Energen Corp. (NYSE: EGN) has launched an underwritten public offering of 5,700,000 shares of its common stock. The company has also begun hedging its 2016 oil production and has added to its 2015 oil hedge position.
The underwriter of the common stock offering will have a 30-day option to purchase up to 855,000 additional shares of common stock from Energen. The underwriter intends to offer the shares from time to time for sale in one or more transactions on the New York Stock Exchange, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices.
Energen intends to use the net proceeds from the offering to fund a slight increase in drilling activity in the Midland Basin in the second half of 2015 and, more significantly, to begin a multi-year acceleration of development activities in the Permian Basin in 2016, with capital investment in 2016 of $1 billion or more; net proceeds also may be used for other general corporate purposes, including the acquisition of proved and unproved leasehold. Pending such uses, Energen intends to use the net proceeds from this offering to repay borrowings outstanding under its credit facility.
Credit Suisse Securities (USA) LLC is acting as sole book-running manager for the offering.
Energen has also begun hedging its 2016 oil production and has added to its 2015 oil hedge position. Over the past week, Energen has entered into swap contracts for 1.1 million barrels of 2016 oil production at an average NYMEX price of $63.80 per barrel. The company also has hedged an additional 2.9 million barrels of 2015 oil production in July through December 2015 at an average NYMEX price of $62.46 per barrel.
Adjusted for the new 2015 swaps, Energen’s oil hedge position for the period April through December 2015 (as disclosed on May 6) now covers 82% of the company’s estimated 2015 production midpoint for the last nine months of the year of 11.1 million barrels (based on production guidance issued on May 6) at an average NYMEX price of $80.76 per barrel.
Average realized oil prices for Energen’s production associated with NYMEX contracts, as well as for unhedged production, will reflect the impact of basis differentials; average realized oil prices also will reflect estimated oil transportation charges.
At year-end 2014, Energen had 373 million barrels of oil-equivalent proved reserves, mainly located in the Permian and San Juan basins.