Outlook in oil & gas

By Katy Anderson January 27, 201527 January 2015

There are always opportunities for lawyers in down times, but for now in the oil patch they’re taking stock.

The future is unclear – that’s the unified message coming from lawyers who work in Alberta’s oil patch. As prices hover below $50 a barrel, we checked in to see if these normally busy lawyers expect to stay busy.

“It’s still very early to see which way it’s going to go,” says Evan Nuttall.

The Borden Ladner Gervais partner runs the Calgary office’s patent litigation group. Over the last eight years since building his practice in Canada, he’s watched oil and gas industry players start to realize the value of intellectual property, and protect it. Working in a relatively small industry – federal oil and gas patents number around just 10 a year – Nuttall doesn’t expect to see that number decline much.

“For some of the bigger players, I wouldn’t be surprised if they hold off, but with the smaller players, I wouldn’t be surprised if they decided now is probably a good time to start commencing an action to try and stop the bleed,” says Nuttall.

“The thing is with patent litigation, the cases take a number of years usually to resolve themselves, so there’s a lag – I’ll be spending a lot of my time working on cases that were commenced a couple of years ago. So, my expectation over the next couple years is for things to continue in much the same way and then it’ll be within the next year or so, when one will see what the effects are of the current downturn and the price of oil and the possible negative effects that has on the economy in Alberta.”

As for the mergers and acquisitions side of things, Stikeman Elliott senior partner Chip Johnston says the uncertainty and violent price movements aren’t unprecedented.

“It will facilitate investment because, I think, the view would be that if you’re buying companies or commodities at this price level, you’re probably going to make quite a bit of money in the next five years. We don’t have solar or fusion for everybody, or fuel cells. And maybe that stuff will happen and Calgary will be able to go out of business and return to its ranching and farming roots, but until then kids in India want to buy iPhones and that needs hydrocarbons.”

The low oil prices will change the types of transactions being made, says Johnston. But despite times of uncertainty and doubt, he’s banking on this period of change being beneficial in the long-term.

“We see a lot of opportunity. I think that there will be transactions around reforming management ideas, and capital management ideas, in a more efficient collective basis, and there will be transactions around the deployment of new capital to this space,” he says.

“Bargains will attract bargain hunters. So plays that are strong when commodity prices are good and capital markets are running – IPO, acquisitions by intermediates and strategics – those may not be as prevalent, but there will always be other transactions to replace them.”

Gavin S. Fitch, Q.C., who does environmental and energy regulatory law at McLennan Ross, doesn’t expect his practice to slow down – at least not yet.

“It’s hard to say how much of a slowdown there’s going to be – nothing dramatic at this point,” say Fitch who nonetheless acknowledges that projects for which permits have been granted are likely to stall in the near future.

The Calgary lawyer, who recently went on a ski trip with a number of people who work in services for the oil patch, like drilling and servicing wells, says that’s where the brunt of slumping oil prices will be felt.

“The sense that you get from clients is that everyone’s hunkering down,” he says. “There’s no doubt there will be an impact. I think it will be felt most strongly or keenly on the front lines, probably less so in the towers downtown, particularly external counsel that work for oil and gas companies. …Forget about lawyers, it’s going to be much worse among the actual workers.”

Osler’s Sander Duncanson – who focuses on environmental, regulatory and aboriginal issues for major resource developments – has his team working on projects that aren’t affected at this stage. But he expects fewer projects to come forward in the next three to six months.

Some clients are treating the drop in prices as short-term problem, he says,. Others are cautiously reducing their capital budgets.  

“For them, even if they are relatively optimistic that their long-term plans won’t be affected, or won’t be significantly affected, they are less willing to invest dollars today on advancing those projects.”

On the environmental side, Dentons’ Colin Lipsett, who works out of the Edmonton office, says the economic slowdown is a chance for players to catch their breath and change focus from chasing deals and ferociously competing over projects.

“In general, when the deals aren’t hot or when the deals side of things start to cool down a little bit, you start to see more focus on the environmental, especially in more established organizations that aren’t concerned for their corporate lives, so to speak, as the result of a downturn. I think the old saying was, ‘In hot times, do deals and in down times, litigate’,” says Lipsett.

“I think you’ll see a slowdown in terms of environmental impact assessment and other sorts of consulting work that would be required from those sorts of things. But I still think you’re going to see an uptick in consulting work on site assessments and potentially remedial work, as well.” 

Katy Anderson is a writer based in Calgary.

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