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CALGARY – Nexen Inc. has agreed to a $15.1-billion (U.S.) takeover by Chinese oil producer CNOOC Ltd., marking the most important acquisition to date by an Asian firm in Canada.
The all-cash deal is worth $27.50 per Nexen share, a 66-per-cent premium to the 20-day volume-weighted average for the company, which has not seen its shares reach that level since before the financial crisis. Nexen closed at $17.06 Friday.
Nexen is Canada’s 12th-largest energy company, producing 213,000 barrels of oil equivalent per day. But the company has struggled in recent years as its corporate pillars each faced problems. Its North Sea production was hit by a new U.K. tax scheme. Its Gulf of Mexico drilling was hurt by the BP oil spill. Its West African offshore production was hit by a costly drill well. It was forced to abandon a major project in Yemen after a production sharing contract expired there. Its oil sands ambitions were hampered by problems at Long Lake, where problems with underground geology have so far kept it far from reaching its planned output.
Long Lake, however, served as a springboard to the corporate takeover. Last November, CNOOC completed a $2.1-billion buyout of OPTI Canada Inc., which held a 35-per-cent stake in the project, which is still operating at less than half its design capacity years after it began operation.
Prior to the Nexen deal, announced early Monday morning, CNOOC had spent $2.8-billion (Canadian) in Canada. The Nexen deal is not the first corporate oil patch takeover by a Chinese firm, but it is the first transaction of its size. Chinese firms, burned by the failed CNOOC takeover of Unocal Corp. and loath to stir trouble on a continent sensitive to ownership by foreign state-owned entities, have moved cautiously with North American investments.
The Nexen takeover, which will test Canadian foreign ownership rules, is a signal of a dramatic boost in confidence by Chinese acquirers since the Unocal deal died in 2005.
In a news release, CNOOC said it would work to retain Nexen staff and management, and make Calgary the headquarters for its North and Central American operations, as well as for operating the far-flung Nexen assets.
CNOOC said it will move to list its common shares on the TSX, will continue to support oil sands research at Canadian universities and “will implement and enhance Nexen’s current planned capital expenditure program, thereby investing significant capital in Canada and in Nexen’s other international assets.”
CNOOC said it “brings greater financial capacity to better realize the full potential of Nexen’s significant resource base.”
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/chinas-cnooc-to-buy-nexen-for-151-billion/article4435247/