Talisman Energy (NR): Paladin deal shows commitment to North Sea consolidation - Goldman Sachs - October 20, 2005
Talisman Energy's US$2.1 billion announced offer for Paladin Resources is consistent with the company's strategy of consolidating North Sea assets and expanding into other international regions. While US$12.50 per BOE of estimated proved and probable reserves may seem high at first glance, the company's ability to ramp up production could make the deal financially accretive. We continue to believe Talisman is executing on its strategy of conventional hydrocarbon and deep gas growth. At 3.9x 2006 EV/DACF valuation is attractive, though other conventional E&Ps for now are trading at similar multiples.
Talisman is Not Rated. (Goldman Sachs & Co., and or one of its affiliates, is acting as advisor to Talisman Energy Inc. in the proposed offer for Paladin Resources PLC, and as such is an associate of Talisman Energy Inc. for the purpose of the Takeover Code. Goldman Sachs & Co., and or one of its affiliates, will receive a fee for this advisory role.)
Key opportunity/risk: Production growth Talisman plans to heavily ramp up spending over the next year, principally in the North Sea, to raise gross production to 70,000 BOE/d in 2009 from about 45,000 BOE/d at present (most of the growth would be in 2007-09). Profitably accelerating production is both the key to making this transaction successful as well as the biggest risk. The secondary catalyst is any exploration success Talisman shows, either in the North Sea or in smaller Paladin areas (Tunisia, Indonesia and Australia). Given that Talisman is allocating almost 20% of the enterprise value to exploration acreage, there is greater burden to show exploration success over the next two years from Paladin properties.
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Brian Singer, Arjun Murti.
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Talisman Energy (NR): Moving to Not Rated October 20, 2005
We have temporarily suspended the investment rating for Talisman Energy (TLM). Such suspension is in compliance with applicable regulation(s) and/or Goldman Sachs policies in circumstances when Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Brian Singer, Arjun Murti. |
