CALGARY – The trend of consolidation in Canada's oil industry is poised to continue following a series of significant transactions last year. However, the interest of foreign buyers in Canadian energy assets remains uncertain. Senior partner and vice-chair at Burnet, Duckworth and Palmer LLP, Grant Zawalsky, noted that companies recognize the potential benefits of mergers and acquisitions, particularly as oil prices remain stagnant around US$60 per barrel. Investors are increasingly demanding higher returns through dividends and buybacks amidst uncertainty in selling their products in competitive global markets.
According to Zawalsky, mergers and acquisitions serve as viable growth strategies for companies reluctant to invest heavily in drilling or that are not seeing the returns they expect. He suggests that this trend will likely persist until market fundamentals change.
Last year, Zawalsky facilitated three major energy transactions: the competitive bidding war for MEG Energy Inc., which was won by Cenovus Energy Inc.; the $15 billion merger between Whitecap Resources Inc. and Veren Inc.; and Ovintiv Inc.'s $3.8 billion acquisition of NuVista Energy Ltd. In total, his firm played a role in eight of the ten largest energy producer deals in 2025, predominantly involving domestic players. Ovintiv, while headquartered in Denver, maintains a substantial Canadian footprint, as it was previously known as Encana and was based in Calgary.
Tom Pavic, president of Sayer Energy Advisors, anticipates a busy year ahead for energy transactions, albeit with potentially lower deal values than those observed in 2025, which featured numerous large-scale deals exceeding billions. He expects continued activity, but primarily on smaller scales as companies strive for cost-effective methods to expand their drilling inventories.
Pavic highlighted the recent improvement in the investment landscape, particularly following a significant energy accord between Ottawa and Alberta that includes support for a new West Coast oil pipeline. Despite this optimistic backdrop, he notes a lack of increased global interest in acquisitions of Canadian assets.
According to Zawalsky, potential buyers must navigate the appealing quality of Canadian assets while taking into account concerns related to regulatory challenges and the infrastructure needed for international exports. Yet, U.S. private equity firms have shown an interest in Canadian assets, aiming to increase production and either resell the companies or go public. They see an opportunity in the perceived value arbitrage, where Canadian assets are often less expensive or can be developed at a lower cost compared to their U.S. counterparts. These firms are generally more willing to navigate risks associated with regulatory issues than established oil and gas producers.
Hostile bids, like the one from Strathcona Resources Ltd. that made MEG Energy a target last spring, are expected to be exceptions rather than the norm. Zawalsky revealed that around 40 professionals at BD&P were involved in the MEG-Strathcona-Cenovus negotiations, underscoring the legal complexities and significant costs associated with these types of bids.
In its 2026 outlook, ATB Capital Markets forecasts a "modest slowdown" in consolidation among explorers and producers. The report attributes this anticipated decline to a combination of structural and economic factors, including a shortage of high-quality targets that possess the scale and inventory depth necessary to justify elevated valuations. Additionally, a potential downturn in oil benchmarks and a lack of appetite for transactions at the bottom of the commodity price cycle create a challenging environment for mergers and acquisitions, likely widening the gap between opportunistic buyers and sellers waiting for improved valuations.
