I'm glad I'm not the only one exasperated by these endless equity raises.
Here are some of my Foolish colleagues' responses to Valero Energy's (NYSE:VLO) follow-on offering last week:
- Chris Barker: "Wall Street is living it up, but I fear shareholders will suffer the hangover."
- Matt Koppenheffer: "The timing and price of the stock offering is just awful, particularly when we consider the massive amount of stock the company bought back at much higher prices over the past few years. Buy high and sell low? Sounds like management has no idea how much Valero's equity is worth"
- Joe Magyer (via instant message): "Why don't they just kick my dog while they're at it?"
So it's not just me. Phew.
Time, then, to highlight a few of the week's lowlights from within the energy sector.
On Tuesday, Stone Energy (NYSE:SGY) offered up a pile of shares to help pare its bank debt. This offering, which will expand the share base by up to 20%, is a direct outgrowth of the debt dilemma I outlined here.
The following day, owners of ATP Oil & Gas (NASDAQ:ATPG), which I've championed as an underdog of the deepwater, were treated to another share top-up to the tune of 23% or so initially. The offering size was increased Thursday night, spelling maximum dilution of 28%.
You can hardly accuse ATP of being unimaginative in its approach to deleveraging. The E&P has sold a chunk of reserves to France's EDF, and monetized some infrastructure by partnering with GE (NYSE:GE). The firm's even worked out a deal with Diamond Offshore (NYSE:DO) in which the driller will take an overriding royalty interest in lieu of cash. Despite these moves, the company still felt compelled to issue a big slug of shares at these low prices.
If this stock's asset value is nearly as high as some on our dedicated ATP message board believe it to be, then the offering is really a terrible blow. It doesn't give one much comfort with regard to the company's ongoing monetization efforts, either. I'm holding onto my outperform rating in Motley Fool CAPS, but I'm not happy.
Last but not least, EV Energy Partners (NASDAQ:EVEP) offered up some fresh units Wednesday in order to pay down debt and help fund a small acquisition. Assuming a full over-allotment exercise, unitholders of this master limited partnership are looking at a greater than 30% dilution. I don't follow EV, and certainly don't plan to.
