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  • Jul 31st, 2006
  • Comments Off on US market expects to see more oil and gas IPOs
Record high energy prices have generated big demand for initial public offerings of oil and gas companies and even if some of these deals tank, analysts say they are likely to keep coming. So far, 11 oil and gas companies have made their debut in 2006, compared with seven at this time in 2005, five in 2004 and zero in 2003, according to data tracker Dealogic.

These deals are being met with strong demand, analysts said.

"Everybody and his brother is looking for oil stocks," said Fadel Gheit, an analyst with Oppenheimer & Co.

But the three largest oil and gas IPOs of the year, Complete Production Services Inc EXCO Resources Inc and Magellan Midstream Holdings LP all traded below their offering prices Friday.

These lackluster results are probably because of recent pullbacks in oil prices US light, sweet crude oil futures closed on Friday at $73.25 a barrel after ending as high as $77.03 just a few weeks ago.

But many oil stocks are doing just fine. Exxon Mobil Corp the world's largest public oil company, shot to an all-time high after it reported a quarterly profit on Thursday of more than $10 billion.

Three companies that made their debuts in January Western Refining Inc Linn Energy LLC and Calumet Specialty Products Partners LP traded above their offering price Friday.

Calumet, which priced 6.45 million shares at $21.50, was up more than 40 percent from the offering price, trading at $30.11 on Friday.

And oil and gas exploration company GeoMet Inc priced at the bottom of a forecast range on Thursday, but closed up 9.7 percent in its Friday debut.

As long as oil prices are high, there should be plenty of initial public offerings in the sector, analysts said.

"Its like a beauty contest in the sense that certain styles are in fashion at the moment," said Francis Gaskins, an independent IPO analyst and president of IPO Desktop. "Energy related companies are in style because of what is happening."

Buckeye GP Holdings LP is scheduled to price a 14.1 million share offering Wednesday in a deal worth $282 million if shares price at the midpoint of the forecast range.

That said, in the near term, there may still be some hiccups in energy IPOs. For one thing, there have been so many deals recently.

"When there is a hot market, investment bankers try to take advantage of that window and launch as many IPOs as they can," said Tom Taulli, founder of InvestorOffering.com. "But there is only so much appetite."

Copyright Reuters, 2006


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