20 | LEXPERT • June 2015 | www.lexpert.ca/usguide-corporate/
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RESOURCE DEALS
IF OIL PRICES remain low into 2016, some of Canada's oil and gas
companies may start looking to their brethren in the mining industry for guidance.
It's a notion that would make any self-respecting oilman grind his teeth, but Cana-
da's miners know a thing or two about how to ride out a tough time for a long time.
While they have been scrambling to keep the wolf from the door for years, the
sharp tumble in oil prices that started in late 2014 has been spreading that particu-
lar brand of pain to a wider swathe of companies in the resource sector.
But from gold to gas, cash is king. Trying to generate it and trying to hang on to
it have become a major preoccupation.
Some companies have been trying to offl oad non-core assets to shore up their
balance sheet, only they are not seeing eye-to-eye with potential buyers over valua-
tion, making such sales unexpectedly problematic.
It has resulted in what John Cuthbertson, an energy practitioner at Burnet,
Duckworth & Palmer LLP in Calgary, calls "deal paralysis. It's due to an expecta-
tion gap. One side thinks that with time the pricing will be even better while the
other side, the distressed company, feels that this is the bottom and they don't want
to transact at such a huge discount. ey think they'll be getting skinned."
US private-equity fi rms like Kohlberg Kravis Roberts & Co. (KKR) and Apollo
Global Management have built up large war chests and are said to be among those
prowling Canada's battered resource sector for deals. But the volume of transac-
tions being completed is more of a thin trickle than a gush.
" ere's been a lot of interest from US private equity but it seems to be very
diffi cult to get deals done," says John Turner, leader of the global mining group at
Fasken Martineau DuMoulin LLP in Toronto. " at's a big part of the distressed
deal story."
The mining sector was forced to be creative
when commodities declined a few years ago.
Now it is the oil companies' turn
BY SANDRA RUBIN
FROM
MINING
FROM FROM
TO OIL
PHOTO:
SHUTTERSTOCK
