China’s CNOOC to buy OPTI Canada for $2.1-billion

China has agreed to make another multibillion-investment in Canada’s oil sands, this time striking a deal to buy OPTI Canada Inc., the struggling energy company that filed for bankruptcy protection last week.

China National Offshore Oil Corp. has agreed to pay about $2.1-billion (U.S.) for the Calgary-based company, with most of the cash going toward OPTI’s lenders. Indeed, equity shareholders will only receive $34-million, or 12 cents per share. The deal was announced early Wednesday morning.

The proposal not only rescues OPTI, but gives Nexen Inc. a wealthy partner for the Long Lake oil sands project – a major, but troubled, effort. OPTI developed technology that it hoped would transform the industry, but so far its take on upgrading and extracting bitumen via steam-assisted gravity drainage (SAGD) has struggled. OPTI owns 35 per cent of Long Lake. Like other SAGD projects, Nexen and OPTI pipe steam into the ground to melt the bitumen and then suck the tar-like goo to back up to the surface using another pipe, instead of using shovels and trucks to get at the bitumen.

That project’s slow development and ballooning budget put the small oil sands company in a financial pinch years ago. CNOOC, however, is one of the world’s largest energy firms, and Canadian companies and investors have embraced Asian partners because of their deep pockets and patience – both needed at Long Lake.

“CNOOC Limited is a technically experienced and well-capitalized company that is equipped to support further development at Long Lake and future expansions in the Canadian oil sands,” Chris Slubicki, OPTI’s chief executive, said in a statement.

Nexen and OPTI churned out 30,000 barrels of bitumen per day at Long Lake, according to a report in May. (The pair had pledged to produce between 40,000 and 60,000 barrels per day by the end of 2010. Nexen and OPTI have repeatedly missed production targets at Long Lake, pushing them to recently revamp the project’s blueprints and frustrating investors along the way.)

The CNOOC offer needs approval from two thirds of OPTI’s second lien noteholders, and the Canadian company said it has secured support from 55 per cent of these lenders. OPTI’s board, which set out to solve its financial conundrum in November 2009, unanimously supports the proposal.

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Source: Globe & Mail