'Huge year' predicted for oil and gas marketplace
Energy asset acquisitions expected to surge over winter
BY DAN HEALING, CALGARY HERALD
The growing list of western Canadian oil and gas assets for sale is being matched by companies with full wallets and long shopping lists, observers say, leading to predictions of the most active marketplace in years this winter.
"It's going to be a huge year for oil and gas asset acquisitions and divestitures," says David Potter, deputy head of Scotia Waterous in Calgary. "The corporate side will probably be very strong, too."
He predicts the number of production barrels that will change hands will be at a five-year high in 2010.
"It's going to be pretty lively, I think," concurred Peters& Co. oil and gas researcher Andrew Boland.
On the selling side, several big players have announced plans to focus on core areas by selling non-core assets, including new EnCana Corp. and Cenovus Energy Inc., the company it is spinning out to specialize in heavy oil and refining.
Others that have been selling or plan to sell assets include Pengrowth Energy Trust, Suncor Energy Inc. and Talisman Energy Inc.
This week U. S. oil giant ConocoPhillips announced it would sell $10 billion US worth of assets. In Canada, it has a nine per cent stake in Syncrude Canada Ltd. and is one of the top three producers of natural gas.
On the other side are companies like Crescent Point Energy Corp., which this week announced a half-billion-dollar bought deal equity offering, to be used in part to buy reasonably priced assets in its core area -- Saskatchewan's Bakken light oil play.
"Over the next six to 12 months there are several potential acquisition opportunities out there and we wanted to position ourselves to be strong going into this market," president and chief executive Scott Saxberg said in an interview.
"The numbers we're tracking, there's potentially 50,000 barrels per day of production going to come up for sale over the next six to 12 months through various small-cap, large-cap energy companies . . . in Western Canada."
Potter said smaller companies will use thawing financial markets to get into the game as well.
He expects oil and gas asset sales (not counting mergers or acquisitions of companies) in Western Canada next year will be in excess of 100,000 barrels of oil equivalent in production, the highest since 2005.
The record year for such sales was 2004, when American companies selling Canadian assets powered about 160,000 boe/din sales. In 2008, asset sales were barely 25,000 boe/d and so far this year they add up to about 44,000 boe/d, he said.
Potter said companies that have previously been constrained by the credit crunch and low commodity prices will catch up on portfolio changes they've been waiting to make.
The key New York oil price this week hit a one-year high price over $78 US per barrel and natural gas prices are firming up after being stuck at low levels for over a year.
Analysts agreed that the industry's shift in interest to promising unconventional oil and gas resource plays is another big driver in the expected surge of asset sales.
"I think where we'll see the biggest rate of change, year over year, is on the conventional side," said Potter.
"There are companies that still want to grow on the unconventional side, which means there will be transactions in that space, but what is different is that companies that have historically have been very conventional-focused are changing their strategy significantly and will put on the market relatively large offerings of oil and gas assets, perhaps more on the gas sides," said Potter.
Potter said he thinks the assets for sale will be high quality and get premium pricing, taking into account changes in the commodity price, but Boland disagreed, calling it a buyers' market for most of the property.
"There are a lot of smaller junior companies looking to transact in some way in the market and what will make that difficult in terms of receiving premium valuations will be the fact that the property market looks like it's going to be swamped with some pretty big packages coming in from Suncor, EnCana and Talisman," Boland said, noting that between 600 million and 800 million cubic feet of natural gas production (100,000 to 130,000 boe/d) is being sold by those three companies.
Another oil analyst, who asked not to be identified, agreed that the big players will likely drive down prices in the marketplace.
The analysts agreed, however, that oil properties will see better pricing than natural gas.
Many companies will be setting their capital acquisition and development budgets over the next few months.
Saxberg said Crescent Point will plan to spend more than it is spending this year, if commodity prices stay at current levels.
---------
Planned asset sales
-In September, Suncor Energy Inc. said it would complete a "significant downsizing" of conventional natural gas assets --estimated at as much as 400 million cubic feet per day-- over the next 15 months as it digests Petro-Canada following a $20-billion merger.
-Talisman Energy has signalled its intention to sell North American conventional gas assets to focus attention on shale and tight unconventional gas plays.
-EnCana Corp. says it plans to continue to divest after selling $700 million worth of gas assets this summer.
http://www.calgaryherald.com/business/energy-resources/Huge+year+predicted+marketplace/2115160/story.html
