PLS' Capitalize reviews oil and gas industry's Q3 capital raising activity

HOUSTON, TX--(Marketwired - October 26, 2017) -

• Aggregate funds raised through equity and debt offerings were $28.9 billion, down 34% year-over-year and up 6% sequentially
• $3.0 in equity offerings, off 60% from 2Q17 and 75% year-over-year
• $25.9 in debt offerings, up 30% from 2Q17 but down 18% year-over-year
• Most active participants-Wells Fargo in 53% of all offerings and loans, Wells Fargo in 58% of all equity offerings, JP Morgan and Wells Fargo in 71% of all debt offerings
• $39.0 B in borrowing either launched or amended across 54 agreements, down 26% sequentially but up 50% year-over-year
• JP Morgan most active lender in quarter with 57% participation in all credit facilities but Citi had largest aggregate allocation with $2.3 billion
• Private equity remains robust, filling void created by public markets pulling back
• PLS estimates the industry still requires more than $290 billion in D&C capital to drill acreage that has been acquired since 2016
• Special purpose acquisition companies drive 6 US IPOs YTD, raising $2.7 billion or 30% of the total Upstream equity deal value this year

PLS, Inc., a leading oil and gas research firm, announced that Capitalize™, its proprietary comprehensive capital markets tracking platform, released a statistical review of the oil and gas industry's capital markets activity for 3Q17, ended September 30.

Capitalize reported a $28.9 billion aggregate value of bond and equity issuances in Q3, down 34% year-over-year and up 6% sequentially. The total was aggregated from 53 bond and equity deals, of which 41 were debt sales and 12 were equity offerings, compared with 90 deals completed in 3Q16 consisting of 38 equity and 52 debt offerings with an aggregate value of $43.6 billion, and 52 in 2Q17 when the sector launched 21 equity and 31 debt deals worth an aggregate $27.3 billion.

Source: PLS Capitalize

3Q17 equity offerings

Equity Markets slowed down in 2Q17 and stumbled to a crawl in 3Q17 with the second lowest quarter since 2010 with approximately $3.0 billion. The Midstream sector led in equity offerings, bringing five to the market to raise more than $1.9 billion. That's a 13% decrease from 3Q16 when midstream companies raised more than $2.2 billion across 11 offerings, and a 44% sequential decline.

Energy Transfer Partners issued a $1.0 billion follow-on offering, the largest in the quarter. There were three initial public offerings during the quarter -- Oasis Midstream Partners, Ranger Energy Services and Osprey Energy Acquisition Corp. -- which raised almost $462.5 million combined. Osprey, with $250 million of the total, is a special purpose acquisition company, the fifth to roll out by the quarter's end. Early in Q4, Black Ridge Acquisition Corp. launched an IPO to raise $120 million. Of the eight Upstream IPOs launched year-to-date, six are SPACs, raising a combined $2.7 billion or 83% of all funds raised in Upstream IPOs this year.

In addition to a continued decrease of issuances, Q3 may be remembered for the return of Downstream offerings, with the two offerings follow-ons by Westlake Chemical Partners and Hoegh LNG Partners, raising $99 million and $100 million, respectively.

There were five Midstream and four Upstream offerings during Q3 raising an aggregate $1.9 billion and $794 million, respectively. Total Midstream funds raised were 44% lower sequentially and 13% lower year-over-year, while Upstream funds raised were off 91% year-over-year and down 68% sequentially. The 3Q Upstream issuances represents the lowest transaction value since 2010 and the 5^th consecutive quarter of declines for the sector. One Upstream IPO, Osprey, and one Midstream IPO, Oasis Midstream Partners, raised a combined $378 million.

The quarter's three IPOs raised a combined $462.5 million before factoring in overallotment options. This compares with $281.3 million raised via one energy sector IPO in 3Q16 and about $3.5 billion raised through eight IPOs in 2Q17, which were Vantage Energy Acquisition Corp, TPG Pace Energy Holdings, Hess Midstream Partners, Antero Midstream GP, Solaris Energy Services, NCS Multistage Holdings and Gardner Denver Holdings.

Source: PLS Capitalize

Does not include overallotment shares.

Lead equity bookrunners

Wells Fargo was the most active bookrunner in Q3 equity deals, followed by Credit Suisse, Barclays and Citi. Barclays had a higher focus on Midstream offerings at over $1.0 billion in deal value, or 313% higher than the second-highest bank (Wells Fargo) participating in the sector. In Upstream, Credit Suisse led the banks with $657 million in deal value, dominating the sector and over 2,600% higher than Suntrust, next closest in Upstream with about $24 million in deal value. UBS led the downstream sector with $101 million deal value outpacing Morgan Stanley by nearly 150%. Credit Suisse led in participation in the Services sector, with a deal value of $32 million, 33% higher than the next closest sector underwriter, which was Piper Jaffray.

Source: PLS Capitalize

3Q17 bond issuances

The bond market appears to be relatively stable of late. The debt issuance total among companies in the Capitalize universe amounted to $25.9 billion, which was down 18% year-over-year but up 30% from the $19.9 billion raised in 2Q17.

At $10.85 billion, the aggregate principal amount of bond floats in the Midstream segment eclipsed Upstream's $10.40 billion and Integrated's $3.3 billion. Midstream was up 28% year-over-year and 23% sequentially. Upstream bond issuance was off 19% year-over-year but up 14% sequentially while Integrated deals were 57% lower year-over-year. There were three Services sector debt offerings in Q3 for a combined $1.4 billion in value, up 8% year-over-year and 116% from 2Q17's $0.6 billion. No Downstream debt was issued in the quarter.

Lead bond bookrunners

JP Morgan, Wells Fargo and Bank of America captured the top three spots for oil and gas industry bond underwriting in Q3. At over $2.2 billion, Citi was spread across the industry spectrum focusing largely on Upstream ($1.5 billion) and Midstream ($653 million). JP Morgan and Bank of America, with $2.2 billion and almost $1.8 billion, respectively, each reported similar levels of Upstream participation in the quarter at just over $1.0 billion, behind Citi's leading allocation of nearly $1.5 billion. Barclays led in Midstream with $841 million in deal value followed by Credit Suisse ($675 million) and Wells Fargo ($665 million).

Credit Facilities

Nearly $39 billion in credit facilities launched or were amended in Q3 across 54 distinct agreements according to Capitalize data, 50% higher than 3Q16's aggregate value of $25.9 billion across 43 agreements and 26% off 2Q17's aggregate value of about $53 billion across 76 agreements. Of the Q3 facilities, 35 were secured first lien agreements.

Midstream borrowed the most at $18.53 billion, or 48% of all facilities launched or amended in Q3. Enterprise Products Partners took 30% of the total with $5.5 billion. The sector's 11 agreements, two of which were secured first liens, were worth 85% more than 3Q16's $10.0 billion across 11 agreements and 1% more than 2Q17's $18.3 billion through 20 agreements. Downstream had three agreements, with no secured first liens, compared with $3.2 billion in five agreements in 2Q17 and 16% less than 3Q16's $4.5 billion through eight agreements.

Upstream credit facilities launched or amended totaled $11.0 billion spanning 15 agreements, up 131% in value from 3Q16's $4.8 billion across 13 agreements, but down 47% over 2Q17's total of $20.9 billion stemming from 32 agreements. All but two of the Q3 Upstream agreements were secured first liens. The sector took 28% of all credit facility agreements in the quarter.

The busy Services sector accounted for 25 agreements and borrowed $5.6 billion during Q3, up 3% from $5.4 billion across nine agreements year-over-year and down 46% from 2Q17's $10.2 billion (in 19 agreements). Twenty-one service sector agreements were secured first lien.

The quarter's leading lenders

JP Morgan participated in 31 facilities, or 57% of the total, either as lead or sole underwriter or as a syndicate member during Q3, with allocations of about $2.2 billion. In 3Q16 it had a presence in 21 facilities, or 49% of the total, with $1.4 billion in allocations, and in 2Q17 it participated in 38 facilities, or 50% of the total with $2.8 billion in allocations. Wells Fargo and Bank of America followed in Q3. Wells Fargo was involved in 30 agreements for $1.9 billion in allocations and Citi took part in 25 agreements for almost $2.3 billion in allocations.

About Capitalize

Capitalize is a comprehensive data platform of oil and gas debt, equity offerings and private equity investments. The database tracks bank leads, syndicates, client relationships and associated fees. The database is essential for bankers, borrowers and private equity investors seeking transparency on the capital-intensive oil and gas markets.

About PLS

PLS Inc. is a leading Houston-based oil and gas information and advisory firm that specializes in insightful real-time research for a global client base of both industry and investment professionals. Flagship products include the Global M&A Database, docFinder, Capitalize and PetroScout (E&P databases) along with specialty industry reports. PLS Inc., through its PLS Energy Advisory Group, is also a leading transaction firm that has advised on over $8.0 billion in transactions since 1990 and closed nearly 35 deals across the globe in 2016. For more information on PLS, contact Chris George at cgeorge@plsx.com or call 713- 600-0129.