Author: Mark Young

Cdn$347 Million of E&P Deals in Canada in March 2016

Analysis in CanOils’ new report “Upstream Oil & Gas M&A in Canada Reaches Cdn$347 Million in March 2016” shows that while March 2016 saw the lowest monthly deal value for domestic Canadian E&P assets since mid-2015, there was a distinct increase in M&A activity involving internationally-focused Canadian companies.

Domestic deal value has been low since 2016 began; the combined total values of newly announced domestic Canadian E&P deals in January, February and March 2016 do not reach the total of Cdn$1.35 billion of December 2015 alone.

Download the CanOils review of March 2016’s most significant deals involving TSX and TSX-V listed E&P companies here.


Source: CanOils M&A Review March 2016 – “Upstream Oil & Gas M&A in Canada Reaches Cdn$347 Million in March 2016

Highlights – March 2016

  • The biggest deal on the domestic front in Canada from March saw Penn West Petroleum Ltd. (TSX:PWT) continue its divestiture programme with the Cdn$148 million sale of its Slave Point assets. The company also agreed Cdn80 million-worth of non-core asset sales in March 2016, bringing its total asset sales since January 2015 up to over Cdn$1 billion.
  • Outside of Canada, there was more deal activity in March 2016. The biggest deal involving a Canadian-listed company in March 2016 saw a group of Chinese investors agree to acquire Bankers Petroleum Ltd. (TSX:BNP) for Cdn$638 million including debt. The company is mainly focused on the Albanian E&P industry and produces over 18,000 boe/d.
  • In all, Canadian-listed companies were involved in M&A-related stories in 13 different countries around the world this month.
  • Over 23,000 boe/d was put up for sale this month, including assets owned by Harvest Operations Corp., NEP Canada ULC and Questfire Energy Corp. (TSX-V:Q.A)

Full details on all of the biggest deals and M&A stories, including all Canadian E&P assets put up for sale in March, detailed analysis on the Penn West Petroleum asset sales and the Chinese acquisition of Bankers Petroleum, are provided in the CanOils M&A Review for March 2016.


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Private Companies Dominate U.S. Upstream M&A in Q1 2016

New analysis in Evaluate Energy’s M&A Review for Q1 2016 shows that privately held companies had a huge impact on the United States’ upstream oil and gas industry in recent months. While the biggest deal in the U.S. involved two public companies – Dominion Resources Inc. (NYSE:D) agreed to acquire Questar Corp. (NYSE:STR) for US$6 billion – the next biggest deals all involved a public company selling assets to a privately-held acquirer. In total, U.S.-based private companies were the acquirers in US$3.5 billion worth of asset and corporate deals in the U.S. during Q1 2016, a figure that also stands out because the total value of newly announced E&P deals by all companies worldwide was only US$18.5 billion.


The largest deal involving a private acquirer for E&P assets in the United States during Q1 2016 was a US$910 million sale by WPX Energy Inc. (NYSE:WPX). To help reduce its substantial debt position, which stood at around US$3.1 billion at the end of 2015, the company sold its Piceance Basin assets in Colorado in an all-cash deal to Terra Energy Partners LLC. The assets currently produce around 500 mmcfe/d and cover 200,000 net acres. The sale will leave WPX with its positions in the Delaware Basin, the Williston Basin and the San Juan Basin to focus on moving forwards. The company also made a significant US$309 million gathering system midstream sale in the San Juan Basin this quarter to further bolster its debt-reduction strategy. Terra Energy Partners LLC, the acquirer of WPX’s Piceance Basin assets, is a private exploration and production company formed to pursue the acquisition and development of large, long-life producing oil and gas assets in North America. It is funded by equity commitments from Kayne Private Energy Income Fund and Warburg Pincus.

Another large private company deal involved Dallas-based Covey Park Energy LLC, which announced a US$420 million acquisition of EP Energy Corp.’s (NYSE:EPE) Haynesville and Bossier shale gas assets that are located primarily in Louisiana. EP Energy recorded nearly US$5 billion in long term debt in its 2015 annual results and this deal presumably is targeted at reducing that figure. Other multi-million deals by private acquirers in the U.S. saw Chesapeake Energy Inc. (NYSE:CHK), Concho Resources Inc. (NYSE:CXO) and ConocoPhillips (NYSE:COP), among others, sell off assets in Q1 2016. More details on the largest private company deals in the United States, as well as a full review of the biggest and most significant deals in the U.S., Canada and around the world, can be found in Evaluate Energy’s review of global E&P deals for Q1 2016.

Top 5 Upstream M&A Deals in the U.S. During Q1 2016 Involving a Privately-Held Acquirer

Source: Evaluate Energy Report: Global Upstream Oil & Gas M&A Reaches Just $18.5 billion in Q1 2016″ 


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Global Upstream Oil & Gas M&A Reaches Just $18.5 billion in Q1 2016

Analysis in Evaluate Energy’s new M&A report shows that Q1 2016 saw the lowest number of newly announced M&A deals in the global upstream oil and gas sector – 157, excluding licensing rounds – take place than at any time during the price downturn. The previous lowest number of deals was recorded a year earlier in Q1 2015 and Q1 2016’s deal count was 11% lower than that. Low commodity prices are continuing to cause a lack of confidence in the M&A market, but with oil prices increasing – WTI averaged US$4.20 higher in March than in February 2016 – activity may pick up in Q2.

While the deal count was low, Q1 2016’s combined total deal value in the upstream sector of US$18.5 billion was also among the lowest quarterly values in recent times. It would have been even lower, had it not been for a number of high value deals that bolstered the total considerably. Dominion Resources Inc. (NYSE:D) agreed to acquire Questar Corp. (NYSE:STR) for US$6 billion in this quarter’s biggest deal and Rosneft made two multi-billion dollar asset sales in Siberia to a group of Indian E&P players.

The quarter’s biggest deals in the U.S., Canada and around the world are analysed in detail in this report, which can be downloaded here.

Source: Evaluate Energy Report: Global Upstream Oil & Gas M&A Reaches Just $18.5 billion in Q1 2016″ 

Top 10 Upstream M&A Deals During Q1 2016

Source: Evaluate Energy Report: Global Upstream Oil & Gas M&A Reaches Just $18.5 billion in Q1 2016 

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Were Canadian Oil & Gas Companies Able to Raise Finance in 2015 and 2016?

New analysis from CanOils has shown that while the total value of Canadian oil and gas company financing arrangements being completed has fallen since the commodity price downturn began in late 2014, companies have still been able to raise finance.

Looking at all TSX and TSX-V listed oil and gas companies that produced between 0 and 100,000 boe/d in their most recently released operational results, we can see that in the past year around Cdn$8.6 billion in gross proceeds (see note 1) has been raised between 2015 and 2016 (see note 2) in one of two ways:

  • Equity Financing – The raising of funds through the sale of company stock, either in the form of common shares, warrants or a combination of units.
  • Debt Financing – The raising of funds through the initiation of a loan agreement or note offering. Excludes drawings on revolving credit facilities.

Source: CanOils Financings – Note: Q1 2016 represents the value of all equity and debt financing deals that completed between January 1, 2016 and March 21, 2016, which was the time of writing. A senior producer is a company that produced over 100,000 boe/d in Q4 2015.

This Cdn$8.6 billion total is of course much lower than the 2014 total of Cdn$13.0 billion and there was a steep drop in finance raised from Q2 2014 to Q1 2015. While the price downturn is the main instigator of this drop in finance being raised, these numbers themselves do not give any idea whether the drop is due to companies being unable or unwilling to source extra finance. In all likelihood, it is probably a combination of both. Companies might have seen it as a tough prospect to approach a bank for a loan outside of its existing credit facilities or to successfully issue new shares in a struggling marketplace at lower prices and not moved ahead with any such plans. Equally, if companies did try and get a new loan from a bank, it may have been refused – something that would be unlikely to ever reach the public arena.

One thing that is clear from the chart above, however, is that when finance was raised in 2015 and in 2016 so far, it would come increasingly through an equity-based arrangement rather than debt.


Source: CanOils Financings – Note: Q1 2016 represents the value of all equity and debt financing deals that completed between January 1, 2016 and March 21, 2016, which was the time of writing. A senior producer is a company that produced over 100,000 boe/d in Q4 2015.

Right up until the end of Q3 2015, it was almost a 50/50 split between debt and equity financing agreements to raise funds. There were less equity and debt financings (in terms of value) between the end of Q2 and Q3 2015, but from this point on, the companies that produced between 0-100,000 boe/d stopped raising finance through debt-based deals almost entirely. Only Cdn$300 million of new debt financings were agreed between the end of September and March 21, 2016. In contrast, the rate of equity deals did not slow at all, being completed at roughly the same rate as they did between Q2 and Q3 2015; Cdn$1.8 billion of new equity financings completed between the end of September and March 21, 2016, resulting in a steady average of Cdn$790 million of new deals between the end of Q2 2015 and March 21, 2016.

Reasons for Financings

While it is not possible to tell from the data whether the drop in financings following the price downturn was primarily down to companies being unable or unwilling to raise finance, we can see the key use of proceeds from finance raised in 2015 and 2016.

Source: CanOils Financings – Note: Q1 2016 represents the value of all equity and debt financing deals that completed between January 1, 2016 and March 21, 2016, which was the time of writing. The data only includes equity and debt financing deals for companies producing between 0 and 100,000 boe/d as of Q4 2015 or Q3 2015, depending on the latest available report for each company as at March 21, 2016.

CanOils Financings provides the principal reason behind every financing that completes and repaying debt was perhaps unsurprisingly the main motivational factor behind most deals in 2015 and 2016. Cdn$4.4 billion – over half of the total Cdn$8.6 billion raised – of the finance raised in 2015 and 2016 was primarily used to pay off debt. Again, unsurprisingly, with capital expenditure budgets slashed across the board and companies focusing on sustaining operations rather than development, finance being raised to fund capital spending was low at Cdn$1.3 billion in 2015 and 2016. Capex funding did increase in Q1 2016, with Cdn$328 million raised for this purpose, more than Q3 and Q4 2015 combined, but this is nearly all from one deal completed in February by Seven Generations Energy Ltd. (TSX:VII) for Cdn$300 million.

There was a significant amount of cash (Cdn$2.2 billion) raised to fund acquisitions and pay off the debt included in those acquisitions (see note 3). Opportunistic, cheaper-than-usual acquisitions have been a symptom of the price downturn, where confident or stronger companies have picked up an entire debt-laden smaller company in cut price deals or boosted core asset positions with a cost-effective purchase of a struggling company’s non-core assets.

Top 10 Financings Between January 1, 2015 and March 21, 2016

Source: CanOils Financings

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1) All figures here for finance raised refer to gross proceeds. This is the amount raised in the financing, before any deduction of underwriters’ fees or general expenses related to the financing deal, as these costs are not routinely provided for every deal.

2) This article includes all financings completed from January 1, 2014 up to and including March 21, 2016, which was the time of writing. This article does not contain any data related to drawings on credit facilities, nor financings that have been announced but not finalised.

3) If finance was raised to pay off debt involved in a corporate acquisition, the principal reason for the financing is listed as “Acquisition” rather than “Debt Repayment” in CanOils. This is for the simple reason that without the acquisition in the first place, there would be no debt to repay.

4) The companies included in this article have been chosen based on the fact that they produced between 0 and 100,000 boe/d in their most recent report, typically Q3 2015 (September) or Q4 2015 (December), depending on the company. Any company that produced under 100,000 boe/d in Q2 2014, for example, but now produces over 100,000 boe/d, is excluded throughout.

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How Big Were Canadian Upstream Spending Cuts in 2015?

In light of the commodity price downturn that began in 2014, almost every oil and gas company in Canada cut spending in 2015, with focus quickly switching from large scale development of properties to eliminating non-critical expenditures and merely sustaining production as much as possible to survive in the low price environment. But just how big were these cuts?

New analysis of annual results from CanOils shows that 49 TSX-listed oil and gas producers reduced their annual upstream spending by an average of 36% in 2015 as they sought to deal with consistently lower commodity prices compared with a year earlier. The total combined upstream spending (see note 1) over the whole of 2015 for these 49 TSX-listed E&P companies that had reported their annual capex spends for 2015 as of March 15, 2016 was Cdn$30.9 billion, compared to Cdn$48.1 billion in 2014.


Source: CanOils (see notes 1, 2 and 3)

Juniors Cut Spending to a Greater Extent than Larger Producers

Of course, the biggest producers on the TSX will have a greater impact on the above chart than smaller companies, as they have spent much larger sums over the past two years. To get a clearer look at how the upstream companies on the TSX have adjusted their spending patterns in light of the oil price downturn, we have split the companies into three distinct peer groups: Senior Producers (companies that produce over 100,000 boe/d), Intermediate Producers (between 10,000-100,000 boe/d) and Junior Producers (under 10,000 boe/d) – see note 4. Again, the combined spending in Cdn$ of each group is plotted in the charts below alongside the WTI price in US$.

Source: CanOils (see notes 1, 2 and 3)

It is interesting to note the delay in the reaction time to the falling price. When the price downturn had really started to take hold during Q4 2014, all three peer groups actually increased their spending from Q3 2014 levels; the senior and intermediate peer groups actually recorded their highest combined quarterly spends over the past two years in Q4 2014, when the oil price was rapidly moving in the other direction. Presumably, cash that was long-committed into certain projects and could not be reallocated, and the time taken to identify and then implement a new strategy away from non-essential spending both played a role in this delayed reaction. Also, it was highly uncertain whether or not lower prices would be a long term issue at the start of the downturn, with many companies not having an immediate need to react by cutting production or spending at all.

It was a completely different story throughout 2015 however, with all three groups cutting spending across the board. It was the junior producers that reacted to the most drastic extent in terms of spending cuts; there were 8 juniors in the group of 10 that cut their full-year spending in 2015 compared with 2014 and the average reduction in spending for those 8 companies was 68%. In contrast, the senior and intermediate producers only cut their combined full-year spending by 36% and 43% respectively.

The Top 10 Percentage Drops in TSX Oil & Gas Company Annual Upstream Capex Spends Between 2014 and 2015


Source: CanOils (See notes 1 and 3)

MEG Energy Inc. (TSX:MEG) – the biggest producer in the top 10 spending cuts chart above – lowered its capex by the sixth highest degree of the 49 companies in 2015; MEG’s spending was cut by 79% to Cdn$271 million from Cdn$1.24 billion a year before. Unlike the other producers in the chart, however, MEG is unlikely to see any major impact to its production levels going forwards because of this spending cut. The other companies in the chart are mainly involved in Western Canadian resource plays, where major, constant drilling and development work is often required to even maintain production at a certain level for extended periods of time. MEG, on the other hand, is an insitu oilsands producer and will benefit from the low-decline nature of production associated with that resource. MEG invested heavily in its existing oilsands project phases and implemented key cost-cutting and efficiency measures over the past few years, meaning it can now sit back while prices are low and invest a relatively lower amount to keep production steady for many years ahead.


1) Total upstream spending throughout this article relates to exploration and development activities only. Any spending related to acquisitions or divestitures of either proven properties or businesses/business segments is excluded.

2) The WTI price is included in four of the five charts in this article in US dollars for reference purposes. The price data is sourced from CanOils’ new markets product, which provides historic coverage of selected oil and gas benchmark spot and futures prices as far back as 1988.

3) All company data is sourced from CanOils, which provides quarterly financial and operating data for TSX and TSX-V listed companies back to 2002. Find out more here.

4) The full list of 49 companies included in this article can be found here. The companies were placed into their production peer groups based on their annual average daily oil and gas production in the full year 2015.


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U.S. Oil Companies See Reserve Values Fall by Over Half a Trillion Dollars in 2015

New analysis from Evaluate Energy shows that 57 U.S.-based E&P companies have seen the present value of their global proved (1P) reserves fall by a combined 63% between 2014 and 2015, a staggering $515 billion. The full breakdown of the company data provided on an annual basis shows that the overwhelming majority of this fall in value is clearly linked to the commodity price downturn.

Every year, oil and gas producing companies based in the United States have to report figures in their 10-K annual reports under the heading “Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves.” This section of each company’s report estimates the present value of its 1P reserves, based on a number of factors and subject to a 10% discount rate, due to the future-looking nature of the data in question (see note 1). This year, 57 U.S.-based E&P companies that have all been reporting the relevant data at least since 2010, saw the combined present value of their 1P reserves plummet to just over $300 billion due to the price downturn.


Source: Evaluate Energy (see note 1)

An important fact to remember here is that these values are calculated using average commodity prices for each year. Were this data based on year-end prices, we would have seen a sharp fall in 2014 as well. But seeing as the price downturn did not begin in earnest until Q4 2014, the present value of reserves in that year were largely unaffected, and 2015, after a full year of low prices, saw a steep drop in values.

Biggest Impact of Prices on Present Values of 1P Reserves Between 2014 and 2015

If we now look at the 2-year period from 2014 to 2015, an additional 7 companies can be added to  the analysis that have only started to report the relevant data more recently than 2010. Out of the group of 64 companies, the full list of which can be seen here, it was EQT Corp. (NYSE:EQT) that saw the biggest drop in its discounted future net cash flows of 1P reserves, experiencing a drop of almost 80% to $978 million.


Source: Evaluate Energy

Other notable companies in the group of 64 (not shown in the top 10 chart above) include ExxonMobil Corp. (NYSE:XOM), which saw its global 1P reserve value fall by 66% to $71 billion, Chevron (NYSE:CVX), which saw a 54% drop to $67 billion and ConocoPhillips (NYSE:COP), which saw a 69% drop to $26 billion.

However, these drops are not necessarily completely related to prices, as there are a number of other factors that can have a negative impact on reserve value from one year to the next, a large asset sale for example. A closer look at the data and how the present value changed between 2014 and 2015 will give a better indication of the companies that were hit hardest by changes in values related specifically to the price downturn; each company has to report both the impact on 1P reserve value caused by:

  • a change in pricing and production costs, and
  • revisions being recorded in the company’s reserve reports.

These two items would carry the majority of the impact of the price downturn on U.S. company reserve values.

If we remove the negative impacts of revisions and changes in commodity pricing and production costs from each company’s discounted future net cash flow totals, the following ten companies would see their reserve values increase by the largest factor, thus identifying them as the companies that have had their reserve values hit hardest by the price downturn.

Source: Evaluate Energy (see note 2)

The major takeaway from this is that every company has been affected; this top 10 chart alone includes a range in market capitalization values from barely over $1 million to over $48 billion. On average, the 64 companies would see their 1P reserve value increase by 3.2x if we removed the negative price-related impacts recorded between 2014 and 2015. Other notable individual companies in the group of 64 include ExxonMobil, which would see its global 1P reserve value increase by 3.6x if we remove price-related negative impacts, Chevron, which would see reserve value increase by 2.5x and Anadarko Petroleum (NYSE:APC), which would see reserve value increase by 4.0x.


1) The discounted future net cash flow is not a perfect indicator of the future value of 1P reserves, but rather an estimate based on a series of current factors (such as current development costs and current tax rates) and the average commodity prices for the year in question. The discounted net future cash flow data throughout this report from each company always refers to the company’s global asset base.

2) The values in this chart were calculated by taking the reported discounted future net cash flow for each company and adding back the effect of a) the net change in pricing and production costs and b) revisions, as reported in the companies’ annual reports, in order to simulate a scenario in which these price-related impacts did not occur.

3) All data in this article was created using the Evaluate Energy financial and operating database.


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Top 5 Canadian Junior Oil & Gas Divestitures Since January 2015

While upstream deal activity has been low in general in Canada since the start of 2016, TSX and TSX-V listed junior companies have been common takeover targets during the price downturn and very active in selling assets. A junior oil and gas producer is a company that produces between 1,000 and 10,000 boe/d. In total, according to new analysis using the CanOils M&A database, between the start of January 2015 and the end of February 2016, there were 35 deals involving a publicly-named junior oil and gas producer in Canada as the selling entity (see note 1). The total value of these deals was just over Cdn$2 billion and the deals that included producing assets ranged from a cost of Cdn$12,000 to over Cdn$100,000 per flowing barrel of oil equivalent.

A more data-focused recap of the biggest Canadian junior divestitures in 2015 and 2016 forms part of CanOils’ latest monthly M&A review for February 2016.


The 5 biggest deals involving a junior Canadian producer as the selling party were as follows (see note 2):

1) Athabasca Oil Corporation (Q3 2015 Production: 5,145 boe/d, 48% oil/liquids)

Murphy Oil Corp. (NYSE:MUR) and Athabasca Oil Corp. (TSX:ATH) entered into a joint venture agreement in January 2016 targeting the Duvernay and Montney shale plays of Alberta. Murphy will pay Cdn$475 million (Cdn$250 million in cash, Cdn$225 million by way of cost carries) to earn a 70% operated interest in Athabasca Oil’s Duvernay lands in the Greater Kaybob area and a 30% non-operated interest in Montney lands in the Greater Placid area.


Source: CanOils Assets. The yellow blocks outside of the red polygon are the Duvernay, Greater Kaybob lands involved in the deal, the blocks inside the red polygon are the Montney lands.

2) Kicking Horse Energy Inc. (Q2 2015 Production: 2,482 boe/d, 54% oil/liquids)

Poland’s PKN Orlen SA, through its subsidiary ORLEN Upstream Canada Ltd., took another step to increase its foothold in the Canadian E&P space by completing its Cdn$356 million acquisition, including debt, of Kicking Horse Energy Inc. (formerly TSX-V:KCK). The deal was first announced in October 2015 and closed at the start of December.  The acquisition increased the Polish refiner’s Canadian subsidiary’s production in Canada to around 11,000 boe/d and pushed its 2P reserves up to nearly 80 mmboe. This is the company’s third major acquisition in Canada since 2013.

3) Arcan Resources Ltd. (Q1 2015 Production: 3,581 boe/d, 97% oil/liquids)

Privately held Aspenleaf Energy Ltd. acquired Alberta Deep Basin and Kaybob producer Arcan Resources Ltd. (formerly TSX-V:ARN) in a Cdn$300 million deal including debt assumption that closed in June 2015. The cash paid per share in the non-debt portion of the transaction represented a 100% premium to the TSX-V listed company’s share price the day before the acquisition was announced in late April.

4) Boulder Energy Ltd. (Q3 2015 Production: 6,974 boe/d, 78% oil/liquids)

In February’s biggest deal, a private equity fund raised and advised by ARC Financial Corp. agreed to acquire all the issued and outstanding shares of Boulder Energy Ltd. (TSX:BXO). This Cdn$268 million deal is featured in detail in CanOils’ February M&A review, which can be downloaded here.


5) Pinecrest Energy Ltd. (Q4 2014 Production: 1,885 boe/d, 97% oil/liquids)

In a complex reorganisation arrangement first announced in February 2015, Pinecrest Energy Inc. (formerly TSX-V:PRY) sold 100% of its assets to Virginia Hills Oil Corp. and Cardinal Energy Ltd. Virginia Hills assumed 90% of Pinecrest’s assets for around Cdn$90 million of stock and assumed debt at a cost of around Cdn$59,000 per flowing boe for the 1,530 boe/d included in this part of the process. Virginia Hills (TSX-V:VHO) continued on as the resultant public company. The remaining 10% of Pinecrest’s assets as well as all of Pinecrest’s issued and outstanding stock was then acquired by Cardinal Energy for Cdn$23.5 million in cash. The arrangement completed in April 2015.

Further Junior Sales on the Horizon

This trend of the junior TSX and TSX-V companies being active sellers in the M&A market is set to continue throughout 2016. As lower commodity prices have endured, more and more of Canada’s smaller producers have fallen into difficulty. February 2016, for example, saw the appointed receiver and manager of Spyglass Resources Ltd. (TSX:SGL) announce this month that they are seeking buyers for the company’s assets, after it entered receivership in November 2015. This, as well as all new Canadian asset listings in the last month, also forms a major component of CanOils’ M&A Review for February 2016.


1) There may have been many more deals involving a selling junior oil and gas producer in Canada, but it is not uncommon for either the acquiring or the selling party in a transaction to remain anonymous.

2) The production level listed next to each selling company’s name is the production that was most recently reported by that company in quarterly reports at the time of the transaction being announced.

3) All data and analysis here was created using the CanOils M&A database.

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Upstream M&A in Canada Falls Away at Beginning of 2016

Analysis in CanOils’ newest report “Upstream M&A in Canada Falls Away at Beginning of 2016” shows that the Canadian oil and gas upstream sector only saw Cdn$1.7 billion worth of M&A transactions in December 2015 and January 2016 combined. While this value is low, the two months did see their fair share of intriguing and significant deals, all of which are covered in detail in the report. The report is available for download now.


The biggest story of December and January was undoubtedly Suncor and Canadian Oil Sands finally reaching a merger agreement that everybody was happy with. The largest single new deal announced in the two-month period was a Cdn$770 million deal that will see Long Run Exploration Ltd. acquired by a group of Chinese investors. Long Run had only begun a process to sell 80% of its production portfolio a month earlier, so this deal to suddenly sell off the entire company was somewhat surprising. In the period’s second biggest deal, Murphy Oil and Athabasca Oil Corporation entered into a joint venture focused on the Duvernay and Montney shale in Alberta, while Husky Energy Inc. engaged multiple brokers to help sell off around 62,000 boe/d of production.


Source: CanOils M&A Database. Note: Excludes international deals involving Canadian companies. Sign up to the CanOils & Evaluate Energy Mailing List here and be informed as soon as new analysis reports like this are available.

This combined value of Cdn$1.7 billion for December and January is a 39% drop on November, when the final total reached Cdn$2.8 billion in that month alone. However, the lack of a +Cdn$1billion deal in December and January was the main factor here. November saw a Cdn$1.8 billion deal between Canadian Natural Resources Ltd. and PrairieSky Royalty Ltd., while Suncor Energy Inc.’s Cdn$6.6 billion offer for Canadian Oil Sands Ltd. was first made public in October. Both of these deals bolstered their respective monthly deal totals significantly.

Top 5 New Deals Announced in Canada – December 2015/January 2016


Source: CanOils M&A Database. Note: Excludes international deals involving Canadian companies. Sign up to the CanOils & Evaluate Energy Mailing List here and be informed as soon as new analysis reports like this are available.


* Tourmaline Oil Corp. was not officially announced as the acquirer for Enerplus’ assets. Enerplus stated that it was selling its assets in two deals for Cdn$193 million. Tourmaline later said it had bought assets in the same areas for Cdn$183 million and are assumed to be the acquirer for one of Enerplus’ two dispositions. Enerplus itself confirmed the closing of a Cdn$183 million deal a day later.


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Opportunities for Oil & Gas Service & Supply Companies in Iran

The lifting of UN sanctions on Iran could well be a lifeline for companies in the oil and gas service and supply sectors. The oil price collapse has tightened E&P company budgets for development in North America, significantly reducing the potential market for oil and gas service and supply companies to operate in. Companies traditionally focused on North American markets are increasingly being drawn into potentially transferring their skills and expertise overseas, and the developments in Iran could open up a huge amount of new opportunities. Before the sanctions were recently lifted, 2014 data shows Iran’s oil and gas industry was a sleeping giant in terms of its potential global reach.


Source: Evaluate Energy, via a Country Analysis subscription

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Iran not only had the highest amount of oil and gas reserves out of any country in 2014 according to BP and IEA data, it also had the third highest reserve life of all countries with over 1 billion boe of oil and gas reserves based on 2014 production levels.

The news that the UN sanctions were being lifted was accompanied by the announcement that Iran would be opening up 50 oil and gas development projects to foreign investment, with the Iranian government and the national oil company, NIOC, hoping to garner an initial US$25 billion injection through this venture. The announcement attracted all of the world’s biggest and most significant international oil companies to the table; new projects and development plans in one of the world’s most oil and gas abundant areas could be countless within a very short time scale. Of course, general security in the region is being placed under increasing scrutiny as time goes on, but the sheer size of the untapped resource and the very low cost environment make Iran an incredibly attractive prospect for E&P companies wanting to bolster their portfolios at the best value in these challenging times. Service companies looking to move out of the stricken North American marketplace would be wise to consider the Iranian E&P sector as a potential growth market.

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Canadian Upstream M&A Activity Halves in 2015

M&A in the upstream sector of the Canadian oil and gas industry saw a very significant drop off from 2014, according to new analysis from CanOils. In 2015, the total combined value for all deals in Canada reached just over Cdn$21 billion, almost half of the 2014 total of Cdn$41 billion. The collapse in oil price has clearly been a major contributing factor to this. 2015 has been a year that has seen cash-rich companies attempt to buy assets at opportunistic price levels from struggling companies, while the potential targets in these deals are reluctant to sell assets at these new lower prices. This dynamic has created an impasse in many cases between buyers and sellers, hence the fall in M&A activity.


Source: CanOils M&A Database (see notes 1 and 2)

While the 2015 total is not the lowest overall total in recent years, the Cdn$21 billion is bolstered heavily by deals costing over Cdn$1 billion. There were four such deals in Canada in 2015 and together they made up 62% of the Cdn$21 billion total. In fact, the biggest deal of the year, the Cdn$6.6 billion offer made by Suncor Energy for its Syncrude partner Canadian Oil Sands Ltd., made up around 31% of the Cdn$21 billion total by itself.

If deals or offers with prices of over Cdn$1 billion are excluded from the chart above and deals with values of under this amount are considered independently, then 2015 did see the lowest activity in the last six years. This is similar to the U.S. shale industry, which saw a six-year low in total deal value in 2015 and only one deal with a value over US$1 billion.

Royalty Assets in Vogue

While there was a clear fall in activity in Canadian upstream M&A from 2014 to 2015, there is one asset type that has actually become relatively hot property. Royalty assets have been changing hands frequently and often for large sums since September 2014, when the price collapse began, particularly when compared to similar activity in the 4-5 year period prior to this.

Source: CanOils M&A Database

Selling royalty assets has clearly become a trend in the last eighteen months. The long-term nature of the titles, the lack of short-term risk and the low ongoing costs inherent to royalty assets have all meant that their value has not been as affected by low commodity prices as other asset types; they have served as a prudent strategy to raise capital during the price downturn. Notable royalty deals in 2015 have included Cenovus’ sale of 4.8 million acres for Cdn$3.3 billion in June, Canadian Natural Resources’ sale of its royalty business to PrairieSky Royalty Ltd. for Cdn1.8 billion in November and Penn West Petroleum’s sale of 325,000 acres for Cdn$318 million in April.

Deal Counts Show True Drop in Canadian M&A Activity

The fall in activity between 2015 and 2014 is much clearer if the number of deals announced is considered, rather than value. In fact, 2015 saw the lowest number of deals recorded in any of the six years since 2010. This lack of activity was not confined to any one particular geographic area either, with all three major producing Canadian provinces seeing significant drops in the number of new deals announced during 2015 compared to 2014.

Source: CanOils M&A Database (see notes 2 and 3)

Top 10 Deals Announced in Canada in 2015

Source: CanOils M&A Database (see note 1)


1) This includes deals that are still in progress but does not include deals that have been cancelled or bids that have been rejected. For any deal that is still in progress or incidences where an offer is still on the table, there is of course no guarantee of completion. In six months’ time, for instance, this chart could look completely different should a raft of deals be eventually cancelled for any reason.

2) A deal is assigned to each year based on its announcement date, unless the announcement was made in a later period to the actual deal taking place. For example, if a deal was announced in 2014, but did not complete until 2015, it would form part of the 2014 deal total. If, however, a deal was announced by a company in 2015, but actually closed in 2014, it would form part of the 2014 deal total.

3) A deal is assigned to a province if the deal involves assets within that province. If a deal involves assets from multiple provinces, it is included in the chart twice so that a province does not lose a deal in any case, even if it is a minor part of the deal in question. For example, if a deal involved assets from both Alberta and Saskatchewan, the count was included in both Alberta and Saskatchewan columns. The chart on the right (by province) is not indicative of the number of deals across the whole of Canada in each year because of this.

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