved in energy infrastructure.

Severance and Stock Award

The base salary and employment contract for Mr. Javidi has never been publicly disclosed, so it is not clear how the $2.95 million severance was calculated. We do know that the company awarded Mr. Javidi 140,000 fully vested shares on December 29, 2021. Mr. Javidi promptly sold 55,090 shares for $949,200. He was also awarded 62,750 shares that were due to vest in 2024. With his severance, these are now fully vested.

General Counsel leaving after 7 months

The company also announced that Lindsay Ellis, General Counsel, is also leaving. She has only been with the company since July 2021. No details of her severance were disclosed. She also granted 33,333 restricted shares that have now fully vested, worth $600,000.

The company thanked Mr. Javidi for building out the company’s financial functions and Ms. Ellis for building the legal and HR functions. Undoubtedly, going public at the same time as trying to combine two businesses is a very stressful and complicated affair. It’s not clear what went wrong.

SEC filing – Archaea CFO departure

Archaea Investor Presentation – April 21

Houston Biopharma misled investors in $40 million offering

Kiromic Biopharma, based in the Medical Center, has fired its CEO for misconduct and also admitted it misled investors during a $40 million public stock offering in 2021.

The company is developing immuno-oncology therapeutics for the treatment of blood cancers and solid tumors. It went public in October 2020, raising $15 million at $12 per share. It raised a further $40 million in July 2021 at $5 per share. The shares now trade at $1.

On August 17 and 23. 2021, then CFO and Board member Tony Tontat submitted substantially identical reports through the company’s complaint hotline. The complaints pertain to the company’s public disclosures with the SEC regarding the anticipated timing of the US Food and Drug Administration (FDA) authorization of its drug applications and the anticipated timing of human clinical trials.

The complaints were passed to the Audit Committee of the Board. In turn, the Audit Committee recommended the Board form a Special Committee to investigate. After engaging outside counsel (Sidley Austin) and AlixPartner, the Special Committee reported on its findings to the Board on February 2, 2022

FDA Clinical Hold

In short, the company received communications from the FDA  on June 16 and June 17, 2021 that the FDA was placing two new potential drugs on clinical hold. A clinical hold means the company has to suspend ongoing clinical work. The formal clinical hold letters were received from the FDA on July 13, 2021.

On July 16, 2021, the company issued a press release disclosing it had received comments from the FDA but did not mention the term ‘clinical hold’. It was only on August 13, 2021 that the company disclosed this fact.

These dates are important as the company filed its S-1 Registration Statement on June 25 without mentioning the correspondence from the FDA on the clinical holds. It closed its IPO on July 2, 2021. That lack of disclosure will trigger even more shareholder lawsuits.

Disclosure Committee

The SEC filing doesn’t explicit state who in the company knew what and when. The Special Committee did recommend the formation of a Disclosure Committee comprising the CEO, CFO, General Counsel, the Corporate Controller and any Executive in charge of FDA submissions. Their role is to ensure timely and accurate disclosure of relevant information to investors and the SEC.

CFO lied about his education

For good measure, the Special Committee also found that Mr. Tontat lied to the company about his educational background. Instead of a BA in Economics from Harvard University, he received a Bachelor of Liberal Arts, a degree conferred by the Harvard Extension School.

Mr. Tontat resigned as CFO in October 2021, with Dan Clark, VP of Finance, promoted to interim CFO. The SEC filing announcing Mr. Tontat’s resignation stated that it was due to personal reasons and did not relate to any disagreement with the operations, policies or practices of the Company on any matters.

CEO fired

CEO Maurizio Chiriva-Internati was terminated for cause on January 27, 2022 after the Special Committee found ‘evidence of conduct that the Board believe was inconsistent with the Company’s policies.’

Pietro Bersani, a current member of the Board, has been appointed interim CEO while the company searches for a permanent CEO.

SEC filing – Kiromic Biopharma fires CEO


ExxonMobil to move head office to Houston metro area

Gary Coronado/Houston Chronicle

ExxonMobil has announced that they will be moving their head office from Irving, TX to their campus in Spring, TX. The move will be completed by mid-2023.

Exxon has a market capitalization of $319 billion. When it relocates, it will be the largest in Houston, by market cap.

Exxon moved its head office from Manhattan to Irving in 1989. The current head office is 365,000 square feet and houses 250 employees, who have been offered relocation packages. Last year, Exxon put up for sale 50 acres of vacant land around its headquarters. In addition, it owns another 50 acres in the area.

Construction on the campus in Spring began in 2011 when oil was over $100 a barrel. It was completed in 2015, when oil was below $60. It is based on 385 acres and officially houses 10,000 employees. The campus is currently appraised at $890 million.

ExxonMobil also announced a reorganization as part of efforts to save $6 billion in cost savings by 2023;

  • The Downstream and Chemical segments will be combined into a segment called Product Solutions.
  • The US and International Upstream businesses, previously run separately, will be consolidated into one organization
  • A new segment called Low Carbon Solutions will be created.
  • Technology and Engineering groups will be combined into one shared service for the segments.

The cost-cutting is probably the result of pressure by an activist investor, Engine No 1, who won three seats on Exxon’s board in June 2021, despite only owning 0.02% of the stock.

In July, the company hired Kathryn Mikells as its new CFO. She joined from Diageo PLC, a drinks manufacturer and is the first woman to be appointed to the Executive leadership team at Exxon.

ExxonMobil news release


BP Midstream Partners to be acquired by its former parent

BP Midstream Partners (BPMP), based in west Houston, is to be re-acquired by its parent, BP, in an all-stock transaction. Each unitholder will receive 0.575 of an American Depositary Share of BP for each public common unit owned. At the current price of the ADRs, that amounts to $14.89 per unit

Back in August, BP offered to buy BPMP common units at $13.01 per unit. BP currently owns 54.4% of the outstanding BPMP units.

BPMP owns the pipelines and other midstream assets that service BP’s Gulf of Mexico’s fields as well as the pipelines around the Whiting refinery in Indiana.

BP Midstream was spun off by BP only in October 2017 at $18 per unit. That was a few years later than many of its competitors. In fact, the trend to re-acquire them started shortly thereafter in 2018.

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

SEC filing – BP to acquire BPMP



Katy woman pleads guilty to defrauding BP of $2.3 million

A Katy woman, Angelica Garcia-Dunn, has pleaded guilty to defrauding BP.  Ms. Garcia-Dunn was the founder and CEO of Aim Global Logistics, a freight forwarding and logistics company.

She contracted with BP to act as an escrow agent in which she would make payments on BP’s behalf to BP’s railcar lessors and repair vendors. Between July 2018 and September 2019, BP made payments totaling $2,282,148.53 that Ms. Garcia-Dunn was supposed to use to pay the BP vendors. Instead she diverted the money to either pay other business obligations or to her own personal account.

Most of the money diverted was used to pay business creditors. However, Ms. Garcia-Dunn transferred at least $80,000 to her personal bank account.

The scheme went undetected for so long because Ms. Garcia-Dunn used later payments from BP to pay earlier vendor invoices that had not been paid due to the misappropriation of BP funds. As an accounting fraud, this is known as  ‘Teeming and Lading’.

Sentencing is set for September 30. At that time, Ms. Garcia-Dunn faces up to 20 years in prison and a possible $250,000 maximum fine. She will remain on bond pending that hearing.


Graf blank check company completes IPO

Graf Acquisition Corp IV has completed its $150 million initial public offering. It is a Woodlands-based Special Purpose Acquisition Company (SPAC), otherwise known as a blank check company. It’s also the first Houston-area SPAC to go public since the SEC clamped down in April. All Houston-area SPACS are restating their results.

Interestingly, Graf IV has completed its IPO before Graf Acquisition Corp II ($225 million) and Graf Acquisition Corp III ($300 million). All three companies filed their registration statements in February.

The first Graf Acquisition SPAC went public in October 2018. It took Velodyne Lidar public in September 2020. The San Jose-based company, which makes radar-like sensors used in autonomous vehicles, has had a rocky beginning as a public company.

Velodyne Lidar’s rocky road

The first quarterly results since going public underperformed analysts’ expectations. It also reported material weaknesses in revenue recognition in its first annual report. Finally, the chairman and co-founder of Velodyne Lidar, David Hall, had a spectacular falling out with Jim Graf.  The company accused Hall and his wife (who worked at the company) of behaving inappropriately regarding the Board and company processes. In turn, Hall accused the Board of prioritizing its own self-interests over that of the shareholders.

Mr Hall is no longer on the Board, though he remains the largest shareholder. However, his wife, who was fired as an employee in February, remains on the Board as does his wife’s brother. That should make for some interesting dynamics at future board meetings!

When the deal closed, the share price popped to $24.75. It’s now trading around $10.

You can see the complete list of Houston-area public companies here.


Charter School Superintendent sent to prison for embezzlement

Richard Garza, former Superintendent of Houston Gateway Academy, was sentenced to serve 60 months in prison. He pleaded guilty in September 2019 to taking $250,000.

The charter school is located in the Gulfgate area of Houston. It opened in 1999 with two classrooms. It now has about 2,300 students in three schools. Although over 90% of the students are considered economically disadvantaged, it has the highest average percentage of students meeting state standards in the Houston area.

Garza admitted he awarded a $280,000 no-bid contract in 2014 to a business owned by Ahmed Bokaiyan, an IT employee at the school. The contract was to supply IT equipment and services to a new school not yet constructed.

An audit revealed that Garza sent the business $252,757 before it completed any work. The business sent back $164,381 to Garza’s personal account. Garza used the funds to buy a Nissan Armada SUV and a condo.

Garza was ordered to pay a $20,000 fine and restitution of $191,292 to the Texas Education Agency. Bokaiyan had previously pleaded guilty and was ordered to pay $156,595 in restitution.

Houston blank check company completes $250 million IPO

Flame Acquisition Corp has completed its Initial Public Offering (IPO) by selling 25 million units at $10 each. The company is based in downtown Houston.

The company only filed its S-1 in early February. However it confidentially filed with the SEC back in November 2020.

Flame is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

Sable Permian was formed in 2017 after it was spun off from American Energy Partners, which was formed by the late Aubrey McClendon, after he left Chesapeake. Sable filed for bankruptcy in June 2020. Mr. Flores and Mr. Patrinely left Sable days after if exited from Chapter 11 bankruptcy in February 2020.

The company is targeting opportunities in the the exploration and production and midstream sectors.

Flame has been added to the list of Houston-area public companies. There are now 8 SPAC’s or blank check companies on the list, which you can see the list here.

New CFO appointed at LNG company

Ben Atkins has submitted his resignation as the CFO of NextDecade. He has been replaced by Brent Wahl, who joined the company in June 2019 and is currently the Senior VP of Finance.

The company is based in downtown Houston and is trying to build a LNG terminal in Brownsville, Texas.  NextDecade went public in July 2017 via a reverse takeover of a blank check company.

The company has received permits from the Federal Government for the terminal but won’t start construction until it has signed long-term contracts with customers. Currently, the company has enough cash to last it through the end of this year.

So far, the company has only a 20-year contract with Shell, covering about 20% of the proposed output. Late last year, Engie, a French company, delayed making a decision on a proposed contract with NextDecade. The French government, which owns 24% of Engie, wants the Engie to source cleaner energy. The company suffered another blow last week when Ireland dropped a plan to build a terminal in Cork that would have imported LNG from the proposed Brownsville facility.

Mr. Atkins had been the CFO since November 2015. Prior to that he worked for GE Capital and McKinsey.

Before joining NextDecade, Mr. Wahl was the Head of Midstream Investment Banking for North America at Macquarie Group. He spent nine years there, working on raising finance for LNG facilities in North America.

Mr. Atkins will receive a base salary of $350,000.

SEC filing – NextDecade CFO