This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Best Energy IPO: Laredo Petroleum

NEW YORK (TheStreet -- Private equity firms have a reputation, just or not, for unloading investments on the public in hyped-up IPOs but that doesn't look like the case when it comes to Laredo Petroleum (LPI).

The company, which is 93%-owned by Warburg Pincus, is seeking to raise $332.5 million through the sale of 17.5 million shares at $18-$20 each. The deal is one of the few PE-backed energy plays that Francis Gaskins, the president of IPO Desktop, likes.

Laredo is an independent energy company based primarily in the Permian Basis in West Texas and the Anadarko Granite Wash in the Panhandle in Texas and Western Oklahoma.

Revenue more than doubled to $371.3 million for the nine months ended Sept. 30 from $157.1 million in the year-ago equivalent period, while net income jumped to $104 million from $51.2 million.

More tellingly, the shareholders are only selling 14% of the stock in the offering. The proceeds will be mainly used to pay down its credit line. Laredo has drilled more than 660 vertical wells, but the real growth looks to be in the horizontal program. The increase in horizontal drilling may add significant production and reserves.

Another relatively large offering is Bonanza Creek Energy (BCEI) and IPO Desktop's Gaskins says he's taking a pass on it. Based in Denver, Bonanza Creek is seeking to raise $300 million through the sale of 14.3 million shares at between $20-$22 each.

Canadian firms West Face Capital and Alberta Investment Management own 40% of Bonanza Creek after investing $265 million. Bonanza Creek doesn't plan on paying dividends.

The company has been aggressively acquiring acreage in Colorado, targeting the Niobrara formation -- one of the most active oil shale plays in the United States. The company's goal though is to increase production from proven inventory as well as accretive acquisitions. Gaskins doesn't believe the company will be doing much exploring and thinks Laredo looks better for energy investors.

Another energy play pricing this week is Houston-based Sanchez Energy (SN), which is seeking to raise $250 million through the sale of 10 million shares at between $24-$26 each.

Gaskins also advises that investors pass on Sanchez Energy, saying it's priced too high at 62X forward earnings and 3.5x book value.

Still, the company has shown signs of turning things around this year, reporting net income of $3.4 million on revenue of $9.9 million for the nine months ended in September, a vast improvement from its loss of $3.1 million on revenue of $1.5 million in the same period the previous year.

Sanchez Energy plans to use the proceeds for drilling and exploration and for payments to owners such as SEP I and Marquis LLC.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs