Grant Fagerheim, a 25-year veteran of the energy business, says a major shakeup is about to hit the oil patch. He predicts four of every 10 companies will no longer be around this time next year as companies, in particular income trusts that must switch back into corporations by January, search for growth, and as bigger players try to consolidate unconventional resource plays.
Q: How do you see the market changing over the next year or two?
A: Once we get through 2010 into 2011 when the trusts conversions all shake out. . .major, major shift. If you take a picture of the landscape today and another picture at the end of 2011, they will be very, very different. [I don't think] 40% of the companies that are currently traded will be around. I think they will be consolidated up by other companies, whether the majors or the larger trusts. I think you're going to see mergers. . .
Q: What's your exit strategy if you're a smaller player?
A: It is not visible at this particular time as to how juniors will liquidate in the future, but liquidity events will present themselves over the next three–five years. I think we can demonstrate that we can grow in certain areas; and, if you underpin your company with very good assets, people will always want them in the future.
Q: Do you think the Chinese will look at smaller projects?
A: I believe that over time. My perspective would be once you're working in an area you'll continue to expand that area. And it is no different all over the globe. . .So, yes, initially they are looking at our oil sands for investment, but when they are here, why not continue to expand? All your putting is more product under management. . .
Q: How do you see the market changing over the next year or two?
A: Once we get through 2010 into 2011 when the trusts conversions all shake out. . .major, major shift. If you take a picture of the landscape today and another picture at the end of 2011, they will be very, very different. [I don't think] 40% of the companies that are currently traded will be around. I think they will be consolidated up by other companies, whether the majors or the larger trusts. I think you're going to see mergers. . .
Q: What's your exit strategy if you're a smaller player?
A: It is not visible at this particular time as to how juniors will liquidate in the future, but liquidity events will present themselves over the next three–five years. I think we can demonstrate that we can grow in certain areas; and, if you underpin your company with very good assets, people will always want them in the future.
Q: Do you think the Chinese will look at smaller projects?
A: I believe that over time. My perspective would be once you're working in an area you'll continue to expand that area. And it is no different all over the globe. . .So, yes, initially they are looking at our oil sands for investment, but when they are here, why not continue to expand? All your putting is more product under management. . .
