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Constellation Launches E&P Spin Off

A natural gas partnership spun off by utilities giant Constellation Energy Group Inc. (CEG) on Wednesday earned modest success, raising $94.5 million on 4.5 million common units. Constellation Energy Partners LLC, formed as a subsidiary by CEG in February 2005, was forecast to earn between $19 and $21 per unit, and it was trading in the high end of the forecast at midday.

The exploration and production (E&P) unit will maintain its current strategy: acquire, develop and exploit oil and natural gas properties and related midstream assets. The CEG assets now consist primarily of coalbed methane reserves, which are located in the Robinson's Bend Field in the Black Warrior Basin of Alabama (see Daily GPI, Aug. 14).

The initial public offering (IPO) is expected to be completed by Monday. Global Markets Inc. and Lehman Brothers Inc., acting as joint underwriters, were granted a 30-day option to purchase up to an additional 675,000 common units at the same price to cover any overallotments. The E&P will trade on the New York Stock Exchange under the ticker symbol "CEP." Baltimore-based CEG will own 59% of the E&P, and it will pay profits in the form of a 9% annual dividend.

The Constellation launch is one of several energy-related IPOs expected to debut this year.

Los Angeles-based BreitBurn Energy Partners LLP, whose 29.7 MMboe of proved reserves are concentrated in the Los Angeles Basin and in the Big Horn and Wind River Basins of Wyoming, was launched by Calgary-based Provident Energy Trust in October. BreitBurn's initial 6 million units sold for around $18.20/unit; it was trading at around $19.50 on Wednesday. BreitBurn trades on the Nasdaq Global Market under the symbol "BBEP."

Houston-based EV Energy Partners LP debuted on Oct. 1. Its 3.9 million units sold for about $20/unit; it was selling for about $21.69 at midday Wednesday. General partner is EV Energy GP LP, and its predecessors were controlled by EnerVest Management Partners Ltd. EV Energy owns oil and gas properties and related assets in North Louisiana, the Appalachian Basin and West Virginia, and it trades on Nasdaq under the symbol "EVEP."

The much-anticipated offering is scheduled by Nymex Holdings Inc. on Friday (see Daily GPI, Nov. 15). Nymex Holdings, which operates the New York Mercantile Exchange, expects to earn between $54-57 per share on 6.5 million shares.

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