Talisman bids $530-million for Lundin Oil - The Globe and Mail, June 21
By OLIVER MOORE and LILY NGUYEN
Calgary-based Talisman Energy Inc. announced plans Thursday to buy Sweden's Lundin Oil AB for $529-million in a deal that, if approved, will add interests in Africa and the Far East.
Talisman said it intends to retain the Swedish company's interests in the North Sea, Malaysia, Vietnam and Papua New Guinea. Projects in Sudan and Russia, it added, will become part of a newly formed spin-off company called Newco.
In a conference call after the deal was announced, Talisman chief executive Jim Buckee said that the company's main interest in the deal is the Malayasian assets.
"The key strategic driver for us is the very large upside in Malaysia. It establishes a new core area for Talisman," he said, adding that "it provides another long-term growth vehicle for Talisman, and we can achieve this at reasonable cost."
The deal is expected to add over 50-million barrels of oil equivalent (boe) of proven reserves, and about 140-million boe of probable reserves.
The acquisition is driven by two factors, Talisman said in a release. Interests in Malaysia enjoy both technical certainty and good growth prospects, with the region expected to form a core area for the company by 2004.
Talisman is a major Canadian oil and gas producer with varied holdings in Canada, the North Sea and Indonesia. But it is far better known for its chunk of a controversial oil play in war-torn Sudan that accounts for less than a 10th of its total assets.
Mr. Buckee reiterated that he remains open to the idea of selling the controversial Sudan property, which has been in the news recently because of proposed legislation in the United States that could see the company lose its coveted NYSE listing if it maintains its investment in Sudan.
"All assets are for sale. It goes without saying that we are in compliance with all laws and we will remain in compliance with all laws," Mr. Buckee said. When asked whether that means Talisman will exit Sudan only if the U.S. legislation passes, he said: "It doesn't necessarily mean that at all."
Martin Molyneaux, senior analyst and research director of FirstEnergy Capital Corp. in Calgary said there's lots of potential in Malaysia, but that it's become too much for Lundin to handle.
"The amount of capital that the Lundins had to put into this thing, their balance sheet just culd not handle it." he said.
"The Lundins have added a lot of value for very little dollars. It's time for a bigger entity with a lot bigger pockets and a bigger management team to come in and takes over the role."
Mr. Molyneaux says he thinks there is a lot of potential in Malaysia and that that's one of the main reason's he thinks the deal makes a lot of sense.
"When Talisman took over Arakis (their Sudan assets), actually Sudan was behind this point. It looks very similar to when Talisman entered Sudan," he explained. "What it boils down to is the Malaysia-Vietnam block can represent 10 to 12 per cent of this company in value and production and reserves 2 or 3 years out.
"I think that what is not readily apparent in this thing, is I think Talisman is going to be a much bigger force in southeast Asia," Mr. Molyneaux concluded.
In a separate transaction, Lundin Oil's interests in Libya are being sold to Petro Canada for $75-million (U.S.).
globeandmail.com |
