CNOOC To Buy Nexen
Purchase of Nexen Inc., with about 900 million BOE proven reserves.
The Canadian government approved the announced $15.1 billion purchase of Nexen Inc (NYSE: NXY) by the Chinese state-controlled CNOOC Ltd. (NYSE: CEO), but said additional foreign acquisitions in its energy sector would face additional scrutiny.
The deal caught a lot of attention when it was announced in late July, but was thrown into doubt when the Canadian government rejected the attempt of Petronas, the Malaysian state-owned oil firm, to buy out Progress Energy Resources Corp. (Toronto: PRQ) for $5.2 billion, a transaction whose approval was taken by many as a foregone conclusion.
No additional approvals are needed in Canada for the deal to close. "This is an important milestone in the process and confirms our belief that this transaction provides a number of significant benefits to Canada and to Nexen," said Kevin Reinhart, Nexen's interim president and chief executive.
The deal enables CNOOC to take control of Nexen's Long Lake oil sands project in northern Alberta, with an estimated six billion barrels of oil equivalent (BOE) and a 7.2% stake in the Syncrude Canada Ltd joint-venture.
The Nexen deal is the largest successful foreign takeover ever by a Chinese company and the biggest in Canada since Suncor Energy Inc. (NYSE: SU) bought Petro-Canada in August 2009 for about $18 billion.
Nexen Inc. is a Calgary-based global upstream energy company which has three growth strategies: oil sands and shale gas in western Canada and conventional exploration and development primarily in the North Sea, offshore West Africa and deepwater Gulf of Mexico. Nexen’s assets are focused on conventional oil and gas, oil sands and shale gas.
The agreement values Nexen shares for $27.50 per share, a deal worth about $15.1 billion.
The purchase price represents a premium of 61% to the closing price of Nexen's common shares on the New York Stock Exchange on July 20, and a premium of 66% to Nexen's 20 trading-day volume-weighted average share price.
In the second quarter of 2012, Nexen had average production of 207 thousand BOE per day after royalties. In accordance with SEC rules, Nexen had 900 million BOE of proved reserves and 1,122 million BOE of probable reserves as of Dec. 31, 2011. At the end of 2011, Nexen had best-estimate contingent resources of 5.6 billion BOE predominantly in the Canadian oil sands.
CNOOC Limited is a subsidiary of China National Offshore Oil Corporation.