Tag Archives: SPAC

Sable Offshore completes deal for California offshore field

Flame Acquisition Corp, a SPAC (Special Purpose Acquisition Corp) has completed the acquisition of assets from ExxonMobil and has been renamed Sable Offshore.

Sable has bought the Santa Ynex oilfield that consists of 3 offshore platforms located in federal waters, 12 miles off the coast near Santa Barbara and an onshore processing facility at Las Flores Canyon.



The offshore field had to stop production in 2015. A corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American were the owners of the pipeline at the time.

The deal was originally announced in November 2022. At that time, Sable agreed to pay ExxonMobil $643 million. Most of this was being financed by a $625 million loan from ExxonMobil. The loan had a 10% interest rate. It would not be repaid until the earlier of January 2027 or 180 days after production is restarted. Start of production was targeted for January 2024.

Under the revised terms of the loan, Sable has now agreed to pay Exxon $989 million. This includes $140 million of accrued interest and $187 million of property expenses incurred by ExxonMobil since the deal was announced. The loan from ExxonMobil has increased to $764 million (original $625 million plus accrued interest).

Sable now expects costs to restart production to be $197 million, up from the $172 million at the time of the original announcement. The company is now targeting production to start in Q3 2024.

If production does not restart by January 2026, ExxonMobil has the right to take back the assets.

Management

The company is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable Permian. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

Flame completed its $287 million IPO in February 2021. Originally, the company had until March 2023 to complete or deal or liquidate. As part the approvals to get extensions to complete the deal by February 2024, shareholders holding $230 million of stock exercised their right to redemption.

8-K – Sable Offshore completes deal

Houston SPAC to take Silica company public in $708m deal

Pyrophyte Acquisition Corp, the Houston special purchase acquisition company (SPAC) , chaired by Dr. Bernard Duroc-Danner (the former Weatherford CEO) is to take Sio Silica public. Sio, based in Calgary, intends to extract high-quality quartz silica, which is used in solar panels, semiconductors and batteries. The deal values Sio at $708 million enterprise value.



Pyrophyte went public in October 2021 in a $175 million initial public offering (IPO). The company said it would seek targets involved in energy transitions. That could mean renewable power generation, energy storage, zero-emission transportation, carbon capture or zero/low-carbon industrial applications.

Originally, Pyrophyte had until April 2023 to complete a deal, otherwise it would have to refund the monies from the IPO. Just before the original deadline date, shareholders approved an extension to April 2024.

The Mine

Sio is developing the Vivian Sand Project, southeast of Winnipeg, Canada, which is one of the highest natural purity silica deposits in the world. Most of the world’s silica is too impure to be used in high-end products such as semiconductors. It can only be used in other products such as agriculture, low quality glass, coatings and energy. Some low-quality silica can be converted to high purity silica but at a cost of $70-$100 per ton (and most of this silica is located in Australia).

Valuation

The project is estimated to have a net present value (NPV) of $3.9 billion, using a 10% discount rate. The payback period is projected to be just over one year. The transaction values the equity of the company at 19% of the NPV. Developers of copper and lithium deposits that are not yet in production are typically valued at around 50% of NPV.

Sio will use the proceeds of the deal to fund the Phase 1 construction. It expects the project to be operational within 18 months of close.

Political risk?

Interestingly, the investor presentation doesn’t mention that the go-ahead for the project requires the approval of the Manitoba Minister of Environment and Climate. In the Manitoba elections last month, the government switched from the center-right party (Progressive Conservative Party) to the left-leaning New Democratic Party. I suspect the new Minister is in no rush to make a decision.

[UPDATE – 02-16-24 –  The Manitoba government has denied the application to issue an environmental license for the project.]

The deal is expected to close in the first half of 2024.

Investor Presentation

 

Another Houston SPAC dissolves

Another Houston SPAC (Special Purpose Acquisition Company) has dissolved and return the monies raised during its IPO to the shareholders. This time, it is Newhold Investments II which went public in October 2021 in an IPO that raised $175 million.  In February, three Houston SPACs dissolved.



The company was targeting businesses involved in advanced robotics, the Internet of Things, Software as a service with machine learning or new energy technologies.

In a press release, the company said they looked at over 130 companies and signed over 30 NDAs. It conducted due diligence on several. The company came close to announcing a merger partner in April 2023 but market conditions prevented the company from securing the minimum cash needed to proceed.

The company was led by Kevin Charlton, who had taken a number of SPACs public in recent years. He had also worked for McKinsey, NASA and JP Morgan in his career.

One of the SPACs taken public was Newhold Investments I. It raised $150 million in July 2020 and took Boston-based Evolv Technologies public in July 2021 in a deal that valued the business at $1.25 billion. Evolve is a leader in AI touchless security screening. However, its current enterprise value is only $335 million.

SEC filing – Newhold Investments II

Three Houston SPACs announce plans to dissolve

Last week three Houston SPACS (Special Purpose Acquisition Companies) announced plans to dissolve and return the monies raised during their IPOs to the shareholders.

Good Works Acquisition Corp II (GWII) will redeem all its shares, effective as of the close of business on March 16, 2023.  The announcement came one day after the collapse of its $723 million deal to take Direct Biologics, an Austin biotech company, public.  No reason was given for the collapse.

GWII went public in July 2021 in a $230 million IPO and had 15 months to complete a transaction.

The first Good Works SPAC took Cipher Mining public in August 2021 in a $2 billion transaction. The stock of the bitcoin miner is down 85% since going public.

Peridot Acquisition Corp II will redeem all its shares, effective March 13, 2023. In March 2021, it raised $360 million, seeking acquisitions in the environmental or recycling space.

The first Peridot SPAC took Li-Cycle public in August 2021 in a $975 million transaction. The stock of the company, which is a Lithium-ion battery recycler, is down about 45% since the deal.

ESM Acquisition Corp also went public in March 2021 in a $300 million IPO. It was looking for acquisitions of companies that mine commodities that are critical in order to achieve de-carbonization. The company will redeem its shares on March 12.

SPACS generally have two years from going public to complete a deal, though that time period can be extended with a shareholder vote. The exact terms are governed by the Articles of Association of each company.

After these three companies dissolve, there will still be 11 Houston-areas SPACs. A few have announced deals that haven’t yet closed. Some of the others are obtaining shareholder votes for extensions. For example Mercury Ecommerce (now called SEP Acquisition Corp) now has 36 months from its $175 million IPO in July 2021 to complete a deal.

SEC filing – Good Works Acquisition Corp II

SEC filing – Peridot Acquisition Corp II

SEC filing – ESM Acquisition Corp

Two Houston companies taken public by SPACs

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 Drilling Tools company to be taken public by SPAC

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 Infrared Cameras public

 

Sportsmap Tech Acquisition Corp, a Houston SPAC (Special Purpose Acquisition Company) is to take Infrared Cameras Holdings (“ICI”) public in a $100 million deal.



ICI designs and develops thermal cameras and sensing hardware as well as a proprietary subscription software used to analyze thermal data points. Commercial applications include the detection of methane leaks in wells and pipelines and monitoring of conveyor belt equipment in warehouses. The business presumably got a boost with temperature screening during COVID.

ICI was formed in 1995 and is based in Beaumont, Texas. CEO Gary Strahan has lived there since he was two. He started out as a welder and diver, performing underwater non-destructive testing and then worked for companies developing infrared cameras before starting ICI.

No financial details about ICI were disclosed in today’s announcement.

Sportsmap went public in October 2021 with a $100 million IPO. The business aimed to make an acquisition in sports technology such as wearables, data analytics, new methods of fan engagement, and new esports and gambling platforms. Oh Well!

A couple of names well known to Houston sports fans are also Directors of Sportsmap.

  • Reid Ryan, former President of the Houston Astros. He is the son of Nolan Ryan.
  • Oliver Luck, former General Manager of the Houston Dynamo and former CEO of the Houston Sports Authority.  He is the father of Andrew Luck, the number one draft pick in 2012.

The deal should close in the first half of 2023. Under the terms of its IPO, Sportsmap has until April 2023 to complete a deal, otherwise it has to return the money it raised to investors.

SEC filing – 8-K Sportsmap ICI

 

Houston SPAC to take biofuels refinery company public

Port Westward, Oregon

[UPDATE – 11/02/23 – The deal collapsed on October 31, 2023. Industrial Tech Acquisitions II decided to liquidate itself and return money to its shareholders].

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

Houston SPAC buys California assets from Exxon

Flame Acquisition Corp, a Houston-based SPAC (Special Purpose Acquisition Corp) has agreed to buy the Santa Ynez oilfield from ExxonMobil. The business will be renamed Sable Offshore. (Technically, Exxon are selling the business to Sable Offshore, a company set up by Mr. Flores last year. In turn, Flame are buying Sable Offshore).



Flame completed its $250 million IPO in February 2021. The company is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable Permian. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

The Santa Ynez oilfield consists of 3 offshore platforms located in federal waters 12 miles off the coast near Santa Barbara and an onshore processing facility at Las Flores Canyon.

The offshore field had to stop production in 2015 after a corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American (a separate company to Plains Exploration and Production)  were the owners of the pipeline at the time. In 2020, Plains were fined $60 million in relation to the spill.

Last month, ExxonMobil bought the pipeline from Plains and has now agreed to sell it to Sable, who will be responsible for repairing and maintaining the pipeline.

The assets are being acquired for $643 million. However, most of this is being financed by Exxon who are issuing a $625 million loan to Sable. The loan has a 10% interest rate and will not be repaid until the earlier of 5 years or 180 days after production is restarted.

Sable is targeting a production start date for the Santa Ynez field of January 2024 and is estimating it will cost $172 million to repair the pipeline and get the offshore platforms ready. That money will effectively come from the cash that Flame raised in its IPO. Sable is also looking to raise a further $300 million in equity to provide it with cash reserves in case of delays.

Sable believes that they can repair the pipeline quickly by following the processes outlined in the the consent degree that Plains agreed to in its March 2020 settlement. It’s not clear to me how or whether the Californian state authorities can object or delay the repairs.

If production does not restart by January 2026, ExxonMobil has the right to take back the assets.

[EDITED 11-10-22 to make clear that Plains Exploration and Production, the former employer of Mr. Flores, is a separate company from Plains All-American).

Flame – Investor Presentation

 

Houston Space Infrastructure company to go public

[Update 2-14-23 – The deal has been completed]

Intuitive Machines (‘IM’), a Houston space infrastructure company, has agreed to be taken public by Inflection Point Acquisition Corp, a Manhattan-based SPAC.

The company is located near NASA and has recently been awarded a number of contracts with NASA’s Artemis program, which aims to return astronauts to the Moon by 2024.



IM is involved in 4 main segments

  • Lunar landing vehicles
  • Lunar data services
  • Orbital services (e.g. satellite servicing, debris removal)
  • Space infrastructure (power plants, human habitation systems)

IM was founded in 2013 by CEO Stephen Altemus, Kam Ghaffarian and Tim Crain.

  • Mr. Altemus is the former Deputy Director of NASA’s Johnson Space Center.
  • Mr. Ghaffarian is the Chairman of IM and has co-founded a number of space companies, including NASA contractor Stinger Ghaffarian Technologies, which was sold to KBR for $355 million in 2018.
  • Dr. Crain is IM’s Chief Technology Officer and worked at NASA for 12 years.
  • CFO Erik Sallee joined in April 2021 and was formerly the Corporate Controller at Blue Origin.

The company expects to have $102 million of revenue this year and has $153 million in backlog for 2023. The big jump is in 2024 when revenues are projected to be $759 million and the business will make a small EBITDA profit.

The transaction values the business at $815 million enterprise value (2.8 x 2023 revenue) and will leave the business with $338 million cash on hand to fund growth.

The deal is expected to be completed in the first quarter of 2023.

Just last week, Nauticus Robotics, another Houston company with strong NASA connections, was taken public by a SPAC.

Intuitive Machines – Investor Presentation