Challenges ahead as CNOOC acquires Nexen

China National Offshore Oil Corporation (CNOOC) announced Tuesday that it has closed a deal to acquire Canada's Nexen Inc.

CNOOC, China's largest offshore oil and gas producer, said in a statement on its website that the company paid about 15.1 billion U.S. dollars for all of Nexen's common and preferred shares.

Wang Yilin, chairman of CNOOC, said the company is delighted to have gained a leading international platform through its acquisition of Nexen.

"We strongly believe that this acquisition is a good strategic fit for us and will create long-term value for our shareholders," Wang said.

The statement said Kevin Reinhart will continue to serve as CEO of Nexen, which will operate as a wholly-owned subsidiary of CNOOC.

Li Fanrong, CEO of CNOOC Limited, a listed subsidiary of the company, will chair the new Nexen board, the statement said.

Li said Nexen owns a large resource and reserve base and high-potential exploration prospects. "We will thoroughly utilize the platform it provides to further our overseas business."

Nexen runs oil sands and shale gas projects in western Canada. It also conducts conventional exploration and development operations, primarily in the British North Sea, off the shores of West Africa and in the Gulf of Mexico.

CNOOC first announced the deal in July 2012, saying the acquisition would help the company expand its overseas business and resource base in regions such as Canada, Mexico and Nigeria, according to a statement filed to the Hong Kong Stock Exchange.

The Canadian government approved the acquisition in December.

In order to obtain approval, CNOOC made commitments regarding transparency, disclosure, commercial orientation, employment and capital investment that "demonstrate a long-term commitment to the development of the Canadian economy," Canadian authorities said.

U.S. regulators approved the acquisition of Nexen's assets in the Gulf of Mexico on Feb. 12, clearing the last major hurdle in finalizing the deal.

Yang Hua, president of CNOOC, said the assets of CNOOC and Nexen perfectly complement each other.

Through the acquisition, CNOOC's oil and gas reserves will expand by about 30 percent and output will grow by more than 20 percent, Yang said.

"The distribution of the company's oil and gas resources will become more balanced," he said, referring to CNOOC.

Wang Zhen, a professor with the China University of Petroleum, told Xinhua the takeover is just the first step, as the company will face many challenges in its road ahead.

Increasing the company's value is an important target of the acquisition, which means CNOOC will need to boost its business management capabilities, Wang said.

As environmental awareness expands worldwide, CNOOC should also shoulder its due social responsibilities in its global operations, Wang said.

He said the company will also face challenges in global business management, as it has to resolve differences in financial affairs, business practices and culture.

Yang Hua said challenges after the takeover will mainly include ensuring smooth business operations, increasing the company's value and exerting effective control.

CNOOC should strive to push for the integration of the two companies' corporate philosophies and cultures, Yang said.

CNOOC Limited shares dropped 1.7 percent to close at 15.06 HK dollars (about 1.94 U.S. dollars) in Hong Kong on Tuesday.