Over the past 10-plus years, there’s been an extraordinary consolidation among producers in Alberta’s booming oil sands region, most of it tied to building inventory, increasing efficiency and maximizing free cash flow. Now, with Cenovus Energy’s planned multibillion-dollar acquisition of Athabasca Oil Corp., more than 90% of oil sands production — 93% to be exact — will be owned by only five companies: Canadian Natural Resources Ltd. (CNRL), Suncor Energy, Cenovus, Imperial Oil, and ConocoPhillips. In today’s RBN blog, we’ll discuss the recently announced deal and ask whether the golden era of M&A up north is finally petering out.
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Over the past few years, we’ve blogged frequently about the Pac Man-like phenomenon of extra-large North American oil and gas producers gobbling up large competitors and becoming ever-bigger in the process. This has been especially true in the Permian Basin, the U.S.’s premier hydrocarbon play — a classic example being Pioneer Natural Resources’ $7.6 billion acquisition of Parsley Energy and $6.4 billion purchase of DoublePoint Energy (both in 2021), which were followed by ExxonMobil’s record-breaking $64.5 billion acquisition of Pioneer itself three years later. Other Permian producers have opted for a “ground game” — that is, foregoing splashy, big-dollar deals in favor of dozens, or even hundreds, of smaller transactions to gain heft nibble by nibble instead of gulp by gulp. (Permian Resources is a case in point; it reportedly added 30,000 net acres last year through about 700 transactions!)
Up in the Alberta oil sands, the consolidation among E&Ps we’ve all witnessed since the mid-2010s results from a combination of small, medium and large transactions — the last of these exemplified by Cenovus Energy’s October 5 announcement that it had entered into a definitive agreement to acquire Athabasca Oil via a cash-and-stock deal valued at CAD$5.7 billion, or USD$4 billion.
The Big Picture
Before we get to the details of that transaction, though, let’s take a big-picture look at Alberta oil sands consolidation since 2015. Back then, when oil sands bitumen production from mining and thermal projects averaged less than 2.3 MMb/d, 30 producers held a working interest in one or more oil sands production areas, and the Top 5 — at that time (in order), Suncor, CNRL, Imperial Oil, ConocoPhillips and Shell — accounted for only 68% of production. Since then, through scores of transactions, more than 20 companies have exited the oil sands (see Figure 1 below) and five new players have joined the fray.
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About the song
“Castles Made of Sand” was written by Jimi Hendrix and appears as the second song on side two of the Jimi Hendrix Experience’s second studio album, Axis: Bold as Love. The phrase “castles made of sand” is a metaphor for impermanence, and Hendrix supports it with three melancholic vignettes in the song. Supported by the funky drumming of the Experience’s Mitch Mitchell, Hendrix tells the story with his groundbreaking guitar skills underpinning the narrative. A backwards guitar solo adds some psychedelic spice to the mix. Personnel on the record were: Jimi Hendrix (guitars, vocals), Noel Redding (bass), and Mitch Mitchell (drums).
Axis: Bold as Love was recorded in May and June 1967 at Olympic Studios in London and produced by Chas Chandler. Released in December 1967, the album went to #3 on the Billboard 200 Albums chart and has been certified Platinum by the Recording Industry Association of America. One single was released from the LP.
Jimi Hendrix was an American guitarist and vocalist who changed the direction of electric guitar in rock music. His use of the Fender Stratocaster changed its image from a tool for surf bands and R&B groups to a sonic psychedelic musical wand, exploring new territories in the cosmos. Hendrix started playing guitar at 15 and later built his chops playing the Chitlin’ Circuit with his Army buddy Billy Cox on bass. His tenure as a backing guitarist included stints with the Isley Brothers, Little Richard, and Curtis Knight. He was discovered by The Animals’ bassist, Chas Chandler, while playing at the Cafe Wha? In Greenwich Village in 1966. Chandler brought him to London and signed a management/production deal with him. They created the Jimi Hendrix Experience with bassist Noel Redding and drummer Mitch Mitchell. They released their debut album, Are You Experienced?, in August 1967. The Jimi Hendrix Experience released three studio albums, three live albums, two compilation albums and 14 singles and has sold over 107 million records worldwide. The original Jimi Hendrix Experience broke up in June 1969 after Noel Redding left the group. They were inducted into the Rock and Roll Hall of Fame in 1992, and the U.K. Music Hall of Fame in 2005. Hendrix won three Grammy Awards and a Grammy Lifetime Achievement Award, and has a star on the Hollywood Walk of Fame. Jimi Hendrix died in London in 1970 at 27.
"About the Song" -- written by Mickey McMahan , RBN Director of Musicology
