By Collin Eaton, Chron.com, 23 June 2017
Photo: Spencer Platt, Staff. MENTONE, TX – FEBRUARY 05: The shadows of workers with Apache Corp. are viewed at the Patterson 298 natural gas fueled drilling rig on land in the Permian Basin on February 5, 2015 in Mentone, Texas.
Oil companies have only raised $3 million this month through selling new shares to investors, a dramatic drop in the public equity offerings that have helped fuel the return of drilling rigs across the nation this year.
It’s a stark shift in investor sentiment after last month, when producers like Kosmos Energy and RSP Permian collected a combined $1 billion from stock-market investors. That was before U.S. oil prices took a month-long tumble of around 20 percent to $43.15 a barrel on Friday.
Some investor groups have said “they had little-to-no interest in providing a second lifeline to the industry,” Houston investment bank Tudor, Pickering, Holt & Co. said in a note to clients on Friday.
“It’s like you’re having a party, and it’s awesome, and then the parents come home, and the party’s done,” said David Pursell, head of macro research at Tudor Pickering. “There’s no appetite to fund further growth. Oil prices went from the mid-$50s to the low $40s. It’s a big change and it happened quickly.”
The once-vibrant public equity markets had poured $8 billion into U.S. shale drillers in the three months after OPEC announced it would cut oil production, and the number of active U.S. drilling rigs boring has more than doubled since last summer. But the in wake of the recent slump in oil prices, the oil companies that raised billions of dollars this year have seen their shares drop by 22 percent this year. If investors keep pulling back, the surge in drilling could slow sharply, Pursell said. And why wouldn’t they? Other industries are performing much better than energy.
“The Dow’s at record levels and (fossil fuel) energy isn’t working,” Pursell said. “It’s just maximum indifference. You have to get the oil price up for investors to care.”
In the note, Tudor Pickering analysts said some oil companies “will need to change course on capital plans sooner rather than later if crude continues to drift lower.”