File photo of Seven Generations Energy Ltd.'s Kakwa River Project.
Seven Generations Energy Ltd. has set a much lower-than-expected share price range for its upcoming initial public offering following weeks of steep losses among Canadian energy stocks due to falling oil prices.
Seven Generations said it expects to sell its shares at $17-$21 apiece. As recently as last month, some analysts and investors had speculated a range of $25-$30 share, saying the company's record of drilling success should allow it to stand out from the crowd.
In new marketing materials for the much-anticipated deal, Seven Generations, known for growing production in the gas-liquids-rich Alberta Montney formation, said it expects to raise $800-million from selling 38.1-million to 47.1-million treasury shares.
Major shareholders ARC Financial Corp. and KERN Partners also plan to part with some portion of their stakes in a secondary offering. The stock issues are being led by RBC Dominion Securities, Credit Suisse Securities and Peters & Co. Ltd.
The Toronto Stock Exchange energy subindex has shed more than 18 per cent of its value since the beginning of September, raising questions about the timing of what would be the second-largest IPO in the oil patch this year.
Oil prices have tumbled on a combination of weakening economies in Europe and Asia and a glut of supplies. Global benchmark Brent crude fell below $90 (U.S.) a barrel briefly on Thursday for the first time in more than two years.
At the company's size and price ranges, Seven Generations would have a market capitalization of $3.9-billion to $5-billion. Pricing is expected during the week of October 27, according to the marketing presentation.
Investors have been anxiously awaiting the IPO amid the company's sharp gains in production using horizontal drilling and hydraulic fracturing. Production at its Kakwa River project, south of Grande Prairie, Alta., at the end of the second quarter averaged about 24,000 barrels of oil equivalent a day, more than triple the year-earlier volume.
It is expected to pump out around 40,000 barrels of oil equivalent a day by year-end, and it has said output could average as much as 60,000 next year.
Jeffrey Jones