The major C$32.1 billion in oilsands deals that were announced in March dominated Canadian M&A activity during the first seven months of 2017, comprising 87 percent of the overall value of transactions. But there’s been a lot going on outside the oilsands as well.
New analysis in CanOils’ latest M&A report illustrates that upstream activity picked up in terms of overall deal values throughout Q2, but the actual number of deals dropped off in June. After the second quarter ended, even though the number of new deals stayed flat, July saw three of Canada’s largest deals outside of the oilsands sector to boost deal totals.
Below are the top 10 upstream deals in Canada this year so far, away from the four huge deals in the oilsands mining sector, according to CanOils M&A data.
- C$852 million – Paramount Resources acquires 85% stake in Trilogy
The company to agree the largest single sale of 2016 has also agreed the largest non-oilsands acquisition of 2017 so far. Paramount Resources Ltd. (TSX:POU), a company that made headlines with its C$1.9 billion sale of western Canadian assets to Seven Generations Energy Ltd. (TSX:VII) last year, agreed a deal for over C$850 billion for the 85% stake in Trilogy Energy Corp. (TSX:TET) it did not already own.
The deal will see Paramount issue Trilogy shareholders with around C$455 million in Paramount stock, while the rest of the consideration is made up of Trilogy debt to be assumed, according to Trilogy’s balance sheet in Q2 2017.
- C$722 million - Centrica and Qatar Petroleum exit Canada
This deal was a completely international affair, with the UK’s Centrica Plc (LSE:CNA) and Qatar Petroleum deciding to sell their respective 60% and 40% interests in the CQ Energy Canada Partnership to a consortium led by Chinese-backed MIE Holdings Corp. The deal will see the selling parties receive a share of C$722 million proportionate to their ownership stake in the partnership.
Centrica, having sold its interests in Trinidad and Tobago in a US$30 million deal to Royal Dutch Shell (LSE:RDSA), has now switched its E&P focus entirely to Europe, and this week signed a new joint venture agreement with Bayerngas Norge.
- C$467 million – Waterous becomes Northern Blizzard’s majority stakeholder
The largest deal to involve a Canadian-headquartered company outside of the oilsands sector this year so far saw Waterous Energy Fund become the largest stakeholder in Northern Blizzard Resources Inc. (TSX:NBZ).
Since this deal completed in May, Northern Blizzard has changed its name to Cona Resources Ltd. and is now listed under the ticker “CONA” on the TSX.
Waterous acquired its 67% majority stake for C$244 million in cash and Northern Blizzard’s net debt position was C$223 million in Q1 2017, net to this 67% stake. The company produced just over 11,500 boe/d net to Waterous’ position in Q1, representing a cost of C$40,400 per flowing barrel.
- C$460 million – Paramount acquires Apache’s remaining Canadian assets
Paramount’s other huge deal this year was unveiled in the same press announcement as the Trilogy purchase. Paramount will be acquiring the remaining Canadian assets held by Apache Corp. (NYSE:APA) for C$460 million. Unlike the Trilogy deal, no debt will be assumed and Paramount will fulfil the consideration using cash on hand rather than issuing stock.
- C$300 million – Cardinal acquires light oil assets from Apache
Before the larger deal with Paramount was agreed, Apache had already agreed a C$300 million deal with Cardinal Energy Ltd. (TSX:CJ) to sell light oil assets in the Weyburn/Midale area of southeast Saskatchewan and the House Mountain area of Alberta. This deal saw Cardinal’s production boosted by 5,000 boe/d, while light oil now makes up a much larger proportion of the company’s portfolio at 45% compared to medium oil output.
- C$300 million – Pengrowth sells Olds/Garrington area assets in Central Alberta
Pengrowth Energy Corp. (TSX:PGF) has been arguably the busiest seller during the first two quarters. Its C$300 million deal in early July is the largest and most recent of the company’s divestitures so far in 2017 and reduces Pengrowth’s predicted 2017 production by just under 14,000 boe/d at a cost of C$21,600 per flowing barrel.
- C$294 million – Painted Pony acquires UGR Blair Creek
Painted Pony Energy Ltd. (TSX:PONY) completed its acquisition of UGR Blair Creek Ltd. in May from Unconventional Resources Canada LP (“URC”). The deal consideration of C$294 million included C$48 million in net debt assumption and was otherwise satisfied via the issuance of 41 million new Painted Pony shares to URC. Painted Pony now anticipates its 2017 annual average daily production to increase by 12% and also expects to exit 2017 with production of over 73,000 boe/d.
- C$201 million – Twin Butte asset sales cleared in court
The only deal in this list to be announced in the relatively barren first two months of 2017. At the time, the consideration was unknown, but in March, it was confirmed that the company now known as West Lake Energy Ltd. had acquired the assets of the insolvent Twin Butte Energy Ltd. for around C$201 million.
Before being forced into receivership by its banking syndicate last September, Twin Butte had medium and heavy oil production of approximately 12,700 boe/d in east-central Alberta and southwestern Saskatchewan.
- C$185 million – Pengrowth sells assets in the Swan Hills area of Alberta
This was actually the second deal that Pengrowth Energy agreed in the Swan Hills area of north central Alberta this year, but the first of those deals has since been cancelled due to issues faced by the acquiring party in securing finance.
This second deal, originally announced in April, saw Pengrowth part with 5,150 boe/d of oil-weighted production at a cost per flowing barrel of just under C$36,000. In July, Pengrowth stated that it had agreed deals that helped the company reduce its net debt position by 66% and only saw proved and probable reserves decrease by 16%.
- C$150 million – Paramount sells assets in Valhalla, Alberta
Paramount preceded its two huge July acquisitions by making a C$150 million asset sale in the Valhalla area of Alberta in May. The buyer was not named and Paramount did not divulge a specific rationale for the agreement. The divested assets comprise of 74 net sections of land and produced 1,400 boe/d in Q1 2017, representing a cost of over C$100,000 per boe to the acquirer.
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