The market remains slow, despite a window for capital markets that opened in late May and generally closed late in June.
There were eight public deals in Q2, three of which Stikeman Elliott acted on, putting the market on track for 32 deals in 2015, barely exceeding the anemic levels of 2014, assuming that the weakness in activity in Q1 is made up in the second half of the year. Q3 has not given us a great start. It is fair to say that the big transactions were split between two kinds – low cost of capital leveraging its advantage (Crescent Point, Tourmaline, TORC) and high cost of capital issues being resolved (Arcan, Niska) or ameliorated (Cenovus). There was decent midstream activity, but not as much as was expected, and almost nothing at all in services, where it is not clear that anyone has a clear cost advantage when it comes to capital.
Ontario Teachers completed the largest transaction of the quarter, and perhaps the year, with its purchase from Cenovus, perhaps reflecting both a means of strengthening its balance sheet and avoiding what may have been a weak capital markets reception for additional E&P offerings, even with yield. The sector welcomes the addition of a sophisticated investor at a time when confidence is not high. Capital markets activity in this period was heavily biased to elite names.
The Pacific was relatively quiet in this period, with Sinoenergy completing the only direct transaction by an offshore purchaser. Despite, or perhaps because of, the turmoil in commodity and currency pricing, US buyers were somewhat inactive, limiting their material activity to participation in widely-marketed Canadian financings and the sale of Carmel Bay to Black Swan and Niska to Brookfield.
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