EY’s Oil and Gas Eye Index fell by 12% over the second quarter of 2013, the largest quarterly drop

As the global markets begin to show more stability, the divergence in performance of index

deliver and communicate exploration and commercial success that will crowd out the others in

EY’s Oil and Gas Eye Index

alternative investment market (AIM) oil and gas companies

the index are reported in this Oil and

Gas Eye also provides regular analysis and commentary on activity driving the

The Oil and Gas Eye Index is constructed on the same

assigned to the index levels

AIM-listed oil and gas shares

EY produces a similar

Oil and Gas Eyecontact Michael Simpson

com; to receive copies Mining Eye

contact Olivia Russell at

Oil and Gas EyeQ2 2013

| Oil and Gas Eye

Oil and Gas Eye Q2 2013 in review

Performance of the Oil and Gas Eye Index since 2008EYs Oil and Gas Eye Index fell by 12% over the second quarter of 2013, the largest

fallen 11% since the start of 2013, wiping

performance came as global equity markets

Additionally, oil prices came under

the midpoint of the year compared with

crude prices temporarily fell below $100

However, junior oil and gas companies

capital than available supply for oil and

represents the lowest total oil and gas funds raised in a single quarter in four

companies successfully raised capital in the

We anticipate this trend will continue with investors being selective in the stocks they

companies will be compelled to seek

result in further consolidation in the AIM oil

Group has made an offer to acquire

Performance of the Oil and Gas Eye Index over Q2 2013

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EY Oil and Gas Eye FTSE AIM All-Share (rebased)

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900

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2,900

3,400

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EY’s Oil and Gas Eye FTSE AIM All-Share (rebased)

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3Oil and Gas Eye |

As we predicted earlier in the year, against this challenging backdrop there has been a discerned shift in investor focus towards

opportunities in Africa’s oil and gas sector was highlighted by the listing on AIM of

Oil and gas funds raised as a proportion of total funds raised on AIM

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

% of

AIM

fund

s

Oil and gas new issues (£m) Oil and gas further issues (£m) Oil and gas as % of all AIM (RH scale)

Q2

2005

Q3

2005

Q4

2005

Q1 2

006

Q2

2006

Q3

2006

Q4

2006

Q1 2

007

Q2

2007

Q3

2007

Q4

2007

Q1 2

008

Q2

2008

Q3

2008

Q4

2008

Q1 2

009

Q2

2009

Q3

2009

Q4

2009

Q1 2

010

Q2

2010

Q3

2010

Q4

2010

Q1 2

011

Q2

2011

Q3

2011

Q4

2011

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012

Q3

2012

Q4

2012

Q1 2

013

Q2

2013

Q2

2012

0

200

400

600

800

1,000

1,200

Oil

and

gas

fund

s £m

Nigeria and Namibia, raised £32m in May

is not currently included in the Oil and Gas

policy is to acquire or invest in businesses

limited investment there will continue to be

| Oil and Gas Eye

be appointed as operator, of its two licence

that it had relinquished its licences in

Egdon Resources announced a series

form part of the company’s strategy to

In April, the company was awarded licences covering two offshore blocks adjacent to the North Yorkshire coast

a 60% interest in an onshore licence in

Just three months after listing on AIM,

enter the Oil and Gas Eye Index at the end

accelerate activity were also key growth

Nighthawk Energy rose

series of announcements about successful drilling activity, which added substantially

expanded its immediate drilling plans to include two appraisal wells at the Arikaree

increase production and cash generation and will enable the company to establish

In June, IGas Energy announced that

trillion cubic feet in its shale acreage in

in this acreage is expected to commence later this year and will help the company

Sound Oil announced that it had achieved the

Europa Oil & Gas rose

Risers in Q2 2013 increase revenues and pursue strategic deals

the AIM oil and gas universe recorded

Performance of the Oil and Gas Eye Index and oil price over Q2 2013

1,000

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EY Oil and Gas Eye Brent crude (rebased)

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5Oil and Gas Eye |

In May, Petroceltic International

commercial volumes of hydrocarbons

and to trade on their respective Main

of Lochard Energy and The Parkmead Group announced that they had reached agreement on the terms of a recommended

Eye Index at the end of the second quarter following the acquisition of the company by

Wessex Exploration fell

hydrocarbon shows had been encountered

second of a four well exploration drilling campaign that commenced in 2012 to

price of Northern Petroleum

Another company to suffer disappointing drilling results was New World Oil and Gas

of hydrocarbons were found in the Rio

As a result, the company has decided to

In April, Kea Petroleum announced that the Mauku 1 well in New Zealand had failed to intersect any hydrocarbon pay and consequently it will be plugged

Fallers in Q2 2013 suffer operational and deal setbacks

in the AIM oil and gas universe

Performance of the Oil and Gas Eye Index and FTSE 350 Oil and Gas Producers Index

EY Oil and Gas Eye FTSE 350 Oil and Gas Producers (rebased)

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6 | Oil and Gas Eye

Main market oil and gas movers

listed on the Main market were impacted by the wider equity market volatility and

Energy’s share price fell by 31% over

the company announced that the North

had been suspended before reaching planned total depth after encountering

of not being able to test the prospect fully and safely without the use of specialist

time taken to import the equipment into Indonesia prevented an immediate return

Oil is involved in a number of legal proceedings in connection with the sale of

arbitration tribunal ruled in April that the determination of tax was outside its jurisdiction, but that there were two areas

In June, Heritage Oil announced that, in

Oil and Heritage, the court had awarded

company announced that it had agreed to

Share price movements of FTSE 350 Oil and Gas Producers over Q2 2013

announced that its revenues had decreased

primarily due to a decrease in condensate

to a three year extension, and a two year interest payment holiday, on their

0%

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-15%

-20%

-25%

-30%

-35%

Enqu

est

Prem

ier O

il

Sala

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nerg

y

Afr

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ir En

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Cairn

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il

Her

itage

Oil

Rusp

etro

Roya

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ch S

hell

B

BG G

roup BP

Roya

l Dut

ch S

hell

A

Soco

Inte

rnat

iona

l

Essa

r Ene

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7Oil and Gas Eye |

Quarterly trend of funds raised on AIM: oil and gas, and all sectors

Ins and outs of the AIM oil and gas universe

strong at the end of the second quarter,

on AIM following the successful completion

which was formed in 2010, intends to

suspended from trading on AIM in May

new issues by all companies listed on AIM

2013, 69% higher than the total for the

on AIM in April following the completion of the acquisition of the company by

In June, Woburn Energy completed the

change of business, which resulted in Woburn Energy becoming an investing

company, Woburn Energy was required to substantially implement its investing policy or concluded a reverse takeover on or

and shares in the company were suspended

All

AIM

fund

s £m

0

200

400

600

800

1,000

1,200

Oil

and

gas

fund

s £m

Oil and gas new issues (£m) Oil and gas further issues (£m) All AIM total funds (£m) (RH scale)

Q2

2005

Q3

2005

Q4

2005

Q1 2

006

Q2

2006

Q3

2006

Q4

2006

Q1 2

007

Q2

2007

Q3

2007

Q4

2007

Q1 2

008

Q2

2008

Q3

2008

Q4

2008

Q1 2

009

Q2

2009

Q3

2009

Q4

2009

Q1 2

010

Q2

2010

Q3

2010

Q4

2010

Q1 2

011

Q2

2011

Q3

2011

Q4

2011

Q1 2

012

Q2

2012

Q3

2012

Q4

2012

Q1 2

013

Q2

2013

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

| Oil and Gas Eye

return of volatility in equity markets and downward pressure on oil prices combined

on AIM in the second quarter was just

in the previous quarter and represented the lowest amount raised in a quarter

wider AIM market improved slightly in the

21% higher than the total in the previous quarter and 19% higher than the total for

were successful in raising funds in the

As one of the conditions of its proposed merger with Australian

Range Resources

operational and working capital

will use these monies to repay debt and

New World Oil and Gas successfully

proceeds of the placing were in part

analysis of the drilling results, the company announced that the well was

has decided to plug and abandon the

Oil and gas funds raised on AIM and the Main Market (£m)

Secondary fund-raising plummets in Q2

Alkane Energy raised gross proceeds

company plans to use the funds raised

Marine seismic operations company Thalassa Holdings raised gross

purchase additional seismic acquisition equipment and provide the company

also broadening the institutional

In May, Kea Petroleum successfully

proceeds of the placing will be used to fund the construction of new production facilities for the company’s

Additionally, the funds will be used to

as part of the company’s committed exploration work program for

AIM Main Market AIM and Main Market

New issues New issues

2012 Total 177.6 467.0 162.9 288.0 1,095.4

2011 Total 223.1 1,013.1 234.7 457.0 1,927.9

2010 Total 131.9 1,902.7 1,271.7 1,092.9 4,399.2

Oil and Gas Eye |

Q1 2013 MV £m

1,390

362

292

210

193

132

123

Exits

Entrants

Oil and gas constituents at start of each quarter

Q3 2013 MV £m

223

122

Exits

Entrants

Q2 2013 MV £m

329

311

292

269

120

Exits

Entrants

| Oil and Gas Eye

Funds raised on AIM to Q2 2013

New issues Oil and gas Oil and gas All AIM All AIM Oil and gas as % of all AIM Oil and gas as % of all AIM

issues (£m) issues (£m)1

11

1

23

3 20

1

3

33

2 23

2

2

1 31

0

1

2009 0

13

2006

20

2003 163

2002 6 161

2001 3

Further issues Oil and gas Oil and gas All AIM All AIM Oil and gas as % of all AIM Oil and gas as % of all AIM

issues (£m) issues (£m)

96

61

102

Oil and Gas Eye |

Further issues Oil and gas Oil and gas All AIM All AIM Oil and gas as % of all AIM Oil and gas as % of all AIM121

62

2009 262

2006 261

2003

2002 1,126

2001 39 1,026

Total issues Oil and gas Oil and gas All AIM All AIM Oil and gas as % of all AIM Oil and gas as % of all AIM

issues (£m) issues (£m)

63

63 611

123

62

69

2009 262 2,631

3,263

2006

2003 1,636

2002

2001 1,203

EY

EY is a global leader in assurance, tax, transaction and

build trust and confidence in the capital markets and in economies the

building a better working world for our people, for our clients and for

Further informationOil and Gas Eye, or any associated

Jon Clark

Ally Rule

How EY’s Global Oil & Gas Center can help your business

uncertain energy policies, geopolitical complexities, cost

of more than 9,600 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory

execute the mobility of our global resources and articulate points

oilandgas, or contact Michael Simpson at msimpson2@uk.ey.com

Oil and Gas Eye

@EY_OilGas EY Global

You can also connect with us using social media:

Oil & Gas

2013 Global oil and gas tax guide

Our annual guide provides information about

a directory of our global oil and gas tax

local tax legislation, which varies greatly from

Andy BroganGlobal Oil & GasTransaction Advisory Leader

Pip McCrostieGlobal Vice Chair Transaction Advisory Services

The Capital AgendaBased around four dimensions, it helps companies consider their issues and challenges, understand their options and make more informed capital decisions.1. Preserving capital: reshaping the

operational and capital base

2. Optimizing capital: driving cash and working capital and managing the portfolio of assets

3. Raising capital: assessing future capital requirements and assessing funding sources

4. Investing capital: strengthening investment appraisal and transaction execution

About this surveyThe Global Capital Con dence Barometer is a regular survey of senior executives from large companies around the world, conducted by the Economist Intelligence Unit (EIU). Our panel is comprised of select Ernst & Young clients and contacts, and regular EIU contributors. This snapshot of our ndings gauges corporate con dence in the economic outlook, and it identi es boardroom trends and practices in the way companies manage their Capital Agenda. Pro le of respondents

Global Capital Con dence Oil & Gas

con

Key ndings for oil and gasMore than 44% feel that the global economy is strongly or modestly improving, up sharply from just 27% six months ago.Con dence in the local economy is also up modestly.Credit market tightness is notably easing.The oil and gas M&A appetite is improving compared to six months ago.

Our eighth Global Capital Con dence Barometer shows a clear rebound in corporate con dence. After years of conservative decision-making, executives are steadily trending toward an investing agenda. But are companies being bold enough?Expectations for global economic growth, corporate earnings and credit availability are at some of their highest levels in two years. Broader equity markets had a strong rst quarter of the year in just about all geographies. Normally, this positive sentiment would translate into signi cant capital investment and M&A activity. However, our respondents are gravitating toward lower-risk value-creation and growth strategies.

The current situation can best be described as a con dence paradox — a disconnect between con dence and M&A activity. Before the nancial crisis, economic sentiment and M&A activity moved in harmony. However, in the “new normal” economy, these indicators are decoupled. Macroeconomic risks, such as the Eurozone crisis, US sequestration and slowing emerging markets growth, have given companies pause. Consequently, some of the world’s richest and most mature economies, which would be expected to lead a recovery, lack con dence within their borders, lowering appetite for capital investment worldwide.

Valuation levels and sentiment suggest companies now face is a window of opportunity to seize rst-mover advantage in a market gaining momentum. History shows that rst movers in any economic cycle can create differential value and position themselves for sustained market leadership. Now is the time to invest and grow forward.

Global oil and gas tax guide2013