The encyclopedia · Strategy & Leadership · Strategic decision · 2004–2016
Connacher built Canada's costliest oil sands and the oil crash took it all
Connacher spent C$1.05B building oil sands projects, but when oil crashed in 2014 it couldn't pay its debt — filed for insolvency and was delisted.
Connacher Oil and Gas · 2016-05
What happened
Connacher Oil and Gas was a Calgary-based company that developed two steam-assisted gravity drainage (SAGD) oil sands projects near Fort McMurray, Alberta — Pod One and Algar. At its peak in 2011, it generated C$873 million in revenue. But the oil sands are expensive to build and the company borrowed heavily. By December 2014, Connacher carried C$1.05 billion in debt.
When global oil prices collapsed from over US$100 to under US$50 per barrel starting in late 2014, Connacher's high-cost bitumen production lost most of its margin. At US$75 WTI, the company could generate only about C$70 million in EBITDA in 2015 — but had C$90 million in debt payments due that year alone. The gap was unsustainable.
Connacher hired BMO Capital Markets in December 2014 to explore options, but the hole was too deep. On 17 May 2016, it filed for insolvency protection. Its shares were delisted from the Toronto Stock Exchange. Investors lost everything.
Why it happened
- Connacher borrowed C$1.05 billion to build oil sands projects whose extraction costs required US$80+ oil to break even — a strategy that worked only as long as prices stayed high.
- When OPEC abandoned production cuts in late 2014 and US shale flooded the market, oil dropped below US$50 for years — Connacher's cost base was simply too high.
- The company's only option was to file for insolvency: it could not refinance with oil at US$50 and its assets were worth nowhere near its debt when commodity prices cratered.
The lesson
Borrowing to build high-cost oil sands projects is a bet on oil staying above US$80 — a commodity price bet that most producers lose when a crash comes.
Aftermath
Connacher filed for insolvency on 17 May 2016 under the Companies' Creditors Arrangement Act. Its shares were delisted from the Toronto Stock Exchange. The company's assets were later sold or restructured through the insolvency process. Richard Gusella, the founder and CEO who had built the company over a decade, lost control of the business he created.
Sources
spotted an error? The club wants to know.
More like this
Cover FX winds down after sales collapse
Hudson's Bay — the oldest company in Canada — was liquidated in 2025
Panasonic lost ¥765B and cut 40,000 jobs — then rebuilt itself as a battery company
Somewhere, someone solved the problem this company failed at. 2nd Opinion →
Comments · 0
Sign in to join the comments.