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Gold/Mining/Energy : TLM.TSE Talisman Energy -- Ignore unavailable to you. Want to Upgrade?

To: Tomas who wrote (1638)	5/9/2003 8:07:08 AM
From: Tomas	Read Replies (1) \| Respond to of 1713

Talisman finding it hard to shake Sudan legacy The Globe & Mail, Friday May 9 By DEBORAH YEDLIN Talisman Energy must be feeling a bit like the loonie before its recent rise: under-appreciated despite strong fundamentals. It's not enough that the company's balance sheet is strong; it has an asset base with lots of exciting opportunities, its first-quarter numbers were good despite a 5-per-cent drop in production, and yet the only questions raised at the company's annual meeting this week were about Sudan. This despite the fact the cheque for $1.2-billion is in the bank, ownership of the 25-per-cent interest has been transferred to ONGC Videsh Ltd., a subsidiary of Indian National Petroleum Co. and the company's employees are all but gone from the region. In other words, it's history. The company operated in a difficult area and weathered criticism that the oil revenues from the joint venture in which it had a stake were used by the Sudanese government to fuel a civil war. Talisman always countered that it played a positive role in the region through the construction of schools and clinics as well as providing potable water. And it's a pretty good bet the civil war will not attract the same press attention it did while a North American company such as Talisman operated in the country. From that perspective, Talisman CEO Jim Buckee makes a good point -- the Sudanese were better off with a Western presence that had a voice with the government and, while it was at Talisman's expense, resulted in the press raising the awareness of the country's civil war in the Western world. The only issue of potential significance left on the table is the U.S. lawsuit filed in 2001 by the Presbyterian Church of Sudan under an arcane law dating back to the 18th century called the Alien Tort Claims Act. While the company tried to have the case dismissed after the sale of the Sudanese assets was announced last October, it is proceeding. But, according to Talisman executive vice-president Jackie Sheppard, the implication of a ruling granted in the church group's favour would be that corporations can be held responsible for government actions. Cast in that light the chances of success appear remote. What's clear is that Talisman is ready to move beyond Sudan, taking with it the knowledge gained surrounding the greenfield development of a new project in a foreign country, as well as the lessons learned regarding political risk. And while the market might still point to the lost production from Sudan, it's not like Talisman is letting any grass grow under its feet. By year-end the combined production from successes in Algeria and Malyasia/Vietnam will be very close to the 60,000-barrel-a-day number from Sudan. It is also about to sign a deal in Alaska that would give the company access to four mammoth fields containing reserves of between 300 million and 500 million barrels of oil in each field. And unless there is a radical shift at the White House, it's highly unlikely there will be any issues arising out of Talisman setting up camp in Alaska. Yet despite its assets and opportunities, Talisman is in the unusual position of being both prey and predator. That's because the strong balance sheet, and the fact that Sudan is gone from the asset mix, makes the company attractive to potential buyers. At the same time, the low debt level means that Talisman can go out and buy another company of size. The one stick in the mud regarding the likelihood of a corporate acquisition is Talisman's low share price, which increases its vulnerability to a takeover. A stronger share price not only acts as a protective armour, it gives a company the ability to pay for an acquisition by using its shares as currency, which makes the deal financially accretive from the moment the transaction closes and therefore tends to be the corporate world's preferred route. But at $56.50 a share, which is less than estimated net asset value, Talisman arguably has work to do. To no one's surprise, the issue of share price goes back to Sudan: In the past four years, trips to meet existing and potential investors were inevitably consumed by questions about the company's presence in the war-torn country. While Talisman works to regain the confidence of the market, or as Peters & Co. analyst Brian Prokop says, "gets out of the penalty box," investors are also waiting for the return of the "old" Buckee: the one who answered his own phone, was quick with the quips and unafraid to make bold statements -- before Sudan made him wary, weary and uncharacteristically gun-shy. Maybe then, like the loonie of late, Talisman's shares will begin to reflect the company's underlying value as they once did. theglobeandmail.com