Petronas, Progress not giving up after Ottawa balks

Mon Oct 22, 2012 11:52am EDT
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By Jeffrey Jones and Euan Rocha

CALGARY/TORONTO (Reuters) - Progress Energy Resources Corp (PRQ.TO: Quote) and Petronas PETR.UL said they will meet with Canadian officials to try to reverse the government's surprise decision late on Friday to block their $5.2 billion merger deal.

Petronas, the Malaysian state oil company, agreed on Monday to extend its deadline to close the acquisition of Progress, which has extensive exploration lands in the gas-rich Montney shale region of British Columbia, by up to 90 days.

Canadian Industry Minister Christian Paradis said late on Friday that Petronas' friendly bid would not provide the "net benefit" the government seeks under foreign investment laws - a decision that shocked investors as the deal been expected to pass muster easily.

Progress shares tumbled 11.2 percent to C$19.21 in morning trading on the Toronto stock exchange, and other energy shares also fell as the veto prompted discussion about whether Canada, which needs hundreds of billions of dollars to develop its energy patch, was really open for foreign business as it frequently insists.

Shares of Nexen Inc NXY.TO fell 5.2 percent to C$23.84 on concerns about its proposed $15.1 billion takeover by China's CNOOC (0883.HK: Quote).

"Petronas and Progress will work together to ensure that the Minister has the necessary information to determine that the proposed acquisition of Progress would likely be of net benefit to Canada," said the two companies in a joint statement.

The government has given Progress and Petronas 30 days to make their offer more palatable. Progress said on Monday that it had waived a 10-day notification period, which would have effectively meant the deal expired at the end of this month.

Canada's move to block the deal, minutes before a midnight deadline, was a blow to Petronas, whose domestic oil supplies are shrinking. The company has been looking to boost its oil and gas resources beyond Malaysia and volatile areas such as Sudan.   Continued...

Motorists pump petrol at a Petronas station in Putrajaya in this December 8, 2009 file photograph.REUTERS/Bazuki Muhammad/Files