Canada energy deals rebound as shale plays trump oil sands

Tue Jul 1, 2014 1:37am EDT
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By Scott Haggett

CALGARY Alberta (Reuters) - Mergers and acquisitions in Canada's energy sector have rebounded from a dull 2013 and look poised for a further pickup, driven by the country's rapidly developing shale oil and gas properties rather than its better known oil sands.

Interest in the sector was renewed after a cold winter boosted gas demand and as Middle East unrest hikes oil prices. A longer-term slide in the Canadian dollar that boosted producer profits has only reinforced the trend.

"In the last little while we've had a very big boom in the commodities, a boom in expectations and a boom in liquidity," including easy access to capital markets and debt financing, said Dan Barclay, head of BMO Capital Markets' Canadian mergers and acquisitions group.

"What comes out of that is M&A" - mergers and acquisitions, he added, predicting more this year.

Canada's oil and gas sector saw an acquisition boom in 2012, driven by investments from state-owned companies that culminated with CNOOC Ltd's (0883.HK: Quote) $15.1 billion purchase of Nexen Inc.

A worried federal government cleared that deal, but slapped restrictions on foreign ownership of the country's oil sands, which cooled buyers' interest, as did concerns about the fate of TransCanada Corp's (TRP.TO: Quote) stalled Keystone XL pipeline project.

In 2013 corporate acquisitions totaled just $12.4 billion, down nearly 80 percent from the previous year, according to Thomson Reuters data.

There are some concerns that rising stock prices may dissuade some potential buyers, but six months into 2014, merger activity of about $15 billion has already topped last year's total.   Continued...