DBRS Comments on Canadian Government Approval of Nexen Inc. Acquisition by CNOOC

DBRS notes that today the Canadian government has announced its approval of the proposed acquisition of Nexen Inc. (Nexen or the Company; rated BBB, Under Review-Positive) by the China National Offshore Oil Company Limited (CNOOC) for $19.4 billion, which includes $15.1 billion in cash and $4.3 billion in assumed debt. DBRS notes that the transaction, which has already obtained shareholder approval, still requires approval by both the U.S. and Chinese governments.

At the time of the initial announcement (please see DBRS press release dated July 23, 2012), DBRS placed the ratings of Nexen Under Review with Positive Implications, reflecting the change in ownership should the transaction proceed as proposed. CNOOC’s credit quality is significantly stronger than Nexen’s, reflecting its: (1) size and scale of operations, (2) strong financial profile, with low debt levels and strong liquidity, and (3) 64% ownership by the government of the People’s Republic of China, which provides indirect support.

DBRS continues to view the transaction as a credit positive for Nexen, and will monitor the transaction for further developments.

CNOOC is China’s largest producer of offshore crude oil and natural gas, and one of the largest independent oil and gas exploration and production companies in the world, with market capitalization of approximately $90 billion, assets of $61 billion, and production of 900,000 barrels of oil equivalent (boe) per day. Operations are focused primarily in the South China Sea region.

Nexen is an independent Canadian-based upstream oil and gas company with operations located primarily in the U.K. North Sea, North America and other international locations. Production is 200,000 boe per day, heavily weighted toward crude oil and liquids (83%).

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on the DBRS website under Methodologies.