It’s been more than a year since the price of oil began its decline. And, despite West Texas Intermediate plateauing at around US$50 for a few months, the price of that grade of crude oil slid again in recent weeks.

As a result, the pressure on the oil and gas industry has been intense, with companies laying people off, cutting capital expenditures, selling assets and doing just about anything else they can to keep the lenders, shareholders and predatory acquirers at bay.

Many companies have been writing down their assets, too – the most extreme examples being Oando Energy Resources Inc. (a $511-million writedown), Ithaca Energy Inc. ($488 million), Baytex Energy Corp. ($450 million), Southern Pacific Resource Corp. ($428 million) and Long Run Exploration Ltd. ($400 million).

And poor Fort McMurray has seen housing prices collapse.

But the one thing we haven’t seen much of yet, despite expectations that the activity will take off any minute, is mergers and acquisitions in the oilpatch. The vultures must be circling, but, so far, few have come in for the kill. Internationally, Royal Dutch Shell PLC bought Britain-based BG Group PLC for US$70 billion in April, but the M&A activity has been nothing like that of the late 1990s (the last supply-driven price collapse), when Exxon Corp. and the Standard Oil Co. of New York (a.k.a. Mobil) merged, among several big mergers in the sector.

Domestically, Crescent Point Energy Corp. made a splash in June when it picked up Legacy Oil + Gas Inc. for $1.5 billion and then, a month later, bought Coral Hill Energy Ltd. for $258 million. The Legacy deal was, perhaps, a harbinger of what is to come. In it, Legacy shares were valued at $2.85 each. Analysts were nearly unanimous in saying Legacy had been undervalued, as the company’s share price had been more than $10 each just 12 months earlier (more than 70% higher than its eventual selling price). It wasn’t terribly surprising, mind you, considering Legacy had been carrying almost $1 billion in debt compared with about $600 million in equity.

Even the low Canadian dollar has failed to ignite the interest of American buyers for Canadian assets. As with mega-mergers, we saw a lot of U.S. money come north in the late 1990s; but, this time around, enough good deals apparently are to be had south of the border and the U.S. money is staying put. The Investment Canada Act, with its “net benefit” test, also may be dampening American enthusiasm during a Canadian election year.

But a lot of companies that have been relying on well-played oil-price hedges will be vulnerable when those hedges start coming off the books late in the year. That, combined with continuing low oil prices, surely will be enough to push a number of suitors into each other’s arms. A couple of leading contenders to be bought up are Lightstream Resources Ltd., which is facing a couple of lawsuits from investors who don’t like the way the firm restructured its debt, and Penn West Petroleum Ltd., which has a heavy debt load and dwindling income.

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