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The mergers and acquisitions of Alberta’s oil patch

One of the deepest oil routs in memory spelled the end for a long list of oil and gas producers in 2015

Illustration Graham Romieu

Call it spring cleaning. In early 2015, as oil and gas companies stumbled out of a long winter of low oil prices, it seemed the energy ­sector would see long-expected consolidation. Many companies began to buckle under the pressure of heavy debt loads and oil prices below $40 per barrel. The stronger companies began showing interest in snapping up assets at a discount. Companies with weak balance sheets were beginning to topple, leaving space for the better-prepared management teams. In the end, merger and acquisition activity in 2015 was lower than some analysts had expected. But it was still littered with the carcasses of a many oil and gas firms.

The Departed

Argent Energy Trust
Value: $110 million
Argent Energy Trust’s filing for creditor protection in early 2016 marked the end of the international income trust model in the Canadian oil patch. In early 2016, the company had received ­approval for the US$110-­million sale of its U.S. assets, but a sudden fall in commodity prices meant the company could not pay its credit facility, forcing it to file for insolvency. The trust model was popular in the early 2000s as a way to generate revenues from foreign assets while avoiding the same tax obligations of a regular corporation.

Canadian Oil Sands
Value: $4.3 billion
The public first heard of Suncor Energy’s hostile takeover in October 2015, but negotiations had started well before that. When news finally broke that Suncor was offering a deal worth $4.3 ­billion, or 0.25 cents per ­Suncor share for every Canadian Oil Sands share, it kicked off an uncommon war of words between the two companies. COS, which was a major stakeholder in Syncrude, called it a “lowball offer,” and vehemently rejected the deal, urging shareholders to reject it. COS eventually gave into the offer in January 2016. COS had a long history in the oil patch but in recent years was reduced to a non-operating company with only a small group of executives and management.

Calvalley Petroleum
Value: $60 million
Calvalley didn’t disappear so much as it quietly went away. In April, the company offered to buy back all outstanding shares for $60 million, giving investors the option to stick it out with the company or get out before it went private. Calvalley’s production in past years was hampered by ongoing strife in Yemen, where its assets are based.

Kicking Horse Energy
Value: $356 million
Kicking Horse was bought up by Polish company PKN Orlen, which announced its plans in October 2015. According to most analysts, Orlen paid a premium on the $356-million deal, which included just $63 million in debt. Judging by Kicking Horse CEO Steve Harding’s response to the deal – and, for that matter, the response of shareholders – it was the kind of deal that couldn’t be refused. Kicking Horse was one of the youngest oil and gas companies in Alberta after floating its IPO in 2014.

Talisman Energy
Value: $8.3 billion
The sale of Talisman to Spanish company Repsol, finalized in February 2015 for US$8.3 billion, came with a whiff of nostalgia. Talisman was for years one of Canada’s most ambitious international energy companies, and one of the few oil patch giants who (for a while) enjoyed success outside of the country. But after severe operational challenges – particularly at the North Sea – began to drag the company down, it wasn’t long before it was targeted by larger players. Repsol approached the company twice in 2014 to make an acquisition, but backed off on both occasions due to deemed risk. When it finally did close the deal, it marked the end of an era.

Spyglass Resources
Value: $357 million
When Spyglass filed for bankruptcy in November of 2015, purportedly the first conventional producer to do so since mid-2014, it resembled the handful of other insolvencies that had plagued the industry over the year. But the insolvency also raised questions about who incurs the costs of liability once a company goes under. In filings, Spyglass estimated it had $357 million worth of wells and facilities that needed to be shut in over time, raising the question of who would cover the costs. In the case of Spyglass, the dispute eventually went to Alberta’s Court of Queen’s Bench. In broader terms, it’s a question that the province and companies are still answering. AV