Each week, XI Technologies scans its unique combination of enhanced industry data to provide trends and insights that have value for professionals doing business in the WCSB. If you’d like to receive our Wednesday Word to the Wise in your inbox, subscribe here.
Mergers and acquisitions are the name of the game in today’s Western Canadian Sedimentary Basin. Using our own tracking and the BOE Report’s M&A Database, XI calculates that there have been more than 30 notable mergers or acquisitions in the WCSB in 2021 for a total value of approximately $11.5 billion, with an average of approximately $400 million per deal. This compares to over 15 notable mergers within the same period last year for a total value of around $1.2 billion, with an average of $85 million per deal (numbers are derived from publicly available values. Note: the numbers for 2021 do not include the 3.8 billion in shares for the Husky/Cenovus takeover).
With recent headlines dominated by newly announced mergers or acquisitions of companies of various sizes, the lesson is clear: those that want to play the A&D game need to be proactive in their approach.
These deals have signified a return to a more aggressive approach to deal-making in the Western Canadian Sedimentary Basin. In this type of environment, it’s not enough to limit your A&D pursuits to publicly available opportunities. Due to the incredible pressures heaped upon producers in the past two years, many companies are looking to streamline their operations and improve cash flow and are finding acquisition a more viable strategy than drilling.
The issue is that a lot of acquisition or merger opportunities may never become publicly available. Those forced to divest might not be actively looking to do so until an offer is thrust upon them. Those looking to acquire in this challenging environment need to be proactive in their A&D scoping and search for opportunities using public data outside of a data room.
Companies with capital, or with solid financials, are starting to fill in the blanks. Where are target acquisitions focused? Who are the working interest partners, and do they also meet buyers’ criteria? What analogous plays would make sense to pursue? What are the reserves and what are the associated liabilities? Since the number of publicly traded companies has decreased over the past 5 years, the only option is typically government-collected data that can be time-consuming to correlate and evaluate to find the best opportunities available.
So, this is less a radical change in A&D philosophy and more of a return to form. Acquisition and Divestment strategy is coming full circle, which leads to the question: are your processes able to support this current environment? Do you have robust methodology to look for quality assets that may not be currently on the market?
XI Technologies has been in the A&D scoping game since the late 1990s, with tools built and perfected for strategic acquisition identification and evaluation. AssetBook is still the best source for working interest production and has evolved over time to meet the changing needs of the industry and to continue to help clients make better decisions. To get a sense of how you can use AssetBook to compete in the current, more aggressive world of A&D, click here to watch a short video.