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Cnooc Wins Final Approval for $15.1 Billion Nexen Buy

Cnooc Wins Final Clearance for $15.1 Billion Takeover of Nexen
The Cnooc Ltd. headquarters stands in Beijing. Photographer: Nelson Ching/Bloomberg

Cnooc Ltd., China’s biggest offshore oil and natural gas producer, won approval to acquire the U.S. assets of Nexen Inc., its last regulatory hurdle in the $15.1 billion purchase of the Canadian energy company.

The Committee on Foreign Investment in the U.S. approved the deal, now expected to close the week of Feb. 25, Nexen said in a statement yesterday. The panel reviews takeovers by foreign-owned companies for national security implications. Cnooc’s acquisition of the Calgary-based company falls under U.S. jurisdiction because of Nexen’s Gulf of Mexico oil and gas operations, which account for about 8 percent of its output.

Cnooc’s acquisition, the biggest overseas purchase by a Chinese company, prompted changes in the way Canada reviews takeovers of oil sands operators by state-controlled companies. The Canadian government approved the deal in December, announcing at the same time that it would prohibit future state-owned acquisitions in the oil sands barring “exceptional circumstances.”

Investors have been betting on U.S. approval, Sam La Bell, an analyst at Veritas Investment Research in Toronto, said in a Feb. 11 phone interview. Nexen rose 2 percent to C$27.48 in Toronto yesterday, the highest price since June 2009. In U.S. trading, Nexen climbed to $27.43, 7 cents less than Cnooc’s offer of $27.50 a share. Markets in Hong Kong and China were closed today for holidays.

North Sea

Nexen also has oil and gas operations in the U.K. North Sea and offshore West Africa. The deal gives Cnooc control of the Buzzard field in the North Sea, the largest contributor to the Forties crude grade that usually determines the Brent benchmark used to price more than half the world’s oil.

Cnooc, controlled by the Chinese government, and Nexen said Nov. 27 they would withdraw and resubmit their application with the U.S. committee, without providing a reason. The companies also received clearance from the U.K., the European Union and China, according to a Jan. 27 statement.

Nexen and its oil sands assets will add about 23 percent to Cnooc’s production this year and very little to earnings per share, according to James Hubbard, Hong Kong-based head of Asia oil and gas research at Macquarie Group Ltd., who has an outperform rating on Cnooc shares.

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