High time for an IPO: the climate for energy companies to go public remains hot. Even new E&P partnerships are jumping in.(ENERGY EQUITIES)

Publication: Oil and Gas Investor

Publication Date: 01-AUG-05

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COPYRIGHT 2005 Hart Publications, Inc.

With oil and gas prices testing previously undreamed-of levels and all things energy in the headlines, investors' appetite for new public issues appears to be insatiable. Initial public offerings during the past 18 months have given investors a variety of choices: oil and gas production, coal, midstream master limited partnerships, even new LNG ships.

Sources say the market still has pent-up demand and is not too frothy, although it is selective. The IPOs of several energy companies were in the pipeline at the Securities and Exchange Commission this summer.

"Capital markets are open and should stay open for energy IPOs and 144A offerings that combine attractive assets, sound capital structures, line-of-sight growth, predictable cash flows and top-notch management teams," says Pat Keeley of Friedman Billings Ramsey.

"Investors are increasingly comfortable with the sustainability of strong commodity prices and supply/demand fundamentals, permitting them to overcome concerns that we are experiencing only a short-term energy 'bubble.'"

His colleague at FBR, George Hutchinson, adds, "At the moment, institutional investors are generally somewhat overweighted in upstream energy. As a result, they are a bit more selective than they were 18 months ago. Having said that ... compelling value opportunities and aligned management teams will be well received. Substantial amounts of capital continue to be available for quality energy investments."

FBR has raised $1.5 billion of equity during the first six months of 2005 and its pipeline also looks very strong for the latter half of the year.

What type company?

The biggest energy-related IPO year-to-date, not surprisingly, was the June offering of China Shenhua Energy Co. Ltd., now the second-largest publicly traded coal company in the world. The US$2.9-billion offering was led by Merrill Lynch and Deutsche Bank to list on the Hong Kong Stock Exchange.

In the U.S., the upstream outfit with the largest market capitalization at the time it went public was W&T Offshore Inc. in January. Its opening-day market cap was $1.2 billion, or about $200,000 more than Bill Barrett Corp. had with its December 2004 IPO. (For more on Bill Barrett Corp., see...

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