ARC Financial Corp has intensified its deal-making with new investments in a junior oil producer and a hydraulic-fracturing-treatments specialist.
Longshore Resources, a Calgary company founded in late 2015 by senior energy executives, last week said it raised $150 million in equity financing from ARC.
The announcement, which was not widely reported, included news of Longshore’s acquisition of certain producing assets. The buy fits with the company’s plan to secure and develop under-exploited oil-weighted resources in Alberta’s Peace River Arch and south-central regions.
With the financing, Chris Seasons, a senior adviser at ARC, became Longshore’s chairman, and Rob Cook, an ARC senior vice president, a director.
A week prior to Longshore’s announcement, Calgary’s Wayfinder, a developer of solutions to improve the efficiency of hydraulic-fracturing treatments, said it also received equity financing from ARC. Terms weren’t disclosed.
That deal also featured a purchase, with Wayfinder obtaining property near Hinton, Alberta, to build a proppant-manufacturing plant and transloading facility.
Longshore and Wayfinder are two of three new ARC investments disclosed since January. The third, Calgary junior oil and gas producer Boulder Energy, was taken private for about $268 million in April.
ARC is one of Canada’s most active energy private equity firms, with an investment history stretching back almost two decades. Its increased pace, supported by last June’s close of ARC Energy Fund 8 at $1.5 billion, is likely to contribute to a third year of record PE investment in the domestic oil-and-gas industry.
Canada’s industry saw unprecedented PE deployments over 2014-2015. The peak year was 2015, when $6.4 billion was invested, up almost 4 percent from $6.1 billion the year before, according to Thomson Reuters.
Preliminary data indicates activity in this year’s first half is tracking behind 2015 trends, but not by much. To date, a bit more than $2 billion has gone to some 16 transactions, an amount that approaches or exceeds annual totals in six of the past 10 years.
Record PE dollar flows are the result of well-capitalized firms, such as ARC, assuming more prominence in Canadian energy financings, filling a void once occupied by public markets.
Other top investors include pension funds with deep pockets, such as Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan, whose direct deals and co-investments significantly influenced the recent expansion.
Even in an oil-and-gas industry rocked by a prolonged slump in commodity prices, investors are apparently finding steady demand.
Indeed, current deals reflect a substantial share of value and distress opportunities created by the downturn. Examples from 2016’s first half include Pacific Exploration & Production‘s restructuring transaction with Catalyst Capital Group.
According to a survey released this week by EY, PE firms might bring even more money to Canadian energy financings in the months ahead.
EY’s survey of 100 PE firms showed that about 43 percent of respondents are planning acquisitions in the global oil-and-gas industry by the first half of 2017, and 25 percent before the end of 2016.
These findings point to greater confidence about prices, as well as the range of opportunities on tap, particularly in North America, EY said.
Photo of oil-and-gas pumpjack courtesy iStock/doranjclark