Topaz Set to Test Canada Energy Appetite With $188 Million IPO
Topaz Set to Test Canada Energy Appetite With $188 Million IPO
(Bloomberg) -- Tourmaline Oil Corp. is betting investors have an appetite for more Canadian energy stocks, offering up the biggest initial share sale to come out of Alberta’s oil patch in three years.
The Calgary-based natural gas driller is creating a new royalty and energy infrastructure company through an initial public offering of Topaz Energy Corp., with the new entity and Tourmaline aiming to raise about C$252.5 million ($188.3 million) from the stock sale. That would be the largest IPO of an energy firm in the country since the Kinder Morgan Canada Ltd. sale in 2017.
Topaz plans to sell 16.8 million to 19.4 million shares for C$13 to C$15 apiece in an offering expected to close in late October, the firm said in sale documents obtained by Bloomberg. Topaz plans to list on the Toronto Stock Exchange under the ticker “TPZ,” with shares initially yielding approximately 5.3% to 6.2%, the document shows.
The IPO comes as Tourmaline’s shares are up about 10% this year, outpacing peers against a challenging backdrop for oil and gas drillers. Canada’s S&P/TSX Energy Index has fallen 37% in that period as the coronavirus pandemic sapped demand for oil and drove down prices. Tourmaline’s natural gas exposure helped the company fare better than its peers.
Topaz is led by Chief Executive Officer Marty Staples, who was most recently head of Tourmaline’s land department and is described in documents as “instrumental” to the company’s growth since 2010.
To woo investors, Topaz’s objective is “to generate free cash flow growth through indirect oil and gas and infrastructure investment at a relatively low-risk and low cost to the company,” according to its Sept. 24 regulatory filing.
Tourmaline will retain a 52% stake in Topaz, though that would drop to 51% if banks managing the sale take up an option to buy an additional 15% of the offering -- a move that would lift the offering’s total to C$285.1 million. Peters & Co. Ltd. and Bank of Nova Scotia are leading a group of banks on the sale.
One analyst sees promise from Tourmaline’s much-anticipated move.
“With liquidity, a strong balance sheet and embedded value in Topaz, Tourmaline offers investors one of the more attractive ways to play consolidation in Canada,” Cormark Securities Inc. analyst Garett Ursu told clients in a note earlier this month.
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