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Canadian Oil Companies on Shopping Spree as Merger and Acquisition Activity Accelerates

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Canada,Oil Companies,Merger And Acquisition

Canadian oil companies are actively engaging in merger and acquisition activity, driven by cash reserves, low debt levels, and the need to keep up with competitors. Mid-sized producers are expected to be the main targets, while larger players are anticipated to be the ones doing the targeting.

Merger and acquisition activity was already starting to advance in Canada’s oil patch when, south of the border, ExxonMobil Corp.worth a combined US$112-billion earlier this month. Now, with lots of cash, little debt, rising stock prices and a need to keep up with the Joneses, Canadian oil companies are going shopping.

Debt is not just down among oil and gas companies, but it is staying down. Energy producers in Canada are expected to cumulatively repay more than $19-billion in debt this year, according to an estimate BMO published in January. The current wave of consolidation could be similar to what occurred between 1998 and 2002, when 12 of the largest global integrated oil companies merged into five companies, Scotiabank analyst Paul Cheng said in a note to clients on Oct. 23.

“They’ve done their share buybacks. They’ve increased their dividends and reduced their debt, but I think a lot of investors are starting to ask ‘What are you doing now?’”

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