Tuesday, March 24, 2009

Merger in Canada’s Oil Business

I have been waiting to see what actions are taken by Oil companies to face this hard economic times. One of the first moves is the recently announced merger of two major Oil Companies in Canada: Suncor Energy and Petro-Canada. This post provides an overview of the merger.

The objectives of this merger are to reduce their high operating costs and to jointly face the opposition of environmentalist groups that have been gaining public sympathy. The expected savings for this merger are $300 million during the first year.

Actual Suncor shareholders will hold 60% of the new company and the remaining 40% will be hold by the actual Petro-Canada shareholders.

Key facts about the merged company:

· 7.5 billion barrels of oil equivalent proved and probable reserves.
· 433,000 barrels per day of refining capacity.

Suncor, before the merger, was the third largest oil company in Canada. It employs 6,500 workers and was the first company to commercially mine the Athabasca oil sands. It is an integrated oil company: extraction, refining and retailing.

Petro-Canada, employs around 6,000 workers worldwide. It has an upstream production of 418,400 barrels of oil equivalent per day (boe/d) (2008 data).

Is this merger a signal of future mergers in the US? If so, Which companies will merge in the future?




TravisR said...

I think we may see some acquisitions among the larger US oil companies. If you have been following Exxon Mobile they have had dropping reserves in their recent reports. For those larger companies like Exxon Mobile it might be a quick way to gain reserves, purchasing a midsize company with a good reserve portfolio.

taylor12 said...

It will be interesting to see exactly how the company will restructure itself in such an unstable economy. While projected savings are estimted at $300 million is this a reasonable objective? Perhaps this will be a serious example to the US's oil market companies of how their own market is seriously effected by our changing economy.

Also, you've made an interesting comment about how this merger will help face the opposition of environmentalist groups. Oil excavation is still poses threats to the environment, why would this merger lessen the percieved image for environmentalists?