Weekend Edition: Nexen & Progress Takeovers Approved

The federal government has approved the takeovers of

  • Progress Energy by Malaysian national oil company Petronas
  • Nexen by Chinese national oil company CNOOC.

Industry Minister Christian Paradis said CNOOC and Petronas have made “significant commitments to Canada” concerning corporate governance — including transparency and disclosure — as well as adherence to Canadian laws, practices and free-market principles.

Those commitments also extend to employment and capital investments, “which demonstrate a long-term commitment to the development of the Canadian economy,” he said.

Yes the transactions were approved but according to the prime minister:

“Going forward, the Minister will find the acquisition of control of a Canadian oil-sands business by a foreign state-owned enterprise to be of net benefit, only in an exceptional circumstance,”

The PM was blunt about Canada being open for business but not for sale to foreign governments!

No matter what you’re feeling right now towards these takeovers by foreign national companies, there are 2 facts we cannot ignore:

  1. The shareholders of Nexen and Progress are pretty happy having realized a decent gain.
  2. The foreigners will be back for more since the whole sector is severely undervalued (just look at the takeover metrics). If they can’t outright buy a whole company, they will throw money on JV agreements, tons of it.

The positive side of these takeovers is the patch will be injected with much needed development capital.

The sector might see some buying interest on Monday particularly in E&P companies with a decent Montney acreage (hello PPY!.) However, I believe the market will quickly revert back to focus on the ongoing fiscal cliff discussions…

What do YOU think of these takeovers?

News Roundup

Ottawa approves Nexen, Progress Energy takeovers

Ottawa’s guidelines for investment by foreign state-owned enterprises

Canada toughens oil sands investment rules as Nexen, Progress takeovers approved

World’s oil industry won’t be the same in the wake of shale

Canada’s reputation as energy source at risk over pipeline delays, industry spokesman warns

Canadian oil and gas companies set to spend $44.7B in 2013: Barclays

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Hope you’re enjoying your weekend!

11 comments to Weekend Edition: Nexen & Progress Takeovers Approved

  • skeptical investor

    And I would have bet they were not going to approve them. As a matter of fact Petronas yes and CNOOC no, but I suppose the governemnt didn’t just want to approve Petronas and upset the new leadership in China :)

  • Jarrett

    the major concern had to be keeping head office and jobs in canada and continuing nexens charitable donations.

    i’m aware that in africa, china has promised the world and then broght in tens of thousands to work in the camps leaving few jobs for locals. as a result africans have revolted and apparently even killed chinese in their anger. those extremes won’t happen in canada obviously, but the concern is the same.

    i wonder what kind of guarantees were made to the govt by petronas and cnooc?

    as for environment, that’s a non debate. i work in the enviro industry and laws must be followed by companies operating in canada, regardless of the origin of the money or ownership…

    interesting times indeed…

    • Mich

      I am happy with all the commitments these NOCs undertook. It doesn’t matter which government is behind them, Canada’s interest should always come first. That includes employment, head offices, Canadian stock listing, royalties etc…

      Then we’ve got some $20 billion to be most likely recycled into the patch, a nice boost!

      Interesting times indeed!

    • JC

      This is not what I have heard at all. In fact, the Africans welcome the Chinese people with special honor. The overseas Chinese churches find that being a Chinese give them special advantage in promoting their religious work because of the relationship built by the Chinese government. The Chinese government in order to win international approval had send in engineers, workers to build roads and other needed things for them.

  • Approving the merger is a good deal for the oil patch. Aside from the $20B in capital, even if China brings in people and resources to develop the fields, that is also a positive development. Skilled and qualified labor is hard to find, more engineers and techs in the market might keep wage costs to reasonable levels. Chinese standard materials such as drill pipe and flanges and fittingso could now be approved on Nexen projects. GB (China) standard materials can be equivalent to ASTM standards, depending on the application. Bottom line, it’s a question of hydraulics: resources brought in or approved for Nexen projects will free up local resources for other Canadian projects, and in a small way, help to keep costs down.

    • Mich

      101 You bring out an excellent point. I’ve heard first hand from services companies last year where their biggest challenge is finding and retaining manpower!

  • I think these approvals are a great move for our country.

    Thanks for the link Mich!

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