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Energy debt offerings, deal value rebound in Q3'17

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Energy debt offerings, deal value rebound in Q3'17

Debt offerings in the energy sector slightly improved in the third quarter of 2017 as deal value also experienced a jump.

Debt raises for the power, coal, gas utility and midstream sectors totaled $35.63 billion in the third quarter with 87 deals at an average size of $409.5 million. This is up from 84 deals at an average size of $349.6 million in the second quarter, which represented $29.37 billion in debt raises for the energy sector. During the third quarter of 2016, companies raised $40.26 billion through 103 deals at an average size of $390.8 million.

Power companies were again the most active in the third quarter of 2017, raising $18.58 billion through 50 deals at an average size of $371.6 million. Deal value dropped slightly from about $18.60 billion raised in the second quarter through 63 deals at an average size of $295.2 million.

Midstream companies followed with $15.88 billion raised through 25 deals at an average size of $635.2 million in the third quarter. In the previous quarter, midstream companies raised $8.97 billion through 15 deals at an average size of $598.1 million.

Gas utilities raised $1.17 billion through 12 deals at an average size of $97.5 million in the third quarter, down from $1.40 billion raised through five deals at an average size of $280.0 million in the second quarter. The coal sector did not have any debt offerings in the third quarter.

J.P. Morgan Securities LLC was the top energy debt dealmaker, ranked by deal credit, through the first nine months of the year with 57 offerings and a total deal credit of about $6.50 billion. Bank of America Merrill Lynch followed with 57 offerings and total deal credit of $6.27 billion.

Common equity offerings for the energy sector in the third quarter totaled $3.36 billion with 15 deals at an average size of $224.1 million. This is less than half of the $7.87 billion raised in the second quarter through 33 deals at an average size of $238.4 million. In the third quarter of 2016, common equity offerings in the energy sector totaled $8.78 billion through 43 deals at an average size of $204.1 million.

The midstream sector led the way with $2.23 billion raised through eight deals at an average size of $279.1 million. This was a sharp drop from about $6.60 billion raised through 20 deals at an average size of about $329.8 million in the second quarter.

Power companies raised $781.6 million through six deals at an average size of $130.3 million in the third quarter. This was an increase in deal value from $515.6 million raised through 11 deals at an average size of $46.9 million in the second quarter.

The coal sector had one common equity offering at $346.9 million in the third quarter. Gas utilities did not have any common equity offerings.

Barclays Capital Inc. took over as the top common equity dealmaker through the first three quarters of the year, underwriting eight offerings at a total deal credit of about $2.87 billion. Morgan Stanley followed with four offerings at a total deal credit of $2.37 billion.

Preferred equity offerings in the third quarter hit $1.52 billion raised through six deals at an average size of about $253.9 million. Deal activity kept pace with the second quarter when six deals at an average size of $225.9 million raised about $1.36 billion. In the third quarter of 2016, there were nine preferred equity offerings in the energy sector at an average size of $124.9 million for a total of $1.12 billion.

Midstream companies raised $1.15 billion through two deals at an average size of $575.0 million in the third quarter. In the second quarter, midstream companies raised $600.9 million through three deals at an average size of $200.3 million.

In the power sector, there were four preferred equity offerings in the third quarter that raised $373.5 million at an average size of $93.4 million. This was a sharp increase from $4.4 million raised through two deals in the second quarter. Coal companies and gas utilities were inactive in the preferred equity market.

Wells Fargo Securities LLC leads the year-to-date preferred equity offerings, underwriting three offerings at a total deal credit of $258.8 million. Morgan Stanley ranks second, also underwriting three offerings but with a total deal credit of $228.8 million.

Only one initial public offering was launched in the energy sector in the third quarter.

Oasis Midstream Partners LP on Sept. 11 launched its IPO of 7.5 million common units. The Oasis Petroleum Inc. master limited partnership on Sept. 20 sold $127.5 million of the common units at $17 per unit. J.P. Morgan, Morgan Stanley, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, RBC Capital Markets and Wells Fargo Securities acted as joint book-running managers for the offering.

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