Tag Archives: M&A

Goodrich Petroleum to be taken private by Encap Investments

Goodrich Petroleum, an E&P company based in downtown Houston, is to go private after agreeing to be acquired by an affiliate of Encap Investments for $23 per share. Including the assumption of debt, the transaction is valued at $480 million.



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Goodrich was formed in 1975 and went public via a reverse takeover of Patrick Petroleum in 1995. The company primarily owns gas producing wells in the Haynesville Basin.

The company filed for bankruptcy in 2016 during which lenders wrote off $426 million in debt in exchange for most of the equity in the successor company.

Encap Investments is a Houston-based investment firm. It will buy Goodrich using a $7 billion fund raised in 2017.

The offer price represents an approximately 7% premium to the closing price of the stock on November 19, 2021. Certain stockholders have agreed to support the deal. In addition, there is $32.5 million of 13.5% loan notes that can convert to equity at $21.33. Taking the conversion into account, more than 50% of shareholders support the deal.

The deal is expected to close in December 2021.

[UPDATE 11-23-21 Gen IV Investments who were the second largest shareholder (~12%) sold their shares to EnCap. Frankin, the largest shareholder (15%) and Anchorage Capital Group (10%) tendered their shares in support, in addition to the senior management (12%). These percentages exclude the shares that their parties own from the convertible notes.]

SEC filing – Goodrich going private

Spirit of Texas Bank to be acquired for $581 million

Spirit of Texas Bancshares, based in Conroe, has agreed to be acquired by Simmons First National Corporation, in a transaction worth $581 million.

Spirit of Texas Bank operates 37 branches, primarily in the Texas triangle between Houston, Dallas-Fort Worth and San Antonio.



Simmons, based in Arkansas, operates 209 branches, but only 23 in Texas, around Dallas/Fort Worth and towns north of there.  It did have five locations in Austin and San Antonio but sold them to Spirit in February 2020 for $131 million. Simmons has been on an acquisition spree recently. Just last month, the company completed the acquisitions of two Tennessee-based banks for $278 million.

Spirit of Texas started in 2008 by acquiring First Bank of Snook in College Station. It went public in May 2008, raising $42 million. That valued the bank at around $200 million. It has made four  acquisitions since going public.

Founder and CEO of Spirit, Dean Bass, will retire and join the Simmons board as an independent director.

Two weeks ago, two Houston-based banks, Allegiance and CBTX, announced a $1.5 billion merger.

Both transactions are expected to close in the second quarter of 2022.

Simmons Spirit acquisition – investor presentation

Noble to merge with Maersk Drilling in a $3.4 billion stock deal

Noble Corporation, based in Sugar Land, has agreed to merge with Maersk Drilling in an all-stock transaction worth $3.4 billion. Maersk has its head office in Denmark and is listed on the Copenhagen stock exchange.



The combined company will have 20 floater rigs and 19 jackup rigs that can operate in harsh environments such as the North Sea. The fleet will be the second largest behind Valaris, though Transocean is the largest offshore operator by revenue.

Noble is taking an active role in the consolidation of companies in the offshore drilling market. Having exited bankruptcy in February 2021, it acquired Pacific Drilling for $357 million in an all-stock transaction in March 2021.

The shareholders of Noble and Maersk will each own 50% of the combined business. The company will keep the Noble name and will continue to be based in Houston.

Noble Chairman, Chuck Sledge, will become Chair of the combined company, while Noble CEO, Robert Eifler, takes the combined CEO role. Claus Hemmingsen, Chairman of Maersk, will be one of the three directors designated by Maersk. Noble will appoint three directors in addition to Mr. Sledge.

Other positions on the executive leadership team are to determined. Richard Barker is the CFO of Noble. He joined in March 2020  and has an investment banking background. The current CFO of Maersk is Houston-based Christine Morris. She joined in January of this year. Ms. Morris was previously CFO at BJ Services and Head of Financial Planning and Analysis at Halliburton.

The company expects to achieve $125 million in annual cost synergies within two years. The Maersk office in Copenhagen will be scaled down significantly. However, the Maersk Stavanger office in Norway will become the hub for North Sea operations.

The deal is expected to close in mid-2022.

SEC filing – Noble Maersk merger

 

 

Houston banks to merge in $1.5 billion all-stock transaction

Houston-based banks, Allegiance Bank and CBTX, have agreed to merge in an all-stock transaction. The combined market capitalization will be around $1.5 billion. and it will have $8.7 billion in deposits, placing it 6th in the Houston region (behind JP Morgan, Wells Fargo, Bank of America, PNC and Zions).



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Allegiance has 28 branches, 27 in Houston and 1 in Beaumont. CBTX has 19 branches in Houston, 15 in the Beaumont area and one in Dallas.

Allegiance shareholders will own 54% of the combined stock, CBTX 46%. The bank name has yet to be determined.

Steve Retzloff, CEO of Allegiance, will become Executive Chairman, while Paul Egge, CFO of Allegiance, will take the same role in the combined company. Bob Franklin, CEO of CBTX, will become CEO of the combined company.

Both banks began operations in 2007. Allegiance initially concentrated on organic growth but in recent years made four acquisitions including Farmers & Merchants and Post Oak Bank. It completed its IPO in 2015.

CBTX started out in Beaumont in 2007 with the acquisition of CountyBank and later bought Crosby State Bank, Vista Bank and Memorial City Bank to expand into Houston. It went public in 2017.

The banks expect annualized pre-tax cost savings of $36 million. That’s net of $1 million of incremental costs for increased regulations and risk management that are required when a bank exceeds $10 billion in assets.

Closing is expected in the 2nd quarter of 2022.

SEC filing – Allegiance and CBTX merger

Phillips 66 to takeover Phillips 66 Partners

Phillips 66 has agreed to buy its publicly-traded MLP partnership, Phillips 66 Partners for $3.4 billion in an all-stock deal. This continues the recent trend of MLP’s being brought back in-house.

The partnership was originally spun off in July 2013. At the end of last year, Phillips 66 owned 74% of the common units of the partnership, and controlled the general partnership that managed the MLP. 98% of the revenues of the MLP were generated from Phillips 66.

Phillips 66 signaled back in February that it was considering a takeover of the MLP.



Companies spinning off their midstream assets into a separate master limited partnership was all the rage about 10-15 years ago. It was sold to retail investors as a high-yield, low risk play. Unfortunately that proved not to be the case, as many entered the energy downturn in late 2014 too highly leveraged. That led to distribution cuts and the sector fell out of favor. (The Phillips MLP has not cut its dividend since it has been a public company).

In addition, in some cases, the retail unitholders suffered at the hands of the controlling general partner.  The tax reform legislation passed in 2017 also reduced the tax benefits that MLPs receive.

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

Phillips 66 MLP acquisition – press release

 

 

Houston midstream company to be acquired for $1.8 billion

Crestwood Equity Partners has agreed to buy fellow Houston company, Oasis Midstream Partners, for $1.8 billion. $160 million will be paid in cash, the rest in stock. Oasis will own about 22% of Crestwood after the deal goes through.



Oasis Midstream was spun out of Oasis Petroleum in September 2017. Its assets are primarily midstream assets in the Williston Basin in North Dakota. There are also a few assets in the Delaware Basin. In 2020, it had revenues of $347 million. Of that, 97% were generated by Oasis Petroleum.

Oasis Petroleum has a 67.5% limited partner interest in Oasis Midstream. The parent entered a pre-packaged bankruptcy in late 2020. After exit, its founder and CEO retired, and it sold its Permian Basin assets for $481 million to become a pure-play Bakken E&P operator.

Crestwood already has 796 miles of pipeline in the Bakken and 311 miles in the Delaware Basin, plus related infrastructure. It also has assets in the Marcellus, Barnett and Powder River Basins.

Crestwood expects to generate $25 million in cost savings from operations and general and administrative expenses.

The deal is expected to close in the first quarter of 2022.

https://www.sec.gov/Archives/edgar/data/0001136352/000119312521307205/d243796dex993.htm

Altus Midstream to be taken over in all-stock transaction

Altus Midstream, based in Houston, has agreed to taken over by privately-held EagleClaw Midstream. The deal is an all-stock transaction that values the combined business at $9 billion enterprise value.



Prior to the transaction, Altus was 79% owned by Apache (now called APA Corp). After the transaction is completed in Q1 2022, the current majority shareholders of EagleClaw, Blackstone and I Squared Capital, will own 75%. Apache will own 20%, and existing Altus public shareholders will own about 5%.

Altus owns gas gathering and processing assets in the Delaware Basin to service Apache’s production in Alpine High. It also has equity interests in four Permian-to-Gulf Coast pipelines. EagleClaw owns gas gathering and processing assets in the Delaware Basin.

Altus was spun off from Apache in November 2018 when it went public after being acquired by a SPAC or blank check company. At that time, it had a market capitalization of $3.5 billion. Currently, it has a market cap of $1.4 billion. That’s after the recent run-up in the stock price from $65 in late September to $86.53 right before the deal was announced.

The poor share performance since Altus went public is a result of the disappointing results of the Alpine High project of Apache. It was announced with great fanfare in 2016. The field turned out to have more gas than oil. In 2020, Apache wrote off $1.4 billion and Altus $1.3 billion from the assets values related to the project. Ironically, the recent rise in gas prices should lift prospects for Alpine High.

The combined business will have its head office in Midland where EagleClaw is based. The senior management of EagleClaw are based in Houston and will run the combined business, which will operate under a new, yet-to-be-determined name.

SEC filing – Altus Midstream merger

 

 

 

E&P companies merge to form Coterra Energy

Coterra Logo

Cabot Oil & Gas, based in Houston, and Cimarex Energy, based in Denver, have completed their $17 billion merger. The combined company has been renamed Coterra Energy and has its head office in Houston.



The deal was originally announced back in May. Cimarex shareholders ended up with 50.5% of the combined stock. When the deal was announced, Wall Street wasn’t impressed as Cabot mainly operates in the Marcellus Basin (primarily gas) while Cimarex is mainly in the Permian Basin. They wanted Cimarex to merge with another Permian Basin operator. The deal with Cabot limited the scope for synergies.

Natural gas prices have almost doubled since the deal was announced, so the deal looks better from Cimarex’s perspective now.

In terms of the new management, Cabot CEO Dan Dinges becomes Executive Chairman, Cimarex CEO Thomas Jorden becomes the CEO, while Cabot CFO Scott Schroeder is appointed CFO.

Severance

Cimarex CFO Mark Burford is not an Executive officer of the combined group. I am not sure if he has left the company, as there is no official confirmation of that from the company. If he has, he will be entitled to a cash severance of $2.2 million (2x average annual compensation for the past two years, plus a pro-rata bonus for 2021). Even if he has not been terminated, his equity will vest, worth $9.7 million.

Mr. Dingles will be Executive Chairman until no later than December 2022. When he steps down, he will receive a $10 million severance payment.

Background to the merger

Cabot started looking at the possibility of combining with another E&P company in late 2019. At one point, in mid-2020 Cabot was looking at a three-party business combination. That deal fell through because one of the parties demanded a premium. Around the same time, Cimarex started preliminary discussions with other Permian Basin parties about potential mergers.

In the last few months of 2020, a representative of Tudor Pickering Holt had several separate conversations with Mr. Jorden and Mr. Schroeder. In January 2021, the representative suggested that two companies had enough common ground to start direct conversations.

The combined company had $1 billion of proforma revenues for the first quarter. its debt is 0.7 times EBITDAX (earnings before interest, tax, depreciation, amortization and exploration expenses).

SEC filing – Coterra Energy

Chemical manufacturer to be sold for $2.5 billion

Kraton Corporation Logo (PRNewsFoto/)

Kraton Corporation, a chemical manufacturer with its head office near George Bush Intercontinental Airport, is to acquired by DL Chemical for $2.5 billion.



About 50 years ago, Kraton invented styrenic block coploymers, a type of synthetic rubber that is strong, durable and flexible. The products are used in products as diverse as asphalt, roofing and diapers. The company was originally a unit of Shell, before being sold to a private-equity firm in 2001. It completed its IPO (initial public offering) in December 2009.

Its main manufacturing location is in Belpre, Ohio, though it also has major facilities in France, Germany and Sweden. The company also has joint ventures in Taiwan and Japan.

In 2016, the company acquired Arizona Chemical for $1.3 billion. In doing so, it pushed its leverage to almost 5x EBITDA. With hindsight, that turned out to be a poor move as the company was hit by the US-China trade war. In 2020 it ended up writing off $400 million of the $771 million goodwill from that acquisition. Margins in its legacy business also declined.

In early July, the company announced that it had hired JP Morgan to explore a potential sale. At the time, the share price was around $32 per share. DL Chemical, which is based in Korea, will pay $46.50 per share. Last year, DL Chemical acquired the Cariflex business from Kraton for $530 million.

The management team are in line for some large severance payments. Kevin Fogarty, CEO since 2008, will get a cash severance of three times base salary plus three times target bonus, or $6 million in total. All options and restricted awards will also vest. That could be worth around $20 million to Mr. Fogarty.

Atanas Atanasov, CFO since 2019, will get three times base and bonus, or $1.7 million. His restricted awards will also vest (I estimate this to be over $4 million).

The deal is expected to close in the first half of 2022.

SEC filing – Kraton sale

Shell to sell Permian Basin assets to ConocoPhillips for $9.5 billion

Shell is to sell its assets in the Permian Basin to ConocoPhiliips for $9.5 billion cash. The assets are all in Texas and amount to 225,000 net acres and 600 miles of related pipelines and infrastructure. The purchase price of $47,500 per barrel of oil equivalent is in line with other recent transactions in the Permian Basin.



The effective date of the transaction is July 1, 2021, with an anticipated closing date in the fourth quarter.

Shell acquired the bulk of the assets in 2012 from Chesapeake Energy for $1.9 billion. It expects to book an after-tax gain of $2.4 to $2.6 billion once the deal closes. The company plans to pay a special dividend to shareholders of $7 billion.

The majority of Shell’s Midland-based Permian employees and many Houston-based employees will be offered employment by ConocoPhillips.

In June, a Dutch court ruled that Shell was partially responsible for climate change and ordered the company to reduce its carbon emissions (in absolute levels) by 45% by 2030, compared with 2019 levels.  Shell had already committed to a 45% (relative) reduction in net carbon intensity (i.e. the volume of carbon per unit of energy) by 2035.

Shell has been in the process of selling off assets in Egypt, Nigeria and Australia. It also sold its Alberta shale light oil production for $707 million in February. It plans to invest more in low-carbon fuels (biofuels and hydrogen) and carbon capture and storage.

ConocoPhillips has a target to reduce greenhouse gas emissions intensity by 35-45% by 2035 from a 2016 baseline. Shell probably felt some pressure to sell to someone with somewhat similar goals in terms of emissions reductions.

https://static.conocophillips.com/files/resources/transaction-announcement-and-market-update.pdf