Seven Generations Energy Ltd., a fast-growing oil and gas player in the Alberta Montney, is said to be planning an initial public offering in the next eight weeks that could be worth up to $1-billion, according to sources familiar with the situation.
Seven Generations, seen as a juicy IPO candidate for much of this year, has retained Peters & Co. Ltd. and RBC Dominion Securities to lead the offering, according to the sources. The two banks have done other financings for the company, including a $625-million secondary issue of shares by some of its major institutional investors last March.
Although privately held, the company has already created a name for itself in the oil patch for success with horizontal drilling and hydraulic rock fracturing on a land spread that is yielding impressive volumes of high-value liquids-rich gas and light oil along with natural gas. Its Kakwa River project is located about 100 kilometres south of Grande Prairie, Alta.
An IPO in the estimated price range would make it the second-largest public float this year, following that of PrairieSky Royalty Ltd. by Encana Corp. Encana garnered proceeds of $1.7-billion, making it Canada's richest IPO since 2000. It was not immediately known how much of the offering would be from treasury and how much in the form of a secondary sale from major investors.
The energy industry has been fertile ground for initial stock offerings since late last year, with four done to date. Word of a Seven Generations deal comes as another company, Teine Energy Ltd., plots an IPO, reportedly for the end of October.
Some of the demand is from U.S. investors looking north for prospects that could hold similar potential to resource plays from shale formations that have been yielded big returns in the lower 48 states, said Brook Papau, analyst at ITG Investment Research.
The Alberta Montney formation straddles the Alberta-B.C. border. It may not have the explosive growth experienced in shale formations such as the Eagle Ford in Texas or Marcellus in the U.S. Northeast, but Seven Generations has shown its acreage has thick and prolific production zones, which it plies with the same drilling technology that has unlocked the big U.S. reserves, Mr. Papau said.
Its land is close to acreage held by some of the industry's heavyweights, including Exxon Mobil Corp. and Encana Corp.
"These guys have drilled very big wells, they've got a technical team put together, they're doing some of the most aggressive [well] completions in Western Canada, so it is quite a bit different than your typical Canadian junior," he said.
Seven Generations has a shareholders' meeting scheduled for Monday in Calgary, during which it will propose a two-for-one stock split in preparation of a prospectus, the sources said. Its major institutional investors include CPP Investment Board, ARC Financial Corp., KERN Partners, Natural Gas Partners and ZBI Ventures.
The company's shares last traded on the grey market at $42 a couple weeks ago, according to Liquidity Source.
Lee Corbett, Seven Generations' corporate secretary and legal counsel, said he could not comment on a potential IPO. "I can tell you it's an exciting time for the company. They've had a number of press releases they've issued in the past number of weeks," he said. "I expect those types of developments will continue to occur, but that's probably all I can say for now."
Officials at Peters did not respond to requests to comment. A spokeswoman with RBC declined to comment.
On Wednesday, Seven Generations reported its production in the second quarter nearly quadrupled from the same period a year ago to a company-record 24,000 barrels of oil equivalent a day.
Net income surged to $44-million, or 41 cents a share, from a year-earlier loss of $8.5-million, or 10 cents a share. Proved plus probable reserves climbed 129 per cent to 641-million barrels of oil equivalent. During the quarter it completed nine wells and brought seven of them into production.
With files from Boyd Erman in Toronto