Tag Archive | "Southcross Energy Initial Public Offering"

Southcross Energy IPO Natural Gas Transport Play

Details Regarding the Southcross Energy IPO

Southcross Energy IPODallas, Texas based Southcross Energy Partners L.P. is involved in natural gas and natural gas liquids gathering, processing, and transportation.  Southcross Energy filed for an Initial Public Offering (IPO), the Southcross Energy IPO for short, in April 2012.  As part of the Southcross Energy IPO filing, the company stated that their stock will trade on the New York Stock Exchange (NYSE) as symbol “SXE”.

The Southcross Energy IPO will raise an estimated $230 million, with the proceeds to be used to repay company debt and to reimburse the company’s general partner, Southcross Energy LLC.  The lead underwriters for the Southcross Energy IPO are Citigroup and Wells Fargo.  Southcross Energy was created by the private equity company Charlesbank Capital Partners to acquire and operation energy assets.

Southcross Energy owns natural gas pipelines and related assets, and is known as a midstream energy company for its involvement in the transportation of energy between the producers and the users.  Southcross Energy’s natural gas assets are primarily in the area the Eagle Ford shale formation in southern Texas, which is a natural gas producing area.  Southcross Energy operates approximately 2,500 miles of intrastate pipeline in Alabama, Mississippi, and southern Texas.  More than half of Southcross Energy’s pipelines are in Texas.  The company has two gas processing plants with production capacity of 185 million cubic feet per day, two gas treatment plants, and one fractionator in Texas.

The Southcross Energy IPO Outlook

Investors looking at the Southcross Energy IPO as an investment should note that Southcross Energy reported a $7.54 million profit 2011 on revenue of $523.1, which was an increase in revenue of 4.9% from the prior year, according to Southcross Energy IPO filing.  This level of revenue puts Southcross Energy in the small cap stock category, with plenty of room to grow through organic growth and future acquisitions within the energy space.  An investment in the Southcross Energy IPO is essentially an investment in the projected growth of natural gas use in the United States and eventually abroad, as natural gas exporting becomes established.

Southcross Energy expects organic revenue growth to be driven by the increasing natural gas drilling that is occurring in the Eagle Ford shale area and increased demand for natural gas, which should cause higher throughput in Southcross Energy pipelines and natural gas processing facilities.  Southcross Energy also plans on assessing acquisitions of other energy assets to accelerate their revenue growth, with the eventual goal of distributing cash flow back to shareholders.

Investing in the Southcross Energy IPO does entail some risks that must be taken under consideration by IPO investors.  An investment in the Southcross Energy IPO could be negatively affected by changes in the price of and natural gas, changes in the volume of natural gas drilling, and changes in natural gas demand.  All of which could lead to a reduction in demand for the company’s natural gas pipeline and processing services.

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