U.S.-style oil megadeals are viable in Canada: BMO
A U.S.-style megadeal is possible in Canada's oilpatch, though the pressures that pushed ExxonMobil Corp. and Chevron Corp. to pursue large takeovers aren't as strong north of the border, says Bank of Montreal's top energy banker.
Investors would likely support mergers between major Canadian energy producers that increased scale and improved cost efficiencies — and Canadian companies are in a position to do such deals, said Brad Wells, head of energy at BMO Capital Markets.
But the need to add drilling inventory that helped drive Exxon into its US$60 billion offer to buy Pioneer Natural Resources Co. in October and Chevron to pursue a US$53 billion acquisition of Hess Corp. isn't a factor in Canada, where oilsands companies are sitting on decades of supply, he said in an interview.
The overall health of Canadian companies — including balance sheets strengthened by recent gains in oil prices — reduces the impetus to transact and allows them to be opportunistic, making it difficult to predict when such a deal may happen, he said.
“It all comes down to what it looks like: the economics, the strategic rationale, the pro forma business and balance sheet, the price being paid,” Wells said. “All that needs to align for there to be investor support.”
Smaller deals already have been happening in Canada. BMO advised Crescent Point Energy Corp. on its C$2.05 billion acquisition of Hammerhead Energy Inc. in December. The bank is also advising Enerplus Corp. on a US$3.57 billion takeover offer by U.S. driller Chord Energy Corp., announced in February.
Wells said he's seeing an uptick in interest from U.S. buyers in the past year, particularly private companies. The banker spoke in advance of the Bank of Montreal and Canadian Association of Petroleum
Producers Energy Symposium in Toronto, where executives from major producers are scheduled to speak.