finnCap Completes Two Oil & Gas Transactions

The start of 2017 has seen finnCap's Oil & Gas team complete two major transactions as activity in the sector increases. In January, we helped Global Energy Development undertake a fundamental change of business as it acquired a fleet of offshore service vessels. finnCap's advice allowed the company, now trading as Nautilus Marine Services, to complete a successful reverse takeover and raise over $10m in new capital to implement its revised business plan.

Today, finnCap has introduced Anglo African Oil & Gas plc to AIM in an oversubscribed £10m IPO. AAOG will use the cash raised by finnCap to acquire a producing oil field in The Republic of Congo with a view to increasing production by appraising and exploring deeper sands in order to expand the recoverable resource base.  Thanks to the IPO the company has a fully funded multiple well campaign.

David Sefton, Executive Chairman and Alex MacDonald, CEO of Anglo African Oil & Gas plc said:

"We have been delighted with the performance of finnCap in particular. While many firms pitch the importance of teamwork, we saw here what is possible when an entire firm gets behind a deal. We have never seen this in operation before, and it is utterly different, and much more effective than anything else we have experienced."

Oil & Gas Viewpoint

Last year saw the low point of the current oil price cycle with prices reaching US$27/bbl in February. Since this point, we have seen the oil price more than double in part due to the first OPEC oil production cut since 2008.  We have entered 2017 with cautious optimism that the worst of the downturn is over and this is being reflected by both the industry and the investment community.  M&A is emerging as a key theme particularly in the North Sea where we have see Ithaca Energy subject to a bid from Delek Group. Asset divestments by the majors are still key as they re-focus capital allocation on high margin barrel production and strengthening balance sheets.

Due to the growing confidence in the sustainability of the oil price and increasing investment in new upstream projects, we are increasingly positive on the service sector. Global E&P saw capex decline by 40% in 2016 relative to 2014 and that trend has to reverse with capex forecast to increase to US$450bn this year. The advancement of technology has been key to driving down costs and the service industry will be crucial in order to win contracts and to grow margins in future. We expect to see more fundraising activity in this subsect as 2017 progresses.

Overall, we are seeing a positive change in how the sector operates.  We have been through the pain and those companies which have survived are leaner and better adapted to operating in a low oil price environment.  This positive outlook is being reflected in the capital markets and the oil sector is not only seen to be investable once again, but is increasingly being viewed as a sector for value growth.