initial public offerings (IPOs) trading on American exchanges

Wednesday, January 15, 2014

Shale oil and gas IPOs

Shale oil and gas is fueling the first leg of the initial public offering activity this year.

Cypress Energy Partners LP, which helps drillers dispose of saltwater used in shale drilling, is slated to price a roughly $75 million initial public offering late Tuesday, followed by three debuts by larger companies with ties to U.S. onshore energy production.

Oil and gas producers EP Energy Corp. and RSP Permian Inc. are slated to raise roughly $1 billion and $400 million, respectively, in IPOs set to price Thursday. Rice Energy Inc. has an offering estimated around $800 million scheduled for next week.

In all, five IPOs are on the docket this week seeking to raise roughly $2.2 billion, according to capital markets intelligence provider Ipreo.

Growing oil and natural gas production in Pennsylvania, North Dakota, Texas and other parts of the U.S. has led to some of the largest IPOs in recent years, as drillers and service providers seek capital to build out their operations. The boom follows drilling innovations such as hydraulic fracturing, or fracking, that made it easier to extract fuels from shale and other rock formations.

U.S. stock investors have various ways to play the trend. One is the stock of exploration and production firms like EP Energy, which operates in Texas, Utah and Louisiana. These investments offer the prospects of share-price gains if higher production fuels profit growth.

The industry has also fueled an increase in equity investments known as master limited partnerships, which typically operate stable cash-producing assets like pipelines and pay out their cash flow in dividend-like distributions. Cypress Energy Partners, an MLP, would offer an initial annual yield of 7.4% if its IPO priced at the top of its expected range.

Both investing styles were well-represented on last year’s IPO calendar. Oil pipeline holding company Plains GP Holdings LP’s $2.9 billion IPO in October was the biggest in the U.S. Plains GP is a yield-oriented investment similar an MLP.

Driller Antero Resources Corp., meanwhile, held the country’s fifth-largest IPO last year, raising $1.8 billion.

No comments:

Post a Comment