Nov 28 U.S. oilfield services company FTS
International on Wednesday officially pulled its plan for an
initial public offering as the market for its hydraulic
fracturing services remains soft and shows few signs of
The entire oilfield sector has been weighed down by an
influx of new U.S. pressure pumping equipment, which is used in
fracking to extract oil and gas from shale rock.
"The company has determined not to pursue the sale of the
securities covered by the registration statement," Greg Lanham,
the company's new chief executive, wrote in a letter to the U.S.
Securities and Commission.
Singapore sovereign wealth fund Temasek Holdings
holds about 40 percent of FTS, while Chesapeake Energy Corp
owns a 30 percent stake.
The letter from Lanham did not include a reason for the IPO
withdrawal, but the company -- formerly known as Frac Tech --
cited market weakness in June when it said it would postpone its
IPO for the foreseeable future.
Then, earlier this week, Standard & Poors reduced its FTS
earnings outlook due to the industry's excess capacity and high
costs, while cutting its FTS debt rating a notch and assigning a
"negative" outlook due to potential debt covenant breaches.
S&P said FTS's gross margins had dropped to below 20 percent
in the third quarter from more than 50 percent in the first half
of 2011. "Although we had anticipated a slight recovery in the
fourth quarter of 2012, accelerating into 2013, we have pushed
out our recovery expectations to mid-to-late 2013."
The Fort Worth, Texas-based company's full exposure to the
fracking business, unlike more diversified larger rivals Baker
Hughes Inc, Halliburton Co and Schlumberger
, have left it vulnerable in a downturn, S&P said.
A few tougher covenants will kick in through 2014 that
present a risk of breach for the company, which has established
a $175 million "cure" basket to be drawn upon to meet any
earnings shortfalls next year, S&P said on Monday. The rating
service had already anticipated no IPO for FTS until late 2013.
Having shelved its first IPO plan in the first half of 2011,
the company refiled for an even larger share sale in September
of last year while reporting revenue growth of 143 percent for
the first half. The market then turned quickly as a result of
the natural gas glut weighing down prices in North America.