A more robust Canadian energy mergers and acquisitions (M&A) market is expected in 2017 than in the previous year, according to a new survey of 100 senior corporate executives and investment bankers involved in Canadian oil and gas commissioned by Torys LLP.
“Buyers may be enticed by [an oil] price deck above $50 per barrel,” the authors of the M&A outlook state.
Buyers may also be ready to meet the seller’s price expectations as they emerge from a protracted commodity price rout, during which companies were reluctant to part with quality assets.
But there will be a mixed bag of opportunities and challenges due to uncertainty about the impact of long-term global supply and demand patterns, Torys notes, while Canada’s environmental and climate change policies take centre stage.
“Technology acquisition to create cost savings is one of the most frequently cited factors to drive Canadian oil and gas M&A in 2017. Domestic consolidation and inbound buyer interest are equally important trends driving M&A activity,” the authors said.
Specific key survey findings include:
- 67 per cent of respondents believe that M&A volume in the Canadian oil and gas industry will increase. Over half (54 per cent) said the same about M&A values.
- Inbound deal making from the U.S. is expected to be a key driver of activity levels, according to 73 per cent of respondents, closely followed by strong activity from Asia-Pacific buyers, as China continues to secure energy assets abroad (69 per cent of respondents).
- The top target sectors for inbound buyers are LNG, oilsands and offshore oil facilities.
- Private equity firms continue to be strong partners for Canadian oil and gas companies. Forty-four percent of respondents say companies will look to private equity firms for financing, in particular junior E&P companies.
- Environmental regulations loom large as a challenge to Canadian oil and gas companies over the next 12 months, say 42 per cent of respondents.