Oil and gas industry advisors are anticipating a continued trend of consolidation following a series of significant Canadian deals last year. The industry has recognized the benefits of mergers and acquisitions to enhance growth amidst stagnant oil prices and increasing shareholder demands for better returns. Uncertainty surrounding global markets has further fueled this trend.
Grant Zawalsky, a senior partner at Burnet, Duckworth and Palmer LLP in Calgary, highlighted the role of M&A in facilitating growth without the need for substantial drilling investments. He emphasized that as long as market fundamentals remain unchanged, the industry is likely to witness a continuation of these activities.
Zawalsky was involved in three major energy transactions in the past year, including the bidding war for MEG Energy Inc., Whitecap Resources Inc.’s $15 billion merger with Veren Inc., and Ovintiv Inc.’s $3.8 billion acquisition of NuVista Energy Ltd. Burnet, Duckworth and Palmer were notably engaged in eight out of the top 10 energy producer transactions in the same period.
While most deals have involved domestic players, Ovintiv, headquartered in Denver but with a significant Canadian presence, has been an exception. Industry experts like Tom Pavic, president of Sayer Energy Advisors, anticipate a busy year ahead, albeit with a shift towards smaller-scale transactions compared to the large billion-dollar deals of 2025.
Pavic described the current market as favorable for buyers seeking cost-effective ways to expand their drilling inventories. Despite improving investment conditions following energy agreements between Ottawa and Alberta, there has been limited international interest in Canadian acquisitions.
Zawalsky noted that potential buyers are evaluating the value of Canadian assets against regulatory challenges and infrastructure requirements for global exports. However, U.S. private equity firms have shown interest in acquiring Canadian assets, leveraging cost differentials and regulatory risk tolerance to capitalize on investment opportunities.
Hostile bids, such as the one from Strathcona Resources Ltd. that impacted MEG Energy last year, are expected to remain uncommon. Regulatory concerns and the high costs associated with such bids present challenges for prospective bidders.
Looking ahead, ATB Capital Markets projected a modest slowdown in consolidation within the exploration and production sector. The report cited structural and economic factors, including limited high-quality targets and market volatility, as key drivers affecting future M&A activities.