The IPO Buzz: Kodiak Gas Serivces (KGS) Prices IPO at $16 – Below Range

Kodiak Gas Services (KGS) priced its IPO at $16.00 – $3.00 below the bottom of its $19.00-to-$22.00 price range – on 16.0 million shares – the number of shares in the prospectus – on Wednesday night (June 28, 2023). The Permian Basin gas services company raised $256 million in its IPO. Kodiak Gas Services’ stock opened at $15.56, down 44 cents or about 2.8 percent below its $16.00 IPO price, in its debut today (Thursday, June 29, 2023) on the New York Stock Exchange.

Goldman Sachs and J.P. Morgan led the joint book-runners’ team, which included Barclays, BofA Securities, Raymond James, RBC Capital Markets, Stifel, Truist Securities and TPH & Co.

Kodiak Gas Services intends to use the IPO proceeds to pay off some debt, according to the prospectus.

The Street hears that IPO investors had pushed for Kodiak’s deal to be priced below range, due to their concerns about the company’s $2.7 billion in outstanding debt.

At the $16.00 IPO price, Kodiak Gas Services has a valuation of about $1.2 billion.

Kodiak Gas Services, based in Montgomery, Texas, about 50 miles northwest of Houston, is a leading provider of large horsepower compression units to natural gas and oil E&P companies in the Permian Basin. The Permian Basin is the largest producing natural gas and oil basin in the U.S. Kodiak Gas Services says its four largest customers are all members of the S&P 500.

In the prospectus, Kodiak Gas Services says it expects demand for LNG (liquefied natural gas) will increase globally  – especially against the backdrop of Russia’s war in Ukraine and its impact on natural gas supply. A pickup in LNG demand would translate into an expected increase in the demand for Kodiak Gas Services’ work, according to the prospectus.

Kodiak Gas Services earned net income of $65.98 million on revenue of $729.68 million for the 12 months that ended March 31, 2023.

EQT AB, a Swedish public limited liability company whose stock trades on NASDAQ Stockholm, is the largest shareholder of Kodiak Gas Services. After the IPO, an investment fund advised by an EQT AB affiliate will own about 79 percent of Kodiak Gas Services’ outstanding stock, according to the prospectus.