Ernst & Young has revealed that its Oil & Gas Eye index, which monitors the performance of the top 20 oil and gas companies on AIM, has shown a 27 per cent increase in the second quarter compared to the first three months of the year.

During this period AIM saw three new issues, Chariot Oil & Gas, Indus Gas and Petro Matad, which raised £70 million between them.

These were offset by three de-listings, Global Marine Energy, Granby Oil & Gas and Prometheus Energy, as deal activity in the junior oil and gas market picked up pace.

The report claims that the consolidation seen in the industry in the past 18 months has continued despite challenges on valuation, deal structure and people dynamics.

Alec Carstairs, oil and gas partner at Ernst & Young, said with high and volatile commodity prices and an unstable economic environment, many of AIM’s junior oil and gas companies are finding it hard to fund exploration.

“Despite a leading performance by AIM oil and gas companies in the second quarter of this year, companies are warning of mounting inflationary pressures, poor liquidity, the higher costs of debt and a reduction in available capital, while unprecedented market volatility in July has all but wiped out advances made by the index over the second quarter of 2008.”