Drilling down 2020
A REVIEW OF THE PERFORMANCE OF AIM
LISTED OIL & GAS COMPANIES IN 2019
800
600
400
200
0
2. FURTHER ISSUE PROCEEDS
...by contrast, secondary fundraising fell to the lowest level since our survey began.
2014/15
2015/16
2016/17
2017/18
2018/19
342
382
£m
795
498
153
Yellow Cake is not an
exploration or production
company but offers investors direct exposure to the uranium spot price. It will be interesting to see if an investment play such as this becomes a popular way to invest in commodities.
New issue proceeds were the highest since our survey began in 2010/11. However, there were only two IPOs, with Yellow Cake raising £151m…
0
£m
180
135
90
45
2018/19
2015/16
2016/17
2017/18
1
8.35
26.9
27.5
151.1
FUNDING
AIM mining market caps are at the same level as five years ago despite there being 53 fewer companies.
And as a
result...
2013/14
No. of AIM mining companies: 157
Aggregate market caps: £4,398m
2018/19
No. of AIM mining
companies: 104
Aggregate market caps: £4,394m
Average
£28m
Average
£42m
4. MOVEMENT IN MARKET CAPS
5%
-5%
-15%
-25%
Other mining companies
Top 10
Mining companies
All AIM companies
0.9%
-22.1%
-9.2%
-9.5%
Investors' current preference for larger mining companies with proven resources is reflected in the fact that the top 10 held their mining caps whereas all others fell.
The performance of the mining sector was in line with the wider AIM market
6. COMMODITY PRICES AND AIM BASIC RESOURCES INDEX
03.05
03.04
03.03
03.02
03.01
03.12
03.11
03.10
03.09
03.07
03.06
03.07
20
03.08
2017
2018
Since June, gold prices have increased by c9% whereas sector market caps have increased by c4% so AIM gold mining companies may be undervalued
FTSE AIM OIL & GAS
FTSE AIM 100
BRENT CRUDE
UK NBP GAS
OUR OUTLOOK for 2019/2020
1. Mining companies cannot currently rely on equity funding so will need to explore debt, private equity, sovereign wealth funds and other alternative investment strategies.
2. Gold mining companies are likely to benefit from a continuing flight to gold as a safe haven due to geopolitical uncertainties.
3. Ongoing geopolitical uncertainties will continue to weigh on global growth and therefore demand for commodities.
4. Companies investing in rare earth and other niche metals required in battery and other cleantech are likely to outperform more traditional metals companies.
This publication has been carefully prepared, but it has been written in general terms and should be seen as containing broad statements only. This publication should not be used or relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained in this publication without obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of your particular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any responsibility or duty of care in respect of any use of or reliance on this publication, and will deny any liability for any loss arising from any action taken or not taken or decision made by anyone in reliance on this publication or any part of it. Any use of this publication or reliance on it for any purpose or in any context is therefore at your own risk, without any right of recourse against BDO LLP or any of its partners, employees or agents.
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Copyright © March 2020 BDO LLP. All rights reserved. Published in the UK.
www.bdo.co.uk
FOR MORE INFORMATION:
BDO Global Energy Group
BDO LLP
Oil & Gas Sector
...average market cap has increased by 50% reflecting
the perceived size and quality of the remaining
population
LOUISE SAYERS
+44(0)20 7893 2714
louise.sayers@bdo.co.uk
JEFF HARRIS
+44(0)129 384 8994
jeff.harris@bdo.co.uk
A tough year as the recovery loses momentum
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Stock market indices and commodity prices 2019 (rebased)
60
100
140
100
60
20
140
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
CLICK TO VIEW
The AIM Oil & Gas index (down 6%) underperformed the wider AIM market (up 12%).
The performance of the AIM Oil & Gas index reflected the mixed news on commodity prices with oil increasing by 20% but gas declining by 50%.
The recovery in funding has stalled for secondary issues (down 22% on 2018) and IPOs with only one new joiner raising any IPO proceeds (Longboat Energy).
However, the decline in funding was not specific to oil and gas companies as fundraising for the wider equity markets also declined significantly in 2019.
0
500
1,000
£m
1
10
59
99
10
330
673
562
609
474
IPOs
IPOs
Secondary Issues
Secondary Issues
2015
2016
2017
2018
2019
Top 10 companies by market cap (at December 2019)
-50
0
50
100
150
200
250
GAS: 2
OIL: 3
GAS & OIL: 5
Show / Hide all
Split by commodity type
Movement (%)
Both
Oil
Gas
Both
Both
Both
Oil
Gas
Oil
Both
Main Commodity
698.6
666.7
521.5
487.3
426.5
344.8
232.4
214.2
201.7
146.9
Mkt Cap
(£m)
DIVERSIFIED GAS & OIL
HURRICANE ENERGY
INDUS GAS
PHOENIX GLOBAL RESOURCES
JADESTONE ENERGY
SERICA ENERGY
AMERISUR RESOURCES
SAVANNAH PETROLEUM
PETROTAL CORPORATION
CASPIAN SUNRISE
Company
From the start of the decade, market caps declined by 83% to their low point in 2015 …but company numbers remained relatively stable.
Company numbers and aggregate market caps
-
100
120
2,000
91
100
102
97
95
89
78
83
85
80
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Aggregate Market CapS
Company Numbers
Reasons for cancellation of listing
As in previous years, companies continue to leave for regulatory and cost saving reasons, in line with the wider AIM market…
57%
M&A
29%
Regulatory reasons
14%
Cost savings
However, in 2019, the majority of delistings were due to M&A activity, showing that AIM listed companies can be attractive to other industry players. Two of the top 10 at the end of 2018 were acquired, with the team behind Faroe Petroleum, which was acquired by DNO ASA, re-entering the market by establishing and listing Longboat Energy to search for new opportunities in the sector.
Adding to this trend, Amerisur Resources was acquired by GeoPark in January 2020.
Whilst equity fundraising was restricted in 2019, other funding was available. Independent Oil & Gas raised €100m of debt, in addition to an £18m equity raise.
In this uncertain environment, dominated by the Coronavirus crisis and Saudi Arabia’s recent decision to drive down prices, it is even more important to consider alternative sources of funding, if equity finance is constrained for extended periods.
There has been limited change in the mix of oil versus gas companies among the top 10 companies by market capitalisation
Going forwards, companies should pay closer attention to their ESG policies to satisfy shifting investor demands.
As 2019 saw a number of positive M&A stories...
... now may be the time to consider acquisitions or disposals to meet your strategic goals or enhance shareholder value.
ALISTAIR KELSEY
+44(0)20 7893 3657
alistair.kelsey@bdo.co.uk
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
-
80
60
40
20
Oil & Gas Outlook
DIVERSIFIED GAS & OIL
HURRICANE ENERGY
INDUS GAS
PHOENIX GLOBAL RES.
JADESTONE ENERGY
SERICA ENERGY
AMERISUR RESOURCES
SAVANNAH PETROLEUM
PETROTAL CORP.
CASPIAN SUNRISE
Split by commodity type
£m
No
18,000
120
18,000
120