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For Immediate Release

Capital Markets Review: Down 4%, Energy Industry Raises $20 Billion Through Equity & Debt Offerings in 4Q18

Energy IPOs come to grinding halt while more Fed rate hike talk stimulates investment grade issuers in Q4

Media Contact: Jon Haubert | 303.396.5996

Austin, TX (Jan. 16, 2019) – Drillinginfo, the energy industry’s leading SaaS and data analytics company, released its quarterly Capital Markets review today showing $20 billion in aggregate funds raised in the energy industry through public equity and debt offerings in Q4 2018. For the year, total offerings of $106.8 billion were down 20 percent from the $133 billion sold during 2017. Collectively, offerings were down 26 percent from the previous year.

In equity, initial public offerings started the year strong but came to a full stop in the second half of the year – raising just $3.0 billion via nine IPOs for all of 2018, compared to $8.7 billion in 2017. Though seven S-1s were registered in 2H18, market conditions hindered valuations causing companies to pull their registrations.

Christopher George, director of Drillinginfo’s Capitalize, a platform that tracks securities and credit activity of energy companies that file with the SEC as well as private investment activity, said, “Equity markets were challenged in Q4 and throughout 2018, and debt markets may be soon to follow as Federal Reserve rate hikes make borrowing more expensive. Investment-grade issuers, though, managed to get some multi-billion-dollar bonds out the door before year-end.”

Equity Sales Continued to Wane
↓ The industry raised $3.9 billion from public stock offerings during Q4, 56 percent less year-over-year and 67 percent above Q3.

↓ Upstream raised $0.07 billion across two equity offerings, down 97 percent from a year ago and 94 percent from Q3, making Q4 2018 the worst performing fourth quarter this decade.

↓ The midstream and downstream sectors issued $1.2 billion of equity, down 79 percent year-over-year but up 50 percent sequentially.

↑ The oilfield services sector saw three equity offerings raising a combined $2.7 billion, up 125% greater than the funds raised in Q4 2017 from four offerings.

Capitalize tracked a total $16.5 billion in equity offerings across all sectors for 2018, a 55 percent decrease from $36.4 billion raised in 2017. Upstream sold $3.1 billion in equity, midstream and downstream sold a combined $6.2 billion and OFS companies $7.2 billion, compared with $10.9 billion, $17.7 billion and $5.5 billion for those sectors, respectively, in 2017.

In the private equity realm, the pace of new team deployment in 2018 slowed from last year’s peak, especially in the upstream sector. Exit strategies for private equity groups have been challenged in this lower commodity price environment.

Bond issues fell 24 percent YOY, 13 percent from Q3
Capitalize tracked the issuance of $16 billion principal amount across 21 bond floats in Q4 compared with $21 billion in 40 deals in 4Q17. For the full year, the industry issued 137 separate bonds with an aggregate principal amount of $90.3 billion, compared to $96.6 billion sold through 158 bonds issued in the previous year.

Though the Federal Reserve continued rate hikes—the latest bringing the new Fed Funds rate to 2.25-2.5%—investment grade issuers sold 71 percent of the bonds floated in Q4, or 15 issues out of 21. That percentage eclipses the 33 percent of bonds sold in 4Q 2017 by investment grade issuers, with 13 out of 39.

George continued: “Against the backdrop of at least two Fed fund rate hikes expected this year, any refinancing by high-yield energy issuers will have to come with higher coupon rates, if their debt is part of the massive $700 billion in corporate maturities coming this year.”

Bond floats by sector
↓ Upstream issuers sold $1.5 billion across three bonds in Q4, down 79 percent from Q4 2017 and 83 percent sequentially.

↓ The midstream sector issued an aggregate $7.3 billion principal amount across eight bonds in Q4, down 3 percent from Q4 2017 but up 99 percent sequentially

↓ Oilfield services raised $1.5 billion in debt from 4 bonds in Q4, 69 percent lower year-over-year and down 53 percent sequentially

↑ Integrated companies issued $6.0 billion in debt in Q4, up 700 percent year-over-year and 82 percent sequentially

Full copies of the report are available upon request.

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