The oil and gas industry is expected to see more mergers and acquisitions as companies seek growth opportunities amidst challenging market conditions. Shareholders are pushing for better returns, prompting firms to consider consolidation as a strategic move. Grant Zawalsky, a senior partner at Burnet, Duckworth and Palmer LLP in Calgary, highlighted the appeal of M&A activities in a low-return environment.
Last year witnessed significant deals in the Canadian energy sector, including the successful bidding war for MEG Energy Inc., the $15-billion merger between Whitecap Resources Inc. and Veren Inc., and Ovintiv Inc.’s $3.8-billion acquisition of NuVista Energy Ltd. Domestic transactions dominated the landscape, with Ovintiv being one of the few exceptions due to its significant Canadian presence despite being headquartered in Denver.
Tom Pavic, president of Sayer Energy Advisors, foresees another active year ahead, albeit possibly with smaller-scale deals compared to the billion-dollar transactions of 2025. He described the current market as favoring buyers, who are looking to expand their drilling inventories cost-effectively. While the investment climate has improved following energy agreements between Ottawa and Alberta, global interest in Canadian acquisitions remains subdued.
Potential buyers are evaluating Canadian assets carefully, balancing their attractive quality and value against regulatory challenges and infrastructure requirements for international exports. Despite these hurdles, U.S. private equity firms are eyeing Canadian assets for their growth potential and cost advantages. They are more inclined to take on regulatory risks compared to traditional oil and gas producers.
Looking ahead, analysts anticipate a modest slowdown in consolidation activities among exploration and production companies. Factors such as scarcity of high-quality targets and economic uncertainties are expected to influence deal-making dynamics in the sector. The challenging backdrop, including fluctuating oil prices and buyer-seller valuation gaps, may shape the future landscape of mergers and acquisitions in the oil and gas industry.