Argent Energy Trust is reworking plans for its initial public offering by altering its proposed asset acquisition, forcing the firm to re-file its prospectus.
After announcing what was supposed to be a $325-million initial public offering back in May, Argent delayed its road show when oil prices took a nose dive. Two months later, the firm is now adjusting its entire plans by cutting out 40 per cent of the assets that were supposed to be purchased.
Initially, Argent tried to raise money to acquire both the Denali assets in Texas and Mississippi from Denali Oil & Gas for $178-million, as well as the EQ assets in southern Oklahoma and Texas from EnergyQuest for $148-million. The latter acquisition, which would have accounted for 41 per cent of Argent’s proved plus probable reserves, has now been removed.
There are other changes, too. Not only is the purchase price for the Denali assets no longer set in stone, two new conditions have been added. If the acquisition does not close by August 31, or if the average forward strip price is less than $75 (U.S.) at the time the purchase, either party can walk away.
The firm’s offering has a unique structure. Because Argent is classified as a mutual fund trust, it can distribute its taxable income directly to unitholders, which makes the firm tax-free. Though this structure is very similar to an income trust, it isn’t exactly the same thing, and Argent can only get away with it by holding non-Canadian assets -- hence the push for Texas.