Wall Street Pouring Money
Wall Street Pouring Money by Nick Cunningham
“The mood is absolutely different,” even as oil prices have faltered
Despite the near record increase in U.S. oil inventories last week – an increase of 13.8 million barrels – oil prices traded up on February 8 and 9 as traders pinned their hopes on a surprise drawdown in gasoline stocks, which provided some evidence of stronger-than-expected demand.
The abnormal crude stock increase took inventories close to 80-year record levels at 508 million barrels, and is another bit of damming evidence that should worry oil bulls. But the oil markets were not deterred. In fact, that has been a defining characteristic of the market in recent weeks – optimism even in the face of some pretty worrying signals about the trajectory of the market “adjustment” process.
More signs of optimism abound. Wall Street is pouring the most money into oil and gas companies in the U.S. since at least 2000, according to Bloomberg. In January alone, drillers and oilfield service companies raised $6.64 billion in 13 different equity offerings.
“The mood is absolutely different,” Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told Bloomberg. “Go back to a year ago and the knife was still falling. But today, it feels much, much better.”
Moreover, the money raised for these U.S. companies represented more than two-thirds of the total $9.41 billion in new energy equity issued across the globe in January. Big Finance is ready to pour money back into the oil and gas sector and they are doing it mostly in the U.S.
The industry should see more activity this year as companies rush to conclude deals ahead of the rebound. A new report from Moody’s Investors Service predicts that M&A activity will rise substantially in 2017. “E&P acquisitions and divestitures dropped off when commodity prices collapsed in late 2014, but have significantly ticked up since mid-2016,” the Moody’s report says.
A lot of the action, unsurprisingly, is occurring in the Permian Basin. Austin-based Parsley Energy just announced its decision to spend another $2.8 billion on Permian acquisitions. The additional 71,000 net acres will give it one of the largest holdings in the Permian for an independent company.