Nabors Energy Transition Corp. II SEC 10-Q Report

Nabors Energy Transition Corp. II, a blank check company incorporated in the Cayman Islands, has released its Form 10-Q report for the quarter ended September 30, 2024. The report provides a comprehensive overview of the company's financial performance, business activities, strategic initiatives, and the challenges it faces as it seeks to effect a business combination in the energy transition sector.

Financial Highlights

• Net Income: $3.97 million for the three months ended September 30, 2024, driven by interest income on marketable securities held in the trust account of $4.45 million, offset by operating costs of $0.48 million.
• Net Income: $11.34 million for the nine months ended September 30, 2024, primarily due to interest income on marketable securities held in the trust account of $12.35 million, offset by operating costs of $1.00 million.
• Net Income: $3.51 million for the three months ended September 30, 2023, resulting from interest income on marketable securities held in the trust account of $3.27 million, change in fair value of over-allotment option liability of $0.40 million, other income of $0.0003 million, and an unrealized gain on marketable securities held in the trust account of $0.086 million, offset by operating costs of $0.25 million.
• Net Income: $3.50 million for the period from April 12, 2023 (inception) through September 30, 2023, due to interest income on marketable securities held in the trust account of $3.27 million, change in fair value of over-allotment option liability of $0.40 million, other income of $0.0003 million, and an unrealized gain on marketable securities held in the trust account of $0.086 million, offset by operating costs of $0.26 million.
• Basic and diluted net income per share, Class A ordinary shares: $0.10 for the three months ended September 30, 2024.
• Basic and diluted net income per share, Class A ordinary shares: $0.30 for the nine months ended September 30, 2024.
• Basic net income per share, Class A ordinary shares: $0.11 for the three months ended September 30, 2023.
• Basic net income per share, Class A ordinary shares: $0.17 for the period from April 12, 2023 (inception) through September 30, 2023.
• Diluted net income per share, Class A ordinary shares: $0.11 for the three months ended September 30, 2023.
• Diluted net income per share, Class A ordinary shares: $0.17 for the period from April 12, 2023 (inception) through September 30, 2023.

Business Highlights

• Company Overview: Nabors Energy Transition Corp. II is a blank check company formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses or entities.
• Initial Public Offering: On July 18, 2023, the company consummated its IPO of 30,500,000 units, including the partial exercise by the underwriters of their over-allotment option in the amount of 500,000 units, at $10.00 per unit, generating gross proceeds of $305,000,000.
• Private Placement Warrants: Simultaneously with the closing of the IPO, the company sold 9,540,000 private placement warrants to the direct or indirect owners of the sponsor at a price of $1.00 per warrant, generating gross proceeds of $9,540,000.
• Overfunding Loans: The direct or indirect owners of the sponsor loaned the company a total of $3,050,000, and in exchange, the company issued unsecured promissory notes to each lender for an aggregate principal amount of $3,050,000 as of the closing date of the IPO at no interest. These loans will be repaid upon the closing of the initial business combination or converted into warrants of the post-business combination entity at a price of $1.00 per warrant.
• Trust Account: Following the IPO, sale of the private placement warrants, and overfunding loans, a total of $308,050,000 was placed in the trust account. The funds in the trust account are intended to be used to complete the initial business combination.
• Operating Activities: For the nine months ended September 30, 2024, cash used in operating activities was $264,250. This was primarily due to operating costs and changes in operating assets and liabilities.
• Interest Income: The company generated non-operating income in the form of interest income on marketable securities held in the trust account. For the nine months ended September 30, 2024, interest income amounted to $12,345,276.
• Administrative Support Agreement: The company entered into an agreement to reimburse the sponsor or an affiliate $15,000 per month for office space, utilities, secretarial, and administrative support. For the nine months ended September 30, 2024, the company incurred $135,000 in fees for these services.
• Deferred Legal Fees: As of September 30, 2024, the company had a total of $823,703 in deferred legal fees, which are to be paid to the company’s legal advisors upon consummation of the business combination.
• Future Outlook: The company has 24 months (or until July 18, 2025) to consummate an initial business combination. If the company is unable to complete a business combination within this period, it will cease all operations except for the purpose of liquidating.

Strategic Initiatives

• Strategic Focus: Nabors Energy Transition Corp. II is focused on effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses or entities. The company aims to identify solutions, opportunities, companies, or technologies that focus on advancing the energy transition, specifically those that facilitate, improve, or complement the reduction of carbon or greenhouse gas emissions while satisfying growing energy consumption across global markets.
• Capital Management: The company completed its Initial Public Offering (IPO) on July 18, 2023, raising gross proceeds of $305 million through the sale of 30,500,000 units. Additionally, the company raised $9.54 million through the sale of 9,540,000 private placement warrants to the direct or indirect owners of the sponsor. The company also secured $3.05 million in overfunding loans from the sponsor's owners, which will be repaid upon the closing of the initial business combination or converted into warrants. The total amount of $308.05 million was placed in a trust account. Transaction costs amounted to $17.97 million, including underwriting discounts and other offering costs. As of September 30, 2024, the company had $1.65 million in cash and $328.01 million in marketable securities held in the trust account. The company intends to use the funds held outside the trust account primarily for identifying and evaluating target businesses, performing due diligence, and other related activities.
• Future Outlook: The company has 24 months from the closing of the IPO (until July 18, 2025) to consummate an initial business combination. If the company is unable to complete a business combination within this period, it will cease operations and liquidate the trust account. Management plans to consummate an initial business combination prior to the mandatory liquidation date. The company expects to continue incurring significant costs in pursuit of its acquisition plans and aims to use the proceeds from the IPO, private placement warrants, and overfunding loans to finance the operations of the target business or businesses, make other acquisitions, and pursue growth strategies.

Challenges and Risks

• Forward-Looking Statements and Risks: The company acknowledges that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expected. Key risks include the conditions of the proposed Business Combination not being satisfied, which could impact the company's financial position and business strategy.
• Operational Risks: The company has not engaged in any operations or generated revenues to date. The primary activities have been organizational and preparatory for the Initial Public Offering and identifying a target company for an initial business combination. The company expects to incur significant costs in pursuit of acquisition plans and cannot assure the success of completing an initial business combination.
• Liquidity and Capital Resources: The company has determined that mandatory liquidation, should a business combination not occur by July 18, 2025, raises substantial doubt about its ability to continue as a going concern. This uncertainty could impact the company's financial stability and operational continuity.
• Financial Risks: The company has incurred transaction costs of $17,966,142 related to the Initial Public Offering and has used cash in operating activities. The reliance on interest income from marketable securities held in the trust account and the need for additional financing to complete an initial business combination or redeem public shares pose financial risks.
• Marketable Securities and Derivative Financial Instruments: The company holds substantial assets in U.S. Treasury Bills and evaluates financial instruments for derivative features. Changes in fair value of these instruments could impact financial results.
• No Material Changes in Risk Factors: As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Annual Form on Form 10-K filed with the SEC on March 27, 2024. However, the company may disclose changes or additional factors in future filings.
• Potential New Risks: The company acknowledges that additional risk factors not presently known or currently deemed immaterial may also impair business or results of operations. This highlights the potential for emerging risks that could impact the company's future performance.

SEC Filing: Nabors Energy Transition Corp. II [ NETD ] - 10-Q - Nov. 12, 2024