A cashier counts rupees inside a bank in Mumbai.DANISH SIDDIQUI/Reuters
Some weakening Asian currencies could be contributing to the slowdown in merger and acquisition activity in the energy sector.
Executives in the oil and financial industries have blamed a big downturn in purchases by foreign companies in 2013 on a host of factors, including Ottawa's imposition on new restrictions on acquisitions by state-owned enterprises and uncertainty over Canada's ability to move oil to more export markets on new pipelines.
Analysts at TD Securities pointed out the Indian, Japanese and Malaysian currencies have weakened this year against the Canadian dollar. The countries have been either big buyers of oil patch assets or big potential buyers.
"This clearly has the effect of reducing purchasing power," TD said in a report. "Indian companies have been knocking on the proverbial 'door' for some time, but have yet to announce a significant deal in Canada, while the Japanese, on the other hand, have been slowly building out their footprint."
Not this year, though. Foreign takeovers of Canadian exploration and production energy assets are down 77 per cent from the last low, set in 2011. Year-to-date, foreign deals worth more than $250-million have totalled $2-billion, a multi-year low. This comes at a time when numerous companies have assets on the block, or have announced public processes to seek buyers or joint-venture partners.
Since the start of 2012, the Indian rupee has fallen 15 per cent against the loonie and the Japanese yen has fallen 22 per cent.
The effect is not universal, however. Both the Chinese yuan and South Korean won have increased in the period, the report noted.
With its approval of the $15.1-billion (U.S.) takeover of Nexen Inc. by China's CNOOC Ltd. in late 2012, Prime Minister Stephen Harper's Conservative government issued new rules for takeovers that effectively barred state-run enterprises from buying controlling interests in the oil sands.
Some industry sources have said the move created a chill among foreign buyers for acquisitions of other assets as well. However, there have been two small deals announced this month : A $187-million bid for TriOil Resources Ltd. from Poland's PKN Orlen S.A., and a $230-million offer for Novus Energy Ltd. from Yanchang Petroleum Group of China.
TD said some Canadian companies are well-positioned to take advantage of the buyers' market, including Canadian Natural Resources Ltd., Crescent Point Energy Corp. and Husky Energy Ltd. among large caps and Baytex Energy Corp., Peyto Exploration & Development Corp., Surge Energy Inc. and Whitecap Resources Inc. among smaller players.
The bank also took note of word from Spain's Repsol that it is in the market for Canadian or U.S. assets worth $5-billion to $10-billion. It listed potential targets as Baytex, Crescent Point, Peyto, Whitecap, ARC Resources Ltd. and Penn West Petroleum Ltd.