Based in Dallas, TX, RSP Permian (NYSE:RSPP) scheduled a $400 million IPO on the NYSE with a market capitalization of $1.5 billion at a price range midpoint of $20 for Friday, January 17, 2014.
Five operating companies are scheduled to raise over $2 billion this week. The full IPO calendar can be found at IPOpremium.
Manager, Joint managers: Barclays, J.P. Morgan, Tudor, Pickering, Holt & Co., Raymond James, RBC Capital Markets, UBS Investment Bank
Co-Managers: Jefferies & Co., Johnson Rice & Co., Simmons & Co., Scotiabank/Howard Weil,
Stephens Inc., Citi, Comerica Securities.
RSPP is a shale oil driller and oil producer focused in the core of the Midland Basin, a sub-basin of the Permian Basin, primarily in the adjacent counties of Midland, Martin, Andrews, Dawson and Ector.
RSPP is a private equity-based deal apparently put together for the purposes of an IPO.
Athlon Energy (NYSE:ATHL)
IPO'd Aug 2, '13; +45%
Antero Resources (NYSE:AR)
AR IPO'd Oct 10, '13; +25%
Buy; 2000 targeted drilling locations.
RSPP is profitable and a new well started producing in Q4 '13. RSPP has a lower price-to-book value than ATHL and AR, both of which IPO'd in the 2nd half of 2013. RSPP/s P/E ratio is 20% less than ATHL. ATHL and AR are both further along in their development process than RSPP.
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:
RSPP is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas.
The vast majority of RSPP's acreage is located on large, contiguous acreage blocks in the core of the Midland Basin, a sub-basin of the Permian Basin, primarily in the adjacent counties of Midland, Martin, Andrews, Dawson and Ector.
Since RSPP's inception in 2010, the company has participated in the drilling of over 300 vertical Wolfberry wells and served as the operator of over 180 of those wells.
In late 2012, RSPP's primary focus shifted to drilling horizontal wells. RSPP believes horizontal drilling provides more attractive returns on a majority of its acreage.
RSPP targets the multiple oil and natural gas producing stratigraphic horizons, or stacked pay zones, on its properties. Beginning in 2012, RSPP was among the first operators to successfully drill and complete a horizontal well in the core of the Midland Basin targeting the Wolfcamp B formation.
In addition, RSPP is the operator of what it believes is the first horizontal well completed in the Middle Spraberry shale in the Midland Basin, which came on production in the fourth quarter of 2013.
RSPP also believes it was the first operator to successfully drill and complete a horizontal well targeting the Lower Spraberry shale in the Permian Basin.
Other operators have drilled successful horizontal wells targeting the Wolfcamp A formation in close proximity to RSPP's properties.
RSPP's competitors not only explore for and produce oil and natural gas, but also carry on midstream and refining operations and market petroleum and other products on a regional, national or worldwide basis.
These companies may be able to pay more for productive oil and natural gas properties and exploratory prospects or to define, evaluate, bid for and purchase a greater number of properties and prospects than RSPP's financial or human resources permit.
In addition, these companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices.
Larger or more integrated competitors may be able to absorb the burden of existing, and any changes to, federal, state and local laws and regulations more easily than RSPP can, which would adversely affect RSPP's competitive position
RSP Permian Holdco, L.L.C. 45.1%
Ted Collins, Jr. 15.7%
Wallace Family Partnership, LP 15.7%
ACTOIL, LLC 17.1%
Use of proceeds
RSPP expects to net $170.4 million from its IPO. Proceeds are allocated as follows:
- To fully repay its $70 million term loan, make cash payments of $32.5 million in the aggregate to certain of the Existing Investors, upon the closing of this offering, as partial consideration for the properties contributed by such persons and pay $3.1 million of cash bonuses to the company's employees in connection with the successful completion of this offering.
- To reduce amounts drawn under RSPP's revolving credit facility and fund a portion of its capital expenditure program.
Disclaimer: This RSPP IPO report is based on a reading and analysis of RSPP's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.