Talisman's Bid for Lundin Oil Avoids Sudan Controversy
By Simeon Kerr
LONDON, June 21 (Dow Jones) - Canada's Talisman Energy Inc.'s (T.TLM) bid for Sweden's Lundin Oil AB (LOILY) carefully ringfences the company from further controversy over investment in war-ravaged Sudan, analysts said Wednesday.
Under the terms of Talisman's bid, which Lundin's management has recommended to shareholders, the Swedish company would spin off its Sudanese and Russian assets into a new company called Lundin Petroleum AB, to be run by Lundin's current management. Its Libyan assets, meanwhile, are will be snapped up by PetroCanada.
The offer is worth SEK3.9 billion in total and represents a 22.3% premium over the average 30-day closing price of Lundin Oil shares in Stockholm.
"Talisman has been very careful to ringfence its Sudanese operations in order to stay on the right side of U.S. legislation," said Lunde Salami, a U.K.-based analyst with Wood Mackenzie, an oil consultancy.
"Considering the controversy that has engulfed Lundin recently, I'm not surprised Talisman has given the Sudanese assets a wide berth," he added.
Lundin Oil is exploring for oil in Blocks 5A and 5B of the prolific Muglad Basin, which straddles the North-South border region of Sudan. Lundin-funded roads and airfields near the company's exploration blocks have been used by the military to bomb civilian targets, pressure groups say.
Companies investing in Sudan are currently weighing up the impact of the Sudan Peace Act, recently approved by the U.S. House of Representatives. It aims to ban companies trading securities in the U.S. market unless they publicly disclose their activities in Sudan, including their links to the Sudanese government and allegations of human rights abuses.
Last week, Talisman officials said its listing on U.S. stock exchanges is far more important than any particular asset. They indicated that if its U.S. position was threatened, the company would consider selling its 25% stake in the Greater Nile Petroleum Operating Company, the mainstay of the Sudanese oil industry, which exports around 200,000 barrels of oil a day through the Heglig-Port Sudan pipeline.
However, it is far from clear, what - if any - impact the Sudan Peace Act will have. The act remains subject to Senate and Presidential approval.
"Certainly, the proponents of the bill want to see companies like Talisman banned from raising finance in the U.S.," said Peter Verney, editor of Sudan Update, a specialist newsletter.
But much will depend on a pitched battle between two wings of the Bush camp. "The conservative Christian lobby is hawkish on oil investment in Sudan, while the oil lobby is more relaxed - and they both hold sway with Bush," Verney said.
Salami is doubtful that Talisman would be banned from raising financing in the U.S. "We're likely to see these companies forced to disclose their activities, allowing individual investors to make their own decisions about whether or not to invest," Salami said.
"The U.S. government seems happy with the disclosure option, and is more likely to engage the Sudanese government in order to push for peace, rather than going out to punish firms," he added.
But if Talisman's U.S. position were to come under threat, Salami said, it would certainly sell off its Sudanese holdings.
"It wouldn't be too much of a problem - the Chinese National Petroleum Corp. (Q.CPC) or Malaysia's Petronas (P.PDG) would be keen to snap up the assets," said Salami.
CNPC has a 40% share in GNPOC, while Petronas has a 30% share in GNPOC and a 28% share in Lundin's Sudanese assets.
Until then, Talisman will remain one of the biggest targets of U.S. pressure groups.
Over the past few years, these groups have lambasted Talisman, saying that oil production exacerbates the human-rights disaster that stems from the long-running conflict between the Muslim Arab north against the African, animist and Christian south.
The campaign against Talisman by activists has had some success as oil in Sudan has become a burning issue for the North American media. |
