Energize Weekly, July 31, 2019
Investment in the oil sector was $16.9 billion in the second quarter of 2019 – a 36 percent drop year-on-year and down 23 percent from the first quarter of 2019, according to Drillinginfo, an industry data analyst.
The industry raised $3.4 billion from public stock offerings, down 19 percent year-on-year, and raised $13.5 billion on 24 bond offerings, a 36 percent decline compared to the second quarter of 2018 when $21 billion was raised on 30 offerings.
“These numbers understate how weak capital markets were for parts of the industry,” Andrew Dittmar, a Drillinginfo analyst, said in a statement. “In a particularly poor showing, the upstream and oilfield service sectors combined to raise only $300 million from fresh equity, and $2.5 billion from bond issuances.”
Two initial public offerings (IPO) did raise $1.025 billion, but a third IPO was withdrawn when the company decided to finance privately with banks and an overseas sovereign fund.
In stock sales, upstream companies, also known as exploration and production (E&P) companies, sold $261 million in equity in a single offering – Brigham Minerals’ IPO. Still, the segment was down 75 percent year-on-year, making it upstream’s second worst quarter for equity since 2010.
The midstream sector issued $1.6 billion of stock, up 17 percent year-on-year, led by Rattler Midstream Partners’ $765 million IPO.
Neither oil field services nor downstream had any new equity offerings.
“Wall Street emphatically closed the door on fresh external capital for upstream companies, especially from equity raises,” Dittmar said. “That is consistent with calls for E&Ps to live within cash flow.”
In the bond markets, the average principal for the second quarter of 2019 was $561 million, a 13 percent decline compared to the second quarter of 2018. Midstream accounted for 57 percent of debt raised and 50 percent of activity.
Upstream had five offerings that raised $1.97 billion, down two-thirds year-on-year. Oil field services raised $530 million, and integrated companies issued $3.8 billion in bonds.
Two-thirds of the issuers offered investment-grade bonds, while in the first quarter of 2019, investment-grade issues were three-quarters of the market.
“Generally, the trend over the last year has been a focus on a better credit quality of issuer for underwritten bond offers,” Drillinginfo said.
