Only two years ago, investors would have balked at the idea of an oil and gas IPO candidate. The conversation in pitches was all about “green” equity stories – companies dealing with renewables, hydrogen, complex energy storage systems, operators of wind turbines in remote geographies.
In 2022, Oil & Gas is the 6th largest sector for ECM in Europe with around USD 4.9bn of issuance, with a 6.79% market share, according to Dealogic data.
The sector was the 20th largest asset class in terms of issuance volume in 2021 and the 22nd largest in 2020, according to the same data, as a shift towards ESG principles among investors kept investors away from the asset class.
Oil and gas might still be a polluting source of energy, but its relevance to investors has grown in 2022 as energy stocks have risen following Russia’s invasion of the Ukraine and its subsequent sanctioning by Western nations.
Issuers are lining up to take advantage of the new paradigm. This news service reported last week that Ithaca Energy, a Scottish oil and gas company, is tapping into the zeitgeist by planning an IPO on the London Stock Exchange by early next year.
The list of prospective candidates also includes Neptune Energy, a UK-based exploration and production company, which is also weighing a London IPO.
“These IPO candidates might not be green, but they help reduce tension and control energy prices; as opposed to the previous years there is more acceptance among the investors,” an ECM banker said.
ESG-specialised funds or firms with rigid sustainability manifestoes still must avoid these assets; but more generalist investors are ready to turn a blind eye, an ECM adviser said.
“In a sense it is still part of sustainability, in there is still some kind of progress in the reduction of Co2 and it is seen as a resource in the current scenario,” the banker added.
Another ECM lawyer noted that oil and gas candidates will be a staple of the IPO pipeline for a while, as it is unlikely that the global energy transition targets will be met with many countries lagging behind their goals and the war in Ukraine causing further setbacks.
Norway’s Var Energi [OSLO:VAR] priced a downsized IPO in February, but its stock performance has held up well in the past few months, prompting an optimistic outlook among advisers and buysiders. The name is now sought by block investors wanting more exposure, ECM Explorer’s sister column ECM Pulse reported this week.
In times of emergency, once enlightened investors just want to keep the lights on.
