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Smaller groups in the US oil and gas sector are raising outside cash again after years of getting a cold shoulder from capital markets, as higher energy prices and stronger balance sheets help them to win over investors.

Fundraising activity across equity and bond markets has jumped this year, particularly among independent exploration and production groups and oilfield services companies, the contractors that provide equipment and expertise to producers. Senior bankers and lawyers said they expect the trend to pick up pace as the oil price stays high.

“There’s lots more activity — people are seizing on [the prospect of] $100 oil and less concern about inflationary pressures,” said Hillary Holmes, the Houston-based co-chair of capital markets at law firm Gibson Dunn. “Oilfield services faced challenges with capital raising for a long time because it was a volatile business, but they’re seeing more activity and steadier cash flows and trading at nice multiples right now.”

Although capital markets remained open for the largest energy groups, smaller companies have struggled to raise cash in recent years after an earlier wave of debt- and equity-fuelled overexpansion in the early 2010s led to big losses for many investors.

However, Josh Martin, managing director at Pickering Energy Partners, a Houston-based investment and advisory group, said investors were now being drawn back after companies established a better record of capital discipline.

He said: “Companies are really keeping their focus on shareholder returns. They’re very disciplined, they’re making the right decisions by paying out dividends and buying back shares. This is winning the investors back to the sector.”

Two oil and gas services groups have gone public in the US in 2023, compared with just one in the previous four years, according to Dealogic data. There were 11 high-yield bond issuances from the services sector in first nine months of the year, according to Dealogic, up from just one in all of 2022 and the highest total since 2018.

The two new listings — Kodiak Gas Services and Atlas Energy Solutions — both had rocky entries to the stock market, pricing their initial public offerings below their initial target ranges, but Kodiak’s shares have climbed 11 per cent since, while Atlas is up more than 20 per cent.

A further two companies that specialise in exploration and production have listed this year, making it the busiest year of listings in the broader oil and gas sector since 2018. Last month Oklahoma-based Mach Natural Resources became the latest producer to unveil IPO plans.

“We see lots more IPOs on the horizon,” said Pete Bowden, global head of industrial, energy and infrastructure banking at Jefferies.

E&P businesses that are already public have also stepped up share sales, with six deals in September alone raising $1.5bn. That made it the busiest month since 2016 by number of deals and the busiest since mid-2018 by money raised.

Gibson Dunn’s Holmes said most companies were being careful not to lose the hard-won trust even as funding becomes more freely available. She said they were mainly using the cash to refinance old debt on more favourable terms, or to pay for relatively low-risk acquisitions. Services contractor Diamond Offshore Drilling, for example, raised $550mn last month to repay earlier credit facilities that came with restrictive covenants.

“Some are using it to do smart bolt-on acquisitions, trying to shore up their positions in particular geographic areas . . . [but] companies are still fundamentally behaving the same ways in terms of focus on capital discipline and shareholder returns,” she said.