Canadian M&A deals totaled C$9.9 billion for the first six months of 2005, indicating a continuation of M&A growth since deal value dropped off significantly in 2003, says Tom B. Pavic, a financial analyst for Calgary-based Sayer Securities Ltd. "The value in 2005 has been driven up by the sale of approximately C$3.6 billion worth of Canadian assets owned by large independent exploration and production companies such as Devon Energy, EnCana Corp., Nexen Inc. and Pioneer Natural Resources," Pavic says. Pavic cites the growing number of royalty trusts as a factor in the continual increase in acquisition prices in Canada. In the first half, the median price paid per barrel of oil equivalent of proved plus probable (before royalties) reserves rose to C$14.84, a 92% increase from the C$7.74 paid in the first half of 2001. Total deal dollar volume dropped significantly from 2001 and 2002, largely due to the lack of mega-M&A deals (those with a value of more than C$1 billion) in the last couple of years, Pavic says. "For instance, in the first half of 2001 there were six transactions with an enterprise value of over C$1 billion, compared to only one such transaction in the first six months of 2005," Pavic says. The large divestiture packages in Canada have been primarily snapped up by the royalty income trusts, which purchased 48% of the total value for the first half of this year, or approximately C$4.8 billion in companies and assets. Pavic cites notable transactions involving the trusts including Freehold Royalty Trust's purchase of royalty interests from Canadian Natural Resources; Nexen's sale of properties to Harvest Energy Trust; and Paramount Energy Trust's purchase of assets from Devon. Another royalty trust was created with properties purchased by Chamaelo Energy Inc. from Devon, forming Vault Energy Trust and Chamaelo Exploration Inc., Pavic notes. The first half of 2005 also saw the creation of the largest trust-the reorganization of PennWest Petroleum into Penn West Energy Trust. (For more on recent activity, see "Canadian M&A," Oil and Gas Investor, September 2005.) Foreign companies' interest in Alberta's oil-sands projects is another trend Pavic notes from the first half of 2005. China National Offshore Oil Corp. and Sino Canada gained 16.69% and 40% interests, respectively, in certain Canadian oil-sands projects in the first half. Pavic expects strong M&A activity in Canada should continue through the balance of 2005 due to high commodity prices and the increasing number of royalty trusts.