CNOOC sees ink dry on Nexen deal

CNOOC Ltd's headquarters in Beijing. The company has signed about 200 cooperation agreements with 55 countries since 1982, helping it muster rich foreign experience. [Photo / China Daily]

China's largest-ever overseas acquisition was officially completed on Tuesday, marking a major step in the country's progress in the global energy industry.

The $15.1 billion takeover by State-owned China National Offshore Oil Corporation of the Canadian oil and gas company Nexen Inc was first announced in July.

After seven months of regulatory approvals, the deal was closed at the Calgary headquarters of Nexen and confirmed by Yang Hua, the president of CNOOC.

"It is a day worth remembering," he said.

The takeover gives China's biggest offshore oil and gas explorer control of a company with assets in western Canada, the UK's North Sea, West Africa and Gulf of Mexico, as well as producing properties in the Middle East and Canada.

The acquisition will increase CNOOC's proven oil and gas reserves by 30 percent and its output by 20 percent, and provide it with valuable technology assets, especially in shale gas exploration.

But it's the assets in the North Sea which are being seen as particularly significant.

"The deal helps CNOOC participate in the North Sea oil and gas business for the first time, which is in accordance with the company's long-term strategy," said Yang.

"CNOOC has attached great importance to the North Sea region, an area that cannot be omitted by any major global oil player," he added.

"We have been waiting for the right time and the right opportunity to make our move."

In fact, the company has been paying close attention to Nexen since December 2006.

The acquisition decision was made based on CNOOC's three key evaluation standards - resources, return and risk, according to Yang.

"We need to examine the risks the company and our shareholders can stand, which is the most difficult part in balancing the timing and price of any acquisition," he said.

Lin Boqiang, director of the Xiamen-based China Center for Energy Economic Research, said the timing of the global financial crisis was a key factor in the deal being done, especially in the high-capital energy industry.

"It was bad news for the global economy, but could certainly be considered a good thing for acquirers.

"The weak global economy has provided Chinese companies with a great opportunity to buy foreign assets, allowing many to expand their overseas businesses."

Wang Yilin, the chairman of CNOOC, added that the company had acquired "a leading international platform" through the acquisition of Nexen.

He said: "We strongly believe that this acquisition is a good strategic fit for us and will create long-term value for our shareholders."

Nexen currently has 68 blocks including existing and exploration projects in the North Sea region, making it the second-largest oil producer in the area.

Besides the Buzzard oilfield, of which Nexen owns 43.2 percent of the operational rights, it also has 36.5 percent of the Golden Eagle oilfield about 69 km off the Scottish city of Aberdeen, the biggest proven reserves after Buzzard, which officials believe will contribute greatly to the sustainable output growth of the company's operations in the region.

Meanwhile, in Nigeria Nexen has 20 percent shares of large two offshore oilfields - Usan and Usan West - which both started production in 2012 with good cash flow and profitability so far.

Usan is close to the Akpo oil block of which CNOOC already owns 45 percent of the rights.

"The assets of CNOOC and Nexen complement each other, well," said Li Fanrong, the CEO of CNOOC, and the person appointed chairman of Nexen's new board of directors.

He said he believes the deal has provided a solid platform for CNOOC to expand its businesses across North America.

The company said that Kevin Reinhart, who had been serving as interim CEO of Nexen since January 2012, will remain in charge of the company.

"We want to keep all the current management staff and employees after the acquisition because they are among the most valuable assets of the company.

"Integration after the transaction will also be key to creating full value from the deal," he said.

CNOOC has been developing both domestic and overseas businesses over the past 30 years.

The company has signed about 200 cooperation agreements with 55 countries since 1982, helping it muster rich foreign experience.

With assets now in Asia, Africa, Australia and America, the company is gradually expanding its energy interests from traditional resources to unconventional resources including liquified natural gas, shale oil, shale gas and oil sands.

Through the Nexen deal, CNOOC will gain control of the massive Syncrude oil sands project in Canada, which has already been in production for 34 years.

Previous reports

CNOOC-Nexen deal expects to close on Feb 25

CNOOC, Nexen deal wins US approval

NDRC approves CNOOC's acquisition of Nexen

Canada OKs CNOOC's purchase of Nexen

CNOOC, Nexen reapply for US deal approval

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