Talisman pays $145-million for pipelines. Swimming against tide - Financial Post, September 20
By Ian McKinnon
CALGARY - Talisman Energy Inc. is paying about $145-million for gas-gathering systems in northwestern Alberta, a deal that goes against the tide of producers exiting the so-called midstream business.
One of the largest gas producers in Canada, Talisman is acquiring more than 300 kilometres of pipeline in the Edson area from subsidiaries of TransCanada Pipelines Ltd.
David Mann, a company spokesman, said the purchase fits Talisman's strategy of increasing its exposure to gas-prone regions.
Talisman expects spending in the greater Edson region will rise to between $70-million and $90-million in 2003, up from $35-million in 2000. It estimates the lightly explored region could hold six trillion cubic feet of gas reserves.
The deal should also improve utilization of a large processing plant at Edson, owned 52% by Talisman, which is barely operating above half capacity.
"Owning infrastructure is going to be a key component of being a major Canadian oil-and-gas player. You could call it counter-cyclical but I prefer to say it's a good opportunity that we've taken advantage of," Mr. Mann said. "Where they make sense to support our core business, we will acquire midstream assets."
The move by Talisman countered a recent pattern in the Canadian oilpatch where producers concentrated on exploration and development and left the midstream business, which covers gathering, processing and shipping gas to large transmission lines, to specialists from firms such as AltaGas Services Inc., TransCanada or Westcoast Energy Inc. Last year, for example, Gulf Canada Resources Ltd. sold half of its midstream assets to Keyspan Energy Development Corp. of New York for $290-million.
Industry analysts expected the trend would continue and follow the path of the United States, where up to 75% of gathering and processing is handled by third parties. In Canada, producers control between 60% and 70% of midstream assets.
Gord Currie, analyst for Canaccord Capital Corp., said control of infrastructure has more strategic importance for developing areas such as northwestern Alberta and northeastern British Columbia than in more mature parts of the Canadian basin.
"I would say owning the pipelines does a couple of things for Talisman. One, it allows them to divert feedstock to their Edson plant and, two, it acts as kind of a barrier to entry to the region," he said.
With cash flow predicted to reach a record $2.4-billion this year, Talisman will fund the purchase internally. |
