This Day On The Street
Continue to site
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

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 - 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 Sanchez Energy (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.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BCEI $4.05 -4.30%
LPI $11.74 -2.90%
SN $8.89 -5.63%
AAPL $95.03 -2.90%
FB $116.73 7.20%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs