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Talisman ends grand plan Canadian independent relinquishes global vision, turning Repsol offer over to shareholders; Repsol promises Canada will benefit Gary Park For Petroleum News
There was a time when, like the British Empire of old, the sun never set on Talisman Energy’s global operations.
Under the leadership of Jim Buckee, who collected a Ph.D. in astrophysics from Oxford and worked for Royal Dutch Shell and BP on his way to Canada, there were no evident constraints as he planted the Talisman flag in some unlikely corners.
But his voracious appetite for takeovers and acquisition got ahead of realities when he established an outpost in Sudan which was being torn apart by a murderous civil war and immediately collided with human rights and activist shareholder groups, who eventually forced him to bail out, setting the stage for his own departure from Talisman in 2007.
It’s an open question whether the Sudan move by Buckee and his refusal to make a graceful exit, while passing up repeated chances to enter the Alberta oil sands, was the undoing of Talisman as an international player.
Repsol How ironic though that Talisman (which got its own start from assets cast off by BP) seems about to come under the control of Spain’s Repsol - an unthinkable outcome for any blue-blooded Englishman in the four centuries since the humiliation of the Spanish Armada, which was bent on an invasion of the island nation.
After months of swirling rumors, Repsol made its decisive move on Dec. 15 by offering US$13 billion - US$8.3 billion for shares and the rest for assumed debt - to take Talisman out of its misery, not all its own doing.
But the oil price crash has acted as a further drag on its debt load, spreading further panic among investors.
Assuming the deal meets Repsol’s objective of an early closure, the Spanish company will boost its production by 76 percent to 680,000 barrels of oil equivalent per day and fatten its reserves by 55 percent, while acquiring an experienced exploration and production staff of 2,800.
353,000 boepd Powered by strong results in the Duvernay formation of northern Alberta, Colombia and Vietnam, Talisman recorded output of 353,000 boe per day in the third quarter, 323,000 boe per day of which came from its core plays in the Americas and Asia-Pacific, with a heavy emphasis on shale plays.
The combined operations would make Repsol one of the 15 largest privately owned oil and gas companies in the world, with activity in more than 50 countries and more than 27,000 employees.
The offer amounts to US$8 a share, after Talisman gained 83 percent in the five days before the offer was announced, but that is well short of the US$12 value a year ago, providing ammunitions for those investors who believe Talisman has caved in during a sweeping oil price correction.
Bernstein Research analysts said there is “untapped value” in many of Talisman’s assets, which could have thrived “under the right management.”
Bernstein analyst Bob Brackett said the company had an upside prospect of US$17.30 a share if it embarked on a “level of intensity of action not yet witnessed” that could have put it on a “sustainable footing.”
Kvisle stepping down Talisman Chief Executive Officer Hal Kvisle, the former CEO of TransCanada who was hired two years ago to set the company on a different path, had made it clear he wanted to step down by the end of December.
But he conceded recently that the search for his replacement had been complicated by a lack of clarity around on-again, off-again talks with Repsol, the sale of Marcellus midstream assets and negotiations with China’s Sinopec to acquire the rest of Talisman’s stake in the British North Sea.
Kvisle insisted the Repsol deal is a “compelling opportunity” for a company that has considered “in detail other alternative options”
Himalaya Jain, a portfolio manager at ScotiaMcLeod, added weight to Kvisle’s argument that the “time was really running out” for Talisman, whose “ability to ride out these very low oil prices was very short.”
Because Repsol has pledged to maintain a corporate presence in Calgary, Kvisle said the transaction should be “universally approved” by Canadian government regulators, especially given that the company is fully privatized with no involvement from the Spanish government.
A Repsol spokesman said his company expected to be “carefully examined like any other foreigner. ... We are very conscious that we’re guests in the countries where we operate.”
“We will do our best ... to show we can build benefit for Canada, for Alberta, for the employees and for the company as a whole.”
CIBC World Markets analyst Arthur Grayfer said there was no reason why the Canadian government would block the deal because Canada accounted for only 15 percent of the company’s production.
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