ENERGY CONGLOMERATE: A CNOOC jacket, the vital part of a drilling platform, is transported from Qingdao, Shangdong Province, to South China Sea in July 2012 (XINHUA)

CNOOC's oil and gas output is expected to be enhanced by 20 percent and its proven reserves may grow by 30 percent after the Nexen purchase. "This is not only a very good complement to CNOOC's assets, but also strengthens its global layout," reads a company statement.

"The acquisition reflects our strong belief in Nexen's rich and diverse portfolio of assets and world-class management and employees," said Wang Yilin, Chairman of CNOOC, in a statement.

Han Xiaoping, an expert in the energy sector, said the Nexen deal will make it easier for CNOOC to make further acquisitions in overseas market.

"In the global energy market, CNOOC is only a second-tier company. After the Nexen deal, CNOOC will be on its way to becoming a major global player," said Han.

"Nexen's assets are scattered in Canada, the Gulf of Mexico, the North Sea and the shores alongside Brazil, which are the world's major oil resources. The Nexen deal means that CNOOC will have drilling access to all major high-yield basins worldwide. I think great changes will take place in CNOOC's future development," said Han.

Challenges ahead

After CNOOC completes the purchase, how to manage these overseas assets well will be a tough test for CNOOC.

"CNOOC has somewhat overbid for the deal and has to take over $4.3 billion of debt from Nexen, making profitability a key aspect to improve," Shen Yan, General Manager of M&A at CCID Consulting Co. Ltd. told Xinhua News Agency.

The Canadian company saw net income decrease to $59 million in the third quarter of 2012, a fall of 85 percent from the previous quarter, with lower production and higher operating costs.

Since CNOOC didn't uncover details of its promises to the Canadian Government, there is no way to judge whether the concessions that CNOOC made are worthwhile. For instance, CNOOC promised to invest a considerable amount of capital to propel the development of oil and gas exploration in Canada. If the amount is too high and the timeline is too long, it could be a huge burden for the Chinese company.

"The end of the transaction is just the first of a million steps," He Manqing, Director of the Research Center on Transnational Corporations of the Chinese Academy of International Trade and Economic Cooperation, told Beijing Review.

"When it comes to a successful M&A case, values, management principles and the balance of interests are more important than money," she said.

"Integration is the key to CNOOC's acquisition," said He. "Cultural integration is more important than technological integration."

"In all the failed cross-border M&A cases, 70 percent were because of cultural differences," she said, adding that an understanding of different cultural backgrounds and East-West management styles is key to the acquisition's success.

Email us at: zhouxiaoyan@bjreview.com

CNOOC Ltd.

CNOOC Ltd. 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. The company mainly engages in exploration, development, production and sales of oil and natural gas.

The company's core operation areas in offshore China are the Bohai Sea, Western South China Sea, Eastern South China Sea and the East China Sea. Overseas, the company has oil and gas assets in Asia, Africa, North America, South America and Oceania.

With 3.19 billion barrels of proven reserves, CNOOC Ltd. produces approximately 909,000 barrels of oil per day as of December 31, 2011.

CNOOC Ltd. has 5,377 employees and total assets of approximately 384.26 billion yuan ($61.56 billion).

Founded in August 1999, CNOOC Ltd. is listed on the New York and Hong Kong stock exchanges.

Its parent company CNOOC, which owns 64.45 percent of CNOOC Ltd., is the country's third largest oil company and ranked 101st on the list of Fortune Global 500 companies in 2012.

Nexen Inc.

As the 14th largest oil company in Canada, Nexen is an upstream oil and gas company responsibly developing energy resources in the UK North Sea, offshore West Africa, the Gulf of Mexico and Western Canada. Nexen has three principal businesses: conventional oil and gas, oil sands and shale gas.

Nexen has 900 million barrels of proven reserves as of the end of 2011. The company is listed on the New York and Toronto stock exchanges.