Canadian oil and gas company
) has wrapped up its divestiture agreement with the consortium led
by Japan's INPEX CORPORATION. The transaction was closed at $700
million, comprising 50% upfront payment and the balance in capital
Per the deal − announced last November − Nexen divested its 40%
working interest in its northeast British Columbia (BC) shale gas
assets, enabling it to hold its operatorship interest of 60% in the
joint venture domain that is located in the Horn River, Cordova and
Liard basins of northeast BC.
The divested stake of the joint venture will be controlled by the
consortium INPEX Gas British Columbia Ltd. ("IGBC") that was
established by Japan's largest oil and gas company INPEX (82%) and
JGC Corporation (18%). JGC is an engineering contractor with
potential in project management in refining, gas processing,
liquefied natural gas (LNG), and petrochemicals.
Nexen received approximately $821 million in cash from IGBC upon
the completion of the deal. The payment included an initial cash
payment and the Japanese affiliates' share of costs since the
effective date of the transaction. The remaining carry amount was
Currently, Nexen and IGBC remain busy with their appraisal and
development activities across Horn River and Cordova − that is
jointly estimated to contain 4-5 trillion cubic feet (Tcf) of
recoverable contingent resource, and the Liard basins with about
5-23 Tcf of gas potential.
Nexen intends to complete the drilling operation on the 18-well pad
in the fourth quarter of 2012, leading to increased gross
production volumes of approximately 175 million cubic feet per day
(MMcf/d) from approximately 50 MMcf/d. Additionally, Nexen and IGBC
plan to jointly appraise shale assets and examine the feasibility
of LNG exports.
Calgary, Alberta-based Nexen has a diversified portfolio of
exploration and production operations in Canada, the U.S. Gulf of
Mexico, North Sea (U.K.), Yemen, Nigeria and other areas. We
believe that the company's multi-year inventory of development
projects and endeavors will aid in accomplishing the targeted
Of late, Nexen has been in the news with Chinese energy giant
) deal last month to purchase the company for approximately $15.1
billion in cash. Per the agreement, which is expected to be wrapped
up by this year-end, CNOOC will buy all the outstanding common
shares of Nexen at $27.50 per share, representing a premium of 61%
to its closing price on the New York Stock Exchange on July 20.
Nexen retains a Zacks #3 Rank, which is equivalent to a Hold rating
for the period of one to three months.
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