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China’s CNOOC: $15 Billion Nexen Bid Shows Growing Appetite for Foreign Oil Assets

July 24th, 2012 by · Leave a Comment

CNOOC, China’s largest producer of offshore crude oil and natural gas, has offered to buy Nexen for $15.1 billion, the biggest foreign acquisition ever by a Chinese company.

CNOOC is paying $27.50 for each common share, a premium of 61 percent to Calgary-based Nexen’s closing price on July 20. The deal would give CNOOC operational control of a significant Canadian oil sands field operator.

The friendly takeover bid has a good chance of winning approval from the Canadian government, according to some industry experts, lawyers and analysts. Canada has made it clear that it is looking for foreign investment. When Canadian Prime Minister Stephen Harper visited China in February, he said he wanted to sell more oil to Chinese and Asian markets.

An approval of the deal could certainly help restore a Canadian foreign investment climate that was dented in 2010 when the government rejected a $39 billion bid by Australia’s BHP to buy fertilizer maker Potash Corp.

CNOOC will add 900 million barrels of oil equivalent reserves through the deal, according to a document posted on the company’s website. CNOOC plans to boost output to the equivalent of about 930,000 barrels of oil a day.

The deal illustrates ongoing Chinese interest in big assets, big reserves and foreign expertise. In 2011 alone, CNOOC made offers to buy Opti Canada Inc. for $2.1 billion in cash and debt, purchased a 33.3% interest in shale assets in DJ Basin and Powder River Basin held by Chesapeake Energy Corp. for $570 million, as well as a 1/3 interest in Chesapeake’s 600,000 net acres in the Eagle Ford Shale projects in southern Texas for $1.08 billion.

In recent years, Chinese oil producers have also stepped up their presence in Canada, as deals in the United States could face political opposition. Such political pressure derailed CNOOC’s $18 billion bid for Unocal Corp. in 2005. Over the past decade, Chinese companies have spent $53.4 billion on Canadian oil and gas fields and companies, according to Bloomberg data.

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