London is set for its largest oil company listing on the Alternative Investment Market in two years

 
Courtney Goldsmith
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An Appalachia oil producer will find a home on London's junior floatation market
An Appalachia oil producer will find a home on London's junior floatation market (Source: Getty)

London is set for its biggest oil and gas listing since 2014 as Diversified Gas & Oil gears up for a float on the Alternative Investment Market (Aim) Friday.

Diversified, a US-based firm that operates around 7,500 gas and oil producing wells in the Appalachian Basin, raised $50m (£39.7m) in capital. It produces 4,700 barrels of oil equivalent per day (boepd) mainly in the US states of Ohio, West Virginia and Pennsylvania.

The company has exploded over the past two years as it picks up conventional low-risk oil and gas assets from larger American production and exploration companies that are turning their focus to shale production.

Read more: First US shale gas shipment arrives in the UK as fracking debate rages

Listing on London's junior floatation market will take Diversified's market capitalisation to $86.4m. It's the largest initial public offering (IPO) in the sector since Savannah Petroleum was listed in August 2014, after which plummeting oil prices nudged investors away from niche oil and gas companies.

The company will place shares at a price of 65p.

Robert Hutson and Robert Post established Diversified in 2001, and its head office is based in Birmingham, Alabama.

The company said it chose to list on Aim because of its focus on growth companies – the US has no comparable junior market. Diversified hopes to raise capital to expedite growth of the company with its low-risk listing.

Oil and gas companies are rumoured to be making a comeback on Aim this year as commodity prices continue to recover, propping up mid- to large-cap miners, a report from broker FinnCap found.

By the end of 2016, iron ore prices had doubled from their January 2016 lows while other base metal prices like zinc also climbed, up nearly 70 per cent by December.

The rebound in commodity prices helped drive the recovery of the mining sector, with BHP Billiton's shares rising 84 per cent to the end of 2016 and Rio Tinto's 64 per cent.

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