© Reuters. FILE PHOTO: The Ithaca Energy logo and stock graphics are seen in this photo taken October 18, 2022. REUTERS/Dado Ruvic/Illustration
By Emma-Victoria Farr, Shadia Nasralla and Lucy Raitano
LONDON (Reuters) – Ithaca Energy shares fell in their London debut on Wednesday after the North Sea oil and gas producer defied volatile markets to deliver Britain’s biggest initial public offering (IPO) this year and Europe’s fifth largest.
The shares opened 2% below the issue price of 250 pence per share and briefly fell to 240.05 pence. By 1046 GMT, they were down 2.8% at 243.10 pence. At the same time, the pan-European index fell 0.5% and the index of European oil and gas shares fell 1%.
The offering, which was priced at the bottom of the expected price range, gave the company an initial valuation of 2.45 billion pounds ($2.83 billion). The top price range would have valued it at £3.1bn.
Ithaca racked up profits of £288m amid a drought of share market listings this year, with global IPO profits down more than 70% year-on-year, according to data from Dealogic.
The London Stock Exchange has suffered its worst year on record for UK IPOs amid volatile markets hit by the energy crisis and worsening economic forecasts.
A handful of IPOs are expected in Europe, the Middle East and Africa before the end of the year, apart from a live offering in the Middle East, including the listing of Americana Restaurants that is due to price in late November, said an accountant working on the Ithaca deal .
“Ithaca has marketed in a difficult broader market and near-term weakness is likely to underline that,” said Nathan Piper, analyst at Investec.
More than half of the Ithaca book went to British investors, a quarter to Israeli investors and a fifth to American names, the bookmaker said.
With 12% liquidity, Ithaca is the first major company to take advantage of new London listing rules introduced at the end of 2021 that reduced the proportion of shares an issuer must hold in public hands from 25% to 10%. .
Profits from UK share sales have fallen by 95% year-to-date and only two of the 38 UK listings have been in the utilities and energy sector, according to data from Dealogic.
Ithaca, owned by Tel Aviv-listed Delek Group, is being watched for investor interest in energy producers in the North Sea, an aging region where private equity firms have in recent years bought assets, but held off on IPOs.
Britain recently launched its first licensing round for oil and gas exploration since 2019 to boost domestic production, but also imposed a 25% windfall tax on oil and gas producers to help households struggling with energy bills.
Ithaca, which produces about 70,000 barrels of oil equivalent per day, wants to use the sale proceeds to pay down debt, which stood at a net $1.4 billion at the end of June, and plans to pay a 2023 dividend of $400 million.
The last oil and gas producer to float on the main London Stock Exchange was Eastern Mediterranean Energean in 2018.
Goldman Sachs (NYSE: ) swears Morgan Stanley (NYSE: ) are joint global managers of the deal, while HSBC, Jefferies and Bank of America (NYSE: ) are joint bookrunners, with ING acting as lead manager.
($1 = 0.8649 pounds)