Commodities boom sees oil & gas and mining firms raise £1.1bn in new equity

Oil and gas, and mining companies raised £1.1 billion in new equity in the past year, up more than fourfold from the previous 12 months as investors rush to back commodity firms, according to research published today.

UHY Hacker Young, the national accountancy group, has revealed the study, noting the increase in the year to September 30 from £270 million in the prior comparable period.

The firm added that it comes amid booming commodity prices, with those in oil and gas hitting multi-year highs, while metal prices have also significantly regained sparkle from their Covid lows.

UHY Hacker Young, which says it is one of the UK’s top 20 accountancy networks with 100 partners and around 600 professional staff working from 23 locations, also stated that the “unexpectedly” strong post-pandemic economic recovery has fuelled demand for commodities.

'People will still need oil, gas and metals for many years to come,' says UHY Hacker Young (file image). Picture: Jeff J Mitchell/Getty Images.

It added that with the bounceback in prices, oil and gas, and mining companies have been looking to raise money as they rush to bring previously mothballed projects back online, some of which have required an injection of new capital from investors.

The London stock market, including the junior Alternative Investment Market (Aim), “has a strong reputation for helping oil, gas and mining stocks develop,” according to the firm. “UK investors are seen as more patient than some of their global peers, giving these companies the time and money needed to grow and reach their potential.”

The accountancy specialist added that institutional investors have been more willing to back commodity companies in the past year, as sentiment towards oil and gas, and mining stocks turns increasingly positive.

Daniel Hutson, partner at UHY Hacker Young, said: “The market for commodity stocks right now is very hot, particularly among midcaps and Aim stocks.

“Aim is one of the strongest stock markets globally for oil and gas businesses. The last 12 months were a significant test, where investors were asked to back these businesses during an unprecedented period of economic turmoil. Aim passed that test with flying colours.

“Institutional investors in particular are now more willing to put their hands in their pockets. Demand for a wide range of commodities isn’t going to fade any time soon. People will still need oil, gas and metals for many years to come.”

Improvements

UHY Hacker Young also believes institutional investors may be more willing to invest in stocks on Aim than in the past, due to better governance controls and improved reporting standards in recent years.

Its new report comes after energy major BP notched up a better-than-expected profit haul in the third quarter on the back of soaring oil and gas prices.

Underlying replacement cost profits jumped to $3.3bn (£2.5bn) in the three months to September 30, up from just $86m a year earlier when oil prices had slumped due to the pandemic. Chief executive Bernard Looney said: "This has been another good quarter for BP… Rising commodity prices certainly helped.”

The latter has also been the case for peer Shell. Laura Hoy, equity analyst at Hargreaves Lansdown, said earlier this month: “The long-term growth story for Shell still rests heavily on the oil price. For now, buoyant oil prices are keeping the group’s cash coffers topped up, which has had a positive impact on debt and given the group the means to boost shareholder returns.”

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