Unocal to Sell Unit in Canada to Texas Firm
As rival suitors line up to buy Unocal Corp., the El Segundo oil company Monday struck a deal of its own, agreeing to sell its Canadian subsidiary to a Houston-based oil producer for $1.8 billion.
Pogo Producing Co. will pay cash for Northrock Resources Ltd., a Calgary-based Unocal unit with oil and natural gas reserves in the provinces of Alberta, British Columbia and Saskatchewan, the two companies said. Unocal expects to book after-tax proceeds of $1.5 billion from the sale, which requires regulatory approval in Canada.
Unocal announced plans to sell its Canadian subsidiary in May, about a month after it agreed to be acquired by Chevron Corp. in a stock and cash deal that was worth $16.5 billion, or $60.51 per share based on Chevron’s stock price of $57.30 on Monday. Unocal shares rose 23 cents Monday to $65.97.
CNOOC Ltd., an oil company that is 71% owned by state-controlled China National Offshore Oil Corp., last month offered to buy Unocal for $18.5 billion in cash, or $67 per share.
The sale of Unocal’s Canadian unit carries little weight in the bidding for Unocal because Chevron and CNOOC are most interested in Unocal projects in Asia and the Gulf of Mexico, said Jeb Armstrong, energy securities analyst at Argus Research.
“Larger companies have been segueing themselves out of North America, so that in and of itself is not surprising,” Armstrong said.
CNOOC’s bid for Unocal has been met with strong opposition from some U.S. legislators, who have couched the possible buyout as a matter of national security, in part because of the Chinese government’s role in the deal and the growing competition between the two countries for oil.
On Monday, two senators asked federal trade officials to review whether CNOOC’s proposal -- which includes loans to the company at below-market interest rates -- violates China’s commitment to the World Trade Organization that its banks would lend to state-controlled entities only on commercial terms, according to a letter by Sens. Kent Conrad (D-N.D.) and Jim Bunning (R-Ky.). The letter, sent to Commerce Secretary Carlos M. Gutierrez and U.S. Trade Representative Rob Portman, came as the U.S. and China began trade talks in Beijing on Monday.
CNOOC spokesman Mark Palmer denied that the company’s offer was being unfairly subsidized: “The financing is from the parent and from banks and not from the Chinese government .... There’s nothing unusual with a parent company extending financing to a subsidiary if they think it’s a good investment.”
In California, Atty. Gen. Bill Lockyer received a preliminary response from Unocal on the attorney general’s concerns about the fate of environmental cleanup projects should CNOOC take control of the company. Unocal said Lockyer’s request for assurances was premature because there was no formal deal with CNOOC, Lockyer spokesman Tom Dresslar said Monday.
