Pacific Coast Business Times Proudly serving Ventura, Santa Barbara and San Luis Obispo counties 2014-08-23T00:08:47Z http://www.pacbiztimes.com/feed/atom/ WordPress Stephen Nellis <![CDATA[Venoco to sell Oxnard oil field for $200M]]> http://www.pacbiztimes.com/?p=19550 2014-08-22T23:14:41Z 2014-08-22T23:09:21Z With revenue sagging and pressure mounting to reduce its debt load, Venoco has agreed to sell an oil field near Oxnard for $200 million.

Venoco, which is based in Denver but has major operations and holdings on the South Coast, said in its quarterly report Aug. 19 that it has agreed to sell its stake in the West Montalvo field, a major natural gas site. Located near Gonzalez Road and Harbor Boulevard just outside Oxnard, parts of the field are visible from McGrath State Beach.

Venoco acquired the mostly idled field in May 2007 for $61.3 million and would gain about $138.7 million on the sale, excluding the money the firm spent re-working the field to bring wells back into production.

Venoco did not name the buyer. The move follows news of layoffs earlier this year.

The sale and job cuts are the lingering effects of the $471 million transaction in which Venoco founder Tim Marquez took the company private. The deal was financed with a mix of bonds and revolving credit lines and imposed financial terms that tighten over time. Venoco must keep its assets and liabilities evenly balanced, and its debts can’t exceed five and half times its pre-tax earnings, according to company filings.

Venoco projects that it will be in violation of those terms by the end of September, which could cause its lenders to immediately demand large payments. The company said it plans to ask for a waiver while the West Montalvo field transaction is pending.

“The sale is expected to be completed in October 2014 and Venoco expects to apply 100 percent of the net proceeds to reduce the principal balance outstanding on the revolving credit facility,” the company said Aug. 18 in securities filings.

The West Montalvo field is in the midst of being revitalized. The field has both onshore and offshore oil, all of which can be reached by offshore wells. The company had 37 producing wells on the site at the end of last year, most of which were existing wells that had been idle. Venoco was processing data from a 3D seismic survey when the sale of the field was announced.

For the first six months of 2014, Venoco’s revenue was down 22 percent to $129.1 million compared with a year earlier. Net income was $807,000 compared with $36.9 million the same period the previous year.

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Stephen Nellis <![CDATA[IQMS readies for big leagues with first outside investment]]> http://www.pacbiztimes.com/?p=19543 2014-08-21T23:45:20Z 2014-08-22T07:02:25Z Paso Robles-based software firm IQMS has taken an outside investment for the first time in its 25-year history, raising an undisclosed sum from the same financiers who have backed Facebook, Expedia and Netflix.

The company said Aug. 19 that Technology Crossover Ventures led the funding round with Banneker Partners participating. The terms of the deal weren’t disclosed, but founders Randy and Nancy Flamm retain “a big piece” of the company and will continue to oversee day-to-day operations, the company told the Business Times.

Founded in 1989, IQMS makes software that manufacturers use to plan and run factory operations. By integrating with hardware attached to machines on the shop floor, it has built up a specialty with customers whose products need to be highly traceable, such as automotive parts makers and medical device makers.

Between 2011 and 2013, revenue at IQMS grew 56 percent to $32.2 million. The new capital is earmarked to bolster the company’s sales efforts and product development and bring in guidance from Silicon Valley’s heavy-hitters on how to grow even faster.

“We’ve always been very profitable — and are still very profitable — so we don’t need the money. But we need that expertise,” IQMS President Randy Flamm told the Business Times. “To get that expertise, I didn’t want to go to straight consultants because they don’t have any skin in the game.”

Flamm said that after the company appeared on the Inc. 5000’s fastest-growing companies list for several years in a row, it garnered interest from growth-equity firms. IQMS evaluated about 90 different potential partners before settling on Technology Crossover Ventures and Banneker.

With the new capital, IQMS is looking to win new customers from its competitors — including Santa Barbara-based QAD — as fast as it can.
“It’s always a little scary to hear, ‘You guys are great, you’re one of the best-kept secrets in the industry.’ We’re trying to change that, and that’s the big push that [Technology Crossover Ventures] is bringing to the table,” Flamm said. “If I was QAD, I’d probably be concerned.”

IQMS has long had sensors that attach to machines on the shop floor to feed data to its systems, but that trend is now taking off with the so-called Internet of Things. A factory looks more and more like a network by the day. And IQMS software can instantly call up information that manufacturers need in high-stakes industries. Its software can track not only lots of products, but also the lots of raw materials used to make those products. It can track whether each sub-component met the required tests before being integrated into a product. And it can all be printed on an invoice, which helps smooth regulatory requirements in various industries. “It’s not new to us,” Flamm said of the Internet of Things. “It’s one thing to generate all that information, and it’s another thing to know what to do with it.”

“With regulatory environments becoming stricter and need for more visibility on the shop floor rising, manufacturing customers view IQMS as an absolute necessity to remain competitive,” Stephen Davis, a managing partner at Banneker Partners, said in a news release.

IQMS has about 200 employees in North America, with 140 of them in Paso Robles. The company recently added a second building, which it financed with cash rather than debt, to the property it owns near the Paso Robles Airport. The two buildings total about 62,000 square feet, and the company has room for more structures on the property in the future.

IQMS is notable for the Flamms’ unique management style. It has been profitable since near inception. It has never taken on significant debt. The company is extremely selective in hiring, bringing in several employees for each open position and then keeping only the best. Flamm said none of that will change with the capital infusion.

“One of the reasons so many of those equity companies are interested in us is because of how we run the company,” Flamm said. “They come in and say, ‘What do you mean you’re debt free? You just moved into a new building.’ I explain that we paid cash for the building. It’s very unique, but the only reason we can do that is because we’re so profitable.”

There’s talk of a tech bubble these days, but Flamm was emphatic that the company’s decision to take on extra capital didn’t have anything to do with the heated markets.

“We remember in 2000 when it all fell apart, and they were giving out crazy valuations and then everything burst,” Flamm said. “We were not affected whatsoever because we didn’t jump on that bandwagon. And there are some bandwagons today that we won’t jump on.”

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Henry Dubroff <![CDATA[Measure P rekindles north-south feud in Santa Barbara County]]> http://www.pacbiztimes.com/?p=19541 2014-08-21T23:40:55Z 2014-08-22T07:01:12Z Henry Dubroff

Henry Dubroff

The annual Santa Maria Valley Chamber of Commerce dinner is a big deal.  Some 500 business types and politicians turn out in tuxes, ties and cocktail dresses, the tri-tip is served family style, and Bill Murray’s brother Ed, the emcee, has a quick wit that can bite hard.

At this year’s event at the Elks Lodge on Bradley Boulevard, I took a moment to glance at the sponsor banners hanging amid the sparkling lights when I noticed a sign I’d never seen before: “No on Measure P,” it said in big red letters.

It turned out that even in mid-August, the No on P campaign in the Santa Maria Valley was already a high-profile affair. Large energy companies, most of the North County’s elected officials and chambers of commerce and many others are firmly opposed to this November ballot measure, which would bar “high-intensity” energy production in the county.

In contrast, the “Yes on P” campaign, even on the South Coast, is fairly low-key. The Santa Barbara Water Guardians, which pushed the initiative onto the ballot, is not a household name. The “Yes on P” Facebook page had just 111 likes as of Aug. 19.  Higher-profile organizations such as the Environmental Defense Center are just beginning to drum up support.

On closer reading, there are a lot of questions about the ballot measure, a 28-page document that begins by talking about water conservation in times of drought and fracking, then goes on to list a host of other activities that could be barred or heavily regulated.  Those include many of the steam-injection techniques that are commonly being used in conventional, on-shore installations, including some for routine maintenance.

Pacific Energy and other oil firms that operate in the region argue that Measure P is just a stalking horse for entirely shutting down on-shore oil and gas production in the county. Even some county officials acknowledge its ambiguity.

If Measure P passes, the county might need to pass an ordinance further defining “high intensity” operations to head off lawsuits or an erosion of its tax base, or both.
Although Measure P supporters say their initiative is an effort to regulate the controversial oil-extraction technique known as hydraulic fracturing, or “fracking,” some tough new rules are already on the books.

In December 2011, Santa Barbara County enacted an ordinance that heavily regulates injecting steam and chemicals into deep wells in shale formations to stimulate the flow of oil and gas. Anybody who wants to frack must file a plan with the county that’s subject to an environmental impact review.

Meanwhile, tax revenue is an issue. The county estimates it could lose some or all of an estimated $16 million a year in direct revenue. The impact of lost jobs and purchasing power is not included in that figure.

There is also the question of possible litigation and “takings” compensation if existing well owners, even those with grandfathered permits, can’t perform future maintenance and have to abandon their wells.

Pacific Energy, Breitburn Energy Partners and others are expected to pour millions of dollars into Measure P opposition, a boon to television and radio stations but a move that also risks some voter backlash.
And there is the question of jobs. Some 70 percent of rank-and-file oil field workers are Latino. And oil field work is one of the few well-paying industries in North County in growth mode.

Santa Barbara County’s regulate-at-will theory of managing the economy failed at the onset of the recession, when job losses and a collapse in real estate tax revenue left a $70 million budget hole. Pensions remain a huge unfunded liability and without other new revenue sources, legacy oil-and-gas activities will remain a key source of county taxes for the foreseeable future.

A smarter way to go forward would be to develop a viable economic development strategy for North County that trumps its dependence on oil revenue and jobs in the energy sector. Until that happens, issues such as Measure P will be divisive, expensive and hard fought.

Meanwhile, the population of North Santa Barbara County is growing while the South Coast is stagnant or perhaps even shrinking. Measure P will be a litmus test for how well an energized group of North County, Latino and business voters can perform against a dedicated core of South Coast environmental enthusiasts.

• Contact Henry Dubroff at hdubroff@pacbiztimes.com.

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Stephen Nellis <![CDATA[iFixit taps its own mantra for new corporate digs in SLO]]> http://www.pacbiztimes.com/?p=19534 2014-08-21T23:30:13Z 2014-08-22T07:00:49Z

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Pacific Coast Business Times <![CDATA[Editorial: Paso Robles makes progress on water issue]]> http://www.pacbiztimes.com/?p=19522 2014-08-21T23:11:14Z 2014-08-22T07:00:41Z Gov. Jerry Brown has proved himself to be adept at the use of sharp elbows and brute power to get what he wants.

His water bond is a clear example of the use of power to tame public policy — it paves the way for voters to approve a scaled-down, $7 billion issue that would create new storage projects and shelve, at least for now, the controversial idea of bringing water from the Sacramento Delta to Southern California via huge tunnels.

A separate piece of legislation, awaiting Brown’s signature at press time,  paves the way for a solution to North San Luis Obispo County’s chronic groundwater deficits in an area north of Paso Robles.
County supervisors, state legislators and two community groups joined together to support the measure which provides for the formation of a hybrid special district to manage groundwater in North SLO County.

The two groups — Paso Robles Agricultural Alliance for Groundwater Solutions, or PRAAGS, and PRO Water Equity — once fought bitterly for control over who would guide the future oversight of dwindling water supplies in an area that includes a northern portion of the city of Paso Robles and surrounding  areas.

AB 2453 would provide for the formation of a hybrid board of directors to oversee a proposed Paso Robles Water District that would allocate groundwater resources. The provision provides for 10 percent of the landowners in the basin to file a petition with the Local Agency Formation Commission to get the process started; final approval of the district requires a vote of 50 percent plus one with each landowner getting one vote.

The district’s nine directors would be split between those elected by voters and those selected by large and small landowners.

There’s a very long way to go between passage of AB 2453 and the actual implementation of a groundwater oversight plan for North SLO County. But some of the hardest work — getting the parties to the table and getting a framework for going forward — has now been done.

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Stephen Nellis <![CDATA[Competition heats up in infrared market as Flir, Seek Thermal release smartphone products]]> http://www.pacbiztimes.com/?p=19545 2014-08-21T23:50:07Z 2014-08-22T07:00:40Z Flir General Manager Bill Terre shows the company’s new infrared phone app recording a cup of coffee. (Stephen Nellis / Business Times photo)

Flir General Manager Bill Terre shows the company’s new infrared phone app recording a cup of coffee. (Stephen Nellis / Business Times photo)

 

This holiday season, two South Coast firms will compete to sell what could be the hottest gadget gift of the year: affordable thermal cameras for smartphones.

Goleta-based Seek Thermal, the company founded by longtime infrared entrepreneurs Bill Parrish and Tim Fitzgibbons that has raised $30 million, said Aug. 19 that it will offer a camera that plugs into smartphones to provide the same kind of thermal imaging previously used by firefighters and soldiers.

Seek Thermal’s camera will face off against the Flir One, a product conceived and designed in Goleta that wraps around a phone like a case. Flir announced the $349 camera in July, and it was slated to hit Apple stores as the Business Times went to press.

Thermal cameras are different from what most consumers think of as infrared imagery. The black-and-green pictures seen in military footage is actually an amplification of a small amount of existing visible light. Thermal cameras, by contrast, solely detect temperature differences and can see in complete darkness. They produce the brightly colored images popularized in the 1987 film “Predator.”

The high prices of thermal cameras have kept them confined to military, public safety and industrial uses. Civilian devices are available but usually cost thousands of dollars, showing up in products such as BMW’s high-end cars.
Both Seek Thermal and Flir have taken advantage of advancing technology to produce small, easily powered devices that can be sold for a few hundred dollars rather than thousands.

Neither company knows quite how the masses will use thermal imaging once it hits the market, and both plan to adapt quickly with apps and products to meet consumer demand as it emerges. The cameras could end up a in a range of devices, spurring a first-ever proliferation of thermal imaging that could fuel the South Coast’s economy.

Flir Systems

Oregon-based Flir Systems has about 400 employees in Goleta, and the new Flir One was born on the South Coast, said General Manager Bill Terre.

When thermal cameras were first invented, they cost about $100,000 and needed to be cooled to more than 300 degrees below zero because ambient room temperatures caused too much electronic noise. By the 1980s, uncooled cameras came along, and it is the several decades of refinement to those devices that ultimately led to the smartphone-ready products seen today, Terre said.

Flir’s entire camera is 5.5 millimeters across and is made to fit a standard socket used in smartphones so that designers can easily integrate it into other products. In addition to selling its own phone accessory, Flir is seeking out other companies who might want to use its cameras in their products.

“The size of that module wasn’t an accident. We envision that it eventually will end up resident in the handset. That size is what we imagine is the maximum form factor for a camera,” Terre told the Business Times. “We have been for some time in a wide-ranging pursuit of [original equipment manufacturers] who could take advantage of a camera this size.”

Flir has three apps available for its camera at the moment, but it is also releasing a software development kit to coders to make their own apps. Terre said demand for the kits has been strong.
“The killer app for this technology probably hasn’t been invented yet, but with this many people looking at it, I’m confident it will be,” he said.

Part of what has driven down the cost of the Flir One is integrating more and more techniques from standard semiconductor manufacturing into the process of making detectors and lenses. (Standard optical glass reflects heat and can’t be used in lenses for thermal cameras. The lenses have to be made of special materials and are usually the second-highest cost driver in a system.)

“We turned to the silicon foundry and said, ‘Hey, putting the detector on top of the other stuff isn’t all that unlike what you’re doing,’ ” Terre said.

Seek Thermal

Parrish and Fitzgibbons founded what is now Seek Thermal in 2012 with plans to commercialize the technology advances made at Raytheon Vision Systems, coupled with the chip manufacturing prowess of Freescale Semiconductor, the large chipmaking firm spun out of Motorola.

The pair has been involved in some of the most prominent infrared sensor companies in Goleta over several decades, including Indigo Systems, which was sold to Flir in 2004 for $185 million. There was a legal battle between the pair and Flir as they worked to start their new business. Parrish and Fitzgibbons were eventually awarded a $39 million settlement against Flir.

With legal issues in the rear-view mirror, the open market is ahead. Seek Thermal says its camera is smaller and plugs into the bottom of a phone. It also says its resolution is 32,000 pixels, more than six times higher than the 4,800 pixels in the Flir camera. Seek Thermal intends to sell its products for about $100 less than Flir.

Robert Acker, CEO and president of Seek Thermal, said smartphones have unlocked the huge potential of thermal sensors.

“If you can take a picture with an iPhone or Android phone, you can take a picture with our product, and you can carry it with you in the same way,” Acker said. “I think it will allow us to become part of daily life much faster.”

The advances made at Raytheon and Freescale are letting Seek Thermal pack more camera chips on a single wafer, driving down the costs. The company has also perfected a new take on lens technology that is slightly different from Flir’s approach.

Acker said Seek Thermal will work with outside companies to sell its camera internals for use in other products.

Acker said the most exciting aspect of the new product is inventive uses. Thermal cameras will show a “heat footprint” of where a warm object has been sitting for several minutes afterward. One early tester used Seek Thermal’s camera to see whether his dog had been illicitly sitting on the couch while his owner was away.

“What if you could look at a griddle and tell that the pancakes aren’t going to cook on one side but are going to burn on the other side? What if you could look at your grill’s propane tank and tell whether it’s only 10 percent full?” Acker said. “Nobody’s played around with these before, so it’s going to be really fun to come along for the ride.”

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Elijah Brumback http://www.pacbiztimes.com <![CDATA[Pacifica Hotels, Eastern Real Estate team up on hostel takeover]]> http://www.pacbiztimes.com/?p=19537 2014-08-21T23:35:55Z 2014-08-22T07:00:27Z Elijah Brumback

Elijah Brumback

Santa Barbara’s latest hospitality development recently opened its doors to a flurry of tourists looking for budget accommodations. The Wayfarer, a 31-room, 101-bed hostel at 12 E. Montecito St. is the newest project to drop into the city’s Funk Zone.

The project is the result of a deal between the city and the late developer Fess Parker. In that deal, the Parker family had to build a budget hostel in Santa Barbara to gain approval for its new boutique hotel project, slated to be built on Cabrillo Boulevard, next to the 360-room Fess Parker’s DoubleTree Resort.

Last week, Santa Barbara firms Pacifica Hotels and Eastern Real Estate purchased the hostel from the Parker family. The deal had been in escrow for almost a year before closing, Pacifica Hotels President Matt Marquis said in an interview.

Pacifica Hotels operates dozens of hotels in coastal California, as well as properties in Hawaii and Florida. Eastern Real Estate has been a prolific developer and investor in commercial property in downtown Santa Barbara, particularly in the Funk Zone, where it was a partner in the Anacapa Street project anchored by The Lark restaurant.

Pacifica Hotels, a subsidiary of Santa Barbara-based Invest West Financial Corp., joined the project as an operator, but ended up making a “sizable” equity investment in the project, Marquis said. “The Parkers and Eastern Real Estate put the deal together … we came in as the expertise in developing the project, which was basically just a shell when we got it,” Marquis said. “We run a number of other hotels, but coming to this project we had to educate ourselves on how to sell beds versus rooms.”

The company also hired a property general manager out of Hostelling International, a membership organization that brings together hostel information and resources from all over the world.

While the term “hostel” might recall some wild and harrowing experiences for the well-traveled, the Wayfarer, still very clean and new, is definitely not the cot and pot-type living some rubber tramps know too well.  Group rooms feature five memory-foam mattress beds, flat-screen TVs built into the walls and other comfy accoutrements. There’s a pool that looks over lower State Street and bike rentals are on the way. And there is a large, well-equipped kitchen where guests can cook meals and store food away in personal lockers. Private rooms are outfitted with the same built-in flat screen TV, private shower, queen-size bed and a Murphy bed that lets the room sleep up to three people.

Depending on the season, beds and rooms can run between $59 and $200 per night.

“We definitely think there is a market here for the discerning traveler that is happy to pay $59, $79 or $89 for a bed,” Marquis said. “There are definitely people who want to have that social experience of hostel and also have a really nice room. … I think we’re going to find that people really like the vibe here.”

Pacifica is also looking at cross-marketing opportunities with other area businesses. Early talks with the nearby Guitar Bar, a high-end guitar retailer, include offering some incentive for groups who come in for guitar camps.  “There are a lot of opportunities out there,” Marquis said. With very little marketing since opening, the hostel is running at 80 percent occupancy, he said.

Pacifica is looking to take the hostel model it has established in Santa Barbara to other markets. “We definitely think there are more places to take this type of product,” Marquis said.

$24M RESIDENTIAL PROJECT IN VENTURA TAKES SHAPE

A $24 million residential development is taking shape in Ventura. The 59.5-acre site at Telegraph and South Wells roads was purchased by J. FAM in 2011 and CBRE Capital Markets Debt & Structured Finance Group secured the financing. The fully entitled project plans call for 110 townhomes and condo units and 224 single-family homes. Other features include parks and bicycle pathways.

The financing carries a two-year loan term with two six-month extensions funded by U.S. Bank. Sharon Kline and Marina Massari of CBRE represented the borrower in the deal.

DEAL OF THE WEEK

• PetSmart is coming to Santa Barbara.  Lee & Associates Central Coast said it negotiated a 10-year, $2.6 million retail lease at 222 N. Milpas St. in Santa Barbara with the pet goods retailer, which will sublease 8,367 square feet from The Fresh Market.

• Contact Elijah Brumback at ebrumback@pacbiztimes.com.

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