Energy Ink

Seven Generations Energy moves closer to IPO

Market could value Montney-focused energy junior in the $1 billion range

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September 08, 2014

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Seven Generations Energy, a Montney-focused oil and gas private junior player, held a shareholders’ meeting on Monday in Calgary to propose a two-for-one stock split in the lead-up to an initial public offering expected within eight weeks.

Peters & Co. Ltd and RBC Dominion Securities are expected to arrange the offering which could fetch up to $1 billion in value, according the Globe and Mail. A recent Bloomberg story cites unnamed sources who place the company’s value at more than $5 billion without explaining the evaluation methodology.

Seven Generations has amassed acreage in the Montney formation, a hydrocarbon-saturated shale play that poses similar technical challenges – and generates similar producer excitement – to the Horn River and Liard Basin in Canada and the Marcellus and Eagle Ford basins in the United States. The Montney, located predominately in British Columbia and extending east into Alberta, is estimated to hold up to 50 trillion cubic feet of gas reserves.

At its Kakwa River project in Alberta, “7G” has demonstrated its expertise in applying directional drilling and hydraulic fracturing completions technology to develop its tight liquids rich gas resource. The company reported its second quarter production at 24,000 barrels of oil equivalent per day.

In July 1, 2014, an independent reserve evaluation of 7G’s holdings by McDaniel & Associates recognized 328.0 million barrels gross (297.4 million barrels net) of oil equivalent total proved reserves. The before-tax net present value, calculated on the basis of a ten per cent per year discount rate, is $3.28 billion for these reserves.

The company last traded on the exempt market at $42 per share, according to Liquidity Source. An IPO in the magnitude anticipated by analysts would put Seven Generations in the company of PrairieSky Royalty Ltd. (PSK), a collection of energy assets spun out of Encana Corp. that represented Canada’s largest IPO in 14 years.

Seven Generations Energy was founded by the company’s CEO Pat Carlson in 2008, who raised over $300 million from investors including ARC Financial Corp., Natural Gas Partners, KERN Partners, and ZBI Ventures, an investment firm controlled by the Ziff family. The CPP Investment Board began acquiring stakes in May 2012.

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