CNOOC has long way to go after Nexen takeover
Updated: 2012-12-10 14:22
BEIJING -- The Canadian government on Friday gave a green-light for CNOOC's $15.1 billion bid to purchase Nexen, an oil and gas producer based in Calgary in the province of Alberta.
According to agencies, it will be China's biggest ever overseas acquisition once it is completed. In 2011, China's leading oil and gas developers spent nearly $20 billion on the purchase of overseas assets, compared with 150 billion spent worldwide in this sector.
Xinhua File Photo
Wang Yilin, Chairman of CNOOC, said in a statement that CNOOC is "very pleased" by the approval, "which recognizes the long-term economic benefits for Calgary, for Alberta and for Canada."
He added that countries rich in energy sources, such as Canada and Russia, start to eye new markets, while China is one of the very markets that big energy countries are looking for.
However, the oil conglomerate CNOOC still faces many challenges after the Nexen transaction.
According to Lin, the purchase is only the first step in "go global" strategy, how to manage overseas property well will put CNOOC to the greatest test.
Shen Yan, general manager of merger and acquisition at CCID Consulting Co Ltd said "CNOOC has somewhat overbid for the deal and has to take over $4.3 billion of debts from Nexen, making profitability a key aspect to improve."
The Canadian company saw net income decrease to $59 million in the third quarter of this year, 85 percent down from the previous quarter, with lower production and higher operating costs.
Beside CNOOC has accepted management and employment conditions set by the Canadian government, which include guarantees that at least 50 percent of Nexen’s board and management positions be held by Canadians, and that CNOOC has to maintain workforce levels for at least five years as well as list common shares on the Toronto Stock Exchange.
Right after the approval, Canadian Prime Minister Stephen Harper told a press conference that the CNOOC-Nexen deal should be viewed as "the end" rather than the "beginning of a trend."
Experts say it will be a long road for CNOOC to go, but they encourage more Chinese firms to engage in overseas acquisitions, especially those of resources firms, to make good use of the golden opportunity.