Developments set to stall as AIM oil and gas companies face cash squeeze

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Monday 13 August 2012: According to EY, oil and gas investors are facing disappointment as AIM-listed companies appear set to defer and/or scale back on development commitments.

The firm's latest Oil and Gas Eye Index – which measures the performance of the sector's junior companies – plummeted by 20% during the second quarter of 2012, erasing almost all of the gains achieved in quarter one.

And Jon Clark, oil and gas partner at EY, believes that the only certainty facing AIM companies is that a further period of uncertainty is on the horizon.

Jon commented: "The first quarter of the year saw glimpses of light at the end of the tunnel, but that now looks like the glow of an onrushing train of anxiety" .

"Markets will remain volatile while the eurozone continues to seek a more permanent solution to the region's problems. This will push investors towards safer havens, as evidenced by the 38% drop in secondary fund-raising activity between April and June."

"This will realistically result in the delay of development projects, unless companies are willing to court larger, better capitalised partners or acquirers.".

The report notes that just 19% of the 115 oil and gas companies listed on AIM achieved share price gains during the period covered as they underperformed the wider AIM market and their larger FTSE 350 peers.

Clark believes conditions will result in a contraction of the AIM oil and gas universe as the year progresses.

"With the outlook for oil and gas IPO activity remaining difficult, the signs suggest there will be a net reduction in number of oil and gas companies listed on AIM during 2012. Compare that to other sectors on London's junior market in the second quarter in which more than £150 million was raised from 12 new issues," he concluded.