Oil & Gas IPO Market Reflects on Late-2011 Duds (AMID, BCEI, SN, LPI)

The IPO market is 2011 was not the greatest of the last decade.  Some deals soared, but many deals flopped.  We were very skeptical of many of the internet IPOs but we did not expect to find that several of the oil and gas IPOs would have been flops.  The companies may just argue that their shares are now cheap, but they may be doing some damage on the confidence of IPO investors who might have been there to gobble up more oil and gas investments in 2012.

The flops seen from the last few months of 2011 in oil and gas were in American Midstream Partners LP (NYSE: AMID), Bonanza Creek Energy Inc. (NYSE: BCEI), and Sanchez Energy Corporation (NYSE: SN).

American Midstream Partners LP (NYSE: AMID) has failed to live up to the MLP hype and has not done well since coming public in July. At $18.72, it priced the IPO at $21.00 and its post-IPO range is $16.00 to $23.37. This one owns and operates nine gathering systems, three processing facilities, two interstate pipelines, and six intrastate pipelines primarily located in Alabama, Louisiana, Mississippi, Tennessee, and Texas. The company also operates approximately 1,400 miles of pipelines.  Its first and only payout rate was at $0.269 which gives a distribution yield-equivalent of about 5.75% based on today’s pricing.

Bonanza Creek Energy Inc. (NYSE: BCEI) is at least trading much higher today and is in the acquisition, exploration, development, and production of onshore oil and natural gas primarily in southern Arkansas (Mid-Continent region) and the DJ and North Park Basins in Colorado.  At $17.13, the shares are down over 20% from the pricing at $17.00 and the post-IPO range is $12.39 to $15.50.

Sanchez Energy Corporation (NYSE: SN) was supposed to do better than what investors got here.  The company is focused as being an independent oil & gas exploration and production outfit with leases in the promising Eagle Ford Shale, Haynesville Shales, and also up in Montana.  The company is a newly formed entity and its $17.40 price today is against a pricing of $22.00 and its post-IPO range is $16.99 to $18.50.

Before considering these all as bad IPOs in the oil and gas sectors, that is not a rule. Laredo Petroleum Holdings, Inc. (NYSE: LPI) is up almost 30% from its $17.00 IPO in November.

JON C. OGG