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EP Energy Prepares for IPO


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Apollo Global Management’s (APO) own EP Energy LLC plans to begin working with investment banks in preparation for a possible IPO launch later this year. Three anonymous Apollo insiders divulged EP’s activities to Reuters on Monday, causing a wildfire of posts. With news sites like Fox BusinessYahoo Finance and many others already building hype around this up and coming oil and gas company, let’s see how EP Energy reached this point.

ep energy prepares for ipo

(Photo credit to: Bizjournals.com)

Recent Developments for EP Energy

As there has yet to be an official announcement regarding EP Energy’s IPO, the three insiders opted to remain anonymous for the time being. So far any time EP Energy is mentioned in the news they are usually being featured because of their billion dollar sales and initial investment increases. Take a look below to see how EP Energy became Apollo’s latest acquisition.

apollo global logo

(Photo Credit to: Valuewalk.com)

Apollo Global Management Purchases EP Energy

It was merely thirteen months ago in late May of 2012 that Apollo and it’s consortium of private equity firms only purchased EP Energy LLC for a whopping $7.15 billion. This transaction was actually a follow-up to a merger closing between the former production arm of EP, El Paso Corp. and Kinder Morgan (KMI) who acquired El Paso for a total of $38 billion. You can see more about the initial purchase here. Besides EP Energy preparing for it’s IPO launch, they recently made headlines by driving $1.3 billion in sales to their company in just three transactions (sold off some of their natural gas and coal bed methane properties). Needless to say within 10 months EP Energy has shown Apollo a 20% increase on their initial investment. Even Apollo co-founder Josh Harris stated in early June that he felt his private equity group received an actual $12 billion in assets for the $7 billion they purchased EP Energy for.

As you may know, preparing to go public is no easy feat. Besides finding an investment bank to handle your IPO process, you also need to make sure you are meeting all SEC regulations and requirements. After meeting all regulations and requirements, the investment bank chosen (also known as Underwriters) will create all of the necessary documents a company needs to have in order to go public. This includes financial history, projections and initial company valuation, along with other important aspects all investors look for when looking for additions to their portfolio. So where is EP Energy in this whole process?

EP Energy LLC Still Choosing Underwriter

Though three sources gave Reuters the inside scoop, there has not been a public announcement at this moment. While many speculate EP Energy prepares for IPO launch, nothing is set in stone. It seems Apollo may still be on the fence, considering the timing of the IPO launch and may delay EP Energy’s IPO if the market worsens.

While Apollo has not officially confirmed recent speculations, Reuters’ sources did report that EP Energy has already requested plans for a possible IPO from several investment banks. As they are still considering several investment banks, there has not been any announcement for a specific underwriter to lead this offering.

You can most likely expect an underwriter announcement after Apollo Global Management decides to green light EP Energy’s plans to go public.

Initial EP Energy LLC Valuation?

Even though EP Energy is still in the early stages of their IPO preparations one of Reuters’ sources projects that the U.S regulators that may come in during these next few months could value the company at more than $8 billion. It won’t be until we get closer to the launch of EP Energy’s IPO that we will know the actual valuation of the company.

Is it Too Early to Go Public?

Apollo has yet to release an official announcement. Even with that being said, it could be a very exciting time for the newly acquired oil and gas company. A major reason for EP Energy to prepare an IPO is to capitalize on the high oil prices and equity markets. It would definitely be unusual for such a young private equity company to go public as buyout firms tend to hold portfolio companies between three to seven years before considering going public. With recent oil prices declining will Apollo still be eager to launch EP Energy?

The Future of EP Energy LLC

Although EP Energy LLC made over a billion dollars selling off some of their natural gas and coal bed methane properties, they have recently become much more oil focused. They currently have assets in Utah’s Uinta basin and Texas’ Eagle Ford and Wolfcamp shales. EP also held onto its highest return natural gas asset in the Haynesville shale.

We will still have to keep our fingers crossed and wait to see what lies in EP Energy’s future. Apollo will be sure to keep a close watch of the market and oil price projections before allowing their Texas based addition the opportunity to go public. Apollo already has one other oil company going public (Athlon Energy filed for $345 million IPO early June). If EP does launch their own IPO they will also find themselves competing with Antero Resources Corp who plans for a $1 billion IPO this month.

What do you think? Will EP Energy LLC go public, or will Apollo hold off? Will EP Energy be able to stay afloat against the competition?

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