China’s top offshore oil producer CNOOC Ltd has agreed to buy Canada’s Nexen Inc for about $15.1 billion in one of the most ambitious acquisitions by a Chinese company to date that may test Ottawa’s tolerance of foreign takeovers.

State-controlled CNOOC said it would pay $27.50 per common share, representing a 61 percent premium to Nexen’s closing price in New York on Friday.

"The aggregate value of the consideration of the proposed acquisition is approximately $15.1 billion (approximately HK$117.2 billion), and is to be payable in cash," CNOOC said in a statement filed on the Hong Kong stock exchange.

"The current indebtedness of Nexen of approximately $4.3 billion (approximately HK$33.6 billion) will remain outstanding. The company intends to fund the proposed acquisition through existing cash resources and external financing."

The statement said the deal would complement CNOOC’s offshore production in China with Nexen assets in many of the world’s most significant producing regions, including Western Canada, the UK’s North Sea, the Gulf of Mexico and offshore Nigeria.

Nexen’s assets include conventional oil and gas, oil sands and shale gas.

The statement said that the Nexen board has unanimously approved of the deal.

CNOOC made its first tentative Canadian investment in 2005, paying C$122 million ($120.76 million) for a 16.7 percent share of the then-private oil sand developer MEG Energy Corp.

It completed a C$2.1 billion acquisition of Opti Canada Ltd in November, giving the Chinese firm its second stake in a Canadian oil sands company.

The deals in Canada haven’t yet awakened the political opposition seen in the United States in 2005 when CNOOC bid $18.5 billion for U.S. oil and gas producer Unocal Corp. The backlash killed that deal, upsetting Sino-U.S. relations.

But Canada can review and block any foreign investments worth more than C$330 million, a paltry sum in the global mergers game, if it thinks a deal is not in Canada’s best interests.

It most noticeably exercised that right in 2010 when it blocked Anglo-Australian mining giant BHP Billiton’s $39 billion hostile takeover of Potash Corp, the world’s top fertilizer producer.

Yan Shi, UOB Kay Hian oil analyst based in Shanghai, said the price for the deal seemed reasonable.

"Assets in Canada are generally about more than 20 U.S. dollars per barrel. The cost in the deal is less than 20 dollars per barrel," Shi said.

"CNOOC has been seeking overseas acquisitions, as the domestic reserves are limited. But there has been many limits, things like foreign companies are reluctant to sell, price too high. This deal would be quite successful," she said.

Chinese companies have been among the most aggressive in targeting assets around the globe to help feed the fast growth of the world’s second biggest economy.

BMO Capital Markets and Citigroup Global Markets Inc advised CNOOC while Nexen was advised by Goldman Sachs and RBC Capital Markets. ($1 = 1.0103 Canadian dollars)

Nexen is widely considered to have one of the highest cost and least economic oilsands projects out there at the moment. A real catastrophe. Last I read, cost of production including capital was around $150/barrel, an obvious money loser. Still, Nexen had some good assets in Yemen and elsewhere that the Chinese definitely would want to get their hands on.

I suspect that once CNOOC is in charge, it will be tough slogging for Canadian citizen oil and gas professionals who want to join the company.

how much of the 150 per barrel is labor? these Canadian oilmen are paid pretty fat.. now replace that with foreign Chinese labor.. i bet they could make it profitable.