Canadian oilpatch expected to keep bulking up through mergers and acquisitions

Oilpatch advisers are expecting the wave of consolidation to continue after last year’s string of blockbuster Canadian deals, but whether foreign buyers are ready to jump into the fray remains an open question.

Companies have seen the merit in bulking up through mergers and acquisitions as oil prices hover around the lacklustre US$60 per barrel mark, shareholders demand better returns through dividends and buybacks and uncertainty continues to cloud the ability for producers to sell their output in lucrative global markets, said Grant Zawalsky, senior partner and vice-chair at law firm Burnet, Duckworth and Palmer LLP in Calgary.

“M&A is a way that you can grow when you don’t want to invest in drilling, when you’re not going to get the kind of returns you’re expecting,” he said.

“Until the fundamentals change, we’ll likely see more of the same.”

Zawalsky worked on three major energy transactions last year: the bidding war for MEG Energy Inc. in which Cenovus Energy Inc. emerged victorious; Whitecap Resources Inc.’s $15-billion combination with Veren Inc. and Ovintiv Inc.’s $3.8-billion acquisition of NuVista Energy Ltd.

BD&P as a whole was involved in eight of the 10 biggest energy producer transactions last year. Deals were done largely among domestic players, with Ovintiv somewhat of an exception. It’s headquartered in Denver, but its stock trades on the TSX and it has a substantial Canadian presence, having formerly been known as Encana and based in Calgary