Gulf Island Fabrication
Kirk Meche, CEO of Gulf Island Fabrication, has stepped down. 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 $85 million.
Mr Meche, who joined the company in 1999, has been CEO since 2013. He will stay on until December 31, 2019 at the latest while the company begins a search for his successor.
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). Unusually, the company has $50 million of cash on hand and no debt.
Mr Meche will receive a severance payment of $958,000 which is equivalent to two times base salary. Half will be paid immediately, the rest over 12 months. He will also get a pro-rata bonus for 2019. This has amounted to around $100,000 the last two years.
The restricted stock units that Mr Meche holds will be forfeited. However outstanding performance awards will remain valid and will pay out, provided certain targets are met.
The CFO of the company is Wes Stockton. He joined in September 2018.
SEC filing – Gulf Island CEO
Tidewater CFO Quintin Kneen has been promoted to the CEO role, replacing John Rynd, who is stepping down with immediate effect. The company is conducting a search for a new CFO.
Tidewater owns and operates the largest fleet of offshore Support vessels in the industry. The company moved its head office from New Orleans to west Houston last year. In November 2018, it merged with GulfMark Offshore for $386 million in an all-stock deal.
Prior to the merger, Mr Kneen was the CEO of GulfMark. After the deal, he became the CFO of the combined company. Mr Kneen’s new salary will be $500,000. That’s up from the $350,000 he was making as CFO but virtually identical to the salary he was making as CEO of GulfMark.
Mr Rynd only joined Tidewater as CEO in March 2018. He was previously the CEO of Hercules Offshore. He will receive a severance package of one year’s base salary ($600,000) and one year’s target bonus ($600,000). When he joined the company, he received an equity award valued at $2.75 million that would vest over 3 years. As a result of his separation agreement these now all vest (albeit at a lower value).
Since the deal with GulfMark closed, the stock price of Tidewater has fallen by about 40%. In May, the company came under fire from its largest shareholder, Raging Capital, an activist shareholder for being bureaucratic and having bloated overheads.
SEC filing – Tidewater
Raging Capital letter to Tidewater
Granite Construction, a California-based public company has agreed to buy Layne Christensen, based in The Woodlands, in an all-stock transaction worth $565 million, including the assumption of net debt.
Layne is a water management, infrastructure services and drilling company with approximately 2,200 employees. Granite is paying $17 per share for Layne, a 33% premium based on the average share price over the past 90 days.
No details were given on who would run the combined company or where the head office would be located. The deal is expected to close in the 2nd Quarter.
On February 9, Silver Run Acquisition II, a blank check company based in downtown Houston that went public in March 2017, completed its acquisition of Alta Mesa Resources & Kingfisher Midstream for a combined $3.3 billion. Alta Mesa is an onshore E&P, primarily operating in the Anadarko Basin, that had been planning to go public via an IPO. Kingfisher operates midstream assets in the same Basin that primarily serve Alta Mesa. The deal was originally announced in August 2017. Alta Mesa was valued at $1.9 billion, Kingfisher at $1.4 billion.
As a result, Silver Run II has been renamed Alta Mesa Resources Inc and the management of Alta Mesa has effectively taken over, with the corporate office moving to west Houston.
- CEO of Silver Run II James Hackett (former CEO of Anadarko Petroleum Corporation) has been appointed Chairman of the Board. He has also taken on the role of COO of the Midstream division.
- Harlan Chappelle has been appointed CEO. He has been CEO of Alta Mesa since 2004.
- CFO Thomas Walker has resigned to be replaced by Michael McCabe (CFO of Alta Mesa since 2006).
SEC filing – Silver Run II completes acquisition of Alta Mesa
Ray Davis, a 62-year-old Houston man, has been arrested following the return of a federal indictment charging him for his role in a securities and wire fraud scheme, totaling over $30 million.
A grand jury returned a 21-count indictment on 7 December. According to the indictment, the scheme involving defrauding investors in Behavioral Recognition Systems Inc (BRS) by making false and misleading statements to investors to fraudulently induce them to purchase shares in BRS ($32 million). He also allegedly embezzled more than $11 million from BRS.
BRS was based in the Galleria and made artificial intelligence technology that analyzes video information. Mr Davis founded the company in 2005, raised the money from investors in 2008-2009 and sold the business to a company called Giant Gray in 2015.
According to this February 2017 article in the Houston Chronicle Giant Gray sued Mr Davis and his son, Charles Davis for embezzling money by creating false invoices and charging personal expenses to the company.
There was no mention of the son, Charles Davis, in the federal indictment.
If convicted, Mr Davis faces up to 20 years in prison for the securities fraud charges as well as each of the 20 counts of wire fraud. The charges also carry a possible $250,000 maximum fine.
Exterran Corporation (market cap $1.1 billion), a provider of compression services based in NW Houston, has appointed Michael Sanders as its Chief Accounting Officer, effective 30 October 2017.
Mr Sanders joins from Atwood Oceanics where he had been Corporate Controller since January 2016. Atwood was recently taken over by fellow driller, Ensco. Prior to that Mr Sanders spent 14 months at LNG Limited (Corporate Controller), 15 months at KBR (Business Unit Controller, Gas Monetization Group) and 7 years at McDermott (Director of Financial Reporting and Consolidations). He started his career at Ernst & Young.
The base salary for Mr Sanders was not disclosed.
The previous CAO was Ray Carney who left Exterran in May to join KBR in the same position.
CFO Andrew Smith resigned from Kirby Corporation, effective 7 Sept, to take another position (as yet not known). Kirby has a market cap of $3.4 billion and has its head office just west of downtown Houston. The company is the nation’s largest tank barge operator. David Grzebinski, the CEO, will also serve as the interim CFO after Mr Smith departs. Mr Grzebinski was the CFO prior to Mr Smith joining the company.
Indoor Harvest Corp announced some senior executive changes following a change in strategic direction. The company, based in East Houston, trades over-the-counter (market cap $4 million) and is a manufacturer of indoor farming fixtures and equipment. Following a recent merger with Alamo CBD it is in the process of transitioning to a provider of personalized cannabis medicines. In conjunction with this merger, Rick Gutshall has been appointed interim CEO and CFO (he was formerly the CFO of Alamo CBD and prior to that has been a licensed financial adviser in the Austin area) and Annette Knebel was appointed the Chief Accounting Officer. Ms Knebel previously worked for Shawcor, HP and KBR.
Heath Cleaver has been appointed CFO of privately-owned Compressor Engineering Corporation (CECO) and CECO Pipeline Services.
TNT Crane & Rigging has appointed Chris Taylor as vice president of finance focused on acquisitions, capital expenditures and information technology. TNT is private equity backed (First Reserve) and has its corporate office near NRG Stadium.
The Securities and Exchange Commission (SEC) has charged a Houston man, Glenn Hardaway with fraudulently raising $4.7 million from fellow members of a nationwide “Success club”.
The defendant had a company, Hardaway Net-Works (HNW) that purportedly provided network services to a few hotels in the Houston area. Between 2010 and 2016, the company had total revenues of $24,812, yet Hardaway kept selling securities issued by HNW by using baseless projections about HNW’s business operations.
The SEC claimed that Hardaway paid himself $924,000 in salary during the life of the fraud and spent about $1 million in other expenses supporting his lifestyle.
The “Success Club” was an organization called Global Information Network (GIN). GIN was founded in 2009 by Kevin Trudeau, a con-man who was first convicted of fraud in 1991 and settled with the Federal Trade Commission (FTC) in 2004 over dubious weight loss programs that he advertised on late-night infomercials. In 2007 he was fined $37.6 million for breaching the 2004 agreement and in 2013 was jailed for 10 years for contempt of court and failure to pay the fine. The FTC allege GIN is a Ponzi scheme (meaning investors who gave to Hardaway have probably lost money twice over).
In addition the SEC also allege that, in April 2015, Hardaway used $40,000 of investor funds to acquire Vortronnix, a public reporting “shell” company. Hardaway became Vortronnix’s President, CEO, CFO, Treasurer and Chairman. After it was acquired, Vortronnix filed a 10-Q and Hardaway signed the filings and management certifications, despite knowing there had been no review of the company’s financial statements by the auditors. He ignored the request from the auditors to withdraw the 10-Q filing.
Vortronnix remains delinquent in its public reports with the SEC and has never traded publicly.
SEC v Darrell Glenn Hardaway
On Wednesday Weatherford, one of the largest oilfield service companies, announced its quarterly results. The company had a GAAP net operating loss of $399 million in the fourth quarter of 2016. After adjusting for certain charges and credits the non-GAAP operating loss was $148 million. The non-GAAP loss beat market expectations and the share price rose.
The problem is that Weatherford has had adjustments for the past 20 quarters! These adjustments total $6.3 billion. A GAAP cumulative operating loss of $2.5 billion magically turns into an adjusted profit of $3.8 billion! Obviously the company wants you to believe these charges are ‘one-off’ or non-recurring, though at least they don’t label them as such.
Let’s look at all the different ways Weatherford has had adjustments to operating income.
- Over $700 million losses on fixed price contracts in Iraq (2012-2015).
- Settlement payment of $153 million over foreign bribery allegations (2012-2013).
- Settlement payment of $100 million over sanctions violations (2012-2013).
- Settlement payment of $140 million to the SEC as a result of using false income tax accounting (2016).
- Settlement payment of $120 million over class action lawsuit on the tax accounting (2015).
- Approx $75 million of legal fees associated with the tax accounting settlements.
- $98 million write-off of Venezuelan notes receivable (2013).
- $4 billion in impairments of inventory, goodwill and other long-lived assets (2012-2016).
- Nearly $1 billion in restructuring and severance costs (2014-2016).
That’s quite a list!
Weatherford is finally making a serious attempt to put its house in order. In November 2016, CEO Bernard Duroc-Danner left the company after 18 years in the role (with a $57 million severance package). Interim CEO (and permanent CEO candidate) Krishna Shrivram aims to transform the company from a one-stop shop into a company specializing in well construction and production optimization. The North American pressure pumping business has been idled and its assets put up for sale as well as the land rig business that operates in the Middle East and North Africa. He hopes to raise between $1.5 billion and $2 billion from these sales.
There will probably be a few more quarters of credits and adjustments before we find out whether the strategy is working.
Today, the SEC announced that United had agreed to pay a $2.4 million fine in regards to case where the airline created a route so that a public official could get more convenient flights. The investigation initially arose out of the Chris Christie “Bridgegate” scandal.
Back in 2011, the CEO of United, Jeff Smisek, wanted the New York Port Authority to invest public funds into the Newark Liberty International Airport where the airline has a major hub. The chairman of the Port Authority, David Samson responded by asking the airline to restore a route between Newark and Columbia, South Carolina where Samson had a home. The route had previously been canceled because it lost money.
Smisek, who was the former CEO of Continental in Houston prior to its merger with United, agreed to re-instate the route, (flights twice-weekly starting in September 2012) without going through the airline’s normal protocols regarding new routes and without asking the United Board of Directors for a waiver from United’s ethics and compliance policies.
Samson resigned from the Port Authority in March 2014 due to “Bridgegate” and pled guilty to bribery in connection with the South Carolina route in July 2016.
Within days of his resignation, the Newark-Columbia route was canceled. The SEC found that the route lost $945,000 in the 20 months of operation.
Smisek resigned as CEO of United in September 2015 as a result of this investigation. He received a severance package of $4.9 million in cash and $3.4 million in stock. No word of his fate in the SEC announcement today, though the SEC press release did state the investigation was ongoing. If he is found guilty (or accepts charges) of bribery, he could be forced to repay some of that severance.