Young oil and gas firms are becoming increasingly vulnerable to takeovers, according to a report published today.
Professional service firm Ernst and Young (E&Y) said junior energy operators were leaving themselves open to approaches from larger rivals because of their “insatiable appetite” for investment capital.
In its latest Oil and Gas Eye, E&Y said stock in companies listed on the Alternative Investment Market (Aim) rose by 24% in the first quarter of the year, mainly thanks to a series of exploration successes.
Oil and gas transaction partner Ally Rule said these achievements led to as many difficulties as rewards, however.
He said: “Many junior companies have climbed the mountain of exploration success, only to find a larger peak ahead of them in the shape of development delivery.
“Securing the necessary capital and operational expertise while avoiding takeover approaches, or maximising the value of such a bid, is proving to be a challenge.
“As a result, the acquisition activity we previously predicted has become reality, driving the substantial increase in the index.”
The Oil and Gas Eye report comes after Ithaca Energy became the subject of a takeover bid.
The operator has said previously a timetable for submissions had been set and an update would be given by June 4.
Ithaca revealed in March that it had received unsolicited interest from several unnamed parties in a deal estimated to be worth £540million. Speculation about the potential buyers has focused on oil companies including EnQuest, Taqa and Dana Petroleum.
Earlier this year, Premier Oil completed its £221million acquisition of EnCore Oil, making it operator of the North Sea Catcher field with a 50% stake.
When the deal was agreed, EnCore director Alan Booth said that the company had been set up to create value through exploration and appraisal before moving assets on to a bigger company to develop them.