Despite falling short of the record C$16.9 billion set in 2005, the 2006 financings for the Canadian oil industry proved robust with C$16.2 billion in capital being raised.

Ryan Ferguson Young, an associate with Calgary-based energy investment banker Sayer Energy Advisors says part of the decline was due to that energy-trust financings decreased to C$4.8 billion from its C$5.7 billion record in 2005.

Meanwhile, equity financings set a new record at C$8 billion.

Young adds that the robust financings of 2006 are unlikely to be repeated in 2007. "With lower commodity prices, a number of E&P companies with stretched balance sheets, trusts becoming fully taxable in four years and recent environmental concerns raised by the federal government and social-interest groups, the amount of financings completed in the Canadian oil industry in 2007 could decline," he says.

The number of equity issues decreased from 838 in 2005 to 818 in 2006, however there was an increase in the average size from C$9.3 million in 2005 to C$9.7 million in 2006. This is the sixth consecutive year equity financings have increased since the C$1.1 billion raised in 2000, up 635% since that period.

The largest equity issue was the IPO of Addax Petroleum Corp. for C$450 million in February. Addax is focused in Africa and the Middle East and is the largest independent oil producer in Nigeria, with total production of approximately 91,500 barrels of oil equivalent per day in the third quarter.

Young says, "Subsequent to its IPO, Addax raised an additional C$402 million in equity, making it the most active Canada-based E&P company in the equity market in 2006."

Canadian oil IPOs in general decreased from 30 in 2005 to 17 in 2006 while the average size rose 61% from C$28 million to C$45 million. The Addax issue accounted for nearly 60% of the Canadian energy IPO market in 2006.

As for flow-through financings, these set a record at C$1.7 billion, 65% higher than in 2005. "This represents the fourth straight year the total of all flow-through financings has increased," Young says.

Debt financings totaled C$5.3 billion, up 15% from C$4.6 billion in 2005. An increase in convertible debt was the contributing factor; straight debt declined 3% year over year. Convertible debt was its highest in 2006, accounting for 37% of debt raised or approximately C$1.9 billion, he adds.

Yet, the top four debt issues were straight debt, with Opti Canada Inc. raising C$1.2 billion in December following its C$505-million May issue. Opti is developing the Long Lake oil-sands project in a 50/50 joint venture with Nexen Inc. The other major debt issuers were Talisman Energy Inc. and Canadian Natural Resources Ltd. at C$575 million and C$400 million, respectively.

Trusts raised C$1.5 billion in convertible debt or 83% of the total. Harvest Energy Trust had the largest issue at C$380 million.

In contrast, trust-unit issues fell 33% in 2006 from 2005 to C$3 billion. Trusts raised a total of C$4.8 billion in equity and debt issues, down 16% from the C$5.7 billion raised in 2005, which accounted for 30% of total Canadian oil industry financings, down from 35% in 2005.

Pengrowth Energy Trust was the top issuer of units-a total C$988 million in the two largest trust-unit financings, valued at C$527 million and C$461 million. Pengrowth used the funds to purchase assets from ConocoPhillips (C$1.04 billion) and ExxonMobil Canada Energy (C$475 million) and also acquire Esprit Energy Trust (C$1.32 billion).

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