Chinese oil company CNOOC Ltd, its takeover of Canada’s Nexen Inc now complete, is giving the leader of the Canadian unit freedom to get operations running smoothly after an exhaustive seven-month acquisition process, CNOOC’s CEO said on Wednesday.
The deal, which boosts CNOOC’s global oil and gas production by 20 percent and reserves by 30 percent, closed on Monday after clearing the final hurdle, sign-off by U.S. regulators.
“This is a big deal. Nexen is a big organization. We’ll fully empower the management team here to get the operation right, to prioritize the strategy for the future,” Li Fanrong, chief executive of CNOOC, told reporters at Nexen’s Calgary head office.
CNOOC and Nexen executives refused to give details of what they had to do to satisfy the Committee on Foreign Investment in the United States following its extended review. The deal needed U.S. approval because of Nexen’s Gulf of Mexico operations.
Kevin Reinhart, who was interim CEO of Nexen for the past year, is now heading up CNOOC’s North and Central American operations, which adds about $8 billion of assets to Nexen’s holdings. The transaction was China’s biggest foreign takeover.
CNOOC will not initially look to add to Nexen’s assets through further acquisitions, Li said.
With the contentious deal done, CNOOC gets control of Canadian oil sands and shale gas assets as well as exploration and production holdings in the Gulf of Mexico, North Sea and offshore West Africa.
It also takes on 3,000 employees, including 1,700 in Canada. As part of its undertakings to satisfy the Canadian government that the deal would have a net benefit to the country, it has pledged to keep all the staff.
Li and Reinhart hosted a town hall meeting for the employees on Wednesday, partly to calm nerves. They told the staff it will be business as usual, despite the months of uncertainty.
Reinhart said there had been little staff turnover since the announcement, which shook up Canada’s oil patch and raised fears about foreign control over the oil sands. However, he said some incentive programs had been tied to the deal being closed, so it is not clear how many could still cash out and leave.
“It’s possible that we’re going to see some people make some of those decisions. That comes out of every transaction,” he said. “But the whole intent is to go in with compensation programs that make it attractive for people to stay here … you don’t want them to go over to another job where they’re going to be financially better off.”
Ottawa approved the deal in December, saying that it would not be detrimental to the Canadian economy after CNOOC made commitments on employment, spending and other areas. In its wake, however, Prime Minister Stephen Harper essentially closed the door on future majority acquisitions of Canadian oil sands assets by foreign state-owned enterprises.
CNOOC’s undertakings for Ottawa will only go so far as being beneficial to the company and economy, Reinhart said.
“CNOOC wasn’t prepared to make uncommercial commitments and the government wasn’t asking for uncommercial commitments,” he said. “A lot of time was spent so that we could explain our business in sufficient detail so they understood what would be commercial and what wouldn’t be commercial.
“Taken to an extreme example, producing product at below its fair value is not in the best interests of Canadians.”
For future investments in Canada, the executive said they were still evaluating how best to develop Nexen’s extensive north-eastern British Columbia shale gas assets.
Nexen and its partners, a group led by Japan’s Inpex Corp , have discussed the possibility of joining the rush to build liquefied natural gas plants on Canada’s West Coast to help boost the value of the gas from the Horn River and Liard regions. There is no deadline for a decision.
Another commitment is a listing of CNOOC shares on the Toronto Stock Exchange. Executives said they will now go through the approval process with Canadian regulators and do not yet have timing for the listing.