Athlon Energy Inc. (NYSE: ATHL) took advantage of strong investor demand for Permian producers to price its initial public offering (IPO) at $20 per share, seeing an immediate 30% lift in the stock price with its opening trade of $26 per share. The offering was priced at the high end of the range of $18 to $20 per share and raised an estimated $360 million, assuming exercise of the 15% overallotment option. A receptive market for Permian-focused E&Ps was evident in the run-up to the IPO. On the day prior to launching, Pioneer Natural Resources’ stock rose 12% as the company announced the results of its first Wolfcamp A interval well in Midland County. The DL Hutt C #2H had a 24-hour peak initial production rate of 1,712 barrels of oil equivalent (BOE/d), with a 30-day average production rate of 1,107 BOE/d. Diamondback Energy’s stock rose more than 11%, while Laredo Petroleum’s stock rose more than 12%.
Athlon Energy, headquartered in Fort Worth, Texas, with a field office in Midland, Texas, is 100% focused on the Midland Basin. The company has proved reserves of 86 million BOE (99% operated); as of June, production was about 12,000 BOE/d. Its leasehold comprises 98,348 net acres in the Midland Basin in three primary areas: Howard County, 51,556 net acres; Midland County, 33,709 acres; and Glasscock County, 13,083 acres.
Athlon was founded in August 2010 by former executives of Encore Acquisition Co., following Encore’s acquisition by Denbury Resources Inc., and is backed by Apollo Funds. Its executive officers include chief executive Robert Reeves, previously chief financial officer of Encore Energy Partners GP, and Nelson Tread-way, previously senior vice president, land, for Encore Energy Partners and currently Athlon’s senior vice president, business development and land. Post-IPO, management retains 12.2% in the firm, while Apollo’s stake comes down to 65.8% and the public float is about 22.1%.
Enthusiasm for Permian players has been enhanced by mounting evidence of multiple zones being prospective in the Midland Basin and elsewhere. Athlon notes its properties in the Midland Basin are in areas with 3,000 to 4,000 feet of stacked pay zones. The company says that its Midland Basin acreage has been de-risked by some 230 gross operated vertical Wolfberry wells it has drilled since early 2011 with a 99% success rate, and it has identified an inventory of 4,900 gross vertical drilling locations on 40-acre and 20-acre spacing.
In terms of horizontal development potential, Athlon says that multiple Wolfcamp formations are prevalent across its entire leasehold position, while the Cline and Mississippian formations are present across portions of its acreage.
Based on vertical well control data from its own and offset operators’ operations, Athlon says it has identified 311 gross/272 net horizontal locations in the Wolf-camp A formation, 357 gross/317 net locations in the Wolfcamp B formation, 133 gross/125 net locations in the Wolfcamp C formation, and 227 gross/193 net locations in the Cline.
Interestingly, Athlon is an “emerging growth company” under the JOBS (Jumpstart Our Business Startups) Act. This means Athlon will be exempt from certain reporting requirements, such as providing an auditor’s report on management’s assessment of the effectiveness of its systems of internal control. Athlon would cease to be an “emerging growth company” on reaching certain thresholds, such as when it has $1 billion or more in annual revenues.