Feb. 2 (Bloomberg) -- Platinum Energy Solutions Inc., an oilfield services company that specializes in hydraulic fracturing, postponed its initial public offering after seeking to go public at twice the value of peers.
The IPO won’t go forward because of “unfavorable market conditions,” Houston-based Platinum Energy said today in a statement. The company planned to sell shares for as much as $11 each, valuing Platinum Energy at as much as 2.5 times annualized fourth-quarter sales. That’s more than double the median of 1.16 for a basket of oilfield services companies, according to data compiled by Bloomberg.
Platinum Energy had sought funds to compete with larger rivals such as Halliburton Co. in fracking, where companies blast sand, chemicals and water into rock to crack it and release oil and gas. The increasing use of that process in exploration has contributed to excess supplies, leading to a slump in gas prices, the worst-performing commodity on the Standard & Poor’s GSCI Spot Index this year.
“There are many concerns right now, especially about natural-gas prices being so low,” Philip Weiss, an analyst at Argus Research in New York, said before the company postponed the offering. That, as well as the cost of equipment, may deter investors, he said.
Platinum Energy Chief Financial Officer Clarke Legler didn’t immediately return a call seeking comment on why the company postponed the offering.
The company had planned to raise as much as $154 million offering 14 million shares for $9 to $11 each, according to regulatory filings. Platinum Energy will keep evaluating the timing for an offering, according to the statement today.
Gas futures traded near a 10-year low today on speculation production cuts by companies won’t shrink a glut of the heating and power-plant fuel. On Jan. 26, Moody’s Investors Services lowered its price assumptions for North American gas for this year, 2013 and thereafter amid a “persistent glut.”
Platinum Energy had filed to list under the symbol FRAC. U.S. Silica Holdings Inc., the Maryland-based producer of sand used in hydraulic fracturing, sold $200 million in shares this week at $17 apiece. Matador Resources Co., the Dallas-based company that provides oil and gas exploration services, raised $160 million yesterday selling about 13 million shares at $12 each.
Platinum Energy, led by Chief Executive Officer L. Charles Moncla Jr., had aimed to raise about half the amount it sought when it first filed for a $300 million IPO in September. Moncla and Clearlake Capital Group LP are the top two investors in Platinum, each holding more than one-third of the shares.
Formed in 2010, Platinum Energy acquired two fracking rigs last year. The company’s main sources of revenue are contracts with Petrohawk Energy Corp. and Encana Corp. Fourth-quarter sales were $31.5 million to $32.5 million, according to Platinum’s prospectus, implying sales of as much as $130 million at an annualized rate.
Halliburton and Schlumberger Ltd., the world’s largest provider of oilfield services, are listed as Platinum Energy’s major multinational competitors in its IPO prospectus. At the high end of the price range, Platinum Energy’s market value would have been about $325.3 million, compared with about $34 billion for Halliburton, more than $100 billion for Schlumberger and almost $22 billion for Baker Hughes Inc., which bought Platinum Energy competitor BJ Services Inc. in 2010.
“It’s become a different game for the smaller companies,” said Edward Muztafago, an analyst at Societe Generale SA in New York. “Halliburton, Baker Hughes, those companies have the big leases and the big visibility. The smaller companies lack that.”
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