Moody's Investors Service has confirmed the ratings of Talisman Energy Inc.—Baa1 senior unsecured—following the company's announcement of the sale of its indirectly held 25 percent interest in the Greater Nile Oil Project in Sudan to a subsidiary of India's national oil company.
Talisman expects to realize net proceeds plus interest of $758 million, and the transaction is expected to close by year-end. Operations in Sudan accounted for approximately 10 percent of Talisman's total net production in 2001 as well as 11 percent of the company's 2001 year-end net proved developed reserves.
Talisman plans to use a portion of the proceeds from the sale for share repurchases, however, Moody's confirmation of the current Baa1 rating assumes those share repurchases will total approximately five percent of Talisman's outstanding shares. The ratings outlook is stable.
Ratings confirmed are Talisman's Baa1 senior unsecured debentures, Baa3 preferred securities, and Prime-2 commercial paper rating. Talisman's Baa1 senior unsecured rating continues to be supported by a relatively strong balance sheet, moderate near term production growth, competitive operating costs, and historically prudent fiscal policies.
The rating confirmation considers the impact the sale will have on the company's leverage. Excluding the Sudan reserves of approximately 90MMBOE (net), total adjusted debt increases by approximately $0.30/BOE, resulting in total adjusted debt to total proved developed reserves of about $3.10/BOE (using 2001 net reserves).
Therefore, leverage continues to remain within the range consistent with the Baa1 rating. In addition, the sale will result in the loss of approximately 40,000 BOE/day (net) of high margin production.
From a political risk standpoint that is viewed as a positive, however, one of Talisman's near term and medium term challenges will be replacing that production with barrels that have equally attractive economics.
Those barrels may ultimately come from offshore development projects in Malaysia and Indonesia, or through acquisitions. The ratings confirmation further considers the modest negative impact the sale is expected to have on Talisman's overall cost structure.
Talisman Energy is one of Canada's largest independent oil and natural gas exploration and production companies, with headquarters in Calgary, Alberta. Talisman produces oil and natural gas in Canada, the North Sea, Indonesia, Malaysia and Vietnam. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
