Most Aim-listed oil and gas companies loss making
Ninety per cent of small cap oil and gas companies are still loss making, the same as in 2014, despite attempts to whittle down costs in the face of persistently low oil prices, research released today by Company Watch has shown.
And two out of five are in the Warning Area, indicating they are more vulnerable to distress, an increase on 2014 when around a third of Aim oil and gas companies were there.
But the stronger balance sheets of bigger oil and companies meant there were only three – Petrofac, Premier Oil and Cairn Energy – in the warning area.
From June last year to the beginning of 2015, the global benchmark Brent crude had dropped from over $110 per barrel to around $37. It's since fallen even lower, with Brent crude last trading at $31.82 per barrel, and US crude at $31.71. This has heaped pressure onto oil and gas companies, which have been forced to cut costs to weather the rout.
Read more: Low oil prices, China slowdown to blame for "notable downswing" in London Stock Exchange Aim market
"The outlook for the whole quoted oil and gas sector in 2016 is harder to call," Ewan Mitchell, head of analytics at Company Watch, said.
"It is clear that Saudi Arabia isn't going to cut its output which has kept oil prices low for the time being, but its very public fall out with Iran is going to introduce a whole new level of volatility to the market, which could see prices swing wildly until the picture settles."
"Smaller oil and gas companies on Aim will remain under severe pressure because fundraising in this environment will be testing, and many will have already cut costs to the bone last year with little room for more this year."
"We expect 2016 to be challenging for Aim companies."