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In several cases, difficulties in accessing capital led smaller oil and gas players to sell to larger, better capitalized competitors. Painted Pony Energy Ltd., for example, cited its inability to access the capital markets when it announced its sale to Canadian Natural for $461 million on Aug. 10.
“It was more difficult for them to access the market, particularly the smaller ones. It led them to think about whether it made sense for them to combine with another company,” said Mike Boyd, managing director and head of global mergers and acquisitions with CIBC World Markets, which was the second most active bank in the energy financing space in 2020.
“I think an overall driver was the recognition that scale was important, particularly in an environment where reducing costs was critical,” Boyd said, noting that Cenovus Energy Inc.’s $3.8-billion deal for Husky Energy Inc. was also intended to reduce costs and scale up to attract additional investors.
At the time that deal was announced, Cenovus CEO Alex Pourbaix said “tires have been kicked” on a deal between the two companies for a few years. According to Stikeman Elliott’s Young, similar conversations are happening in the industry now.
“I think that consolidation is going to continue to be necessary,” she said. “We’re hearing a lot more tire-kicking than is being reflected in publicly announced deals, so I would expect there will be more to come.”
Financial Post
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