Shares in Scottish AIM companies falls 31.4 per cent

However, this was not as large a fall as the UK-wide AIM listed oil and gas sector fell last year.

A new report by accountants and business advisers BDO entitled ‘Drilling down 2016: a review of the performance of AIM listed oil and gas companies in 2015’ found that the market capitalisation of the UK oil and gas sector fell by 40.8 per cent in 2015 from £4.9bn to £2.9bn.

The report found that 2015 saw the largest number of leavers from the market since the survey began in 2012 but there still remain more AIM oil and gas companies than in 2006. It should also be noted that although the reduction of the market cap value is high it is now at a similar level to 2008 when it was £3.6bn.

In Scotland there are five AIM listed oil and gas companies accounting for a fifth of the total number of AIM listed companies and these constitute 17.4 per cent of the total market capitalisation.

The largest fall in market cap among the Scottish firms was Seaenergy which fell 80.9 per cent over the year while the best performer was Faroe Petroleum which fell only 12.5 per cent and, although still a fall in value, is a robust performance in a difficult market.

Neil McGill, corporate finance director with BDO, said: “It will surprise no-one to find the value of Scotland’s AIM listed oil and gas firms fell substantially during 2015 and the fall largely mirrored the drop in the oil price. What is clear is that the oil and gas market is going to remain volatile and uncertain for the next 12 months and perhaps longer. This means that many listed firms are realigning their strategy whilst maintaining tight cost control and cash management. For some firms the focus will shift to the short term through necessity but others with a more robust balance sheet can take a longer term view and seek out opportunities to optimise their portfolios, including through M&A.

Mr McGill said: “Initiatives such as greater collaboration and partnership between operators and the supply chain will be a key part of the great drive for efficiencies. However some firms will still need to explore funding from alternative sources such as specialist investors and initiate innovative partnering arrangements. There will an inflexion point where the bottom can be called at which point the liquidity taps will turn back on. I think the coming year will remain challenging for Scotland’s oil and gas sector whether listed or not. However, this is a sector which has consistently shown great resilience and an ability to adapt across multiple cycles and will do so again.”