U.S. energy sector second in number of companies waiting to go public but first measured by US$6.95B targeted to be raised; so far this year, 13 energy IPOs have raised US$6.68B, though energy IPO stocks are down 15.9% on average
September 27, 2011
– The U.S. energy sector continues to excel in terms of raising money from initial public offerings (IPO) amid its increased need for investment due to the higher cost of new technologies, reported the Wall Street Journal on Sept. 26.
The US$6.95 billion currently targeted by the 22 energy companies waiting to go public is first in terms of money and second in terms of the number of companies, according to data tracker Dealogic.
Of the 13 energy deals that have been completed this year, $6.68 billion was raised, which was higher than the money raised by any other sector and second by number of deals, the Journal reported.
The number of IPOs completed for the energy industry has never placed it higher than third, according to Renaissance Capital.
Energy IPO stocks this year are down 15.9% on average, with the S&P 500-stock index off 9.6% year-to-date on Friday.
The IPO market has been stymied by volatility and no new deals have been priced in over a month. However, in the average three-month time period between filing and pricing, the market might be more amenable to such deals, reported the Journal.
Since the beginning of August, when more IPOs were delayed than priced, 10 new energy deals have been filed.
Hydraulic fracturing company FTS International Inc. is one of those most recently filed, at a $1.15 billion registration.
Technology advancements taking hold in the energy industry are pushing the need for further investments, making energy a larger part of the overall IPO market, the Journal reported.
These technical advancements are taking more of the risk out of the energy business while making it “even more capital intensive than it used to be,” said Rob Reedy, managing partner at the law firm of Porter Hedges LLP.
New drilling and extraction techniques, such as horizontal drilling and hydraulic fracturing, are “becoming standard practice,” said Kurt Hallead, energy analyst at RBC Capital Markets.
Drilling and expansion are expected to continue to grow even though oil prices have down from their peaks, said Hallead, adding that land-based oil projects remain economically feasible when the oil price is $45-$60 per barrel, reported the Journal.
The primary source of this article is The Wall Street Journal, New York, New York, on Sept. 26, 2011.