Encana Boosts Size of PrairieSky Initial Public Offering

Encana Corp. (ECA) increased the size of its initial public offering for PrairieSky Royalty Ltd. (0977814D) to as much as C$1.46 billion ($1.3 billion) in what would be Canada’s largest initial sale in 14 years.

The nation’s largest natural gas producer boosted the number of shares it plans to sell in its royalty unit to 52 million from 32.5 million and the price range to C$26.50 to C$28 apiece, according to a statement today. Encana initially sought to sell the shares for C$23 to C$26.50 each to raise C$747.5 million to C$861.3 million, according to April 30 marketing documents.

The sale at the revised terms would surpass Athabasca Oil Corp.’s C$1.35 billion IPO in 2010 and would be the largest in Canada since Sun Life Financial Inc. raised about C$1.8 billion in 2000, data compiled by Bloomberg show. The spinoff is part of Chief Executive Officer Doug Suttles’s plan to turn around Encana by selling assets, focusing on primary regions that produce higher-value oil and gas liquids and paying down debt.

The increased IPO size is positive for Encana and translates into a valuation for the PrairieSky unit of as much as C$3.64 billion, Kyle Preston, an analyst at National Bank Financial in Calgary, said in a note today.

Encana’s PrairieSky spinoff adds to a slew of initial offerings that closely held Canadian oil and gas producers are considering for this year as they become large enough for public investors. Equity markets are more favorable for sales from Canada’s energy industry this year because of higher fuel prices and a weaker currency that’s boosting returns for exporters.

Possible Offerings

Journey Energy Inc., a Calgary-based producer, is seeking to raise as much a C$248 million in an IPO, the company said last week in marketing documents. Seven Generations Energy Ltd., which is backed by investors including the Ziff family’s ZBI Ventures and also based in Calgary, is seeking a potential sale or IPO this year, people with knowledge of the situation said earlier this month.

Canada’s S&P/TSX Energy Index is up 14 percent this year, more than the 10 percent gain for the S&P Oil & Gas Exploration and Production Select Industry Index in the U.S.

Encana has risen 37 percent since the Nov. 5 IPO announcement. The gain includes an estimated C$4 per share that investors ascribed to the spinoff as the company unlocks value in the royalty-generating lands, National Bank’s Preston said in a May 15 interview.

The stock rose 2.7 percent to C$25.50 at the close in Toronto today.

Toronto-Dominion Bank and Canadian Imperial Bank of Commerce are co-leading a group of banks on the sale.

A final decision on the offering size and price is expected in late May, Encana said today.

To contact the reporters on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net; Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net; Susan Warren at susanwarren@bloomberg.net Carlos Caminada, Stephen Cunningham

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