Fireweed's IPO is being underwritten by National Bank of Canada and Cormark Securities Inc.TimArbaev/Getty Images/iStockphoto
A small natural gas producer is launching an initial public offering, a rarity in a market that for months has shunned almost all things energy.
Fireweed Energy Ltd., which concentrates on drilling in the Montney region of British Columbia, has filed a preliminary prospectus to raise $40-million in an offering underwritten by National Bank of Canada and Cormark Securities Inc.
The shares are expected to be priced within the next two or three weeks, according to a source close to the deal.
The move is not without risks. Equity markets have been effectively closed to the energy sector since last spring, as oil and gas prices languished. At the time, public companies issued shares to fund asset acquisitions, then the stocks tumbled in the after-market period. Some, including shares sold by Cenovus Energy Inc. and Cardinal Energy Ltd., have yet to recover to pressue levels.
Source Energy Services and STEP Energy Services Ltd. launched the last sizable IPOs in the sector in April and May.
Fireweed is counting on interest from institutional and retail investors ready to show patience while it drills and adds to reserves, the source said. It will have no debt, and plans to use proceeds from the IPO to drill eight to 10 wells over the next two years.
Meanwhile oil and gas prices have edged up in recent weeks, prompting a 7 per cent gain in the S&P/TSX capped energy index since late August, offering some potential momentum.
The company's major assets are in the Fireweed/Inga and Greater Septimus areas of northeastern B.C., regions known for deep drilling and multistage hydraulic fracturing. Other companies operating in the region include Canadian Natural Resources Ltd., Crew Energy Inc. and Kelt Exploration Ltd.
Fireweed's largest shareholder is Predator Oil BC Ltd., which has a 32.7 per cent stake. It sold Fireweed its operational lands this year. Other shareholders include Post Hole Energy Inc. with 7 per cent and Joel MacLeod, chief executive officer of Tidewater Midstream and Infrastructure Ltd., with 3 per cent.
Jeffrey Jones