Tag Archives: M&A

Houston E&P operator to be acquired for $2.5 billion

Leave a reply

Ranger Oil, based in Houston, has agreed to be acquired by Calgary-based Baytex Energy for $2.5 billion or $44.36 per share. The price includes $650 million of debt.



Baytex has most of its E&P operations in Canada but it does have a 25% working interest in 78,000 acres in the Eagle Ford basin in South Texas. Ranger is a pure-play Eagle Ford operator with a gross acreage of 189,000 acres.

A third of the price price will be paid in cash, the rest in stock. Baytex shareholders will end up owning about 63% of the combined business and Ranger shareholders 37%.

The Baytex management team, led by CEO Eric Greager, who only joined the company in October, will run the combined business. However, Baytex intends to add one senior operational leader to the leadership team and retain the Ranger teams in Houston.

Ranger was formerly known as Penn Virginia Corporation. The company entered bankruptcy proceedings in 2016 and eliminated $1.1 billion in debt (converted to equity). During Chapter 11, it moved its head office from Philadelphia to Houston.

In October 2018, Denbury Resources announced it would buy Penn Virginia for $1.7 billion, including $400 million in cash. The deal collapsed in March 2019, as the then major shareholders of Penn Virginia thought the deal undervalued the company.

Juniper Capital invested $188 million in Penn Virginia in November 2020 and became the largest shareholder with a 60% stake (now down to 54%). The following year the company bought Lonestar Resources for $370 million and renamed the combined company as Ranger Oil.

In November 2022, Reuters reported the Ranger had put itself up for sale following large deals for other operators in the Eagle Ford.

The deal is expected to close in Q2 2023.

Baytex Investor Presentation – Ranger

Two Houston companies taken public by SPACs

Leave a reply

Verde Clean Fuels, a Houston-based company that aims to supply gasoline derived from renewable feedstocks, has been taken public by CENAQ Energy Corp, a SPAC also based in Houston.



Verde owns proprietary technology that is designed to produce gasoline from waste feedstocks (e.g. food waste, paper, grass, leaves and other greenwaste) that are otherwise landfilled. It has a demonstration facility in New Jersey. The company is conducting front-end engineering design for its first commercial facility near Phoenix, Arizona. It expects to spend $130 million in capex and complete the plant in the second half of 2024. Further plants are planned in Bakersfield, CA and Odessa, TX

The transaction values Verde at an enterprise value of $250 million or 1.8 times projected 2025 EBITDA and leaves $220 million of cash on the balance sheet to fund the initial capex and operating losses.

CEO Ernie Miller has been with the Verde (or its predecessors) since 2017. He initially joined as CFO and Chief Commercial Officer. Prior to that, he spent 12 years as CFO at Rodeo Resources, an E&P and midstream company. Prior to that, he spent 5 years at Calpine, organizing financing for cogeneration power plants.

The company is conducting a search for a Chief Financial Officer.

The stock (ticker VGAS) is up slightly since it started trading on February 16.]

Verde Clean Fuels – Investor Presentation

Rocket to the Moon

Another Houston company, Intuitive Machines, was also brought to market last week by a SPAC. The company is developing space infrastructure components such as lunar vehicles. The original $815 million deal was announced back in September. After going public at $10 per share on February 14, the stock took off like a proverbial rocket, reaching $46 just two days later. It is currently trading just under $38. The company has not issued any press releases that can account for the run-up in the stock.

Bad news for Good Works

Not such good news last week for Good Works II, a Houston SPAC. Its $723 million deal to take Direct Biologics, an Austin biotech start-up, collapsed. The deal was originally announced in October. No reason was given for the failure.

 

Houston SPAC to take Australian solar power company public

Leave a reply

Nabors Energy Transition Corp (‘NETC’) , a Houston SPAC, is to take Vast, an Australian company, public. After the acquisition is completed in Q2 or Q3, VAST will be listed on the NYSE, but will continue to have its corporate offices in Sydney.

Concentrated Solar Power Plant

NETC completed its $276 million IPO in November 2021. The sponsor of the SPAC is a company co-owned by Nabors Industries, a global leader in land-based drilling rigs and Tony Petrello, the current Chairman and CEO of Nabors.



Vast has developed a next generation of concentrated solar thermal power system. The system uses mirrors to concentrates the sun’s rays. That heat is then transferred and stored in molten sodium, which is then used to drive a steam turbine and create electricity.

Vast believes its system has two main advantages over solar and wind power. Firstly the system can provide efficient long-duration storage (8-16 hours). Secondly, it can generate process heat equivalent to burning fossil fuels, meaning it can be used in industrial manufacturing.

Vast has built a 1.1 MW demonstration plant in Australia that was operational from 2018 to 2020. It is currently developing a 30 MW plant that is expected to become operational in 2025 and a 20 ton per day solar methanol facility. These projects have received funding of up to AUD 215 million ($152 million) from the Australian and German governments

The transaction values Vast at $250 million, though the business will also have $336 million in cash on the balance sheet at close. The SPAC will contribute $286 million, while Vast’s owners will rollover their equity ($209 million). Nabors will also invest $15 million as will AgCentral, the main shareholder of VAST.

VAST Investor Presentation

Houston Drilling Tools company to be taken public by SPAC

Leave a reply

Drilling Stabilizer

Drilling Tools International (‘DTI’), which has its head office in the Westchase area of Houston, is being taken public by ROC Energy Acquisition Corp, a Dallas-based SPAC. The transaction values the business at $319 million.



DTI manages and maintains over 65,000 rental tools and drilling equipment across 22 service and distribution centers in North America and Europe. Its main machine and repair center is in Broussard, Louisiana.

The business was founded in 1984 as Directional Rentals. In 2012, Hicks Equity Partners, also based in Dallas, acquired the business. Since then, the business has made 7 acquisitions and revenue has grown to an expected $164 million in 2023.

Adjusted EBITDA for 2023 is forecast to be $58 million (35%). That’s a misleading metric for any rental business that has high capex needs. Free cash flow, defined as EBITDA less capex is forecast to be $19 or 11%.

The transaction will leave DTI with no debt and $217 million of cash on the balance sheet to fund future acquisitions.

Wayne Prejean has been the CEO at DTI since 2013. He has a long career in directional drilling companies. In 1999, he founded Wildcat Services before selling it to National Oilwell Varco in 2004. Mr. Prejean stayed with NOV after the sale.

David Johnson joined as CFO, also in 2013. He has been the CFO at a number of drilling companies prior to that.

ROC went public in December 2021 in a $150 million IPO. Its original intention was to focus on non-operated oil and gas properties (i.e. where the E&P company owns the well but does not manage the operations of the well).

ROC may have had to pivot after Granite Ridge Resources, a business that owns non-operated assets, was taken public in October 2022 by a rival SPAC chaired by Paul Ryan, the former speaker of the House of Representatives. Since going public, Granite’s stock is down 30%

The transaction is expected to close in the second quarter of 2023.

DTI – Investor Presentation

 

 

Houston SPAC to take biofuels refinery company public

Leave a reply

Port Westward, Oregon

Industrial Tech Acquisitions II, a Houston SPAC, has agreed to take NEXT Renewables Fuels public in a transaction worth $530 million. NEXT, founded in 2016, is also based in Houston. Upon closing, the business will be renamed NXTClean Fuels.

NXT is in the process of developing a 50,000 barrel-per-day refinery in Port Westward, Oregon that will produce renewable diesel (‘RD’) and sustainable aviation fuel (‘SAF’).

Renewable Diesel

Renewable diesel is made from feedstock products such as vegetable oils, animal fats, used cooking oil and distillers corn oil. It uses the same source oils and fats as biodiesel. However, the refining process is different from biodiesel. The process is more capital-intensive, but RD is chemically equivalent to petroleum diesel and can be transported in petroleum pipelines.

Likewise, the refining process to make SAF is similar to regular jet fuel, except for the source feedstocks.

Construction of refinery

NXT expects the permitting of the Port Westward refinery to be granted by late 2023 with initial operations starting in mid-2026. The construction cost is currently $2.7 billion. (NXT’s own website shows a start date of 2024 and a construction cost of $2 billion, though this date and cost appear to be from June 2021).

The company aims to select an EPC (Engineering, Procurement and Construction) Contractor by the end of the year. Fluor is the frontrunner, as they have performed the engineering work so far for the company.

Supply and Offtake Agreements

NXT has an agreement with BP, who will supply 100% of the feedstocks for at least 5 years. It also has offtake agreements with Shell and Chevron. United Airlines, through its venture arm, has invested an initial $2.5 million in NXT. This investment could rise to $37.5 million, assuming certain milestones are met.

Forecast revenues

In its first full year of operation in 2027, the company is projecting revenues of $3 billion and EBITDA of $1 billion.  Half of the revenue will be generated from the sale of credits that arise from the Renewable Fuel Standard, enacted by Congress in 2005.

In the transaction, NXT will have an enterprise value of $530 million. It will also have $156 million of cash on its balance sheet.

Management

The CEO of NXT is Christopher Efird, an entrepreneur and investor who has led, or co-led the investment into 29 growth stage businesses. Many of those later went public.

David Kane, based in Las Vegas, currently serves as the CFO of NXT, though his title is Senior VP and Controller.  He has been the CFO at a number of small and medium sized companies in California and Nevada.

2nd SPAC run by Scott Crist

Industrial Tech Acquisitions II went public in January 2022. It raised $173 million and is the 2nd SPAC run by Scott Crist. The first SPAC took Arbe Robotics public in October 2021. Arbe is an Israeli company developing 4D automotive imaging radar. Arbe’s shares are trading at $4.00, compared to $8 when it went public.

SEC filing – Investor Presentation

BP to acquire renewable gas company for $4.1 billion

Leave a reply

BP has agreed to acquire Houston-based Archaea Energy for $26 per share in an all-cash deal that values Archaea at $4.1 billion, including $800 million of debt. The deal values the company at 20 times the expected 2023 EBITDA.



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. It currently has 13 of them. The company also has 33 landfill gas to electric facilities, some of which were added after a recent acquisition.

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. So, its a tremendous return for its investors.

It is not surprising that they have been acquired by a traditional oil and gas company. Due to high oil prices, they are generating lots of cash, but are under tremendous pressure to invest in anything but traditional oil and gas.

The company appointed Brian McCarthy as its new (old) CFO in August 2022.

The deal is expected to close by the end of 2022.

SEC filing – Archaea – BP

Foxo Technologies goes public via Houston SPAC

Leave a reply

Delwinds Insurance, a Houston SPAC, has completed its business combination with Foxo Technologies. As a result, the company has been renamed and is now based in Minneapolis.

Foxo is developing proprietary saliva-based epigenetic biomarkers with a plan to create simper, smoother, non-invasive underwriting of life insurance. Currently, underwriting involves lengthy timelines and invasive blood and urine specimen requirements.



Epigenetic biomarkers are chemical modifications, called DNA methylation that alter gene expression from external stimuli such as lifestyle and environment. The company plans to use automated machine learning to identify patterns of epigenetic biomarkers that correlate to health and wellness (e.g tobacco use, hypertension, alcohol abuse etc).

Foxo started in 2019.  The company is projecting its first revenues in 2023 with positive EBITDA during the following year. The transaction values Foxo at $300 million and leaves it with $194 million in cash to fund its growth.

Delwinds went public in December 2020 in a $200 million Initial Public Offering.  It planned to target businesses in insurance technology so the deal for Foxo (announced in February 2022) definitely met that criteria. Delwinds had 18 months from its IPO to complete a deal, otherwise it would be wound up and the cash returned to investors. In May, it received a 3-month extension to Sept 15.

SEC filing – Foxo completes Delwinds deal

Nauticus Robotics closes SPAC deal to go public

Leave a reply

Nauticus Robotics, a Houston-based marine robotics company, is now a public company. Back in December 2021, it agreed a deal with CleanTech Acquisition Corp, a SPAC (Special Purpose Acquisition Corporation). The deal valued Nauticus at $377 million enterprise value.



The company used to be called Houston Mechatronics. It was founded in 2014 by Nicholaus Radford, who previously worked at NASA and Oceaneering. The company has its head office in Webster, two miles from the NASA Johnson Space Center and employs about 25 former NASA robot engineers.

Currently, manned service vessels are used to service the offshore energy sectors. Nauticus is developing tetherless, autonomous electric-powered robots that can be controlled by staff onshore. The company plans to rent out its Aquanaut robot for around $40,000 a day, less than half the cost of a deepwater rig.

Pre-production units are projected to be deployed in later this year. The company recently sold its first unit to IKM Subsea in Norway.

Investors in the business included Schlumberger (who now own 20%) and Transocean (19%).

Mr. Radford is the CEO. Rangan Padmanabhan was appointed CFO in May 2022. He spent many years at Solaris Asset Management and is a graduate of Rice University.

The company will trade on the NASDAQ under the ticker ‘KITT’.

SEC filing – 8-K

Shell to acquire rest of Shell Midstream in $1.9 billion transaction

Leave a reply

Shell has agreed to acquire all of the common units of Shell Midstream Partners it did not already own for $15.85 a unit, in cash. The transaction is worth $1.9 billion. Shell currently owns 68.5% of the common units.

Back in February, Shell had offered $12.89 for each common unit in a zero-premium bid.

Many years ago, Master Limited Partnerships were in vogue and it was the fashion for E&P companies to spin off their midstream assets into publicly-traded MLPs. Shell were fashionably late in that they only spun off Shell Midstream for $23 per unit in October 2014, right before the crude oil price crash.

That crash laid bare the claim that MLPs had low risks and therefore low cost of capital. In addition, the tax rules changed in 2018 reducing the benefits of MLPs. Most publicly-traded MLPs have already been taken private by their sponsor. Why pay a dividend of 8% on a MLP when you can bring it inhouse by borrowing at 5%?

The transaction has been approved by the Conflicts Committee but most minority investors remain unhappy as they believe that the deal undervalues the company, particularly as some of the midstream assets were damaged by Hurricane Ida in 2021.

The transaction is expected to close in the fourth quarter of 2022.

SEC filing – Shell to acquire Shell Midstream Partners

Sharps Compliance to be taken private for $170 million

Leave a reply

Sharps Compliance, a waste management company is to be taken private by Aurora Capital Partners. The PE firm offered $8.75 per share, which valued the company at $170 million.

[UPDATE 8-26 The deal is now compete]

The company 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 its head office is just south of NRG Stadium.

It grew rapidly during the pandemic, but revenues has since flattened out. Interestingly, the company has changed both its CEO and CFO this year. Patrick Malloy was appointed the new CEO in April 2022. He replaced David Tusa who had been the CEO since 2010.

In February 2022, Eric Bauer was appointed CFO, replacing Diana Diaz, who stayed with the company as Chief Accounting Officer. Prior to joining Sharps, Mr. Bauer was CFO at another Houston public company, Nuverra Environmental Solutions.

The acquisition came about after Andrew Wilson, a partner at Aurora, placed an unsolicited telephone call to Patrick Malloy, congratulating him on his appointment as the new CEO. Mr. Wilson and Mr. Malloy met a week later, at which time Mr. Wilson expressed a high level preliminary interest in acquiring the company. (Aurora already owns Curtis Bay Medical Waste Services).

Sharps had retained Raymond James in August 2021 to assist the company in seeking acquisitions and they were able to pivot quickly to negotiate with Aurora and assess the merits of the offer.

The offer price of $8.75 represents a premium of 207% over the $2.85 per share price as of July 11, the last day before the announcement of the merger. This time last year, the stock was trading between $9 and $10 per share.

SEC filing – Sharps Compliance – Aurora