SCOTTISH oil and gas companies quoted on London’s Alternative Investment Market saw their value fall by more than 30 per cent last year – but suffered less than the sector as a whole, a new analysis has found.

The figures, from accountancy firm BDO, show a 31.4 per cent fall to £265.75m in the market capitalisation of Scotland’s AIM-quoted oil and gas sector, versus a 40.8% fall in the sector across the UK as a whole to £2.9bn.

"It will surprise no-one to find the value of Scotland’s AIM-listed oil and gas firms fell substantially during 2015 and the fall largely mirrored the drop in the oil price,” said BDO corporate finance director Neil McGill. “What is clear is that the oil and gas market is going to remain volatile and uncertain for the next 12 months and perhaps longer. This means that many listed firms are realigning their strategy whilst maintaining tight cost control and cash management. For some firms, the focus will shift to the short term through necessity, but others with a more robust balance sheet can take a longer term view and seek out opportunities to optimise their portfolios, including through mergers and acquisitions.”

Mr McGill said relatively strong performances – compared to other Aim oil and gas shares – from Edinburgh-based Bowleven and Aberdeen-based Faroe Petroleum had contributed to Scotland’s shallower decline.

“Bowleven did this farm-out deal and got a big chunk of cash back in, which means its balance sheet is very strong,” Mr McGill explained. “And Faroe has fairly strong production coming through. Companies with a balanced portfolio of production assets have got better cashflow, so they’re better positioned than some of the pure exploration companies, some of which are quite indebted.”

The biggest faller in Scotland during 2015 was Aberdeen-based energy services firm SeaEnergy which fell 80.9 per cent over the year. Earlier this month the firm said it was in talks to sell parts of its business as deteriorating conditions hit its cash position.

Faroe was the best performer, with a fall of only 12.5 per cent. The company has a portfolio of around 60 exploration, appraisal, development and production licences in West of Shetland, the North Sea, Norwegian Sea, Barents Sea and the Celtic Sea.

The analysis includes another two AIM companies – Eland Oil & Gas, based in Aberdeen, and Dublin-based Lansdowne Oil & Gas – in which SeaEnergy holds an 18.67 per cent stake.

“Initiatives such as greater collaboration and partnership between operators and the supply chain will be a key part of the great drive for efficiencies,” Mr McGill continued. “However some firms will still need to explore funding from alternative sources such as specialist investors and initiate innovative partnering arrangements.”

Mr McGill predicted there would be an ‘inflexion point’ – possibly next year – where the bottom of the market would be called and ‘liquidity taps would turn back on’.

He added: “I think the coming year will remain challenging for Scotland’s oil and gas sector whether listed or not. However, this is a sector which has consistently shown great resilience and an ability to adapt across multiple cycles and will do so again.”