Cnooc Buys Nexen for $15.1 Billion in China's Largest Deal
“Cnooc did a nice job in adding oil reserves at less than $20 a barrel,” said Shi Yan, a Shanghai-based energy analyst at UOB-Kay Hian Ltd. “It's really a good time to buy assets while crude prices are low and energy firms shed values in stock markets.”
And
Nexen's market value has plunged 60 percent from a high of C$43.45 in June 2008 as its prices fell for natural gas, which accounts for about 20 percent of output. Production growth has also been slower than the company expected because of setbacks at projects in Canada's oil sands and North Sea.
Cnooc will add 900 million barrels of oil equivalent reserves at $19.94 per barrel through the deal, according to a document posted to the company's website. Cnooc plans to boost output by as much as 2.7 percent this year to the equivalent of as much as 930,000 barrels of oil a day.
Eoin Treacy's view The attraction of North American oil and gas producers for a Chinese company
is reflected not only in the quality of the physical assets but also in the
expertise of personnel and work practices that can be adopted by the parent.
China has been in the market for Canadian assets for a number of years and this
announcement is the latest in a series of successes for their long-term strategy.
Additionally, this is another example of Chinese companies successfully acquiring
attractive assets at comparatively lows prices which seems to be a feat major
Western energy and mining companies seem incapable of.
Natural
gas broke out of the three week range on Friday and pushed above the psychological
$3 area. A clear downward dynamic would now be required to question medium-term
scope for additional upside.
WTI
Crude Oil prices rallied impressively over the last four weeks to unwind
the short-term oversold condition. Today's downward dynamic, from the region
of the 200-day MA capped the advance and it will need to find support above
the $80 area if potential for continued higher to lateral ranging is to continue
to be given the benefit of the doubt. I last reviewed a number of North American
natural gas producers in Comment of the Day on June
19th when most had found at least short-term support in the region of their
respective lows.
Over
the last month, there has been a significant bifurcation in the performance
of various natural gas producers. Anadarko
Petroleum (0.52%), Rexx Energy, EOG
Resources (0.69%), Gulfport Corp,
Noble Energy (1.02%) and Southwestern
Energy rallied on consecutive weeks to unwind their respective oversold
conditions. As with oil above, they are susceptible to at least some consolidation
of recent gains.
Encana
(3.86%), Enerplus (7.78%), Apache
Corp (0.76%), Canadian Natural Resources
(1.4%), Devon Energy (1.28%) and Talisman
Energy (2.33%) were slower to react but rallied impressively last week.
Sustained moves below their respective lows would be required to question potential
for continued upside.
Following an impressive bounce, Chesapeake
encountered resistance in the region of $20 two weeks ago and will need to find
support above $15 to confirm more than a short-term low.