In spite of the regulatory hurdles inherent to being a publicly traded company, many private oil and gas companies made moves to go public last year, and more are under way.
Public capital is still less expensive than private funding, so more companies that want growth will at least consider going public, says Thomas Glanville, managing director of Houston-based private-equity firm Eschelon Energy Partners.
"[But] it could be very quiet for the first half of 2007 if gas prices weaken," he adds.
Rob Lindermanis, managing director of mezzanine-finance firm Petrobridge Investment Management LLC, says oil and gas companies that grabbed public equity in 2006 were taking full advantage of the cooperative market, good valuations and liquidity.
"I expect that there will be continued support by the public sector regarding E&P and service IPOs," he says. "Commodity prices drove the last 2.5 years of public-equity activity. I believe good management teams, assets and business plans will be the key in 2007 for those companies wanting to enter the public market."
According to G. Allen Brooks, managing partner with Houston-based oil-service investment-banking firm Parks Paton Hoepfl & Brown, some investors were marking energy stocks down in 2006 because they expected a weak economy this year. This could jeopardize service companies' streak of outperformance in 2007 and shrink the window for oilfield-service IPOs, he says.
"If the U.S. enters a recession this year, it is likely the stock market will be lackluster. That backdrop would probably curtail oilfield-service stock IPOs, but not the ability of oilfield-service investors to book profits."
Several energy and related IPOs are on tap already for this year, including those of Ellora Energy Inc., Legacy Reserves LP, Diamondback Energy Services Inc., Stewart & Stevenson LLC and Targa Resources Partners LP. (For more on these, see "NewsWell," Oil and Gas Investor, January 2006.)
At press time, Sheridan, Wyoming-based, gas-focused Pinnacle Gas Resources Inc. joined the group, planning to sell 3.6 million shares. Pinnacle focuses on coalbed-methane development in the Powder River Basin in Wyoming and Montana.
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