Market volatility and a resultant fall-off in share prices has left Aim-listed oil and gas firms vulnerable to takeover, according to sector specialists at Ernst and Young.
The professional service firm’s comments follow the publication of its latest Oil and Gas Eye, a quarterly index that tracks the fortunes of oil and gas companies on the Alternative Investment Market.
The value of the index fell by 12.1% in the second quarter – the largest quarterly fall since 2008 – and has dropped by a further 23% since the start of last month.
The combination of fluctuations in oil price, anxieties over the future growth of oil demand, exploration disappointments and operational setbacks affected the index as 80% of companies registered a dip in their share price.
Alec Carstairs, office managing partner at E&Y Aberdeen, said: “The fall in the index serves to highlight the fragility of the recovery and the uncertainties weighing on global oil markets.
“A trend is developing that sees oil and gas companies listed on Aim outperformed by companies in other sectors as investors reduce their exposure to stocks that they perceive to carry greater downside risk.
“Companies that failed to take advantage of the more favourable conditions experienced last year are now going to find it significantly more difficult to raise funding. Consequently, they become targets for predators as they struggle to meet commitments.”
Mr Carstairs said volatility was poised to continue, with market turbulence showing no signs of abating.
He added: “This situation may also be enhanced by supply uncertainty driven by events in Libya, however, the better-capitalised players that do exist will be looking to exploit the liquidity gap, resulting in an increase in transaction activity.”
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