Professional services firm Ernst & Young’s oil and gas eye index, which tracks the performance of AIM-listed oil and gas companies, returned to growth over the third quarter of 2010, ending the period up 19.6%.
Since the start of 2010, the oil and gas eye has risen by 29.1% but is still 1% below the value at the beginning of 2008. Junior oil and gas stocks slightly underperformed the wider AIM All-Share Index in the third quarter, with latter rising by 20.6%
E&Y said more stable oil prices had helped provide support to oil and gas company stocks. The firm noted that the Brent crude price in the third quarter averaged $76.83 a barrel compared with $68.09 in the same quarter of 2009, and added that consensus was building around an $80 outlook for oil prices in 2011 and beyond.
Alec Carstairs, oil and gas partner at Ernst & Young in Aberdeen, said: “Despite this, oil and gas companies are not immune to the developments in the wider global economy.
“Economic growth is expected to be patchy across sectors and will vary in strength from country to country. The key concern in all this for oil and gas companies is the likely pace and sustainability of oil demand recovery.
“Polarised demand trends remain, with growth still led by developing countries, particularly in Asia and the Middle East.”
E&Y said there was no secondary fundraising in the oil and gas sector of the main market in the third quarter of 2010. This compares with £326.2million raised by oil and gas companies listed on AIM over the same period.
This was 30% less than the £467million raised in the previous quarter but 17% higher than the total raised in the same quarter in 2009. Flotation activity was subdued with just one oil and gas company listing on AIM in the third quarter, Falklands-focused Argos Resources.
Jon Clark, oil and gas director at Ernst & Young, said: “Just 16 of the 100-strong oil and gas companies on AIM successfully raised additional funds during the third quarter. A significant proportion of those intend to use the proceeds to accelerate developments and to fully fund near-term work commitments.”
“We see clouds looming on the horizon if the wider economy stalls and overspills into the oil and gas sector. Companies who need funding in the next 12 months may want to consider acting soon as they could regret a missed window of opportunity.”