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Energy security trumps the climate? London’s biggest IPO of the year is an oil company

<i>Thaier Al-Sudani/Reuters</i><br/>The world may be losing the fight against the climate crisis
Thaier Al-Sudani/Reuters
The world may be losing the fight against the climate crisis

By Julia Horowitz, CNN Business

The world may be losing the fight against the climate crisis, but investors are still willing to throw money at oil and gas companies.

That’s one lesson from the initial public offering on Wednesday of Ithaca Energy, a North Sea oil and gas producer — which went ahead as world leaders gathered for the UN climate summit in Egypt.

The listing of about 10% of the firm, the biggest in London so far this year, struggled out of the gate. It was last trading at about 230 pence ($2.62), more than 7% below its IPO price. That was already at the bottom end of the range established by the company’s investment bankers, according to Reuters.

Yet the fact that Ithaca hit the market at all is a sign of its appeal at a moment when Europe is gripped with worries about access to energy supplies, fuel prices are high and turbulent markets have sparked an active hunt for stable returns.

Stock market listings have all but dried up this year as companies have decided to wait for economic conditions to improve and volatility to ease.

“The UK oil and gas sector has seen some decent pickup in interest throughout the course of 2022,” said Nathan Piper, an industry analyst at the bank Investec.

The best performing stock so far this year on London’s FTSE 250 index is Energean, which focuses on gas projects in the North Sea and Mediterranean. The company’s shares are up nearly 80% in 2022, while the index is down more than 20%.

The North Sea is an aging basin, and oil and gas giants like Chevron, Exxon and Shell have been winding down their presence. But smaller players and private equity firms have jumped in, investing billions of dollars in recent years.

Plans to develop new oil and gas projects in the region have proven controversial, however, given the United Kingdom’s desire to establish itself as a leader in the fight to lower global emissions.

Earlier this year, Ithaca — which is majority-owned by Israel’s Delek Group — completed the acquisition of Siccar Point, which intends to develop the Cambo oil field in the North Sea.

Activists have been critical of the project, noting that the International Energy Agency has warned that the development of new oil and gas fields must stop if the world is going to limit warming to 1.5 degrees Celsius and avoid the worst effects of the climate crisis.

Piper said an oil and gas company is one of few that could get away with a listing on the market right now. The number of IPOs has plunged this year, according to data from Dealogic. There have been fewer than 1,250 global listings so far in 2022, compared to more than 3,000 in 2021, which was a record year.

But Ithaca’s stock could be in for a bumpy ride. The UK government is considering extending a windfall tax on oil and gas profits in a bid to plug a gaping hole in its finances.

“That’s going to impact the value of all North Sea oil producers,” Piper said.

— Paul R. La Monica contributed reporting.

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