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TLM : TALISMAN ENERGY (NYSE)
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Talisman expected to sell Sudan holdings in favour of southeast Asia play
CALGARY, Oct 17, 2001 (The Canadian Press via COMTEX) -- With a sale of its controversial Sudan properties looking inevitable, analysts say Canadian oil and gas giant Talisman Energy will likely use the proceeds to expand its holdings in southeast Asia.
Talisman president Jim Buckee fuelled new speculation this week by saying he's had discussions with various Asian countries and Saudi princes about selling the company's profitable stake in war-torn Sudan's oil industry. Canada's largest independent energy producer splits its focus between the natural gas fields of Western Canada and oil plays around the world. But with Canadian gas-focused companies selling at high premiums recently, it's likely Talisman will look abroad for a better deal, says Brian Prokop, an analyst with Peters & Co.
In June, Talisman (TSE: TLM chart, msgs) bought a grab-bag of assets from Sweden's Lundin Oil, including holdings in Malaysia, Vietnam and Papua New Guinea. The company already had holdings in Indonesia.
"The Lundin acquisition gave Talisman a new venue of opportunity, which is Malaysia," said Martin Molyneaux, a Calgary-based analyst with FirstEnergy Capital.
"They've already got a fairly significant operation in Indonesia, but now they've do got a brand new office in Kuala Lumpur."
And Talisman could add to its Malaysian properties through a land-swap rather than a sale.
Malaysia's government-owned oil company, Petronas, is one of Talisman's partners in the Sudan and rumoured to be interested in getting Talisman's stake.
The Chinese national oil company holds the largest chunk of the Sudan property and is another possible suitor, but unlikely to do a land-swap.
"I doubt they'd want to swap for something in China," said Prokop. "But would they want to swap for something in Malaysia? Absolutely. They're already there."
Talisman's 25 per cent stake in Sudan is believed to be worth between $700 million and $1.1 billion.
Talisman has faced years of heated criticism for its involvement in Sudan. Africa's largest country has been embroiled in a decades-long civil war and critics have accused the company of fuelling the war through oil profits and displacing thousands of villagers.
Pressure mounted on Talisman this spring to get out of Sudan when the U.S. was considering punitive legislation that would have barred the company from trading on U.S. stock exchanges.
But since the attacks of Sept. 11, the United States has backed away from criticism of Sudan in exchange for promised help in tracking down terrorists.
"Sudan now is off everybody's bad-boy list with the sanctions being withdrawn from the United Nations," said Molyneaux.
"Now, are there still issues? For sure," he said. "But post-Sept. 11, it's a very different world."
That means Talisman can wait for the right offer.
But analysts predict the company will still get out of Sudan as soon as possible. The holdings make up only about 14 per cent of Talisman's output while taking up far more of management's time and energy.
"Buckee and the rest of the management team are very well of their options and they've created a tonne of value in the last decade," said Molyneaux.
"Thinking that these guys are going to walk away with their tail between their legs is just not reading the management team right."
On the Toronto stock market Wednesday, Talisman shares fell two cents to $58.65.
JAMES STEVENSON The online source for news sports entertainment finance and business news in Canada
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