Nexen backs Chinese takeover bid
$15-billion deal will see Calgary established as CNOOC hub
CALGARY — Nexen Inc. has agreed to a friendly $15-billion takeover bid by China’s largest offshore oil producer in a deal which will see Calgary become the site of one of the China National Offshore Oil Company’s international headquarters.
The oil and gas producer’s board, which last year mulled over selling the company, threw their unanimous support behind the deal which see CNOOC increase investments in Nexen’s existing Canadian and international assets.
The bulk of Nexen’s oil and gas production comes from North Sea operations in the United Kingdom.
The Calgary-based company has been struggling with disappointing results from its Alberta oilsands project at Long Lake and last week announced a $120-million hit on secondquarter earnings on a dry well in the U.S. Gulf of Mexico.
The transaction, if approved by Canada’s investment and competition bureaus, will see CNOOC pay a 61 per cent premium on Nexen’s closing share price Friday in New York, $27.50 US per share.
“As one of the largest oil and gas companies in the world, they have the balance sheet and the resources to help move our projects forward at a faster pace than we might have been able to do independently,” said Kevin Reinhart, Nexen’s interim chief executive, in a conference call Monday morning. “This transaction will enable us to accelerate our growth by leveraging CNOOC Limited’s considerable financial resources, global network and operational expertise.”
The transaction also will establish Calgary as one of CNOOC’s global headquarters, Reinhart said.
“From here, we will continue to manage Nexen’s global operations, plus their existing operations for North and Central America. This will result in a contribution of approximately $8 billion worth of their existing assets.”
Although CNOOC president Li Fanrong said he intends to keep Nexen’s management team and staff, Reinhart declined to comment on his future with the new company.
The two producers were not strangers, as Nexen’s original partner at Long Lake, Opti Canada, filed for court protection from creditors last summer and was later acquired by CNOOC for $2.1 billion.
The Chinese company has made several other investments in Canadian companies over the past seven years, including buying stakes in MEG Energy Inc. and a 60-per-cent investment in Northern Cross (Yukon) Ltd.
The state-owed company was attracted to Nexen’s production base in some of the world’s most significant plays, including the oilsands and offshore North Sea, U.S. Gulf of Mexico and West Africa, said Fanrong.
Federal Minister of Industry Christian Paradis confirmed Monday the proposed Chinese takeover would be scrutinized under the Investment Canada Act and by the Competition Bureau. Paradis will review if the takeover will benefit Canada or not on an industrial, employment and competitive level.
“Where an investment is subject to review under the act, my approval is required prior to implementation,” Paradis said in a statement.
“I approve applications where I am satisfied that a proposed investment is likely to be of net benefit to Canada.”
Nexen has faced numerous challenges over the past few years, most recently the troubled launch of its Long Lake oilsands project in northern Alberta. The project has yet to come close to its design capacity of 72,000 barrels of bitumen per day due to a number of operational glitches.
Last week the company reported that second-quarter profits tumbled more than 50 per cent due to an unsuccessful well in the Gulf of Mexico.