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Oil Sands Exodus Pushes Canada’s M&A Deals To Highest Since 2007

Canada

International oil majors have sold a number of oil sands assets in Canada in recent months, with energy deals dominating the total mergers and acquisitions (M&A) activity so far this year, setting the transactions market on course for the best start to the year since 2007.

According to data compiled by Bloomberg, the total M&A transactions through June were worth around US$132 billion, the highest value for a first half since the US$156.5 billion recorded in H1 2007. Energy deals dominated the M&A market this year, for a total value of more than US$35 billion, followed by the financial industry, at less than US$30 billion, Bloomberg data referring to M&A activity by both Canadian and foreign firms showed.

Canada’s oil sands, considered to be one of the most expensive projects to develop, especially in the current oil price environment, have seen international oil majors selling their assets to Canadian oil firms in large deals.

In March this year, Shell said it was selling oil sands interests to Canadian Natural Resources for around US$8.5 billion, as part of its strategy to focus on free cash flow and higher returns on capital, and prioritize businesses such as integrated gas and deep water. At the end of March, ConocoPhillips announced the sale of oil sands assets in Canada to Cenovus in a US$13.3 billion deal, while Norway’s Statoil has sold its entire oil sands operations in Alberta to Athabasca Oil Corporation.

Earlier this month, Canada’s Natural Resources Minister Jim Carr said that there could be opportunities for Chinese companies to invest in oil sands projects.

In a report from last month, Wood Mackenzie said that “Oil sands headlines in Q1 2017 were dominated by two blockbuster M&A transactions for a combined US$23 billion. The recent transactions follow a wave of consolidation in the oil sands and now over 70% of oil sands production is concentrated in the hands of four of Canada’s largest producers: Suncor, CNRL, Imperial Oil and Cenovus.”

Back in March, the Canadian Oil & Gas 2017 Outlook survey, conducted by Torys LLP in association with Mergermarket, showed that market participants expected increased M&A activity this year. According to a managing director of a Canadian investment bank, who took part in the survey: “As the oil and gas industry transforms itself to become profitable at lower price levels, there will be an increased focus on M&A over the next 12 months.”

By Tsvetana Paraskova for Oilprice.com

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