Companies currently looking to buy in Canada are encountering an environment that is allowing them to pick their opportunities.

"The marketplace is getting more comfortable," Mark McMurray, managing director of corporate development for Calgary-based M&A advisor Rundle Energy Partners, said at the sixth annual A&D Strategies and Opportunities conference in Dallas recently, presented by Oil and Gas Investor and A&D Watch.

The companies that entered Canada in the 1990s when the Canadian dollar was worth C$0.70 to the US$1 have come out well with gas assets. During this environment there was an explosion of energy trusts, growing from six to 30 during the past decade.

McMurray added that U.S. companies interested in creating MLPs (master limited partnerships) should take a lesson from the Canadian royalty trusts, which will have their tax breaks revoked in 2011. A similar change in U.S. tax law could be disastrous for U.S. MLPs, he said.

Now energy trusts are starting to shed their assets, which are creating a lot of good investment opportunities for producers interested in gaining assets in Canada.

Lower gas prices are creating companies in distress, another contributor to divestment opportunities. Sellers are looking for buyers with cash that can move fast, he said.

The number of deals has grown but are smaller in size, generally under C$100 million, he added. Rundle handled 26 successful transactions during the first half of 2007. The average package included production of 227 barrels of oil equivalent per day, with a transaction average of C$52,100 per flowing barrel per day and C$23 per proved and probable barrel of reserves.

The smaller deal sizes are not discouraging large E&Ps from seeking assets, however. "We're seeing some of the biggest companies in town deliver 16-person technical and due-diligence teams into our datarooms to acquire an asset that might be a couple hundred barrels a day. That speaks to the companies in Canada trying to focus on their operating positions and accumulate in those areas."

The diversity of types of assets in Canada, and their value, continue to drive deal flow. "We expect that deal flow and that opportunity to continue. Those folks who want to get into Canada, now is a good time to be looking at it as it relates to whatever portfolio strategy you have set up."

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