The value of Canadian M&A activity in the first half of 2017 was the highest in a decade, according to a recent report from Bloomberg. The approximately $132 billion in total transaction value is the highest since the first half of 2007, when approximately $156.6 billion in transactions were completed.
According to the report, one of the most significant drivers of deal value was a sell-off of Canadian oil sands investments by foreign energy companies in the wake of declining prices for crude on global markets. Recent examples of such transactions include Royal Dutch Shell’s divestment of its interests in the Athabasca Oil Sands Project, the Peace River Complex and other undeveloped projects in Alberta. These assets were sold to Canadian Natural Resources for approximately $11.1 billion in March, 2017. Also in March, ConocoPhillips’ sold its interest in the Forster Creek Christina Lake project and the majority of its Deep Basin assets in Alberta and British Columbia to Cenovus Energy Inc. for approximately $13.3 billion. In January 2017, Norway’s Statoil ASA sold all of its Alberta oil sands operations to Athabasca Oil Corporation for total consideration of approximately $530 million, and up to a further $250 million in contingent payments.
The Bloomberg report notes that the cost of maintaining oil sands projects and the difficulty in operating them has led to the current increase in sales to parties who are closer to, and more familiar with the unique nature of such assets, specifically companies based in Calgary.
Despite the trend of oil sands assets being sold off by foreign companies, Environment Minister Jim Carr recently said during a trip to China that the current economic environment presents an opportunity for foreign investment in the Canadian energy space, which the Canadian government would welcome. However, the current market price for oil and the recent change of government in British Columbia impacting the future of the Trans Mountain pipeline would appear to be factors leading foreign companies to shed their investments in the oil sands in the near term, leading to buying opportunities for others with a longer term view of the industry.
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