Category Archives: Uncategorized

ConocoPhillips to buy Marathon Oil for $22.5 billion

ConocoPhillips has agreed to buy Marathon Oil for $22.5 billion, including $5.4 billion of net debt in an all-stock deal. Both companies have their head offices in west Houston.

The companies have adjacent acreage in the Eagle Ford, Bakken and the Permian Basins. Marathon also has assets in Oklahoma and Equatorial Guinea.

Both companies were part of Standard Oil until its breakup into 34 companies in 1911, following a Supreme Court Ruling. The descendant of Marathon (‘MRO’) started life as an amalgamation of a number of Ohio-based oil producers in 1887, before being acquired by Standard Oil in 1889. The descendant of Conoco (‘COP’) was founded in Utah in 1875 as Continental Oil and Transport Company and was bought by Standard Oil in 1884.

COP has identified $500 million of annualized savings from the deal. Half of that will come from the elimination of duplicate general and administrative expenses. $150 million of savings is expected from the optimization of operating and commercial costs. The remaining $100 million will come from reduced capital costs.

As a result of the deal, COP is increasing its ordinary dividend by 34% once the deal closes. It is also increasing its annualized share buybacks from $5 billion to $7 billion.

In March, MRO announced that CFO Dane Whitehead would be retiring on July 1. Rob White, the Controller and Chief Accounting Officer, was promoted to CFO, effective May 1. With today’s announcement, Mr. Whitehead has agreed to delay his retirement until the deal is closed. He will be an Executive VP and Advisor to the CEO.

The deal is expected to close in the four quarter of 2024.

Investor Presentation

Vroom CFO to step down following restructuring

Vroom, the former high-flying online car retailer, has announced that CFO Bob Krakowiak is stepping down. He will be replaced by Agnieszka Zakowicz, the Senior VP and principal accounting officer. Mr. Krakowiak is not leaving the company as he has been nominated to the Board of Directors.



Vroom went public via a $468 million IPO in June 2020 and, at one point later that year, its market capitalization reached $8.2 billion. It currently has a market cap of $23 million.

The company relocated from Manhattan to Houston in 2022 in a bid to cut costs. Back in January, it announced it was winding down its e-commerce vehicles and closing its one physical dealership, Texas Direct Auto, in Stafford. It will concentrate on auto financing and its vehicle analytics company.

In early April, the company had announced it had completed the restructuring. However, its proforma financials of the ongoing business show that the company still has some serious difficulties.

For 2023, the ongoing business had revenues of $206 million and generated a loss from operations of $6 million. The company will still have net debt of $490 million and stockholders’ equity of $160 million. That equity figure includes $132 million of intangibles.

Mr. Krakowiak, who has been CFO since September 2021, will receive a severance equal to 12 month’s base salary. Conveniently, the company just bumped his salary from $565,000 to $650,000 in March 2024.

Ms. Zakowicz joined the company in January 2019 as Senior Director of Accounting Policy. Prior to that, she spent 18 years at PricewaterhouseCoopers.

SEC filing – 8-K Vroom CFO steps down

Chesapeake to buy Southwestern Energy for $7.4 billion

Chesapeake Energy, based in Oklahoma City, has agreed to buy Southwestern Energy (SWN), based in Spring, for $7.4 billion in an all-stock transaction. Chesapeake shareholders will own 60% of the combined company, which will have an enterprise value of $24 billion.



The deal is expected to close in the second quarter of 2024. After it does, the company will have a new name and its head office will be in Oklahoma City. Chesapeake CEO Nick Dell’Osso will be the CEO of the combined company. No other senior executives were named to leadership roles in the combined business.

SWN is primarily a gas producer with assets in the Marcellus and Utica basins in Appalachia and the Haynesville basin. In recent years, Chesapeake has been concentrating on the Marcellus and Haynesville basins and sold its Eagle Ford operations in 2023. The combined company will be the 3rd largest gas producer in the US, behind Chevron and ExxonMobil

SWN was formed in 1929 in Arkansas as a local gas distribution company. The company began exploration and production in 1943 and went public in 1981.  It relocated its head office to Houston in 2001.

Chesapeake expects to save $400 million from the deal. Most of the savings will come from elimination of corporate and regional costs ($125 million). Reduced capital expenditures in drilling and completion will save $130 million.

This is the second big E&P deal announced in the past week. Apache agreed to buy Callon Petroleum for $4.5 billion.

Investor Presentation – Chesapeake SWN

Midstream LP to be taken private by PE firm

Evolve Transition Infrastructure LP is to be taken private by its General Partner. The GP will purchase the common units it doesn’t already own and the units will be delisted from the NYSE in mid-February. Evolve currently has a market cap of $11 million.

[Update 02-16-24 – The deal has been completed.]

The GP and its affiliates are owned by Stonepeak Partners, an infrastructure private equity firm. Combined they own 81.6% of the common units.



The primary asset of the business is a gathering system with 160 miles of gathering pipelines and four processing facilities It is located in the Eagle Ford basin.

The business went public as Constellation Energy Partners in 2006. At that time, it owned coalbed methane wells in Alabama. In 2015, Stonepeak invested in the business by helping it acquire the gathering system from Sanchez Energy for $346 million. The E&P assets were sold off and the business was renamed Sanchez Production Partners.

Sanchez Energy filed for bankruptcy in 2019, though the LP remained out of bankruptcy. However, the LP suffered cash flow issues and Stonepeak took full control of the GP in 2020. The remaining members of the Sanchez family exited the company, which was renamed to Evolve.

Evolve becomes the second Houston-area company in 2024 to announce plans to delist. Last week, the Chairman of Via Renewables said he would take the company private.

SEC filing – 8-K – Evolve going private

 

CFO of Houston retailer resigns

George Bchara, 39, CFO of Conn’s, based in The Woodlands, has voluntarily resigned and will leave the company on December 1, 2023. Timothy Santo, currently the Chief Accounting Officer, will be the interim CFO. He will continue to conduct his CAO duties until a new Chief Accounting Officer has been hired.



Conn’s is a specialty retailer of durable consumer goods and has 171 stores in 15 states across the southern US. The average customer of Conn’s has a subprime credit score (defined as between 580-619).

The recent rise in interest rates provided a double whammy to the company. Its customers reduce their discretionary spending or find it harder to get credit and the company has to pay more interest on its debt.

For the six months ended July 2023, the company made a net loss of $69 million. Compared to the comparable period in 2022, retail sales fell 12%. Revenue from financing charges fell by 6% and bad debt expense rose.

Mr. Bchara originally joined the company in December 2016 as Chief Accounting Officer and was promoted to CFO in June 2019.

Mr. Santo joined the company in April 2023. He previously the Global Controller at PRA Group, a business that specializes in servicing non-performing consumer loans.

SEC Filing – 8-K

 

Perma-Pipe International Holdings appoints new CFO

Perma-Pipe International Holdings has announced that CFO Bryan Norwood will retire, effectively immediately. He will be replaced by Matt Lewicki, who is currently the Chief Accounting Officer.

Perma-Pipe designs and manufactures specialty piping and leak detection systems. It has revenues of $140 million and a market capitalization of $66 million. The company appointed  David Mansfield, a Houston-based CEO, in 2016 and officially moved its head office from Illinois to Spring, TX in 2020.

Mr. Norwood, 68, joined the company in October 2018. He and Mr. Mansfield had worked together at Bredero Shaw, a pipe coating provider. Mr. Norwood also worked at Key Energy and API Perforating.

Mr. Lewicki joined the company in May 2023. Prior to that, from 2019 to April 2023, he was Corporate Controller for HMT Holdings, an oil and gas infrastructure company. Before that he spent six years at Quanta Services.

Mr. Lewicki will receive a base salary of $275,000.

SEC filing – 8-K Perma-Pipe CFO

Social Influencers charged in $114m Pump-and-Dump scheme

Eight men have been indicted in a $114 million ‘Pump and Dump’ securities fraud that ran from January 2020 until April 2022. All have been arrested and will appear in court in Houston. There is both a criminal complaint filed by the Justice Department and a civil complaint, filed by the SEC.



The men allegedly manipulated stock prices by publishing false and misleading information on Twitter, on podcasts and through an online forum called Atlas Trading. Edward Constantin from Montgomery, TX and Perry Matlock from The Woodlands co-founded Atlas. Mr. Constantin, aka “MrZackMorris” had 551,000 Twitter followers while Mr. Matlock had 340,000.

Another defendant, John Rybaracyzk, from Spring had 267,000 followers and founded another stock trading forum on Discord. Other defendants are from Beverly Hills, New Jersey, Miami and Houston.

The scheme was simple. One or more of the group would buy a penny stock and tell the others in the group, allowing them to buy in at lower prices, prior to the manipulation. Then they would promote the stock to their followers. They would announce price targets, tease upcoming news and/or state their intentions to buy or hold their current positions.

After promoting the stock, they would sell their shares. Often they would continue to recommend their followers buy the stock, while not disclosing that they were selling their shareholding.

In the indictment, the first example given is of Camber Energy (CEI), a Houston-based penny stock. On August 3-4, 2021 three defendants bought a combined 2.2 million shares at an average price of 46 cents each. At 3.37pm on August 4, one defendant posts on Twitter and on Atlas “I added CEI for the swing… Last time it was at these prices, we went to $3”. Matlock posts on Atlas one minute later, echoing the sentiment.

Within the next four minutes, all three had sold a combined 465,000 shares after the stock rose by a penny. The cycle of promotional tweets and simultaneous sales happened five more times that day as the stock rose to 50 cents. Between August 3 and August 5, the three defendants made $54,989 through their misleading posts on CEI.

Constantin followed with a similar pattern and between September 1, 2021 and October 5, 2021, he made $4.3 million on buying and selling CEI stock.

It appears that someone known to all the defendants is working with prosecutors and helped build the case against them. The indictment refers to two unindicted co-conspirators. It also refers to private Discord chats between some of the defendants that were surreptitiously recorded.

That includes these two classics from one of the defendants, Daniel Knight (who lives in Houston);

‘Get caught? … We’re robbing f*cking idiots of their money…’

“. . . I mention a stock the less likely I get involved whenever all of Atlas gets a class action lawsuit . . . I’m playing this extremely smart, for the very long term. If you don’t think all
these f*ckers go to jail or at least get sued, you are crazy. . . .PJ is posting McLarens, $10 mill accounts, green 400 f*cking days in a row, come on. Every purchase over $10,000
immediately gets turned to the SEC. And it’s like everything he f*cking buys. . . . Just wait and see. . . . It’s market manipulation.

All defendants are charged with one count of conspiracy to commit securities fraud. Most are also charged with multiple counts of securities fraud. If convicted, each defendant faces a maximum penalty of 25 years in prison for conspiracy to commit securities fraud and each charged count of securities fraud. Constantin also faces a maximum penalty of 10 years in prison if convicted of engaging in unlawful monetary transactions.

Criminal Indictment

Construction services company appoints new CFO

Orion Group Holdings has appointed Scott Thanish as its new CFO. He replaces Robert Tabb, who resigned in October 2021 to become CFO at privately-held Signal Energy Constructors.

Orion is based in SE Houston. The company was formed in 1994 to provide dredging and other marine construction services. However, it later diversified into concrete construction services. The company has revenues of over $600 million and a market cap of $96 million.

CEO and interim CFO Mark Stauffer was fired in April 2022. Chairman Austin Shanfelter took over as interim CEO until Travis Boone was appointed as its new CEO last month. Mr. Boone was a regional CEO of AECOM, an infrastructure engineering firm.

The root of the problems appears to be negative margins in the concrete segment, especially in the Austin and San Antonio regions, relatively new territories for the company.  The company had inexperienced management and weak relationships with customers in these regions and was unable to pass on cost increases.

Mr. Thanish joins from CHC Group, a private company providing helicopter services to the oil and gas industry. He has been CFO there for almost 5 years. He will receive a base salary of $425,000.

SEC filing – Orion Group CFO appointment

 

 

 

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