Energen Corp. (NYSE: EGN) has launched an underwritten public offering of 12,000,000 shares of its common stock, subject to market and other conditions. The underwriter will have a 30-day option to purchase up to 1,800,000 additional shares of common stock from Energen.
In a client note Wednesday, Seaport Global Securities analysts estimated gross proceeds from the offering of roughly $275 million, or or $316 million with the overallotment.
Energen, which has operations focused primarily in the Permian Basin, intends to use the net proceeds from the offering to repay borrowings under its credit facility, to fund drilling and development activities, and/or for other general corporate purposes. Year-end 2015 liquidity stood at $1.2 billion, consisting of $1.3 million in cash and $1.2 billion in availability under its $1.4 billion revolving credit facility, noted Seaport Global Securities analysts.
With company shares down 44% year-to-date, the analysts said, a "sizeable equity offering (~18% dilution)" is not likely to be perceived positively.
"Based on yesterday’s closing price of $22.90/share, gross proceeds of ~$316MM (includes underwriter’s overallotment) should help fund any outspend in 2016, which management estimates at $225MM-$325MM predicated on EGN's $250MM-$350MM FY16 capital program and $36/bbl oil. In addition, the offering could serve as a defensive move to shore up liquidity ahead of EGN’s April 1 borrowing base redetermination, in our view," the analysts continued.
Credit Suisse Securities (USA) LLC is acting as sole book-running manager for the offering.