Chemical company to spend $118 million to reduce air pollution at three Texas plants

Chevron Phillips has agreed to spend $118 million to reduce harmful air pollution at three Texas plants, including one in the Houston-area. The company has also agreed to pay $3.4 million in a civil penalty. This is part of a settlement reached with the Justice Department.



Chevron Phillips is a joint venture between Chevron and Phillips 66 that has its head office in The Woodlands. The company was formed in 2000 by merging the chemical operations of the two companies. In 2021 the company had revenues of $14 billion

The three plants are Cedar Bayou in Baytown, Sweeney and Port Arthur.

Flare Stack controls absent

Companies are allowed to vent gases in a flare stack as a control device in a petrochemical plant. Combustion of the gases must occur in the flare stack. For that reason, the flares must have monitoring equipment. Many flares use steam to assist in combustion by promoting turbulence in a flare’s flame. The steam-to-vent gas ratio must be calculated. Too much steam snuffs out the flame, and too little causing excessive smoke. In either case, air pollutants escape.

The Justice Department alleges that the company regularly ‘oversteamed’ the flares, allowing harmful gases (including benzene) to escape.

The company has agreed to install a gas recovery system, by September 2023, at Cedar Bayou that will allow the gases to be recycled, instead of being combusted in a flare. At the other two plants, ChevonPhillips will amend its air quality permits to limit the flow of gas at selected flares. The company will also create waste minimization plans at all three sites.

In October last year, in a similar settlement, LyondellBasel agreed to spend $50 million to reduce flaring at six facilities, including four in the Houston area.

https://www.justice.gov/opa/pr/chevron-phillips-chemical-company-agrees-reduce-harmful-air-pollution-three-us-chemical

E&P companies to combine in $6 billion transaction

Two E&P companies, Oasis Petroleum and Whiting Petroleum are merging in a $6 billion deal, including debt. Oasis is based in downtown Houston, while Whiting has its head office in Denver. The combined company will have its head office in Houston and will have a new, yet-to-be-determined name. The Denver office will remain open for the foreseeable future.



Both companies have their main operations in the Williston Basin of North Dakota, Montana and Saskatchewan. (The Bakken is the main oil-producing rock formation of the Basin, but there are others). In terms of acreage, the deal combines the number 3 and 4 players into the largest operator in the Basin, ahead of Continental Resources and ConocoPhillips.

Both companies filed for pre-packaged bankruptcies in 2020. Whiting filed first, in April 2020 and exited in September 2020, having converted $2.4 billion of debt into equity. Likewise, Oasis filed in September 2020 and exited three months later. It converted $1.9 million of debt into equity.

After exiting bankruptcy, Oasis sold its Permian Basin acreage for more than $400 million and bought assets in the Williston Basin from Diamondback Energy for $745 million.

Management

Both companies have CEOs who were appointed after exiting Chapter 11. Lynn Peterson, the CEO of Whiting, was appointed in September 2020. He will become Chairman of the combined company. Danny Brown, CEO of Oasis, joined in April 2021. Previously, he was head of US onshore operations for Anadarko. Mr. Brown will be the CEO of the combined company.

Longtime Oasis CFO Michael Lou will be the CFO of the combined company.

Transaction structure

The deal is a combined stock and cash deal. Oasis is the surviving entity and its shareholders will get a special dividend of $15 a share. Whiting shareholders will get 0.5774 shares of Oasis and $6.25 in cash for each share of Whiting they own. Once the deal closes later this year, Whiting shareholders will own about 53% of the combined company.

The company expects to achieve savings of $65 million by the end of 2023. $30 million will come from administrative savings, the rest will come from operational cost synergies.

Oasis – Whiting Investor Presentation

Healthcare waste management company appoints new CFO

Eric Bauer has been appointed the new CFO at Sharps Compliance Corp. He is replacing Diana Diaz, who is staying on with the company as its Chief Accounting Officer. Ms. Diaz had been the CFO since June 2010.



Sharps is a waste management company that handles medical, pharmaceutical and hazardous waste for small to mid-size companies such as pharmacies, dentist offices and nursing homes. The company went public in 2009 and has a market capitalization of $120 million. Its head office is just south of NRG Stadium.

Mr. Bauer was the CFO at Nuverra Environmental Services until its acquisition by Select Energy Services last week. He joined Nuverra in April 2020 on a three-year contract as interim CFO. Before that he worked in investment banking at Evercore Partners, CITI and Lehman Brothers.

For the year ended June 30, 2021, revenues at Sharps increased by almost 50% to $76 million, primarily driven by waste disposal related to Covid-19 vaccines. Since then, the company has made two small acquisitions in October 2021 for $2.2 million and in February 2022 for $4.3 million. The company has a growing cash pile – $32.5 million at December 2021 – and is looking to make more acquisitions.

Mr. Bauer will receive a base salary of $275,000. That’s the same base that Ms. Diaz was receiving.

SEC filing – 8-K – Eric Bauer CFO

Six Houston-area residents charged with mortgage fraud

Six Houston-area residents have been charged in a multi-layered fraud scheme involving mortgage fraud and identity theft.



The US Attorney’s Office in the Southern District of Texas issued a press release, outlining some of the details. However, the original indictment filed last month remains sealed. Therefore, at this time, I don’t know how the scheme started and how long it continued.

The scheme involves

  • Elvina Buckley, a Woodlands realtor
  • Heather Ann Campos, a mortgage broker, based in Spring
  • Melinda Munoz, a notary, based in Spring
  • Leslie Edrington and her daughter, ShyAnne, also based in Spring
  • David Lewis Best Jr, a financial services executive

Ms. Campos and Mr. Best are considered fugitives and warrants remain outstanding for their arrest.

The indictment alleges that the six recruited clients for credit repair and “cleaned” their clients’ credit histories by filing false identify theft reports with the Federal Trade Commission.

After falsely inflating client credit worthiness, the six would fraudulently obtain credit cards, disaster loans and mortgages for themselves and their clients. They maintained control of the properties purchased in their clients’ names for the purpose of, allegedly, building a real estate portfolio worth millions of dollars and enriching themselves with rental income.

If convicted, all face up to 30 years in federal prison and a possible $1 million maximum fine.

https://www.justice.gov/usao-sdtx/pr/area-residents-charged-multi-layered-fraud-scheme

Houston chemical company hires new CFO

Jeff Glajch has been appointed the new CFO at Orion Engineered Carbons. He replaces Lorin Crenshaw, who resigned in November to become CFO at Kansas-based Compass Materials. Bob Hrivnak, who had been the interim CFO, reverts back to being the Chief Accounting Officer.



Orion has its head office in the Kingwood area, though it is technically registered in Luxembourg. The company manufactures Carbon black, a powdered form of carbon used in consumables and additives for polymers, printing inks and coatings. It has 14 production sites around the world and revenues of $1.5 billion.

The company went public in 2014 and has a market capitalization of $1.2 billion.

Mr. Glajch joins from Graham Corporation, a New-York based manufacturer of equipment for energy, defense and petrochemicals, where he had been CFO for 13 years. Graham appointed a new CEO in August 2021, who was part of a business acquired earlier in 2021. In November 2021 Mr Glajch announced he would be retiring and leaving sometime in the second quarter.

In early February, the stock of Graham plunged by 30% following a surprise quarterly loss as a results of issues in the legacy business. Mr. Glajch received a severance of 1.5 times base salary of $325,000.

No compensation was disclosed for Mr. Glajch. His predecessor at Orion had a base salary of $421,000.

SEC filing – Orion Engineered CFO

Houston AdTech company completes $15 million IPO

Direct Digital Holdings, an AdTech company based in the Galleria, has completed its initial public offering. It raised $15 million by offering 2.8 million units (20%) at $5.50.

The company originally planned to offer 4 million shares at a range of $7 to $9. The recent stock market turbulence caused the company to reduce terms twice.



The company is a full-service advertising platform, primarily focused on providing advertising technology, data-driven campaign optimization to underserved and less efficient markets. The business was formed in 2018 by the merger of Huddled Masses (which focused on the buy-side) and Colossus Media (sell-side).

Expensive acquisition

However, digging into the S-1 registration statement, you find the real reason for the IPO.

In September 2020, the business acquired Orange142, a buy-side digital advertising business, based in Austin, for $26.2 million.  $12 million was paid in cash, funded by a term loan with a 16% interest rate. The rest was funded by an issue of shares ($4.3 million) and mandatory redeemable units ($9.9 million, that have an interest rate of approximately 8%).

For 2019, Orange142 had revenues of $17 million. However, it had a large client who transitioned their work in-house right after the acquisition. That client had revenues of $5.7 million in the 9 months to September 2020, but only $0.7 million in the 9 months to September 2021.

The proceeds of the IPO are being used to buy out the seller of Orange142 by buying back the shares and mandatory redeemable units.

Customers

For the 9 months to September 2021, the company had approximately 158 customers on the buy-side . These are advertising buyers at small and mid-size companies and advertising agencies. In the same time, the company worked on 1,300 individual campaigns. Sell-side clients include the US Army, Just Energy, and Visit Colorado Springs.

For the 9 months to September 2021, the company had revenues of $25 million and adjusted EBITDA of $4.5 million. The revenue was a 29% increase on the prior period, with the original business growing 57% and Orange142 growing 17% (even after the customer loss).

Management

The business was formed by Mark Walker (who acts as Chairman & CEO) and Keith Smith (who is the President). Each owned 50% prior to the IPO. Both hold B.A. in Economics from The University of Texas.

Mr. Walker worked for NRG Energy from 2005 to 2016. From October 2016 to May 2019, he worked at CVG Group, a private equity firm, primarily as Acting COO for Ebony Media Operations.

Mr. Smith has an investment banking background and has worked for Standard & Poor’s, Rabobank International and Capital Point Partners. Most recently, he was CEO at Parkview Capital Credit, where he invested and managed more than $75 million with small and mid-sized companies to provide acquisition and capital growth.

Mr. Smith also acted as the CFO of the company, until the hire of Susan Echard in 2021. She originally joined the company as a consultant at SeatonHill LLC in February 2021. She became the CFO in May and a full-time employee in January 2022.

The shares will be listed on the Nasdaq under the symbol DRCT.

SEC filing – Direct Digital Registration Statement

 

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 midstream CFO steps down

Summit Midstream Partners Logo. (PRNewsFoto/Summit Midstream Partners)

Marc Stratton, the CFO of Summit Midstream will be stepping down, effective March 4, 2022. He will be replaced by Bill Mault, who is currently VP Corporate Development, Finance and Treasurer.



Summit has its head office in downtown Houston and operates midstream assets in the Utica, Williston, DJ and Permian Basins. It went public in 2012 and had a peak market capitalization of $1.9 billion in 2014. Its current market cap is $243 million.

The company appointed a new CEO, Heath Deneke, in August 2019 and last year, it completed a refinancing that replaced a lot of debt that was due to mature in 2022. The company still has $1.4 billion of debt. It expects to pay down $130 million or so this year.

Mr. Stratton joined Summit in 2009 as a founding member and became its CFO in December 2018. He will receive a severance of 1.5 times his combined base salary ($350,000), 2021 annual bonus  paid (not stated but assumed to be $350,000) x 1.5) and a pro-rata bonus for 2022.  Mr. Stratton’s unvested phantom stock units will also vest. They will be worth about $0.8 million.

Mr. Mault joined the company in 2016 and has a background in investment banking. He will receive a base salary of $300,000.

The company also announced it was promoting Matt Sicinski to Senior VP and Chief Accounting Officer. He joined in February 2020, having previously worked at Venari Resources and Southwestern Energy.

SEC filing – 8-K Summit CFO steps down

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