Oil Companies Set for a Positive Year Ahead
Around 40 firms in the oil and gas sector could go public in the next two years. This could translate to around three times the number of issuances that 2016 experienced. Chief Executive Officer of Tudor Pickering Holt & Company Maynard Holt has expressed sentiments that this and next financial year’s activity in the mining industry could soar IPO numbers and consequently improve the stock exchange.
One of the reasons spurring firms within the mining sector to go public is the Trump administration’s policy to improve local industries and increase the standards on infrastructure. Infrastructural improvements will require raw materials to produce energy, and one of the products needed will be oil. Further, encouragements on local industries such as lowering interest rates and providing tax relief for factories will cause higher outputs. Consequently, these firms will require a larger number of materials and energy for processing, thereby increasing the overall demand for oil. As such, oil is going to be more profitable as we move further into 2017.
Apart from explorations in Texas and New Mexico, the oil market may spread on to other areas where mining occurs. Further, industries included indirectly in the mining process could also benefit. Some of these firms would include companies that facilitate the transportation of oil through their pipelines as well as more recently discovered mines. Increasing oil prices are also being noted by investors, thereby indicating the possibility of high profits in the industry. As such, many companies could pitch their high returns and increasing revenues to the public so as to raise more from their new release.
Recent issuances in the oil sector have significantly decreased as a result of consistently lowering oil prices. Additionally, the stock market at the time was not as favorable as a consequence of the Brexit decision, an unexpected US election and overall as well as other events around the world. Markets so far into the year, on the other hand, have been considered some of the most favorable for going public since the dot-com era. Companies such as Snap Inc., and other unicorns have been positively received – therefore being able to gather issuances that generate a revenue of hundreds of millions of dollars.
Most oil companies that will go public are likely to do so to raise revenue that they can use as payment of any current debts they currently have. Further, firms under the oil and gas sector may want to take advantage of the favorable IPO markets so as to obtain enough capital for the exploration of new mines and so as to raise the operational fees required to expand ongoing mining sites.
Already, one firm involved in the oil and gas sector went public in the first quarter of 2017; Hess Midstream Partners. It sold 22.5 percent of its company shares during its issuance in March and generated a revenue of $232 million. Hess Midstream Partners is a joint venture between Hess Corp. and Global Infrastructure Partners that operates in the North Dakota Bakken to explore new oil reserves.