Oil and Gas Eye
A bright quarter, but the outlook for some remains dim
- The Oil and Gas Eye index posted 9.6% growth in Q3, the largest quarterly gain in eighteen months.
- Selective investor appetite for perceived riskier stocks has returned. Three AIM oil and gas IPOs reflected this positive sentiment, and the IPO pipeline suggests the AIM oil and gas universe will welcome more entrants in the remainder of the year.
- This market stability is welcome, even if it is once again short-lived. The index has not had more than two consecutive quarters of growth since 2009. The feel-good (or at least less-bad) factor has yet to reach the majority of junior oil and gas companies though.
- Secondary fundraising came to £49.3 million, 17% higher than Q2’s total. Just four companies accounted for almost three-quarters of funds raised though, and, five years since the financial crisis began, equity capital market conditions for most junior oil exploration companies remain difficult.
- With a number of companies undertaking strategic reviews, we believe Q4 will be busy for M&A activity. Strategies to focus on core assets, establish in key geographies, and accelerate production, are likely to make companies more attractive to potential investors.