DBRS Places Nexen Inc. Under Review with Positive Implications Following Announcement of Acquisition by CNOOC

DBRS has today placed the BBB Long-Term Unsecured Debt, BBB (low) Subordinated Unsecured Notes and Pfd-3 Preferred Shares - Cumulative ratings of Nexen Inc. (Nexen or the Company) Under Review with Positive Implications. This rating action follows the announcement that the China National Offshore Oil Company Limited (CNOOC) has agreed to acquire Nexen for $19.4 billion, which includes $15.1 billion in cash and $4.3 billion in assumed debt. This offer includes the purchase of Nexen’s preferred shares ($195 million). The transaction is expected to close in the fourth quarter of 2012, subject to shareholder and various regulatory approvals.

The Under Review with Positive Implications status reflects the change in ownership should the transaction proceed as proposed. CNOOC’s credit quality is significantly stronger than Nexen’s, reflecting its (1) size and scale of operations, (2) strong financial profile, with low debt levels and strong liquidity, and (3) 64% ownership by the government of the People’s Republic of China, which provides indirect support.

The transaction is strategic to CNOOC by increasing diversification of its operations. CNOOC has traditionally relied on regional production in China for the majority of its operating segments. The acquisition of Nexen is expected to be used as a platform to increase CNOOC’s international asset base, providing a geographically diverse mix of offshore and onshore operations.

CNOOC is China’s largest producer of offshore crude oil and natural gas, and one of the largest independent oil and gas exploration and production companies in the world, with market capitalization of approximately $90 billion, assets of $61 billion, and production of 900,000 barrels of oil equivalent (boe) per day. Operations are focused primarily in the South China Sea region.

Nexen is an independent Canadian-based upstream oil and gas company with operations located primarily in the U.K. North Sea, North America and other international locations. Production is 200,000 boe per day, heavily weighted toward crude oil and liquids (83%).

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on the DBRS website under Methodologies.