Page 5 - NorthAmOil Week 31 2022

NorthAmOil COMMENTARY NorthAmOil

assets, justified by their long life and good fit both the US and Canadian industries over the
geographically for Strathcona, Sayer Energy past two years has slowed down, but opportu-
Advisors, president, Tom Pavic, was cited by nities remain. Other major deals announced
Reuters as saying. recently include Whitecap Resources’ acqui-
According to energy data analytics firm sition of Montney and Duvernay assets from
Enverus, Serafina’s output had been growing ExxonMobil and Imperial Oil for CAD1.9bn
steadily since it first began production in 2016. ($1.5bn). Canada’s upstream industry overall
Enverus Foundations data show that the compa- represents a buyers’ market, according to Pavic,
ny’s production rose from 16,344 barrels per day as small producers struggle to access capital in
(bpd) of oil in 2019 to 24,812 bpd in 2021. By order to make acquisitions. Strathcona has not
January 2022, Serafina’s output had hit 27,249 had this issue, however.
bpd. Moody’s said it had affirmed Strathcona’s
It was previously reported in March that Ser- credit ratings and positive outlook, citing the
afina’s owners, private equity firms Pine Brook company’s large production and reserve base.
Partners and Camcor Partners, were gaug- It said Strathcona would fund the deal through
ing interest in a potential sale of the company. borrowings on its revolving credit facility, not-
Waterous was reported at the time to be eval- ing that its liquidity was “significantly dimin-
uating a bid for Serafina via Strathcona, which ished” by the acquisition, but was nonetheless The wave of
was seen as a potential fit given the company’s “adequate”.
own assets in the Lloydminster play. However, The company, whose other areas of focus oil and gas
Waterous and Strathcona declined to confirm aside from Lloyminster include the Montney consolidation
their interest at the time. Waterous’ CEO, Adam play in Alberta and British Columbia and the
Waterous, was reported to have commented at Cold Lake oil sands, currently produces around that hit both the
the time that if a sale did take place, it was likely 110,000-115,000 boepd, mainly comprised of
to be months away, rather than weeks. liquids. US and Canadian
At the time when a possible sale of Serafina While oil prices have weakened somewhat
was first reported, there was speculation that the since March, oil and gas companies continue industries
company could fetch over CAD1bn ($773mn) to generate higher levels of cash flow than they over the past
if sold at the commodity prices then being seen. had been doing previously. However, instead
In mid-March, when the story emerged, West of spending more on additional production, two years has
Texas Intermediate (WTI) prices were hovering many producers continue to favour prioritising
above $100 per barrel. The benchmark tumbled shareholder returns via dividend increases and slowed down,
this week, sinking below $90 per barrel, but if share buybacks. Against this backdrop, further
the details of the acquisition are confirmed, then acquisitions remain an attractive option for but opportunities
Serafina appears to have secured a better deal expanding output and building scale, for those remain.
than had initially been expected. companies that can afford it. There may there-
fore be additional scope yet for new consolida-
What next? tion, both in Canada and across North America
The wave of oil and gas consolidation that hit more broadly.™

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