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CALGARY — Just because oilsands giant Suncor Energy is aiming to gobble up one of its smaller peers doesn't mean others in the oilpatch are eager to do the same just yet, industry players told an energy conference Wednesday.

The pace of mergers and acquisitions in the industry is expected to be relatively limited for the time being, said Drew Ross, managing director of Scotia Waterous, the arm of Scotiabank that focuses on oil and gas deals.

"I can't see it as broad-spread, unfortunately, as I would like," he said, noting would-be buyers are hesitant to take out their weaker counterparts because of what it could mean for their debt levels.

Calgary-based Suncor (TSX:SU) launched a hostile bid for Canadian Oil Sands Ltd. (TSX:COS) last week worth $6.6 billion when the target company's debt is factored in. The move follows two failed attempts at inking a friendly deal with the COS board and management in March and April.

Suncor's effort to consolidate its position as Canada's dominant oilsands name comes as oil continues to hover below US$50 a barrel, less than half of what it was in mid-2014. Canadian Oil Sands is the biggest owner of the Syncrude Canada mine north of Fort McMurray, Alta., which is next door to Suncor's turf.

Bill Marko, managing director at global investment banking firm Jefferies LLC, agrees mergers and acquisitions activity is expected to be "tempered" for now.

The deals that do come to fruition will be for very specific reasons — to refocus a company, like Encana Corp. (TSX:ECA) has done in recent years by bulking up its Texas oil holdings, or to achieve cost savings where there's overlap between the buyer and target.

Marko said potential buyers need to keep in mind: "If you buy it, you have to run it."

Some companies just have so much of their own oil and gas to develop that they have to consider whether it's worthwhile to take on someone else's inventory.

"I've kind of got to finish my plate of food here before I go get a second helping."

So far this year, "deal flow" is at about a third of what it would be during a normal year in the U.S. and Canada — $25 billion versus $75 billion, said Marko.

"Volatility is terrible for deal flow because people just think 'hey, I don't want to be the dummy that bought on the wrong side of the curve, sold on the wrong side of the curve,'" he said.

"We need capitulation, which means sellers have to say 'I'm throwing in the towel. I'll sell at US$45 oil.'"

Grant Fagerheim, CEO of Whitecap Resources Inc. (TSX:WCP), said once some of the uncertainty shakes out — from the outcome of the federal election to determinations on how much banks are willing to lend — things may loosen up, he said.

But Fagerheim said deals around individual properties — rather than outright sales of whole companies — are likely to be the norm.

"I think you will see it. I just think it's going to be a little ways out yet."

Lauren Krugel, The Canadian Press

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