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HOUSTON, March 1 (Reuters) – Energy companies are dominating this year’s U.S. corporate share sales, raising $7.5 billion so far this year, with Marathon Oil Corp the latest to tap the market to bolster balance sheets to weather the volatile price of oil.
Share sales by oil and gas companies accounted for one third of the overall equity raised so far by U.S. corporates, a year to date record, with Marathon in an upsized offering of 145 million shares priced at $7.65 late on Monday.
On Tuesday, Marathon shares fell as low as $7.56 before rebounding in afternoon trading to $8.00, paring losses to 2.6 percent.
While scores of highly-leveraged oil and gas companies are struggling to tap funding, those firms with stronger balance sheets are winning over investors.
“Several oil and gas companies still need equity capital, and only the strongest will actually raise that capital through block trades,” said Michael Cippoletti, Managing Director and Head of US Equity Capital Markets at BMO Capital Markets Corp.
Issuers in recent weeks have included Pioneer Natural Resources Co, Cabot Oil & Gas Corp and Hess Corp .
The money raised is being used to safeguard credit ratings and position companies to potentially acquire weaker rivals. Such acquisitions are expected to take off when the price of oil bottoms out.
Ability to raise funds depends on each company’s acreage and finances.
“Two key elements include the best relative ability to drill economically at current strip pricing, and balance sheet strength,” he added.
John Hess, chief executive of Hess, which sold equity on Feb. 4, said last week the sale was a proactive move during an oil price downturn and rocky debt markets.
Crude oil prices have slumped some 70 percent since mid 2014. (Reporting By Lauren Hirsch and Terry Wade; Editing by Marguerita Choy)
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