E&P CEO leaves with a large severance weeks after bankruptcy

Tommy Nusz, the CEO of Oasis Petroleum, has retired. He has been replaced, on an interim basis, by Chairman Douglas Brooks, the former CEO of Energy XXI and Yates Petroleum.



Mr. Nusz founded Oasis in 2007 and the company went public in 2010. Most of the company’s operations are in the Williston Basin of North Dakota and Montana It also has operations in Delaware Basin in Texas. The company has its head office in downtown Houston. At its peak in 2014, its market capitalization was almost $6 billion.

Oasis filed for a pre-packaged bankruptcy on September 30, 2020. Unsecured loan note holders swapped $1.8 billion of debt for 92.5% of the equity in the newly-reorganized company. Existing shareholders were diluted down to 7.5%.

Mr. Nusz was Chairman and CEO prior to bankruptcy. After the company exited from Chapter 11 in early November, he remained on the Board of Directors. However, because he was no longer Chairman, it was deemed a termination for good reason following a change of control, under the terms of his 2018 employment contract.

That means Mr. Nusz gets a change of control payment of 2.99 times base salary of $881,250 plus 2.99 times average bonus paid in the previous two years. In the 2019 proxy statement that total came to $5.4 million. He will also receive a target bonus for 2020 which is probably another $984,000 (based on the 2019 target bonus) .

Mr. Nusz has also stepped down as a director of Oasis Midstream Partners, the publicly-traded MLP controlled by Oasis Petroleum. The midstream entity was not part of the bankruptcy proceedings.

SEC filing – Oasis Petroleum CEO change

 

 

ION Geophysical agrees to out-of-court restructuring

Poseidon

ION Geophysical, based in west Houston, has reached agreement with 84% of its senior note holders for a debt-for-equity swap that will reduce debt by up to $120 million. The deal was made without going through Chapter 11 restructuring.



The company was originally an offshore seismic data provider. More recently, it has been trying to grow its business in mission critical software to optimize vessel movements and operations.

The company has debt, net of cash, of $92 million and negative shareholders’ equity of $61 million. It has $121 million of loan notes due in December 2021. The agreement calls for these notes to be redeemed for $18 million of cash and $107 million of new convertible notes due in 2025.

If all the loan note holders convert, the company will no long-term debt and equity of $73 million. At the midpoint of the conversion price range, the loan note holders will own approximately 74% of the proforma equity. Existing shareholders will be diluted down to 21%. The remaining 5% is from a $25 million rights issue the company is planning to make. The company expects that most of the participants in the rights issue will elect to receive loan notes rather than equity.

ION has relatively new senior management. CEO Christopher Usher was appointed to the role in May 2019, though he joined the company in 2012. Mike Morrison has been interim CFO since his predecessor, Steve Bate, retired in February. Mr. Morrison joined the company back in 2002.

[Update 12-29-20 The company issued an 8-K announcing that Mr. Morrison was appointed CFO back in September. Oops. Base salary $300k]

ION’s largest shareholder is China National Petroleum Corporation, who own 10.6% of the stock.

SEC filing – ION Geophysical restructuring – Project Poseidon

Small E&P company agrees to reverse takeover

Camber Energy has agreed to buy 51% of Viking Energy for $20 million. Both E&P companies are based in Houston, with Camber traded on the NYSE and Viking traded over-the-counter. The deal is effectively a reverse takeover as it’s the Viking management who will be running the show post-close.



Camber Energy used to be called Lucas Energy and went public in 2006. It’s had a troubled past. The strangest event was in October 2011 when the then-CEO made an acquisition for $22 million without telling the Board or making it public. The issue only came to light a year later when the seller sued for payment that was due in November 2012.

Camber has effectively been a shell since selling its main operating assets in 2019. In June 2019, it announced a reverse takeover by Lineal Holdings, an oilfield construction company. The deal closed but had to be unwound on December 31, 2019 as it did not meet NYSE listing requirements

Viking deal

The Viking deal was originally announced in January 2020, though in a different form. In the original version, Camber would have issued shares to Viking shareholders so that the latter would own 85% of the combined group post-closing.

Instead the revised deal calls for Camber to pay $20 million in cash. This is financed by $9.2 million cancellation of debt owed to Camber by Viking. Camber had lent money to Viking earlier in 2020 to enable Viking to close on an acquisition of 123 wells in Texas and Louisiana.

The remaining $10.8 million was paid in cash and funded by a new loan from Camber’s preferred shareholder.

James Doris, the CEO of Viking, has been appointed the CEO of Camber. Frank Barker, the CFO of Viking, becomes the CFO of Camber. Louis Schott, former interim CEO and Robert Schleizer, the former CFO of Camber, have stepped down. Each was paid a bonus of $150,000.

Fake CFO

Viking Energy was the subject of my most bizarre post I’ve written in this blog.  In September 2019, the SEC announced fraud charges against a former CEO for creating a fake CFO.

SEC filing – Camber Energy Viking acquisition

Insurance blank check company completes IPO

Delwinds Insurance Acquisition has completed its $200 million Initial Public Offering. It becomes the 7th Houston-area blank check company to go public this year. It will be listed on the NYSE.



The company was formed by The Gray Insurance Company and is based in downtown Houston. CEO Andrew Poole is an investment consultant at Gray while CFO Bryce Quin, is a process improvement specialist at Gray. They previously led a blank check company called Tiberius that went public in 2018. It subsequently acquired International General Insurance earlier this year.

Delwinds plans to target businesses in the insurance technology sector or brokers or carriers that use insurance technology (i.e. using data analytics or artificial intelligence to better price risk or automate back offices procedures).

https://www.globenewswire.com/news-release/2020/12/15/2145792/0/en/Delwinds-Insurance-Acquisition-Corp-Announces-Closing-of-201-250-000-Initial-Public-Offering.html

Houston oilfield telecoms company to be acquired

Rignet, based in west Houston, has agreed to be acquired by Viasat, in an all-stock transaction that values Rignet at $222 million enterprise value.



Rignet originally provided remote communication networks for the offshore sector. More recently the company has been diversifying into mission-critical IoT (Internet of Things) applications and systems integrations for energy telecom projects.

The company has revenues of $225 million. However it also has debt of over $100 million that primarily expires in 2022. Rignet went public via an IPO in 2010. Its largest shareholder is a Kolhberg Kravis Roberts, who own 25%.

Viasat is based in Carlsbad, California and is a leader in satellite-based networking products and services to the consumer, enterprise and government. It has revenues of $2.3 billion and a market capitalization of over $2 billion.

The existing management team of Rignet will operate the business from the Houston headquarters.

The companies expect the deal to close in mid-2021.

SEC filing – Rignet takeover

E&P company hires from within for CFO position

Goodrich Petroleum has appointed Kristen McWatters to be its new CFO. She replaces Robert Barker, who is retiring. Mr. Barker joined the company in 2007 and had been CFO since 2017.



Goodrich has its head office in downtown Houston. It operates primarily in the Haynesville Shale Basin that straddles East Texas and Louisiana. The company has a market capitalization of $138 million.

The company was formed in 1975 and went public via a reverse takeover of Patrick Petroleum in 1995. In 2016, the company went through bankruptcy, converting $400 million of debt into equity.

Ms. McWatters joined the company in 2017 and has been its Controller since March 2020. She started her career at KPMG and has also worked at Southwestern Energy and Spark Energy, two Houston-based publicly-traded companies.

Ms. McWatters will receive a base salary of $200,000.

SEC filing – Goodrich – CFO appointment

Publicly-traded MLP to be acquired by effective parent

Houston-based TC Pipelines, LP is to be acquired by TC Energy which controls the General Partner that manages TCP. TC Energy also owns 24% of the common units of master limited partnership.



This is part of a trend in recent years where MLPs have been taken back in-house. Once owners and investors realized that MLPs were not really like a risk-free utility, the cost of capital rose and the attractions of being publicly-traded faded.

The deal values TCP at $1.68 billion or $31 per common unit. The 52-week high was $41. Once again, minority unit holders will feel aggrieved that the controlling owner has chosen to act when the stock price has been depressed. However, the offer price does represent a rise from the $27.31 that TC Energy originally proposed back in October.

TCP was formed by TransCanada in 1998 and went public the following year in a $275 million Initial Public Offering.  The company has interests in 6,300 miles of natural gas pipelines, mainly in the Great Lakes region and the Pacific Northwest.

The deal is expected to close around the end of the first quarter of 2021.

https://www.tcpipelineslp.com/announcements/2020-12-15-tc-pipelines-lp-announces-definitive-agreement-for-tc-energy-to-acquire-all-its-outstanding-common-units/

Houston Doctor pleads guilty to receipt of kickbacks

Dr. Ghyasuddin Syed has pleaded guilty to receiving $475,992 in kickbacks from the owner of a Houston toxicology laboratory. Dr. Syed operates a pain management clinic in Baytown.



Uday Shah, who owned and operated several labs, originally pleaded guilty in October 2019.  He was sentenced to 24 months’ imprisonment. Timothy Andrews of Deer Park, who worked as a marketer for Mr Shah, pleaded guilty in June 2019. He got 15 months.

The scheme ran from November 2014 through August 2017. Mr Shah paid kickbacks to Dr Syed, though the payments were disguised as rent payments from Mr Shah to entities controlled by Dr. Syed or his wife, Shazana Begum. In return, Dr. Syed referred urine drug testing to Shah’s labs, including Pinnacle Laboratories in Lexington, Kentucky.  Medicare paid the labs $325,739 to which they were not entitled.

Dr. Syed is scheduled to be sentenced in March 2021 in the Eastern District of Kentucky.  He faces up to five years in prison for the conspiracy to violate the Anti-Kickback Statute, and a maximum fine of $250,000.

Dr. Syed’s wife, Shazana Begum, has entered into a pretrial diversion agreement wherein she admitted her role in the offense. She agreed to be under the supervision of the United States Probation Office for 12 months, to pay restitution of $325,739 along with Shah and Andrews, and to perform community service.

It appears that the case was first brought to the attention of authorities by a lawsuit filed in 2015 by an employee at the laboratory in Kentucky. However, the lawsuit remained sealed until September 2019.

https://www.justice.gov/usao-edky/pr/toxicology-lab-owner-and-marketer-sentenced-payment-kickbacks-doctor-pleads-guilty

Houston ATM company receives buy-out offer

[UPDATE 15 Dec 2020 – Cardtronics has now agreed to a buy-out offer of $35 per share from the two PE firms].

Cardtronics has received a buy-out offer from two private equity firms. Apollo Global Management and Hudson Executive Capital have jointly offered to buy the stock for $31 per share.



Cardtronics is the world’s largest ATM operator with 285,000 ATMs in 10 countries. It has its head office in the Westchase area of Houston. The company owns about a quarter of the ATMs. For the rest, Cardtronics manages the ATMs for customers such as Walgreens and CVS. Approximately half of its $1.2 billion of revenues comes from the company charging end users a surcharge fee for using its company-owned ATMs.

At the height of the pandemic in March, ATM withdrawals in the US fell about 30% year-on-year. By Q3, volumes were flat year-on-year. The company also has a presence in the UK, where Q3 ATM withdrawals were still 33% down on a year earlier. As a result, the stock price hit a low of $16 in March, having been $47 in January 2020.

After the offer was announced, the share price rose 32% to $34.11. This gives the company a market capitalization of $1.15 billion.

Douglas Braunstein, a non-executive director since June 2018, is the Founder & Managing Partner of Hudson Executive Capital LP. It owns 19.4% of the stock of Cardtronics.

Mr. Braunstein has recused himself from any discussions that the Cardtronics Board of Directors has had regarding any transaction. The other members of the Board of Directors will review and assess the terms of the proposal.

Cardtronics has retained Goldman Sachs & Co. LLC as its financial advisor and Weil, Gotshal & Manges LLP and Ashurst LLP as its legal advisors

https://ir.cardtronics.com/news-releases/news-release-details/cardtronics-confirms-receipt-proposal-apollo-global-management

 

Houston man charged in $2 million business email compromise scheme

Marvellous Eghaghe has been arrested in Houston and charged by the US District of Virgin Islands in connection with wire fraud and money laundering schemes.



According to the indictment, Eghaghe created a Texas company and an associated bank account. He used  these to obtain money fraudulently from victims in the Virgin Islands, Alabama, Texas and Columbia. He would set up email addresses very similar to legitimate vendors, thereby diverting funds to the bank account he had created.

In particular, between February 2018 and March 2018, he is alleged to have

  • diverted $109,000 of funds intended for the closing of a home in the Virgin Islands.
  • forged over $2 million of checks from a business in Alabama.
  • diverted $48,000 of funds from a business in Texas.
  • diverted $35,000 from a business in Columbia.

Eghaghe appeared to have three co-conspirators, who were not named in his indictment. For the three smaller amounts, Eghaghe diverted most of the funds to himself and his co-conspirators. The indictment also alleges that $25,000 of the $2 million was transferred to a personal account. However, it’s not clear what happened to the rest of the money.

 

https://www.justice.gov/usao-vi/pr/houston-man-arrested-international-money-laundering-conspiracy-stretching-us-virgin