Capital Markets Review: Down 14%, Energy Industry Raises $22 Billion Through Equity & Debt Offerings in 3Q18
IPO Market Shuns E&P; Federal Funds Rates on the Rise
Media Contact: Jon Haubert | 303.396.5996
Austin, TX (Oct. 30, 2018) – 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 Q3 2018. For the first nine months ending on September 30, total offerings of $87.4 billion were down 14 percent from the $102 billion sold during the comparable period in 2017. Collectively, offerings were down 28 percent from Q3 2017.
In equity, initial public offerings – which in 2017 had shown encouraging rates of investor engagement, thus fueling hopes of escalated activity for 2018 – raised just $3.0 billion via nine IPOs during the first three quarters of 2018, equal to 42 percent of the IPO capital raised during the same period in 2017. Two IPOs closed in Q3—special purpose acquisition company Spartan Acquisition Corp. and Berry Petroleum, raising a combined $663 million compared with three IPOs in Q3 2017 that raised $463 million and one in Q2 that raised $360 million.
Christopher George, director of Drillinginfo’s Capitalize, noted the currently prohibitive conditions for upstream equity deals, particularly IPOs.
“The market clearly has rejected publicly traded E&P’s. If you’re not a special purpose acquisition company then don’t bother. Eight of the eleven upstream IPOs since January 2017 have been SPACs,” George commented.
George’s analysis is underscored by two recent upstream IPO postponements—Riley Exploration-Permian and multi-basin royalty interest holder Remora Royalties, both of which were seeking to raise capital in the low-$100 millions. George added that for companies in the prolific Permian investor-magnet, critical takeaway capacity and water issues have thwarted equity raises.
Equity Sales Continued to Wane
↓ The industry raised $2.4 billion from public stock offerings during Q3, 48 percent less year-over-year and 43 percent below Q2.
↑ Upstream raised $1.2 billion across five equity offerings, up 54 percent from a year ago and 15 percent from Q2.
↓ The midstream and downstream sectors issued $786 million of equity, down 79 percent year-over-year and 43 percent sequentially.
↑ The oilfield services sector saw two equity offerings raising a combined $356 million, up 300% greater than the funds raised in Q3 2017 from one offering.
Capitalize tracked a total $12.6 billion in equity offerings across all sectors for the nine months ending on September 30, 2018, a 54 percent decrease from $27.3 billion for the comparable period in 2017. Upstream sold $3.05 billion in equity, midstream and downstream sold $5.0 billion and OFS companies $4.55 billion, compared with $8.7 billion, $12 billion and $4.4 for those sectors, respectively, in the comparable 2017 period. Q1-3 2017 results include a $2.25 billion raise from an integrated company.
Private equity firms tracked below the 2018 three-quarter average in Q3 with 30 commitments across all sectors, bringing the total for the three quarters to 104. Competition for new management teams continues to intensify as 28 unique sponsors backed a team during Q3.
Bond issues flat on YTD results, off 27 percent in Q3
Capitalize tracked the issuance of $19 billion principal amount across 32 bond floats in Q3 compared with $26 billion in 41 deals in 3Q17. For the nine months ending on September 30, the industry issued 117 separate bonds with an aggregate principal amount of $74.82 billion, nearly identical to the $74.88 billion principal amount sold through the same number of bonds issued in the like period 2017.
Though the Federal Reserve continued rate hikes—the latest bringing the new Fed Funds rate to 2.0-2.5%—investment grade issuers sold just 28 percent of the bonds floated in Q3, or nine issues out of 32. That percentage retreated one point below the Q1 level of 29 percent after a Q2 in which investment grade issuers floated 53 percent of all energy bonds.
Bond floats by sector
↓ Upstream issuers sold $9.32 billion across 14 bonds in Q3, down 10 percent from Q3 2017 but up 63 percent sequentially.
↓ The midstream sector issued an aggregate $3.7 billion principal amount across seven bonds in Q3, down 66 percent from Q3 2017 and 71 percent sequentially
↑ Oilfield services raised $3.16 billion in debt from 7 bonds in Q3, 134 percent higher year-over-year and up 98 percent sequentially
↑ Integrated companies issued $3.3 billion in debt in Q3, flat year-over-year and up 128 percent sequentially
Full copies of the report are available upon request.
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