CFO of HPE resigns to take CEO job at RingCentral

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Tarek Robbiati, CFO of Hewlett Packard Enterprise (‘HPE’), is leaving to become CEO of RingCentral, with effect from August 25. Jeremy Cox, Corporate Controller & Chief Tax Officer, has been appointed interim CFO while the company conducts a search for a permanent replacement.



RingCentral is based in Silicon Valley, which is where HPE had its headquarters until it moved to Spring, TX in 2020. RingCentral has a market cap of $3.7 billion, compared to HPE’s $22 billion. The company provides enterprise cloud communications, collaboration and contact center solutions, primarily through subscription services.

RingCentral CEO Vlad Shmunis founded the company in 1999 and is transitioning to Executive Chairman. To make run for Mr. Robbiati, Mo Katibeh, COO for the past 18 months, is leaving the company.

Mr. Robbiati became a non-executive director of RingCentral in January of this year.

Diverse Background

Mr. Robbiati was appointed CFO of HPE in August 2018. He holds both Italian and Lebanese citizenship and is fluent in six languages. He has a degree in Nuclear Physics and Electronics from Ecole Nationale Supérieure d’Ingénieurs, Caen, France and an MBA from the London Business School.

Mr. Robbiati started his career as an R&D Engineer for Schlumberger in France but has mostly worked in Telecoms in UK, Australia and Hong Kong. He was CEO of FlexiGroup, an Australian financial services group, before becoming the CFO of Sprint in 2015.

Conventional Background

Mr. Cox has been with HPE or its predecessors since 2008 and has a more orthodox background. He has a degree from Texas Tech. Most of his experience has been in Tax. He was promoted to Corporate Controller a year ago.

SEC filing – 8-K Robbiati resignation

Houston E&P CFO leaves after less than seven months

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Kristen McWatters, CFO of Battalion Oil and Gas, has resigned less than seven months after being appointed. She handed in her resignation on August 2 and left two days later. Her duties will be covered by Matt Steele, the CEO and the other members of the finance department.



The company is based in NW Houston and has working interests in approximately 40,000 net acres in the Delaware Basin. Its market capitalization is currently $136 million. It also has $230 million of debt that carries an interest rate of over 12%.

The company was formerly known as Halcon Resources. It went into bankruptcy in August 2019. The company emerged in October 2019, having eliminated over $750 million of debt. In return, the debt holders got 91% of the newly reorganized equity. It changed its name to Battalion in January 2020.

In her resignation letter, Ms. McWatters did not give a reason for her departure, though she did say it was not the result of any disagreement with the Company on any matter relating to how the Company has operated, its policies or its practices, including its controls or financial related matters.

The SEC filing made no mention whether severance would be paid. If it were, it would be $150,000 or six months’ severance.

Ms. McWatters was appointed to the role on January 22 and she reported to then-CEO Rich Little.  About six weeks later, Mr. Little was replaced as CEO, leaving with a $1 million severance. The new CEO, Mr. Steele, was appointed with a lower base salary than Ms. McWatters.

SEC filing – 8-K – Battalion Oil CFO resignation

Struggling nutrition company appoints new finance leader

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Guardion Health Sciences has promoted Katie Cox to be its Chief Accounting Officer. She replaces Jeffrey Benjamin, who has resigned. The CAO role is the most senior financial position in the company.



Guardion is a clinical nutrition company. Its main product is Viactiv, a line of supplement chews for bone health. The company is based in the Greenway Plaza area of Houston, having moved its head office from San Diego in 2021. It has a market capitalization of $10 million.

Disastrous Acquisition

Guardion is suffering from a disastrous acquisition made in June 2021. It paid $26 million in cash for the business that owned Viactiv. The product is sold in retailers such as Walmart and Target. Starting in late 2021, the company experienced supply chain issues that resulted in a lack of inventory at the retailers. In fact, the company ended up paying $83,000 in out-of-stock fees to the retailers in 2022.

At the end of 2021, Guardion wrote off $12 million in goodwill related to the acquisition because its market cap was below the carrying value of its assets. In 2022, it wrote off $10 million, the value of intangible assets that it had acquired.

Change of Control clause

Ms. Cox joined the company in June 2022 as the Head of Financial Planning and Analysis. Prior to that, she spent nearly three years as Director of FP&A at Catalent Pharma Solutions and ten years as a Finance Manager in a subsidiary of Baxter International.

Ms. Cox will receive a base salary of $225,000. She will also get a $50,000 retention bonus immediately following a Change of Control transaction. She will get another $50,000 if the Change of Control transaction doesn’t happen by December 31, 2023.

Craig Sheehan, the Chief Commercial Officer, recently entered into a bonus agreement with a similar bonus structure except his refers to either a Change of Control transaction or the sale of the Viactiv brand.

Jeffrey Benjamin was appointed CAO in August 2021, following the departure of CFO Andrew Schmidt. Mr. Benjamin joined the company in April 2021.

New CEO

In June, CEO Bret Scholtes stepped down as CEO after two-and-a-half years in the role. The company appointed Jan Hall as its new CEO. Ms. Hall has worked for Johnson & Johnson and Coca-Cola and most recently was CEO of M2 Ingredients.

SEC filing – 8-K – Guardion CAO

Crown Castle to cut headcount by 15% and close offices

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Crown Castle, based near the Galleria, has announced it will cut its headcount by 15% (approx 750 jobs). It will also discontinue installation services as a product offering within its Tower segment. The company will incur one-time restructuring charges of approximately $70 million (mostly severance).



In addition, the company said it would consolidate office space and incur a charge of $50 million. That’s for accruing remaining lease obligations and writing off leasehold improvements. The company didn’t publicly disclose which offices were affected but an anonymous post on ‘TheLayoff.com’ stated that 13 regional offices were closing. That post also said that, if employees in those offices didn’t work for that specific region, they would have to move to Houston or leave the company.

Crown Castle has said that the mobile phone operators have slowed down tower construction activity by 50% in the second quarter as they complete the major part of their 5G investment roll-out.

The company owns and operates 40,000 large cell towers, 120,000 small cells and 85,000 miles of fiber. The company has revenues of around $7 billion, 90% of which comes from the rental of its infrastructure.

The other 10% of revenue comes from Tower Services with about 55% of that from Site preparation and 45% from installation services. It is the latter that is being discontinued. Unlike the rental business that has high margins under long-term contracts, services have lower margins (~30%) and volumes are more volatile.

Elliott Management

Back in 2020, activist investor Elliott Management took aim at Crown Castle, believing that it had under-performed because it invested heavily in Fiber, which had a return on capital of 3%. It also said the board was too insular. At the time, 8 of the 11 non-executive directors had served for at least 13 years and included two former CEOs.

Elliott launched its campaign with great fanfare in June 2020 and Crown Castle quickly responded by replacing three of its non-execs. However, the company didn’t make any other major changes and Elliott appeared to quietly drop its campaign soon thereafter.

At that time, Crown Castle’s market capitalization was $71 billion. It is currently $47 billion.  The company’s largest customer is T-Mobile. Its long-term growth prospects took a hit following the merger of T-Mobile and Sprint as the combined customer required less tower rentals.

That leads me to wonder if Elliott will come knocking on the door again, like they did recently with another Houston company, NRG. The Fiber business still earns a single digit return that is below the company’s cost of capital.

For good measure, today the company also announced two new non-exec directors. That will mean 5 out of 12 will have been appointed in the past three years.

SEC filing – 8-K – Restructuring

 

Academy promotes from within for CFO role

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Academy Sports and Outdoors, based in Katy, has promoted Carl Ford, Senior VP, Finance to be its CFO. He replaces Michael Mullican, who was appointed President of the company at the beginning of June.



Academy went public in September 2020 with an IPO share price of $13. It now trades at $57, though that is about $10 off its 52-week high as comparable net sales in its latest quarter were down 7% . It currently has 269 stores in 18 states.

Mr. Ford joined the company in January 2019. Prior to joining the company, he spent 15 years at Belk, a department store chain based in Charlotte, NC, ending up as the VP of Financial Planning and Analysis. He started his career at Deloitte and Touche.

Mr. Ford will have a base salary of $500,000 and will receive equity awards valued at $1 million, which are a mixture of time and performance-based restricted stock units.

Mr. Ford’s promotion is the latest of a series of changes at the company. Back in April, Ken Hicks, who had been CEO since May 2018, announced he would transition to Executive Chairman, effective June 1. In turn, Steve Lawrence, the Chief Merchandising Officer, was promoted to CEO. Matt McCabe, Senior VP, General Merchandise Management of Footwear, was promoted to Mr. Lawrence’s role.

Mr. Mullican’s role as President covers Strategic planning, logistics & supply chain, legal, compliance, and risk management functions.

Sec filing – 8-K Academy CFO

ExxonMobil officially moves its head office to Spring, TX

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Gary Coronado/Houston Chronicle

ExxonMobil has officially changed the location of its headquarters from Irving to Spring with an 8-K filing with the SEC on July 5. Exxon has a market capitalization of $417 billion and therefore becomes the largest company in the Houston-area, as measured by market cap. Its market cap is over three times the next largest (ConocoPhillips at $125 billion).



The company announced back in January 2022 that it would be relocating its corporate offices to its campus in Spring sometime in 2023.

Exxon moved its head office from Manhattan to Irving in 1989. The campus in Irving, built in 1996, was 365,000 square feet and housed 250 employees, who were offered relocation packages. In December 2022, the company sold the offices and 290 acres of land (of which 200 were undeveloped) to an Austin-based developer, Capital Commercial Investments.

Jones Lang LaSalle, who brokered the sale, have been hired to market the office building to companies looking to relocate to the Dallas-Fort Worth area. The development plans of Capital Commercial for the rest of the property are not yet known.

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 $990 million.

As a side note, when a company changes its corporate office, it doesn’t have to file a document with the SEC. It just starts using the new address with its next filing. The Exxon filing happened to be a Regulation FD disclosure on upcoming earnings considerations.

Kodiak Gas completes IPO below expected price range

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Kodiak Gas Services, based in Montgomery, TX, has completed its $256 million Initial Public Offering (IPO). Its stock is now listed on the NYSE under the symbol ‘KGS’. It offered 16 million shares at $16 per share, well below the proposed range of $19-$22.



The company operates gas compression services, mostly in the Permian and Eagle Ford basins in Texas. In 2022 it had revenues of $708 million, adjusted EBITDA of $399 million and net income of $106 million. The business is capital-intensive business and spent $48 million on maintenance capex and $211 million on growth capex last year.

Kodiak was founded in 2011 and backed by the Stephens Group, an Arkansas-based PE firm until 2019 when EQT Partners, a Swedish-based investment firm, acquired a majority stake in the business.

Management

David Marrs and Mickey McKee co-founded Kodiak in 2011. Mr. Marrs served as the CEO until shortly after the investment by EQT. Mr. McKee has been the CEO since then.

John Griggs has been the CFO at Kodiak since January 2023.  Previously, he held various CFO roles at PE-backed companies.  He also worked at CSL Capital Management, a Houston-based PE firm, for three years. Ewan Hamilton, who was the CFO for nearly seven years prior to the appointment of Mr. Griggs, remains at the company as Chief Accounting Officer.

High Debt

It was intended that the monies raised in the IPO would be used to repay $314 million of a term loan that carries interest of almost 12%. Given that the IPO price was well below the proposed price, the amount of debt repayment will be lower

Prior to the IPO, the company had borrowings of $2.75 billion. In addition to the repayment,  $700 million (the remaining balance of the term loan) was to be transferred to Kodiak’s parent, leaving $1.75 billion of debt on the books post-IPO. The $700 million was based on the proposed IPO range and may change given the lower IPO price.

In case you feel sorry for the parent having to take back $700 million of debt, don’t. In 2022, the  company paid a $838 million distribution to its parent that was mostly funded by increasing the balance on the term loan.

SEC filing – S-1 Kodiak

https://www.prnewswire.com/news-releases/kodiak-gas-services-inc-prices-initial-public-offering-301866415.html

W&T Offshore appoints new CFO

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W&T Offshore has appointed Sameer Parasnis as its new CFO, replacing Janet Yang, who left last month as she was relocating to another city for family reasons.

The company has its head office in the Galleria area of Houston. It holds working interests in 47 offshore fields in the Gulf of Mexico. It has a market capitalization of $540 million.

Mr. Parasnis joins from Stifel investment bank where he was Managing Director of the Energy and Natural Resources team. He joined Stifel in 2016, then spent a year at Texas Pacific Land Trust, before rejoining Stifel in the same role in 2020. He started his career at Reliance Industries in India before joining Citigroup in consumer banking. He transitioned to investment banking with Credit Suisse in Houston.

Mr. Parasnis will receive a base salary of $450,000. Target annual cash bonus will be 85% of base and target long-term incentive compensation will be 300% of base.

SEC filing – W&T Offshore new CFO

 

 

Coterra hires CFO from another Houston company

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Coterra Energy (market cap $19 billion) has appointed Shane Young as its new CFO. He replaces Scott Schroeder, who is retiring, effective September 30, 2023. Mr. Young joins from another Houston-based E&P company, Talos Energy (market cap $2 billion). In turn, Talos has promoted Sergio Maiworm from VP Finance, Investor relations and Treasurer to be its new CFO.



Coterra was formed from the merger of Cabot Oil and Gas and Cimarex in October 2021. Mr. Schroeder joined Cabot in 1995 as Assistant Treasurer and became CFO in 2014.

Mr. Young will a base salary of $620,000. He also receives a cash bonus of $100,000, a one-time long-term restricted stock grant valued at $2 million and a one-time long-term performance grant of $2 million.

Mr. Young had been CFO at Talos since May 2019, though he also had a spell as CFO between December 2014 and September 2015. He left after his first stint to join Cobalt International Energy and then Sheridan Production. He started his career as an investment banker with Morgan Stanley and Goldman Sachs.

Mr. Maiworm joined Talos in April 2018 as its Director of Finance and Investor Relations and added the Treasurer role when Mr. Young rejoined in May 2019. Mr. Maiworm has also worked as an investment banker (with Deutsche Bank). He has also worked at Shell, Transocean and ION Geophysical. He started his career at Deloitte and Touche.

Mr. Maiworm will receive a base salary of $425,000. He will also receive restricted stock and performance stock worth a total of $350,000 that will vest over the next three years.

Coterra Energy – 8-K filing – new CFO

Talos Energy – 8-K filing – new CFO

 

 

Former McDermott CEO and CFO settle with the SEC

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David Dickson and Stuart Spence, former CEO and CFO of McDermott International respectively, have settled charges with the Securities and Exchange Commission without admitting or denying responsibility.

The charges pertain to the project cost overruns on the Cameron LNG project in 2018. In short, the SEC alleges that Dickson and Spence issued misleadingly optimistic information in its Q2 2018 earnings release regarding the project cost and schedule.



Dickson and Spence approved a $490 million loss estimate at completion to be used in its Q2 2018 financial results, even though the initial draft estimated loss was $1.1 billion.

The Cameron LNG project was actually awarded to Chicago Bridge and Iron (‘CB&I’) and Chiyoda, its joint venture partner, in 2014 as a $6 billion fixed price contract  In December 2017, McDermott and CB&I agreed to combine in a $6 billion transaction. The deal closed in May 2018.

According to the SEC, in Q1 2018, prior to the merger being completed, the project cost team within CB&I initially forecast a loss of $438 million on the project. However this was challenged by CB&I management and the loss was reduced to $160 million, which was the number used in CB&I’s Q1 results, its last quarterly results as a public company.

In late June 2018, the project cost team in CB&I emailed Dickson and Spence a new forecast on the project that showed projected losses of $1.25 billion, an increase of over $1 billion in two months.

Dickson and Spence expressed skepticism with the loss forecast as they sought to use a less costly execution by reducing the number of employees and contractors on the project from 11,400 to around 9,000 or so. In addition, the JV partner also expressed doubts about the size of the forecast loss.

An executive at CB&I came up with an alternative loss forecast of $490 million that was developed outside the normal project cost controls and procedures. The company also prepared various scenarios that should losses would range from $702 million to $1.7 billion. Despite this, Dickson and Spence signed off on the $490 million loss to be used in its Q2 numbers. In the earnings release, they didn’t disclose that their revised execution plan increased the risk that the project would be delayed.

Dickson agreed to pay a penalty of $100,000 and Spence $40,000.

McDermott ended up booking losses of $1 billion on the project in 2018 and 2019. The company filed for bankruptcy in February 2020. Spence resigned as CFO in November 2019 while Dickson stepped down as CEO in June 2021.

McDermott, Dickson and Spence, along with former CB&I CEO Patrick Mullen, are still being sued in the Southern District of Texas in a class action lawsuit by investors (led by the Public Employees’ Retirement System of Mississippi). That case appears to be in the discovery stage.

https://www.sec.gov/enforce/34-97740-s