Mid-cap oil and gas companies are having trouble securing fresh investments because fund managers are reorienting their priorities towards alternative energies, says the chief financial officer of one such company, UK-based Hurricane Energy, as quoted by Energy Voice.
Private equity firms are still willing to invest in oil and gas exploration, but this is not the case with investors in public companies. As a result, Alistair Stobie told Energy Voice, the industry needs to do more to restore faith among investors that fossil fuels will have a role to play in the future energy mix even if it is a smaller one.
The biggest part of the problem facing medium-sized energy independents seems to be that most specialist investors—those focusing specifically on the energy industry—were “wiped out” during the latest industry downturn and now sector players are finding themselves having to deal with what Stobie called “generalist” investors: funds and institutions who spread their investments across many different industries and whose priorities are different.
An important group among these is investment funds who are now placing a lot more emphasis on environmental, social, and governance factors than pure growth in returns. For now, the problem is not acute, the executive said, but in might become so in the future.
“There are fewer oil and gas experts available and the pressure not to invest is greater,” Stobie told Energy Voice. The rise of the generalist investors also means there is less specialist knowledge among investors about new discoveries and their future prospects, he added.
Hurricane Energy is one of the private equity-backed energy independents that flooded the UK North Sea when the supermajors began to pull out to focus on quicker-return projects in U.S. shale and elsewhere. The company is operator of the Lancaster field, one of the largest recent discoveries in the area estimated to hold some 500 million barrels of crude oil.