Home Listing rules Shares of oil producer Ithaca sink in UK’s biggest IPO of 2022

Shares of oil producer Ithaca sink in UK’s biggest IPO of 2022

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  • Ithaca Energy shares down 11.6% after market debut
  • The company has raised £288m to pay off its debt
  • First major company to use new LSE listing rules
  • IPO comes amid drought in global equity sales

LONDON, Nov 9 (Reuters) – Ithaca Energy made a lackluster debut in London on Wednesday as the North Sea oil and gas producer defied volatile markets with Britain’s biggest initial public offering of 2022.

As Europe’s fifth-biggest IPO of the year began trading, Ithaca shares fell 11.6% below their issue price of 250 pence, hitting a low of 221 pence shortly after noon. At 12:14 GMT, shares were down 10.1% at 224.75 pence.

The pan-European STOXX 600 (.STOXX)meanwhile, was down 0.5% and an index of European oil and gas stocks fell 1.3%. (.SXEP)

The IPO of Ithaca, which is priced at the low end of the expected price range, gave the company an initial valuation of 2.45 billion pounds ($2.83 billion). At the top of the original price range, it would have been valued at £3.1 billion.

“Ithaca went public in a difficult market environment and the short-term weakness probably underlines that,” Investec analyst Nathan Piper said.

Amid a stock market listing drought, Ithaca raised proceeds of £288m. Global IPO proceeds are down more than 70% from the same time last year, according to Dealogic data.

The London Stock Exchange had its worst year on record for IPO volumes as the ongoing energy crisis and deteriorating economic forecasts made markets volatile.

Very few IPOs expected in Europe, Middle East and Africa before year-end, bookrunner working on Ithaca deal says, except deals already underway in the Middle East, including a listing by Americana Restaurants which is expected to be priced in late November. .

More than half of Ithaca’s book went to British investors, a quarter to Israeli investors and a fifth to American names, the bookrunner said.

With a free float of 12%, Ithaca is the first major company to take advantage of new London listing rules implemented at the end of 2021 which reduced the proportion of shares to be held by the public from 25% to 10%.

Reuters Charts

Proceeds from equity sales in Britain have fallen 95% so far this year and only two of the 38 listings have been in the utilities and energy sector, according to Dealogic data.

NORTH SEA HORIZON

Ithaca, owned by Tel Aviv-listed Delek Group (DLEKG.TA)is being watched for investor interest in North Sea energy producers, an aging pool where private equity firms have bought assets in recent years but delayed IPOs.

Britain recently launched its first round of oil and gas exploration licenses since 2019 to boost domestic production, but also imposed a one-off 25% tax on oil and gas producers to help struggling households with energy bills.

Ithaca, which produces around 70,000 barrels of oil equivalent per day, wants to use proceeds from the IPO to pay off debt, which stood at $1.4 billion net at the end of June, and aims to pay a 2023 dividend of $400 million.

The latest oil and gas producer to list on the main London stock exchange was Energean, which focuses on the eastern Mediterranean. (ENOG.L) in 2018.

Goldman Sachs (GS.N) and Morgan Stanley (MS.N) are global co-coordinators of the agreement, while HSBC (HSBA.L)Jefferies (JEF.N) and Bank of America (BAC.N) are joint bookrunners with ING (INGA.AS) acting as co-lead.

($1 = 0.8649 pounds)

Reporting by Emma-Victoria Farr, Joice Alves, Shadia Nasralla and Lucy Raitano; Editing by Amanda Cooper, Mark Potter and Alexander Smith

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