Poor investor confidence in junior oil and gas companies is forcing them to consider more creative funding options, according to EY research.
The “faint signs” of investor interest in minnow explorers tailed off at the start of the year, the company said.
The Oil and Gas Eye Index, which monitors the performance of the sector’s AIM-listed companies, fell 6% during 2013, a decrease attributed to individual companies’ drilling and operational performance.
Barry Fraser, oil and gas transactions executive director at EY in Aberdeen said: “Market conditions remain tough for most junior oil and gas companies.
“There were faint signs of increased investor confidence towards the tail-end of last year, but it doesn’t appear likely that they will be carried forward.
“The wider rally in global equity markets suggests the fall in the index was down to factors other than the global economy.
“Companies which are able to deliver and communicate exploration success will naturally face fewer challenges in raising capital.”
“That leaves the rest of the market to pursue more innovative solutions, such as farm-out transactions, oil and gas prepayment deals and loan arrangements with service providers”, he added.
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