For sale midstream company appoints new CFO

Noble Midstream Partners has appointed Thomas Christensen as the CFO of the General Partner. He was appointed interim CFO in July 2019 and has been the Chief Accounting Officer since August 2016.



Noble Midstream has a market cap of $960 million and is based in NW Houston. It was spun off from its parent company, Noble Energy, in September 2016.  That was when MLP partnerships going public was in vogue.

Noble Midstream Partners still gets 57% of its total revenues from Noble Energy, who still own a 45% partnership interest in them.

According to a report in Bloomberg in early August, The Williams Companies, based in Tulsa, and New York PE firm, Global Infrastructure Partners, are working on a possible offer for the company.

The previous CFO, John Bookout resigned to pursue another opportunity in July. He was followed out the door by CEO, Terry Gerhart, and COO, John Nicholson, the following month. They resigned on August 9 to ‘pursue other business opportunities’. Brent Smolik, currently the COO of Noble Energy, was appointed CEO of the General Partner.

SEC filing – Noble appointment of CFO

Oilfield Services company delisted

Photo by Joshua Doubek

Superior Energy Services, based in downtown Houston, has been delisted by the New York Stock Exchange. This is because the share price has been below $1 for more than 30 days. The company plans to appeal the decision.



Superior provides a number of different oilfield services such as downhole rental tools, pressure pumping services and coiled tubing. It has been struggling for a few years and last made an operating profit in 2014.

At the time of delisting it had a market capitalization of $13 million but had debt of over $1.3 billion. $800 million of this matures in December 2021.

At lot of debt stems from the acquisition of Complete Production Services for $2.9 billion in February 2012. The company paid cash of $550 million and issued stock for the rest. However, three months prior to the finalization of the deal, it issued $800 million of senior loan notes (the ones that are due next year).

The Complete acquisition also involved $1.9 billion of goodwill. This has been written off in subsequent years.

The NYSE has acted unusually quickly in delisting the company. The NYSE originally informed the company about the non-compliance on August 9. The company issued a press release on August 12 stating that it planned to notify the NYSE by August 23 of its receipt of the notice and of its intention to cure the non-compliance.

The company didn’t issue a press release or file anything with the SEC on or after the August 23 deadline. Maybe they forgot to respond! Normally the NYSE are usually patient if a company files a plan to get back into compliance. That’s how many companies can go months with the stock price below $1.

https://ir.superiorenergy.com/news-releases/news-release-details/superior-energy-services-receives-notice-nyse-regarding-0

Oilfield Products Distributor hires new CFO

Kelly Youngblood has been appointed as the next CFO of MRC Global, an oilfield products distributor, based in downtown Houston.

Mr Youngblood replaces Jim Braun, who announced last month that he intends to retire in March 2020. He has been the CFO since November 2011. Mr Youngblood will join MRC right away but won’t take over the CFO position until Mr Braun retires.



MRC Global is the largest distributor of pipe, valve and fitting products and services to the energy and industrial markets. It went public in 2012 and was previously called McJunkin Red Man Holding Corporation. The company has revenues of $4 billion and a market capitalization of $1 billion.

Mr Youngblood joins from BJ Services, another oilfield services company, where he had been CFO since December 2017. Prior to that, he was the CFO of Diamond Offshore Drilling and the VP of Investor Relations at Halliburton.

BJ Services filed for an Initial Public Offering in July 2017 but withdrew its registration statement in March 2019.

Mr Youngblood will receive a base salary of $500,000 (same as Mr Braun). He will also receive a signing bonus of $380,000 (to be paid in two installments in 2020) and an initial equity long-term incentive award with a target value of $1.5 million (to vest over three years).

SEC filing – Youngblood appointment

Former employee charged with $10 million fraud

James Camp has been charged with $10 million fraud from his former employer, Lubrizol Corporation, based in Deer Park.

The 10-count indictment for wire fraud was returned in the Southern District of Texas. The indictment remains under seal. Therefore many details of the scheme have not been released.



Lubrizol is a provider of specialty chemicals. It was a public company until it was acquired by Berkshire Hathaway in 2011. Its corporate head office is in Ohio.

Mr Camp allegedly defrauded the company of $9,256,713 between April 1998 and November 2017. Camp submitted fraudulent invoices for laboratory services from two companies he owned. He then allegedly caused Lubrizol to issue payments to those companies. The indictment further alleges that he used the fraudulently obtained payments for his own personal benefit.

If convicted, Camp faces up to 20 years imprisonment on each count as well as a possible $250,000 fine.

https://www.justice.gov/usao-sdtx/pr/former-employee-indicted-nearly-10-million-fraud-scheme

 

 

McDermott moves closer to large debt restructuring

Photo: Nandu Chitnis

The news surrounding McDermott International keeps getting worse as its liquidity crisis deepens. Just in the past week, it has emerged that

  • the company has hired Kirkland & Ellis (legal) and AlixPartners LLP (Financial advisers) to advise it on its debt restructuring.
  • A group of bondholders has hired Paul Weiss Rifkind Wharton & Garrison (legal) and Houlihan Lokey (Financial advisers) to advise them.
  • Another group of lenders has hired Davis Polk & Wardwell as counsel (Jones Day was initially hired but had to step down due to a conflict) and Centerview Partners.
  • The company has hired Evercore to help it sell Lummus, a technology business for $2.5 billion.
  • The company is seeking a bridge loan to help it cover a $1.7 billion working capital deficit until it can sell an asset such as Lummus.
  • Moody’s downgraded McDermott one notch to B3 (speculative, high credit risk).

When the news broke that McDermott had hired Kirkland & Ellis, the go-to legal firm in Houston for restructuring, the company issued a weak statement that stated ‘it routinely hires external advisors to evaluate opportunities for the company.’

Debt trading at big discount

The company’s $2.2 billion term loan is quoted at 77 cents on the dollar. In contrast, the $1.3 billion 10.625% unsecured notes have been trading at 36 cents. A key date coming up is November 1 when there is $69 million of note interest due to be paid.

The share price is currently $2.15 (market cap $427 million), down from $21 in May 2018.

Disastrous acquisition

The problems stem from McDermott’s disastrous acquisition of fellow Houston company, CB&I in May 2018 for $4.1 billion ($2.4 billion cash, $1.7 billion stock). CB&I had a lot of legacy Engineering & Construction projects that have turned out to be much less profitable than McDermott expected at acquisition.

The costs to complete estimated at acquisition on just 3 projects (Cameron LNG, Freeport LNG and Calpine Power) increased by over $1 billion. As a result, the goodwill on CB&I ended up being $4.8 billion. McDermott wrote down $2.1 billion in goodwill 7 months after acquisition. That’s a quick destruction of shareholder value!

Since acquisition, the costs to complete on these three projects increased by an additional $199 million in 2018. For the first 6 months of 2019, costs on all major projects have increased by $116 million. No wonder the company is having cash flow problems.

Of course, all those high-priced lawyers and financial advisors have to be paid too!

Backlog

One thing in its favor is that the company has record backlog of $20.5 billion. Having worked at a large E&C company in a former life, I know from personal experience that investors & lenders view backlog has having value (‘somebody must be able to make money on $20 billion of revenue!). However, if you can’t execute, there is no value.

https://www.prnewswire.com/news-releases/mcdermott-statement-300921007.html

 

 

TechnipFMC pays SEC $5 million to settle Iraq bribery violations

TechnipFMC, has agreed to pay the Securities and Exchange Commission (SEC) $5 million to settle bribery allegations in Iraq.

Between 2008 and 2013, FMC Technologies (based in Houston) made over $794,000 in payments to a third-party consultant, who used some of these funds to pay bribes to Iraqi government officials to procure metering technology contracts with Iraq state-owned oil companies.



Back in June, the Department of Justice announced that TechnipFMC had agreed to pay $296 million to settle bribery allegations in Brazil and Iraq. $214 million of that was to be paid to the Brazilian authorities, with $82 million going to the DOJ.  In June, Technip issued a press release announcing a $301 million settlement. I noted, at the time, the $5 million discrepancy. I presume the $301 million includes the $5 million just announced.

The FMC sales manager who played an active role in the bribery scheme was based outside the US. However personnel in the US sent numerous documents and approved payments to Unaoil, the consultancy firm based in Monaco. The company disguised the payments as site installation expenses.

TechnipFMC did not self-report to the SEC until after being contacted by the DOJ. It has agreed to pay $4.3 million (representing profits on the contracts won) plus interest of $0.7 million.

Technip and FMC merged in January 2017. Last month, the company announced plans to split into two having spent $231 million on integration costs since 2016.

https://www.sec.gov/enforce/34-87055-s

 

 

Wells drilled but not completed fall below 8,000

The number of wells drilled but not completed (DUCs) fell to 7,950 in August 2019, the lowest level since November 2018. This is according to the latest Drilling Productivity Report from the Energy Information Administration (EIA). The report covers key onshore unconventional (shale) plays.

The number of DUCs has fallen by almost 300 since April 2019. In addition, the monthly 2019 numbers were also revised down by about 30-40 DUC’s from the numbers reported previously.

Completions were 1,389 in August 2019, a slight reduction from last month.

Interestingly Spears & Associates recently published a podcast ‘Mythical Beasts’ that cast doubt on the number of wells drilled but not completed. They point out flaws in the EIA methodology and have estimated that the number of DUCs is overstated by about 3,000. They conclude that there isn’t really a backlog of wells being held back by the E&P companies.

The EIA is projecting production of 8,768,000 barrels per day (bpd) for September. That’s up 87,000 on August’s number. For October, the projection is 8,842,000, up 74,000 bpd on September.

The September 2019 projection is 919,000 bpd higher than September 2018. That’s the first time in two years that the year-on-year increase is below 1 million bpd.

SEC charges former CEO of Houston company with creating fictitious CFO

The Securities and Exchange Commission (SEC) has announced fraud charges against Tom Simeo. He is the former Chairman and CEO of Houston-based Viking Energy Group. The charges are for making materially misleading disclosures regarding Viking’s purported CFO.

Viking Energy is traded over-the-counter. At the time of the alleged fraud, it had a market cap of around $5 million.



Company had no CFO

The SEC alleges that Simeo, a resident of New York, created the false impression to the public that Viking had an experienced financial professional involved in its operations and financial reporting as its CFO, when in reality, the Company had no CFO.

According to the complaint, between November 2014 and May 2016, Viking’s public filings falsely disclosed that Guangfang “Cecile” Yang was Viking’s CFO.  Internal control certifications required by Sarbanes-Oxley falsely represented that Yang had performed an evaluation of Viking’s internal controls over financial reporting.

According to the SEC ‘there is no evidence that Yang performed any activities as Viking’s CFO from at least November 2014 through Yang’s resignation in July 2016. Indeed, other than a single email to Simeo from someone purporting to be “Cecile,” neither Viking nor Simeo has produced any documentary evidence that anyone from Viking, or its auditors, had ever communicated with Yang’.

Chinese Incubator 

Simeo served as Chairman of Viking from August 2008 until May 2017. Until 2014 Viking operated as an incubator for Chinese companies. Simeo’s former wife introduced him to Yang in Shanghai in 2013 and hired her as the company’s CFO shortly afterwards.

At the time she was appointed, Yang provided to Simeo a ‘standing resignation letter’ and a power of attorney in favor of Simeo, authorizing him to affix Yang’s signature to any and all documents that Yang was required to review and sign as CFO.

In 2014, Simeo converted the business to an Exploration and Production company. In 2016 he moved the head office from New York to Houston.

False Biography

Simeo provided Yang’s unverified resume to Viking’s outside counsel to use in the senior management biography disclosed in the annual report. The biography claimed that Yang had;

  • worked at KPMG from 1998 to 2006,
  • participated in audits of the Sinopec and China Mobil IPO’s,
  • a business degree from the Hult International Business School in London

According to the SEC, she didn’t work at KPMG for the years listed, she didn’t work on the IPO’s and she never graduated from the business school.

According to the annual reports, Ms Yang received no compensation over than a grant of 25,000 shares worth $3,914 in 2014.

$2 million raised from investors

During this period, the company raised approximately $2 million from investors. Viking and Simeo continued to disclose Yang as the company’s CFO until the securities had been sold.

https://www.sec.gov/litigation/litreleases/2019/lr24599.htm

 

 

Biotechnology company hires interim CFO

Salarius Pharmaceuticals has hired Mark Rosenblum as Interim CFO. He replaces Scott Jordan, who has been appointed Chief Business Officer.

Salarius is based in the Medical Center. The primary drug in its pipeline is one that treats Ewing sarcoma, a bone cancer that affects children and young adults. The company moved from Salt Lake City in 2016 after receiving a $19 million grant from the Cancer Prevention and Research Institute of Texas.  The company went public in July 2019 via a reverse takeover.



According to LinkedIn Mr Jordan is based in Chicago while Mr Rosenblum is based in Dallas. Mr Rosenblum has been working as a consultant to Salarius since February 2019. He has previously served as CFO of another biotech company, Advaxis.

Although he is described as the Interim CFO, Mr Rosenblum has converted from a consultant to an employee. He will be paid $265,000. He will also get a guaranteed bonus of $19,300 for 2019 and $14,500 for Q1 2020.

SEC filing – Salarius Rosenblum

Houston healthcare executive sentenced to 10 years for $16m fraud

Starsky Bomer of Houston has been sentenced to 10 years in prison for his role in a $16 million Medicare fraud scheme.

Mr Bomer was convicted in October 2018 of one count of conspiracy to pay and receive healthcare kickbacks, two counts of violating the Anti-Kickback Statute and one count of conspiracy to commit health care fraud.



Mr Bomer was the CFO & COO of Atrium Medical Center in Sugar Land and Pristine Healthcare in Pasadena. Between 2011 and February 2013, Bomer and others engaged in a scheme to defraud Medicare by submitting false and fraudulent claims for partial hospitalization program (PHP) services. A PHP is a form of intensive outpatient treatment for severe mental illness.

Mr Bomer orchestrated a scheme by which he paid bribes and kickbacks (typically around $1,500) to group home owners and patient recruiters in exchange for sending patients to Atrium and Pristine. Mr Bomer disguised the bribes and kickbacks as salary payments and transportation payments. In addition, Mr Bomer knew that most of the patients admitted to Atrium and Pristine’s PHP did not qualify for and were never provided legitimate partial hospital services.

Mr Bomer has to pay back $6.3 million in restitution and forfeit $158,000.

https://www.justice.gov/opa/pr/texas-hospital-administrator-sentenced-10-years-prison-role-16-million-health-care-fraud