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Slipping investor confidence will result in smaller oil and gas companies coming under takeover pressure, according to Ernst & Young’s latest Oil and Gas Eye Index.

The index tracks performance of oil and gas firms listed on London’s Alternative Investment Market (AIM).

It fell by 12 percent during the second quarter — the biggest drop in a year.

AIM is the London Stock Exchange’s international market for smaller companies. Companies listed on AIM are typically early stage and venture capital backed, although some are more established and looking for growth capital.

The FTSE 350 Oil & Gas Producers’ Index and the AIM All-Share Index, both of which track bigger companies, fell just 2 percent and 
5 percent respectively during the second quarter.

Smaller companies are more vulnerable to oil price drops and drilling performance.

Falling investor confidence can make it harder for small firms to find financing, prompting some to merge or be acquired by bigger players.

Source: The Scotsman