CNOOC to acquire Canada's Nexen for $15.1 billion
BY SIMON HALL
BEIJING--China's Cnooc Ltd. unveiled what would be Beijing's biggest move yet to secure energy resources abroad, with a blockbuster $15.1 billion pact to acquire Canada's Nexen Inc.
The move will provided the biggest test yet of the world's willingness to accept Chinese capital for control of key strategic resources. Seven years ago, Cnooc led an ultimately unsuccessful effort to acquire Unocal of the U.S., an $18.5 billion effort that the Chinese company withdrew amid intense political opposition in the U.S. The Cnooc-Nexen deal will likely require regulatory approval in the U.S., Canada and elsewhere.
But the energy industry has shifted since then, with companies around the world showing an increasing acceptance of Chinese capital as energy projects become more ambitious, expensive and technically complex. In North America, much of Chinese investment has taken the form of minority stakes, particularly in shale gas and heavy oil projects.
Cnooc will pay $27.50 per share for Nexen, representing a 61% premium to their closing price on Friday on the New York Stock Exchange.
State-owned Cnooc is China's largest offshore oil company by production. The deal will give it ownership of oil and gas reserves in western Canada, the U.K. North Sea, the Gulf of Mexico and offshore Nigeria.
"The acquisition reflects our strong belief in Nexen's rich and diverse portfolio of assets and world-class management and employees. This is an exciting opportunity for us to build on our existing joint venture relationship with Nexen in Canada, and to acquire a leading international platform in the process," Cnooc Chairman Wang Yilin said in a statement to the Hong Kong stock exchange.
Nexen Chairman Barry Jackson said the company's board of directors was unanimous in recommending that shareholders approve the transaction.
The deal would give Cnooc greater access to hot offshore areas such as the Gulf of Mexico and West Africa, and would increase its presence in potentially lucrative but capital-intensive projects such as shale gas and Canada's oil sands. In 2012, about 70% of Nexen's output is expected to come from offshore fields, according to Nexen's website, making it a good fit for the Chinese company's offshore fields. In 2011, Nexen produced around 207,000 barrels a day of oil equivalent.
Nexen, which describes itself as a major player in Canada's oil-sands sector, is also a producer of shale gas in northeastern British Columbia.
Cnooc said it will fund the deal through existing cash resources and external financing. Nexen's current debt of around $4.3 billion will remain outstanding.
If the deal is approved by Nexen shareholders, Nexen will become a wholly owned subsidiary of Cnooc, the statement said.
The planned purchase comes almost a year to the day after Cnooc announced the acquisition for $2.1 billion of Canadian oil sands producer OPTI Canada Inc., on July 20, 2011. In so doing, it became a partner with Nexen in the Long Lake oil-sands project in Alberta, Canada. Cnooc deepened its relationship with Nexen in December 2011, when the two agreed a joint venture deal which gave Cnooc stakes in six deepwater Gulf of Mexico operated by Nexen.
Chinese companies have invested heavily in Canada, and particularly its resources sector, pumping in at least $12.8 billion into companies and projects since 2009, according to Dealogic in May.
Cnooc said it planned to establish Calgary as the head office of its North and central American operations and list its common shares on the Toronto stock exchange.
Dow Jones Newswires