Capitalize, PLS Inc.’s proprietary comprehensive capital markets tracking platform, released a statistical review of the oil and gas industry’s capital markets activity for calendar year 2017.
Key findings:
- $34 billion in equity raised through offerings in 2017, down 36% from 2016’s $53 billion
- Of 2017’s eight upstream equity offerings, six were SPACs
- Big names such as Hess, Antero and BP spun off midstream MLPs
- $95 billion total debt issued in 2017, down 24% from 2016’s $124.8 billion
- Midstream sector led debt issues with $38 billion of $95 billion total
Upstream equity deals down by two-thirds
Though upstream equity deals in 2017 decreased by 67% year-over-year to $10.6 billion, the year ended with an upstream upswing with fourth quarter equity offerings totaling $1.9 billion or 139% higher than the previous quarter.
The industry’s total equity raised in 2017, according to PLS’ Capitalize, amounted to $34 billion, a 36% drop from 2016’s $53 billion. However, initial public offerings made a very strong return to the market with 20 in 2017 that raised an aggregate of more than $7.8 billion for their issuers compared with seven in 2016 that raised just $2.1 billion.
Upstream IPOs
There were eight upstream IPOs in 2017 which raised more than $3.2 billion.
Of the eight, six were blank-check, special purpose acquisition companies targeting the upstream sector—Silver Run Acquisition Corp. II, Kayne Anderson Acquisition Corp., Vantage Energy Acquisition Corp., TPG Pace Energy Holdings Corp., Osprey Energy Acquisition Corp. and Black Ridge Acquisition Corp.
The only two E&P companies that went public—Jagged Peak and Kimbell Royalty Partners—did so in the first quarter.
Of the remaining IPOs, four were midstream-focused. Big names such as Hess, Antero and BP spun off assets into master limited partnerships and raised an aggregate $2.1 billion. The oilfield services sector also sold IPOs during the year, raising more than $2.4 billion, and that momentum was carried over into January as the sector saw six IPOs either completed or in the planning stage. One of the OFS IPOs was a SPAC.
Including IPOs and follow-on offerings, midstream sold $15.8 billion in equity securities during the year, up 11% year-over-year, and the OFS sector sold $5 billion in equity, up 23% year-over-year. One integrated issuer—Canada’s Cenovus—sold $2.3 billion in common stock.
Debt issues off 25%
The bond markets were down in 2017 by 24% with Capitalize tracking a total $95 billion of debt instruments sold compared with $124.8 billion in 2016.
Of the total, upstream accounted for $34.3 billion, off 17% year-over-year with all but $8.0 billion of it issued by North American producers. Midstream had a bumper crop with $38 billion, a 37% jump from 2016 and OFS sold $8.1 billion, down 18%. Integrated issuers sold $11.2 billion in debt during the year, or 71% less than they did in 2016.
Canada
In addition to Cenovus, the largest Canadian upstream equity offerings were launched by Tamarack Valley Energy ($311 million), MEG Energy ($285 million) and Painted Pony ($88 million). Midstream went for large raises fairly often with Enbridge bringing in $3.6 billion, TransCanada selling $2.75 billion in securities, Alta Gas raising $2.5 billion and big raises by Pembina Pipeline and Gibsons.
Upstream debt offerings were used to refinance liabilities, fund acquisitions and capital expenditures. Among the largest were Canadian Natural Resources Ltd.’s $5.8 billion, Cenovus’ $2.9 billion, MEG’s and Husky’s $750 million and several below $500 million.
As in the US, private equity was a key source of capital for Canadian energy—Riverstone, Arc Financial, EnCap, NGP and Waterous all took major stakes in Canadian firms, ranging from Painted Pony and Vesta Energy to Step Energy Services.
