Several exploration and production companies both large and small have become appealing targets for consolidation as a result of falling market valuations and uncertainty surrounding oil's prices in the future.

According to the IHS Herold Oil and Gas Perspectives Report, many smaller companies who list their shares on London's Alternative Investment Market (AIM) Index are in the pre-production stage. Since they are not yet generating revenue to sustain their future operations, these companies are dependent on funding. In order to reach production, they must either sell new shares in their operations or contract out partial interests in their licenses, Oil & Gas Financial Journal reports.

The AIM index has dropped 40 percent from its most recent high, and a company wishing to raise funds would need to issue 70 percent more shares than a few months ago to generate the same amount of money, the news source reports.

Potential farm-in partners are less optimistic about future oil prices, and will demand better terms for participating in projects, according to the media outlet.

Alternative Investment Market is a part of the London Stock Exchange that caters to small-to-medium-sized businesses. Since its founding in 1995, more than 3,000 companies have listed their shares on the index in order to raise capital.