Nexen shareholders approve sale to Cnooc Ltd.
Now comes the hard part, getting the blessing of the Canadian and U.S. governments
Nexen Inc. announced this morning that shareholders have approved the proposed sale of the company to Cnooc Ltd. for $15.1 billion.
In a press release, Nexen says the deal received approval from 99 per cent of the votes cast by its common shareholders and 87 per cent of the votes cast by preferred shareholders.
That’s great. However, there was never any question Nexen shareholders would give the sale the thumbs up. But now comes the difficult part – getting the approval of Ottawa and Washington, D.C.
The deal is currently undergoing an Investment Canada Act review. The federal government can reject the deal, particularly if it determines the sale doesn’t give Canada a net benefit.
As we reported earlier this month, Canadian Prime Minister Stephen Harper has publicly said the review will be rigorous and approval is not a sure thing. There are also members of Harper’s party who have recently voiced their misgivings about the deal.
So gaining approval from Canada’s federal government could be problematic for Nexen and Cnooc. But what isn’t talked about as much is that the U.S. federal government must also approve the deal.
Why is that, you ask?
Well, Nexen holds assets in the Gulf of Mexico where it produced 22,000 barrels of oil equivalent per day in 2011.
As a result, the U.S. is conducting its own 30-day review of the sale to determine if foreign ownership of U.S. assets threatens national security.
The proposed deal has already raised hackles in Washington. Democratic Congressman and ranking member of the U.S. Committee on Natural Resources, Edward Markey, has expressed his displeasure regarding the proposed sale.
In a research note to clients, FirstEnergy Capital’s Mike Dunn points out the review being done by the Committee on Foreign Investment in the United States (CFIUS) should be complete by early October, at the latest.
But if approval is not granted (a possibility), then a 45-day CFIUS investigation kicks in. And if a decision is still not made by then, it goes to U.S. President Barack Obama. He has 15 days to make a decision, which could mean no approval (or rejection) of the Cnooc-Nexen deal stateside until the end of November.
Dunn expects the U.S. will eventually sign off on the deal. His confidence comes from the fact that the feds there recently approved a US$2.5 billion Sinopec-Devon Energy deal, and a US$1.25 billion deal between Cnooc and Chesapeake Energy Corp.
Both of those deals, for non-operated minority interests for U.S. onshore properties, were approved. Nexen’s U.S. assets are primarily offshore minority working interests, some of which it operates, and some of which are non-operated assets.