Oil sands company MEG Energy filed the year's second large energy IPO late Monday, a financing that follows on poorly-performing debut from Athbasca Oil Sands Corp.
Calgary-based MEG raises money to pay down debt and fund development of two major projects, after private investors and banks sank $3.2-billion into its projects over the past 11 years. No one was available to comment late Monday, but in the past, investment bankers said MEG would target a $500-million-plus intial public offering.
The company boasts 1.7 billion barrels of proven oil reserves and another 3.7 billion of probable reserves beneath the rolling hills of northern Alberta: an independent survey pegged the value of MEG's reserves at $19.8-billion, and the company's existing shareholder equity totals $3.1-billion.
MEG plans an intitial public offering that is being led by Credit Suisse Securities, BMO Nesbitt Burns, Barclays Capital, and Morgan Stanley Canada. MEG has been planning to go public for several years.
The oil sands play is partly owned by China National Offshore Oil Co, or CNOOC. In 2005, CNOOC paid $150-million for a 17 per cent stake in MEG.
Private equity fund Warburg Pincus is also a major shareholder, with a 24 per cent stake, according to docoments filed Monday as part of the IPO. MEG's board of directors includes former Alberta premier Peter Lougheed, a tireless advocate for refining what's produced from the oil sands within the provinces's borders. The company was founded in 1999 by CEO William McCaffrey.
The IPO is expected to see the company sell shares from its treasury, to property development. Existing shareholders are only expected to sell a portion of their stakes if there strong demand for stock, and investor orders exceed a pre-set but undisclosed threshold. MEG owes its lenders $996-million, but has $853-million of cash.
MEG lost $485,000 on revenues of $126-million in the most recent quarter - the three months ended March 31. However, results to date will mean little in selling this IPO, as MEG will woo investors on the potential of its massive Alberta holdings. Bankers working on the underwriting say MEG has better quality properties than Athabasca Oil Sands, which went public at $18 a share earlier this year, and raised $1.35-billion, but is now changing hands at $10.43.
There was talk that poor performance from Athbasca Oil Sands would delay an offering from MEG. Smaller IPOs from growth-focused companies such as Porter Aviation have also struggled - the $120-million Porter offering was pulled in late May.
MEG has hired law firm Bennett Jones on the financing, while the underwriters are using law firm Blake, Cassels & Graydon.
MEG employs what's known as the steam assisted gravity drainage approach to extracting petroleum from sand, a method considered to be the most environmentally friendly approach to recovering oil in the region.
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