Canadian Oil Industry Strengthens with Ongoing Mergers and Acquisitions
The Canadian oil industry is witnessing ongoing consolidation through mergers and acquisitions. This trend is fueled by the current economic landscape and fluctuating oil prices. Industry experts predict this wave of activity will continue as companies seek growth without heavy investments in new drilling operations.
Current Landscape of Mergers and Acquisitions in Canada
Industry analysts emphasize the importance of mergers and acquisitions (M&A) for companies facing pressures from shareholders and uncertain market conditions. With oil prices currently hovering around $60 per barrel, many producers are under pressure to enhance shareholder value through dividends and buybacks.
Grant Zawalsky, senior partner at Burnet, Duckworth and Palmer LLP, noted that M&A offers a viable growth strategy amidst these challenges. He stated, “Until the fundamentals change, we’ll likely see more of the same.” Last year, Zawalsky participated in three noteworthy transactions:
- The bidding war for MEG Energy Inc., which was won by Cenovus Energy Inc.
- A $15 billion merger between Whitecap Resources Inc. and Veren Inc.
- Ovintiv Inc.’s acquisition of NuVista Energy Ltd. for $3.8 billion.
The firm Burnet, Duckworth and Palmer played a significant role in eight of the ten largest energy transactions within the previous year. Most deals involved domestic companies, although Ovintiv, headquartered in Denver and formerly known as Encana, also participated significantly in the Canadian market.
Future Outlook for the Canadian Oil Industry
Tom Pavic, president of Sayer Energy Advisors, anticipates a busy market moving forward. However, he notes that while 2025 might have featured larger deals, the upcoming year may see more activity but on a smaller scale. He describes the current environment as a “buyer’s market,” encouraging companies to pursue cost-effective growth strategies.
Recent collaboration between Ottawa and Alberta aimed at an energy accord supporting a new West Coast oil pipeline has fostered an improved investment climate. Nonetheless, Pavic has not seen a significant increase in foreign interest in Canadian acquisitions. Potential buyers evaluate the attractiveness of Canadian assets against concerns about regulatory environments and the necessary infrastructure for international exports.
U.S. Private Equity Interest
Despite overall hesitance from foreign buyers, U.S. private equity firms are increasingly interested in Canadian assets. These investors look to capitalize on perceived value differences by acquiring Canadian companies, enhancing production, and then either selling or going public. Zawalsky remarked on their willingness to accept higher risks in the Canadian regulatory landscape compared to traditional oil and gas producers.
Challenges Ahead in the M&A Sphere
Unsolicited bids, such as that from Strathcona Resources for MEG Energy, are expected to be rare. Zawalsky elaborated on the complexities and costs associated with hostile bids, as substantial legal resources are required to navigate these challenges successfully.
According to a 2026 outlook from ATB Capital Markets, a slight decrease in M&A activity is expected among explorers and producers. Factors contributing to this slowdown include the scarcity of high-quality targets and weak commodity prices impacting overall deal momentum.
This evolving scenario illustrates the ongoing dynamics of the Canadian oil industry, where strategic mergers and acquisitions are key to navigating both challenges and opportunities.
