- Shares fell 0.8%, in line with sector index
- Company raised 288 million pounds to pay off debt
- Listing comes amid drought in IPO markets
LONDON, Nov 9 (Reuters) – Ithaca Energy shares fell in their London debut on Wednesday after the North Sea oil and gas producer defied volatile markets to deliver Britain’s biggest initial public offering (IPO) this year, and Europe’s fifth biggest.
The shares opened 2% below the issue price of 250 pence a share and briefly fell as much as 4% to a low of 240.05 pence, before recovering to 248 pence, 0.8%. At the same time, the pan-European STOXX 600 (.STOXX) was down 0.4% and an index of European oil and gas shares was down 0.9%. (.SXEP)
The IPO, which priced at the bottom of the expected price range, gave the company an initial valuation of 2.45 billion pounds ($2.83 billion). The top end of the original price range would have valued it at £3.1bn.
Ithaca raised proceeds of 288 million pounds amid a drought of stock market listings this year, with global IPO proceeds down more than 70% compared to the same time last year, according to Dealogic data.
The London Stock Exchange has suffered the worst year on record for UK IPOs as market volatility continues amid the energy crisis and worsening economic forecasts.
“Ithaca has IPOs in a difficult broader market backdrop and the near-term weakness likely highlights this,” said Investec analyst Nathan Piper.
Proceeds from UK equity sales have fallen 95% so far this year and only two out of 38 listings in Britain were in the utilities and energy sector, accounting for just $5m of an overall $910m raised in the region year to date. according to Dealogic data.
So far in 2022, global utilities and energy IPOs valued at more than $100 million have achieved an average return of 19.9% after one day, compared with negative returns for European utilities and energy IPOs and UK IPOs across all sectors, according to Dealogic data.
Ithaca, owned by Tel Aviv-listed Delek Group ( DLEKG.TA ), is being watched for signs of investor interest in energy producers in the North Sea, an aging basin where private equity firms have bought assets in recent years but held back on IPOs.
Ithaca’s move to tap capital markets comes amid renewed government interest in the North Sea region due to the energy crisis, with Britain recently launching its first oil and gas exploration licensing round since 2019 in a bid to boost domestic production’ to give a boost.
Ithaca, which produces about 70,000 barrels of oil equivalent per day, wants to use the IPO proceeds to pay down debt, which stood at a net $1.4 billion at the end of June.
The last oil and gas producer to float on the main London stock exchange was eastern Mediterranean Energean ( ENOG.L ) in 2018.
Goldman Sachs ( GS.N ) and Morgan Stanley ( MS.N ) are joint global coordinators on the deal, while HSBC ( HSBA.L ), Jefferies ( JEF.N ) and Bank of America ( BAC.N ) are joint bookrunners, with ING (INGA.AS) acting as co-lead manager.
($1 = 0.8649 pounds)
Reporting by Emma-Victoria Farr, Joice Alves, Shadia Nasralla and Lucy Raitano; Editing by Amanda Cooper and Mark Potter
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