Oil And Gas Company Not Feeling The Love As They Search For Corporate Suitors

The TD Securities report said, TD Securities as of late analyzed the strategic reviews of 15 Canadian energy firms in the course of recent months. It’s getting so terrible in the oilpatch that companies stuck in an unfortunate situation can’t offer themselves. As indicated by the analysis released a week ago, six are still hunting down a suitor; four have slipped into receivership; one shut down in the wake of offering the majority of its assets and another dropped its strategic review and employed another CEO. The companies, mostly junior outfits, are the energy sector’s undesirable.

In principle, strategic reviews are an open invitation for answers to an organization’s poor share price that can incorporate refinancing, asset sales, and partnerships. Be that as it may, achievement frequently implies a corporate sale or merger.

Calgary-based Zargon Oil and Gas reported its strategic review 13 months back and regardless of late agreements to sell its southeast Saskatchewan oilfields and a littler package of Alberta assets, it is as yet attempting to fix its balance sheet.

“We wanted to capture the best value we can for the shareholders, so we did eventually sell our best assets in a couple of transactions,” said the president and CEO Craig Hansen.
“We had some bank debt, we got rid of it, but we still have debentures to pay and so we continue on.”

There’s a ” gulf” between what purchasers will pay and what sellers will acknowledge, Hansen said, particularly for assets offering marginal returns at today’s low oil and gas prices.

Bruce Edgelow, VP of strategy for lender ATB Financial, said the string of failed strategic review in the course of recent months is identified with several factors. They incorporate falling commodity prices, market expectations by potential purchasers and recent regulatory moves, for example, Alberta’s choice to toughen minimum well abandonment liability coverage levels before approving licence transfers.

However, he supposes companies will proceed with their strategic reviews in any case.

“It’s all about share price. If I’m being treated poorly in the marketplace, then the board will say, ‘It’s time to do something,”‘ said Edgelow.
“It’s a good way to flag the system that you may all of a sudden be open to doing some business. It may bring someone to the front that you didn’t know was interested, so you might as well do a formal process.”

The bank said TD additionally gave a list of 29 companies that launched strategic alternative processes from 2011 through 2014, a time of much higher oil and gas costs. Twenty-one of those finished up effectively in corporate deals, refinancings, partnerships or asset sales.