This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

China's Oil Hunger Hits $15 Billion in Canada Amid U.S. Diet Deals

Monday's deal could lead to a new round of regulatory hurdles for Chinese operators looking to gain control of U.S. assets -- Nexen owns assets in the Gulf of Mexico -- after regulatory authorities and Congress blocked CNOOC's $18.5 billion bid for Unocal in 2005. Still, there are those who believe the political resistance to outright acquisitions of North American assets by Chinese energy companies never made sense.

"The Unocal bid was derailed by negative press and myopic rhetoric by a few ignorant politicians," says Fadel Gheit an oil and gas analyst with Oppenheimer & Co., who notes that in the aftermath of the deal breakup, the country has remained a large U.S. energy investor. "CNOOC has invested in unconventional JVs with US independents, which benefit both and should increase our domestic production," adds Gheit. The analyst believes Chinese firms should be able to invest more freely in the U.S. since oil is a global business.

Even if outright M&A may remain politically challenging in the U.S., Chinese players like CNOOC, Sinopec and PetroChina will continue to test the waters. "CNOOC is sitting on a pile of cash and has been aggressively seeking energy acquisitions for the last five years, reflecting China's hunger for energy and oil in particular, and I expect this trend to continue," says Gheit.

In November Bloomberg reported that Marathon Oil (MRO - Get Report) was in talks to sell its Angolan offshore operations to Sinopec and other Asian buyers for $800 million. Reports also indicate that Marathon may look to sell 30% of a joint venture in its Gulf of Mexico deepwater assets for $1 billion to Asian buyers as part of the Houston -based company's announced plans of oil asset sales up to $3 billion.

If the deals were to go through, it wouldn't be Marathon's first sale to Chinese buyers. In 2009, state-backed oil companies Sinopec and CNOOC (CEO) bought a 20% stake in a promising Angolan deepwater oil prospects from Marathon for $1.3 billion.

The political climate in Canada remains a wildcard for the Nexen deal. While Chinese state-run oil companies have had success in Canadian M&A in recent years, Canadian regulators blocked BHP Billiton's (BHP) $38.6 billion bid for Saskatchewan based fertilizer company Potash (POT) in 2010, a high-profile political end -- and M&A failure -- for what was slated to be a huge foreign acquisition of a Canadian company.

The key to the Nexen deal not suffering the same fate may be its far-flung assets.

"We don't expect there to be any regulatory issues as only 28% of Nexen's production is in Canada. Plus there is an agreement to retain NXY's management team and for CNOOC to establish Calgary as its North and Central American headquarters. CNOOC also plans to list on the Toronto Stock Exchange," writes Cannacord Genuity's Skolnick in a Monday note to clients.

A logical counter bidder would be Total, according to the analyst, however, "We don't expect Total, or really anyone else, to try to compete with China," the analyst wrote.

-- Written by Antoine Gara in New York.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
NXY $27.41 0.00%
CEO $120.15 -2.40%
CHK $7.46 6.30%
DVN $42.16 3.40%
MRO $16.90 5.80%

Markets

Chart of I:DJI
DOW 16,585.08 -69.69 -0.42%
S&P 500 1,986.27 -1.39 -0.07%
NASDAQ 4,809.7260 -2.9820 -0.06%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs