CALGARY, Alberta (Reuters) - The $15.1 billion takeover of Canadian oil and gas producer Nexen Inc NXY.TO by China’s state-owned CNOOC Ltd (0883.HK) is not yet wrapped up despite the Canadian government’s blessing after months of heated debate, Nexen’s chief executive said on Monday.
“We are nowhere near done,” Nexen interim CEO Kevin Reinhart told Reuters as he left a business conference about economic ties between Canada and Asia. He declined to give his reaction to Ottawa’s decision on Friday to approve the deal, saying it was too early.
A further decision on the high-profile transaction still rests with a secretive U.S. foreign investment panel, which gets a say because Nexen has exploration and production assets in the Gulf of Mexico.
Investors had been assuming that Canadian Prime Minister Stephen Harper’s green light on Friday - after deliberating on how much control foreign state-owned enterprises may have over the country’s energy resources - would be the biggest hurdle.
Reinhart would not give details on what else was needed before the deal could close. “It’s in the press release, so that’s all I’m going to say,” Reinhart said.
In a statement released early on Saturday, Nexen and CNOOC said the deal’s closing remained subject to “the receipt of other applicable government and regulatory approvals, and the satisfaction or waiver of the other customary closing conditions.”
A source familiar with the matter highlighted the ruling by Committee on Foreign Investment in the United States, or CFIUS, as the main regulatory decision still remaining.
“That’s the principal one,” said the source, who spoke on condition of anonymity because he was not authorized to comment on the matter. He would not speculate how long the committee, which is led by Treasury Secretary Timothy Geithner, might take to rule.
In late November, the companies said they withdrew and resubmitted their application for CFIUS approval and discussions with the committee were taking place “with a view to completing the CFIUS review process as expeditiously as possible”.
The panel has the power to negotiate or impose conditions, including divestitures and security-control agreements to mitigate any national security threats, possibly forcing the combined company to sell interests in the Gulf, where Nexen’s production averaged 14,000 barrels a day in the third quarter. It also has a stake in the recently discovered Appomattox field, operated by Royal Dutch Shell (RDSa.L).
The U.S. has been traditionally been more wary than Canada of Chinese investment.
In 2005, it blocked CNOOC’s bid for Unocal Corp because of national security concerns, and an influential House committee earlier this year urged U.S. companies not to do business with Chinese telecommunications firms like Huawei and ZTE, because Beijing could use equipment made by the two to spy.
Nexen stock rose steeply on Monday, the first trading day since the Canadian decision. But the shares still reflect some risk that the transaction may not close as planned. Nexen’s shares on the New York Stock Exchange closed up 14 percent at $26.77, still below the CNOOC bid price of $27.50.
Its Toronto-listed shares finished up 13.5 percent at C$26.44.
Along with its approval of the Nexen transaction, the government also served notice that foreign control of the Alberta oil sands had reached the end of its comfort zone with new rules that any future bids from state-owned enterprises like CNOOC for full control of oil sands businesses would be allowed only in exceptional circumstances.
Ottawa also approved allowed a C$5.2 billion ($5.3 billion) takeover of Progress Energy Resources Corp (PRQ.TO) by Malaysia’s Petronas PETR.UL, another state oil company.
Canadian Natural Resources Minister Joe Oliver said CNOOC’s takeover of Nexen would have been “difficult” under the new guidelines.
Nexen has a 7.2 percent stake in the Syncrude Canada Ltd oil sands project in northern Alberta, one of the largest such ventures. It also has a 65 percent interest in the Long Lake oil sands venture. CNOOC is already the minority partner.
Additional reporting by Susan Taylor in Toronto. Editing by Gerald E. McCormick, Peter Galloway, Janet Guttsman and Bernard Orr