Just two weeks into the new year and investor enthusiasm in the oil and gas services sector is clear. Higher oil prices are driving the rush, and Liberty Oilfield Services Inc.’s upsized IPO reflects it. As the industry’s first IPO of 2018, Denver-based Liberty Oilfield Services Inc. (LBRT) pulled $216 million in its NYSE debut, taking its market value to $2.6 billion.
If Liberty Oilfield’s performance is any indicator, higher oil prices have generated some serious optimism in the minds of 2018 energy investors who are ready to support 2018’s surge in U.S. production.
Industry’s Debut 2018 IPO Rises 28% Trading Day One
On Friday, the private equity-backed hydraulic fracturing services provider, Liberty Oilfield, planned on selling 12,731,092 shares of its Class A common stock at $17.00 per share, opening trading at $21.20. By lunchtime, Liberty Oilfield shares were trading at $22, a nearly 28% premium, before closing out the day at $21.75.
“We had tremendous interest in the offering so it allowed us to allocate shares to what we thought would be the best long-term owners and partners in Liberty,” Chris Wright, Liberty Oilfield’s chairman and CEO, told Hart Energy. “I think the market got our story and we’re thrilled to be part of the institution that is the New York Stock Exchange.”
Liberty Oilfield Adding Three New Fleets in 2018
An independent provider of hydraulic fracturing services to North American onshore oil and natural gas E&P companies, Liberty Oilfield operates in the Permian, Denver Basin, Powder River Basin, Williston Basin, and the Eagle Ford shale. Among Liberty’s customer base are energy leaders Noble Energy Inc., Anadarko Petroleum Corp., Extraction Oil & Gas Inc., PDC Energy, Continental Resources Inc., and Devon Energy Corp.
Demand for the 6-year old company’s services increased after oil prices began recovering in 2016. Wright recently told Reuters that Liberty had seen a 50% to 60% increase in service prices after a mid-2016 low.
Starting with just one hydraulic fracturing equipment fleet back in 2010, the company expanded to 19 fleets by the close of 2017. For 2018, Liberty plans to add three new hydraulic fracturing fleets.
While fleet counts aren’t massive, Liberty boasted 2017’s most sales-per-available-horsepower at $1,961 and is shooting for 1.03mn horsepower by Q3 2018,” Wright told Bloomberg Houston.
Liberty originally announced it would go public in February 2017, with plans to offer 10.7 million shares at $14 to $16 per share. But the company withdrew its plans in May 2017 amidst declining oil prices.
Liberty IPO Proceeds Repay Debt, Fund CAPEX
The company plans to use net proceeds to repay borrowings under its term loan and credit facility, and to fund a portion of its 2018 and other future capital expenditures, according to a press release.
Liberty has also granted underwriters a month to purchase an additional 1,909,663 shares of stock at the IPO price, less underwriting discounts and commissions. If the underwriters purchase additional shares, Liberty plans to use the proceeds “to redeem shares of Class A common stock or Liberty LLC Units from certain existing holders.”
2018 Energy IPOs Signal Investor Interest
As the first oilfield services company to go public this year, industry leaders kept an eye on Liberty’s IPO performance to gauge investor interest. Similarly, the industry is watching the second energy IPO of 2018, Houston’s Nine Energy Service Inc., which plans to raise up to $150 million in its debut on Tuesday, January 16.
As global demand continues to drive U.S. output, analysts expect to see some major U.S. production growth in the next five to 10 years. If Liberty’s performance is any indicator, 2018 energy investors are certainly showing interest in high-quality oilfield service companies who offer innovative technology, operational efficiency and solid corporate planning.