High-grade debt issuance by the oil and gas sector was on track to set a new record of approximately $106 billion in 2012, surpassing the prior high of $104 billion set in 2009. Similarly attractive conditions may lie ahead for prospective oil and gas issuers in 2013.

“Energy is viewed as the asset class of choice in fixed income,” says Greg Hall, head of natural resources debt capital markets at Barclays.

He attributes record issuance to both industry-specific and technical factors.

With attractive expected drilling economics, integrated oil and E&P issuers are “locking in near record-low long-term rates” as they set capital budgets focused on continued oil and liquids-rich production growth.

In addition, “there is huge technical demand, as investors continue to pour money into the sector,” says Hall. “Investors are drawn to the relative safety of the asset class and the fact that these are familiar companies with assets in the ground. And there is still an opportunity to pick up yield, even at these coupons.”

With Federal Reserve policy “keeping treasury rates artificially low, coupled with technical demand driving spreads tighter, we have a confluence of events here that is awfully attractive for issuers, and they are taking advantage of it in record numbers.”

Energy issuer coupons are in the lowest 1% of energy debt issued over the past 10 years, with five of the six lowest coupons issued in November-December of 2012, according to Barclays.

Energy issuance has been active across subsectors. For example, in the E&P sector, ConocoPhillips in December issued two debt tranches ($1 billion apiece, one five-year and one 10-year) at coupons of 1.05% and 2.40%, while offshore drilling contractor Rowan Companies issued two tranches ($200 million of 10-year, $400 million of 30-year) at 4.875% and 5.40%.

Midstream has also been well represented as infrastructure buildout expands to serve growing shale plays. Plains All American issued two tranches ($400 millon of 10-year, $350 million of 30-year) at 2.85% and 4.30%.

What’s the outlook for 2013?

“We expect 2013 to be active again,” says Hall. “Capex budgets continue to increase, and non-U.S. issuers view the U.S. dollar market favorably from a cost perspective. The wild card will likely remain acquisition financing volume.”