Money raised in London for oil and gas projects heads to Africa

A report by international law firm Berwin Leighton Paisner (BLP) has found that nearly half of all money raised in the last year in London’s mid-market oil and gas sector was for projects in Africa.

The research, published to coincide with the start of Africa Oil Week in Cape Town, shows that despite only representing a quarter of deals completed, the money raised for African projects was US$ 453.4 million out of a total value of nearly US$ 1 billion.

Geographical risk

BLP has also found that geographical risk was clearly a significant issue for investors when pricing fundraisings. All of the South American projects raised money at a greater than 10% discount, while less than a third of European projects were completed on the same terms. Approximately half of African projects were carried out at a less than 10% discount.

BLP analysed all oil and gas fundraisings announced on AIM and the Main Market of the London Stock Exchange between 1 October 2013 and 31 September 2014 (greater than £1 million and excluding the FTSE 100).

Report findings

Other key findings within the report include:

• The average size of fundraising was US$ 24 million (£14.9 million), broadly in line with the London market generally.
• Half of the fundraisings by number totalled just US$ 76.2 million (£47.4 million).
• The largest seven totalled US$ 625 million (£389 million), almost two thirds of the amount raised.
• Nearly a fifth of fundraisings (tending to be larger raises with an average size of US$ 80 million (£49 million)) were conducted by way of an accelerated book build.
• An average of two or more banks were used for larger US$ 50 million+ deals (£31 million+).

Comments

Alexander Keepin, Corporate Finance Partner at BLP, said: “The Capital Markets have continued to be difficult for natural resources companies. However, the year saw over 40 fundraisings in the Oil and Gas sector, raising a total of nearly US$ 1 billion. We expect companies with compelling plans for strong assets to continue to be able to tap the London Market in the coming year.”

Adam Dann, Energy and Infrastructure Partner and Head of BLP’s Finance Department, added: “When it comes to the price of oil, with demand for oil and gas rising more slowly than anticipated, downward pressure on oil price has reduced appetite for equity. It does not feel like this situation will persist in the medium term.”

Adapted from press release by Katie Woodward

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/04112014/london-funds-head-for-african-projects-1759/