LRR Energy, L.P. (NYSE:LRE) is one of the newest public companies in the energy sector, after completing an initial public offering last week. This offering, and others completed in recent weeks, gives energy investors even more choices when playing this sector.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

IPO Details
LRR Energy, L.P. issued 9.4 million limited partner interests at $19 per unit. This was at the lower end of the $19 to $21 per unit pricing range established when underwriters started marketing the offering in October.

LRR Energy, L.P. is a limited partnership that was created in April 2011, to own and operate oil and gas properties in North America. The company looks for producing properties with predictable production profiles and is currently operating in the Permian Basin, the Mid Continent and the Gulf Coast regions of the United States.

Operational Summary
LRR Energy, L.P. reported proved reserves of 30.2 million barrels of oil equivalent (BOE) at the end of the first quarter of 2011, with 84% in the proved developed category. The company produced an average of 6,133 BOE per day, in the first half of 2011. (For related reading on oil, see Oil: A Big Investment With Big Tax Breaks.)

Investors tend to favor companies that produce crude oil and other liquid hydrocarbons; the company reported that 57% of pro forma revenue, in the six months ending June 30, 2011, were derived from oil and natural gas liquids.

LRR Energy, L.P. is active on both the Texas and New Mexico side of the Permian Basin and has a majority of its proved reserves in this basin. The company produces from more than 550 net wells in this region. It also has 33% of its proved reserves in the Mid Continent area, and 12% in the Gulf Coast. The company's reserves in the Gulf Coast have the shortest reserves to production ratio, at approximately eight years.

Organizational Structure
Like other limited partnerships in the energy sector, LRR Energy, L.P has a fairly convoluted organizational structure. The company was sponsored by affiliates of Lime Rock Resources and will remain closely tied to these entities. LRE GP, LLC is the general partner of LRR Energy, L.P, and is controlled by Lime Rock Management, a private equity firm active in the energy business. After the offering is complete, Lime Rock Resources will own approximately 58% of the units of LRR Energy, L.P. (For more on private equity, see A Primer On Private Equity.)

LRR Energy, L.P. has stated its intention to pay out a minimum annual cash distribution of $1.90 per unit, or a 10% yield based on the offering price. This distribution is obviously dependent on the company having sufficient cash flow realized through the production and sale of crude oil and natural gas.

LRR Energy, L.P. is not the only energy company to go public in the last week. Enduro Royalty Trust (NYSE:NDRO) issued 13.2 million trust units at $22 per unit in early Nov. 2011, raising approximately $290 million. The company has oil and gas properties in the Permian Basin, as well as Texas and Louisiana.

Chesapeake Granite Wash Trust (NYSE:CHKR) issued 20 million units at $19 per share, raising $380 million in proceeds. The company operates properties in the Anadarko Basin and is closely aligned with Chesapeake Energy (NYSE:CHK). Both these IPO's were priced at the lower end of the expected pricing range.

The Bottom Line
The less than enthusiastic reception by the market of several recent IPO's in the Energy sector may be indicative of saturation and proving that even the hottest sectors can sometimes turn off the investing public.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  3. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  4. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  5. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  6. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  7. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  8. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  4. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center