CPP reportedly weighing sale, IPO options for Encino

Canadian pension fund CPP Investments is reportedly weighing strategic options for what to do with Houston-based oil and gas producer Encino Acquisition Partners. Citing sources familiar with the matter, Reuters reported on February 4 that a potential sale or initial public offering (IPO) were among the options CPP was exploring. According to the sources, this could value Encino at up to $7bn including debt.

The sources went on to tell Reuters that Encino was in the early stages of evaluating its options and was also in the process of selecting investment banks to lead the review. While a deal is not guaranteed and would be influenced by market conditions, the sources were quoted as saying that it could take place later this year.

This comes amid renewed interest in IPOs among the energy industry. LNG producer Venture Global LNG made its stock market debut on January 23. The company had to scale back its IPO ambitions from issuing 50mn shares for $40-46 per share to 70mn shares at $23-27 per share after initially struggling to win investors over to its plans. Its shares opened nearly 4% below their IPO price, giving the company a valuation of $58.2bn – short of high expectations.
Then on January 31, Appalachian producer Infinity Natural Resources saw its shares rise 11% following their debut on the New York Stock Exchange (NYSE). This put the company’s valuation at $1.3bn.

Like Infinity, Encino is an Appalachian natural gas producer, operating in Ohio’s Utica shale. The company was formed in 2017, growing via investments from CPP and also via the acquisition of Chesapeake Energy’s Ohio assets in 2018.

One of Reuters’ sources was quoted as saying that Infinity’s stock market debut and the positive market reaction to it had encouraged Encino to start exploring its options for a potential sale or IPO.