INDUSTRY FOCUS: FINANCE

Rich in nature, the second largest country in the world, heavily exposed to adverse climate impact such as flooding and wildfire, Canada is an advocate of the global energy transition. Shifting from fossil fuels to renewable energy sources to reduce CO2 emissions and limit global temperature increases, the country is ambitious, aiming for greenhouse gas emissions reductions of 40 45% by 2030 from 2005 levels, and to reach net zero emissions by 2050. The diverse plan to achieve these goals includes major policy changes such as a modern carbon pricing system, clean fuel legislation, commitments to phase out unabated coal use in the next seven years, nuclear plant expansions, upstream methane regulations, energy efficiency programmes, and decarbonising activity in the transport sector.

Of course, like everywhere else in the world, these targets and concepts require funding. Not just grants and subsidies, but monumental financial figures – Deloitte predicts 6% of GDP. There will also be significant M&A activity as the majors look to align with the journey. Acquisition and divestiture activity will increase, and the requirement for stringent review and advice will be significant.

The story of Denmark’s Ørsted is perhaps the most famous organisational transition, taking a decade to shift entirely away from coal and conventional generation, becoming the world leader in offshore wind and delivering financial results that surpassed the expectations of most. Initially, the aim was to upend the generation mix from 85% conventional and 15% renewable to 85% renewable over a 50-year period. After just 10, the business has achieved its goal and is continuing to invest in green energy all over the world.

Busy Business

For Canada, significant deals have been done in recent times. Supporting the health of the North American economy, working closely with its big neighbour, the USA, the country is a hive of transactional activity.

In 2019, Shell Canada Energy sold its Foothills Assets – Waterton, Jumping Pound and Caroline gas plants, associated wells and pipelines and the gas fields which feed them – to Pieridae Alberta Production Ltd. In the same year, Devon Energy Corp sold its Canadian business to Canadian Natural Resources Limited for CAD $3.8 billion. In Imperial Oil and ExxonMobil Canada agreed to sell their Montney and Duvernay shale oil and gas assets to Whitecap Resources in a $1.47bn deal. TotalEnergies also announced that it planned to sell its interests in Alberta-based, Suncor Energy-operated Fort Hills mining project, and the ConocoPhillipsoperated Surmont thermal project, alongside associated midstream and trading-related activities.

To complete these types of transactions, banks must understand the environment. thankfully, Canada’s leader – BMO (Bank of Montreal) –has decades of experience in A&D for the energy sector, and the bank has taken a balanced approach to benefit the future clean vision for the country as well as the interests of its clients. In 2017, the company was hired by Petronas to sell oil and gas drilling rights, wells, pipelines and three gas processing plants mainly located in north-western Alberta.

Last year, Cheryl Sandercock –Co-Head, Energy A&D Advisory and a Managing Director in BMO Capital Markets – told Energy Focus that the company had fantastic people power internally and was the obvious choice for large, complex sales. “Our team members are predominantly technical specialists, including geologists and engineers, who understand the energy assets and technical aspects related to owning and operating these assets.

“Banks have an important role to play helping our clients manage the impact of the energy transition on their business. Helping our clients adapt and thrive through the coming transition requires a thoughtful, balanced, and accelerated approach.

“In an environment as volatile as today’s energy market, we act as that experienced advisor helping our clients get the results they want.”

Today, the market is even more unpredictable and with the transition becoming a core element in company and country strategy, impartial advice is hard to come by. Dan Barclay - Chief Executive Officer of BMO Capital Markets says that this major change should be viewed as an opportunity and be carefully managed to achieve business growth and sustainable environmental success.

“It’s encouraging just how much the climate change narrative has evolved in the last few years,” he says. “Climate change is an integral part

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In a global energy crisis, with markets unpredictable and uncertain, divestiture activity must be safe and secure, and data must be valid and trustworthy. Oil Finders clips into transactions for investment banks and majors to consult on the science and security behind the deal.

Oil Finders is the Canada-based provider of transactional support in significant asset divestiture, utilising secure data rooms and seismic knowledge to safeguard deals for clients. Founder and President, Todd Knight explains that now is an essential time for banks to obtain experienced guidance and support from proven industry professionals. “The industry is still in something of a recovery mode,” he says. “People are getting back to work but cautiously, and finances are tight. Banks are not as open to lending as they were in the past, and the oil companies are building funds to pay back shareholders.

“My job is a lot about encouraging what they should do rather than what they shouldn’t. We ensure that the data that will be reviewed is focussed on the property. Sometimes when a bank gets a project from an oil company, the data is scattered and there is a broad focus around the land that is being sold. That isn’t great as people that may view might have land in other places, and they can be distracted by data that isn’t focussed on the primary property that is being sold. It’s about bringing focus to the project and ensuring reviewers spend time on what is valuable.”

As the global energy transition continues, the market for buying and selling major oil plays remains hot. There was a brief slowdown through 2020 and 2021 as the industry took stock and re-strategized to ensure long-term sustainability. But now, investment banks and private companies are busy as O&G asset holders streamline portfolios.

In international markets, sales have been buoyant with most of the world’s majors active in multi-milliondollar transactions since 2021. But when buyers come to the table it is essential to keep them there and get transactions over the line. To achieve this, a clear and concise display of information and a scientific review of what is on offer is critical.

From bases in Calgary and Ontario, Oil Finders details geoscientific information using specialist software, in highly-secure data rooms, leaving no stone unturned so that clients - including BMO Capital Markets, ExxonMobil, Shell, and more – can understand true value.

“In our world, where it involves seismic – looking for upside – it’s not just about pools. When they involve us, it is not just about buying a pool of oil, it’s about making sure the wells are high quality. We have increasingly become the go-to for divestures around the world where seismic shows the value,” Knight adds.

“I use industry standard software and work closely with bank directors,” he says, highlighting the simplicity of his offering for end users. “We are busy with a number of significant projects right now. We get involved in some of the largest oil plays in the world and some are quite famous in the marketplace. Often, owners are looking