Seismic reflections: Funding troubles, M&A bubbles
Many junior developers have the assets to make the leap to full-cycle E&P with commercial resources and experienced management ready to fast track discoveries into production. However, with debt funding elusive and equity prohibitively expensive many companies are struggling to fund their developments. To overcome this some are turning to alternative options such as SEDA facilities while a more diverse portfolio allows others, such as Faroe Petroleum, to swap discoveries for production that can be leveraged for debt. But if juniors do not secure funding, share prices are likely to continue to underperform and we may see them becoming takeover targets for mid-sized cash-rich players looking to buy cheap oil in the ground.
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