Canadian Oil Patch M&A Activity Expected to Slow

In 2025, the Canadian upstream oil and gas sector experienced a significant surge in mergers and acquisitions (M&A), totaling approximately $31.2 billion, marking a 53% increase from the previous year. This surge was the highest level of deal-making since 2017, driven primarily by domestic players and a few notable transactions, including Whitecap Resources’ $15 billion merger with Veren Inc. and Cenovus Energy’s $8.6 billion acquisition of MEG Energy. The activity was largely concentrated in the Montney formation, a region rich in natural gas and natural gas liquids.

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Despite the record-breaking activity in 2025, a report from Calgary-based Sayer Energy Advisors forecasts a moderation in M&A activity over the next 12 months. This expectation contradicts the views of some industry analysts who anticipated increased interest from U.S. buyers and favorable government policies to stimulate further acquisitions. The anticipated slowdown is attributed to a combination of structural and economic factors, including a diminishing number of high-quality acquisition targets that can justify valuation premiums.

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Grant Zawalsky, a senior partner at Burnet, Duckworth and Palmer LLP, noted that M&A serves as a strategic alternative for growth when drilling investments yield insufficient returns. He emphasized that the current market conditions are likely to sustain the trend of consolidation. Meanwhile, Tom Pavic from Sayer Energy Advisors highlighted that while the investment climate is improving due to supportive energy policies from the Canadian and Alberta governments, there remains a lack of global interest in Canadian acquisitions, primarily due to regulatory concerns and infrastructure challenges.

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While traditional Canadian firms may be less inclined to sell, U.S. private equity investors are showing interest in Canadian assets. These investors see potential for value arbitrage, as Canadian assets are often perceived to be undervalued or developed at lower costs. Zawalsky remarked that these investors are generally more willing to navigate regulatory risks compared to established oil and gas producers.

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Reports from ATB Capital Markets indicate that many Canadian producers maintain strong balance sheets, which could further reduce the number of firms willing to engage in M&A. The firm anticipates a modest slowdown in exploration and production M&A activity through 2026, following three years of robust consolidation.

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There is a divergence in expectations regarding the future of M&A activity in the Canadian oil sector. While Sayer Energy Advisors predicts a slowdown, some analysts remain optimistic about increased U.S. interest and favorable government policies. The lack of clarity on regulatory burdens and infrastructure readiness for overseas exports adds to the uncertainty surrounding future acquisitions.

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• “M&A is a way that you can grow when you don’t want to invest in drilling, when you’re not going to get the kind of returns you’re expecting,” — Grant Zawalsky, Senior Partner, Burnet, Duckworth and Palmer LLP

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• “We anticipate a modest slowdown in Canadian (exploration and production) M&A activity through 2026 following three years of robust consolidation within the sector,” — ATB Capital Markets Report

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• “Anywhere they see a value arbitrage with Canadian assets selling lower or being developed at a lower cost, they view that as an opportunity,” — Grant Zawalsky, Senior Partner, Burnet, Duckworth and Palmer LLP

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