Oil and gas execs primed for investment
Positive business conditions in Canada are giving oil and gas companies the confidence to invest this year, although rising inflationary pressures could crimp their plans, says a Ernst & Young report.
Oil & Gas
Ernst & Young
mergers and acquisitions
CALGARY: Positive business conditions in Canada are giving oil and gas companies the confidence to invest this year, although rising inflationary pressures could crimp their plans, says an Ernst & Young report.
Of the 1,000 worldwide company executives polled by the global consulting firm, 75% said they are more optimistic about prospects in 2011.
“With political unrest in the Middle East putting pressure on companies to develop energy sources in new regions, and economic growth amplifying global demand, it’s no surprise that the vast majority of oil and gas companies are on the prowl for new growth opportunities,” said Kevan Holroyd, executive director in Ernst & Young’s Oil & Gas Transaction Advisory Services group.
He said Canadian companies are in a prime position to capitalize on growth opportunities thanks to the stable financial, regulatory and political environment. “This combined with our proximity to the US market and our track record for attracting foreign investment from Asia has created an environment that’s ripe for robust transaction activity.”
Here are some highlights:
• Of the 83% pursing growth, 46% are looking at mergers and acquisitions this year, up 15% from 2010.
• 37% intend to grow organically by adding projects and properties.
• 23% expect financing will be readily available for major acquisitions and/or capital projects.
• 33% believe that access to finance is not a problem.
Companies are keeping an eye on rising cost pressures, cutting costs and operational efficiencies, and improving cash flow before making long-term plans.
Ernst & Young notes joint ventures, partnering and strategic alliances, particularly with foreign companies, are becoming increasingly common in Canada as companies look to share development costs, pool resources, share and mitigate risk and support greater collaboration. An example is Progress Energy’s $1.1 billion partnership with Petronas, Malaysia’s national oil company, in the Montney shale gas assets in BC.
Click here for a pdf of the report.