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Tourmaline Oil files preliminary prospectus for $252.5M Topaz Energy IPO

CALGARY — Shares in Tourmaline Oil Corp. tracked lower Friday as its subsidiary, Topaz Energy Corp., announced it has filed a preliminary prospectus to raise $252.5 million through an initial public offering.
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CALGARY — Shares in Tourmaline Oil Corp. tracked lower Friday as its subsidiary, Topaz Energy Corp., announced it has filed a preliminary prospectus to raise $252.5 million through an initial public offering.

The offering — which will test the market's appetite for new energy investments — is to generate $217.5 million from sales of treasury shares, along with $35 million from a secondary offering of shares held by majority owner Tourmaline. The shares to be priced at between $13 and $15 each.

Final pricing and closing is expected in the latter part of October.

In Toronto, Tourmaline stock fell by as much as 55 cents or 3.2 per cent to $16.58 on Friday afternoon. The larger energy sector is down by 55 per cent so far this year but Tourmaline has actually gained from its close on Dec. 31 of $15.22.

The energy industry has been out of favour on stock markets for years for sound fundamental reasons and there's no reason to expect that to change soon, said Allan Small, senior investment adviser at HollisWealth in Toronto.

"I wouldn't be interested in the slightest (in the IPO) ...I just think there is no future," he said in an interview Friday, adding the timing of IPO is unfortunate as the COVID-19 pandemic drags on and oil prices stall after staging a recovery through the summer.

"I think oil companies are doing what they have to to survive and thrive in some way, whether that's spinning off assets, whether that's mergers, whether that's changing your business."

The market's doubt about the ability of the energy industry to regain its former strength is reinforced by the recent move by oil giant BP Plc to reduce fossil fuel production and change itself into a clean energy giant, he said.

Calgary-based Topaz was created by Tourmaline in November to hold royalty and energy infrastructure assets that it felt were not being recognized by the market in its share price.

Topaz owns royalty interests on about 920,000 hectares of developed and undeveloped oil and gas lands, as well as non-operated stakes in four natural gas processing plants.

The offering is being made through a syndicate of 14 underwriters co-led by Peters & Co. Ltd. and Scotiabank.

"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," says the preliminary prospectus.

"Topaz seeks to achieve this objective by selectively pursuing strategic business development opportunities with high-quality partners that are accretive to Topaz."

This report by The Canadian Press was first published Sept. 25, 2020.

Companies in this story: (TSX:TOU)

Dan Healing, The Canadian Press




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