FirstEnergy Chief Sees Canada Clearing Cnooc-Nexen

Cnooc Ltd. (883)’s $15.1 billion bid for oil and natural-gas producer Nexen Inc. (NXY) will probably get approval from the Canadian government, said FirstEnergy Capital Corp. Chief Executive Officer Jim Davidson.

“My personal belief is they will find a way to allow this transaction to go forward,” Davidson said today in an interview at Bloomberg’s Toronto office.

Nexen shareholders approved the $27.50-a-share takeover in a vote today. The deal still needs approval from the U.S., U.K. and Canadian governments. Canada reviews foreign acquisitions valued at more than C$330 million ($338 million) to ensure there’s “net benefit” to the country.

The government said Aug. 29 it had received Cnooc’s application to buy Nexen. Canada has 45 days to examine the deal and may extend that deadline by 30 days. Cnooc, China’s largest offshore oil and gas producer, announced the agreed offer July 23.

Closely held FirstEnergy, based in Calgary, is an oil and gas boutique investment dealer with about 130 employees in Calgary and London. It ranked 10th in Canada for equity and equity-linked sales last year, raising $772 million in 11 deals, according to data compiled by Bloomberg. The firm ranks 22nd this year with four deals.

The Nexen deal is “a great test case,” Davidson said. The federal government’s rejection in 2010 of Melbourne-based BHP Billiton Ltd.’s hostile $40 billion bid for Potash Corp. of Saskatchewan Inc. was a “different story,” Davidson said, without elaborating. Potash Corp. was the second takeover since 1985 to be blocked under Canadian law.

Assets Return

Nexen produces crude from its Long Lake oil-sands project in Alberta, as well as projects in the North Sea, offshore West Africa and the Gulf of Mexico. U.S. authorities can block the sale of Nexen’s Gulf assets.

Assuming the deal succeeds, the Nexen assets may eventually come back on the market anyway, Davidson said. Chinese companies in particular are focused on acquiring skills and technology, he said.

“Everybody takes out as much as you can from the assets you have and they become less important to you, for whatever reason it is, and you drive on,” he said. “I believe that there’s a possibility that these assets are going to come back to us at some point.”

Besides Nexen, Talisman Energy Inc. (TLM), based in Calgary, could become a takeover candidate for an Asian buyer, Davidson said. New CEO Hal Kvisle is “methodical” and will take his time to make the company profitable in the near term, Davidson said. “At some point in time that company will be for sale.”

Davidson said he also sees Athabasca Oil Corp. (ATH) being “taken out.” He declined to comment on whether potential buyers include PetroChina Co. (857), which bought a 60 percent stake in the company’s MacKay River and Dover oil-sands projects in 2010, and acquired the remainder of MacKay River in March.

Northern Gateway

Northern Gateway, Enbridge Inc. (ENB)’s proposed C$5.5-billion pipeline to carry oil-sands crude to the Pacific coast through British Columbia is a bridge too far, Davidson said.

“There’s too much opposition to it,” he said. “I believe it makes sense. I believe it’s logical. We are supportive of the project. It can be financed. Enbridge are very good operators. The project would be very beneficial to the oil patch, B.C. and to Canada. I just see the local opposition as being too strong.”

To contact the reporters on this story: Divya Balji in Toronto at dbalji1@bloomberg.net; Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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