The second largest IPO in the Canadian energy space this year was completed this week by Seven Generations Energy (TSX: VII). This IPO proves investors still have a strong appetite for energy stocks, even with energy prices sliding recently. $51.75 million shares were issued at $18 per share, raising a total of $932 million for the company.
Seven Generations operates out of Calgary and focuses on the liquids rich natural gas area of the Montney shale in Northwest Alberta. Current land position totals over 350,000 net acres in the Kakwa region (330,000 of those in the Montney). Production has been determined viable and Seven Generations is looking at a multi-decade development program in the area.
Production for the third quarter was 35,400 barrels of oil equivalent per day which is up 400% year over year and a 48% increase quarter over quarter. The company is profitable and earned net income of $41 million in the second quarter (3rd quarter results yet to be released).
A July 1, 2014 reserve estimate by McDaniel shows gross proved plus probable reserves of 649 MMboe (570 MMboe net of royalties). 10 drill rigs are currently active on the property with 5 more expected to be added in 2015.
Management has disclosed in the prospectus that production in 2015 is expected to average between 55,000 and 60,000 barrels of oil equivalent a day.
Seven Generations is led by CEO Pat Carlson who founded the company with $300 million from investors. He has a proven track record of building successful private junior oil companies. Marty Proctor was recently appointed Chief Operating Officer, a position he formerly held at Baytex Energy (BTE:T).
Major shareholders include the Canada Pension Plan Investment Board (14.8%), and private equity funds Arc Financial Corp (11.6%) and KERN partners (8.2%).
Initial signs appear promising that the stock will trade above the IPO price. Shares of PrairieSky Royalty (PSK.T), Canada's largest IPO this year at $1.5 billion, are trading at $34.80 up from the $28 IPO pricing in May.
A strong growth profile is expected for Seven Generations which is always exiting for shareholders in the energy space.
Symbol: VII.T
Share price: $21.20
Shares outstanding: 192.39 M
Market cap: $4.78 B
I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.