Special Focus on Independent Oil & Gas
Stock Prices
While AIM stocks sank alongside the broader market it was interesting that companies in our sector (AIM Oil & Gas) suffered more: AIM fell around 25% by the end of 2011 and Oil and Gas stocks hit a low in September having lost c40% of their value. Was this justified? At the time I rationalized this on the back of three factors:
1. The summer season is always characterized by thin trading as investment managers exchange trading screens in the Square Mile for iPads on the beaches of the Caribbean, Mediterranean or, maybe last year, Cornwall.
2. In declining markets investors generally shy away from risk. AIM Oil & Gas not only had exploration risk but funding risk as the threat of a return to tight equity markets loomed. Debt markets wouldn’t help since exploration and debt are always a tricky combination.
3. Between April and June, it seemed equity investors were starting to price in a fall in crude prices that eventually came through in August and September. Just the threat of falling oil prices can be enough to spook the markets.
2012 – Two Tiers
On the face of it 2012 appears to have started out well, with AIM up 13% and AIM O&G up nearly 23% as I write. While Oil and Gas fundamentals are arguably the best they have been for many years the world around us still seems to be falling apart.
Behind this two-tier economy there are a number of positives out there for the sector:
After the declines in 2011 the sector is looking cheap with many companies trading at a significant discount to risker Net Asset Value.
The increased realization that oil prices are more likely to stay north of $100/bbl has helped stabilize the sector.
With Big Oil looking to focus on upstream you could argue that small-mid cap companies are looking vulnerable as potential M&A targets, especially companies with acreage or assets in the Far East (where a number of majors are under-represented), West Africa, East Africa and the Gulf of Mexico.
Around 80% of companies in the sector now have net cash on their balance sheets, great news in the event of a “credit re-crunch”.
Strong fundamentals are allowing companies to raise capital with several already having tapped the markets in 2012.
Drillers and Dealers :::
::: February 2012 Edition
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62