Chinese oil firm in biggest takeover
By Richard Fu |
February 27, 2013, Wednesday
|
Print Edition
Print Edition
China's dominant offshore oil producer has completed a US$15.1 billion acquisition of Canada's Nexen Inc, winning a key international platform for its global expansion.
The closing of China's largest overseas takeover comes seven months after it was first announced.
CNOOC Ltd's acquisition of Nexen, which has oil sands and shale gas in western Canada and conventional exploration and development in the North Sea and the Gulf of Mexico, will increase the Chinese firm's production by 20 percent and its proven oil and gas reserves by 30 percent.
Yang Hua, CNOOC's vice chairman, said Nexen was attractive because it had a diversified product portfolio and the majority of its assets were in politically stable regions.
CNOOC, which failed in its US$18.5 billion bid for Unocal Corp in 2005 due to the United States' political opposition, started to track Nexen as a potential target the same year, Yang told Xinhua news agency.
In 2011, CNOOC acquired struggling Canadian oil sands producer OPTI, becoming a partner with Nexen in the Long Lake project in Alberta. The OPTI deal paved the way for the Nexen acquisition, Yang said.
Moody's Investors Service said the ratings and stable outlooks of CNOOC and its parent will remain unchanged after the closing of the Nexen deal.
Senior analyst Simon Wong said the acquisition would "strengthen CNOOC Ltd's position as one of world's largest independent exploration and production companies and further diversify its product portfolio, in spite of its weakened credit metrics."
Canada granted its approval in December after CNOOC agreed to various conditions. CNOOC made commitments regarding transparency, disclosure, commercial orientation, employment and capital investment that "demonstrate a long-term commitment to the development of the Canadian economy," Canadian authorities said.
But Ottawa indicated this was the last deal of its kind it would approve by saying it wouldn't allow foreign state companies to control the nation's oil sands.
The Committee on Foreign Investment in the US approved the deal earlier this month, clearing the last major hurdle for the acquisition to succeed.
Nexen will operate as a wholly owned subsidiary of CNOOC and will continue to be led by its CEO, Kevin Reinhart, who has been with Nexen for over 18 years. Li Fanrong, CNOOC's chief executive, will be Nexen's chairman.
CNOOC has promised to keep Nexen's headquarters in Calgary and also make it the headquarters of the Chinese company's North and Central American assets.
Nexen, which reported a net loss in the fourth quarter of 2012, will be delisted.
Wang Zhen, a professor with the China University of Petroleum, told Xinhua the takeover was just the first step, as the company would face many challenges on the road ahead.
Increasing the company's value was an important target of the acquisition, which means CNOOC will need to boost its business management capabilities, Wang said.
As environmental awareness expands worldwide, CNOOC should also shoulder its due social responsibilities in its global operations, Wang said.
He said the company will also face challenges in global business management, as it has to resolve differences in financial affairs, business practices and culture.
The closing of China's largest overseas takeover comes seven months after it was first announced.
CNOOC Ltd's acquisition of Nexen, which has oil sands and shale gas in western Canada and conventional exploration and development in the North Sea and the Gulf of Mexico, will increase the Chinese firm's production by 20 percent and its proven oil and gas reserves by 30 percent.
Yang Hua, CNOOC's vice chairman, said Nexen was attractive because it had a diversified product portfolio and the majority of its assets were in politically stable regions.
CNOOC, which failed in its US$18.5 billion bid for Unocal Corp in 2005 due to the United States' political opposition, started to track Nexen as a potential target the same year, Yang told Xinhua news agency.
In 2011, CNOOC acquired struggling Canadian oil sands producer OPTI, becoming a partner with Nexen in the Long Lake project in Alberta. The OPTI deal paved the way for the Nexen acquisition, Yang said.
Moody's Investors Service said the ratings and stable outlooks of CNOOC and its parent will remain unchanged after the closing of the Nexen deal.
Senior analyst Simon Wong said the acquisition would "strengthen CNOOC Ltd's position as one of world's largest independent exploration and production companies and further diversify its product portfolio, in spite of its weakened credit metrics."
Canada granted its approval in December after CNOOC agreed to various conditions. CNOOC made commitments regarding transparency, disclosure, commercial orientation, employment and capital investment that "demonstrate a long-term commitment to the development of the Canadian economy," Canadian authorities said.
But Ottawa indicated this was the last deal of its kind it would approve by saying it wouldn't allow foreign state companies to control the nation's oil sands.
The Committee on Foreign Investment in the US approved the deal earlier this month, clearing the last major hurdle for the acquisition to succeed.
Nexen will operate as a wholly owned subsidiary of CNOOC and will continue to be led by its CEO, Kevin Reinhart, who has been with Nexen for over 18 years. Li Fanrong, CNOOC's chief executive, will be Nexen's chairman.
CNOOC has promised to keep Nexen's headquarters in Calgary and also make it the headquarters of the Chinese company's North and Central American assets.
Nexen, which reported a net loss in the fourth quarter of 2012, will be delisted.
Wang Zhen, a professor with the China University of Petroleum, told Xinhua the takeover was just the first step, as the company would face many challenges on the road ahead.
Increasing the company's value was an important target of the acquisition, which means CNOOC will need to boost its business management capabilities, Wang said.
As environmental awareness expands worldwide, CNOOC should also shoulder its due social responsibilities in its global operations, Wang said.
He said the company will also face challenges in global business management, as it has to resolve differences in financial affairs, business practices and culture.
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