Oil and gas companies globally raised a total of approximately $530 billion in 2017, representing a rebound of almost 3% from the recent low of about $516 billion in 2016. However, the 2017 figure was down close to 30% from the peak level of $740 billion recorded in 2014 and below the five-year average, based on data from ThomsonOne and Ernst and Young.
On one hand, accessibility to the capital markets has been improved alongside the recovery of crude oil and natural gas prices. Taking the West Texas Intermediate (WTI) crude as an example, it was priced in low-$40 a barrel at the beginning of 2016 but near $60 per barrel at year-end 2017 or up in the vicinity of 40% during the period.
On the other hand, the rise in cash generated from operations (free cash flows) due to better pricing of the commodities, capital expenditure discipline, efficiency enhancement in capital deployment, divestments of projects and forward sales of crude and natural gas are limiting the amount of capital to be raised.
The recovery of oil and gas prices has helped enhance the financial position of oil and gas companies in general and boosted investor confidence in them. A lot of independents and large-cap oil and gas companies have started delivering positive returns on capital.
According to a recent survey conducted by DNV GL, a quality assurance firm, on more than 800 executives of oil and gas companies, two-thirds of them plan to maintain or raise capital expenditure in 2018. Nonetheless, it is expected that many of them wound fund their operations through divestments and mergers and acquisitions rather than depending too much on tapping the capital markets, in particular bank loans, which accounted for 59% of the total capital raised in 2017.
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