CNOOC struck a $2.1 billion deal to buy Opti Canada as the Chinese oil producer seeks to add another oil sands property to its portfolio.
CNOOC, which is China's largest producer of offshore crude oil and natural gas, will pay $34 million to the equity shareholders of Opti, $1.18 billion to holders of notes and assume around $825 million of Opti’s debt. Opti filed for bankruptcy earlier this month so creditors are effectively calling the shots.
Opti’s principal asset is a 35% working interest in the Long Lake project and three other project areas located in northeastern Alberta. The balance 65% of the Long Lake project is owned by Nexen, a Canadian energy company, which is also the operator of the project. The output from the project is crude oil.
"The transaction strengthens our Canadian presence in the oil sands business,” said Yang Hua, chief executive officer of CNOOC, in a written statement. “We believe that upside potential of the assets will facilitate local energy supply and our production growth in the long term."
The deal is subject to approvals in Canada and China. Last month, PetroChina and EnCana called off a $5.4 billion deal agreed in February to jointly develop a portfolio of shale gas assets. The parties said they could not agree commercial terms.
However, the circumstances surrounding this deal are quite different given that Opti is in bankruptcy proceedings. CNOOC already owns a minority stake in a Canadian oil sands project, which it bought in 2005, although that deal was for a 17% stake and a much smaller outlay of around $160 million.
CNOOC was advised by BMO Capital Markets and CIBC World Markets, with legal advice from Gowling Lafleur Henderson. Scotia Waterous and TD Securities advised Opti on the deal, with legal advice from Macleod Dixon. Lazard Frères & Co is advising Opti on its restructuring.
CNOOC’s choice of advisers continues a trend among China’s energy companies of hiring boutique investment banks that bring specific industry expertise and opportunities, rather than hiring bulge-bracket investment banks. In October last year, CNOOC struck a deal that saw it shell out $2 billion for a one-third interest in the Eagle Ford shale project in south Texas, owned by Chesapeake Energy. Chesapeake's adviser on the deal was Jefferies & Company, while CNOOC's adviser was Tudor, Pickering, Holt & Company Securities.
In February this year CNOOC agreed to buy a one-third interest in another shale oil and gas lease owned by Chesapeake in the US for up to $1.27 billion. On the second deal both parties continued to work with the same advisers that had worked on the Eagle Ford shale deal.