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