With renewed apparent stability in commodity prices and investor appetite gaining strength, energy companies are looking toward the stock market for investment funds.
After a two-year slump, oil and gas companies appear to be gaining enough confidence to return to the stock market.
Extraction Oil & Gas LLC raised $633 million in the largest initial public offering (IPO) in the U.S. sector this year, and its share price has climbed almost 20 percent since its debut earlier this month. And in September, Noble Energy Inc.’s master limited partnership, Noble Midstream Partners LP, generated $323.4 million with its IPO.
But the market is also eagerly anticipating the IPO of Double Eagle Energy Permian, a private Texas-based oil and gas company that some bankers say could be worth as much as $3 billion. Double Eagle holds more than 63,000 acres in the Permian Basin, one of the most productive U.S. shale plays.
“The door to U.S. oil and gas IPOs appears to be reopening,” said Greg Matlock, Americas Energy Tax Leader at EY, in a research note. “Positive performance by IPO stocks combined with high investor appetite as well as certain other factors could entice more U.S. energy IPOs in the coming weeks and months.”
One of the main reasons IPOs are emerging is that commodity prices are stabilizing, Matlock said. Relative stability boosts confidence in investors, and the companies filing IPOs have strong assets.
“This renewed IPO market with high-quality execution and capital structures ought to receive positive investor reception, especially in light of the lack of IPOs in this space over the past 19 months,” he said.
Upstream companies with Permian Basin assets – especially those with acreage in the Delaware Basin portion – are expected to perform particularly well, he said.
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