Red-Hot Canadian Oil Patch M&A Likely to Cool
- Canada’s upstream oil and gas sector saw a record $31.2 billion in M&A activity in 2025.
- 2025 saw major deals such as Whitecap Resources’ merger with Veren and Cenovus Energy’ takeover of MEG Energy.
- Sayer Energy Advisors expects deal activity to moderate in 2026 due to a shrinking pool of high-quality targets, strong producer balance sheets, and structural constraints despite improving policy signals.
Last year saw a record number of deals in the Canadian oil patch, with sectoral consolidation reaching an eight-year high.
But a new report from Calgary-based Sayer Energy Advisors anticipates mergers and acquisitions in Canada’s upstream oil and gas will moderate over the next 12 months.
The report’s findings go against the expectations of industry analysts and executives of more US buyers searching for acquisition targets, along with more favorable government policies towards the sector spurring more action in 2026.
According to the report, via the Calgary Herald, the upstream oil and gas sector saw an estimated $31.2 billion of M&A activity in 2025, a 53% jump from the previous year and the most dealmaking since 2017, when five large transactions led by foreign firms exiting the oilsands accounted for 80% of the total deal value.
The 2025 total included Whitecap Resources’ (TSX:WCP) $15 billion merger with Veren Inc. last March, and Cenovus Energy’s (TSX:CVE) $8.6B takeover of oilsands producer MEG Energy in November.
Other deals saw Sunoco LP’s (NYSE:SUN) purchase of fuel giant Parkland Corp. for $9.1 billion; Keyera Corp.’s (TSX:KEY) $5.1B acquisition of Plains All American Pipeline’s (NASDAQ:PAA) NGL (Natural Gas Liquids) Division; Ovintiv Inc.’s (TSX:OVV) purchase of NuVista Energy for $3.8 billion, and Canadian Natural Resources’ (NYSE:CNQ) acquisition of Chevron’s (NYSE:CVX) Oilsands/ Duvernay Assets ($1.0B).
Buyers bulked up to achieve better returns and operational synergies during a period of lower oil prices averaging roughly $60 a barrel, rather than investing in new drilling.
About 30% of last year’s M&A activity targeted assets in the Montney formation of northeastern British Columbia and northwestern Alberta — a region known for its natural gas, condensate and NGLs.
Most major deals were completed by domestic players, although interest from US buyers began to increase as US shale wells started to become depleted.
A separate report from ATB Capital Markets notes most producers still have strong balance sheets, which could slow M&A in 2026, as there will be fewer firms looking to sell.
“We anticipate a modest slowdown in Canadian (exploration and production) M&A activity through 2026 following three years of robust consolidation within the sector,” the report states, per the Herald.
“This expected decline in momentum is driven by an intersection of structural and economic factors, most notably the scarcity of remaining high-quality targets that possess adequate scale and inventory depth to justify valuation premiums.”
On the other hand, Grant Zawalsky, senior partner and vice-chair at law firm Burnet, Duckworth and Palmer LLP in Calgary, was quoted by The Canadian Press as saying that “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,” he said.
“Until the fundamentals change, we’ll likely see more of the same.”
He should know. Zawalsky worked on three major energy transactions last year: the Cenovus-MEG Energy acquisition, Whitecap’s combination with Veren, and Ovintiv’s purchase of NuVista Energy.
BD&P was involved in eight of the 10 biggest transactions.
Tom Pavic, president of Sayer Energy Advisors, said that while the investment environment has been improving due to the Canadian and Alberta governments reaching an energy accord that includes support for a new West Coast oil pipeline, he hasn’t observed increased global interest in Canadian acquisitions.
Pavic chalked the disinterest up to lingering concerns over regulatory burdens and infrastructure needed for overseas exports.
However, US private equity players have been showing an interest in picking up Canadian assets, building up production and then selling the companies or taking them public.
“Anywhere they see a value arbitrage with Canadian assets selling lower or being developed at a lower cost, they view that as an opportunity,” Zawalsky was quoted by The Canadian Press.
“And they tend to be more willing to take risk on the regulatory side than established oil and gas producers.”
By Andrew Topf for Oilprice.com
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