Junior oil and gas firms could become acquisition targets for their larger rivals this year as tightening credit markets take their toll, according to Ernst & Young (EY).
The professional services firm said drilling successes at the end of last year meant North Sea explorers had entered 2012 on a high, but said the eurozone debt crisis would have an impact on the industry.
In its latest Oil and Gas Eye, EY said just 15 energy companies in the Alternative Investment Market successfully raised funds in the final quarter of 2011.
Ally Rule, EY oil and gas partner in Aberdeen, said this pointed to further mergers and acquisitions (M&A) activity.
“Many junior oil and gas companies are going to find fundraising – whether debt or capital – increasingly challenging,” he said.
“Those seeking to deliver on exploration and development projects have to consider a broad range of options. All the while, well-capitalised majors and national oil companies will be eyeing opportunities to exploit their balance sheet advantage.
“The global oil and gas arena averaged three transactions per day in 2011, so difficult funding dynamics should result in it remaining a hotbed of M&A activity for much of 2012.”