Encana Raises $1.34 Billion in Largest Canada IPO Since 2000

May 23, 2014 10:26 am ET

(Updates with market value from third paragraph.)

May 23 (Bloomberg) -- Encana Corp. raised C$1.46 billion ($1.34 billion) in Canada’s largest initial public offering in 14 years as higher fuel prices sparked a revival of investor interest in the country’s energy industry.

Encana, Canada’s largest natural gas producer, sold 52 million shares in its PrairieSky Royalty Ltd. unit at C$28 each, or a 40 percent stake, according to a statement yesterday. That was at the top of the revised per-share price range of C$26.50 to C$28 after Encana boosted the proposed terms earlier this week.

The offering gives PrairieSky, which will generate revenue by charging drilling levies on its property, a market value of C$3.64 billion, based on 130 million shares outstanding after the close of the deal.

The spinoff of PrairieSky is the first of several Canadian energy IPOs expected this year, including a C$248 million sale by Journey Energy Inc., as higher fuel prices and a weaker currency boost exporter returns and draw investors. The Standard & Poor’s/TSX Energy Index has advanced 14 percent this year compared with an 8 percent gain in the benchmark composite index. Western Canadian Select crude is trading at its highest level since August.

The sale surpasses Athabasca Oil Corp.’s C$1.35 billion IPO in 2010 and is the largest in Canada since Sun Life Financial Inc. raised about C$1.8 billion in 2000, data compiled by Bloomberg show.

The IPO is part of Encana Chief Executive Officer Doug Suttles’s plan to turn around the company by selling assets, focusing on primary regions that produce higher-value oil and gas liquids and paying down debt.

CEO Changes

As part of the CEO’s makeover at Encana, the company also has announced $2.3 billion of gas property sales, the purchase of $3.1 billion of oil lands, a 35 percent dividend reduction and the firing of almost 1,000 people, about 20 percent of its workforce.

Encana’s purchase of Texas shale lands from Freeport- McMoRan Copper & Gold Inc., set to close by the end of June, will double the company’s crude output and hasten its transition toward more oil and liquids in the four-year strategy laid out by Suttles last November.

PrairieSky will hold about 5.2 million acres (2.1 million hectares) of oil and gas properties in central and southern Alberta and pay dividends.

Toronto-Dominion Bank and Canadian Imperial Bank of Commerce led a group of banks on the IPO and have the option to sell an additional 15 percent of the offering after it closes. If the option is fully exercised, Encana’s proceeds would rise to C$1.67 billion, according to the company.

PrairieSky will trade on the Toronto Stock Exchange under the ticker symbol PSK after the close of the IPO, which is expected May 29, the company said.

--With assistance from Scott Deveau in Toronto.