Canadian oilpatch expected to continue boom through mergers and acquisitions

Oilpatch advisers are expecting the wave of consolidation to continue after last year’s blockbuster Canadian deals, but whether foreign buyers are ready to jump into the fray remains an open question.

Grant Zawalski, senior partner and vice-president of law firm Burnett, Duckworth & Palmer LLP in Calgary, said companies have seen merit in increasing their assets through mergers and acquisitions as oil prices hover around the low US$60 per barrel mark, shareholders are seeking better returns through dividends and buybacks, and uncertainty remains over the ability for producers to sell their output in attractive global markets.

“M&A is a way to grow when you don’t want to invest in drilling, when you’re not getting the kind of returns you’re expecting,” he said.

“Unless the fundamentals change, we’ll probably see more of this.”

Zawalski worked on three major energy transactions last year: the bidding war for MEG Energy Inc. in which Cenovus Energy Inc. won; Whitecap Resources Inc $15 billion combination Warren Inc., and Ovintiv Inc. with $3.8 billion acquisition Nuvista Energy Limited

Burnett, Duckworth and Palmer combined were involved in eight of the 10 largest energy producer transactions last year.

Deals were largely made between domestic players, Owintiv being somewhat of an exception. It is headquartered in Denver, but its stock is traded on the TSX and has a substantial presence in Canada, formerly known as Encana and based in Calgary.

‘Buyer’s market’

Tom Pavic, president of Sayer Energy Advisors, expects this year to be busy.

“I don’t know if we’ll see the values ​​we saw in 2025, which were dominated by several large deals worth more than billions,” he said.

“I think you’ll still see a lot of activity, on a smaller scale.”

Pavic said it’s a “buyer’s market” as companies look for the most cost-effective way to add to their drilling inventory.

Pavic said the investment climate is improving after Ottawa and Alberta reached a comprehensive energy agreement, which also includes support for the new West Coast oil pipeline. But so far, he hasn’t seen any increase in global interest in Canadian acquisitions.

Zawalski said potential buyers are having to weigh the attractive quality and value of Canadian assets against concerns over the regulatory burden and infrastructure required for overseas exports.

However, U.S. private equity players are showing interest in taking over Canadian assets, increasing production and then selling the companies or taking them public, he said.

“Wherever they see price arbitrage with Canadian assets being sold at low cost or developed at low cost, they see it as an opportunity,” Zawalski said.

“And they are more willing to take risks on the regulatory side than established oil and gas producers.”

Hostile bids, such as the bid from Strathcona Resources Ltd., which brought MEG into play last spring, are expected to be even higher, Zawalski said.

About 40 people at Burnett, Duckworth & Palmer had a hand in the MEG-Strathcona-Cenovus saga because its lawyers worked on behalf of the target company, he said.

“They’re very legally intensive for the bidder. It’s a very expensive proposition to bid when you don’t know if you’re going to be successful.”

In its 2026 outlook, ATB Capital Markets said it expected a “modest slowdown” in consolidation among explorers and producers.

“This expected decline in momentum is driven by the intersection of structural and economic factors, particularly the lack of remaining high-quality targets that have sufficient scale and inventory depth to justify valuation premiums,” the report said.

“Furthermore, weakness in oil commodity benchmarks in the new year … and limited appetite for crystallization at the bottom of the commodity price cycle create a challenging backdrop for transactions, which is likely to widen spreads between opportunistic buyers and sellers patiently waiting for higher valuations.”