PLS' Capitalize reviews oil and gas industry's Q1 capital raising activity

$41 billion in debt & equity raised through offerings during quarter

HOUSTON, TX--(Marketwired - May 09, 2017) - PLS, Inc., a leading oil and gas research firm, announced that Capitalize™, its proprietary comprehensive capital markets tracking platform, released a statistical review of capital markets activity for the first quarter of 2017, ended March 31, in which…

  • Equity markets reported total deal value of $14.2 billion in 1Q17, which was off just 1% from 4Q16 deal value. This is the second consecutive quarter of strong equity capital markets despite a 3% year-over-year decrease
  • Credit Suisse was the most active bank, participating in 42% of all equity offerings
  • Citi led the IPO market, leading 4 of the 6 deals launched in 1Q17
  • Bond market reported $27 billion in total deal value, a 19% sequential decrease and the second lowest quarter in five years
  • Wells Fargo was the most active bank in securities offerings in 1Q17, participating in 47% of all equity and bond issuances
  • Bank of America/Merrill Lynch was the most active bank in issuing energy fixed income, participating in 68% of all issuances
  • Private equity investors flocked to Upstream in Q1, with the sector accounting for 84% of all commitments
  • Private equity sponsors have backed 31 new portfolio companies YTD, with NGP and Encap each backing three

In its tracking of the US oil and gas sector, Capitalize reported that the aggregate value of bond and equity issuances in the first quarter 2017 was $41.4 billion, which was flat year-over-year and down 13% from the aggregate value of debt and equity deals in the fourth quarter of 2016. The Q1 total was aggregated from 76 bond and equity deals, compared with 59 total deals completed in the first quarter of 2016 and 99 in the fourth quarter of 2016.

1Q17 Energy Bond and Equity Issuances
Quarter  Deal Amount  Deal Count
1Q16  $41.19  59
2Q16  $48.60  86
3Q16  $43.74  90
4Q16  $47.71  99
1Q17  $41.43  76

Source: PLS Capitalize

1Q17 equity offerings -

The increase in equity deals included more oilfield services companies either doing follow-on offerings or, in the case of Keane Group and ProPetro Holdings, launching IPOs. The services sector transacted 10 equity offerings during the quarter to raise an aggregate of over $2.2 billion, up 14% sequentially and 203% year-over-year.

There were nine midstream and four downstream offerings during Q1, raising an aggregate $4.6 billion and $337.5 million, respectively. Total midstream funds raised were 4% higher sequentially and 10% higher year-over-year, while combined downstream funds raised were off 42% on a sequential basis, with no money in the sector raised during the year-ago quarter. There were also no IPOs in these sectors during Q1.

Upstream brought 12 offerings to the market in Q1 with total funds raised exceeding $4.8 billion. That's a 51% drop from the first quarter of 2016 when the sector raised more than $9.7 billion across 16 offerings, and a 32% decline from the money raised during the fourth quarter of 2016. Cenovus, with a $2.3 billion offering, was the only Integrated company in the Capitalize universe to raise money during Q1.

There were six IPOs in Q1, raising almost $2.7 billion in the aggregate before factoring in overallotment options. Two were the aforementioned service companies and the other four were upstream-oriented, Jagged Peak Energy, Kimbell Royalty Partners, Silver Run Acquisition II and Kayne Anderson Acquisition. The last two are special purpose acquisition companies, continuing a trend that started in 1Q16 with Silver Run Acquisition I and KLR Acquisition Corp., and has already flowed into the second quarter of 2017 with Vantage Energy Acquisition Corp.

The low traditional IPO rate over the past few years created an environment conducive to the launching of SPACs as bankers capitalized on investors' appetites for new deals, even ones that didn't have assets at the time of launch. The rate of SPAC formation in a more IPO-friendly environment, such as the one we see developing, will likely diminish if history is any indication.

Top 10 Equity Offerings By Deal Value: First Quarter 2017

Company  Lead
 Lead Allocation  No. of
 Deal Amount
Cenovus Energy Inc  RBC  22%  16  $ 2,259
Williams Cos. Inc  Morgan Stanley  23%  22  $ 1,885
Plains GP Holdings LP  Citi  91%  11  $ 1,310
Parsley Energy Inc  Credit Suisse  42%  17  $ 1,116
Parsley Energy Inc  Morgan Stanley  30%  25  $ 770
WPX Energy Inc  Credit Suisse  50%  17  $ 596
Targa Resources Corp  Barclays  90%  2  $ 461
Patterson-UTI Energy  Goldman Sachs  25%  5  $ 418
Hi-Crush Partners LP  Credit Suisse  66%  7  $ 366
Tesoro Logistics LP  Citi  50%  2  $ 287

Source: PLS Capitalize

Does not include overallotment shares.

Lead equity bookrunners-

Citi took the lead allocation in the Q1 equity market, followed by Credit Suisse, Barclays and Morgan Stanley. Citi had a higher focus on midstream offerings at over $1.4 billion in deal value, or almost double that of Barclays, the second-highest bank participating in the sector. In Upstream, Credit Suisse led the banks with $1.3 billion in deal value, 83% higher than Citi, which was the next closest in Upstream with about $715 million in deal value. Credit Suisse also led in participation in the services sector, with a deal value of $418 million, 27% higher than the next closest participant in the sector, which was Goldman Sachs.

  Top 10 US Banks for U.S. Energy Equity   Deals in 1Q17
Bank Name     Upstream     Midstream     Downstream     Services     Integrated     Total
Citi      $715      $1,419      $77      $95      $-        $2,306
Credit Suisse      $1,309      $135      $-        $418      $-        $1,943
Barclays      $245      $739      $56      $152      $103      $1,295
Morgan Stanley      $568      $434      $104      $134      $-        $1,239
JP Morgan      $211      $90      $-        $173      $494      $967
RBC      $88      $145      $-        $25      $494      $751
Wells Fargo      $105      $332      $-        $188      $-        $625
Deutsche Bank      $320      $209      $-        $11      $-        $540
Goldman Sachs      $171      $15      $-        $331      $-        $517
BAML      $53      $90      $-        $238      $103      $484

Source: PLS Capitalize

1Q17 bond issuances -

The total raised through debt issuances in Q1 among the companies in the Capitalize universe amounted to $26.9 billion, which was up 2% year-over-year but 19% down from the $33.4 billion raised in the fourth quarter of 2016.

At $8.3 billion, the aggregate principal amount of bond floats in the Midstream sector eclipsed Upstream's $7.1 billion and Integrated's $7.1 billion. For Midstream, it was a 185% year-over-year increase but a 15% sequential decrease in debt issuing activity. Upstream bond raising was off 34% year-over-year and 38% sequentially while Integrated deals were 41% lower year-over-year but up 255% from the previous quarter. Downstream sold $3.5 billion principal amount of debt in Q1, up almost sixfold from a year ago but 35% less than in 4Q16.

There were three oilfield service company debt offerings in Q1 for a combined $1.2 billion in value, up 193% year-over-year but down 77% from 4Q16's unusually high issuance activity in which 10 issuers sold almost $5.2 billion in service sector paper, led by Noble Corp.'s $1.0 debt raise last December.

Lead bond bookrunners -

Citi, Bank of America Merrill Lynch and Barclays captured the top three spots for oil and gas industry bond underwriting in Q1. At over $2.7 billion, Citi was spread across all five sectors with the largest focuses on Integrated ($900 million) and Upstream ($831.8 million). BAML and Barclays, with $2.4 billion and almost $2.1 billion, respectively, in deal value, each reported identical Integrated participation in the quarter at $1.4 billion and change.

HSBC, Morgan Stanley and Brazilian bank Bradesco BBI followed closely behind Citi in the Upstream sector, each reporting $800 million in deal value, while Mitsubishi UFJ eschewed Upstream altogether and split its participation mainly among Midstream and Integrated activity with a little Downstream and Service exposure.

  Top 10 US Banks for U.S. Energy Bond   Deals in 1Q17
Bank     Upstream     Midstream     Downstream     Services     Integrated     Total
Citi      $832      $679      $99      $148      $900      $2,658
BAML      $74      $632      $223      $59      $1,417      $2,405
Barclays      $117      $546      $-        $-        $1,417      $2,079
Mitsubishi UFJ      $-        $887      $173      $14      $843      $1,918
Wells Fargo      $184      $579      $249      $14      $327      $1,354
HSBC      $800      $282      $98      $14      $80      $1,274
JP Morgan      $219      $422      $240      $-        $327      $1,207
Deutsche Bank      $-        $495      $-        $14      $517      $1,026
Morgan Stanley      $800      $85      $98      $14      $-        $996
Bradesco BBI      $800      $-        $-        $-        $-        $800

Source: PLS. Capitalize

About Capitalize

Capitalize is a comprehensive data platform of oil and gas debt and equity offerings. The database tracks bank leads, syndicates, client relationships and associated fees. The database is essential for both bankers and borrowers needing 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 and Capitalize along with specialty industry reports. PLS Inc., through its PLS Energy Advisory Group, is also a leading transaction firm and in 2016 closed over 35 oil and gas deals across the globe.

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