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Takin' Care of Business - Strong Crude Oil Prices Driving Robust Canadian M&A Activity

Merger-and-acquisition (M&A) activity in Canada’s oil and gas sector has accelerated this year compared to 2022. With crude oil prices generally strengthening over the course of 2023, it should come as no surprise that the focus of much of this activity has been crude oil- and NGL-producing companies and assets. As we discuss in today’s RBN blog, several large deals have been announced and many have already closed, including a complex arrangement involving Suncor and production ownership in the oil sands that only recently concluded after six months of uncertainty, with more deals expected before the year is over.

The ebb and flow of corporate wheeling and dealing is just as familiar in the Canadian oil and gas sector as it is the U.S. — see our recently published Drill Down Report for more on recent M&A south of the 49th parallel. When times are tough, the exploration and production companies (E&Ps) that squirreled away money and remain financially comfortable can swoop in and purchase assets or entire companies that are in trouble, adding to their production base to (presumably) generate greater value from those assets in the future.

When times are good — such as in 2023, when crude oil prices have been strong and mostly rising — cash is more plentiful for all companies and M&A fever can really take off. Acquiring E&Ps look to expand their production base with quality assets, while sellers may be shifting gears, looking to consolidate their production around a certain geographic focus, or simply selling to get a financial lifeline to pay down that pending bank loan. Whatever the driving force might be, M&A activity in Canada’s oil and gas sector has been on the upswing.

The last time we examined M&A activity in the Canadian oil and gas space was in Get Closer back in April 2021. In that blog, we reviewed what was, at the time, mounting pressure on Canadian producers focused on natural gas to rationalize their assets through mergers or asset sales in order to weather the storm of very weak Canadian gas prices (see Undun) and the COVID-related collapse in energy prices that had taken place the previous year. Numerous companies were in dire or worsening financial shape, with some really on the ropes.

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