The oil and gas industry is adapting quickly to the changing global environment, but Canadian companies are still approaching opportunities with caution, according to a new Ernst & Young report, Lessons From Change - Cautious Optimism in the Oil and Gas Industry.
The report found Canada is starting to see a renewed, yet cautious, interest in transaction activity in energy services, from both domestic and large multinationals, primarily U.S. companies looking to enter and or enhance their presence in the Canadian marketplace. Capital markets are starting to open up, with better access to both debt and equity. Private equity participants are also beginning to re-enter the marketplace, looking to deploy capital that was previously being held.
The report also finds many companies have no choice but to transact as balance sheets remain under pressure. Particularly relevant to the experience of Canadian exploration and production companies is the fact that natural gas prices have hit seven-year lows.
Historically, oil and gas prices have traded in tandem, but natural gas demand fell during the recession, while production remained relatively resilient and storage reached record highs. Low prices and lingering uncertainty have players in the natural gas market reluctant to transact, unless they’re doing so at distressed prices.
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