Petronas rejection may hurt Canadian stocks
By Scott Haggett and Euan Rocha
CALGARY/TORONTO (Reuters) - Canadian markets could face a bloody opening on Monday after the government blocked the C$5.17 billion ($5.22 billion) acquisition of Progress Energy Resources Corp (PRQ.TO: Quote) by Malaysian state oil company Petronas PETR.UL, raising questions about other, bigger bids and about Canada's willingness to let foreign investors in.
Canadian Industry Minister Christian Paradis said late Friday night that Petronas' bid for Progress -- one of the largest owners of exploration lands in the gas-rich Montney shale region in northeastern British Columbia -- would not provide the "net benefit" for the country required by Canada's foreign investment laws.
Investors had expected a favorable decision on the bid by the minister, especially given Petronas' pledge to help spur Canada's nascent liquefied natural gas export industry by building an LNG export facility on the country's Pacific coast.
But Paradis' veto also raises doubts over the outcome of Chinese oil group CNOOC's (0883.HK: Quote) C$15.1 billion offer for oil producer Nexen NXY.TO and is expected to weigh on other Canadian firms hoping to tap the foreign investment needed to harvest their vast energy reserves and the mood among investors is somber.
"We're going to see sell-offs all around and gore on the floor for Progress and Nexen," said Chris Damas, an independent analyst with BCMI Research.
Still, the ruling Conservatives say the refusal is not an issue. Petronas and Progress have 30 days from last Friday to convince the Canadian government to reconsider the decision. Canadian Finance Minister Jim Flaherty confirmed on Sunday that the government is willing to negotiate.
"I'm not involved in those discussions directly. The minister of industry is," Flaherty said in an interview on CTV's "Question Period". "I'm sure they'll continue to work on it. There's another period of time during which they can continue to have discussions and try to satisfy the concerns that the Department of Industry has."
Along with Progress and Nexen, some analysts think that mid-sized energy companies operating, like Progress, in the Montney shale-gas region of northeastern British Columbia are most likely to be hit by selling pressure when the Toronto Stock Exchange opens on Monday. Continued...