Summary
1. Consolidation in the energy industry will continue due to limitations on further overseas expansion limited by state oil companies 2. The very large amount of capital needed for new projects requires firms with broad-based cash flow. 3. Most Canadian reserves are secure but have high cost. The last 2 years have proven that only large players have enough staying power. Canada will a major role in the future North American energy supply.
Analysis
Competition in the Canadian energy industry is healthy; the largest company by production of BOE (barrels of oil equivalent) is not EXXON, or Shell, but an all Canadian firm called Encana. Encana itself grew from an Alberta government company being privatized merging with the spun-off oil and gas division of Canadian Pacific Railways. Further acquistions made it the size it is now.
The recent merger of Suncor (a spun-off divions of Sun Oil) and PetroCanada, the privatized state oil company, now will make it the largest Canadian oil and gas firm.
At last count there were over 50 oil companies headquartered in Calgary, Canada's oil capital. Many of these are juniors and started by single individuals ar partners. Eventually these grow up and either sell out or merge with others to grow larger. Most oil companies' share values are now underpriced and make extremely attractive takeover prospects for well funded firms to build a quality portfolio of production and exploration assets. Most of these firms do not refine and market petroleum fuels; they sell their production to the 20 or so firms who refine/retail the fuel..
Canada will play a major role in the future US energy supply, more important than Mexico or Venuzuela. The Canadian oil industry is healthy with both International and domestic players. More mergers are expected to see the industry become a potent force in the interntional oil and gas production and refining industry.
Most Canadian oil firms now have also overseas activities, from the North Sea to the Middle East to Africa and Asia and Latin America. Many, like Talisman, have more overseas operations than domestic. Canadian firms operating overseas generally do not suffer from the "imperialist" label that the large multinationals often experience.
