By Andrew Callus
LONDON, Aug 19 (Reuters) - Takeover action is on the horizonamong smaller and weaker London-listed oil companies becausethey are finding it harder to raise funds, while their largerpeers are having no such difficulty, according to a predictionby Ernst & Young.
The consultancy's Oil and Gas Eye Index, which monitors thesector within London's Alternative Investment Market (AIM), fell12 percent in the second quarter.
By contrast, the broader AIM market lost only 5 percent, andthe FTSE 350 Oil & Gas Producers' Index of mainstream oil andgas stocks fell by only 2 percent, oil and gas transactionspartner Jon Clark noted in the Eye Index's latest report.
Meanwhile, second quarter equity fundraisings among Oil andGas Eye Index stocks totalled just 42.1 million pounds ($65.5million), 76 percent down on the first quarter and the lowestsince the first quarter of 2009, even though such fundraisingsacross AIM were up 21 percent from the first quarter.
"The lack of confidence evident in the decline of the indexhad a pronounced impact on overall market demand for the sectorand contributed to the very low levels of fundraising," saidClark in the latest index report.
He said he still saw a divergence in the availability ofcapital within the industry, with larger players finding sourcesof finance relatively plentiful, while smaller companies werefinding things increasingly tough.
"At the smaller end of the spectrum, those companies thatcan deliver and communicate exploration and commercial successwill crowd the others out. The remaining companies will becompelled to seek out alternative funding routes, which couldresult in further consolidations as the year progresses."
Seventy-nine percent of Oil and Gas Eye Index stocks fell inthe quarter, mostly because of poor drilling results, the reportsaid.
It picked out Wessex Exploration and NorthernPetroleum after their drilling disappointment in FrenchGuiana; New World Oil and Gas after a poor hydrocarbonshow in Belize; Kea Petroleum for its abandonment of adisappointing well in New Zealand, and Petroceltic International which failed to find worthwhile deposits off Bulgaria'scoast.
0.6428 British pounds)
