Vitol’s Viva Energy Float Dissappointing Debut in Australia

The Oil refiner and marketer Viva Energy IPO debuted Friday in Australia down 4 percent below the issue price, dissappointing for owners led by independant global energy trader Vitol.

The Oil refiner and marketer Viva Energy IPO debuted Friday in Australia down 4 percent below the issue price, dissappointing for owners led by independant global energy trader Vitol. The stock failed to trade higher than the issue price of A$2.50 and closed at A$2.40. 

Viva Energy

Viva Energy trades under the symbol VEA on the Australian Stock Exchange

Vitol, the majority owner, raised A$2.65 billion ($1.96 billion) selling 55 percent of the company in the initial public offering. The IPO was priced at the bottom of the bidding range at 13.1 times forecast net profit for the year to June 2019.

The IPO came in as a slight discount to it’s regional rival Caltex Australia Ltd. Caltex Australia back in May released better than expected first quarter earnings. $CTX.AU profit was boosted by increased transport fuel sales as Australia’s economy expands. However the flow on from the Viva Energy floar saw Caltex shares also fall on Friday, ending down 1.4 percent.

It was reported that fund managers were surprised at the drop with the IPO having had good support from institutional investors. The volume was not heavy, at less than 3 percent of the shares on issue. This suggested retail investors disappointed with Viva’s weak opening may have sold out.  “It’s not one you’d be expecting to make a big ‘stag’ on since it’s a stable, yielding business,” Wilson Asset Management portfolio manager Matthew Hauptman told Reuters.

Viva Energy expects its net profit to grow by about 14 percent to A$370.8 million in the year to June 2019, according to the float (IPO) prospectus.

“I have great confidence on our ability to deliver on our long-term forecasts and I look forward to leading a team that will continue to produce outstanding long-term shareholder returns,” Viva Energy Chief Executive Scott Wyatt said in an emailed comment.

The IPO was managed by Bank of America Merrill Lynch, Deutsche Bank and UBS.

About Viva Energy Australia

Viva Energy Australia was formed following the acquisition of Shell’s downstream business (excluding lubricants production) in Australia in 2014. Vitol and its unnamed partners bought Royal Dutch Shell’s former refinery in Geelong near Melbourne and its petrol stations in Australia for $2.6 billion in 2014. Since then they have spent over A$1 billion improving the business, including buying Shell’s jet fuel operations, expanding its petrol station network, and acquiring a 50 percent stake in independent fuel retailer Liberty Oil.

Viva Energy is the exclusive licensee of the Shell brand in Australia and provides consumers and business customers with quality Shell products. Viva Energy has more than 985 Shell branded service stations, a further 187 Liberty branded stations, and employs over 1,200 people. The retail network is evolving continuously, both through investment in existing service stations and expanding the footprint on the ground.

The network is supported by almost 50 fuel import and storage terminals and the Geelong Refinery, owned by Viva Energy Australia. The 120,000 barrels per day refinery is one of the largest and most complex hydrocarbon refineries in Australia. It produces about half of Victoria’s fuel needs and is the only Australian refinery that manufactures bitumen and avgas (used by piston engine planes). In addition, the refinery produces solvents to support the Australian mining, paint, adhesive and other industries.

Source: Reuters, Vitol

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