After a lethargic first quarter, five major deals in the second quarter managed to bring the Canadian oil-industry M&A volume to C$13.9 billion in the first six months, up from C$9.8 billion in the first half of 2005, according to Calgary-based investment banker Sayer Energy Advisors.

While below the C$21 billion raised in the first half of 2002, the 2006 figures are far better than the C$5 billion of first-half 2003. The 2002 figure was unusually high due to the merger of Alberta Energy Co. Ltd. and PanCanadian Energy Corp., which was valued at C$16 billion, says Sayer vice president Brent Heinz.

Oil and gas trusts made up four of the five second-quarter 2006 transactions valued at more than C$1 billion. Penn West Energy Trust acquired Petrofund Energy Trust for C$3.7 billion, and Focus Energy Trust purchased Profico Energy Management Ltd. for approximately C$1.2 billion.

"Taken together, the trust sector contributed approximately C$7.8 billion to the total value of transactions in the first half of 2006, or approximately 57% of the total value of all transactions," he adds.

The other trust deals involved the combination of Sequoia Oil & Gas Trust and Daylight Energy Trust, and the merger of Advantage Energy Income Fund and Ketch Resources Trust, which resulted in the creation of Spur Resources Ltd.

The only large non-trust-related deal was Shell Canada Ltd.'s purchase of BlackRock Ventures Inc., an oil-sands player, for C$2.5 billion.

First-half Canadian deals went for an average C$20.34 per proved-plus-probable barrel of oil equivalent (BOE) from C$15.25 in first-half 2005, a 33% increase, Heinz says.

The highest price was Canadian Oil Sands Trust's C$87.69-per-flowing-BOE offer for Canada Southern Petroleum Ltd., which has properties in the Yukon and British Columbia, plus seven licenses in the Arctic Islands.

The strong prices may draw senior producers to put assets on the market, he adds. Canadian Natural Resources Ltd. has bid more than US$4 billion for Anadarko Canada Corp., which produces approximately 70,000 BOE per day. Other offerings are ConocoPhillips assets that produce roughly 20,000 BOE per day; Talisman Energy Inc. assets in Canada, the North Sea and elsewhere; Imperial Oil Resources' sale of 3,667 BOE per day; and PetroCanada's package of 2,000 BOE per day.

Heinz says, "The very large dispositions, such as Anadarko and ConocoPhillips, have a select number of purchasers, leaving a strong appetite for the smaller asset packages that attract a much larger audience. These smaller divestitures should assist in supporting the elevated acquisition prices through the last half of 2006."