Edgen Murray could get interest

• By TED GRIGGS
• Advocate business writer
• Published: Sep 30, 2008 - Page: 1D - UPDATED: 12:05 a.m.

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Baton Rouge-based Edgen Murray Corp.’s filing of an initial public offering suffers from poor timing, but industry analysts said the high-performance pipe supplier will probably still draw a lot of attention from investors.

Edgen Murray expects, with no particular date set, to raise $250 million from the IPO that it filed with federal regulators last week. The money will be used to help retire the company’s debt. As of June 30, Edgen Murray had around $530.1 million in debt.

“Oil service stocks have dropped so much. It seems like a year ago they could have gotten a ton of money for that company, and now it’s going to be a much tougher sell,” said Peter Ricchiuti, assistant dean at Tulane University’s A.B. Freeman School of Business.

However, Ricchiuti said a number of things are working in the Baton Rouge-based firm’s favor.

For one thing, there are basically no publicly traded pure-play pipe companies left, he said. In the last two years, four firms like Edgen Murray have been bought out by larger companies.

Being the lone member in that category is a pretty good advantage, Ricchiuti said. There will likely be a lot of investor appetite for Edgen Murray’s stock.

In addition, natural gas players such as the Haynesville Shale in north Louisiana and the Barnett Shale in the Dallas-Fort Worth area require energy companies to drill much deeper than usual — the wells are being drilled around 12,000 feet deep and 3,000 feet horizontally — and that’s great for pipe suppliers like Edgen Murray, Ricchiuti said.

Edgen Murray officials could not be reached for comment Monday. However, federal regulations forbid them from commenting on the filing, made Sept. 24 with the Securities and Exchange Commission.

The company reported a loss of $2.3 million on revenue of $951.1 million during 2007, SEC records show. For the first six months of 2008, Edgen Murray reported net income of $27.8 million and revenue of $567.5 million. The company said it has close to 2,800 customers in 50 countries.

The loss resulted primarily from Edgen Murray’s decision to refinance its senior debt and acquire Petro Steel International LP and Petro Steel International LLC, which produce steel plates. Edgen Murray incurred a $31.4 million prepayment penalty.

Edgen Murray announced plans to go public earlier this year but delayed that strategy after receiving an injection of capital from private equity firm Jeffries Capital.

Edgen Murray cites several factors in its growth strategy:

• Increasing global demand for crude oil and natural gas, especially in deeper waters offshore and in unconventional reserves onshore.
• Increasing investment in natural gas pipelines in North America.
• Limited excess global refining and processing capacity requires expanding existing plants in the United States and new refineries overseas.
• Global investment in power generation capacity continues to increase, requiring new or replacement plant construction.

Al Pitre of Al Pitre Investor and Media Relations in New Orleans said the good news for Edgen Murray is that it doesn’t have to issue stock today.

The oilfield services stocks got hit hard when oil dropped from a peak $147 a barrel to less than $100, where it closed Monday, said Pitre, who does consulting work for energy companies.