December 5, 2012 / 6:33 PM / in 5 years

Canada says deadline on CNOOC bid ruling could be delayed

OTTAWA (Reuters) - Canadian Industry Minister Christian Paradis surprised markets on Wednesday by saying the December 10 deadline for ruling on a bid by China’s CNOOC Ltd (0883.HK) for energy company Nexen Inc NXY.TO could be extended, comments that nudged Nexen’s shares lower.

Canada's Industry Minister Christian Paradis speaks during Question Period in the House of Commons on Parliament Hill in Ottawa November 27, 2012. REUTERS/Chris Wattie

Paradis said he did not want his comments to be construed in any particular way.

“This is a deadline that could be extended, but once again, I won’t speculate and ... I don’t want to send a signal,” he told reporters. “When the decisions are made and are ready to be announced, this will be done. Don’t interpret anything from what I‘m saying here.”

The Canadian government is due to announce new foreign investment guidelines at about the same time it delivers its verdict on the CNOOC move and on a separate bid by Malaysia’s Petronas PETR.UL for Progress Energy Resources Corp (PRQ.TO).

Ottawa can extend the deadline beyond December 10 if CNOOC and Nexen agree, but markets mostly assumed the twice-extended deadline would stand.

Nexen shares in New York fell to $24.50 from $24.62 after Paradis spoke. That is above Tuesday’s close of $24.35 but below CNOOC’s $27.50 offer price.

Progress shares eased to C$20.25 in Toronto from C$20.33 before the remarks. The stock closed at C$20.32 on Tuesday. Petronas’ offer is for C$22.

Shares of both Nexen and Progress have fluctuated over the last few weeks as markets try to work out what the government will decide. On October 22, Prime Minister Stephen Harper said the guidelines would come out “fairly shortly.” On November 8 he said they would be issued “in the very near future.”

Some Conservative legislators are concerned about the prospect of foreign state-owned enterprises, especially Chinese companies, buying up energy assets. Harper has said the government’s new guidelines will address that matter.

Finance Minister Jim Flaherty, who is not directly responsible for investment decisions, said he couldn’t address the timing. “I can say that it’s been given priority,” Flaherty told reporters in Ottawa.

Asked why the government was taking so long, Flaherty replied: “It is a very important issue, and it’s absolutely imperative that the government get it right. So one must be cautious and prudent and analytical.”

Pressed further, he said only: “It’ll be fairly soon.”

The Conservative parliamentary caucus held its last regular weekly meeting on Wednesday ahead of the December 10 deadline. Four legislators told Reuters that no one raised the issue of the takeovers at the meeting and ministers did not say when the decisions might come.

A leading Conservative told Reuters that party members were still split over the CNOOC bid, noting that Harper, who sometimes holds informal polls in caucus on various topics, had not done so on the CNOOC bid.

“If you held a show of hands inside caucus on this, I do not know what the result would be,” the Conservative said.

Some Conservatives are deeply suspicious of China’s Communist government and what they say is its poor record on human rights.

But the government is keenly aware that Canada’s energy industry needs to access foreign capital to expand.

Political sources say the CNOOC bid is dividing the cabinet, where opponents such as Immigration Minister Jason Kenney are ranged against Natural Resources Minister Joe Oliver and Trade Minister Ed Fast, who both think the deal should be approved with appropriate safeguards.

Possible options for the government include limits on how much of the energy patch state-owned enterprises could own and strict conditions on levels of employment and investment.

Additional reporting by Louise Egan; Editing by Janet Guttsman and Prudence Crowther

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