Trends In Canadian Energy M&A

Energy industries remain at the core of Canadian M&A activity. Approximately 25 percent of the largest 50 friendly public transactions reviewed in a survey by the authors’ firm occurred in the energy sector, notably in oil and gas. There were several high profile transactions, including the $19-billion acquisition of Nexen by China’s CNOOC.

Asian demand for commodities remains strong, and Asian companies, including state owned enterprises, have turned to Canada and other resource-rich countries to secure supply. In addition, Asian companies continue to see value in investing in commodities, even where those commodities cannot presently be exported to Asian markets. Synthetic crude oil from the Canadian oil sands is an example.

Canada continues to develop its liquefied natural gas infrastructure, which bodes well for investment in Canada’s shale gas reserves. In recent years, technological advances have solidified the economic viability of shale gas investment.

All large investments by non-Canadians in Canadian businesses must meet the “net benefit” standard: They must be of net benefit to Canada. In a speech following government approval of the CNOOC/Nexen and Petronas/Progress Energy transactions, Canada’s prime minister stated that in respect to oil sands investments in particular, foreign state control “has reached the point at which further such foreign state control would not be of net benefit to Canada,” and going forward, acquisitions of control of Canadian oil sands businesses by SOEs will satisfy the test only under “exceptional circumstances.”