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Energy deals fuel Canada’s merger, acquisition market
Gary Park
Energy industry deals underpinned the bulk of merger and acquisition activity by Canadian companies in the first half of 2004, according to two companies that track the sector.
Investment banker Crosbie & Co. recently reported that 42 energy deals in the second quarter totaled C$12.5 billion, more than one-third of Canada’s 250 M&As worth almost C$35 billion.
Topping the list were two offshore transactions — EnCana’s C$3.6 billion takeover of Denver-based independent Tom Brown and Petro-Canada’s C$1.15 billion purchase of Intrepid Energy North Sea.
Tilak Dias, manager of M&A activity at Crosbie & Co., said most of the big oil and gas companies are diversifying their natural gas assets to utilize the heavy cash flow from record oil prices.
Calgary-based Sayer Securities put the total enterprise value of industry M&As for the first half at C$8.8 billion, strongly ahead of the C$5 billion in the same period of 2003. Increase propelled by sales by U.S. firms Propelling the increase was the sale of C$3.1 billion of Canadian assets or companies owned by U.S.-based companies — a figure that has continued to grow in the second half, with Calpine and Anadarko Petroleum unloading almost C$1 billion of holdings.
That is a complete turnaround from the opening years of the decade, when U.S. operators were hungry for natural gas properties, Sayer said.
In the first half of 2000, U.S. buyers spent C$4 billion on Canadian companies and assets, or 24 percent of the total M&A market. That share soared in 2001 to C$16 billion or 61 percent of the total, then plummeted to a mere 4 percent in the first six months of this year.
On the sales front, U.S. companies sold C$1 billion worth of assets in the first half of 2003, or 19 percent of combined M&A value — a figure that climbed this year to C$3.1 billion or 35 percent of the total.
However, Sayer analyst Tom Pavic noted a small, but emerging trend in deal-making, with coalbed methane prospects as the target.
Quicksilver Resources paid C$6.8 million for the coalbed methane assets of Ice Energy and APF Energy Trust purchased Great Northern Exploration for a total consideration of C$291 million.
Sayer said the median acquisition prices are continuing their rapid ascent, reaching C$13.27 per barrel of oil equivalent in the first half, a 160 percent explosion from 2000’s C$5.11.
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