Two months after a glowing story in The Daily Advertiser, in which Lafayette-based Green Field Energy Services boasted that it was talking to about a dozen companies interested in doing business with it — with Green Field’s VP of sales noting how difficult it would be to grow that fast — the company defaulted on an $80 million loan from Shell and this month defaulted on a $250 million loan from Wilmington Trust.
Then, on Sunday, Lafayette businessman Michel Moreno’s Green Field Energy Services (Billy Rucks and Kevin Moody are minor investors, according to Green Field’s annual report) filed for protection under Chapter 11 of the U.S. Bankruptcy Code, hoping to reorganize its approximately $500 million in outstanding debt — about the same amount it lists in assets. The man with the Midas touch, whose business deals almost always seem to end up in a heated court battle, might need to pull a rabbit out of his hat to get this venture out of bankruptcy.
Moreno is chairman and CEO of the private company, having led the group that purchased Hub City Industries in mid-2011, changing its name to Green Field, which soon boasted that it was years ahead of its competition in the use of natural gas to run its hydraulic fracturing equipment (saying it could even pipe the hydrocarbon directly from the wellhead). The company also offers cementing, coiled tubing, pressure pumping, acidizing and other pumping services. Its major competitors are the big boys of the oilfield services industry, Halliburton, Schlumberger and Baker Hughes.
This time, however, the high-flying entrepreneur behind The Moreno Group — Dynamic Industries, ARC Industries, Southern Steel & Supply, and Industrial Solutions Group — was off in his timing. (According to his Green Field bio, Moreno has not been involved in the management of Moreno Group since July 2012, though he retains a seat on its board.)
Green Field President Rick Fontova told the Houston Chronicle that the company started offering its fracturing services at a time when competitors were expanding and other companies were entering the market, creating an immediate glut in equipment. “Back in 2011 in this market, the demand far exceeded the supply and margins were much higher, which was how we entered the market,” Fontova told the newspaper. “But very quickly the conditions changed to where there was an oversupply.”
|Green Field's Turbine Fracturing Pumps|
Green Field's response was to dramatically increase its fleet of fracturing pumps, which mine natural gas, from eight in 2011 to 65 today. All the while, natural gas prices were starting to bottom out, causing a slowdown in hydraulic fracturing.
The company’s big break — or so it seemed at the time — came in 2012 when it signed a long-term contract with Royal Dutch Shell.
In May 2012 Green Field announced that it had inked the deal with Shell to begin offering hydraulic fracturing services. “We are pleased to announce that we have moved beyond the manufacturing phase and into operational mode,” Moreno said in the announcement. “We have commenced hydraulic fracturing operations with Shell in the United States. Shell is utilizing Green Field’s unique and proprietary clean turbine pumping technology, which offers significant environmental and efficiency advantages over pumps powered by traditional diesel engines.”
Court filings indicate that Shell went on to become Green Field's top customer, accounting for nearly 80 percent of its $145 million in 2012 revenue.
Court documents indicate the company hasn’t turned a profit in four of the past five years, but the loss of Shell’s business in August of this year was apparently too much to overcome. The Wall Street Journal reports that as of its Chapter 11 filing Sunday in Wilmington, Del., Green Field had $255.9 million in bond debt, an $80 million credit facility owed to Shell (the national newspaper points out that Green Field argues in court documents that Shell failed to perfect liens securing this debt, which the WSJ believes is a hint that a potential court fight could be in the making) and $98.6 million in trade debt. Green Field lost $74.6 million last year and $81.4 million so far this year.
It’s unclear how many of Green Field’s 355 people at 14 facilities throughout Texas and Louisiana have been laid off. An ABiz source with information about its local operations says about half of the roughly 40 office staffers in Lafayette lost their jobs. The company’s Lafayette office is located at 4023 Ambassador Caffery Parkway.
Company filings indicate Green Field owns half of Franklin-based Turbine Powered Technology. According to Green Field’s website, in September 2011, Green Field and Marine Turbine Technologies formed Turbine Powered Technology to design and produce turbine equipment from old military aircraft engines.
The Houston Chronicle noted that Moreno also holds stakes in several companies that do business with Green Field, including (and not surprisingly) some on the company’s list of top creditors.
Certainly worth noting is what Moody's had to say about Moreno when it downgraded Green Field in September, ahead of the bankruptcy filing: "The company also did not receive the committed preferred stock investment from its owner and CEO (Mr. Michael Moreno, who owns 93% of the company)."
Green Field secured $30 million in bankruptcy financing from GB Credit Partners LLC and ICON Capital LLC to keep the business operating as it restructures. GB Credit Partners said in a prepared statement that the financing will be used to fund essential expenses during the bankruptcy process, noting that the loan is secured by super priority lien in all of Green Field Energy Services’ assets.
A voice message left with Fontova was not immediately returned.
Read more on Moreno and Green Field in the next issue of ABiz, out on newsstands Nov. 15.