STEP Energy IPO ends two-year ‘ dry spell’
Company files preliminary prospectus
CA LGA RY • For the first t i me i n more t han t wo years, a Calgar y - based energy company has filed to publicly list its shares as the oilpatch recovers from a long collapse in oil prices.
STEP Energy Services Ltd., a fracking company, filed a preliminary prospectus for an initial public offering on Thursday, which would make it t he f i rst company in the Canadian oilpatch to go public since Northern Blizzard Resources Inc. raised $ 500 million through an IPO in Aug. 2014 — the summer when oil prices began their sharp decline.
The oil price collapse caused many fracking companies to sell off assets or file for creditor protection, including heavily indebted Sanjel Corp.
Step, backed by private equity firm Arc Financial Corp., took advantage of the downturn to expand its fleet and purchased Sanjel’s fracking equipment in April 2016. The company also hired more than 300 people between the end of 2015 and today while its competitors were downsizing, the prospectus shows.
Now, Step’s management believes the energy industry has begun to recover along with oil and gas prices that, according to the prospectus, “should increase demand for (Step’s) services and create a more positive environment for its services than has been experienced in the prior two years.”
“It ’s definitely been a dry spell for IPOs, that’s for sure,” University of Calgary Haskayne School of Business Prof. Ari Pandes said, referring to the downturn in oil prices.
Pandes added, however, that “there’s a wider trend of IPOs coming down in the larger market.” In recent years, he said, more companies have opted to raise money privately to avoid the demands of “hostile” public markets.
“You saw companies in the public markets through this oil price drop take a beating in a very public way, whereas companies that were private probably didn’t get that same hostility or negative attention,” Pandes said.
Despite the trend of fewer companies raising capital through an IPO, Pandes said he expects more energy companies to follow Step’s lead “as prices improve and the market appetite improves for energy companies.”
Other companies, i ncluding Brookfield Asset Management- backed Ember Resources Inc., Warburg Pincus- backed Canbriam Energy Inc. and TriWest Capital Partners- backed Source Energy Services Canada LP, are all considering public offerings, according to Bloomberg reports.
Step, which did not respond to a request for comment, is the first to file its preliminary prospectus and would be the first Canadian oilfield service company to go public since Strad Energy Services Ltd. i n October 2010.
Step’s prospectus shows executives and employees have been offered shares through an incentive plan at an exercise price between $7.50 and $15.65.