Q: I noticed recently Fairfax had declared ownership of a 15-20 % stake in Ensign.
Not sure what their intentions are if anything other than purchase of a passive and undervalued investment. What are your thots on this ownership stake by Fairfax and do you see any likelihood of them purchasing a bigger piece or all of this company?
There has not been a lot of M&A in the Cdn Oil Sector amongst the Mid Cap Producers and Drillers lately. Do you see 2025 bringing any increase in M&A in this group amongst Mid Cap Producers and Service CO’s?
Not sure what their intentions are if anything other than purchase of a passive and undervalued investment. What are your thots on this ownership stake by Fairfax and do you see any likelihood of them purchasing a bigger piece or all of this company?
There has not been a lot of M&A in the Cdn Oil Sector amongst the Mid Cap Producers and Drillers lately. Do you see 2025 bringing any increase in M&A in this group amongst Mid Cap Producers and Service CO’s?
5i Research Answer:
We would expect more M&A; valuations are cheap and rates are dropping. However, many management teams would likely be quite reluctant to sell at current valuations without a big premium. CR, for example, was acquired by TOU at a 70% premium. FFH makes lots of investments, and we would not necessarily call a full privatization here. Murray Edwards owns 23% and could block any deal he did not like. With a fair degree of leverage and at 20X earnings, we would not exactly call it cheap, either. But it does have big leverage to spending in the sector, and this may have spurred FFH's interest in the company.