Colombia’s state-controlled oil company Ecopetrol could raise nearly $3 billion with an expected share sale starting later this month, analysts surveyed by Reuters said on Thursday.
The offering would be the largest issuance in the market of Latin America’s No. 4 oil producer this year, although foreign investors will not be allowed to participate. The sale is due to run between July 27 and August 17.
The company is authorized to sell shares that would represent a 9.9 percent interest, and analysts expect Ecopetrol to issue about a third of that amount, according to a Reuters poll of 10 local brokerages.
Estimates for the offering ranged from $1.71 billion to $5.69 billion, with a median of $2.84 billion and an average of nearly $3 billion, the survey showed. Prices were estimated between $1.90 and $2.10 per share, with an average of $2.00.
Colombia’s largest oil producer sold shares representing a 10.1 percent interest in 2007 and is authorized by the country to sell a total of a 20 percent interest. The 2007 offering raised $3.24 billion and priced at about 80 cents at the current exchange rate.
On Thursday, local shares were trading 1.2 percent lower, due in part to portfolio liquidations ahead of the offering, which is expected to price at a discount, experts said.
“It is understandable that investors anticipate and act accordingly, but the stock is sharply undervalued with respect to our estimates,” said Juan David Pineros, an analyst at brokerage Interbolsa, which has a “buy” rating on the stock, with a price target of 4,670 pesos ($2.65) for year-end 2011.
The big question hanging over the offer is how many shares Ecopetrol will offer. The company’s board meets on July 22 to decide on the details of the issue, which still needs regulatory approval.
Analysts say market conditions may not be the best for a large issuance, amid expectations of other big offerings from local firms during the third and fourth quarters.
The market’s big investors — pension funds — are already heavily invested in Ecopetrol’s stock and bonds, nearing the participation limits imposed by regulators, experts say.
Still, brokers said the sale could see strong demand from retail investors, just as in 2007, when lines were seen stretching until midnight during the last day of the offering in front of brokerage offices and even some supermarkets.
“I don’t think they will offer the whole amount because it is too large. It could reach $8 billion; it would be the largest ever; and I don’t think there’s enough liquidity to absorb that,” a Bogota-based analyst said.