Canadian Manufacturing

Nexen acquired by China’s CNOOC for $15-billion

Nexen's original partner Opti Canada filed for court protection last summer and was acquired by ChinaNational Offshore Oil Co.



CALGARY—Oil and gas producer Nexen Inc. has agreed to be acquired by China National Offshore Oil Company for US$15.1 billion cash.

Both the federal industry minister and the federal Competition Bureau will examine the acquisition under the Investments Canada Act.

Paradis says the act requires him to look at how the deal affects investment and employment in Canada, production and resource processing in Canada, and the degree of Canadian involvement in future business.

The Competition Bureau will take see if the arrangement substantially lessens or prevents competition in Canada.

The takeover will put the prime minister and premiers to the test, forcing them to decide how to handle the future of the oil patch, said University of Calgary economist Jack Mintz, who in a phone interview said the process of examining the biggest foray of a Chinese state-owned enterprise into Canada to date will be “fascinating.”

Mintz said the CNOOC prepared its bid with an eye to regulators by offering a 61 per cent premium to shareholders, and stressing that it intends to keep the Calgary-based management intact.

“The government is going to have to look carefully at the net benefits, leaving aside the large premium to shareholders,” Mintz said. “It’s going to be hugely political.”

Whether Ottawa decides if that arrangement helps Canada as a whole will depend partly on how Alberta sees the presence of a major Chinese player in its midst.

“This transaction will allow for significant investment in our business and opens the door to new opportunities for our employees,” said Nexen chief executive Kevin Reinhart in a release.

As part of the transaction, CNOOC said it plans to list its shares on the Toronto Stock Exchange.

Nexen has faced numerous challenges over the past few years, most recently the troubled launch of its Long Lake oilsands project in northern Alberta. The project has yet to come close to its design capacity of 72,000 barrels of bitumen per day due to a number of operational glitches.

In January, Nexen announced a major management shakeup, with Marvin Romanow leaving his post as CEO and Gary Nieuwenburg stepping down as the executive vice-president of the company’s Canadian operations.

Reinhart was previously the company’s chief financial officer.

Nexen’s original partner at Long Lake, Opti Canada, filed for court protection from creditors last summer and was later acquired by ChinaNational Offshore Oil Co. for $2.1 billion.

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