Oil and Gas Eye

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Juniors take another step backward, but IPOs offer signs of hope

  • EY’s Oil and Gas Eye index continued to trend lower in early 2014, falling 15% in Q1 – the largest decline in eighteen months. It has now fallen in three of the last four quarters – perhaps a reflection of current negative stock market sentiment towards the junior resources sector.
  • Larger oil and gas companies, with more stable cash flows and a more balanced portfolio of exploration and producing assets, continue to outperform their AIM peers. The FTSE 350 Oil and Gas Producers’ index fell just 3% over Q1.
  • AIM-listed oil and gas companies raised £110.3 million through further issues. Once again, fund raising activity was limited to a small number of companies: only 14% successfully raised funds, and three companies accounted for 79% of total funds raised.
  • Total funds raised by junior oil and gas companies represented just 7% of the total raised across all sectors on AIM this quarter – the lowest proportion since early 2009. Companies without cash flows from operations, lacking in scale, or with risk concentrated in a single project, are likely to continue facing funding challenges.
  • The one bright spot is that two new oil and gas companies joined AIM in Q1, raising £19.5 million. AIM itself appears to be returning to growth. It saw a total of 17 new listings across all sectors this quarter, and the £1.2 billion these raised represented the highest total raised in a single quarter since 2007.