Mergers in Oil and Gas Firms on the Rise
Despite the recession, merger and acquisition activity amongst oil and gas companies are increasing.
Accountancy firm Ernst & Young reported over the weekend that merger activity in the oil and gas sector is expected to increase significantly due to a 26% fall in their market value in the three months to September.
The report shows that fundraising amongst oil and gas companies fell for a fourth consecutive quarter, with those businesses displaying weaker balance sheets and impending development projects, now expected to seek 'better capitalised' acquirers.
Jon Clark, oil and gas partner at Ernst & Young, says that the pending deals for Dominion Petroleum by Ophir Energy and EnCore by Premier Oil can be seen as 'M&A bellweathers'.
In the third quarter of 2011 three companies joined the junior market raising a total of £71 million, moves which Clark sees as exceptions to the 'listings stall'.
Jon Clark said: "Those companies with weaker balance sheets and particularly those with development projects will be looking towards larger, better capitalised acquirers."
Secondary fundraising by AIM-listed oil and gas businesses reached £168.7 million in the three months since July, a figure which represents a 48 per cent decline over the amount raised during the same period in 2010. The amount also equates to a drop of 37 per cent over the second quarter of 2011.
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