According to the Financial Times, smaller groups in the U.S. oil and gas sector are raising outside cash again after years of getting a cold shoulder from capital markets, as higher energy prices and stronger balance sheets help them win over investors. After a recent run-up in commodity prices, initial public offerings (IPOs) and bond issuance have revived.
Although capital markets remained open for the largest energy groups, smaller companies have struggled to raise cash in recent years after an earlier wave of debt-and-equity fueled overexpansion in the early 2010s led to big losses for many investors.
According to data from Dealogic, US oil and gas companies have raised $25.6 billion through IPOs in the first nine months of 2023, up from $1.2 billion in the same period last year. Bond issuance has also increased, with US oil and gas companies raising $64.5 billion in debt capital markets in the first nine months of 2023, up from $34.2 billion in the same period last year.
This renewed interest from investors is due to a number of factors, including rising oil and gas prices, strong demand for energy, and the Biden administration's focus on increasing energy production.
Oil prices have more than doubled in the past year, reaching over $90 per barrel in June 2023. This is due to a number of factors, including the war in Ukraine, sanctions on Russia, and strong global demand.
Natural gas prices have also increased significantly in the past year, reaching record highs in Europe this summer. This is due to a number of factors, including reduced supplies from Russia, increased demand from Asia, and low inventories.
The Biden administration has also signaled its support for the oil and gas industry, with President Biden releasing a plan in June 2023 to increase domestic energy production. This plan includes steps to streamline the permitting process for new oil and gas wells, increase leasing on federal lands, and provide financial support for clean energy technologies.
The renewed interest from investors in US oil and gas companies is a positive sign for the industry. It will allow companies to raise the capital they need to invest in new production and expand their operations. This will help to meet the growing demand for energy and reduce reliance on foreign oil and gas.
However, it is important to note that the oil and gas industry is facing a number of challenges, including the need to reduce its carbon footprint and the growing popularity of renewable energy sources. It remains to be seen how the industry will address these challenges in the long term.