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DW Monday: Raising Growth Capital

By November 11, 2013 November 28th, 2019 No Comments

DW MondayFor many firms in the global oilfield service industry, raising growth capital is a constant preoccupation, particularly for firms that are ‘asset heavy’ such as drilling contractors, vessel operators and logistic firms that rely on a rental fleet to generate earnings streams. As demand has grown, the pressure on oil service firms to add capacity has been intense. DW analytics highlights that the deepwater and associated subsea market has grown significantly, with expectations of a further doubling of growth in the next five years to $223 billion. Investment in infrastructure, drilling and construction assets is only going to intensify. It’s not just an offshore story either, onshore the rig fleet is aging and thus requires many additional newbuilds to develop deeper and more complex oil & gas reservoirs as the industry moves to increasing non-conventional hydrocarbon developments.

With oil service firms performing well on equity markets since the high levels post the 2008 peak, anticipated spending growth in targeted sectors allied with strong backlog and consequently revenue visibility, many firms are looking to the public markets to raise new equity. Relative to alternatives, the public market route can work well for mid-market sized firms which can find themselves capital constrained in leverage models, or worse, under financial pressure due to the cyclicality of the upstream oil & gas market. Regionally, initial public offerings are progressing on all the key exchanges in the US, Europe and Asia. For firms with an international story the London Stock Exchange may be a popular choice as funds are seeking niche market investment in service sectors as an alternative to the engineering heavy names that dominate the exchange.

Andrew Reid, Douglas-Westwood Aberdeen
+44 1224 264971 or Andrew.Reid@DouglasWestwood.com