Energy Investment Bank IPO: Highlights from Petrie Parkman's S-1 Filing

Petrie Parkman & Co, an investment bank specializing in the energy sector, filed today for a NYSE IPO. Highlights and excerpts from the company's S-1 filing are outlined below:

Proposed Ticker: (PDP)

Underwriters: Keefe, Bruyette & Woods; Petrie Parkman & Co.

Maximum Offering Size:$115 million

Business Overview:

We are an investment bank specializing in the energy industry. Over the past 17 years, we have grown to become a leading energy investment bank with a strong reputation for serving our corporate clients as a trusted advisor on merger and acquisition, divestiture and capital-raising transactions. We believe our extensive advisory experience and industry specialization enable us to deliver differentiated advice that our clients require and appreciate when addressing complex problems and making important strategic and financial decisions. We serve our clients as a highly specialized alternative to larger, diversified financial services institutions.

We provide strategic and advisory investment banking services to our corporate and governmental clients. We also provide equity research and equity sales and trading services, which we refer to as capital markets services, to our institutional clients. Our business is currently focused on serving clients and investors that are active in the following sectors of the energy industry: oil and natural gas exploration and production, or E&P; oilfield services and equipment; hydrocarbon gathering and processing; and refining, marketing and transportation.

Since our founding in 1989, we have advised our clients on more than 200 energy industry merger, acquisition and divestiture transactions representing an aggregate value of approximately $84 billion. According to Bloomberg L.P., we were ranked first based on the total number of merger and acquisition transactions in the domestic E&P sector in 2005. We have advised on a significant number of mergers involving publicly traded U.S. oil and gas companies for the three years ending June 30, 2006. We are also very active in the divestiture business. Recent transactions include the sale of Western Gas Resources to Anadarko Petroleum for approximately $5.3 billion and the sale of oil and gas properties and gathering and processing assets of Chief Holdings to Devon Energy and Crosstex Energy for approximately $2.7 billion.

Financial Highlights: For the first half of the year, revenues were $62.3 million, 79% above the same period in 2005. For all of 2005, revenues were $74.3 million, an increase of 28% over 2004. Expenses grew 81% to $62.2 million in the first half of 2006, and net income dropped from $363k to $17k. According to the S-1, "The increase in expenses is largely driven by the $27.0 million increase in compensation and benefits expense recorded as a result of the increase in revenues from the first half of 2005 to the first half of 2006." Net income for 2005 was $4.2 million, 18% above 2004 net income.

The bulk of the company's revenues are from investment banking, with the remainder originating from commissions and research. From 2004 to 2005, investment banking increased from 80% to 86% of revenues; for the first half of the year, they increased from 86% to 92% in H1 06. Note that in this period, one client contributed 33% of total revenues.

At the end of June, PDP had cash and equivalents of just under $60 million. The company had contractual obligations of $10 million and change.

Use of Proceeds: Business expansion and general corporate purposes.

Employees and Management: At the end of June, PDP had 53 employees. Thomas Petrie, 63, is Chairman, President and CEO:

Mr. Petrie has served as a Director and our Chairman and Chief Executive Officer since the time of our founding in 1989 and as our President since April 2006. Prior to forming Petrie Parkman, Mr. Petrie was a Managing Director and Senior Oil Analyst of The First Boston Corporation. For eight consecutive years during his tenure at First Boston, Mr. Petrie was ranked the number one oil analyst in the E&P sector by Institutional Investor magazine's annual survey of money managers and oil analysts. Prior to joining First Boston in 1977 as Senior Oil Analyst in the Equity Research Department, Mr. Petrie was a Vice President, Senior Oil Analyst, and Director with Wainwright Securities and its predecessor partnership in New York City from 1973 to 1977, a Petroleum Research Analyst for Colonial Management Associates in Boston from 1971 to 1973 and a Captain in the United States Army serving in Germany and Vietnam from 1967 to 1971. Mr. Petrie holds a Bachelor of Science degree from the U.S. Military Academy at West Point, a Master of Science in Business Administration from Boston University's overseas program and an honorary doctorate of engineering degree from the Colorado School of Mines. He holds a Chartered Financial Analyst designation.

The Parkman half of the equation--co-founder James Parkman--reached a termination agreement with the company in June, whereby he's entitled to a $9.5 million payout as well as compensation equal to two-thirds of Mr. Petrie's cash compensation, health and life insurance, a Huston apartment and all sorts of additional goodies.

Current Ownership: The co-founders Mr. Petrie and Mr. Parkman currently hold 38.1% and 28.6% of the company respectively. John Hughes and Randall King, Heads of Investment Banking currently hold 11.2% each. (Petrie, Hughes and King figure in the photo above).

Related: See Bill Simpson's in-depth analysis of Evercore's (EVR) recent IPO, and comparison to other investment banking IPOs this year.