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Details Regarding The NSE IPO

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Details Regarding The NSE IPO

NSE IPOThe New Source Energy (NSE) Initial Public Offering (IPO), NSE IPO for short, was scheduled to start trading on the New York Stock Exchange (NYSE) during the week of May 11, 2012, using symbol “NSE”.  However, due to weak overall stock market conditions in May 2012, NSE has delayed the NSE IPO to a future unspecified date.

NSE is an oil and natural gas exploration and production company based in Oklahoma City, Oklahoma, which currently focuses its efforts to find and produce oil and natural gas in Eastern Oklahoma.  NSE obtains approximately 90% of revenue from natural gas production, with oil production rounding out the difference.

The NSE IPO was designed to raise approximately $100 million via an offering of 9.1 million shares of NSE within a price range of $10 to $12.  If the NSE IPO were to price at $11 per share, NSE would have a market valuation of $363 million, which is about seven times current sales of $50 million.  The NSE IPO is being managed by jointly by BMO Capital and KeyBanc.  NSE is a relatively new company, having been founded in 2011, when a number of oil and natural gas producing properties were acquired by the founders of NSE.

NSE has states that the proceeds from the NSE IPO will be used to repay outstanding debt associated with its credit facility, to pay withholding taxes, , to fund the company’s oil and natural gas development program, and for potential future acquisitions.

Why The NSE IPO May Be A Good Investment

Since the NSE IPO has been delayed until further notice, while the company waits out the current stock market slump, it is a good time to assess whether the NSE IPO makes a good investment going forward.

As of December 31, 2011, the estimated proven reserves of oil and natural gas liquids on the properties controlled by NSE were 23.8 MMBOE, which means Million Barrels of Oil Equivalent.  Based on the net production from the NSE properties at the end of 2011, the properties had a reserve to production ratio of over 17 years, which means they can be expected to produce oil and natural gas liquids for approximately another 17 years.

As of December 31, 2011, NSE generated impressive revenue of $50 million during calendar year 2011.  The revenue was derived from oil and natural gas production on the NSE controlled properties.  Revenue was up by $8.3 million over the calendar year 2010 figures, which was a 20% increase compared to 2010.  In 2011 NSE reported the following source of revenue breakdown:  70% natural gas liquids, 20% natural gas sales. and 10% oil.

NSE is not sitting still.  During the first quarter of 2012, NSE oversaw the drilling of eleven new wells on land that the company controls.  Six of these new wells have been completed and are producing oil and/or natural gas.  During the first two months of 2012, NSE estimated that the average daily production from their wells was 3,659 barrels of oil equivalent per day, which includes oil and natural gas liquids.

Investing in the NSE IPO carries with it the risks associated with an economic slowdown that could reduce demand for oil, natural gas liquids, and natural gas, which could cause a reduction of revenue with the potential to negatively impact NSE’s profits.

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