It’s an uncertain market for oil and gas companies, especially with crude oil prices down to $88 per barrel in the first week of October, according to NYMEX figures.

But that’s not stopping oil and gas companies from going “all in” on the initial public offering (IPO) market.

Ernst & Young’s IPO Pipeline Analysis has the numbers, and they show that while IPOs were in decline for the third quarter of 2012, on a year-to-year basis, IPOs are up and should remain so through the end of the year.

Here are some key takeaways from the latest Ernst & Young report:

• Of all IPOs priced in Q3, 14 had positive returns, and the average post-IPO return was 34% compared with 7.3% for the S&P 500.

• Q3 had 26 IPOs excluding REITs, closed-end funds, SPAC and OTC issues.

• IPO volume and value thus far in 2012 were 90 and $31.1 billion, up from 85 and $28 billion in the first nine months of 2011.

• Of the 114 IPOs currently in the IPO pipeline, 22 of them are in the oil and gas sector.

How do industry experts view the strength of the energy side of the IPO market?

Although the consensus says that even with 22 IPO’s – a big number for the industry – the flood of oil and gas new stock offerings shouldn’t have a big impact on energy prices.

“The overall story for the oil and gas IPO market remains relatively unchanged in recent months,” says Rob Reedy, managing partner with Porter Hedges, a Houston-based law firm specializing in the energy industry. “The minor decrease in market volatility has offered slightly increased activity over the same period last year for oil and gas IPOs.”

It’s not IPO’s driving the oil and gas pricing issue, it’s the other way around, Reedy says.

“Commodity prices remain one of the primary drivers of oil and gas company IPO performance,” he adds. “In addition, the trend of service companies going public as well as a new round of non-midstream MLPs is also continuing, including some variable rate MLPs. It is still a tough market with institutional investors being very selective.”

“That said, market volatility and commodity prices have the most impact on the oil and gas industry, and as long as there is uncertainty about those in the market oil and gas prices will continue to fluctuate,” Reedy adds.

Of the oil and gas IPOs in play, and coming down the pipeline, which sectors are most prominent? Three key energy sectors stand out, analysts say.

“Currently, we’re seeing a high level of IPO activity in the oil and gas industry with the most active sectors being E&P, oilfield services and midstream,” explains Victor Burk, a managing director with the global professional services firm Alvarez & Marsal in Houston. “One of the key drivers of IPO activity is private equity investors using IPOs as an exit strategy for some of their portfolio company investments. We’re also seeing new master limited partnership IPOs, not only in the midstream and upstream sectors but also in refining and other sectors.”

Others agree that MLPs are a rising factor in the energy IPO market, as more E&P companies turn to them in increasing numbers.

“From an intermediate and long-term point of view, the oil and gas market is looking very positive,” says Ron Montalbano, U.S. Oil and Gas sector leader at Ernst & Young Capital Advisors LLC. “There is a strong interest in yield in the current market, and structures such as Master Limited Partnerships (MLPs) are seeing higher demand. The types of assets in MLP structures are expanding as more upstream companies, or companies that produce crude oil and natural gas, are using the structure for select assets. Weaker sectors like downstream and services companies do not always follow the same trends as upstream; however, those sectors are beginning to look at MLPs as well.”

Montalbano also agrees that energy prices are fueling the oil and gas IPO market, and that energy IPOs are making big bucks in a strong market.

“Actually it is the opposite. Strong oil and gas prices will impact the IPO market,” he says. “If oil prices rise bullish, bets by speculators drive prices even higher. Oil and gas was a top sector this quarter with 22 companies in the pipeline raising $6.7 billion,” he adds.

Montalbano also offers some advice for investors mulling energy company IPOs this fall.

“For traditional IPO's in the oil and gas sector, the short- and long-term fundamentals of the underlying commodity price are key to a successful IPO,” he explains. 

“Investors should focus on the sector fundamentals and layer that with the fundamentals of the company, and the strength of that company's story. This includes looking at senior management team credentials, quality of corporate governance, corporate earnings and earnings forecasts.”

In bull and bear markets, those are the tenets that hold fast with oil and gas IPOs. If you eyeball a newly public oil and gas company, it’s perfectly OK to note that it’s likely a good time to invest in energy IPOs.

But even when the sun is shining, it’s best to shed as much light on new IPOs as you can.

After all, as any seasoned Wall Streeter will tell you, when it comes to pouring good money into IPOs, failure just isn’t an option.