LONDON |
LONDON Aug 19 (Reuters) – Takeover action is on the horizon
among smaller and weaker London-listed oil companies because
they are finding it harder to raise funds, while their larger
peers are having no such difficulty, according to a prediction
by Ernst Young.
The consultancy’s Oil and Gas Eye Index, which monitors the
sector within London’s Alternative Investment Market (AIM), fell
12 percent in the second quarter.
By contrast, the broader AIM market lost only 5 percent, and
the FTSE 350 Oil Gas Producers’ Index of mainstream oil and
gas stocks fell by only 2 percent, oil and gas transactions
partner Jon Clark noted in the Eye Index’s latest report.
Meanwhile, second quarter equity fundraisings among Oil and
Gas Eye Index stocks totalled just 42.1 million pounds ($65.5
million), 76 percent down on the first quarter and the lowest
since the first quarter of 2009, even though such fundraisings
across AIM were up 21 percent from the first quarter.
“The lack of confidence evident in the decline of the index
had a pronounced impact on overall market demand for the sector
and contributed to the very low levels of fundraising,” said
Clark in the latest index report.
He said he still saw a divergence in the availability of
capital within the industry, with larger players finding sources
of finance relatively plentiful, while smaller companies were
finding things increasingly tough.
“At the smaller end of the spectrum, those companies that
can deliver and communicate exploration and commercial success
will crowd the others out. The remaining companies will be
compelled to seek out alternative funding routes, which could
result in further consolidations as the year progresses.”
Seventy-nine percent of Oil and Gas Eye Index stocks fell in
the quarter, mostly because of poor drilling results, the report
said.
It picked out Wessex Exploration and Northern
Petroleum after their drilling disappointment in French
Guiana; New World Oil and Gas after a poor hydrocarbon
show in Belize; Kea Petroleum for its abandonment of a
disappointing well in New Zealand, and Petroceltic International
which failed to find worthwhile deposits off Bulgaria’s
coast.
0.6428 British pounds)