IPO market cautious on oil prices
SIXTEEN Houston companies raised a combined $3.7 billion in public offerings over the last year and a half, up only slightly from the previous year, as a fickle market waited for signs that oil’s resurgence is here to stay. “There’s some concern with what will happen with OPEC, with Iran, with keeping supplies where they are,” said Joe Dunleavy, a specialist in energy IPOs at PricewaterhouseCoopers in Houston. “We live and die by supply and demand.”
The tally of Houston companies tapping public markets remains well up from 2015, when they raised only a combined $2 billion in public offerings.
All but two are oil field services providers or blank-check offerings seeking to acquire exploration and production companies, according to rankings prepared for the Chronicle by S&P Global Market Intelligence. The others were banks.
Among them was Nine Energy Service, which offers high-technology well completions and a range of production services.
When Ann Fox took the corner office in 2015, she had never been a CEO before and had never experienced a down oil market. By the first quarter of 2016, oil bottomed out around $26 a barrel.
“There were many nights … when I wondered if we’d have a top line because rigs were laying down so fast,” she said.
But the company pulled through on the determination of its employees, who own roughly 30 percent of Nine, Fox said. In January, it raised $161 million through its public offering.
Given a fidgety market, it’s hard for a company to pick the right moment to reach out to investors.
“Especially within the energy sector it seems like those windows are very, very fickle,” Fox said. “Within a very short period of time you can go from seeing darkness to seeing light.”
Coming out of the third quarter, as West Texas Intermediate topped $50, “that’s where I think supplydemand fundamentals finally started shaping up in a real way,” she said.
She noticed investors become less sensitive to weekly reports from the U.S. Energy Information Administration, looking out over longer periods.
“It used to be very tight around that weekly sentiment,” she said.
Dunleavy expects more public offerings this year.
“Brent went over $80. We’ve got buyers and sellers that are getting closer together,” he said. “You’ve got private equity firms that made investments they need to monetize. Those things are all indicators we’re going to see greater activity in IPOs and greater deals.”