Canadian oil and gas deal value down 60% in 2011 but opportunities exist in 2012: Ernst & Young

Cash-rich companies hungry to execute growth strategies this year

CALGARY, March 19, 2012 /CNW/ - Deal value in Canada's oil and gas sector decreased by 60% in 2011 while the total number of deals declined from 202 in 2010 to 138 year over year, according to Ernst & Young.

"In 2011, continued economic uncertainty put a damper on transactions, partnerships and new business relationships in Canada's oil and gas sector as companies went back to basics and focused on exploration and production," says Kevan Holroyd, Associate Partner in Ernst & Young's oil and gas practice. "But this year's another story. Cash-rich companies with strong balance sheets, access to credit and a well-balanced capital agenda are hungry to execute on their growth strategies."

What drives success in 2012 may be different than what we've seen in the past, explains Holroyd. Companies are approaching deals with a longer-term vision, a well-thought-out partnering arrangement, and a seamless integration plan. Not only that, they're looking for transactions that are strategic to both sides of the table — as these are the ones that are understood, embraced and endorsed by the marketplace.

Making the most of transaction opportunities in 2012 begins by focusing on the following key areas:

1. Developing a proactive opportunity identification process
   
   
2. Managing and transitioning strategic supplier and customer relationships
   
   
3. Creating a plan to identify and retain or recruit key personnel
   
   
4. Aligning corporate culture between both parties
   
   
5. Establishing controls to mitigate interim operating risks
   
   
6. Leveraging margins
   
   
7. Tracking finances and operations on an interim basis
   
   
8. Putting in place a well-thought-out transitional services agreement

But before a company pursues a transaction, it has to take a close look at its capital positioning and related strengths and weaknesses. A company's capital position will almost exclusively determine whether they'll become a buyer, seller or strategic partner, or whether they should retrench, be prudent and stay the current course.

"Understanding your company's relative place on the capital agenda will be the key to getting the most out of transaction opportunities in 2012. Minimizing risk and optimizing opportunities when buying, selling or entering into joint ventures and strategic partnerships will be critical to ensuring your transaction stands the test of time," says Holroyd.

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Sarah Shields
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Julie Fournier
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Jennifer Nascimben  
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