CALGARY - Calgary-based oil and gas producer Nexen Inc. (TSX:NXY), the target of China's largest foreign takeover bid to date, said Thursday it continues to expect the $15.1-billion deal to be completed by the end of this year.
There has been intense interest in the deal, both because of its size and because it may finally shed some light on the Canadian government's policy towards major foreign takeovers — particularly when state-owned companies are involved.
Nexen noted Thursday that the July 23 agreement with China National Offshore Oil Co. has been approved by its shareholders and that the final closing remains subject to regulatory approvals.
"We continue to expect the arrangement to close in the fourth quarter of 2012," Nexen said.
Most of the third-quarter financial report, however, was devoted to Nexen's operations in Canada, the North Sea, Gulf of Mexico and elsewhere.
Its net income fell to $59 million, or 11 cents per share in the third quarter from $109 million, or 20 cents per share in the second quarter.
In the third quarter of 2011, Nexen (TSX:NXY) had a net income of $200 million, or 38 cents per share.
The company attributed the fall in profits to lower cash flow and the impact of several non-recurring items.
At the same time, net debt dropped to $2.36 billion in the third quarter of 2012. It stood at $3.13 billion in the second quarter and $3.4 billion in the third quarter of 2011.
The federal government is in the process of studying whether the deal represents a "net benefit" to Canada.
The review process is expected to last until mid-November, after which it may be extended by further 30-day increments with the buyer's consent.
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The federal government approved the takeover of Alberta-based Celtic Exploration by Texas-based ExxonMobil in February 2013. The deal was believed to be worth $3.1 billion.
Calgary-based energy leader Nexen is in the middle of a massive takeover bid worth more than $15-billion by China energy China National Offshore Oil Company, or CNOOC. The deal is currently being reviewed by Canadian Industry Minister Christian Paradis.
Stakeholders in natural gas producer Progress Energy Resources Corp. have approved a $6-billion takeover of the company by a subsidiary of Malaysia's state-owned Petronas. Meanwhile, the company said the sale to Petronas Carigali Canada Ltd. is not being opposed by the federal government under the Competition Act, which requires major takeover deals to be of net benefit to Canada.
Kuwait's state-owned petroleum company, Kuwait Petroleum Corp., has reportedly signed a preliminary deal to invest as much as $4-billion in a joint venture with Athabasca Oil Corp., for an investment to develop some of Athabasca's (TSX:ATH) oilsands properties in northern Alberta.
In 2009, Athabasca sold a 60 per cent interest in its MacKay River and Dover oilsands lands to PetroChina. In Early 2012, Athabasca exercised its option to sell the rest of MacKay River to PetroChina, making it the first oilsands operation to be fully controlled by a Chinese company.
The prospect of a Chinese state-run enterprise taking control of a Canadian energy company has stoked much political furor.
The NDP has raised a litany of national security, environmental and human rights concerns with the CNOOC deal.
Opposition natural resources critic Peter Julian also calls the federal review process to secretive and says it doesn't set up clear enough guidelines on what constitutes a net benefit to Canada.
"There is a deplorable process in place. It's a mess," he said recently.
"It's difficult for Canadians to determine whether it's in the best interest of the country because they haven't put forward that clear definition of net benefit and a process that allows for public consultations."
Canada's spy agency raised a red flag on foreign investment by state-owned firms in its annual report earlier this year.
Though CSIS didn't name specific countries or companies it said certain state-owned enterprises have pursued what it called opaque agendas or received clandestine intelligence support for their pursuits in Canada.
Prime Minister Stephen Harper has said the Nexen-CNOOC deal "raises a range of difficult policy questions."
At a news conference in Senegal earlier this month, he said there's a national security angle that factors into Canada's relationship with China.
CNOOC and Nexen weren't strangers when the deal was announced.
Last year, CNOOC scooped up Opti Canada, Nexen's beleaguered minority partner in its troubled Long Lake oilsands project. The two firms also worked together in the Gulf of Mexico.
While Nexen's headquarters are in Calgary, its strategic importance to Canada is questionable. Only about 30 per cent of its forecasted daily production in 2012 is from its Canadian operations, with the vast majority coming from offshore platforms in the North Sea and elsewhere around the globe.
Both Nexen and CNOOC have sought to allay concerns about the deal.
CNOOC is to keep the Nexen name and expand the role of the company's Calgary headquarters to manage not just Nexen's operations, but also some $8 billion of the Chinese company's other assets in North and Central America.