CNOOC and Sinopec target Nexen and Talisman assets
July 23rd 2012, the Chinese CNOOC Ltd (CNOOC) announced to have signed an Arrangement Agreement with Nexen for the acquisition of the Nexen shares listed in Toronto and New York Stock Exchanges.
The aggregate value of the proposed acquisition is approximately $15.1 billion on the top of which comes $3.1 billion debt representing a total capital expenditure of $18.2 billion.
In parallel, China Petrochemical Corporation (Sinopec) announced to propose $1.5 billion to take 49% equity interests of the Canadian Talisman Energy Inc. (Talisman) in UK North Sea assets.
In total CNOOC and Sinopec investment will reach $20 billion capital expenditure.
CNOOC and Nexen $18.2 billion deal
The Arrangement Agreement signed between CNOOC and Nexen is based on the acquisition of all the outstanding common shares of Nexen for $27.50 per share in cash.
The purchase price represents a premium of 61% to the closing price of Nexen‘s common shares on the NYSE on July 20, 2012, and a premium of 66% to Nexen’s 20 trading-day volume-weighted average share price.
The transaction is expected to close in the fourth quarter of 2012.
Nexen will complement CNOOC’s large offshore production footprint in China and extends CNOOC‘s global presence in many of the world’s most significant producing regions with:
– Onshore production in Western Canada, Yemen and Colombia
– Offshore production in the UK North Sea, Gulf of Mexico and Nigeria on West Africa.
In 2012, approximately 70% of Nexen’s production is expected to come from offshore facilities.
Nexen is a major player in Canada’s oil sands with capital expenditure in oil sands mining, in-situ bitumen production and upgrading.
Nexen operates the Long Lake oil sands facility, that uses innovative technology to develop this vast resource.
Like all natural gas, shale gas is a clean-burning and abundant resource.
Nexen produces shale gas in northeastern British Columbia, Canada and is exploring development opportunities in Poland and Colombia.
In addition, Nexen management’s current mandate will be expanded to include all of CNOOC’s North American and Caribbean assets.
Nexen had average production of 207 million boe/d in Q2 2012.
In accordance with SEC rules, Nexen had 900 billion boe of proved reserves and 1,122 billion boe of probable reserves as of December 31, 2011.
In addition, as of December 31, 2011, Nexen had best estimate contingent resources of 5.6 billion boe in accordance with Canadian National Instrument 51-101, predominantly in the Canadian oil sands.
The transaction will be funded by CNOOC‘s existing cash resources and external financing.
With Nexen acquisition, CNOOC is taking a major leap to bridge western Canadian resources with China, thus paving the way to major further capital expenditure in upstream and midstream projects to come.
Sinopec put $1.5 billion to revive Talisman North Sea assets
Talisman and Sinopec entered into an agreement whereby Sinopec will acquire a 49% equity interest in Talisman’s UK North Sea business, Talisman Energy (UK) Limited (TEUK), for $1.5 billion.
The deal structure will be a corporate joint venture whereby Sinopec will buy 49% of the shares of TEUK for $1.5 billion, with adjustments for working capital.
This will proportionately reduce Talisman’s share of capital spending, production and abandonment liabilities for its UK business.
The effective date of the sale is January 1, 2012, and the transaction is expected to close by the end of this year, subject to government and regulatory approval.
The joint venture plans to invest to improve ongoing operating performance, as well as infill drilling, exploration opportunities and major projects, thereby extending field life and deferring decommissioning.
Through TEUK, Talisman will continue to operate the assets, and Sinopec will appoint select personnel into key positions within the organization.
TEUK is based in Aberdeen, Scotland and employs 564 employees, with approximately 1,950 core contractors.
Talisman plans to implement a normal course issuer bid, to repurchase approximately $500 million of its common shares, on both the TSX and NYSE.
With this agreement, Sinopec is planning to move forward for the next phase of development of Talismans’ UK North Sea assets.
Sinopec will provide additional resources and energy to Talisman to invest more in the UK than Talisman would have on its own, leading to a stronger, more sustainable business.
While Talisman is reducing its working interest and capital spend in the UK business by approximately half, allowing it to focus on and fund other growth areas within our portfolio.
Talisman’s business strategy is focused on:
– Establishing safe, long-term profitable growth from its operations in North America shale and Southeast Asia
– Repositioning the international portfolio for renewal through high-impact exploration in selected areas
– Operating its conventional North Sea business and conventional portfolio in North America at maximum efficiency to maintain stable, high-quality production and cash generation for at least the next decade.
Through this agreement, Sinopec and Talisman will be in a situation to focus on their respective most strategic areas for growth to consolidate their own Market Leadership
CNOOC in brief
CNOOC Limited (CNOOC) is a Chinese National Oil Company (NOC) incorporated in Hong Kong in August 1999, and listed on the New York Stock Exchange on 28 February 2001.
CNOOC is China’s largest producer of offshore crude oil and natural gas and one of the largest oil and gas exploration and production companies in the world.
CNOOC mainly engages in exploration, development, production and sales of oil and natural gas.
CNOOC’s core operation areas are Bohai, Western South China Sea, Eastern South China Sea and East China Sea in offshore China.
In overseas, CNOOC has oil and natural gas assets in Asia, Africa, North America, South America and Oceania.
As of 31 December 2011, CNOOC owned net proved reserves of approximately 3.19 billion boe, and deliver net production 909,000 boe.
CNOOC has 5,377 employees and total assets of approximately $60 billion.
Nexen in brief
Nexen’s origins date back to the formation of Canadian Occidental Petroleum Ltd. (Canadianoxy), a Western Canadian oil and gas producer, in 1971.
Canadianoxy was renamed Nexen Inc. in 2000 and today Nexen is an independent, Canadian-based global energy company, listed on the Toronto and New York stock exchanges.
Nexen is focused on three growth strategies: oil sands and shale gas in Western Canada and conventional exploration and development primarily in the North Sea, offshore West Africa and deepwater Gulf of Mexico.
Nexen has onshore production in Canada, Yemen and Colombia, with the largest component of our conventional business occurring offshore, in the UK North Sea, Gulf of Mexico and offshore West Africa.
Nexen operates the Long Lake oil sands facility, that uses innovative technology to develop this vast resource.
Nexen has a team of approximately 3,000 employees.
Sinopec in brief
China Petrochemical Corporation (Sinopec Group) is a super-large Chinese National Oil Company (NOC) established in July 1998 on the basis of the former China Petrochemical Corporation.
Sinopec Group is a state-owned company solely invested by the State, functioning as a state-authorized investment organization in which the state holds the controlling share.
Headquartered in Beijing, Sinopec Group has a registered capital of $28.4 billion.
China Petroleum & Chemical Company (Sinopec Corp.), controlled by Sinopec Group, is listed on stock markets in Hong Kong, New York, London and Shanghai.
Sinopec Group owns 75.84% of Sinopec Corp, international investors own 19.35% and domestic investors own 4.81%.
Sinopec Group’s key business activities include all upstream, midstream and downstream comprehensive utilization of oil and natural gas and petrochemical products.
In addition Sinopec runs engineering and services companies for the design, construction and installation of oil and natural gas and petrochemical projects, the overhaul and maintenance of oil and natural gas and petrochemical equipment.
Talisman Energy in brief
Talisman Energy (Talisman) was established in 1992 and is headquartered in Calgary, Canada.
Talisman has a diversified, global portfolio of oil and gas assets.
Talisman’s main operating areas are North America, the North Sea and Southeast Asia.
In addition, the company is pursuing a number of high-impact international exploration opportunities.
In 2010, Talisman produced 417,000 boe/d, approximately 50% oil and 50% natural gas.
Talisman is listed on the Toronto and New York stock exchanges.
At year-end 2010, the company’s enterprise value was more than $25 billion, with 1,023 million shares outstanding.
In spending nearly $20 billion capital expenditure in Nexen and Talisman assets, CNOOC and Sinopec adopt the strategy of the IOCs in securing long term oil and gas reserves in trouble-free regions of the world.
