The Financial Post reports in its Saturday edition that small and mid-sized oil and gas companies in Canada are an endangered species.
The Post's Geoffrey Morgan writes that some of the better-off companies are snapping up the poorer ones.
Obsidian Energy, which is heavily indebted and in the middle of a strategic alternatives process, pushed Bonterra Energy on Aug. 31 to agree to a merger. Without access to capital, Painted Pony Energy sold out to Calgary major Canadian Natural Resources on Aug. 10 for $111-million in cash and the assumption of $350-million of debt.
Analysts say Kelt Exploration's $510-million deal on July 23 to eliminate its debt by selling 140,000 acres of B.C. natural gas lands to ConocoPhillips was also motivated by debt and liquidity considerations.
Equity values for smaller energy companies have fallen sharply in recent years and the enterprise value for many oil and gas companies is now controlled by their debtholders, said Michael Zuk at Athena Capital Markets in Calgary.
"As equity markets are shut off from these guys, we are going to see more M&A but it's not going to be the friendly Canadian M&A. It's going to be more of the backs-against-the-wall type."
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