Canada's energy shares burned by blocked Progress bid

Mon Oct 22, 2012 12:30pm EDT
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By Claire Sibonney

TORONTO (Reuters) - Leading Canadian energy companies' shares tumbled on Monday after the government's shock rejection of a Malaysian takeover bid for Progress Energy Resources Corp PRQ.TO raised fresh doubts about Canada's willingness to accept foreign investment.

Progress Energy skidded 11 percent to C$19.26 on the Toronto Stock Exchange, below Petronas's initial C$20.45-per-share offer in June, a nearly 80 percent premium at the time. Petronas raised its offer to C$22 in July.

Nexen Inc NXY.TO shares were down about 5.3 percent at C$23.82 on heightened uncertainty over a C$15.1 billion ($15.24 billion) offer for the company by Chinese state-owned CNOOC Ltd 0883.HK, which Ottawa is also scrutinizing.

Canadian Industry Minister Christian Paradis said late Friday night that Petronas' C$5.17 billion 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.

"If the Canadian government is going to get involved in making decisions like this everybody needs to know what the set of rules look like," said Norman MacDonald, a portfolio manager at Invesco Trimark, who sold all of his Progress and Nexen holdings shortly after the takeover announcements.

MacDonald echoed long-held concerns from investors and opposition politicians alike that the Conservative government has not defined the "net benefit" criteria, and said the decision would cause volatility across a lot of oil and gas names.


Prime Minister Stephen Harper, wary of a potential backlash, says Ottawa will unveil guidelines on foreign investment at the same time that it publishes its decision on the Nexen deal.   Continued...