Sudan: "Talisman should hang on to the project and wait for the political storms to abate"
"If I were them, I'd hang tough"
"It can only improve from here, regardless of what the company does with the project"
Talisman falls amid turmoil in Sudan - Expects no impact
By CLAUDIA CATTANEO
The Financial Post, December 14
CALGARY - Talisman Energy Inc. took another pounding in
the stock market yesterday -- this time over a power struggle
between Sudan's two top strongmen that resulted in the
declaration of a three-month state of emergency and the
suspension of the country's parliament.
The Calgary-based oil and gas company, whose stock has
been rattled in recent weeks by U.S. government criticism and
the threat of Canadian sanctions against the African country,
said it doesn't expect the emergency laws to affect its oil
project in the country.
"Life is going on normally" for the company's 150 employees
in Khartoum, said David Mann, a Talisman official.
Talisman shares lost 95c in Toronto yesterday, closing at
$34.05, after Sudan's president, Omar el-Bashir, dissolved
parliament on Sunday and declared the emergency, apparently
over frictions with the legislature's powerful head, Hassan El
Turabi.
Mr. Mann said his company, which has striven to remain
outside Sudan's complex politics, doesn't anticipate its
fortunes changing if one leader prevails over the other.
"We tend not to align ourselves. Our licence to operate is
given to us by the government of Sudan, whoever that may
be," Mr. Mann said.
Canada's largest oil and gas explorer has been criticized by
the U.S. government, the United Nations, churches and
human rights groups for taking a 25% interest in an oil project
in Sudan last year in partnership with the state oil companies
of Sudan, Malaysia and China. They claim oil revenue is
exacerbating a 16-year civil war against Sudan's rebel-held
south.
Lloyd Axworthy, the Foreign Affairs Minister, has asked the
company to use its influence to facilitate peace in the region
and to ensure cash from oil isn't buying weapons.
During a meeting last month with North American financial
analysts and media, Mr. Turabi promised to use oil revenue to
improve the country's infrastructure and alleviate poverty.
Gord Currie, an analyst with Canaccord Capital Corp. in
Calgary, said Talisman should hang on to the project and wait
for the political storms to abate.
Sudan, which already produces 40,000 barrels a day for the
company, or about 10% of its total oil and gas production,
could be hard to be replace, he said.
With Sudan, the company's production growth is 29% over
last year's average. Without it, it falls to 16% growth over last
year. "So, it's not the end of the world [if they sell], but it's a
significant difference in growth rate. The challenge would be,
what do they do instead? If I were them, I'd hang tough."
Robert Plexman, oil and gas analyst with CIBC World
Markets, said the company's stock is trading at such a low
multiple relative to its peers, or about three times next year's
cash flow per share, it can only improve from here, regardless
of what the company does with the project.
"We keep the 'strong buy' recommendation on because it
seems that all the risk in Sudan is fully discounted in the stock
here. So, one way or another, the situation we think improves
from here."
Lee Fullerton, spokesperson for the Ontario Teachers'
Pension Plan Board, one of Talisman's largest shareholders,
said the board is hanging on to the stock, despite pressures
from human rights organizations to divest.
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