Nexen sags as speculation over Total deal wanes

By Scott Haggett

CALGARY, Alberta (Reuters) - Nexen Inc (NXY.TO) shares fell by more than 9 percent on Wednesday as speculation waned that Canada's No. 4 oil exploration firm would be the target of a hostile takeover bid by French oil major Total SA (TOTF.PA).

Nexen shares dropped C$2.23, or 9.3 percent, to close at C$21.65 on the Toronto Stock Exchange in a heavy volume of more than 16 million shares, rebounding from a low of C$18.10 set in the first few minutes of trading.

London-based banking sources said Total had not secured financing for a potential C$19.7 billion ($15.7 billion) bid for Nexen, contradicting earlier media reports that said the company had the backing of lenders for a deal that would see Total offer C$38 per Nexen share.

As well, Britain's Times newspaper reported on Wednesday that Total had decided not to go ahead with an offer for Nexen. However a European industry source said the French firm has been interested in acquiring Nexen for years.

"Total has been looking at Nexen for six years," according to the source.

"It's not a question of finance" the source said, rather a matter of strategy.

Such a deal may make strategic sense for Total, which could add Nexen's Long Lake oil sands project and its small stake in the Syncrude Canada Ltd joint venture to immediately boost its own Canadian oil sands investments.

"Total has made it very clear that they want to bulk up on the oil sands side," said Martin Molyneaux, an analyst at FirstEnergy Capital. "They have to get to a critical mass and (buying Nexen) would leapfrog them ... into a real player" in the oil sands.

Nexen has also a big stake in a burgeoning shale gas region in northern Canada and operates the massive Buzzard oil field in the North Sea.

It also has production from prolific fields in the Gulf of Mexico, Yemen and elsewhere

Nexen said on Tuesday it had not been approached by any bidder. The company has said it would put itself up for auction rather than succumb to a hostile offer.

($1=$1.25 Canadian)

(Additional reporting by Tom Bergin; editing by Rob Wilson)