China's CNOOC hopeful on Nexen bid; raises full-year output goal

HONG KONG Thu Oct 25, 2012 6:09am EDT

The man stands at the front desk of the headquarters of China National Offshore Oil Corp (CNOOC) in Beijing July 25, 2012. REUTERS/Jason Lee

The man stands at the front desk of the headquarters of China National Offshore Oil Corp (CNOOC) in Beijing July 25, 2012.

Credit: Reuters/Jason Lee

HONG KONG (Reuters) - CNOOC Ltd, China's top offshore oil and gas producer, said on Wednesday it was working to win regulatory approval from Canada this year for its $15.1 billion bid for energy producer Nexen.

"Our team is still working to obtain approval," Chief Financial Officer Zhong Hua told reporters on a conference call about CNOOC's third-quarter results. "We still expect to get the approval by the end of the year."

His comments came days after Ottawa held up Malaysian state oil company Petronas' $5.2 billion bid for Canada's Progress Energy Resources Corp, a move that raised concerns that the Chinese offer for Nexen - which would be China's biggest overseas takeover - could also be blocked.

Under a barrage of questioning from reporters, Zhong said CNOOC had submitted all the documents requested by Canadian and U.S. regulators for the proposed deal. He declined to elaborate further.

A senior industry source told Reuters that CNOOC was shocked by Canada's decision last weekend to block the Petronas bid, but remained hopeful it would win Canada's backing for its own deal.

"It's a shock to everybody, but when you look more at the detail you feel it's not as bad as it looks," said the source, who asked not to be named as he was not authorized to speak to the media. He noted the Canadian government needed time to rechart its policy on foreign takeovers of Canadian companies.

CNOOC is confident its bid will go through as only about a quarter of Nexen's assets are in Canada, while Progress Energy's operations are centered in Canada, the source said, adding Canada needs China to help develop its vast oil sands industry and buy its crude oil.

"This is a hugely different deal," he said, noting also that CNOOC had promised to keep all of Nexen's staff, list shares in Toronto and make Calgary the headquarters for CNOOC's operations in the Americas.

CNOOC is pressing on in its search for overseas assets as it has only nine years worth of reserves based on its current production - one of the lowest ratios among global oil majors.

RAISES FY PRODUCTION TARGET

CNOOC said earlier on Wednesday it expected to beat its full-year production targets, helped by new projects at home and higher overseas output.

In a filing to the Hong Kong stock exchange, CNOOC said its oil and gas production rose 8.5 percent in July-September from a year ago to 87.8 million barrels of oil equivalent (boe).

The company said it expected to produce 335-345 million boe this year, topping its initial target of 330-340 million boe. It produced 331.8 million boe in 2011, when an oil spill at its Penglai 19-3 field in eastern China's Bohai Bay cost CNOOC 5.9 million boe in lost output.

"2012 net production is expected to exceed the annual production target and achieve 335-345 million boe," CNOOC said.

Third-quarter unaudited oil and gas sales revenue totaled 48.44 billion yuan ($7.75 billion), up 4.7 percent from a year earlier - even though its average oil selling price fell 6.5 percent from a year ago to $104.74 per barrel. The average realized natural gas price rose 12.5 percent to $5.83 per thousand cubic feet, CNOOC said.

Capital expenditure rose 47 percent year on year to 15 billion yuan in the quarter, due to a jump in the number of new development projects and exploration activities.

CNOOC shares closed down 1.7 percent at HK$16.04 ahead of the announcement, while the benchmark Hang Seng Index added 0.3 percent. CNOOC shares have gained 3.7 percent in the past month and 27 percent in the past 12 months. ($1 = 6.2480 Chinese yuan)

(Additional reporting by Twinnie Siu, Anne Marie Roantree and Christina Lo; Editing by Ian Geoghegan)

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Comments (1)
No thanks to this deal unless they are some severe restrictions, enforcement and penalties that go along with it. I doubt China is interested in selling anything state owned to any other country. Canada better wake up before they sell us out.

Oct 25, 2012 4:18pm EDT  --  Report as abuse
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