A total of C$10.2 billion was raised in the Canadian oil patch during the first six months of 2007. Equity fund-raising by trusts and fund-raising in debt categories both increased, despite the uncertainty for the future of the trusts, while equity issues decreased, according to Ryan Ferguson Young, an associate with Calgary-based asset-marketer Sayer Energy Advisors.

The amount of capital raised in the first half of 2007 is 40% more than in first-half 2006.

Debt has been more appealing to Canadian companies because it continues to be relatively inexpensive, despite the interest-rate increase enacted by the Bank of Canada on July 10, he says.

The main issuer of straight debt in first-half 2007 was a traditional E&P company, Canadian Natural Resources Ltd., which raised C$2.6 billion to repay bank debt. Another traditional E&P, Addax Petroleum Corp., which raised C$324 million, was the largest issuer of convertible debt in the half.

As for the trusts, they were expected to lay in wait after news of a new federal tax regime, yet as a group they raised a total of C$2.6 billion in the first half of 2007. Of that, C$1.8 billion was raised through issuing units, a 255% increase from the C$500 million of the same period in 2006.

The most significant offering completed by a trust in the first half of 2007 was by Provident Energy Trust, which completed a C$374-million unit sale to fund the acquisition of Capitol Energy Resources Ltd. In debt financing, Penn West Energy Trust was the most active, raising a total of C$510 million, Young says.

While equity financings fell 10% in the first half of 2007 compared with the same period in 2006, there were still some very large issuances, most by E&P companies with an international focus or by junior E&P companies raising equity to fund acquisitions, Young says.

Bayou Bend Petroleum Ltd. made the largest single equity sale with a private placement of C$200 million. The company is focused on the Gulf of Mexico and used the proceeds to fund the acquisition of additional interests in the Phase I area of the Marsh Island project offshore Louisiana and other Gulf assets.

Other companies with an international focus that made significant equity sales in the first half of 2007 were Niko Resources Ltd., First Calgary Petroleum Ltd., Pacific Stratus Energy Ltd., Oilexco Inc., Antrim Energy Inc., Petro Andina Resources Inc. and Tethys Petroleum Ltd., Young says.

Equity markets were also receptive to E&P companies funding domestic acquisitions. Those who tapped this money in the first half of 2007 included ProEx Energy Ltd., which raised C$100 million to fund the acquisition of Progress Energy Trust, and Rider Resources Ltd., Alberta Clipper Energy Inc., TriStar Oil & Gas Ltd. and NuVista Energy Ltd.

Young expects further Canadian E&P equity financings will hinge on the prospects of a domestic acquisition or on international exploration stories for the remainder of 2007. He predicts flow-through financings will likely increase in the fourth quarter and debt will continue to be attractive for now, though a Bank of Canada meeting in September, followed by the possibility of another interest-rate increase may make debt a less attractive choice.

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