By Michael McCullough| July 20, 2011 Canadian Business
Back in 2005 the China Offshore Oil Company, or CNOOC, gotburned when U.S. lawmakers made noises to block its US$18.5-billiontakeover of integrated Unocal Oil Company, eventually bought by Chevron.Since then, it's been more timid than the two other Chinese state-ownedoil companies, Sinopec and China National Petroleum Corp. (parentcompany of PetroChina) investing in North America. Its only oilsandsholding is a piece of junior MEG Energy (now a public company) acquiredaround the same time as the withdrawn Unocal bid.
But with its $2.1-billion rescue of Opti Canada, which just last weekentered creditor protection, it not only reasserts its Canadianpresence; it looks like the good guy(CCNOC)????. While shareholders will receiveonly the slightest of premiums on their 12-cent share price, the bigwinners are bondholders, who will recoup a greater share of their loansand not be saddled with stock in an operationally troubled andundercapitalized company. Under the deal second lien debtholders willget $1.18 billion while CNOOC assumes first-lien notes for $825 million."Backstop parties" will get $37.5 million.
Probably more important to CNOOC than the 35% stake in theproblem-plagued Long Lake project that provides all of Opti's cash floware the three undeveloped oilsands properties which it can now proceedto develop at a time of its choosing using the best technologyavailable. In the meantime, it will doubtless learn a thing or two fromLong Lake's operator and majority owner, Nexen Inc. Expect this deal togo through. It's CNPC/PetroChina that has a history of backing out ofCanadian resource deals, not CNOOC, and Canadian regulators will seethis for what it is: a best-possible end to a messy business.