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Canada blocks Petronas’ bid for Progress Energy – AP

TORONTO — Canada has blocked the Malaysian state-owned oil firm Petronas’ US$5.2 billion (CA$5.17 billion) bid for gas producer Progress Energy Resources, saying the proposed investment would not provide a net benefit to Canada.

Federal Industry Minister Christian Paradis did not explain his decision in a statement released just before midnight Friday, saying only that it was made after a careful and thorough review of the proposed transaction.

“Due to the strict confidentiality provisions of the (Investment Canada) Act, I cannot comment further on this investment at this time,” said Paradis.

“Canada has a long-standing reputation for welcoming foreign investment. The Government of Canada remains committed to maintaining an open climate for investment,” he added.

Petronas has up to 30 days to make any changes to the proposed deal and send it back to the federal government for another review under the terms of the Investment Canada Act.

Petronas’ offer for Progress is substantial at $5.2 billion, but it’s eclipsed by the US$15.2 billion (CA$15.1 billion) that China National Offshore Oil Co. (CEO) is offering for oil producer Nexen Inc. (NXY)

Progress did not immediately respond to calls for comment.

Observers had been looking for signals from the review of the Petronas deal for an indication of how the government might proceed with the more controversial deal to buy Nexen.

Both dears involve Asian state-owned players, are worth billions of dollars and sprang from joint-venture partnerships with Canadian firms, but the Chinese bid has stoked a great deal more political furor than the Malaysian one.

“China comes with more baggage, as befits a great power,” said Gordon Houlden, director of the University of Alberta’s China Institute.

CNOOC and other big state-owned Chinese energy companies have increased purchases of oil and gas assets in the Americas as part of a global strategy to gain access to resources needed to fuel China’s economy. The companies have moved more carefully since CNOOC tried seven years ago to buy the California energy firm Unocal Corp. only to withdraw its bid in the face of opposition from U.S. lawmakers who cited national security fears.

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Petronas Rejection Casts Doubt on Cnooc $15.1 Billion Bid – Bloomberg

Canada’s rejection of a bid by Malaysia’s state oil company for Progress Energy Resources Corp. casts doubt on Beijing-based Cnooc Ltd.’s $15.1-billion takeover of Nexen Inc. and raises questions about the openness of Prime Minister Stephen Harper’s government to foreign investment.

Industry Minister Christian Paradis said in a statement he wasn’t satisfied the C$5.2 billion ($5.23 billion) acquisition by Petroliam Nasional Bhd., known as Petronas, is in Canada’s interest. Harper’s Conservative government reviewed the bid under its foreign takeover law, which says transactions must be judged to have a “net benefit” to Canada.

“The implication now is that the government does not want a foreign national oil company to acquire Canadian companies,” said Eric Nuttall, a portfolio manager with Sprott Asset Management LP in Toronto. “For a Conservative government to make this decision is mind-boggling. The amount of capital that that decision wipes out is stunning.”

The Petronas rejection marks the second time in two years Harper’s administration has denied a multi-billion dollar overseas bid. The government blocked BHP Billiton Ltd. (BHP)’s $40 billion hostile offer for Potash Corp. (POT) of Saskatchewan Inc. in 2010 after the province’s premier, Brad Wall, opposed it.

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Nexen Holders Spooked as Canada Rejects Petronas Deal – WSJ

Canada’s decision to block Petronas’ bid for Progress Energy is spooking investors in Nexen, also the target of a takeover attempt by a state-owned energy giant.

Progress Energy, a natural gas producer, had struck a deal to be sold to Malaysia’s Petronas for $5.21 billion. But Canada rejected the move late Friday night. Canada has left the door open to a potential deal, but the move was surprising to analysts.

Progress shares were dropping 11% to $19.32 in Toronto on Monday.

Meanwhile, the government’s decision is causing collateral damage at Nexen, which is waiting on word from Canada on whether China’s Cnooc will get approval to buy Nexen for $15.1 billion.

Nexen shares are down 7% to $23.65 in recent trading, well below the $27.50 that Cnooc offered in July.

Highlighting that the market was making a clear distinction between measuring the risk of takeover deals initiated by state-owned and non-state-owned companies in Canada: Celtic Exploration, which has agreed to be acquired by Exxon Mobil (XOM), was recently only down around 1%.

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Petronas Will Continue to Pursue Progress Energy – WSJ

Petroliam Nasional Bhd.’s Canadian affiliate said it would continue to seek approval for its 5.18 billion Canadian dollar (US$5.21 billion) bid for Progress Energy Resources Corp. and work with Canadian officials to “better understand” the government’s requirements with respect to the deal.

Over the weekend, Canada’s government rejected the merger but gave Petronas 30 days to continue talks with the government.

In a short statement, Petronas Carigali Canada Ltd. said it would “work together to ensure that (Canada’s Industry) Minister has the necessary information to determine that the proposed acquisition of Progress would likely be of net benefit to Canada.”

Canada’s federal government reviews all big foreign acquisitions to ascertain “net benefit” to Canada’s economy. The Petronas statement, issued just before Canadian markets opened Monday, helped soften investor reaction to the surprise rejection, announced by Ottawa just before midnight Friday night.

At midmorning Monday, Progress Energy shares were down C$2.54, or almost 12%, to C$19.11. But they were still significantly higher than Progress’ share price of C$11.55 the day before Petronas’s bid, announced in June. Petronas sweetened its bid to C$22 a share in July.

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Petronas, Progress not giving up after Ottawa balks – Reuters

Progress Energy Resources Corp  and Petronas said they will meet with Canadian officials to try to reverse the government’s surprise decision late on Friday to block their $5.2 billion merger deal.

Petronas, the Malaysian state oil company, agreed on Monday to extend its deadline to close the acquisition of Progress, which has extensive exploration lands in the gas-rich Montney shale region of British Columbia, by up to 90 days.

Canadian Industry Minister Christian Paradis said late on Friday that Petronas’ friendly bid would not provide the “net benefit” the government seeks under foreign investment laws – a decision that shocked investors as the deal been expected to pass muster easily.

Progress shares tumbled 11.2 percent to C$19.21 in morning trading on the Toronto stock exchange, and other energy shares also fell as the veto prompted discussion about whether Canada, which needs hundreds of billions of dollars to develop its energy patch, was really open for foreign business as it frequently insists.

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Cnooc’s Unocal Lessons (July 23 2012) – WSJ

Cnooc Ltd.’s $15 billion acquisition of Canada’s Nexen Inc. wouldn’t have made the record books if its most ambitious, and famous overseas foray, had succeeded.

That was, of course, its attempt to buy Unocal Corp. in 2005 for $18.5 billion, the deal that has become the poster child for what happens when U.S.-China trade tensions get in the way of deal making.

Since then, Chinese firms have learned to restrain their appetites by taking minority stakes instead. The world also has grown more accustomed to Chinese takeovers  with the U.S. and Europe mired in economic slumps. One recent example is the acquisition of AMC Entertainment Holdings by China’s Dalian Wanda Group Corp. for for $2.6 billion. While the the movie industry isn’t as politically sensitive as the energy sector, the deal nevertheless illustrates how capital flows between the two countries have reversed as cash-strapped U.S. companies seek deep-pocketed buyers. Indeed, Chinese acquisitions in the U.S. hit a record high last year, according to Dealogic.

Fu Chengyu, the  Cnooc executive, whose name became almost synonymous with the Unocal bid, is now at the helm of Cnooc’s competitor, China Petroleum & Chemical Corp., or Sinopec, and is leading that company on an intrepid M&A trail from Australia to Africa. After the Unocal failure, Mr. Fu changed tack and pioneeredChina’s entry into the shale industry, teaming up with Chesapeake Energy in 2010. Since then, news about Chinese investments into oil and gas in North America have become almost commonplace.

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CNOOC’s Failed Unocal Bid Paved Way for Nexen Deal (July 24, 2012) – CNBC

The memory of  its failed 2005 bid for Unocal still fresh, China’s state-controlled CNOOC Ltd. has put lessons learned into practice and “networked strongly” with regulators in Canada and the U.S., smoothing the way for its$15.1 billion all-cash deal to  buy Canadian oil producer Nexen Inc.

A political backlash in 2005 against Chinese efforts to snap up U.S.-based Unocal for $18.5 billion may have encouraged Chinese firms to tread more carefully as they target foreign assets that could help feed demand in the world’s second-biggest economy.Energy analysts CNBC spoke to after the deal broke unanimously agreed that China’s largest foreign acquisition yet would win regulatory approval from Ottawa. Nexen’s asset base is focused primarily in the Gulf of Mexico and the North Sea, not in Canadian territory, reducing any immediate strategic national interest concerns, they said.

“The deal size is actually very, very similar to Unocal,” Neil Beveridge, Senior Oil Analyst at Sanford C. Bernstein told CNBC’s Asia’s “Squawk Box” on Tuesday.

“CNOOC has learned a lesson from the Unocal experience and I think they’re likely to have networked very strongly on this deal with the Canadian government and U.S. authorities in advance of putting this bid in. There’s a fairly high degree of probability that Canadian regulators will approve this…because of the international nature of these assets,” he said.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.