Earlier this week, Santa Fe International ( SDC) announced that it would buy Global Marine ( GLM) for $3 billion in stock. That represented a 16% premium over Friday's closing price. On the heels of that deal, Devon Energy ( DVN) said that it agreed to purchase Canadian exploration and production company Anderson Exploration ( AXN) for about $3.4 billion in cash. That deal represented a 50% premium. Are more deals in the energy sector on the way?
|Scott Walters |
|Recent Daily Interviews|
Scott Walters, a trader at Toronto-based Research Capital, chatted with TheStreet.com about that possibility, in addition to share prices, oil and gas supply and other energy-related topics.
TSC: Why are we seeing a consolidation in the industry between Canadian and American companies? Walters: Canadian companies offer a compelling value to U.S. companies as targets, due to the cheap Canadian dollar and fairly cheap acquisition costs. But now Devon steps up to the plate and buys Anderson and pays a big premium in a very weak market. Americans are looking forward to seeing a much stronger gas market, and they have to replace the reserves. They're not having any luck finding it in the Gulf of Mexico, so they have to look north to Canada in the Mackenzie Delta Region and a lot of other frontier properties. Anderson has a good asset base in Western Canada in the Mackenzie Delta Region, the Northwest Territories and the Yukon. Those are gas-rich areas that are relatively inexpensive to purchase, and by buying Anderson, Devon is getting expertise in that area, great land and good producing assets. TSC: What is your opinion of the high premium Devon paid for Anderson in such a weak market? Walters: Anderson is really a crown jewel in Canada, and you have to pay top dollar for that. TSC: Will this consolidation continue? Walters: We saw a two-month break, but judging from the