NEW YORK (
-- 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
(LPI - Get Report)
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 - Get Report)
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
(SN - Get Report)
, 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.