15 September (Hfrance.fr) - A slew of privately funded oil and gas companies have gone up for sale in Canada's energy patch, as rising crude prices prompt buyout stores to step out and release a part of their capital that was locked in for much longer than expected.
The sales present attractive opportunities for small and mid-cap Canadian oil companies to strengthen their operations, improve their chances of accessing debt and capital markets and reduce costs through economies of scale.
Source industry, currently looking for rac targetshat, said at least a dozen privately-backed Canadian oil and gas assets ranging from C $ 50 million (C $ 39.5 million) to C $ 500 million are for sale.
These include Corex Resources, backed by Azimuth Capital, Manitoba's second-largest oil producer, which could be valued at around $ 300 million Canadians, sources told Hfrance.fr. Another company in Azimut 's portfolio, TimberRock, and Fire Sky Energy, backed by PFM Capital, are also seeking buyers, according to sales documents viewed by Hfrance.fr.
Rise in junior companies to sell highlights how rising oil prices have created the best environment in more than seven years for private equity firms to cash in on Canadian energy investments .
After a number of difficult years, smaller companies have reduced costs and strengthened their balance sheets, making them more attractive acquisition targets, said Scott Barron, chief executive officer Calgary investment banking at TD Securities.
"Everyone wants to see bigger, bigger, bigger security. This is one of the reasons we are seeing more consolidation "said Barron.
The buyout companies have sold for about $ 2.6 billion to Canadian oil and gas producers so far this year, the highest level since at least 2,010, IHS Markit agrees. The exits follow a wave of consolidation among Canadian companies after many global oil majors pulled out of the Canadian energy patch over the past five years.
State-owned companies were the buyers in all but one of the ten biggest energy contracts this year, involving a Canadian private seller, a review of data from Refinitiv showed. The best deals included oil tourmaline (TOU.TO) C $ 1.1 billion takeover of Black Swan Energy Ltd in June and purchase of Velvet Energy by Spartan Delta Corp for C $ 743 million in July. learn more
The oil capital of Canada, Calgary was once a breeding ground for junior oil and gas companies. Experienced management teams would lease the rights to drill to a promising area and secure financial backing from private equity firms, which typically expected new junior companies to prove their reserves and go public within five years, thus making a healthy profit.
But the global oil price crash of 2014-15 brought the Canadian energy sector out of favor with international investors and a prolonged downturn has forced many private equity firms to hold on to their investments.
"Due to low oil prices, they had no monetization options or exit pathways in recent years "said Christopher Sheehan, director of M&A research at IHS Markit.
Vaccine deployments to fight pandemic and supply restrictions by the world's major oil-producing countries have pushed U.S. crude to its highest level since 2014, giving buyout firms a long-awaited exit window and making banks more willing to lend.
"Oil at $ 70 (per barrel) means banks are now breathing much easier, not so quickly to put pressure on some companies - access to capital is much more stronger than it has been in years "said David Phung, CFO of Greenfire Acquisition Corp.
Greenfire in July bought (1662. T) UnitCanadian company JACOS, taking over the Hangingstone oil sands project in northern Alberta. learn more
"I don't think we are yet at the point where there is a flood but still $ 20 a barrel (up) and we could be there very quickly "said Phung.
($ 1 = C $ 1.2668) Report by Shariq Khan in Bangalore and Nia Williams in Calgary Edited by Denny Thomas and Matthew Lewis
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