China's oldest oil and gas producer has established a toehold in Western Canada with a C$320 million ($288 million) takeover of a fledgling Alberta firm.
Yanchang Petroleum International Ltd. and Novus Energy Inc. completed the transaction, announced last fall, with an elaborate deal signing ceremony this week in the Canadian industry capital of Calgary.
The combination attracted attention as the largest Chinese takeover of a Canadian energy firm since CNOOC Ltd.'s C$15.1 billion purchase of Nexen Inc. in 2012 (see Daily GPI, July 24, 2012).
Alberta Energy Minister Diana McQueen contributed an encouraging statement to the ceremony, saying the provincial government hopes to attract continuing Chinese interest. She said the deal shows foreign investor confidence in Canada.
The Novus transaction, unlike Nexen's, was too small and involved the wrong assets to trigger intensive examination or slow approval by the federal government.
The Nexen transaction led to months-long scrutiny by the Conservative regime in Ottawa, a national economic policy debate and a tightening of foreign investment controls. The Nexen takeover was a case of a Chinese state-controlled enterprise scooping up an elder pillar of the Canadian industry with big oilsands interests as well as extensive international assets in the North Sea and Gulf of Mexico.
About C$100 million ($90 million), or nearly one-third, of the takeover cost of 25-employee Novus is an acceptance by Yanchang of debts accumulated by the six-year-old Calgary firm, which was in turn sired by a merger of small producers.
Novus produces about 3,400 boe/d of oil and liquid byproducts of natural gas, primarily in Saskatchewan. The company has also built up a spread of Alberta drilling rights for future field developments.