Now that China National Offshore Oil Co. (CNOOC) has agreed to acquire Nexen Inc. (TSX: T.NXY, Stock Forum) (NYSE: NXY, Stock Forum) for $15.1 billion, energy sector analysts are speculating about who might be next on the shopping lists of resource-hungry Chinese energy firms.
In its regular Morning Coffee newsletter, Canaccord Wealth Management said the market is likely to see the $27.50 per-share all cash deal as a positive indicator of Talisman Energy Inc.’s (TSX: T.TLM, Stock Forum) (NYSE: TLM, Stock Forum) ability to be acquired given that it has a mixture of international assets.
However, Nexen has oil sands, which Talisman does not, making Nexen more attractive, according to Canaccord oil and gas analyst Phil Skolnick. Nevertheless, money is likely to flow into Talisman given its own issues and its market cap being only $11 billion, Canaccord writes.
Trading at $12 on Tuesday, Talisman has a market cap of $12.4 billion, based on over one billion shares outstanding. The 52-week range is $19.57 and $9.72.
Canaccord says the Nexen deal also has a positive read-through to Canadian National Resources Ltd. (TSX: T.CNQ, Stock Forum) (NYSE: CNQ, Stock Forum) given that the company has a mixture of international assets and Alberta oil sands.
Trading at $27.72 on Tuesday, Canadian National has a market cap of $30 billion, based on 1.1 billion shares outstanding. The 52-week range is $41.64 and $25.58.
Penn West Petroleum Ltd.’s (TSX: T.PWT, Stock Forum) (NYSE: PWE, Stock Forum) scale, oil weighting and relatively low market multiple makes the company a good potential takeout candidate, said Canaccord Genuity oil and gas analyst Brian Kristjansen.
“The CNOOC/Nexen deal value implies a $16.35 per share takeout price for Penn West, using the 2013 barrels of oil per day metric of $76,000. That’s nearly a 30% premium to market, Canaccord writes.
Down 1% to $12.98 in early trading Tuesday, Penn West has a market cap of $6.1 billion, based on 472.9 million shares outstanding. The 52-week range is $22.22 and $12.51.
Penn West has an existing joint venture with a subsidiary of China Investment Corp. (CIC), through its 45% interest in the Peace River Oil Partnership (bitumen assets in northern Alberta). CIC also owns 5% of the outstanding shares of Penn West.
Although 98% of Penn West’s production is in Canada, Kristjansen sees a lower risk of regulatory issues given the company’s sub-$10 billion market cap.
Meanwhile, Skolnick does not expect there to be any regulatory issues with CEO’s purchase of Nexen as only 28% of the company’s production is in Canada.
“Plus there is an agreement to retain Nexen’s management team and for CEO to establish Calgary as its North and Central American headquarters,’’ Canaccord writes, adding that CEO plans to list on the TSX.
Skolnick says Total SA (NYSE: TOT, Stock Forum) of France is the only other logical buyer for Nexen. But he doesn’t expect Total, or anyone else, to try to compete with the Chinese. Therefore, he is ruling out a counter offer.