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The Globe & Mail: Latest oil patch takever rumours are All-Canadian

Andrew Willis, today at 7:01 AM EDT

Speculation on oil patch monster deal has taken a new twist, with talk of a Canadian-buys-Canadian deal pushing aside foreign takeover speculation.

Domestic energy companies have long been seen as targets for cash-rich global players that want to lock in reserves. The Royal Dutch Shell purchase of its Canadian subsidiary is expected to mark the first step in a larger consolidation.

In the past week, talk has shifted from ‘who will BP and Chevron buy?’ to ‘Is there a Canadian team with the moxie to create a national champion?’  (Chevron, by the way, filed the paperwork needed for a massive financing a few months back.)

The company most frequently mentioned as a target is Talisman, known to be considering a restructuring. Performance pressure is coming from the shareholder ranks, as raider Carl Icahn filed paperwork as a passive investor last month. Mr. Icahn will have to update that filing in the next few weeks. Talk on trading desks is Mr. Icahn has been buying more Talisman stock and may switch to an activist role, demanding a bust up of Talisman.

While Talisman has decent properties, any CEO looking to build a top-tier energy company knows the real jewel of the oil patch is Suncor, where CEO Rick George has built a top-quality play on the oil sands.

However, a merger involving Suncor poses enormous challenges. It commands a premium valuation, which makes the financial terms of the deal daunting for a prospective partner, and a deal stands a good chance of kicking off a rival bid from one of the global players. BP is seen as coveting Suncor.

Finally, Nexen has long been viewed as a company with quality properties that’s not quite big enough to survive as an independent.

Who are likely buyers these days? In Canada, the list of top-tier energy companies is depressingly short. EnCana is finding its feet under a new CEO and knows the oil sands cold. PetroCanada could step up, and like Cameco and CN Rail, the former Crown corporation has a share structure that ensure the head office stays in Canada. And Canadian Natural Resources guiding light Murray Edwards has never lacked for ambition.

 Oil company takeovers are coming, and one member of this trio just may be a buyer.

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