Who are the top 25 independent FTSE oil and gas producers?

UK upstream independents league table 2018

Oil prices started 2018 at US$68 and for the first 10 months of the year, things were looking up—prices rose steadily until they peaked at US$86 in October. From there, it was a steady slide down until closing out the year at US$54, an annualised 20 per cent drop. Given the wild ride experienced by many players in previous years, 2018 would still count as a fairly sedate period.

Oil prices have been at a more comfortable level over 2018 for the companies comprising the Top 25 Upstream Independents. We note that three of the top six performers made a series of key acquisitions, and one was itself acquired at the end of 2018, which boosted its share price.

In the case of our poor performers, all suffered from unexpected delays in bringing production on-stream. For an independent, listed operator, this can make or break a year’s share price performance. We also note that three of the worst off are Russia or CIS-focused.

See Table 1 for the 2018 Rankings.

Chart 1: Brent Crude Price Movement (2018)

Table 1: Upstream independents league table 2018

Key points

League table spread remains significant

The market capitalisation of the 25 league table participants continues to show a significant spread from Tullow Oil, retaining the top spot for a third year with a market capitalisation at December 2018 of £2.5 billion, to Exillion Energy, closing at December 2018 at £90.1 million.

Despite the wide spread, the aggregate market capitalisation remained broadly consistent decreasing by £34.53 million to £11.5 billion—a movement of 0.3 per cent. Digging a bit deeper, the combined market cap of the 23 companies that were in the Top 25 both in 2017 and 2018 was down £1.2 billion, a year-on-year decline of 10 per cent, contrasted against the 20 per cent oil price decline over the same period.

Two in, two out

The fact that the overall market cap of the Top 25 remained so close to that of 2017 was due to the arrival of one noteworthy new entrant.

Energean Oil & Gas listed on the main market in March 2018 and closed out the year in second place, with a market cap of £968 million. This was thanks to a 45 per cent increase in production and a reduction in cost of production, combining to yield strong operating profits.

Regal Petroleum returned to the league table following its re-admission to AIM, closing out the year at 18th place. The Ukraine-focused company also saw an increase in production, and benefited from an uptick in the price of gas.

This year also saw Bowleven and Pantheon Resources slip out of the Top 25, due to lower earnings.

Thrills, spills and steady as she goes

Overall, 2018 saw a healthy mix of good and not-so-good news. On a positive note, nine companies recorded a net year-on-year increase in market cap, noticeably in excess of the oil price performance. On a less positive note, 11 companies saw a net year-on-year drop in market cap, mirroring the oil price performance. Three companies saw their positions remain unchanged.

Who’s up, who’s down

The top six risers in this year’s league table are:

Diversified Oil & Gas (up 14 places to sixth). A new kid on the block in 2017, this Alabama, US-based firm made four acquisitions over 2018 adding to its focus in the Appalachian region, where it is the largest conventional well operator. This rise also gained it the crown of the largest oil and gas firm on AIM by market cap.

Savannah Petroleum (up eight places to 17th). It benefited from five oil discoveries in Niger and the acquisition of Nigerian assets from Seven Energy. The combined effect of these resulted in a healthy increase in market cap and the move up the league table.

Genel Energy (up four places to ninth). Focused on the Kurdistan region in Northern Iraq, Genel found a firmer financial footing at the mid-year mark, supported by payment receipts from the Kurdistan Regional Government and by increased production from two of its wells.

Eland Oil & Gas (up four places to 15th). Eland saw the best six months of earnings in its history in the first half of 2018, including achieving its first-ever reported profit. This was driven by a big increase in production from one Nigerian well that achieved first oil in 2017. It followed this over 2018 with the first full year of production and discoveries at a second well, and by announcing plans to return £3 million to investors through share buy-backs.

Serica Energy (up three places to 12th). Serica has been active over 2018, buying interests in the Bruce, Keith and Rhum fields, amongst others, from the likes of BP, BHP Billiton, Total and Marubeni. This contributed to a tenfold increase in production in less than a year, driving an increase in share price from 81p at the start of 2018 to 118p by the end of 2018, a trend that has continued through the first few months of 2019.

Faroe Petroleum (up three places to seventh). Faroe closed 2018 up three places, largely supported by the protracted takeover discussions with DNO coming to a head and, following close of 2018, ultimately resulting in the 160p per share hostile takeover, relative to its opening price of 104p at the start of 2018.

Those who fell the furthest:

For small firms with only a few assets, delays or decreases in production, or downturns in the financial forecasts can hit share price unduly hard.

Nostrum Oil & Gas (down 14 places to 19th). Kazakhstan-focused

Exillon Energy (down eight places to 25th). Russia and Kazakhstan-focused

Indus Gas (down six places to tenth). Focused on its natural gas block in the Indus Basin

Amerisur Resources (down six places to 20th). Latin America-focused

Caspian Sunrise (down five places to 21st). Kazakhstan-focused

Ophir Energy (down five places to 13th). Ophir is likely the second member of the league table that will exit in the next publication, assuming completion of its agreed takeover by Jakarta-based Medco Energi at 55p per share.

Are we expecting anyone else?

A few PE-backed companies have grown rapidly and are widely reported as lurking just off the stage of the London Stock Exchange. The likes of Chrysaor, Neptune Energy and Siccar Point have been buying assets to the tune of £12 billion in the UK North Sea alone. Their focus has been on supermajor assets, competing with the independents, to the extent they have sufficient funding for such aspirations.

So the question is, given the PE-backing of these investments, how long might it be before the PE houses seek to monetise their investment? Will it be a London listing? The size of these business are such that any IPO would likely land them in the Top 5 of the Independents League Table.

How we did it

We included all United Kingdom, Guernsey, Jersey and Isle of Man-incorporated, oil and gas exploration and production companies (ICB subsector 533) trading on the London Stock Exchange as of 31 December 2018. We then compare market capitalisation from the same point of the previous year and rank the top 25 companies by £ value.

If you’d like to discuss the league table with one of our industry specialists, please get in touch via the contacts below.

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