Ernst & Young said yesterday its Oil & Gas Eye index ended 2010 on a high.
The index rose by 14% in the final quarter – concluding a strong year, which saw an overall gain of 47%.
Coupled with the 123% gain of 2009, this increase saw the index recoup all losses experienced during 2008.
The index monitors the performance of AIM-listed oil and gas companies.
Alec Carstairs, oil and gas partner at E&Y, said: “Events in the Gulf of Mexico, shifts in the regulatory landscape and concerns relating to business and consumer confidence have combined to create a challenging environment. However, the resurgence of the index reflects the optimism that is beginning to stream back into the sector.
“There is a disparity in the performance of junior oil and gas stocks compared to their larger peers on the London Stock Exchange’s main market, but the latter are beginning to shrug off the impact of the Deepwater Horizon oil spill that saw shares drag.”
Fundraising activity continued on a positive trend during the fourth quarter, particularly in the secondary market.
Initial public offerings (IPOs) were more subdued in 2010. Only five oil and gas companies successfully completed an IPO during the year, compared with the 52 companies seeking secondary fundraising.
Jon Clark, oil and gas director at E&Y, added: “With the strong recovery of secondary fundraising in 2010, many of the smaller companies that have nursed their balance sheets during times of uncertainty are taking a more positive view on capital and acquisition activities reflecting better capital availability.”
The fourth quarter of 2010 saw 70% of AIM-listed oil and gas companies record share price gains. E&J said the “winners” in this quarter were those demonstrating exploration successes and those entering into partnerships that improved near-term cash flow while advancing projects.
Mr Carstairs concluded: “The reasons behind ‘wins’ and ‘losses’ remain fairly consistent. Exploration success will lead to an increase in share prices, while disappointing exploration results will result in a fall.
“Attention should be paid to strategic partnerships and acquisitions in the coming year, particularly in oil field services where the improving corporate environment and opportunities created by the emerging economies is leading to an expansion into new geographies and an extension of their global footprint.”