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Consultant: Canada’s heavyweights to grow in market dominance EnCana, Petro-Canada, Suncor Energy seen as Big Three by 2010; Canadian Natural, Nexen, Talisman at risk of losing out in consolidation Gary Park PNA Canadian Correspondent
Three will thrive and three will hang by a thread, says a prominent consulting firm in rating the future of the major Canadian-owned petroleum companies.
EnCana Corp. (created from this year’s merger of Alberta Energy Co. Ltd. and PanCanadian Energy Corp.), Petro-Canada and Suncor Energy Inc. — which account for 55 percent of the market capitalization of publicly-traded oil and gas companies in Canada, up from 43 percent a decade ago — will extend their dominance over the next eight years, A.T. Kearney said in a report released late in July.
But the consultant says Canadian Natural Resources Ltd., Nexen Inc. and Talisman Energy Inc. must find a way to move to the value-building group if they hope to have any long-term survival prospects.
Otherwise they will fall into the category of “companies with the highest potential for future takeover plays,” because they fall into the categories of either under-performers or those that significantly lag in creating shareholder value.
Foreign buyers will continue active Meanwhile, foreign buyers, especially U.S.-based firms will continue to be active in Canada as the wave of takeovers rolls on.
Paul Inglis, vice president at A.T. Kearney’s Canadian unit, said Anadarko Petroleum Corp. is almost certain to make another acquisition after swallowing Berkley Petroleum Corp., and Gulfstream Resources Canada Ltd. for a combined C$1.3 billion.
Conoco Inc., which snagged Gulf Canada Resources Ltd. for C$6.7 billion, will also bring more Canadian assets into its fold, he said.
But A.T. Kearney noted that successful growth does not automatically follow mergers and acquisitions. It said 52 percent of Canadian companies examined one year after a merger had not increased shareholder value as much as other companies in the industry.
Two years after a merger, 45 percent of the companies still fell short of average shareholder growth, the report said.
Top three could claim 80 percent Within five to 10 years, the top three Canadian players could claim 80 percent of the energy sector’s public valuation, with the remainder made up of junior companies since the depleted ranks of intermediate firms will have neither the scale nor the lower profile need to survive, the consultant predicted.
Inglis said EnCana is best-placed to compete worldwide because it now has “sufficient scale to become a global concern.”
Petro-Canada, which has just completed the purchase of international assets from Germany’s Veba Oil & Gas for C$3.2 billion will have to continue stretching beyond Canada, he said, adding: “I don’t think they’ve got much choice if they want to be an integrated oil company.”
Suncor, because of its focus on r ramping up its oil sands output could very well acquire other oil sands operators once its own projects are operating smoothly, Inglis suggested. u
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