Nexen: Another Foray from France (NXY, TOT)

December 3, 2008 by Douglas A. McIntyre

Oil_sands_imageThe FT reported that Canadian oil company Nexen (NYSE:NXY) is being courted by France’s Total SA (NYSE:TOT). Total could be preparing a bid for as much as $16 billion for the Canadian company. Total will apparently not make a hostile bid, so it will have to depend on sweet talk and cash to get the deal done. Nexen has said that should it receive a bid from Total, the company would go up for auction to the highest bidder.

Nexen owns 7.23% of Syncrude, the largest oil sands miner in Canada.The synthetic crude produced there is barely viable at a crude price of$50/b. Nexen’s stake amounts to about 10% of the company’s dailyproduction of nearly 250,000 barrels. If crude prices don’t go back toat least $70/b, mining the oil sands barely pays for itself.

Total would like to get into the sands box, but this deal might be too rich at current crude prices.

Paul Ausick
December 3, 2008