Seven Generations Energy Ltd.’s Kakwa River projectHandout
Seven Generations Energy Ltd. is closing in on an initial public offering that by some estimates could be worth up to $1-billion, but its chairman said the board is still working to finalize the terms of the much-anticipated issue.
The company's shareholders approved a two-for-one split of its privately-held stock at a meeting in Calgary on Monday, a move aimed at making the price of the shares more attractive for average investors when a deal is launched.
Seven Generations, largely owned by five large institutional investors, has created a buzz with its success in drilling for liquids-rich natural gas on its acreage in the Alberta Montney formation. Sources have told The Globe and Mail that an IPO could be launched in the next eight weeks.
Chairman Kent Jespersen said the company working vigorously toward its "liquidity event," something envisioned when Seven Generations was created in 2008.
"What we're doing is all the preparation that's necessary to either sell the company or IPO the company. The board of directors hasn't decided timing or which alternative, but we're doing all the work that's necessary," Mr. Jespersen said in an interview following the brief meeting. "There's just a lot of effort going on around that."
It is understood that a stock offering is the preferred route, especially given the warm reception numerous other oil-patch equity issues have garnered over the past year, and the company has hired Peters & Co. Ltd. and RBC Dominion Securities to lead the effort. The stock split is in preparation of such a move.
"There is a psychological aspect to it. If the stock price is too high, some retail investors tend to shy away from it," Mr. Jespersen said.
An IPO in the estimated price range would make it the second-largest public float this year, following the $1.7-billion offering of PrairieSky Royalty Ltd. by Encana Corp. Three others have been completed since late last year.
Details such as how much of an offering would be from treasury, and how much in the form of a secondary sale from major investors, have yet to be worked out.
The company's major investors include CPP Investment Board, ARC Financial Corp., KERN Partners, Natural Gas Partners and ZBI Ventures.
Seven Generations had been scheduled to give a presentation at Peters & Co.'s investment symposium in Calgary this week, but opted to cancel with a deal drawing near.
"It's a sensitive time right now," Mr. Jespersen said.
With regard to timing and market demand, the company is looking to its investment bankers to provide advice, said senior vice-president Steve Haysom. Some analysts have raised concern about weakness in commodity prices weighing on energy stocks in the coming months.
"We hope that we have a unique offering here that precludes any market concerns, and we hope to adequately convey the risks of our business to the public," Mr. Haysom said.
"The board will make decisions on if they feel the timing's right, and the size that the IPO should be."
Seven Generations is known for its Kakwa River project, south of Grande Prairie, Alta. There, it uses horizontal drilling and hydraulic fracturing to tap large reserves of oil, gas and gas liquids.
It recently reported that proved plus probable reserves climbed 129 per cent in a year to 641-million barrels of oil equivalent.
Jeffrey Jones