Canada’s Talisman Energy has entered into a definitive agreement for the sale of its indirectly held interest in the Greater Nile Oil Project in Sudan to ONGC Videsh, a subsidiary of the Oil and Natural Gas Corporation, India's national oil company.
The aggregate amount to be realized by Talisman from the transaction, including interest and other closing adjustments, is anticipated to be approximately 1.2 billion Canadian dollars $758 million. Talisman expects the sale to be completed by December 31. The completion of the transaction is subject to certain conditions, primarily relating to obtaining consents from the Government of Sudan and the other consortium members and to the waiver or expiry of rights of first refusal.
"Talisman's shares have continued to be discounted based on perceived political risk in-country and in North America to a degree that was unacceptable for 12 percent of our production,” stated Talisman’s President and Chief Executive Officer, Jim Buckee.
As part of the sale, the purchaser will receive the benefit of all free cash flow from Talisman's interest in the project commencing September 1, 2002 and will also receive associated working capital as at August 31, 2002 estimated to be $30 million. In accordance with accepted accounting principles, Talisman will continue to record production, cash flow and capital expenditures related to the project until closing.
"We received other proposals, but we consider this to be the most attractive opportunity, generating a full cycle, after tax rate of return of approximately 30 percent. We expect to book an after tax accounting gain of approximately CDN 340 million on completion of the transaction…We intend to use this money to pursue our long-term strategy of growing value per share while maintaining financial flexibility,” added Bukee.
According to the President, Talisman intends to repurchase sufficient shares, to ensure at least five percent productions per share growth on a comparable basis, with or without Sudan, for 2003 over 2002. On this basis, the company intends to deliver at least a five to ten percent growth in production per share this year through a combination of executing a business plan and share repurchases.
Talisman acquired a 25 percent interest in the Greater Nile Oil Project in October 1998 through the acquisition of Arakis Energy for approximately 8.9 million common shares of Talisman. Based on Talisman's share price at the time, the purchase price for Arakis was approximately CDN $278 million. At the time, commerciality had been established and project development was underway.
The other consortium members are CNPC International holding a 40 percent share, Petronas Carigali Nile holding a 30 percent share and Sudapet with a five percent share. Current gross production is about 240,000 barrels per day.
Talisman Energy is one of the largest independent Canadian oil and gas producers with operations in Canada, the North Sea, Indonesia, Malaysia, Vietnam and Sudan. Talisman is also conducting exploration in Algeria, Trinidad, Colombia and the United States. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
