Sector Update: Strong Gains for Energy Stocks; Tallgrass Energy Cut Down After Selling Discounted Stock

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Energy stocks were broadly higher Tuesday, with the NYSE Energy Sector Index rising nearly 1.5% while shares of energy companies in the S&P 500 were up about 1.0% as a group. Crude oil for September delivery was down 25 cents at $102.61 per barrel while August natural gas was down 6 cents to $3.79 per 1 million BTU.

In company news, Tallgrass Energy Partners LP ( TEP ) fell Tuesday after the pipeline company disclosed plans to buy a significant minority stake in a new pipeline connecting oilfields in Wyoming and Colorado with the industry hub in Cushing, Okla., selling 7 million equity units at $41.07 apiece to help fund the $600 million purchase.

The offering went out at a 4.2% discount to Monday's closing price for the TEP units, generating nearly $287.5 million in gross proceeds. Underwriters received options to buy up to 1.05 million additional shares, which if fully exercised, would produce an extra $43.1 million in gross proceeds for the company.

The Tallgrass Pony Express pipeline project is being completed in stages, including converting a 430-mile natural gas pipeline starting in Guernsey, Wyo., along with a 260-mile extension to the Cushing hub. The project also calls for a 66-mile spur into northeastern Colorado. The mainline is expected to begin service by late September with the Colorado Lateral coming on-line before next June.

Under terms of the proposal, TEP would be able to acquire a 33.3% interest in pipeline from its current owner, Tallgrass Development, for $600 million. According TEP Chief Executive David Dehaemers, the deal would significantly diversify the company's operations and regional footprint, and would immediately add to TEP earnings if completed this year.

TEP shares recently were down 4.8% at $40.80 apiece this afternoon, earlier sliding to a session low of $40.50 a share. The stock has a 52-week range of $22.03 to $43.50 a share, climbing more than 90% in value over the past 12 months.

In other sector news,

(+) HLX, (+7.5%) Q2 net income rises to $57.8 mln, or $0.55 per share, from $27.2 mln last year and beating analyst estimates by $0.13 per share. Revenue jumps 31.6% year over year to $305.6 mln, crushing Street view by around $38.6 mln.

(-) PVG, (-7.5%) Announces plans for a $60 mln offering of common stock, with the company selling 82.5% of the shares to be sold - with proceeds funding more development of its Brucejack project - and Silver Standard Resources selling the remaining 17.5%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing Commodities
Referenced Stocks: TEP

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