12 LEXPERT
|
2018
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WWW.LEXPERT.CA
PHOTO:
SHUTTERSTOCK
OIL AND
GAS M&A
Stagnant oil price,
transportation bottleneck
and hike in US production
all point to a subdued year
for Oil & Gas sector
By Sandy Rubin
n a note to clients earlier this year, BMO Capital Markets urged Cana-
dian energy companies to "merge, innovate or face extinction."
It was advice that resonated, yet when it comes to merging, despite
predictions that many small- and mid-sized explorers and producers
would be forced to consolidate aer energy prices slumped in mid-
2014, it hasn't happened to any great degree.
"is is what's really strange about this downturn," says Alicia Ques-
nel, an energy practitioner at Burnet Duckworth & Palmer LLP. "It's
not acting similarly to downturns in the past. is is a much longer cycle
than we've seen in the past, and it's taking longer for us to come out of
it. What happened in the mid-1980s and mid-1990s is not happening
this time."
According to Michael ackray, co-chair of the oil and gas group at
McMillan LLP, there's "a pretty simple answer why we haven't seen the
juniors to intermediates wiped out."
He says the banks that funded their exploration and development pro-
grams in the boom years have shown "a real reluctance to push them off
the cliff. It's the old adage 'If you borrow, you best borrow a lot, not a little.'
Because if you borrow a lot the bank really doesn't want to crystallize a loss."
THE BIG SQUEEZE
I
