| TORONTO, April 11
TORONTO, April 11 Private equity firm Waterous
Energy Fund is seeking investment opportunities in the Canadian
oil and gas sector as valuations turn attractive after a
prolonged slump in the oil price, making a contrarian bet as
global players pull back, its top executive said.
Calgary-based Waterous Energy, which invests C$100 million
to C$400 million ($75 million to $300 million) per deal in
energy assets, is targeting companies in Canada and the United
States, and is finding Canada particularly appealing, said Adam
Waterous, head of Waterous Energy and a former top investment
banker at Bank of Nova Scotia.
Waterous Energy agreed to pay about C$244 million for a 67
percent stake in Canadian energy company Northern Blizzard
Resources Inc from U.S. private equity firms Riverstone
Holdings LLC and NGP Energy Capital Management LLC. This marks
the second deal for Waterous Energy, which already has committed
C$650 million since setting up shop earlier this year.
Northern Blizzard shares ended the day up 5.1 percent.
The Waterous acquisition is the latest example of
Canada-focused firms buying into the country's energy sector and
comes as international energy players exit the market.
"The macro theme playing out is the 'Canadianization' of the
heavy oil business," Waterous said in an interview. "These
assets tend to be very capital intensive upfront but once
they're onstream they have long reserve life and tend to have
high free cash flow. From a Canadian investor's perspective,
that's really compelling."
Last month, ConocoPhillips said it would sell oil
sands and natural gas assets to Calgary-based Cenovus Energy
for C$17.2 billion, while Canadian Natural Resources
Ltd is snapping up billions of dollars worth of oil
sands assets from Royal Dutch Shell and Marathon Oil
Oil prices have lost about 50 percent of their value since
June 2014, when the industry slump began. They are almost flat
since the start of the year.
"The market is saying the sun has set on the oil business,"
Waterous said. "I'm willing to bet against that."
Waterous said his firm was looking for assets with long
reserve lives in top quartile reservoirs, where advanced
technology techniques could be used.
"I find the environment right now to be very compelling.
You've got a pessimistic market, you've got low costs in Calgary
and you've got new technology being developed," he said.
For Waterous Energy, private Canadian energy producer Strath
Resources Ltd was its first investment.
($1 = 1.3328 Canadian dollars)
(Reporting by John Tilak; Additional reporting by Nia Williams;
Editing by Bill Trott)