Canada's oilpatch is spread out over about eight square blocks in downtown Calgary, where there are at most two degrees of separation between anyone walking those streets at lunchtime.

This is a tight-knit industry, not one known for hostile deals. Until this morning, when Suncor Energy announced its unsolicited offer for Canadian Oil Sands Ltd.

Which is not to say the Suncor offer is being viewed with suspicion. 

"I think it's quite exciting," said Martin Pelletier, a portfolio manager with Trivest Investment Counsel. "You need to clean up the sector during these market troughs, good on Suncor for implementing this strategy."

Robert Mark, an energy analyst with 3Macs agrees. "The fact that it's hostile to me is a real plus," he said.

"When you see a hostile deal being done at the bottom of a market cycle, it tells me both companies think they are stealing the assets, that they're getting them for cheap, or too cheap."

Higher offer refused in spring

Suncor is offering 0.25 of a share to Canadian Oil Sands' existing shareholders, at today's share price, that amounts to just under $9 per share. Canadian Oil Sands said it's reviewing the offer and asked shareholders to wait until it has time to respond.

Just 13 months ago, Canadian Oil Sands stock was trading at $23 a share. Compared to that, $9 a share doesn't look that great.

Pelletier owns shares in Canadian Oil Sands and likes the offer. "I'm in a position where I like it because I'm in at lower levels, if you bought this thing in the spring at higher levels, you might not like it."

Back in the spring, Suncor CEO Steve Williams met with Canadian Oil Sands leaders to talk about a deal. At that time the price of oil was trading around $50 US a barrel and there was hope that it had hit bottom and was recovering.

According to Suncor's offer, at that time, it floated the price of .32 of a share, which would have amounted to approximately $12.50 per share in April, a healthy premium over the eventual offer this morning.

"There was a little bit of confidence then," said Pelletier. "Why would I sell now when the market is starting to come back?  We're in a different situation today."

Today the price of crude bounces around the $45 US range, and energy companies have laid off staff every week since the beginning of September. There are no signs that the downturn will end soon.

Canadian Oil Sands is a small company, with just 23 full time employees as of the end of 2014, but it owns one big asset, 37 per cent of Syncrude, the grandaddy of oilsands projects north of Fort McMurray, Alta.

It is the largest shareholder of Syncrude, but it doesn't operate the project, its role is to manage the investment and its shareholders. Suncor is one of the joint venture partners, so if the deal proposed today is successful, it will own nearly 50 per cent of the project.

Syncrude's Mildred Lake plant

Syncrude, which runs this Mildred Lake project, is owned 37 per cent by Canadian Oil Sands Ltd. (The Interior/Wiki Creative Commons)

Canadian Oil Sands' reaction 

Canadian Oil Sands officials said this morning that the offer will be reviewed and shareholders have been asked not to tender their shares until the company can respond.

"I'm sure they're going to say this is Suncor taking advantage of one of the weakest oil markets in a generation, and we don't think it's the right time to sell," said Mark.  

"Everything has worked against over the past year and even though it's opportunistic and it's at a low price, I would be positive as a COS shareholder. I would rather switch my equity into Suncor, it's the best of a very bad situation for COS shareholders."

Another offer coming?

Canadian Oil Sands shares were trading above the offer price as of early afternoon on Monday, which indicates that shareholders might expect a better offer is coming. 

The obvious choice would be that it come from another of the Syncrude partners, which include Imperial Oil, Sinopec, Nexen, Murphy Oil and Japan's Mocal Energy. Investment rules limit the Chinese companies' ability to buy more oilsands assets and even Imperial would likely be subject to a foreign investment review, given that its majority owner is Exxon.

However, shareholders may hold on for more money from Suncor itself, given that just six months ago it was willing to pay 0.32 of a share.

"Maybe Suncor comes back with a small sweetener," said Mark. "To maybe save some face and make it look a little bit better, but I don't know if they even need to do that. My guess is that this deal gets done at the current price."