Stockwatch Energy Today April 14, 2022,
Over in Alberta, oil sands producer MEG Energy Corp. (MEG) added 29 cents to $18.22 on 4.98 million shares, closing out a short but volatile week. Investors are wondering what to make of rumours surrounding one of MEG's major shareholders. That would be China's CNOOC, a sizable investor in MEG since 2005. Reuters and other news sources began reporting this week that CNOOC is considering exiting its operations in Canada, including its oil sands assets and potentially the MEG investment, amid fears of sanctions relating to the Russia-Ukraine war. China has refused to condemn Russia for invading Ukraine, adding to already strained relations between China and the West.
CNOOC has not confirmed the rumours. The potential sales come as CNOOC pursues a listing on the Shanghai Stock Exchange, having previously lost its NYSE listing last year as part of a U.S. government crackdown on companies associated with the "Chinese military-industrial complex." This also led CNOOC to delist its American depositary shares from the TSX. Last month, Chinese regulators gave CNOOC the all-clear for a homecoming listing in Shanghai (in addition to its Hong Kong listing), and this week, the company revealed that it is planning an initial public offering for more than $5-billion (U.S.). Its name in the headlines coincided with the rumours that it is preparing to unload its Canadian assets (and its U.S. and U.K. ones too).
CNOOC's Canadian presence includes ownership of 28.6 million shares of MEG, or 9.3 per cent of the 307 million shares outstanding. It started acquiring shares of MEG in 2005 (representing the very first time a Chinese company had taken an interest in a Canadian oil sands producer) and owned all 28.6 million shares by the time MEG went public in 2010. As MEG was private before then, the exact amount that CNOOC paid for its shares is not entirely clear, but documents reveal that it bought the vast majority of them -- 25.0 million shares -- for a total of $425.1-million. The full position of 28.6 million shares is currently worth $486-million.
Worth noting is that MEG announced last month that it has received TSX approval to buy back up to 27.2 million shares over 12 months. Investors seem confident that MEG can use this program to offset potential selling pressure. Today the stock closed at $18 for the first time all month.