A growing number of U.S. investors — and even some American producers — are quietly shopping for oil and gas deals in Canada, say industry insiders, as top-tier drilling prospects south of the border become harder to find. U.S. drillers descended on Calgary earlier this month to attend Canadian bank-hosted energy conferences, timed to coincide with the city’s annual hard-partying, corporate glad-handing Stampede festival and rodeo. Speculation was rampant at Stampede that a top U.S. producer of natural gas, Expand Energy Corp. (formerly Chesapeake Energy ), could be “looking up north” for opportunities, RBC Capital Markets suggested in a recent note. TD Securities’ annual energy conference in Calgary saw its highest turnout from U.S. investors and producers since before COVID. “If you’d asked me the question three years ago, ‘How much interest is there in Canada?’, there was very little interest, almost no interest,” Scott Barron, head of Calgary investment banking at TD Securities, said. “That has changed dramatically.” U.S. energy players take another look at Canada The uptick in U.S. attention contrasts sharply with a long-standing trend of capital outflow from Canada’s energy sector, industry watchers say, with the exodus of foreign majors from the oilsands and other Canadian resource plays over the last decade. American energy companies and investors, facing slower growth from top U.S. oilfields like the Permian basin, have been eyeing Western Canada’s prolific Montney shale play, attracted by competitive prices and the country’s new liquefied natural gas (LNG) export terminal. “There have been lots of people kicking tires and asking, ‘Should we be getting into the Montney ?’,” said Mike Belenkie, chief executive of Calgary-based Advantage Energy Ltd., which was targeted earlier this year by U.S. activist hedge fund and energy investor Kimmeridge to appoint new directors and explore a potential sale. Kimmeridge holds a high single-digit stake in the company. “This is mostly because we have a massive amount of undeveloped resource in Canada versus the U.S., pound for pound. The U.S. is running out of inventory, especially high-quality inventory. So the American companies are all thinking, ‘Well, where do we go next?'” For a very long time, the answer to that question hasn’t been Canada, Barron said, noting a stampede of foreign majors — including ConocoPhillips , ExxonMobil Corp. and Shell PLC — left Canada or divested from Canadian assets in the last decade, citing high production costs, a lack of pipeline infrastructure or environmental, social and governance pressures. Foreign companies are exiting the oilsands — and maybe investors tooThe $30-billion exodus: Foreign oil firms keep bailing on Canada's energy sector But there are emerging signs that foreign investors and producers are taking another look, he said. “Absolutely we are seeing and hearing more interest from U.S. producers and U.S. investors, including private equity, in Canadian energy,” Barron said, confirming the bank had seen a rise in American firms signing up to participate in confidential sale processes for Canadian firms. “When we’re selling a company or we’re selling assets, we’re increasingly seeing U.S. private equity showing up to be participants in that process and evaluating the opportunity to acquire these companies.” Much of the current focus for U.S. investors and producers has been on the Montney basin, Barron confirmed. Drillers are attracted to the massive liquids-rich natural gas play spanning the B.C.-Alberta border since it’s cheaper to develop than many U.S. fields and produces valuable liquids that boost profits. U.S. investment funds have been opportunistically snapping up assets in recent years, particularly in the Montney. They’ve been setting up new operators, or buying into existing private, junior and mid-sized Canadian companies, according to reports and regulatory filings. But even those tracking the renewed interest closely are not declaring a turnaround in Canada’s fortunes just yet, since foreign players are still not showing much interest in the oilsands and there has been no significant acquisition by a U.S. operator in the Montney, despite the influx of private capital. U.S. natural gas giant, Expand Energy, did not respond to requests for comment about the recent speculation that it was scouting for potential deals in Calgary. “The trend is around Americans doing their homework and getting up to speed on Canada,” Barron said. “The trend is not yet in the transactions that we’re seeing. So we really need the first (deal) to happen, and then see if there’s follow-on momentum from that.” ‘Long list’ of potential buyers More U.S. producers have been shopping in virtual data rooms for Canadian assets that have been put up for sale, Belenkie said. Data rooms allow companies to share confidential information with potential buyers, investors or partners. Although they sign confidentiality agreements, Belenkie said, the names of interested parties have a tendency of leaking out: “People talk about it. So we know which companies have been coming, and there’s a long list of them,” he said. Market watchers say the reason why rumoured interest from U.S. producers causes such a stir is the sheer financial firepower of some American energy firms that have the capacity to make investments that could galvanize interest in an entire basin, lifting energy stocks and signalling Canada’s competitiveness on a global scale. The shift in interest has been especially encouraging for Canadian companies currently in the market with assets to sell. Geoff Cain, chief executive of the privately held Halo Exploration Ltd., said he had heard rumblings that around 20 non-Canadian entities had shown an interest in the sale of a public oil and gas company near his own assets that are on the market in the Montney and Duvernay resource plays. “It’s been a long time since I’ve seen this sort of activity level,” Cain said. “There are some well-heeled U.S. teams and private equity groups that have an interest in the Canadian operators, and that’s good for our sector.” Foreign companies are exiting the oilsands — and maybe investors tooThe $30-billion exodus: Foreign oil firms keep bailing on Canada's energy sector Outside of giants like Canadian Natural Resources Ltd. or Tourmaline Oil Corp ., he said, Canadian oil and gas companies have largely been starved for capital with little domestic private equity or institutional support available for growth. “It’s hard. This business is so difficult,” Cain said. “ We need a little more interest and we need some more capital into the basin, and it’s been a long time since we’ve had that.” mpotkins@postmedia.com Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.