Aravive, a Houston-based biotech company is to delist from Nasdaq and liquidate itself. Back in August, it announced that its lead drug candidate, Batiraxcept, had failed to meet its primary goal in a Phase 3 trial for patients with platinum-resistant ovarian cancer.
As a result, the company decided to terminate testing for the drug in renal cell carcinoma and pancreatic adenocarcinoma. At a meeting in early October, the shareholders passed a resolution authorizing the directors to liquidate the company if it was unable to raise cash. At that time, the company had about $8 million of cash on hand.
In conjunction with the planned delisting, expected February 8, the employment of CEO Gail McIntrye and CFO Rudy Howard was terminated, effective January 17. Each will get a severance amounting to one year’s base salary ($510,000 and $395,000 respectively).
Aravive went public in 2018 after it merged with publicly-traded Versartis in a deal that valued Aravive at $39 million. As part of the merger, the company moved its head office from California to Houston.
SEC filing – 8-K – Aravive to delist
Parker Drilling (market cap $270 million) will voluntary delist its common stock from trading on the New York Stock Exchange, effective February 10, 2020. This is commonly referred to as ‘going dark’.
The company has annual revenues of $600 million and provides drilling services worldwide, using both company-owned and customer-owned rigs. It also has a rental tools division.
The company was formed in 1934 in Tulsa. It went public in 1978 and moved its head office to Houston in 2001. In December 2018, the company entered bankruptcy proceedings. At that time the shares were delisted from the NYSE.
Chapter 11 resulted in debt being reduced from $585 million to $210 million, with the bondholders gaining a controlling equity stake. Existing shareholders ended up owning only a small fraction of the new equity. After the company came out of bankruptcy in March 2019, the company’s shares regained their listing on the NYSE.
The company has now elected to buy out the small shareholders to get its number of stock holders below 300. Below that level, the company is not required to file public reports with the SEC. By delisting the company expects to save $800,000 per year.
The company is currently without a CEO. Back in July 2019, the company announced it was parting with longtime CEO, Gary Rich, at the end of 2019. Mr Rich received a cash severance of $1.5 million (1x base salary and target bonus). At the time of the announcement, the company said it would engage a search firm to find a successor. No successor has yet been named.
SEC filing – Parker Drilling delisting
Carbo Ceramics has been delisted from the New York Stock Exchange (NYSE) because its share price is too low. It was trading at 30 cents (market cap $9 million) at the time of the delisting. Going forward, it will be traded over the counter.
The company has its head office in west Houston and makes proppants, primarily for fracking. It started out making ceramic proppants and went public in 1996. At its peak in 2011, the company had a market capitalization of almost $4 billion. Ceramic proppants are considerably more expensive than natural sand. Although the company tried to protect itself by supplying natural sand as well, it has been hit hard by the downtown.
In November, the company disclosed that its largest customer planned to discontinue purchases of frac sand under its existing contract. (Its two biggest customers in 2018 were Halliburton and Keane Group). The company has significant fixed costs associated worth this contract such as rail car leases and a distribution facility. The company estimated that it will incur $8 million to $10 million in cash costs to exit these leases and other supply contracts, associated with the contract. As a result, the company issued a going concern warning.
The company has not made positive annual EBITDA since 2014. At the end of September, the company had cash balances of $40 million. Against that, it has a fully-utilized $65 million credit facility with the Wilks Brothers (who sold their pressure pumping business in 2011 for $3.5 billion) that matures in December 2022. It also has leases with a present value of $58 million.
You can see the complete, updated list of Houston-area public companies here
SEC filing – Carbo Ceramics delisting
Buckeye Partners has been delisted after its takeover by IFM Global Infrastructure Fund was completed. The $6.5 billion deal was originally announced in May 2019.
The original Buckeye Pipe Line Company was founded in 1886 as part of Standard Oil and became a publicly-owned independent company in 1911 after Standard Oil was broken up. In 1964, the company was acquired by a subsidiary of the Pennsylvania Railroad. In 1986, it was reorganized into a master limited partnership (MLP) and went public the same year.
Buckeye has 6,000 miles of pipeline and 115 liquid petroleum products terminals in the US and the Caribbean. In 2018, it had revenues of $4.1 billion. The company has its head office in Greenway Plaza.
Breakup of Standard Oil
Standard Oil was established by John D Rockefeller and Henry Flagler in 1870. In 1911 the Supreme Court ordered it to be broken up into 34 smaller companies. This included;
- Standard Oil of New Jersey – later merged with Humble Oil to become Exxon
- Standard Oil of New York – later merged with Vacuum to become Mobil
- Standard Oil of California – renamed as Chevron.
- The Ohio Oil Company – renamed as Marathon.
Background to the deal
In early 2018, the Board of the partnership decided to pursue strategic alternatives given that publicly-traded MLPs were out-of-fashion with investors. The company had discussions with various interested parties through May 2019.
IMF agreed to pay $41.50 per unit, all in cash. That represented a premium of 27.5% over the closing price of the partnership units prior to the announcement.
Equity awards vest
Equity options have vested on completion of the transaction and will be settled in cash. That means that CEO Clark Smith will receive $16.9 million and CFO Keith St. Clair $5.6 million. 7 other members of the executive management team will receive between $2.2 million and $4.8 million each.
If senior executives are also terminated as a result of the merger, they will also receive severance (annual salary plus target annual cash bonus). For CEO Smith that would be $2 million, for St. Clair that would be $1.2 million. The deal closed Friday without any terminations in the senior management group.
You can see the updated list of Houston-area public companies here
SEC filing – Buckeye takeover
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.
The shares of EP Energy have been delisted by the New York Stock Exchange due abnormally low trading price levels. Before the delisting, the shares were trading at 16 cents.
The company has its head office in downtown Houston. It has producing assets in the Eagle Ford, Northeastern Utah and the Permian Basin.
The company first received a delisting notice in early January following 30 days of trading below $1. Normally a company has six months following the notice to regain compliance. There had been no indications of a reverse stock split that would have achieved that, so I guess the NYSE decided to pull the plug early.
Apollo Global Management, a private equity group, bought EP Energy in February 2012. The company was the E&P arm of El Paso Corp that was being divested as part of its merger with Kinder Morgan. The purchase price was $7.2 billion, which included $4.3 billion of debt.
The company went public in 2014 at $20 a share ($704 million offering). In an April 2019 article, the Wall Street Journal stated that Apollo and its partners will lose about $2.5 billion on the investment, even after extracting about $750 million in fees and dividends from the company.
In its most recent quarterly filing, the company made an operating loss of $55 million and a net loss of $140 million. It had debt of $4.4 billion and negative equity of $736 million.
The company stated that it does not have enough liquidity to repay $182 million of unsecured notes due in 2020. It is evaluating alternatives.