10-Q: Nabors Energy Transition II Terminates Merger, Extends Lifespan

Nabors Energy Transition Corp. II (NETD) terminated its business combination agreement with e2Companies, securing a $29.23 million settlement, and is seeking an indefinite extension for its operating period.

Summary

• The Business Combination Agreement with e2Companies, LLC (e2) was terminated on October 14, 2025.
• A Settlement Agreement was reached with e2, resulting in a secured promissory note for $29.23 million, with $14.615 million due by March 31, 2026 (including a $3.5 million prepayment by December 31, 2025) and the remaining $14.615 million due by October 14, 2028.
• The Company reported a net loss of $2,288,322 for the three months ended September 30, 2025, compared to a net income of $3,971,625 for the same period in 2024.
• For the nine months ended September 30, 2025, net income was $940,982, a significant decrease from $11,340,536 in the prior year.
• Cash and marketable securities held in the Trust Account decreased from $331,781,130 as of December 31, 2024, to $154,158,677 as of September 30, 2025, primarily due to $186,654,533 in redemptions.
• The Company's operating cash balance decreased from $1,599,682 at December 31, 2024, to $629,566 at September 30, 2025, resulting in a working capital deficit of $1,421,438.
• Deferred underwriting fees totaling $10,675,000 were waived by Wells Fargo Securities, LLC and Citigroup Global Markets Inc.
• The Board elected to extend the business combination deadline monthly from July 18, 2025, to November 18, 2025, with Nabors Lux (an affiliate of the Sponsor) depositing $250,000 into the Trust Account for each extension.
• The Company is seeking shareholder approval for an indefinite extension of its business combination deadline and to allow future interest earned on the Trust Account to be deposited into its operating account.
• Miguel Rodriguez was appointed Chief Financial Officer, effective November 12, 2025, succeeding William Restrepo who resigned due to retirement.

Sentiment

Score: 3

Explanation: While the settlement payment and waiver of underwriting fees provide some relief, the termination of the primary business combination, significant redemptions, ongoing operating losses, and the explicit 'going concern' warning indicate substantial challenges and uncertainty for the company's future. The need for an indefinite extension further underscores these difficulties.

Positives

• Secured a $29.23 million settlement from e2Companies following the termination of the Business Combination Agreement, providing a new asset.
• Received waivers for $10,675,000 in deferred underwriting fees from Wells Fargo and Citigroup, reducing future liabilities.
• Shareholders approved monthly extensions for the business combination deadline, indicating continued support for the SPAC's existence.
• Earned $8,282,080 in interest on marketable securities held in the Trust Account for the nine months ended September 30, 2025.

Negatives

• Termination of the definitive Business Combination Agreement with e2Companies, indicating a failed initial target.
• Significant decrease in Trust Account assets from $331,781,130 to $154,158,677 due to $186,654,533 in redemptions, reflecting reduced public shareholder participation.
• Reported a net loss of $2,288,322 for the three months ended September 30, 2025, a decline from net income in the prior year period.
• Net income for the nine months ended September 30, 2025, decreased substantially to $940,982 from $11,340,536 in the prior year.
• Operating cash decreased significantly, leading to a working capital deficit of $1,421,438 as of September 30, 2025.
• Management has identified substantial doubt about the Company's ability to continue as a going concern if a business combination is not completed or the deadline is not extended beyond November 18, 2025.
• General and administrative expenses increased significantly to $7,341,098 for the nine months ended September 30, 2025, from $1,004,740 in the same period of 2024.

Risks

• The Company may not receive full payment under the Settlement Agreement or the Notes from e2Companies, as payment is dependent on e2's financial ability.
• Security interests for the e2 promissory notes will not vest until obligations to a priority creditor are paid in full, potentially impairing the Company's secured creditor status.
• Foreclosure on collateral for e2 notes may be impractical, or the collateral value may be less than the amount owed.
• Risks associated with Mission Critical e2 LLC and Mission Critical e2 Limited's collateral, including Herbata's financial condition, project completion, permits, and financing.
• Potential for being deemed an investment company under the Investment Company Act of 1940, which would impose burdensome compliance requirements and restrict activities, making a business combination difficult.
• Geopolitical instability (Russia-Ukraine conflict, Middle East conflicts) and resulting sanctions could lead to market disruptions, volatility, supply chain interruptions, and increased cyberattacks, adversely affecting the search for a business combination.
• Uncertainty regarding future U.S. trade policies (tariffs, trade barriers) could disrupt supply chains and negatively impact business.
• Inability to raise additional capital through loans or investments from the Sponsor, shareholders, officers, directors, or third parties, which could lead to curtailing operations or suspending transaction pursuit.
• Substantial doubt about the Company's ability to continue as a going concern if an initial Business Combination is not completed or the deadline is not extended beyond November 18, 2025.

Future Outlook

The Company is seeking shareholder approval for an indefinite extension of its business combination deadline, moving beyond the current November 18, 2025, limit. It also seeks to amend its investment management trust agreement to allow future interest earned on the Trust Account to be deposited into its operating account, providing more liquidity for ongoing expenses. The Company intends to continue its search for a suitable business combination target.

Management Comments

• "If the Company is unable to complete an initial Business Combination within 28 months, or such earlier date as the Board may approve, from the closing of the Initial Public Offering (the Combination Period), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares..."
• "Management has determined that if the Company is unable to complete an initial Business Combination by November 18, 2025, then the Company will cease all operations except for the purpose of winding up. The date for mandatory liquidation of winding up and the liquidity condition of the Company raises substantial doubt about the Companys ability to continue as a going concern."
• "We do not expect to generate any operating revenues prior to the completion of our initial business combination at the earliest."

Industry Context

The SPAC market has seen increased redemptions and terminations of business combinations, reflecting a more challenging environment for blank-check companies to find and close suitable deals. The termination of the e2Companies merger and the need for an indefinite extension highlight the difficulties many SPACs face in meeting their initial deadlines and finding attractive targets. The shift to allow interest earned on the Trust Account to fund operating expenses is a common strategy for SPACs facing extended timelines and dwindling operating cash. The focus on 'Energy Transition' aligns with broader industry trends towards sustainable energy solutions, but the company's operational status as a SPAC means it has not yet contributed to this sector.

Comparison to Industry Standards

• The high redemption rate, leading to a significant reduction in Trust Account assets, is consistent with a challenging SPAC market where public shareholders often redeem their shares rather than participate in a de-SPAC transaction, especially when the target is perceived as less attractive or the timeline is extended.
• The termination of a definitive business combination agreement is not uncommon in the current SPAC environment, where due diligence and market conditions can lead to deals falling apart, similar to challenges faced by other SPACs in recent years.
• The need for multiple extensions and now an indefinite extension is indicative of a SPAC struggling to find or close a suitable target within its initial timeframe, a trend observed across the industry as the SPAC boom cooled.
• The waiver of deferred underwriting fees is a positive development, but it also reflects the underwriters' recognition of the difficulties faced by the SPAC and their willingness to reduce their claim on the Trust Account to facilitate a potential deal or liquidation.

Management Changes

Corporate Governance

Legal Proceedings

• Dismissal with prejudice of 'Nabors Energy Transition Corp. II, et al. v. e2Companies LLC, 2025-0810-BWD' as part of the Settlement Agreement.

Related Party Transactions

• Sponsor (Nabors Energy Transition Sponsor II LLC) paid $25,000 for Founder Shares and received additional Founder Shares via share capitalization, holding 7,625,000 Founder Shares with independent directors.
• Direct or indirect owners of the Sponsor loaned $3,050,000 (Overfunding Loans) to the Company.
• Nabors Lux (an affiliate of the Sponsor) deposited $250,000 into the Trust Account for each monthly extension (July 17, Aug 15, Sept 17, Oct 17, 2025), totaling $1,000,000, in exchange for unsecured promissory notes.
• Nabors Lux 2 S.a.r.l. (an affiliate of the Sponsor) issued a $2,000,000 unsecured promissory note to the Company on October 20, 2025, for additional working capital.
• The Company reimburses the Sponsor or an affiliate $15,000 per month for administrative support, with accrued expenses totaling $397,500 as of September 30, 2025.
• Sponsor, officers, and directors are reimbursed for out-of-pocket expenses incurred on the Company's behalf.

Stakeholder Impact

• Shareholders (Public): Face uncertainty regarding the completion of a business combination and the ultimate value of their shares. Redemptions have significantly reduced the Trust Account. The proposed indefinite extension could prolong this uncertainty. The ability to use Trust Account interest for operating expenses could reduce the per-share redemption value if the company liquidates.
• Shareholders (Sponsor/Founder): Continue to bear the operational costs and risks associated with finding a target. The settlement payment and waiver of underwriting fees are beneficial. The indefinite extension provides more time to find a suitable deal, potentially preserving their Founder Shares.
• Creditors (e2Companies): Now owe the Company $29.23 million via secured promissory notes, with specific payment deadlines.
• Creditors (Nabors Lux/Sponsor affiliates): Have provided significant loans ($3.8 million in convertible notes as of Sept 30, 2025, plus an additional $2 million in Oct 2025) to support the Company's operations and extensions, indicating continued financial commitment.
• Underwriters: Waived $10,675,000 in deferred underwriting fees, reducing their potential payout but also their exposure to a failed SPAC.

Next Steps

• Seek shareholder approval for an indefinite extension of the business combination deadline.
• Seek shareholder approval to amend the investment management trust agreement to deposit future interest earned on the Trust Account into the operating account.
• Continue identifying a target company for a Business Combination.
• Receive settlement payments from e2Companies, including $3.5 million by December 31, 2025, and the remaining $11.115 million of the First Note by March 31, 2026.

Key Dates

Recommendation

The termination of the e2Companies merger is a significant setback, and the 'going concern' warning indicates substantial risk. However, the $29.23 million settlement provides a new asset, and the waiver of deferred underwriting fees improves the balance sheet. The proposed indefinite extension, if approved, would remove the immediate liquidation pressure, offering more time to find a new target. Given the current uncertainty and the potential for either a successful new business combination or a liquidation with some recovery from the settlement, a 'Hold' recommendation is appropriate for investors who are already in, while new investors should exercise extreme caution due to the high risk profile.

Keywords

SPAC, Energy Transition, Business Combination, Merger Termination, Settlement Agreement, Promissory Note, Going Concern, SEC Filing, 10-Q, Financial Report, Corporate Governance, Risk Factors, Capital Raise, Warrants, Trust Account, Liquidation, Nabors Energy Transition Corp. II, NETD, e2Companies