Canada will see increased energy mergers and acquisitions in the next 5 to 10 years as cheaper oil forces producers to cut costs, Bank of Montreal’s Brian Belski said.
“Remember the mid-90s, late-90s, massive consolidation for Canada’s big energy companies?” Belski, chief investment strategist at the bank, said during the Bloomberg Canada Economic Summit in Toronto on Thursday. “We think we’re going to see a replay of that.”
Crude oil prices remain about 44 percent lower than in June even after rebounding somewhat from a six-year low in March. The lower prices have led oil-sands producers in Western Canada to reduce spending by billions of dollars and cut thousands of jobs.
Belski said the industry is entering a prolonged period of slower global growth and lower prices that will mean companies will need increased cash flow to invest in the technologies that make them more efficient. That will translate into oil companies buying each other.
Suncor Energy Inc., Canada’s largest producer, was able to produce a barrel of oil-sands crude for C$28 in the first quarter, compared with C$40 five years ago, said Chief Executive Officer Steve Williams, who in January announced 1,000 job cuts and trimmed spending by about C$1 billion.
The Standard & Poor’s/TSX Energy Sector Index has declined 23 percent since oil prices started declining from a June 20 high last year.