Oil, gas company to buy Canada's Nexen for $15.1b to tap North American market

CNOOC Ltd has agreed to pay $15.1 billion in cash to acquire Nexen Inc, the Calgary-based oil and gas producer, in the biggest overseas acquisition by a Chinese company.

China's largest offshore oil and gas explorer is paying $27.50 for each common share, a premium of 61 percent to Nexen's closing price on Friday, according to its statement to the Hong Kong Stock Exchange on Monday.

Nexen's board has recommended the deal to its shareholders.

Nexen, whose assets include conventional oil and gas, oil sands and shale gas, will give CNOOC assets in Canada, the United Kingdom, West Africa and the Gulf of Mexico that produced 207,000 barrels a day in the second quarter, boosting the Chinese buyer's output by about 20 percent.

The deal is a second attempt by CNOOC to buy a large North American oil and gas producer after political opposition blocked the acquisition of Unocal Corp in 2005.

"CNOOC did a nice job in adding oil reserves at less than $20 a barrel," said Shi Yan, a Shanghai-based energy analyst at UOB-Kay Hian Ltd.

"It's really a good time to buy assets while crude prices are low and energy firms shed values in stock markets."

CNOOC will offer to buy Nexen's preferred shares and the Canadian company's debt of $4.3 billion will remain in place, the statement said. CNOOC will pay for the acquisition using existing cash funds and external financing.

"The acquisition of Nexen will expand the group's overseas business and resource base in order to deliver long-term sustainable growth," CNOOC said in the statement.

"Nexen will complement the group's large offshore production footprint in China."

The Chinese company is paying 8.84 times earnings before interest and tax for Nexen, compared with the median of 33.06 of 10 comparable deals, according to data compiled by Bloomberg.

The Beijing-based company will add 900 million barrels of oil equivalent reserves at $19.94 per barrel through the deal, according to a document posted on the company's website.

CNOOC plans to boost output by as much as 2.7 percent this year to the equivalent of as much as 340 million barrels of oil. CNOOC lost production from its largest offshore oilfield in the first quarter after the site was temporarily shut down.

Bloomberg