Houston oil and gas investor admits to fraud

Chris Bentley, who founded Bellatorum Resources in 2016, has shut the business and admitted to fraud. Based in Spring, TX, Bentley raised about $31 million from 150 wealthy individuals to buy mineral rights in Texas shale fields.



Unusually, he sent an email on April 9 to the investors admitting to acquiring ‘bad’ and ‘non-arms length’ deals, overspending on corporate overheads and failing to hire professionals to advise him. He has turned himself into authorities, though he has not been charged with anything yet.

Bentley is a former Marine, who became a landman (someone who negotiates to acquire oil and gas or mineral leases) in 2014. Only two years later, he started his own investment fund. In all, he raised eight funds. For the last fund, Bentley aimed to raise $100 million. He admitted that he was trying to raise funds to pay distributions on his earlier funds. Instead he only raised a couple of million. Much of that money was spent on expenses.

It’s not clear whether Bentley used the funds to enrich himself. However, it appears that all the $31 million raised has been lost.

https://finance.yahoo.com/news/exclusive-texas-energy-fund-shuts-102813500.html

 

Houston real estate company to be taken over in $5.9 billion transaction

Courtesy JLL

Weingarten Realty Investors, a Houston-based real estate investment trust (REIT) has agreed to be acquired by Kimco Realty Corporation, based in New York in a transaction valued at $5.9 billion.



KImco is the number two in shopping center REITs while Weingarten is number five. Weingarten primarily operates in Texas, Florida and California. It has 159 properties where it develops and leases space in centers anchored by tenants such as Kroger and TJ Maxx.

Weingarten history

Harris Weingarten, an immigrant from Poland, first came to America in the 1880s. He started a general store in the Richmond/Rosenberg area, southwest of Houston. To grow the business, he moved to Houston in 1895 and opened his first grocery store in 1901. His son founded the real estate company in 1948 to build supermarkets for his father’s business. The grocery business grew to 103 stores before being sold to Grand Union in 1980 while the real estate business went public in 1985. Harris’ grandson, Stanford Alexander, 92, is Chairman Emeritus while great-grandson, Andrew is the Chairman and CEO.

Severance and synergies

Kimco shareholders will own approximately 71% of the combined company. The company will keep the Kimco name and its headquarters in New York. The press release stated that the business would be run by Kimco senior management. It made no mention of the Weingarten executive team.

According to the recently-filed proxy, Andrew Alexander will get approx $17 million (including vested equity) if he leaves as a result of a change in control. COO Johnny Hendrix will get about $8 million, CFO Stephen Richter over $9 million. The two Alexanders still own 6% of the equity. That means the stake is worth about $200 million.

Kimco expects to make annual savings of $35-$38 million from the combination, which it  expects to close in the second half of 2021.

SEC filing – Weingarten takeover

 

E&P company to move senior management to London as CEO steps down

Vantage Jackup rig – offshore Gabon

Cary Bounds, CEO has stepped down as CEO of Vaalco Energy. He will be replaced by non-executive director, George Maxwell, who resides in London.



Vaalco is based in the Westchase area of Houston and has a market capitalization of $130 million. Its main revenue is from offshore Gabon in West Africa. It also has an undeveloped block in offshore Equatorial Guinea. So, the CEO being based in London makes sense.

Last month, the company announced that CFO Elizabeth Prochnow would be retiring and that it would be conducting a search for her replacement. The new CFO will also be based in London. For now, it appears the head office will remain in Houston as most of the shareholders are based in the US.

Mr. Maxwell joined the Board last year. He has worked for both E&P companies with African operations (Eland Oil & Gas, Addax Petroleum) and oilfield service companies (ABB Oil & Gas). He’s also worked in Nigeria, Geneva and Houston. Mr. Maxwell will receive a base salary of $450,000.

Mr. Bounds had been CEO since December 2016. He leaves with a cash severance of $1,164,500 and $95,000 for attorney fees. He also exercised his stock appreciation rights and employee stock options, making $1.5 million in profit.

SEC filing – Vaalco CEO

Cadence Bank to merge with BancorpSouth in all-stock deal

Cadence Bancorporation, based in Houston, has agreed to an all-stock merger with BancorpSouth, based in Tupelo, Mississippi. The combined business will have a market capitalization of $6 billion.



The two banks are quite complementary is that Bancorp is a community bank, while Cadence brings commercial banking expertise. Bancorp has 325 full-service branch locations in Alabama, Arkansas, the Florida Panhandle, Louisiana, Mississippi, Missouri, Tennessee and Texas. Cadence has 98 branches in Alabama, Florida (around Tampa), Georgia (where Bancorp South has no presence), Mississippi, Tennessee, and Texas.

The two banks have contrasting histories. Bancorp was founded in 1876 in Verona, Mississippi and moved to Tupelo ten years later.  In contrast, Cadence was only formed in 2009 by banking industry veterans who helped grow Amegy Bank before it was sold to Zions Bancorporation in 2005.

The shareholders of Bancorp will get 55% of the combined equity, Cadence 45%. The company will keep the Cadence name. It will have its corporate headquarters in Houston, but its banking headquarters in Tupelo.

Dan Rollins, the CEO of Bancorp will become the Chairman and CEO, while Paul Murphy, CEO of Cadence will become Executive Vice Chairman. Mr. Rollins, before becoming CEO of Bancorp in 2012, spent 18 years in Houston as President and COO of Prosperity Bank.

Chis Bagley, COO of Bancorp will become President of the combined group. He’s also ex-Prosperity, having spent 17 years there. Valerie Toalson, the CFO of Cadence, will become the CFO of the combined group.

The deal is expected to close in the fourth quarter of 2021.

SEC filing – Cadence BanCorp merger

 

Charter School Superintendent sent to prison for embezzlement

Richard Garza, former Superintendent of Houston Gateway Academy, was sentenced to serve 60 months in prison. He pleaded guilty in September 2019 to taking $250,000.



The charter school is located in the Gulfgate area of Houston. It opened in 1999 with two classrooms. It now has about 2,300 students in three schools. Although over 90% of the students are considered economically disadvantaged, it has the highest average percentage of students meeting state standards in the Houston area.

Garza admitted he awarded a $280,000 no-bid contract in 2014 to a business owned by Ahmed Bokaiyan, an IT employee at the school. The contract was to supply IT equipment and services to a new school not yet constructed.

An audit revealed that Garza sent the business $252,757 before it completed any work. The business sent back $164,381 to Garza’s personal account. Garza used the funds to buy a Nissan Armada SUV and a condo.

Garza was ordered to pay a $20,000 fine and restitution of $191,292 to the Texas Education Agency. Bokaiyan had previously pleaded guilty and was ordered to pay $156,595 in restitution.

https://www.justice.gov/usao-sdtx/pr/former-charter-school-official-sent-prison-embezzling-funds

Woodlands real estate company appoints new CFO

The Howard Hughes Corporation has appointed Correne Loeffler as its new CFO. She replaces David O’Reilly, who was promoted to CEO in December 2020. Ms. Loeffler was previously the CFO at Whiting Petroleum, based in Denver.



Howard Hughes is now based in The Woodlands, following its move from Dallas late last year. It is primarily a developer of residential master planned communities and has market capitalization of $5.4 billion.

Ms. Loeffler will receive a base salary of $500,000 and be eligible for annual cash bonuses of $900,000 and annual long-term equity awards worth up to $1.2 million, 50% of which will vest based on performance.

Ms. Loeffler was CFO at Whiting from August 2019 to September 2020. She left as Whiting exited from bankruptcy. In Chapter 11, the bondholders exchanged $3 billion of debt for 97% of the equity in the newly-reorganized company.

Ms. Loeffler was paid handsomely for her 13 months at the company

  • Base salary of $440,000
  • Signing bonus of $190,000 in 2019
  • Cash bonus of $2.2 million paid the day before Whiting filed for bankruptcy.
  • Severance payment of $880,000
  • Transition consulting services of $68,250

Whiting also paid $158,000 in relocation costs to relocate Ms. Loeffler from Houston to Denver.

Ms. Loeffler was VP, Finance and Treasurer at Houston-based Callon Petroleum from April 2017 to July 2019. Prior to that, she spent 11 years at J.P. Morgan Securities.

Howard Hughes Corp – CFO appointment

Huntsman CFO resigns to take senior position with LDS Church

Sean Douglas, the CFO of Huntsman Corporation, has announced he is resigning to take a senior leadership position with The Church of Jesus Christ of Latter-day Saints. His last day will be July 1, 2021.

Huntsman, a chemicals company with revenues of $6 billion, is based in The Woodlands. However, it was founded in 1970 in Utah by Jon Huntsman, Sr. The Huntsman family is Mormon and just last month, it was announced that James Huntsman, his son (but not an employee of the company), was suing the church, accusing it of spending members’ tithes meant for charity on commercial purposes.

Mr. Douglas has been the CFO since January 2017. He joined the company in 1990, though he left the company between 2012-2015 to perform charitable services for the Church.

The company has initiated a search for a new CFO and is evaluating both internal and external candidates. The company expects to appoint a new CFO before July.

SEC filing – Huntsman CFO resigns

 

Weatherford applies to relist its shares on Nasdaq

Weatherford International plc has applied to have its share listed on the Nasdaq Exchange. The stock used to trade on the NYSE until they were delisted in April 2020 for having too low a share price.



Weatherford entered Chapter 11 bankruptcy in July 2019 and exited in December 2019, having converted $7.6 billion of debt into equity. With hindsight, it left bankruptcy proceedings too soon as its business was ravaged by the pandemic.

In 2020, revenues were $3.7 billion, a drop of 26% on the prior year. It made an operating loss of $1.5 billion. The losses included a goodwill write off of $239 million, which was all the goodwill created in the fresh-start accounting when it emerged from bankruptcy. There was also impairment of $814 million on intangible assets ($155 million), fixed assets ($571 million) and right-of-use assets ($88 million). Again these were values determined in the fresh-start accounting.

When Weatherford exited Chapter 11 in December 2019, it had shareholders’ equity of $2.9 billion and long-term debt of $2.1 billion. One year later, it now has equity of $937 million and long-term debt of $2.6 billion.

While the Business suffered, the Executives didn’t…

Weatherford has had a reputation for paying large severances while performing poorly. The registration statement continues that trend by disclosing;

  • ex-CEO Mark McCollum (left June 2020) received $4.6 million in severance. For good measure, he also received $780,000 in cash bonuses in 2020.
  • COO Karl Blanchard retired in February 2020. The bankruptcy was deemed a change-of-control under his contract so he gets 3 x base salary (3 x $700,000) plus 1 x average bonus for the past 3 years. It’s hard to tell what the average bonus is. He didn’t get any bonuses in 2018 or 2019 but got $2.2 million in bonuses for his interim CEO position in the 2nd half of 2020. He was also paid $672,955 in 2020 for cash bonuses in lieu of stock options.
  • Stuart Fraser, Chief Accounting Officer, is leaving March 31, 2021. He has the same change-of-control clause as Mr. Blanchard. Mr. Fraser gets 2 x base (2 x $425,000) plus average annual bonus. He also got $270,938 in 2020 for cash bonuses in lieu of stock options.
  • Mark Swift, former President of the Western Hemisphere, left in March 2020 with a $1.4 million severance.

Weatherford employed 17,200 at December 2020, down nearly 7,000 from the prior year.

Weatherford new CEO is Girish Saligram, appointed in September 2020. Keith Jennings was appointed as CFO the previous month.

SEC filing – Weatherford Nasdaq listing

E&P company appoints new CFO as it relocates to The Woodlands

Ring Energy has appointed Travis Thomas as its new CFO as it relocates its head office from Midland to The Woodlands. Former CFO Randy Broaddrick, who had been CFO since 2012, elected not to relocate from Tulsa, Oklahoma, where the accounting office was based.



Ring is an E&P operator with properties in the Permian Basin. It has revenues of $108 million and a market capitalization of $245 million. In February 2019 it acquired assets in the Permian Basin for $300 million from Wishbone Energy Partners. $28 million of the consideration came through issuance of new equity at $6.20 per share, the rest came from a revolving line of credit.

Prior to the acquisition from Wishbone, the company had been conservatively run with little long-term debt. In February 2018, one year prior, it issued new stock at $14 per share. High debt and a declining share price is not good for management and shareholders and both Lloyd Rochford (Chairman and co-founder) and Kelly Hoffman (CEO) stepped down in September 2020.

New CEO and dissident shareholders

Paul McKinney was appointed CEO. He spent 23 years at Anadarko (hence The Woodlands connection) and 6 years at Apache. More recently he was CEO at Yuma Energy from April 2017 to January 2019 and at Sandridge Energy for 11 months in 2019.

Those short stints raised the ire of Dr. Simon Kukes, a 11% shareholder , who stated that Mr. McKinney was too connected to the old Board and was overpaid ($480,00 base salary). Dr. Kukes is the CEO of Pedevco, another E&P company headquartered in Houston, with properties in the Permian Basin.

CFO compensation

Mr. Thomas joined the company in October 2020 as its VP of Finance. Prior to that, he was the Chief Accounting Officer and Treasurer at Paradox Resources, a private E&P company with its head office in downtown Houston. Mr. Thomas will receive a base salary of $290,000. His predecessor had a base salary of $195,000.

I’ve added Ring Energy to the list of Houston-area public companies. You can see the complete list here.

SEC filing – Ring Energy CFO appointment

Houston SPAC to take space technology company public

Credit: Made in Space (a Redwire company)

Genesis Park, a Houston-based Special Purpose Acquisition Company (SPAC), has agreed to take Redwire, a space technology company, public.



Genesis Park went public in November 2020 in a $150 million IPO.

Redwire, is based in Jacksonville, FL and manufactures space-capable robotics, solar arrays and antennas, and other equipment used in space. It plans to manufacture and assemble components in-space using 3D printing. The company was formed in June 2020 from the merger of two companies, with backing from AE Industrial Partners. Since then, it has made five more acquisitions.

Redwire becomes the seventh space venture in the past year to announce a SPAC deal. It had revenues of $120 million in 2020 and is currently cash flow positive. By 2025, it expects to grow to $1.4 billion. The transaction values the company at $615 million enterprise value.

Its CEO, Peter Cannito, was previously the CEO of Polaris Alpha, a high-tech solutions provider that developed systems for the Department of Defense. He’s also spent 12 years working for PE-backed companies in the defense, technology and government services market.

Jonathan Baliff, the CFO of Genesis and former CFO at Bristow Group, will join the Board of Redwire as a non-executive director.

The deal is expected to close by June 2021.

Investor Presentation – Genesis Park Redwire