311_offshore oil well.
(photo credit: Associated Press)
The Israel Securities Authority held a briefing today on the results of its study into trading in Tel Aviv Stock Exchange (TASE) listed oil and gas exploration partnerships. Securities Authority Economics Department director Dr. Gitit Gur-Gershgoren presented the results.
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The Securities Authority is formulating new reporting rules as oil and gas exploration activity has boomed in recent months, and because many exploration partnerships' disclosure to the public has simply been unclear. The new rules will reportedly be ready in a few weeks, and today's briefing was a kind of opening shot by the Securities Authority on tighter regulation of the industry.
Gershgoren said, "The new and special reporting rules for the oil and
gas industry will be published after the Securities Authority plenum
approves them." She avoided giving details about the new rules, saying
only, "We hope that they will come into effect before 2011."
A Securities Authority study found that the aggregate market cap of
TASE-listed oil and gas exploration partnerships rose eight-fold in the
past two years from NIS 5 billion to NIS 39.4 billion, and trading
volume in their partnership units peaked at 30% of total TASE turnover.
In 2010, oil and gas exploration partnerships raised NIS 985 million in
Another indication of the public's headiness for the industry is the
daily turnover in oil and gas exploration partnerships' partnership
units: an average of NIS 450 million.
The Securities Authority also found is that the proportion of investment
institutions' holdings in oil and gas exploration partnerships fell
from a peak of 10.75% in December 2009 to 8.81% in June 2010. The
aggregate holding of investment institutions in oil and gas exploration
partnerships was NIS 2.3 billion in June, less than 9% of their total
market cap. Private investors own more than 90% of the firms'
Gur-Gershgoren said, "There is extreme volatility, much of which is
driven by rumor, from which it is not clear how investors can draw
information. The institutions' holdings increased very little, and
remain negligible compared with their total portfolios."
Gur-Gershgoren added, "We saw something here that seems to us to be
unusual compared with other industries. We see rapid rise in market
caps, volatility, and a disproportionate increase in trading volumes.
The risk is very high, and the information is technical and very hard to
understand. This information has led the Securities Authority to think
about what to do so that investors can make wise decisions and investors
should take this into account."