Commodity IPOs, in high demand, price above range

By Alina Selyukh

NEW YORK (Reuters) – Initial public offerings of two commodities and energy companies priced higher than expected on Thursday, setting the tone for what could be a wave of IPOs looking to tap investor appetite for stocks that could benefit from rising commodities prices.

CVR Partners LP, a unit of oil refiner CVR Energy Inc (CVI.N: Quote, Profile, Research), raised $307 million, selling 19.2 million units for $16 each, above an expected range of $12 to $14.

Golar LNG Partners LP, a subsidiary of liquefied natural gas shipper Golar LNG (GLNG.O: Quote, Profile, Research), raised $270 million, selling 12 million units for $22.50 each, an underwriter said. It had planned to sell the units for $20 to $22 each.

The IPO pricings follow a successful debut by SandRidge Mississippian Trust I (SDT.N: Quote, Profile, Research), Sandridge Energy’s (SD.N: Quote, Profile, Research) royalty trust. The trust’s units rose more than 15 percent on Thursday after it sold more units than expected and at the top of the proposed price range.

The string of offerings comes at a time when oil prices continue a steep climb and a number of companies with exposure to energy and natural resources may be considering public offerings to take advantage of investors’ hunger for exposure to various commodities.

“Energy is the place where you want to be right now, given the economics and the oil prices, the momentum.” said Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster LLC.

Turmoil in the Middle East has sent crude oil prices surging in recent weeks to 2 1/2-year highs. U.S. crude futures breached $110 a barrel on Thursday.

In the meantime, the nuclear crisis in Japan is adding to the growing demand for alternative energy, including liquefied natural gas. Booming growth in developing countries, especially China, has supported strong demand for raw materials and natural resources such as coal, metals and agricultural products.

Sources have told Reuters that several bigger energy and commodities companies could float shares later this year, while many smaller businesses all across the board within natural resources, energy and commodities are also weighing such plans.

CVR Partners makes nitrogen fertilizer out of petroleum coke produced at CVR Energy’s Coffeyville, Kansas oil refinery.

Investments in Golar LNG Partners offer exposure to Golar’s carriers of liquefied natural gas and offshore units that process LNG to turn it back into natural gas.


Both of the companies that priced on Thursday are set up as limited partnerships, similar to the recent blockbuster offering of Kinder Morgan (KMI.N: Quote, Profile, Research), said Renaissance Capital analyst Nick Einhorn.

“Given the low interest rate environment, a high yield is not that easy to find,” he said.

“They’re all offering pretty high yields and generally, there has been a lot of demand (for that).”

Kinder Morgan’s IPO was a master limited partnership (MLP), which offers low tax liability and provides investors with a lower cost of capital.

Based on the midpoint range, Golar is expected to pay a minimum dividend yield of 7.3 percent. CVR said it expects to pay a dividend yield of 14.8 percent, according to the latest filing with U.S. financial regulators.

The units of both companies are expected to begin trading on Friday. CVR Partners units are expected to trade on the New York Stock Exchange under the symbol “UAN” (UAN.N: Quote, Profile, Research). Golar LNG Partners units are expected to trade on the Nasdaq under the symbol “GMLP.” (GMLP.O: Quote, Profile, Research)

Morgan Stanley, Barclays Capital and Goldman Sachs led underwriters on the offering by CVR Partners. Citigroup, Bank of America Merrill Lynch and Morgan Stanley led underwriters on the Golar LNG Partners offering.

Shares of SandRidge Mississippian Trust I finished their first day of trading at $24.21. The IPO on Wednesday raised $315 million, selling 15 million common units instead of 12.5 million expected at the top of the $19 to $21 price range.

The trust will own royalty interest in more than 150 oil and gas wells SandRidge has and plans to drill. This way, the trust will receive a portion of what SandRidge makes on the sale of oil extracted from the wells.

(Reporting by Alina Selyukh; Editing by Steve Orlofsky)

Commodity IPOs, in high demand, price above range