Oil and gas industry advisors anticipate a continued trend of consolidation following a series of significant Canadian deals last year. The willingness of foreign investors to participate in this trend remains uncertain.
The appeal of mergers and acquisitions has grown for companies as oil prices linger around the $60 US per barrel mark. Shareholders are seeking improved returns through dividends and buybacks, while challenges persist in selling output in global markets. Grant Zawalsky, a senior partner at law firm Burnet, Duckworth, and Palmer LLP in Calgary, highlighted how M&A offers a growth opportunity when drilling investments may not yield expected returns.
Zawalsky was involved in major energy transactions last year, including the bidding war for MEG Energy Inc., Whitecap Resources Inc.’s $15-billion merger with Veren Inc., and Ovintiv Inc.’s $3.8-billion acquisition of NuVista Energy Ltd. Burnet, Duckworth, and Palmer played a significant role in eight of the top 10 energy producer transactions.
Most deals were completed among domestic firms, with Ovintiv being a notable exception due to its Canadian presence despite being headquartered in Denver. Tom Pavic, president of Sayer Energy Advisors, foresees a busy year ahead, emphasizing a buyer’s market as companies seek cost-effective ways to expand drilling inventories.
While the investment environment has improved with recent energy agreements, global interest in Canadian acquisitions has not significantly increased. Potential buyers are evaluating Canadian assets against regulatory challenges and export infrastructure needs. U.S. private equity firms are showing interest in acquiring Canadian assets, leveraging lower costs and regulatory risks to drive value.
Zawalsky noted that hostile bids, like the one that targeted MEG Energy, are likely to be uncommon. ATB Capital Markets anticipates a modest slowdown in consolidation among explorers and producers, citing various economic factors influencing transaction activity in the industry.
