Canadian Oil and Gas Company Financings Pick up in Third Quarter

Canadian oil and gas companies increased funds raised from financing activities for the second quarter in a row this year. However, aggregate funds and the number of deals completed still remains far shy of the levels seen during the previous year, according to the CanOils Financings Database.

A total of C$2.8 billion was raised by Canadian TSX or TSX-V listed exploration and production financings from July to October of this year across 55 deals and the average amount raised was C$50.9 million. Comparatively, during the same period in the previous year, C$5.7 billion was raised at an average size of C$80.7 million for 73 issuances, representing a drop of 51%.

Year to date 2013, there have been 173 issuances for a total of C$7.3 billion, down from the same period last year when there were 257 issuances for a total of C$11.4 billion. The decrease in the number of deals and the amounts raised resulted in the average deal size falling 12% to C$42.8 million from C$48.2 million.

Source: CanOils

Equity

The majority of deals this quarter – 40 out of 55 – were equity financings, and 80% of the C$1.2 billion raised was from brokered deals. However, twice as many non-brokered deals closed during the quarter, accounting for an average deal size of C$77million per brokered deal and C$9 million per non-brokered deal. C$500 million (or 43%) was raised publicly and C$657 million through private placements.

The largest equity issues this quarter were completed by TORC Oil & Gas Ltd (TOG) in August for combined proceeds of C$412 million in order to fund the acquisition of assets in southeast Saskatchewan for C$510 million. Part of the financing was raised through a bought deal prospectus offering of C$242 million, the remaining C$171 million was a cornerstone investment by the Canada Pension Plan Investment Board.

Surge Energy Inc. (SGY) completed the next largest equity financing of the quarter for combined proceeds of C$247.5 million, of which C$75 million was used to pay down debt, and the remainder used to fund an acquisition in southwest Saskatchewan.

TSX-V companies completed 29 out of the 40 equity financings, but for total proceeds of C$78 million, an average of C$2.7 million per deal. The largest of these was completed by Strategic Oil & Gas Ltd. (SOG) that raised C$19 million from a private placement, which was announced in conjunction with a C$29 million prospectus offering that is expected to close in early October.

Debt

There were 15 debt issuances in Q3 2013, totalling C$1.6 billion, of which 82% of this was raised by TSX companies. This is 54% lower than the C$3.6 billion of debt issuances in the same quarter last year. The majority of debt issued was for repayment or refinancing of debt, which totalled C$1.1 billion, or 68%.

Cenovus Energy Inc. (CVE) raised the most from debt issuances this quarter, using the US$800 million raised from two unsecured non-convertible note issuances to partially fund the US$800 million notes which are due for redemption in 2014.

Brokered Deals

There were 12 brokered equity financing deals in the quarter, one more than in Q3 2012. National Bank Financial Inc. participated in the most deals (10) this quarter, of which it was lead underwriter in one deal.

Macquarie Capital Markets Canada Ltd. underwrote C$137 million of equity in the quarter from 6 deals. They received C$6.7 million in underwriters’ fees and acted as lead underwriter in 3 of these deals.

Use of Funds

Proceeds from 18 financings were to be used for an exploration and development work program, however this only accounted for 2% of the financing value raised. Even though there were only 9 financings carried out to be used for the repayment of debt, this accounted for 46% of total funds raised. A similar pattern was observed in Q2 2012, whereby 37% of funds raised to repay debt, came from only 18% of the deals.

Source: CanOils

This report was created using CanOils’ financings database which tracks all Canadian TSX and TSX-V listed E&P financing deals on a daily basis and provides a comprehensive set of deal metrics. CanOils also tracks daily M&A deals, provides 10+ years of historical financial and operating data for TSX and TSX-V listed oil & gas companies as well as guidance, forecasts and an extensive oil sands product.

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