Canada has blocked a $5.5 billion (Can.) bid by Petronas Carigali Canada Ltd. for Canadian natural gas producer Progress Energy Resources Corp. in a move that is prompting questions among analysts about whether the government also might reject CNOOC Ltd.’s pending offer to buy Nexen Inc.
Progress Energy issued a news release saying Progress and Petronas Canada executives planned to meet Oct. 22 with Industry Canada officials in Ottawa. Canada’s government has left open the option of reconsidering its decision.
The Minister of Industry Christian Paradis late Oct. 19 issued the rejection notice but also said Petronas Canada has up to 30 days, or longer as mutually agreed upon, to make proposals to be considered by the government.
Paradis made no additional comments. Finance Minister Jim Flaherty said he believes Petronas and the government will continue working toward an agreement.
“We believe in foreign direct investment,” Flaherty said Oct. 21 in an interview broadcast by Canada’s CTV.
In an Oct. 22 release, Progress said, “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.”
Progress shareholders already had approved the proposed transaction.
The Calgary gas producer focuses on exploration, development, and production of large, unconventional gas plays in northeast British Columbia and northwest Alberta. Progress holds acreage in the Montney shale gas play.
Last year, Petronas and Progress Energy formed a joint venture to develop a portion of Progress' Montney shale assets in the foothills of northeast British Columbia.
Both companies said they wanted to consider opportunities to develop LNG export capacity on the west coast of British Columbia.
In making the acquisition announcement, Petronas and Progress said they plan to build a terminal in Prince Rupert, BC (OGJ Online, June 28, 2012).
CNOOC-Nexen deal now in question
In a separate deal, Nexon shareholders already approved CNOOC offer to buy Nexen for $15.1 billion (OGJ Online, July 30, 2012). The Canadian government is still reviewing that proposal.
After the latest Canadian government decision on the Petronas-Progress proposal, UBS analysts noted that CNOOC is a publicly traded company while Petronas of Malaysia is not.
CNOOC has been transparent in its Nexen acquisition intentions, UBS analysts said.
“We believe CNOOC has been quite proactive in its commitments toward ensuring the net benefit of the transaction to Canada,” UBS analysts wrote.
When announcing the proposed acquisition, CNOOC noted that Nexen's assets, which will expands its own global offshore footprint, are mainly in Western Canada, the UK North Sea, the Gulf of Mexico, and offshore Nigeria. Nexen is focused on conventional oil and gas, oil sands, and shale gas.
In another pending transaction involving a parent company based outside Canada, ExxonMobil Corp. plans to acquire Celtic Exploration Ltd., Calgary, for $3.1 billion (Can.). That transaction involves large acreage position in Canadian shale plays (OGJ Online, Oct. 17, 2012).
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