Canadian Lawyer InHouse

33 CANADIANLAWYERMAG.COM/INHOUSE MAY 2016 I n d u s t r y S p o t l i g h t line capacity, oil production in Canada is being sold at a signifi cant discount to WTI prices," he says. "So producers' prices are suffering in addition to the general commod- ity price situation. Simply stated, there needs to be more takeaway pipeline capacity that will allow oil to fl ow freely to markets." The capital that kept companies afl oat may have so far come from lenders, but as banks now review their borrowers' reports — and quite likely fi nd them unimpressive — com- panies will have to look elsewhere for cash. "I think because equity markets don't present a number of options for companies, one of the ways that they're going to raise the necessary capital is going to include the sale of upstream and midstream assets," says Fedun, adding the necessity for capital will narrow the bid-ask gap and spur transactions. "There will need to be asset sells that have to happen as opposed to companies wanting to, in ordinary situations, undertake those kinds of transactions," he adds. The longer oil prices remain low, it's more likely banks are going to start pressuring bor- rowers to sell themselves or their assets, says Don Greenfi eld, energy and M&A lawyer at Bennett Jones LLP in Calgary. But while this has so far meant hints of more activity in M&A, it's "by no means in full fl ood," Greenfi eld says. According to Fedun, there's a consider- able amount of private equity on the sidelines waiting for the bid-ask gap to close. This capital is ultimately going to fl ow into juris- dictions and operations in North America where the rate of return is most attractive, he says, adding he expects some competition for capital. This year, Fedun co-led the Canadian side of a multijurisdictional Norton Rose team that represented Brookfi eld In- frastructure Partners L.P. in its agreement to acquire 100 per cent of the outstanding eq- uity interests in Niska Gas Storage Partners LLC, a publicly traded natu- ral gas storage busi- ness with operations in the U.S. and Can- ada. The $912-million trans- action also includes a short-term working capital facility to be provided by a Brookfi eld subsidiary to Niska in the period between signing and closing. The closing of t he partner and Canadian head of ener- gy at Norton Rose Fulbright LLP. Canadian oil and gas compan- ies are caught in a double whammy of sorts, according to Fedun, who says that, in addition to the drop in oil prices, they're also feeling the crunch of insuffi cient pipe- line capacity. "Because of constraints on takeaway pipe- MORE MERGERS and acquisitions ac- tivity may be coming down the pipes for the Canadian oil and gas sector, as companies can no longer delay the sale of non-performing assets, lawyers say. The tumble in oil prices has meant a number of exploration and production com- panies are simply trying to survive until the market recovers, says Wayne Fedun, Will banks start pressuring borrowers to sell assets? BY YAMRI TADDESE Will this be the year for an uptick in M&A for resource sector? y According to Fedun, there able amount of private equity on waiting for the bid-ask gap t capital is ultimately going to fl dictions and operations in N where the rate of return is most says, adding he expects some co capital. This year, Fedun co-led t side of a multijurisdictional team that represented B frastructure Partn agreement to ac cent of the ou uity interests Storage Par publicly ral gas ness wi in the U partner and Canadian head of ener- gy at Norton Rose Fulbright LLP. Canadian oil and gas compan- ies are caught in a double whammy of ns ac- or the es can rming ing ?

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