Oil industry experts anticipate a continued trend of mergers and acquisitions in the wake of significant Canadian deals from the previous year. The willingness of foreign investors to join this trend remains uncertain, given prevailing market conditions.
As oil prices linger around $60 US per barrel, companies are exploring consolidation as a strategy to enhance shareholder returns through dividends and buybacks. Grant Zawalsky, a senior partner at Burnet, Duckworth and Palmer LLP in Calgary, highlighted the appeal of M&A for growth amid challenging investment prospects in drilling activities.
Zawalsky, who was involved in key energy transactions in the past year, emphasized the potential for further consolidation in the industry. Most deals have involved domestic players, with Ovintiv being a notable exception due to its significant Canadian presence.
Tom Pavic, President of Sayer Energy Advisors, foresees a busy year ahead in terms of M&A activities, albeit possibly at a smaller scale compared to 2025. He described the current market as a “buyer’s market,” with companies seeking cost-effective ways to expand their drilling portfolios.
Despite improved investment conditions following an energy agreement between Ottawa and Alberta, global interest in Canadian acquisitions has yet to see a significant uptick. Potential buyers are evaluating Canadian assets against regulatory challenges and infrastructure requirements for international exports.
While foreign interest remains subdued, U.S. private equity firms are increasingly eyeing Canadian assets for acquisition, production enhancement, and potential resale or initial public offerings. These players are more inclined to take regulatory risks compared to established oil and gas producers.
The occurrence of hostile bids, such as the one targeting MEG Energy last year, is expected to be rare, according to Zawalsky. He noted the extensive legal complexities and costs associated with such bids, emphasizing the uncertainties involved.
Looking ahead, ATB Capital Markets anticipates a modest slowdown in consolidation activities among exploration and production companies. Factors such as limited high-quality targets and challenges posed by oil price fluctuations are expected to influence the pace of M&A in the industry.