By OGJ editors
HOUSTON, Sept. 10 -- In the first 6 months of 2003, the enterprise value of Canadian oil industry mergers and acquisitions fell to $5 billion (Can.) compared with $21 billion for the same period last year, said Sayer Securities Ltd., Calgary, an investment firm specializing in M&A activity.
Total enterprise value is measured by total equity, plus long-term debt and other liabilities, said Frank J.D. Sayer, founder and president of the firm.
The main reason for the decrease stemmed from a lack of available M&A packages worth more than $1 billion, he said, adding less interest on the part of non-Canadian buyers also contributed to the decrease.
Acquisition prices
While overall M&A activity was down, the median acquisition price was up compared with the first 6 months of 2002. During the first half of 2003, the median price of reserves rose 18% to $8.94/boe compared with $7.60/boe for the same period last year.
"This corresponds with the increase in commodity prices in the first half of this year compared to the same time period a year ago," Sayer said.
"With commodity prices remaining relatively high and acquisition prices following suit, it would stand that more companies that made major purchases in the past will review their assets with the intention of selling. We may well see more activity in the second half of 2003," he said.
Buyer profile
US buyers have virtually disappeared from the Canadian M&A market. In the first half of 2003, US buyers accounted for $200 million of the total enterprise value, or only 4% of the M&A market. That held steady with the first 6 months of 2002.
In contrast, the US buyer total was $16 billion, or 61% of the M&A market, in 2001 and $3.9 billion, or 24%, in 2000.
This year, most US companies are not out shopping, but rather they are reviewing their asset base and deciding what noncore assets to put on the market, Sayer said.
For instance, ChevronTexaco Corp. has said that it plans to sell up to $2 billion in nonstrategic assets each year during the "next few years" (OGJ, Aug. 18, 2002, p. 36).
Meanwhile, royalty income trusts (RITS) were very active in the first half of 2003, purchasing a total of $2.6 billion, or 56%, in companies and assets of the total M&A market.
Other buyers besides US-based companies and Canadian RITS in the first half of this year accounted for $2.3 billion, of which 31% involved start-up companies.