Energy securities offerings on rise

Texas corporate lawyers who specialize in securities offerings saw their business vanish in July 2015 and remain dead for more than a year because of the plunge in oil and gas prices.

But new data from The Texas Lawbook’s Corporate Deal Tracker show the capital markets have reopened to Texas energy companies, especially involving smaller and midsized oil and gas operations.

Law firms in Texas handled 308 securities offerings in 2016 — a 19 percent increase from the year before — raising $118.8 billion. More than threequarters of the IPOs, eq-

uity and debt offerings occurring during the second half of the year, 82 percent, involved energy companies.

Legal experts and anecdotal evidence show that the strength has continued into the first four months of 2017. They point to Sunnova Energy’s $615 million equity offering and Hess Midstream’s $391 million IPO in April.

Corporate Deal Tracker data shows that securities offerings of $200 million or less spiked 72 percent in 2016. In addition, offerings that raised between $400 million and $600 million jumped 56 percent.

Legal experts say the uptick in those value ranges demonstrates a renewed sense of optimism among small- and mid-sized energy companies that drive deal flow in Texas.

“At the end of 2016, we really started to see what I consider a return to normal,” said Sean Wheeler, a partner at Latham & Watkins in Houston. “Right now, there is a lot of excitement about IPOs. I’d say what has been exceeding my expectations is the number of people seeking to go public in the energy space.

“A number of companies spent the downturn building their business in anticipation for the rebound,” he added. “As soon as the rebound occurred, they made an effort to move into the public market.”

At the same time, the Corporate Deal Tracker data shows a steep decline in “mega” offerings by larger companies. Texasbased attorneys handled 31 percent fewer securities offerings valued at $1 billion or more in 2016 than they did in 2015.

The largest offering reported to the database in 2016, on the other hand, was Anadarko’s $3 billion offering of senior notes. Halliburton and Schlumberger each had equity offerings that doubled that amount in 2015.

“Investors were being more cautious about how they wanted to put money to work in the energy industry,” said Mike O’Leary, a partner at Andrews Kurth Kenyon in Houston.

“They were not as willing to put huge amounts of money to work,” O’Leary said. “The larger offerings were healthy companies that needed to raise capital, and the investor appetite was there — companies with a good reputation and a good story that would convince investors it was worth the investment.”

The Texas Lawbook’s Corporate Deal Tracker data tracks public and private debt and equity offerings handled by Texasbased attorneys.

About 90 percent of the 308 offerings were led by Houston corporate lawyers. Two Houston-based firms — Vinson & Elkins and Latham & Watkins — were involved in nearly two-thirds of all CapM activity in 2016.

The heightened IPO activity reflects a sense of optimism and growth in the Texas legal market for the rest of 2017.

“Typically a healthy IPO market also suggests a healthy follow-on equity market,” said David Oelman, a partner at Vinson & Elkins. Oelman and others are already seeing a sharp increase in IPO work this year.

For a longer version of this article, visit TexasLawbook. net.