This article explores how the top 25 independent oil and gas producers listed on the London Stock Exchange performed in 2023.
2023 brought relative stability to the oil market after a turbulent 2022. However, the UK natural gas price, which declined significantly in the first half of the year, became more volatile in the autumn. Prices for both commodities fell from their peak in 2022 amid signs of a global economic slowdown, but the UK natural gas price rose sharply following tensions in the Middle East.
Down from an average price of $101 per barrel in 2022, the Europe Brent Crude spot price was more stable and averaged around $80 per barrel in 2023 on the back of slower global demand growth and increased supply, primarily from non-OPEC+ producers.
The UK natural gas price declined steadily due to the mild weather and ample gas storage across Europe and fell below GBp 60/therm by the start of summer 2023. However, the new conflict in the Middle East, which put LNG trade to Europe at risk, pushed the price close to GBp 140/therm in October 2023.
The UK’s 33rd Oil and Gas Licensing Round, which offered 27 new licenses, and the announcement of the Offshore Petroleum Licensing Bill in the Autumn Statement 2023 are aimed at helping boost investor confidence in the North Sea.
Chart 1. Europe Brent Crude spot price and UK Natural Gas day-ahead price 2023
Source: Energy Information Administration and Bloomberg (accessed on 11 January 2024)
Table 1. Upstream independents league table 2023
The total market capitalisation of the top 25 upstream independents declined 27 per cent to £9.8 billion in 2023. The top three companies (Harbour Energy, Energean and Ithaca Energy) accounted for 58 per cent of the league table by market capitalisation. This rises to 88 per cent for the top ten companies.
A fall in global oil and gas prices last year decreased the market caps of 17 companies in the league table. Only 8 companies saw an increase in their market cap at the end of December 2023.
While all top three companies retained their positions, each saw a decline in market cap. Harbour Energy, Energean and Ithaca Energy lost 8 per cent, 18 per cent and 20 per cent, respectively, from their market caps compared with 2022.
Five companies entered the top 25 in 2023:
Five companies left the league table in 2022 due to a decline in market cap, mergers and acquisitions or insolvency.
The outlook for the year ahead is uncertain. On the one hand, we have recently seen mergers and acquisitions activity increase as two years of high and stable oil and gas prices have helped improve the financial health of many independents. Examples from 2023 include Harbour Energy’s proposed acquisition of Wintershall Dea’s assets from BASF and Letter One for $11.2 billion, the completion of Serica’s acquisition of Tailwind Energy and Ithaca Energy’s purchase of the remaining 30 per cent stake in the Cambo field from Shell. Indeed, Harbour Energy’s proposed acquisition would make it a ‘super independent’ and could result in more than doubling the league table’s total 2023 market cap.
However, a change in government after the UK general election in 2024 could make the current windfall tax, the Energy Profits Levy (EPL), more onerous. Labour’s proposed measures include increasing the headline tax rate from 75 per cent to 78 per cent (EPL would increase from 35% to 38%), and removing EPL relief for capital expenditure. Further, Labour has proposed that no further exploration licences would be issued. The SNP in Scotland has also called for a more cautious approach to granting new exploration licences. If introduced, these measures would significantly deter further investment in the UK North Sea.
Cost efficiency is likely to remain a key consideration for 2024 as companies see costs rise due to geopolitical tensions, inflation and the need to innovate and invest in the energy transition. To reduce costs, companies could be looking at increasing economies of scale through mergers and acquisitions, exploring digital solutions such at Generative AI and continuing to change company culture to encourage innovation and reduce organisational complexity.
In 2024, decarbonisation is expected to remain an important theme. This could include a continued focus on reducing emissions from operations and looking for opportunities in renewables and carbon capture.
We included all United Kingdom, Guernsey, Jersey and Isle of Man incorporated crude oil producers trading on the London Stock Exchange as of 31 December 2023. We then compared market capitalisation from the same point in the previous year and ranked the top 25 companies by their value in British pound sterling.
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