2021 Top Operators Report: M&A activity thawed in 2020 and is heating up in early 2021 as operators build scale and fill value chain gaps

Editor’s note: Last year, when assembling the 2020 Top Operators Report, the COVID-19 pandemic had shuttered the global economy. Oil demand had been reduced by over 20 million bbls/d and prices were at lows not seen in decades.  

The mood of the Canadian industry was grim. After five years of being rocked by wild price volatility the pandemic hit like a knockout punch.  

The 2021 Top Operators Report looks back at how Canada’s oil and gas leaders pivoted to meet the challenges of 2020, and how they are positioning their organizations for future success.  

Once again, we have tapped into the experience of professional services firm KPMG in Canada to provide insight into what strategies operators could pursue to thrive in the current environment.  

The report also features a broad swath of the insights and opinions from industry leaders gleaned from Daily Oil Bulletin coverage, along with commentary from data providers Evaluate Energy and CanOils. 


Dollar-wise, 2020 was a strong year for mergers and acquisitions (M&A) in Canada. Deal values rose from around $5 billion in 2019 to a little over $10 billion in 2020, driven largely by the Cenovus Energy takeover of Husky Energy.

This trend has continued in early 2021, with the $3.7 billion takeover of Seven Generations Energy by ARC Resources, and Crescent Point Energy acquiring Shell’s Duvernay assets for $712 million.

There are a variety of drivers behind these deals, said Grant Brown, managing director and partner, KPMG Corporate Finance Inc.

“There are the traditional drivers – asset proximity, operational leverage, field consolidation, and access to capital. There are companies looking to fill voids in the value chain. For example, Cenovus was long on production and short on refining and export access while Husky was in the opposite position. The challenging market means companies need to find ways to build efficiencies, and other ways to grow.”

Companies are evaluating their portfolios continuously. Long dated assets are being culled for disinvestment, along with some shorter-cycle non-core opportunities. But Brown said finding middle ground between buyers and sellers at a time of volatile commodity markets is key to making deals happen.

 “We’re not seeing many forced sellers,” he said. “Dealing with the different expectations of the buyers and sellers is the biggest challenge.”

The deals done in 2020 and early 2021 are sending some interesting signals, said Bemal Mehta, managing director, Energy Intelligence for geoLOGIC systems ltd. and JWN Energy.

“After years of speculation, ownership of the Montney play is now rapidly consolidating. Aside from the ARC/ Seven Generations deal we have seen Tourmaline do a series of acquisitions, CNRL take over Painted Pony, ConocoPhillips buy assets from Kelt, and Whitecap acquire Kicking Horse. There have been smaller deals as well. All of these deals are about individual operators gaining scale and efficiency. They are also about gaining market share without increasing overall production from the basin.

“The two large deals in the Duvernay are also interesting. Ovintiv had been looking to offload its Duvernay assets for years before finally doing a deal. Shell’s divestment follows the path of oil super-majors shedding what they see as non-core assets globally. The buying management teams in both cases are technology- focused companies that believe they can lower costs and build-out on current development.”

Private equity appears to be selling off across the WCSB, Mehta said. CanOils data shows that there has been $2.4 billion of corporate and asset sales by private companies since the start of 2020, a larger figure than the total divestments by private companies for the combined four-year period between 2016 and 2019.

“These have largely been low-premium consolidation deals. They are bolt-on acquisitions by larger operators solidifying their positions in core areas.”

So will the M&A rush continue?

According to CNRL president Tim McKay, there may not be many more chances to keep consolidating on a large scale, although there are always opportunities to rationalize sections and optimize land positions. In terms of the better M&A deals, he noted, they probably occurred over the past 12 months.

“I just think, as always, and you’ve heard the mantra, that the lowest-cost operator will be the last one standing. To me, you’ve seen it very much this last year. The very good operators are consolidating their positions in Canada,” he explained.

But many smaller and mid-sized operators will continue to look for acquisitions to increase scale and efficiency.

Tamarack Valley Energy has been active in the acquisition market building up a position in the Charlie Lake play.

“We do see some consolidation opportunities in Charlie Lake,” said Brian Schmidt, president and chief executive officer, during a conference call in April after taking over private producer Anegada. “I really like the smaller kind of opportunities that we’re able to put together in this area, and Anegada has passed a list of opportunities over to us, and we’re pursuing those.

Darren Gee, president and CEO of Peyto, said he’s not looking to bulk up his company just for the sake of getting bigger. That said, he’s not averse to the possibility of enacting a deal if it ticks all the boxes.

“The concept of mergers to get bigger to get better cost of capital or some other size advantage, obviously we’ve looked at that. But really I think a company our size is kind of in the sweet spot,” he said. “We’ve got size enough so we can have continuous operations, we’ve got purchasing power with the service companies, we’ve got the ability to do long-term market diversification and I think, arguably, when we’ve got reasonable cash flows coming from reasonable prices we’ve got good cost of capital, too.”

Download the 2021 Top Operators Report here

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