Introduction
Today I consider the Consortium’s third member, CNOOC Nexen Petroleum Limited; a subsidiary of the CNOOC group and its subsidiary Nexen. Although I offer brief commentary on this firm as with last week’s on Hess Corporation, I focus on filling informational deficits due to weak coverage of the subject.
CNOOC
CNOOC International holds 25% working interest in the Consortium operating under the Stabroek Block’s PSA with ExxonMobil the Lead Operator [ 45% interest] and Hess Corporation 30%. Declared recoverable sources are estimated at 10 plus billion boe.
CNOOC Limited is listed on the Shanghai and Hong Kong Stock Exchanges engaging in exploration, appraisal, development, production and sale of crude oil and natural gas.
Further, its website reveals that, CNOOC is 1] China’s largest offshore crude oil and natural gas producer
2] one of China’s ‘largest independent oil and gas exploration and production companies worldwide.
3] mainly engaged in exploration, development, production and sale of crude oil and natural gas.
4] In July 2012, CNOOC announced its intention to acquire Nexen for Canadian $15.1 billion. Shareholders accepted the proposal a month later.
This decision occasioned great public political debate and was approved in December 2012, when the Government simultaneously announced stringent guidelines for foreign acquisitions of oil companies.
The acquisition closed in February 2013; representing China’s largest-ever foreign acquisition. Nexen’s common stock shareholders received cash proceeds of US$27.50, without interest, whereas preferred stock shareholders received cash proceeds, of $26, plus accrued and unpaid dividends without interest.
By prior agreement the Nexen name disappeared from both legal and practical perspectives on 31 December 2018. The firm became known as CNOOC Petroleum North America ULC. Simultaneously and with the same date of effectiveness, related Nexen subsidiaries and affiliates changed both their legal and branding names. CNOOC, remained a foreign reporting issuer in Canada.
Nexen has other interests in Canada. Recall, as a former Canadian petroleum company, it started as far back as 1969, and was acquired by CNOOC in 2013 more than four decades later. It is a major subsidiary, with a focus on three areas, namely, conventional exploration and development of oil and gas, oil sands, and shale gas/oil. It operates globally, in Africa, the Americas, Asia and Europe.
NEXEN
The contentious $15.1 billion takeover of Canadian Nexen by Chinese state-owned CNOOC Ltd closed more than seven months after China’s largest-ever foreign take-over was announced. Nexen, based in Calgary, Alberta, announced the deal had closed and its shareholders would receive $27.50 in cash for each Nexen share.
Further its common and preferred shares would be delisted from the Toronto Stock Exchange while its common shares were expected to cease trading on the New York Stock Exchange prior to the market opening on February 26.
It was reported that, the company would retain its chief executive, and will continue to operate as a wholly owned subsidiary of CNOOC.
Nexen also said it would have a new board chaired by the CEO of CNOOC. The takeover, originally announced in July, won approval from Canadian regulators in December. CNOOC overcame its last major hurdle after the deal was cleared by the Committee on Foreign Investment in the United States, which had a say because of Nexen’s exploration and production assets in the Gulf of Mexico.
The two companies have not disclosed what conditions were imposed by Canadian and U.S. regulators for the deal to win approval, but one of CNOOC’s advisers said the parameters around the assurances were largely in line with expectations.
“The level of detail that was negotiated and the time-frames of those commitments, that was a bit of a surprise though,” said Dan Barclay, who heads BMO Capital Markets’ Canadian M&A group, which acted as one of CNOOC’s financial advisors on the deal.
“What they (CNOOC) had signed up for in the beginning, they got in the end, only it was a bit more rigorous than where we had started,” said Barclay.
The Nexen acquisition gives CNOOC new offshore production in the North Sea, the Gulf of Mexico and off western Africa, as well as producing properties in the Middle East and Canada.
In Canada, CNOOC gains control of Nexen’s Long Lake oil sands project in the oil-rich province of Alberta, as well as billions of barrels of reserves in the world’s third-largest crude storehouse – the oil sands in the province of Alberta.
Observations
Four observations on the deal are pertinent for Guyana; namely,
1] Evaluators claim that the approval process in Canada took roughly as long as the companies expected, while the process in the United States took longer.
2] Canada approved even though some members of the governing Conservative Party had misgivings
3] Government advised CNOOC-Nexen this was the last such deal it would approve. Indeed, it drew a line in the sand against state-controlled companies taking majority stakes in the oil sands.
4] U.S. approvals dragged on as legislators examined whether the deal would threaten U.S. national security. A few years ago, the United States, which has been more wary than Canada of Chinese investment, thwarted CNOOC’s $18.5 billion bid for Unocal due to national security concerns.
Closing comment
To readers following the explosive growth of Guyana’s petroleum sector since First Oil, CNOOC has been the least expansive in offering commentary on this phenomenon. My view is this is not a function of it having the least share of working interest in the Consortium. Given CNOOC’s unique China offshore Deepwater and global experiences this has been quite disappointing.
