Private Equity Poised for Greater Role in Slower Energy Market

Neal Ross, Janice Buckingham

Oct 31, 2015

With more than 960 oil and gas companies headquartered in Calgary, the city is a global hub for energy deals. From 2010 to 2014, it accounted for a quarter of worldwide oil and gas M&A. But, with oil and gas prices slashed, commodity deals have slowed. Enter private equity (PE) investors – entrepreneurial players with an approach well-suited to the current market.

A recent Lexpert Special Edition called on Osler corporate partner, Neal Ross, and Janice Buckingham, Chair of Osler’s Oil & Gas Practice and Co-lead of the Energy Practice, for expert opinion. Commenting on the entrepreneurial culture, Neal says many start-up oil and gas companies are created with the intention of being sold or consolidated once they’ve built up sufficient value. He adds that with the gap created by the departure of income trusts, which were natural buyers of oil and gas companies that had achieved production, and with oil and gas prices slumping, it has become increasingly harder to build and sell companies. According to Janice, increasingly complex and expensive drilling and fracking technologies in a downward price environment make building those companies a longer term proposition than has historically been the case.

It’s an environment that leads to PE becoming a bigger player in Canadian energy. The deal velocity in Calgary’s concentrated ten-square-block of office towers is an added attraction. Notable PE investors as well as pension funds seek to outperform public markets. In the M&A hiatus it seems there’s room for patient money. Some suggest that PE is rushing to acquire assets at bargain prices, but Neal thinks otherwise, “They’re investing in expert management teams. This type of capital isn’t available to everyone. Only those with outstanding track records and meaningful business plans are going to attract PE funding.”

For a deeper understanding of how private equity is driving energy markets, read the Lexpert article, with input from a panel of expert energy lawyers, Private equity poised for greater role in energy market Oct 30, 2015, by Brian Burton, Lexpert Special Edition – Energy.