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The pace of Canadian energy initial public offerings rebounded this year as markets emerged from the doldrums, and with oil prices maintaining strength, equity financings should pick up even more in 2011.

Dealers say IPO activity will be focused on a few specialized parts of the energy business, including a new wave of unconventional oil players and international explorers, especially those with South American prospects.

Stubbornly weak natural gas markets, meanwhile, may keep many gas-weighted going-public deals on the shelf for a while longer.

Still, one gas explorer, Tourmaline Oil Corp (TOU-T 20.49 0.14 0.69%), bucked the trend with a successful IPO last month, showing there is investor appetite for the right deal.

"Oil-opportunity financings have been strong in 2010 and obviously there was a great deal of equity raised with a couple of very large financings," said Jim Davidson, chief executive of FirstEnergy Capital Corp.

"That should continue in 2011 because I don't see any material change for oil prices. I think the investment community is hoping that gas prices will begin their rebound in 2011 and set themselves up for a good 2012."

By the end of October there were 13 new energy listings on the Toronto Stock Exchange and 30 on the small-cap Venture Exchange, although not all of them were initial offerings.

There have been five IPOs on the TSX this year that raised a total of $2.4 billion.

The biggest was Athabasca Oil Sands Corp (ATH-T 14.5 0.48 3.42%), which raised $1.4 billion for its Hangingstone and Dover steam-driven bitumen projects in the Alberta oil sands, which the company is developing with PetroChina.

It offered its shares at $18 each in April and they immediately dropped. They have stayed below the offering price, but have recently gained strength, closing on Friday at $14.02 on the Toronto Stock Exchange.

In August, MEG Energy Corp (MEG-T 39.25 -0.08 -0.2%), another oil sands developer with Chinese backing, raised $700 million for its Christina Lake project. Floated at $35 a share, MEG shares closed at $39.33 Friday.

Recently oil sands developers have attracted more capital from Asian sovereign wealth funds and state oil companies.

Other IPOs included C&C Energia Ltd (CZE-T 11.84 -0.26 -2.15%), which produces oil in Colombia, at $65 million, Eagle Energy Trust (EGL.UN-T 10.19 0.14 1.39%), a U.S. light oil producer, which raised $150 million, and the one gas name, Tourmaline, at $260 million.

Investment banking sources said Tourmaline's offering was snapped up as much for the record of its founder, Calgary oil man Mike Rose, as for its prospects in British Columbia and Alberta. Rose has built and sold two other energy firms, raking in high value for both.

While the oil sands players went to public markets in 2010, companies developing such hot plays as the Bakken in southern Saskatchewan and Pembina Cardium in Alberta are expected to seek development money in 2011, said Mike Tims, co-chairman of Peters & Co Ltd.

In those plays, companies are using using horizontal drilling and rock fracturing techniques developed in recent years for extracting shale gas. The technology pays off in terms of unlocking large but previously tough-to-extract reserves, but it is pricey.

"There are a lot of small unconventional oil names that have done private issues and you could see some of them ramping up to gain additional capital," Tims said. "That whole part of the (Western Canadian) basin is extremely active right now. There is a lot of capital being spent."

Junior companies have controlled smaller land positions in such areas as Bakken Pembina Cardium and still have prospects for sizable reserves, providing opportunities for investors, Davidson said.

"Many of them go from 100 barrels a day to 4,000 or 5,000 and ultimately sell out. You can still do that in that area," he said.

The oil theme of IPOs is also translating into financing for small Canadian companies with Colombian assets, of which there are now as many as a dozen that are headquartered in Canada, Davidson said.

Source: Reuters

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