Talisman offers $365 mln for Sweden's Lundin
(UPDATE: All figures U.S. unless otherwise noted)
CALGARY, Alberta, June 21, 2:08 pm Eastern Time (Reuters) - Talisman Energy Inc. (Toronto:TLM.TO - news), one of Canada's largest oil and gas producers, is paying $365 million to establish a toehold in Malaysia, a move the Canadian company said on Thursday will boost production while giving it more options to deal with a controversial but lucrative oil development in Sudan.
Calgary-based Talisman offered $3.43 per share for Lundin Oil AB, a Swedish company with properties in Malaysia, Vietnam, Papua New Guinea and the U.K. North Sea. The offer is supported by the Lundin family, which owns 26 percent of the target. The $365 million deal includes $21 million of cash and working capital.
Established reserves in the North Sea, a core region for Talisman, plus the opportunity to rapidly boost output in Malaysia were key attractions for the buyer.
``This acquisition fits Talisman's strategy of acquiring assets in the late exploration stages, prior to significant production,'' chief executive Jim Buckee said on Thursday during a conference call. ``It provides another long-term growth vehicle for Talisman's shareholders and we achieve this at reasonable cost.''
The company, which expects to spend $350 million over the next four years in Malaysia, hopes to produce 50,000 barrels of oil equivalent per day by 2004, up from the current level of 3,000. The number may go higher because of recent discoveries on the acquired properties.
The purchase, to be funded from cash and debt, will add C$2 per share in cash flow by 2003 and 2004, Buckee said.
The complex deal for a restructured Lundin does not include the Swedish firm's assets in Russia or Libya. The latter were acquired in a separate deal on Thursday by Petro-Canada (Toronto:PCA.TO - news) for $75 million.
The transaction also excludes Lundin's interest in Sudan, which is adjacent to the concession operated by the Greater Nile Petroleum Operating Co. Talisman has a 25 percent stake in GNPOC, which produces about 200,000 barrels per day.
Earlier this week Buckee promised to sell out the Sudan stake, if necessary, to ensure compliance with U.S. laws and maintain access to the huge U.S. capital market.
An amendment passed last week by the U.S. House of Representatives would prevent oil companies operating in Sudan from selling securities in the U.S. The bill, which needs Senate and presidential approval, is unlikely to become law, observers have said.
Stephen Calderwood, Calgary analyst with brokerage Salman Partners Inc., said on Thursday the purchase was a good one for Talisman. But he added investors are unlikely to reward the company immediately because jumps in production and cash flow are several years away.
``There is existing production and near-term opportunities to increase production incredibly , from 3,000 barrels per day in 2001 to perhaps 60,000 barrels in 2004,'' he said. ``This is the kind of production increase multiple that Talisman has seen in Sudan but Malaysia does not have any sanctions.''
Buckee said the Sudanese investment could be worth as much as $1.5 billion. The company's involvement in the African country has drawn intense criticism from human rights groups, who allege oil revenues are intensifying a brutal civil war between the government and southern rebels. Talisman has said its presence helps protect and promote human rights.
If the House bill fails to become law, Talisman could still auction off its Sudanese stake, which accounts for 10 percent of its daily crude production.
``One of the things that we have always said is that having a new area of entry, provided by not the least by Malaysia, is one of the necessary preconditions'' to selling," Buckee said in response to an analyst's question.
Shares of Talisman dropped C$1.24 to C$59.46 in Toronto after the takeover was announced. The stock has varied between a high of C$65.77 and a low of C$43.75 in the past year.
($1 equals $1.53 Canadian)
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