In a recently released report, the Global Capital Confidence Barometer, EY suggests that M&A intentions in the global oil and gas sector are at an all-time high. Most notably, 69% of the oil and gas executives surveyed indicated that they intend to pursue acquisitions in the next 12 months. This is the highest figure recorded since 2009, when EY first launched the Barometer.

These figures will likely be of particular importance for the Canadian M&A market, given its heavy focus on energy.

The Report: oil & gas M&A findings

The Barometer is a twice-yearly survey compiled of nearly 3,000 senior executives from large companies around the world and across 14 sectors, including oil and gas.

With respect to oil and gas, of particular interest in this most recent instalment are that over the next 12 months:

  • 96% of oil and gas executives see the M&A market as improving or stable
  • 25% of oil and gas executives anticipate more cross-border deal-making
  • 45% of oil and gas companies expect increased competition for assets from private equity
  • 78% of oil and gas companies review their portfolio every six months or less
  • The United States was ranked the top destination for oil and gas investment, followed by Canada, Australia, the United Kingdom, and Saudi Arabia

In explaining this confidence, EY notes the following trends among those surveyed:

  • Confidence in the overall economy
  • Optimism about corporate earnings, credit availability, and equity valuations in the oil and gas sector
  • Supportive market factors in the oil and gas industry, including healthier balance sheets, narrowing of the bid-ask spread, overall consensus on oil price outlook and private equity firms with money to spend

What does it mean for Canada?

In Canada, overall M&A activity is to a large extent tied to the health of the energy sector. According to Natural Resources Canada, approximately 6.5% of Canada's GDP comes directly from the energy sector.

The high confidence EY reports is likely to combine with a host of other recent trends that have emerged in just the past few weeks to encourage M&A activity in Canadian oil and gas. For instance, in late November, oil prices reached their highest level in two years. The Globe and Mail also recently reported that in just the last week, Canadian companies that specialize in processing and transporting oil and natural raised financings totaling $2.7-billion, more than half of the total raised in the three months to September 30. The Globe notes that these figures suggest major oil and gas companies are starting to ramp up production.

All told, these figures are yet another data point underscoring renewed enthusiasm in the sector after the challenges of recent years.

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