Mergers and acquisition activity in Canada’s oil sands are at lows last seen in 2004, as increased government scrutiny of deals and a slump in the price of bitumen-derived oil hurt the industry.
Bloomberg reports Canadian authorities are not only “digging deeper” into deals by foreign state-owned companies, but are also now vetting investments of less than $344 million that don’t require approval under current foreign takeover rules.
After more than $50 billion worth of investment into the oil sands over the past seven years, including last year’s $15 billion purchase of Calgary-based Nexen by China’s CNOOC and the $5 billion sale of Progress Energy to Malaysia’s state-owned oil company, 2013 has seen no investment even reach the $1 billion mark.
The price oil sands producers receive fell back to around $70 a barrel on Monday, down more than 20% from 2013 highs reached in July, adding further pressure to oil sands stocks which have massively underperformed their US peers.
The fall in the price of Western Canada Select – a blend of heavy oil sands crude and conventional oil – comes on the back of a deepening discount to US benchmark West Texas Intermediate (WTI) of $32, which itself trades more than $6 below international benchmark North Sea Brent.
Today’s effective price for for bitumen-derived oil from Alberta’s oil sands of $70 a barrel is a vast improvement from the five-year lows of just $45 hit mid-December 2012, but marks something of a reversal for the blend that managed to narrow the gap to Brent to just $16.50 in July.
