There are three energy deals in marketing now that are solid but not interesting enough to warrant individual analysis.
Of the three we prefer Cypress (CELP) even though it’s a small ($90M) deal being brought by a mid-market group of bankers. In a period of increased US energy activity we like the related service industry and the high yield element of the equity versus pure E&P which builds NAV over time. A yield of close to 8% at the mid-point gets our attention.
EP Energy (EPE) is an independent exploration and development company focused on “repeatable” drilling efforts in well known oil basins in the US, notably Eagle Ford, Wolfcamp and Altamont. This is a $1B deal at the $25 mid-point with 40M shares offered. Credit Suisse and JPM are leading the transaction. Here is a link to the EP Energy IPO roadshow slides.
RSP Permian (RSPP) is a smaller $400M deal positioned as a “pure play on the Permian Basin” where risks and returns are well-known. Like EPE this company will achieve “growth through the drill bit” and also acquire and develop additional properties to build NAV. Follow this link to the RSP Permian IPO roadshow slides.
Finally we have Cypress Energy (CELP) which is more of a yield play (7.75% at the mid-point price of $20) than the other two. Cypress provides water and environmental services to support the E&P operations that companies like EP Energy and RSP Permian engage in. This is a link to the Cypress Energy IPO roadshow slides.
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