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Nabors Energy Transition Corp. 10-K Analysis & Summary – 2025-03-28

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Nabors Energy Transition Corp.

Filing date:

03/28/2025

TLDR:

Nabors Energy Transition Corp. II is a blank check company seeking a business combination in the energy transition sector; they have entered into an agreement with e2Companies LLC. The company’s ability to continue as a going concern is dependent on completing a business combination by July 18, 2025.

ELI5:

This company is like a treasure chest looking for a company to merge with in the green energy world. They’ve found a potential partner, but need to finalize the deal soon, or they might have to close down and give the money back to investors.

Accession #:

0001410578-25-000525

Published on

Analyst Summary

  • The company has entered into a business combination agreement with e2Companies LLC, a Florida limited liability company.
  • The company’s strategy is to identify opportunities in the energy transition sector, including alternative energy, energy storage, emissions reduction, and carbon capture.
  • The company’s ability to complete the business combination is subject to shareholder approval and other customary closing conditions.
  • The company’s ability to continue as a going concern is dependent on completing a business combination by July 18, 2025.
  • As of December 31, 2024, the company had $331.8 million in trust and $1.6 million of cash outside the trust account.
  • The company’s sponsor has agreed to be liable for claims by third parties that reduce the amount of funds in the trust account, subject to certain exceptions.

Opportunities and Risks

  • Opportunity: Capitalizing on the emerging energy transition to decarbonization.
  • Opportunity: Participating in the development of renewable energy sources.
  • Opportunity: Leveraging Nabors’ global operational, commercial and manufacturing platform and capabilities to develop and deploy technology.
  • Risk: The company may not be able to complete the Business Combination in a timely manner or at all.
  • Risk: The company is subject to risks and uncertainties relating to the Business Combination with respect to e2 and e2’s business.
  • Risk: The ability of public shareholders to redeem their shares for cash may make the company’s financial condition unattractive to potential business combination targets.
  • Risk: The requirement that the company complete its initial business combination within the prescribed timeframe may give potential target businesses leverage over the company in negotiating a business combination.
  • Risk: The company may not be able to complete its initial business combination within the prescribed timeframe, in which case it would cease all operations except for the purpose of winding up and it would redeem its public shares and liquidate.

Potential Implications

Company Performance

  • The company’s prospects depend entirely on the future performance of the single business it combines with.
  • The company may be affected by numerous risks inherent in the business operations with which it combines.
  • The company’s financial condition, results of operations and share price could be negatively affected by write-downs, write-offs, restructuring and impairment or other charges.

Stock Price

  • The market price of the company’s Class A ordinary shares could be adversely affected by the registration and availability of a significant number of securities for trading in the public market.
  • The market price of the company’s Class A ordinary shares could be negatively impacted by the company’s lack of diversification.
  • The market price of the company’s Class A ordinary shares could be lower than they otherwise would be if the company relies on exemptions available to emerging growth companies.

SEC Filing Report: Nabors Energy Transition Corp. II – 10-K (FY 2024)

Executive Summary

This report analyzes the 10-K filing for Nabors Energy Transition Corp. II (NETD), a blank check company, for the fiscal year ended December 31, 2024. The company has no operating history and is focused on finding a business combination target in the energy transition sector. The filing reveals a pending business combination with e2Companies LLC, a Florida limited liability company. Key risks include the company’s limited operating history, dependence on completing the e2 transaction, and potential redemptions by public shareholders. The company’s financial position is primarily comprised of cash held in trust. The report highlights the potential conflicts of interest related to the sponsor, Nabors Industries, and management. Given the inherent risks associated with SPACs and the dependence on the successful completion of the e2 transaction, a neutral assessment is warranted.

Company Overview

Nabors Energy Transition Corp. II is a blank check company formed to acquire a business in the energy transition sector. The company completed its IPO in July 2023. The primary focus is on identifying and acquiring a company that facilitates the shift from fossil fuels to renewable energy sources. A business combination agreement has been signed with e2Companies LLC, but the transaction is subject to shareholder approval and other closing conditions.

Detailed Analysis

Management’s Narrative (MD&A)

Management’s discussion focuses on the company’s strategy to identify and acquire a target business in the energy transition sector. The narrative emphasizes the company’s relationship with Nabors Industries and its expertise in the energy industry. The MD&A highlights the pending business combination with e2 and outlines the terms of the agreement. The tone is optimistic regarding the potential of the e2 transaction.

Financial Statement Analysis

Balance Sheet

The balance sheet is dominated by cash and marketable securities held in the trust account, totaling $331.8 million as of December 31, 2024. Current assets are minimal outside of cash. Liabilities primarily consist of deferred underwriting fees and overfunding convertible notes to related parties. A significant portion of equity is classified as “Class A ordinary shares subject to possible redemption,” reflecting the potential for shareholders to redeem their shares.

Key observations:
* **High Liquidity:** The company is highly liquid, with the majority of assets held in cash.
* **Limited Operations:** Minimal operating assets or liabilities, reflecting its status as a blank check company.
* **Redemption Risk:** The large balance of redeemable shares indicates a significant risk that the company’s cash reserves could be depleted if a large number of shareholders choose to redeem their shares upon the business combination.

Income Statement

The company has not generated any operating revenue. Net income for the year ended December 31, 2024, was $11.95 million, primarily driven by interest income earned on the trust account. Operating expenses are relatively low, consisting mainly of general and administrative costs.

Key observations:
* **Dependence on Interest Income:** The company’s profitability is entirely dependent on interest earned on the trust account.
* **Minimal Operating Activity:** Low operating expenses reflect the company’s limited activities prior to a business combination.

Cash Flow Statement

Cash flow from operating activities was negative, primarily due to general and administrative expenses. The primary cash inflow was from the IPO proceeds. Cash flow from investing activities reflects the investment of cash into the trust account.

Key observations:
* **Negative Operating Cash Flow:** The company is burning cash due to operating expenses.
* **Trust Account Funding:** The cash flow statement highlights the importance of the trust account as the primary source of funds for a business combination.

Key Ratios

Given the nature of a blank check company, traditional financial ratios are not particularly meaningful. However, the following metrics are relevant:

* **Cash per Share:** Approximately $10.88 per Class A ordinary share (redemption value) as of December 31, 2024.
* **Trust Account Balance:** $331.8 million, representing the potential funds available for a business combination.

Uncommon Metrics

* **Founder Share Conversion Ratio:** The filing mentions potential adjustments to the conversion ratio of founder shares, which could impact the ownership structure post-business combination.
* **Overfunding Loans:** The existence and potential conversion of overfunding loans into warrants represent a potential dilution risk.

Risk and Opportunity Assessment

Risks

* **Business Combination Failure:** The company may be unable to complete the proposed Business Combination in a timely manner or at all.
* **Redemption Risk:** High levels of redemptions by public shareholders could reduce the cash available for the business combination and potentially lead to its failure.
* **Conflicts of Interest:** Potential conflicts of interest related to the sponsor, Nabors Industries, and management could influence the selection and terms of a business combination.
* **Dependence on Key Personnel:** The company’s success is heavily reliant on its officers and directors.
* **Regulatory Risks:** The proposed business combination may be subject to regulatory review and approval requirements by governmental entities, or ultimately prohibited.
* **Going Concern:** The company’s ability to continue as a going concern is dependent on completing a business combination by July 18, 2025.

Opportunities

* **Energy Transition Sector:** The company’s focus on the energy transition sector presents opportunities for growth and value creation.
* **Nabors Relationship:** The company’s relationship with Nabors Industries provides access to expertise, resources, and potential deal flow.
* **e2Companies Business Combination:** The proposed business combination with e2Companies LLC presents an opportunity to acquire a company with potential in the “green energy” sector.

Conclusion & Actionable Insights

Nabors Energy Transition Corp. II is a blank check company with a pending business combination agreement. The company’s financial position is strong in terms of liquidity, but it faces significant risks related to the completion of the e2 transaction and potential redemptions. Investors should carefully consider the potential conflicts of interest and the dependence on management’s ability to execute the business combination strategy.

**Overall Assessment:** Neutral. The company’s future performance is highly dependent on the successful completion of the e2 transaction and the ability to manage redemption risk.

**Recommendations:**
* **Monitor Redemption Levels:** Closely track the level of redemptions by public shareholders in connection with the e2 transaction.
* **Assess e2’s Business:** Conduct thorough due diligence on e2Companies LLC to evaluate its business model, financial performance, and growth prospects.
* **Evaluate Management Alignment:** Assess the alignment of interests between management, the sponsor, and public shareholders.

Financial Analysis of Nabors Energy Transition Corp. II (NETD)

1. Commentary

Nabors Energy Transition Corp. II (NETD), a special purpose acquisition company (SPAC), reported a net income of $11.95 million for 2024, a significant increase from $7.57 million in the prior period. This profitability is primarily driven by interest earned on marketable securities held in the trust account. The company is in the process of a business combination with e2Companies LLC, which introduces both opportunities and risks. NETD faces the typical challenges of a SPAC, including the need to complete a business combination within a specific timeframe and potential redemptions by public shareholders.

2. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin: Not applicable as the company has no sales.
  • Operating Profit Margin: Not applicable as the company has no sales.
  • Net Profit Margin: Not applicable as the company has no sales.
  • Return on Assets (ROA):

    • Metric: Net Income / Total Assets = $11,951,781 / $333,516,287 = 3.58%
  • Return on Equity (ROE):

    • Metric: Net Income / Total Shareholders’ Deficit = $11,951,781 / (-$16,062,815) = -74.41%
  • Earnings Per Share (EPS):

    • Metric (Basic and Diluted): $0.31

Liquidity

  • Current Ratio:

    • Metric: Total Current Assets / Total Current Liabilities = $1,735,157 / $313,719 = 5.53
  • Quick Ratio (Acid-Test Ratio):

    • Metric: (Total Current Assets – Inventory) / Total Current Liabilities = $1,735,157 / $313,719 = 5.53 (Assuming no inventory)
  • Cash Ratio:

    • Metric: Cash / Total Current Liabilities = $1,599,682 / $313,719 = 5.10

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Metric: Total Liabilities / Total Shareholders’ Deficit = $17,797,972 / (-$16,062,815) = -1.11
  • Debt-to-Assets Ratio:

    • Metric: Total Liabilities / Total Assets = $17,797,972 / $333,516,287 = 5.34%
  • Interest Coverage Ratio (Times Interest Earned): Not applicable as the company has net positive interest income.

Activity/Efficiency

  • Inventory Turnover: Not applicable as the company has no inventory.
  • Days Sales Outstanding (DSO): Not applicable as the company has no sales.
  • Days Payable Outstanding (DPO): Not applicable as the company has no purchases.
  • Asset Turnover:

    • Metric: Revenue / Total Assets = $0 / $333,516,287 = 0 (Since there is no revenue)

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Metric: Market Cap / Net Income. Assuming a market cap of $386.25 million (38.125 million shares outstanding * $10.13 share price), and using the 2024 net income of $11.95 million, the P/E ratio is 32.32.
  • Price-to-Book Ratio (P/B):

    • Metric: Market Cap / Book Value of Equity. Book Value of Equity = -$16,062,815. Since book value is negative, P/B is not meaningful.
  • Price-to-Sales Ratio (P/S):

    • Metric: Market Cap / Revenue = $386,250,000 / $0 = N/A (Since there is no revenue)
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Metric: EV = Market Cap + Total Debt – Cash. EBITDA = Net Income – Interest Income + Taxes + Depreciation and Amortization. Since there is no debt, taxes, depreciation or amortization, EBITDA = $11,951,781 – $16,113,015 = -$4,161,234. EV = $386,250,000 + $17,797,972 – $1,599,682 = $402,448,290. EV/EBITDA = $402,448,290 / (-$4,161,234) = -96.71

Growth Rates

  • Revenue Growth: Not applicable as the company has no revenue.
  • Net Income Growth:
    • Metric: ($11,951,781 – $7,569,900) / $7,569,900 = 57.89%
  • EPS Growth:
    • Metric: ($0.31 – $0.29) / $0.29 = 6.90%

Other Relevant Metrics

  • Business Combination with e2Companies LLC:
    • NETD is pursuing a business combination with e2Companies LLC, a company focused on providing clean, dispatchable, and scalable power.
    • The success of this combination is subject to various risks, including regulatory approvals, market conditions, and e2’s ability to execute its business plan.
    • The merger agreement includes provisions for director nominations and board composition post-combination, reflecting the influence of Nabors and the e2 Principal Holder.
  • Class A Ordinary Shares Subject to Possible Redemption:
    • The balance sheet reflects a significant amount of Class A ordinary shares subject to possible redemption, indicating potential shareholder redemptions upon completion of the business combination.
    • The redemption value per share increased from $10.35 in 2023 to $10.88 in 2024, reflecting the accretion of carrying value to redemption value.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️