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Maxum Energy IPO Offers A Different Angle On Energy Investing

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Details Regarding the Maxum Energy IPO

Maxum Energy IPOGreenwich, Connecticut based Maxum Energy Logistics Partners, LP sells fuel and lubricants directly to companies involved in exploring and producing oil, natural gas, and coal, with delivery of products directly to work sites.  Maxum Energy also provides on-site refueling services for equipment used in energy exploration and production and storage tank fabrication services for storage of fuel and lubricants onsite.  Maxum Energy filed for an Initial Public Offering (IPO), the Maxum Energy IPO for short, in May 2012.  As part of the Maxum Energy IPO filing, the company stated that their stock will trade on the New York Stock Exchange (NYSE) as symbol “MXLP”.

The Maxum Energy IPO will raise an estimated $230 million, with the proceeds to be used to fund working capital needs and for other general business purposes.  The lead underwriters for the Maxum Energy IPO are Bank of America-Merrill Lynch and J.P. Morgan.

The Maxum Energy IPO Offers An Indirect Energy Play

The Maxum Energy IPO offers investors an indirect energy play.  As a supplier to the energy exploration and production industry, Maxum Energy’s revenue should grow as the energy exploration and production industry grows.  Implementation of hydraulic fracturing has fueled the growth of the energy exploration and production industry in the United States, which should continue for a number of years.

For the six months ended December 31, 2011, Maxum Energy reported revenue of approximately $915 million, up 45% from the same period in 2010.  Maxum Energy will be a small cap company when the Maxum Energy IPO occurs; however, if the growth rate for Maxum Energy continues at such a high rate, it will not be long before Maxum Energy reaches the $2 billion mid cap company threshold.  Maxum Energy lost approximately $100,000 on the $915 million in revenue that the company booked in 2011, as the company used free cash flow to expand operations.

The risks associated with investing in the Maxum Energy IPO are primarily two risks.  First. a sharp drop off in economic activity in the United States and/or energy exploration and production could cause a sharp reduction in demand for Maxum Energy’s products and services.  Second, competitive forces in the energy exploration and production products and services business could squeeze margins for Maxum Energy over time, and make it difficult for Maxum Energy to turn a profit on the infrastructure it owns and leases to support its sales to the energy exploration and production industry.

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