For Immediate Release

Capital Markets Review: $22 Billion in Debt and Equity Raised: Up 9 Percent from 4Q 2018, but Down 45 Percent Year-Over-Year

Upstream sluggish as capital flows to Midstream; Bonds normalize while equity markets have icy start in 2019

Media Contact: Jon Haubert | 303.396.5996

Austin, TX (April 17, 2019) – Drillinginfo, the energy industry’s leading SaaS and data analytics company, released its quarterly Capital Markets review showing $22 billion in aggregate funds raised in the energy industry through public equity and debt offerings in Q1 2019. Collectively, offerings were down 45 percent from the comparable quarter a year ago.

In equity, initial public offerings opened after coming to a stop in Q4 2018, raising $505 million via two initial public offerings – New Fortress Energy and Tortoise Acquisition Corp – compared to $2.0 billion in Q1 2018. Brigham Minerals was the only company to file an S-1 during the quarter.

Christopher George, director of Drillinginfo’s Capitalize, a database that tracks securities and credit activity of energy companies that file with the SEC, as well as private investment activity, said, “Wall Street has forced financial discipline and seeks return of capital, dividends, and share buybacks as evidence. Until the sector demonstrates this behavior across the board, the spout of equity capital is being choked off. The first quarter represents the least amount raised from the fewest deals in any quarter this decade.”

Equity Markets Continue Slide
↓ The industry raised $1.2 billion from public stock offerings during Q1, 81 percent less year-over-year and 70 percent below Q4.

↓ Upstream raised $0.5 billion across two equity offerings, down 32 percent from a year ago, but up 684 percent from Q4 ($68 million).

↓ The Midstream and Downstream sectors issued $0.3 billion of equity, down 88 percent year-over-year and 72 percent from Q4.

↓ The Oilfield Services sector saw one equity offering raise $0.3 billion, down 87 percent from the funds raised in Q1 2018 from 12 offerings.

Bond Issues Fall 38 Percent YOY, but Increased 28 Percent from Q4
Capitalize tracked the issuance of $21 billion principal amount across 30 bond floats in Q1 compared with $33 billion in 51 deals in 1Q 2018. Despite a sequential rise in transaction value and count, the average deal size decreased from $772MM to $691MM.

The Federal Reserve decided to keep the Federal Funds rate at 2.5 percent through 2021 in response to a slowing economy. This policy change reversed fourth quarter guidance which forecast a 3.5 percent target from four estimated rate hikes through 2021.

Investment grade issuers dominated the quarter selling 75 percent of the bonds floated in Q1 or 13 issues out of 17. This continues a general trend towards credit quality observed over the past four quarters.

Bond Floats by Sector
↓ Upstream issuers sold $4.6 billion across six bonds in Q1, down 35 percent from Q1 2018, but up 212 percent from Q4.

↓ The Midstream sector issued an aggregate $9.9 billion principal amount across 13 bonds in Q1, down 40 percent from Q1 2018, but up 37 percent from Q4.

↓ Oilfield Services raised $0.6 billion in debt from five bonds in Q1, 89 percent lower year-over-year and down 59 percent from Q4.

↓ Integrated companies issued $4.0 billion in debt in Q1, down 33 percent sequentially. There were no issuances in Q1 last year.

Private Equity Favoring Midstream
In the private equity realm, midstream dominated the quarter with 44 percent of the new management teams backed during the quarter and is on pace to surpass the 2017 high of 32 new teams. George noted, “This should come as no surprise given the successful midstream fund closures in 2018. If last year’s fund closures are a harbinger, then we should expect to see a strong year for OFS-focused private equity as well.”

Full copies of the report are available upon request.

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