CNOOC in Offer of Guarantee of $3.9 Billion of Debt in Nexen Consent Solicitation

Cleary Gottlieb represented Citigroup Global Markets Inc. as offering and solicitation agent in an offer by CNOOC Limited to guarantee existing debt of Nexen, Inc. (Nexen), a Canadian oil and gas company, as consideration for holders to grant a consent to modify the Nexen debt. Nexen was recently acquired by CNOOC Limited, a Hong Kong-based subsidiary of the Chinese National Offshore Oil Corporation. The solicitation, commenced on March 7 and expired on March 20, was successful and received the consent of holders of more than 98% of the principal amount outstanding of the notes.

The solicitation sought consents from holders of eight series of senior unsecured notes issued by Nexen between 1998 and 2009 with approximately $3.9 billion principal amount outstanding. The purpose of the consent solicitation was to amend the indentures governing the notes to delete or amend certain restrictive covenants with respect to Nexen. In addition, as part of the consent solicitation, CNOOC Limited filed an automatic shelf registration statement in order to issue an SEC-registered guarantee of the notes held by consenting holders.

The offer contained an unusual feature in that the guarantee was structured to benefit only the holders that granted consents, assuming the requisite majority consent was received. This differs from the typical offer in which a guarantee offered in a consent solicitation benefits all holders if the requisite majority consent is received. Following the expiration of the consent solicitation, CNOOC Limited decided to gratuitously issue its guarantee to holders who did not consent, as well.

Nexen Inc. is a wholly-owned subsidiary of CNOOC Limited. Nexen is an upstream oil and gas company developing energy resources in some of the world’s most significant basins including the UK North Sea, offshore West Africa, the Gulf of Mexico and Western Canada. Nexen is strategically focused on three businesses: conventional oil and gas, oil sands and shale gas.

CNOOC Limited 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. CNOOC Limited mainly engages in exploration, development, production and sales of oil and natural gas.