Tag Archives: Severance

Former Oilfield Services CFO leaves with a $6 million cash payment

Greg Powell, Chief Integration Officer with Nextier Oilfield Services, will be leaving the company in May. Mr Powell was the CFO of Keane Group, prior to its all stock merger with C&J Services in October 2019.



Under the terms of the merger, Mr Powell was to leave at the earlier of (i) 18 months or (ii) the date at which the company achieves $100 million in annualized savings. He will receive a performance bonus of $2.6 million.

Mr Powell will also receive a cash severance payment of $3 million, to be paid over the next two years. In addition he will also get a pro-rated cash bonus for 2020 of approximately $300,000. Just over 200,000 restricted stock units will also vest. At the current share price of $2.40, these are worth $0.5 million.

Mr Powell spent 10 years in various divisions of General Electric. He then joined PE firm Cerebus Capital Management before coming the CFO at Keane Group, a portfolio company, in March 2011.

Annualized savings

At the time the deal was announced, the target cost savings were $100 million. This was soon increased to $125 million. On the Q4 2019 earnings call held on March 11, Mr Powell stated that $3 million of savings were achieved in Q4 2019, $20 million would be achieved in the first half of 2020 and $63 million in the second half of 2020.

Declining Market capitalization

Keane went public in early 2017 with a market capitalization of $2 billion. It announced its merger with C&J Services in June 2019 (combined market cap $1.5 billion). By the time the deal closed in October, the combined market cap had fallen to $1 billion. It’s now just over $500 million.

CFO of Nextier got $4.1m severance 

At the time of the merger, Jans Kees van Gaalen, the CFO of C&J, became the CFO of the combined group. He left in December 2019, just 15 months after joining C&J, with a cash severance of $4.1 million.

Kenny Puchei, the former VP of Finance for Keane, was appointed as the new CFO.

The remaining executive officers are reducing salaries by 20% for 2020 due to the uncertainties caused by COVID-19.

SEC filings – Powell departure

Sysco CEO leaves with $6 million cash severance

Sysco Corporation has replaced CEO of two years, Tom Bene with Kevin Hourican, who joins from CVS.

Sysco, a food distributor, is one of the largest companies headquartered in Houston. It has a market capitalization of $42 billion, revenues of $60 billion and 69,000 employees.



Tom Bene had been the CEO since January 2018 and Chair of the Board since November 2018. His promotion to the top job was announced in July 2017. Mr Bene had joined Sysco in 2013 as Chief Merchandising Officer before becoming COO in January 2016. Prior to that he spent 24 years at Pepsi-Cola.

Although the stock is near its all-time high, clearly matters are not going well inside the company. In announcing the switch, the board stated that the change will allow the company to ‘accelerate performance, fully capitalize on its scale advantages and drive meaningful operating improvements’.

Severance payment

Mr Bene had a base salary of $1.2 million and his target annual bonus was 150%. He will receive a severance of $6 million, in cash. This represents two times base and target bonus.  For the year ended 30 June 2019, Mr Bene received a cash bonus of just over $1.5 million, representing 85% of target.

Mr Bene will also get two years’ worth of health insurance premiums. Other than that, he didn’t get any additional payments. All his unvested stock has been forfeited. Like all officers of Sysco, Mr Bene didn’t have a severance or employment agreement that provided for guaranteed severance or other compensation upon termination.

New CEO compensation

Mr Hourican was the Executive VP of CVS Health and president of CVS Pharmacy. He will receive an annual base salary of $1.3 million. He will also receive a one-time sign-on bonus of $1.45 million to compensate him for the bonus foregone at CVS. Mr Hourican will also receive an annual equity award with a fair value equal to $8.5 million. 40% will vest over 3 years, the rest is performance-based.

New Chairman

Edward Shirley, currently Lead Independent Director of the Board, has been appointed Chair of the Board.

SEC filing – Sysco CEO change

 

CEO leaves with large severance after leading company into bankruptcy

Gary Rich, CEO of Parker Drilling, is leaving the company with a large severance package just months after the company emerged from bankruptcy proceedings. He will leave by December 31 at the latest, while the company searches for his successor.

Parker Drilling (market cap $270 million) has its head office in Greenway Plaza. The company is an international provider of contract drilling and drilling-related services. It has operations in 20 countries.



The business entered into pre-packaged bankruptcy proceedings in December 2018 and emerged at the end of March. It reduced its debt from $585 million to $210 million and raised an additional $95 million through an equity rights issue.

Severance package

As part of his severance, Mr Rich will get;

  • payment of $1.5 million representing 1 years’ salary and 2019 target bonus
  • if he leaves before Dec 31, he will get a pro-rata portion of his salary ($745,000) for the remainder of the year
  • Health care premiums for 12 months
  • vesting of one third of his restricted stock units (49,407) and stock options (74,111)
  • If there is an agreement to sell Parker Drilling within six months of Mr Rich’s termination date, he will also get a $1.5 million cash payment.

The current stock price is $18.38. That means the stock units are worth $908,000. The exercise price for the options is $23, so they are currently out-of-the-money.

New Employment contract

Here’s what must be galling to the old shareholders. Mr Rich only entered into a new employment contract on March 26, 2019. Mr Rich’s salary was increased from $650,000 to $745,000. The restricted stock units were also granted at that time.

2018 Cash bonuses

To add insult to injury, in July 2018, because of the low share price, the company switched to quarterly cash incentives in lieu of equity awards. Mr Rich received cash payments of $2 million for 2018 bonuses. He also received a cash payment of $532,000 in March 2019 relating to the vesting of a 2016 performance cash unit grant.

Just in case, Mr Rich wasn’t feeling rich enough, he also benefited from the cashing out of the old restricted stock units that were issued in the years prior to bankruptcy. That amounted to another $300,000.

Mr Rich has been the CEO since October 2012. At that time the stock price was around $65 (adjusted for stock splits). The business hasn’t made an operating profit since 2014.

SEC filing – Parker Drilling

 

CFO out at Houston Building Products Company

Quanex Building Products has let go CFO Brent Korb with immediate effect. Scott Zuehlke, VP of Investor Relations and Treasury has been appointed interim CFO while the company conducts an executive search.

Quanex has a market cap of $558 million and is based in the Galleria area. The company designs and produces energy-efficient windows and doors fenestration products in addition to kitchen and bath cabinet components.



Mr Korb joined the company in 2001 and had been the CFO since August 2008. He will receive 18 months of severance ($627,000) and a pro-rated target bonus for 2019 (approx $160,000). He will also receive 18 months of benefit premiums ($29,000). Unlike most companies, upon termination, unvested stock options and restricted stock are forfeited and do not vest.

Mr Zuehlke has been with the company since 2016. Prior to that, he was VP, Investor Relations at Halcon Resources.

SEC filing

Small Houston E&P company replaces CEO

Lilis Energy (market cap $64 million) has announced the immediate ‘retirement’ of Chairman & CEO Ron Ormand. Existing Director David Wood becomes Chairman and current CFO, Joe Daches, becomes interim CEO. A search for a new CEO has begun.

The company operates in the Delaware Basin in West Texas and New Mexico. The company moved its head office from San Antonio to the Galleria area in June 2018.



Revolving door of Senior Executives

Mr Ormand became Executive Chairman in July 2016 and was appointed CEO in April 2018. In that time, he went through two CEO’s and two COO’s. His first CEO, Avi Mirman resigned in August 2017 after being charged by the SEC in an unrelated $17 million penny stock fraud. His second CEO, James Linville, lasted seven months. Both received lucrative severance payments.

Severance package

Mr Ormand had a base salary of $500,000 and received a $1.25 million cash bonus for 2018. He will receive a severance payment of 12 months of base salary. He will also receive an additional separation payment of $500,000 in consideration for extending his non-competition term from six months in his original employment agreement. The new non-compete term was not disclosed.

In addition, 693,000 shares of restricted stock will vest immediately. At the current share price of 69 cents, these are worth $478,000. 75% of these shares were only granted in February. Also, the exercise date for 250,000 options was extended for an additional two years. The option price is $2.98.

Growth fueled by debt

Through acquisitions and capital spending, average daily production increased from 350 Barrels of Oil Equivalent in 2016 to 6,058 BOE in the first quarter of 2019. However the growth was fueled by debt and the company remains cash flow negative.

The share price rose from $2 (market cap $32 million) in July 2016 to $5.52 (market cap $333 million) in September 2018 before dropping to its current price of 69 cents.

In March 2019, the company agreed to convert $133 million of convertible debt issued in 2017 by Varde Partners to common and preferred stock. This meant that Varde, a Minneapolis investment firm, effectively controls 41.9% of the outstanding shares. Varde has been a long-time investor and owned about 20% when Mr Ormand became Executive Chairman in 2016. It’s not clear what prompted the change in CEO now.

SEC filing

Houston Oilfield Services CEO leaves with large severance

Brian Hanson, the CEO of ION Geophysical has ‘retired’, effective June 1, to be replaced by Chris Usher, VP of Operations Optimization.

ION (market cap $103 million) has its head office in west Houston and provides products and services related to seismic data acquisition and processing.



Mr Hanson joined ION as its CFO in 2006 and became the CEO in 2011. He had a base salary of $600,000. Mr Hanson has signed a separation agreement that gives him:

  • severance payment of $2.4 million, payable over a 2-year period.
  • $250,000 representing pro-rata share of Mr Hanson’s 2019 target annual bonus payment
  • continuing healthcare coverage for 48 months
  • 120,000 restricted shares that become fully vested (worth almost $1.1 million).
  • 25,000 stock options that become fully vested.¬† The options are in the money and are currently worth about $142,000

When Mr Hanson was appointed CEO, the company had a market capitalization of $557 million. For 2018, the company had revenue of $180 million, EBITDA of $43 million and a net loss of $71 million.

Mr Usher started his career at WesternGeco and has worked at a number of seismic companies.

As an aside, in June, ION lost a case at the Supreme Court. WesternGeco had filed a lawsuit in 2009, alleging infringement of various patents. The Supreme Court ruled that a patent owner may recover lost foreign profits for infringement. A lower court had originally awarded WesternGeco $94 million in lost profits. Subsequently 4 of the 5 patents have been invalidated by the Patent Office, so the damages that ION may have to pay are likely to be much lower.

WesternGeco was owned by Schlumberger until it was sold in August 2018 to Shearwater GeoServices, a Norwegian company, for $600 million.

SEC filing

 

CEO of Midstream company leaves with large payout

Lynn Bourdon, Chairman and CEO of American Midstream, has resigned from all his positions ahead of its $285 million deal to go private. That transaction was engineered by ArcLight Capital Partners who currently owns 51%.

Mr Bourdon has been CEO since December 2015. One of his first acts was to move the head office from Denver to the Westchase area of Houston. Mr Bourdon made several acquisitions after he was appointed, in a bid for growth. In early 2017 ArcLight also effectively merged American Midstream with another larger affiliated company, JP Energy.

Annual report filed late

The rapid growth from a series of smaller deals and the head office relocation taxed the controls and systems of the company, the big deal effectively broke the company.

The company recently filed its 10-K late. The audited financials raised going concern issues due to a $515 million credit agreement expiring in September 2019 and material weaknesses in internal controls.



Cash payouts

Mr Bourdon will receive the following compensation

  • Cash payment of $1.2 million, being 1 x base salary + 1 x target bonus
  • Cash payment of $1.74 million for unvested phantom stock units
  • Cash payment equivalent to 12 months of COBRA

The unvested phantom stock units were only granted in April 2018. The $1.74 million is on top of approximately $0.8 million of units that vested earlier this year. Note that the transaction to go private is not considered a change-of-control as ArcLight already owns 51%. Otherwise, the payments to Mr Bourdon would have been greater.

In 2018 Mr Bourdon also received a cash bonus of $500,000 and a cash retention award payment of $1.2 million.

When Mr Bourdon was appointed in December 2015, the stock price was $7 per unit. It is being taken private at $5.25 per unit. The company was paying a quarterly dividend of 41.25 cents until it was slashed to 10 cents in July 2018.

SEC filing

 

Struggling E&P company gives out another huge severance package

Alta Mesa, the struggling E&P company with its head office in west Houston, has given another large severance package to a senior Executive. This time it is Craig Collins, the COO of the Midstream division.

The Alta Mesa share price is currently $0.28 (market cap $50 million). When the company went public in February 2018, its market capitalization was $3.3 billion.

[Update 04-08-19 Company has drawn all its remaining capacity on its credit facility. It has hired Perella Weinberg Partners and Tudor Pickering Holt to assist with analyzing and considering financial alternatives].

[Update 04-12-19 Mr Collins has landed on his feet. He has been appointed COO of Altus Midstream, the company that was spun out of Apache in 2018. It has its head office in the Galleria area].

[Update 05-31-19 Mr Collins has resigned from Altus after 6 weeks. He has accepted a position with a large E&P company].

Severance package

Mr Collins joined the company almost exactly one year ago. He had a base salary of $450,000 and received a cash sign-on bonus of $90,000. He will receive;

  • severance of 18 months base salary ($675,000)
  • 1.5 x 2019 target bonus ($641,250)
  • pro-rated target bonus for 2019 ($108,925)
  • $24,000 for outplacement services
  • Nine months of company-funded COBRA coverage

That’s $2 million dollars for one year’s work!



In his original offer letter, the target bonus in the event of termination was listed at 1 x target bonus. This has been increased in the severance package as Mr Collins has agreed to forfeit his rights to outstanding equity awards. The company acknowledges that the 2019 equity award would have had a minimum market value of $1.5 million.

Mr Collins took over from Jim Hackett, the former CEO of Anadarko Petroleum. Mr Hackett had the role of COO of the Midstream division as well as being Chairman of Alta Mesa.

Senior management replaced in December

Just before Christmas, Mr Hackett took over as interim CEO after the resignations of the CEO, COO and the Chief Technology Officer. The combined cash severance was approx $6.5 million.

At the same time, Mr Hackett employed the services of three consulting executives from Meridian Energy for a monthly fee of $245,771. The consulting firm can also earn a quarterly bonus of $872,950 and a semi-annual bonus of $2.1 million, assuming certain performance metrics are met.

A new CFO, John Regan, was hired in January 2019.

Annual report will be late

In February, the company disclosed it would be late in filing its annual report. It expects to report a non-cash impairment of $3.1 billion. The company is also in breach of its covenants with its lenders. It also expects to report a material weakness in internal controls over financial reporting.

The company let go 58 employees from its head office in February.

SEC filing