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The agreement boosts Nexen's share of the C$6.1 billion project to 65 percent from 50 percent, gives it operating control of the 60,000 barrel per day upgrader run by Opti and will boost its 2009 oil production targets by 5,000 barrels per day (bpd) to a range of 225,000 to 240,000 bpd after royalties.
The Long Lake project officially opened this year but the upgrader that had been operated by Opti is still starting up and not yet fully operating.
Opti, whose major asset is its Long Lake stake, has seen its shares pummeled in a downturn for oil sands stocks that hit smallest companies the hardest. Its stock, which traded at C$25.40 in June, has fallen 93 percent since as oil prices tumbled, making it vulnerable to a takeover.
Now Nexen no longer has to worry about having an unwanted partner in the project but the purchase may make Nexen more attractive to any potential buyer.
"Nexen is now in the driver's seat at Long Lake and no one else can muscle their way in," said Martin Molyneaux, an analyst at FirstEnergy Capital. "But it does make them a more attractive target for someone with a bigger balance sheet ... There's not a caveat on Long Lake anymore."
Nexen shares jumped earlier this month on rumors it was about to be acquired. Chatter that French oil major Total SA was interested in buying the company has since eased, however.
Nexen said it doesn't expect the hand-over of the upgrader, which converts the oil sands bitumen into refinery-ready crude, to be troublesome.
It also expects that having control of both the upgrader and thermal production, where steam is pumped into the ground to liquefy the bitumen so it can flow to the surface, to cut costs.
Nexen said it can easily afford to pay for the acquisition, since it has C$4 billion cash on hand and undrawn credit lines and expects to generate substantial free cash flow.
Nexen shares closed at C$22.67 on Tuesday on the Toronto Stock Exchange, down 23 percent over the past 12 months, while Opti closed at C$1.87.
($1=$1.20 Canadian)
(Additional reporting by Arup Roychoudhury; editing by Peter Galloway)
((scott.haggett@thomsonreuters.com; Reuters Messaging: scott.haggett.reuters.com@reuters.net; +1 403 531-1622)) Keywords: OPTICANADA/NEXEN (For help: Click "Contact Us" in your desk top, click here or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com ; +1 646-223-5546)
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