Ithaca Energy shares dip after UK’s largest IPO this year

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LONDON — Ithaca Energy shares dipped on their London debut on Wednesday after the North Sea oil and gas producer defied volatile markets to deliver Britain’s largest initial public offering (IPO) this year, and Europe’s fifth biggest.

The shares opened 2% below the 250 pence per share issue price and briefly fell to a low of 240.05 pence. At 1046 GMT, they were down 2.8% at 243.10 pence. At the same time, the pan-European STOXX 600 was down 0.5% and an index of European oil and gas stocks fell 1%.

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The IPO, which priced at the bottom of the expected price range, gave an initial valuation of 2.45 billion pounds ($2.83 billion) for the company. The top of the original price range would have valued it at 3.1 billion pounds.

Ithaca raised proceeds of 288 million pounds amid a drought of stock market listings this year, with global IPO proceeds down more than 70% compared with the same time last year, according to Dealogic data.

The London stock exchange has suffered the worst year on record for UK IPOs amid volatile markets hit by the energy crisis and worsening economic forecasts.

Very few IPOs are expected in the Europe, Middle East and Africa region before year-end, barring live deals in the Middle East including a listing by Americana Restaurants which is due to price in late November, a bookrunner working on the Ithaca deal said.

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“Ithaca has IPO’d into a difficult broader market backdrop and the near term weakness probably underlines that,” said Investec analyst Nathan Piper.

More than half of Ithaca’s book went to UK investors, with a quarter going to Israeli investors and a fifth to U.S. names, the bookrunner said.

With a free-float of 12%, Ithaca is the first major firm to take advantage of new London listing rules implemented at the end of 2021 that reduced the proportion of shares an issuer is required to have in public hands from 25% to 10%.

Proceeds from UK shares sales have dropped 95% so far this year and only two out of 38 listings in Britain have been in the utility and energy sector, according to Dealogic data.

Ithaca, owned by Tel Aviv-listed Delek Group, is being watched for investor interest in energy producers in the North Sea, an aging basin where private equity firms have in recent years bought assets, but have held off IPOs.

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Britain recently launched its first oil and gas exploration licensing round 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 around 70,000 barrels of oil equivalent per day, wants to use the IPO proceeds to pay down debt, which stood at a net $1.4 billion at the end of June, and aims 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-focused Energean in 2018.

Goldman Sachs and Morgan Stanley are joint global coordinators on the deal, while HSBC, Jefferies and Bank of America are joint bookrunners, with ING acting as co-lead manager.

($1 = 0.8649 pounds)

(Reporting by Emma-Victoria Farr, Joice Alves, Shadia Nasralla and Lucy Raitano; Editing by Amanda Cooper and Mark Potter)