Exploration and production companies are prodigious users of capital and usually need to invest heavily to replace rapidly depleting oil and gas reserves. This constant search for capital has led some energy companies to access the capital markets or conduct other transactions to raise this much-needed cash.

Forex Broker Guide: Using the right broker is essential when competing in today's forex marketplace.

Debt and Equity
Gulfport Energy (Nasdaq:GPOR) is involved in various project areas across North America, including the Utica Shale and the oil sands in Canada. The company estimates that capital spending in 2013 will range from $317 million to $327 million, not including capital spending related to the Grizzly Oil Sands project.

Gulfport Energy has accessed both the debt and equity markets to fund part of this program. The company issued $250 million of senior notes due in 2020, and will use the proceeds to pay down its credit facility as well as fund capital expenditures.

Gulfport Energy also sold its Permian Basin oil and gas assets to Diamondback Energy (Nasdaq:FANG) in exchange for cash and common stock. The company conducted an initial public offering immediately after acquiring the assets from Gulfport Energy.

Penn Virginia (NYSE:PVA) accessed the equity markets to raise capital and issued common and depositary shares, raising combined proceeds of approximately $149 million. The company also raised capital in July 2012 through the sale of its non-Marcellus Shale Appalachian Basin assets for $100 million.

Penn Virginia will use the proceeds of these deals to pay down its credit facility and fund its capital program. The company also announced the end of its common stock dividend when it released earnings for the second quarter of 2012.

SEE: Raising Capital- Issuing Long-Term Debt

Eagle Ford Shale
Sanchez Energy (NYSE:SN) is focused on the Eagle Ford Shale and recently issued Series A Cumulative Perpetual Convertible Preferred Stock, raising approximately $144 million in proceeds. The company also secured a $250 million credit facility and a $250 million term loan to provide more liquidity. Sanchez Energy will use the proceeds to accelerate the development of the company's 95,000 net acre position in the Eagle Ford Shale, most of which is in the wet gas area of the play.

Deleveraging
Forest Oil (NYSE:FST) got a little too leveraged over the few years and in July 2012 announced a divestiture program to reduce its debt load. The company just announced the sale of oil and gas properties in south Louisiana for $220 million. The properties produced 20 million cubic feet of natural gas equivalents per day in the most recent quarter and contained proved reserves of 45 Bcfe at the end of 2011.

Forest Oil has now raised $277 million through divestitures and has reduced capital spending for the final two quarters of 2012, with a goal of having cash flow and capital spending at an equivalent rate by the fourth quarter of 2012.

SEE: Deleveraging: What It Means To Corporate America

The Bottom Line
Exploration and production companies always seem to be looking for additional capital, either to replace rapidly depleting oil and gas reserves, or to deleverage when debt burdens become too great.

At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Savings

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  3. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  5. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  8. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  9. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  10. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!