HOUSTON, Oct. 13, 2015 /PRNewswire/ — Amid oil prices at record lows and potential interest rate hikes, the third quarter of 2015 saw a marked decrease in the number of North American oil and gas initial public offerings (IPOs) and master limited partnerships (MLPs). While many in the industry continued to make progress toward going public, no North American oil and gas IPOs were issued during the quarter, according to a recent report: EY Global IPO Trends: Q3 2015.
“Opinions diverge tremendously on the size and timing of the commodity price comeback, and, as a result, the industry is enacting short and long-term adjustments to fit this ‘new normal’,” said Greg Matlock, Master Limited Partnerships (MLP) leader for Ernst & Young LLP in the US. “During Q3, oil and gas companies – especially producers – increasingly focused on evaluating new and different sources of capital.”
While hedging will protect many oil and gas companies from the full impact of low oil prices for some time, many leveraged companies will face lower flexibility as their hedges roll off. Additionally, a prolonged low oil price will force certain E&P executives – especially those who are not hedged as well as others – to respond aggressively.
“For companies not hedged as well or those with hedges rolling off, figuring out how to manage capital will be critical,” Matlock said. “This is where we are seeing companies evaluate alternate sources of capital, like teaming with private equity or considering strategic structural options, in order to pay down debt and shore up their balance sheets.”
Looking forward to the fourth quarter of 2015 and early 2016, companies looking to access the public markets for the first time (either through a traditional IPO, MLP, or otherwise), as well as those companies that are already public but are looking for additional capital, will be closely monitoring market dynamics and investor reception. While the interest in and value of accessing the public markets still provides an array of benefits, ensuring that any offering is aligned with the right market reception is critical.
About the data
Analysis included on this press release includes all deals listed up to mid-September and EY’s expectation of deals that will close in the rest of the month. Data sourced from Dealogic as of 15 September 2015. January 2015 through September 2015 (i.e., 3Q15 YTD) IPO activity is based on priced IPOs as of 15 September and expected IPOs by the end of September. M&A data is sourced from Dealogic as of 16 September 2015.
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