Canada’s oil patch is ripe for a mega merger, analysts say, after a bumper year for deals has left relatively few smaller targets available.
The value of deals executed or pending as of Dec. 31 totaled $37.8 billion, according to data compiled by Bloomberg. The value of those transactions exceeded that of any year since 2017, when international oil majors including Shell Plc. and ConocoPhillips began selling oil sands assets to local companies, data compiled by Bloomberg show.
Since then, a wave of consolidation in the Canadian energy patch has put control in the hands of an increasingly smaller group of companies. Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., ConocoPhillips and Exxon Mobil Corp.’s Imperial Oil Ltd. account for roughly 85% of Alberta’s oil sands production.
Any major deals would follow a series of massive transactions in the US shale patch in recent years, driven by efforts to improve efficiency in shale plays where drilling has become costlier and margins thinner. Exxon Mobil bought Pioneer Natural Resources Co. in 2024 and Chevron Corp.’s purchase last year of Hess Corp. included significant shale assets.
“From what we’ve seen in the US, there’s been five mega deals” in the last two years, BMO Capital Markets analyst Jeremy McCrea said by phone. “We haven’t seen that yet in Canada, but it doesn’t mean that it can’t happen here.”
Oil’s almost 18% decline in the past two years combined with the prospect that export pipeline capacity out of Canada will once again become scarce in the coming year or two is encouraging companies to focus on buying other oil and gas producers as opposed to expanding production from their own well sites. Last year, Cenovus purchased rival oil sands producer MEG Energy Corp. for $5.61 billion.
“A lot of people are asking the question whether there’ll be some consolidation between these bigger players,” Grant Zawalsky, senior partner at the law firm BD&P, said by phone. “The medium and small oil sands players are a pretty short list.”