Canada’s Oil Patch Swept Up in Record $38B Consolidation Wave
- U.S. upstream M&A is slowing sharply, falling from $192 billion in 2023 to $65 billion in 2025.
- Canada is seeing the opposite trend, with $37.8 billion in 2025 deals consolidating oil sands control among a handful of major players.
- M&A action was driven by cost-cutting, operational synergies, pipeline constraints, and investor pressure for efficiency.
Previously, we reported that the U.S. Shale Patch has witnessed a big slump in corporate buyouts in recent years as premium acreage depletes and volatile energy prices keep buyers on the sidelines. Following a record $192 billion in mergers and acquisitions announced in 2023 and $105 billion in 2024, U.S. upstream oil and gas M&A activity totaled just $65 billion in 2025, despite a late-year rebound with $23.5 billion in deals announced in the fourth quarter.
However, the situation could not be more stark in America’s neighbor to the north.
Canada's oil and gas sector is currently experiencing a massive, multi-year wave of consolidation, with 2025 seeing over $37.8 billion in deals executed or pending, marking the highest activity level since 2017. This trend is consolidating control into the hands of a few dominant players including Canadian Natural Resources Ltd. (NYSE:CNQ), Cenovus Energy Inc. (NYSE:CVE), Suncor Energy Inc.(NYSE:SU), and Imperial Oil Ltd.(NYSE:IMO) and even Texas-based ConocoPhillips (NYSE:COP)--who together account for roughly 85% of Alberta's oil sands production. Some high-profile tie-ups in the space include Whitecap Resources Inc.'s (OTCPK:WCPRF) CA$15-billion merger with Veren Inc.; Cenovus Energy’s merger with MEG Energy for ~CA$8.6 billion as well as Ovintiv Inc.'s (NYSE:OVV) CA$3.8-billion acquisition of NuVista Energy Ltd.
Related: U.S. Crude Stockpile Surge Weighs on Oil Prices
With oil prices remaining lacklustre over the past two years, energy companies are increasingly seeking to cut costs by scaling up, improving operational efficiency and slashing overheads, rather than through organic growth. Meanwhile, investors are demanding better returns through dividends and buybacks, forcing companies to focus on profitability rather than production growth. Further, rising crude oil production from the Western Canadian Sedimentary Basin (WCSB) has led to increased pipeline congestion and renewed rationing on the Enbridge Mainline system. This has depressed prices for heavy Canadian crude despite the completion of the Trans Mountain Pipeline expansion, discouraging new and expensive long-term projects.
“M&A is a way that you can grow when you don't want to invest in drilling, when you're not going to get the kind of returns you're expecting,” Grant Zawalsky, vice-chair at Calgary law firm Burnet, Duckworth and Palmer LLP, told Radio Canada. “Until the fundamentals change, we'll likely see more of the same.”
However, while consolidation will likely persist in the current year, analysts anticipate a modest slowdown in deal momentum, in large part due to a growing scarcity of high-quality targets, “I don't know if we'll see the values that we saw in 2025, which were dominated by a number of large deals over in the billions,” Tom Pavic, president of Sayer Energy Advisors, told Radio Canada. “I think you'll still see quite a bit of activity, just at a smaller scale,” he added.
Experts have predicted that the "field synergy" model, whereby merging companies combine operations that are geographically close to each other, will remain a popular M&A strategy. Tie-ups in the Canadian OilPatch are increasingly focusing on asset consolidation and improving efficiency by combining adjacent or complementary assets to improve operational scale, such as merging Montney producers to maximize infrastructure usage rather than just drilling new wells. These deals include optimizing field logistics, sharing procurement contracts and reducing overhead, such as Cenovus Energy’s estimated $400M/year in projected synergies after merging with MEG Energy, largely driven by field efficiencies and G&A cuts.
Consolidation often leads to lower job-per-barrel ratios through automation and leaner head offices, allowing for increased production with fewer, more specialized staff. Further, companies are utilizing predictive geophysics and "subsurface digital twins" to simulate and optimize field operations before drilling.
Interestingly, mergers in Canada’s energy sector are increasingly focused on improving the Environmental, Social, and Governance (ESG) profile, with over 70% of recent deals involving the target having a higher ESG score than the buyer.
Unlike in the U.S., ESG criteria remain critically important in Canada's energy sector, acting as a core framework for risk management, investment attraction, and social license to operate. While there is a shift away from glossy marketing towards more data-driven reporting, the pressure to maintain high ESG standards--particularly regarding greenhouse gas (GHG) emissions, indigenous partnerships, and corporate governance--is increasing, rather than decreasing. That’s probably not surprising considering that the federal government of Canada is led by the centre-left Liberal Party of Canada, which has been in power since 2015 and secured a fourth consecutive term in April 2025.
In contrast, many U.S. energy companies are scaling back, altering, or outright hiding their ESG commitments, a trend driven by political pressure coupled with investor backlash against underperforming sustainable funds.
The re-election of Donald Trump has accelerated the anti-ESG movement, with efforts to roll back Biden-era climate policies, clean energy tax credits from the Inflation Reduction Act (IRA) and regulations favoring ESG investing. Consequently, many U.S. Big Oil companies are ditching their previously ambitious clean energy roadmaps and have abandoned earlier plans to cut oil output.
By Alex Kimani for Oilprice.com
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