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Independents vow to stick with go-it-alone strategies, brush off talks of takeovers Talisman, Husky and Nexen see no reason to follow EnCana’s lead; their chief executives believe their companies can survive through domestic and global production growth Gary Park PNA Canadian Correspondent
Three of Canada’s shrinking ranks of E&P independents — Talisman Energy Inc., Husky Energy Inc. and Nexen Inc. — have declared their intentions to pursue go-it-alone strategies, brushing off talk of takeovers or mergers.
The chief executive officers of all three said their focus is on internal growth, property acquisitions and a growing stable of international prospects rather than contemplating a merger along the lines of Alberta Energy Co. Ltd. and PanCanadian Energy Corp. to create EnCana Corp. or the May 13 offer by Canadian Natural Resources Ltd. to buy the Canadian operations of financially-ailing Rio Alto Exploration Ltd. for C$2.4 billion.
Husky, valued at about C$6.8 billion, owned by interests of Hong Kong billionaire Lee Ka-shing and the hottest takeover target in the past six months, is no longer for sale and has no plans to open a data room for any potential bidders, said CEO John Lau. Husky viewed as too costly With TotalFinaElf SA and PetroChina backing away from takeover offers because they viewed Husky as too costly, Lau said his company will now pursue large-scale ventures to boost production to 470,000 barrels of oil equivalent per day from 270,000 boe per day within five years, pinning its hopes on the Wenchang oilfield in the South China Sea and Newfoundland’s Terra Nova and White Rose offshore oilfields.
Reacting sharply to suggestions that Husky wants too high a price, Lau said: “Of course we’re expensive because the return is good. You don’t expect to get a Cartier watch by paying a Seiko price, right?”
When a shareholder complained Husky’s shares have under performed its peers, Lau fired back: “We grow by about 17 percent (in the two years that Husky has been trading). I am surprised that wouldn’t make you happy.” Talisman’s Nile share being shopped Talisman CEO Jim Buckee confirmed one rumor that his company’s controversial 25 percent stake in Sudan’s Greater Nile project is being shopped among six companies including India’s state-owned Oil and Natural Gas Corp.
But he said Talisman’s asking price is higher than a reported US$650 million for an assets that contributes 56,000 boe per day to its total output of 452,000 boe per day.
“If people really want this asset and are prepared to pay the money that we would like, then we will sell it,” he said after an annual meeting that saw Talisman again confronted by protesters from human rights and religious groups who claim oil revenues have been used by the Sudan government to finance a protracted civil war.
Buckee said Talisman is closely following the fortunes of EnCana to see “whether it runs properly” and achieves its goal of “simplicity of choice for an investor or a portfolio manager.”
He said the two founding companies brought together “an awful lot of shallow gas activity, which has proven difficult in the past. To make the behemoth run will be a challenge.”
However, Buckee left the door slightly open, saying Talisman, with about C$8.7 billion in assets, would consider the option of a mega-merger, along with many other strategies. Nexen won’t sell at market Nexen chief executive officer Charles Fischer said “we’re not prepared to sell at market. (But) if someone wants to sell us their company at market, we’d be more than interested.”
For now, Nexen (formerly Canadian Occidental Petroleum Ltd. and worth about C$5.5 billion) is buoyed by its core Yemen production of 120,000 barrels per day from the Masila field and a host of new programs in Nigeria, where it predicts “very high delivery rates” from a new discovery in the offshore Usan field, Australia, Indonesia, Colombia and the U.S. Gulf of Mexico. The Gulf alone is expected to triple to 30,000 boe per day.
Among analysts there is a consensus that no company can rule out a merger or takeover and that all keep their doors open to special opportunities, especially at a time when markets say bigger is better.
With the emergence of Canadian Natural Resources Ltd. (better known by its stock symbol CNQ) as North America’s fourth-largest independent gas producer, the odds-makers suggest there is renewed pressure on Talisman and Nexen to grow, perhaps through a merger of their own.
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