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PE-backed Edgen sets IPO range

by Lou Whiteman and Claire Poole | Published April 17, 2012 at 12:14 PM

Private equity-backed Edgen Group Inc. said Tuesday, April 16, it would raise upward of $276 million in its planned initial public offering, as the energy patch continues to reshuffle assets and head for public markets.

Baton Rouge, La.-based Edgen, which is controlled by a group of investors led by Jefferies Capital Partners, sells highly engineered steel pipes, valves, heavy plates and other specialty products to the oil and gas industry. The company in January said it planned to list on the New York Stock Exchange, and in an updated filing Tuesday said it would sell 15 million shares, or 42% of itself, at between $14 and $16 apiece.

Jefferies, Morgan Stanley and Citigroup Inc. are joint bookrunners on the offering, with Carmen Romano and Eric Siegel at Dechert LLP advising the company and Marc Jaffe, William Finnegan IV and Divakar Gupta at Latham & Watkins LLP advising the underwriters. Proceeds from the public fundraising will go to help pay back $656 million in debt held by Jefferies.

Edgen joins a growing roster of energy companies raising public funds as they look to exploit $104 per barrel oil prices and remain undeterred by soft natural gas prices.

Chesapeake Oilfield Services Inc. also filed an initial public offering late Monday, continuing the efforts of parent Chesapeake Energy Corp. to sell $2 billion in assets to raise capital this year for development.

Chesapeake Oilfield, based in Oklahoma City like its parent, didn't give the number of shares in the issue or a pricing range, but it hopes to raise up to $862.5 million. The lead underwriters are Goldman, Sachs & Co. and Bank of America Merrill Lynch, which have the option to sell up to an additional $112.5 million shares if demand is brisk. The company plans to trade on the New York Stock Exchange under the symbol COS.

Michael Telle at Bracewell & Giuliani LLP is representing the company on the offering and William Moss III at Mayer Brown LLP is assisting the underwriters.

Chesapeake Oilfield's biggest units include Nomac Drilling, which owns the fourth largest drilling fleet in the U.S.; Thunder Oilfield Services, one of the largest oilfield trucking and rental tool businesses in the U.S.; and Performance Technologies, which Chesapeake believes will be one of the top five pressure-pumping businesses in the U.S. once it receives equipment that is on order. The company's Ebitda totaled $280 million last year.

The company will continue to serve Chesapeake Energy as its main mission. It plans to spend $1.1 billion to $1.2 billion over the next two years to expand its business to meet its parent's needs and $217.5 million to buy some of its leased rigs when it is advantageous and it has the capital to do so.

Global Hunter Securities LLC analyst Mike Kelly wrote in a report Tuesday that he's confident Chesapeake can plug its $7 billion operating cash flow deficit this year by monetizing $14 billion to $17.5 billion worth of assets this year and next. "We estimate that such a feat would put CHK [Chesapeake] on the path to increasing oil production by 127% and increasing cash flow by 2.5 times over today's levels by 2015," he wrote. Chesapeake has said its oil services and other assets are worth $8.9 billion.

Chesapeake also is considering selling its 30% stake in Fort Worth oilfield services provider FTS International Inc., formerly known as Frac Tech Services, which filed for an IPO this past fall but has yet to price.

Among recent IPOs of oil services companies, oilfield equipment maker Forum Energy Technologies Inc. on April 12 priced its IPO at the top of its expected range and sold 20% more shares than expected. Its shares are up 8% since the offering.

SandRidge Mississippian Trust II, an oil and gas explorer in Oklahoma City, expects to price its $520 million IPO on Wednesday. Its underwriters are led by Morgan Stanley, Raymond James Financial Inc., BofA Merrill Lynch, Citigroup and Royal Bank of Canada. David Engvall at Covington & Burling LLP is representing SandRidge and David Oelman and Matthew Pacey at Vinson & Elkins LLP are assisting the underwriters.

Midstates Petroleum Co. LLC, an oil and gas explorer backed by private equity firm First Reserve Corp., is expected to price its IPO on Friday; it hopes to raise $432 million. The underwriters are led by Goldman Sachs, Morgan Stanley and Wells Fargo Securities LLC. Vinson & Elkins' Oelman and Pacey are advising it as well, while Joshua Davidson and Kelly Rose at Baker Botts LLP are assisting the underwriters.

Chesapeake already has sold or monetized a considerable amount of assets. Last week it said it entered into three deals involving its exploration and production assets that will raise $2.6 billion in cash. Analysts think next up will probably be a partial sale or joint venture of its 1.8 million acres in the Mississippian play and the sale of 1.5 million acres in West Texas and New Mexico's Permian Basin.

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PE-backed Edgen sets IPO range

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