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Nexen chief to leave as rivals circle

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By Carola Hoyos in London and Julie MacIntosh in New York

Published: October 29 2008 02:00 | Last updated: October 29 2008 02:00

Charles Fischer, chief executive of Nexen, is expected to step down today as large energy groups, including Total of France, are considering a takeover of the Canadian oil company following a slide in its share price.

Marvin Romanow, Nexen’s chief financial officer, may be tapped to replace Mr Fischer, who has left bankers and executives from other oil companies speculating over the motivations for his anticipated departure.

Along with Total, Royal Dutch Shell, which is heavily invested in Canada’s oil sands, is also weighing its interest in Nexen, according to banking insiders and oil executives.

Other companies said to be possible suitors of Nexen, whose assets are viewed as well placed and relatively young, include CNPC of China and BP.

“It’s absolutely on everybody’s radar screen, it’s a real stir of the pot,” one energy banker said. “It’s all about asset quality and Nexen is perceived as having great assets.”

A deal for Nexen would be the first move in the anticipated consolidation of the oil industry, where larger oil groups are expected to buy up their smaller counterparts.

Bruce Bullock, director of Cox School of Business in Dallas, said: “Nexen may be the first domino to fall. In this environment, the longer a company waits to get into the M&A market, the fewer players will be available.”

Nexen declined to comment.

Meanwhile, Ian Taylor, head of Vitol, the energy trader that yesterday announced a £82m ($127.6m) takeover bid of oil producer Arawak, said he believed the industry stood at the edge of a wave of consolidation. “This is the best opportunity for 15-20 years. Many companies are trading at below the value of their assets,” he said.

Several executives who work on strategy for major oil companies said US companies such as Anadarko, Marathon and the UK’s BG were prime targets coveted by many of the top seven oil companies by market value. In Canada, EnCana and Suncormight also prove attractive, Mr Bullock said.

Total had eyed Nexen before and found it too expensive, and a few other companies have also looked at Nexen. But Calgary-based Nexen’s share price has fallen 56 per cent in the past six months, shrinking its market capitalisation to C$7.5bn ($5.7bn) as oil prices have more than halved from $147 a barrel in July to $63 a barrel today.

Nexen missed production targets last year and its Long Lake oil sands project is behind schedule. But Randy Ollenberger, analyst at BMO Capital, said Nexen had good cash flow and attractive assets, including a 7.23 per cent stake in the Syncrude venture, fields in the Gulf of Mexico and the North Sea, and shale gas.

He said interest from Shell or Total, a relatively late entrant to oil sands that is now keen to beef up its presence, made sense. Christophe de Margerie, Total’s chief executive, has often said he believes oil prices will rise when demand recovers, only to find supply restraints remain.

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