Malaysia’s Progress strikes $1.5b Canada deal
A Petronas subsidiary that has shelled out billions of dollars to become a major player in Canada’s natural gas industry is further expanding its position through a $1.5-billion deal with Talisman Energy Inc, the Canadian Press reported.
Calgary-based Talisman, which has been under pressure from investors to pare its holdings, is selling 75 per cent of its assets in northeastern British Columbia’s Montney formation to Progress Energy Canada Ltd., owned by Petronas.
Progress will be buying more than 51,000 net hectares of land in the Farrell Creek and Cypress areas that Talisman owns through a 50-50 partnership with South Africa’s Sasol. The all-cash deal also includes interests in wells, pipelines and processing plants.
If the deal closes as planned and Sasol doesn’t exercise its right of first refusal for the assets, the Malaysian and South African companies would be partners in the Montney.
“These natural gas interests are an attractive complement to our existing North Montney asset base in northeastern British Columbia and are among the largest remaining North Montney lands not dedicated to a potential liquefied natural gas project,” said Progress CEO Michael Culbert.
“The location, resource potential and operational synergies of these assets make this an ideal fit that expands our British Columbia resource base and increases our land position to 486,000 hectares.”
Provided the deal receives Investment Canada and Competition Bureau approval — which the companies expect to happen early next year — it will go a long way toward meeting Talisman’s goal of shedding between $2 billion and $3 billion in assets.
Once it closes, Talisman will still have acreage in the Groundbirch and Saturn areas of northeast British Columbia.
Under Talisman’s partnership with Sasol, the South African company shoulders a higher proportion of the development costs. Progress said that $870-million “capital carry” will help offset its acquisition costs.
Petronas established its foothold in British Columbia’s shale gas scene through its acquisition of Progress, announced in 2012. It has since said it intends to invest up to $11 billion in a liquefied natural gas export terminal near Prince Rupert, British Columbia, where the natural gas will be chilled into a liquid state and sent to lucrative overseas markets by tanker.
“When you think about it, the natural buyer was always the guys at Petronas for that property because it makes a ton of sense,” said AltaCorp Capital’s Dirk Lever, noting the Progress acreage is in the same area as Talisman’s position.
“There’s a motivated seller, there’s a motivated buyer.”
Several companies other than Talisman have had British Columbia natural gas assets on the market over the past several months. As recently as Tuesday, Talisman CEO Hal Kvisle painted a bleak picture of the market, saying the company was having a tough time selling assets.
He did, however, say that the company was expecting to announce one or two deals before year-end.
“It is priced in line with recent major Montney transactions, further simplifies the company and enables us to strengthen our focus on our Edson-Duvernay producing and development assets,” Kvisle said in a release on November 8.
He said proceeds from the sale will be used to pay down debt and strengthen Talisman’s balance sheet.
The Talisman-Progress deal may look like a “one-off,” but Lever said he sees a glimmer of hope in the acquisition and divestiture market.
“If you look outside that deal there are indications that things are starting to move a bit, but it’s not a torrid pace,” he said.
“There are signs that deals are starting to get done.”
Investors have been anxious to see a share-price turnaround at Talisman since Kvisle set out a new strategy for the company about a year ago.
Activist investor Carl Icahn disclosed he had a six per cent stake in Talisman last month, but Kvisle said earlier this week that it was still unclear what changes Icahn might be after.
John Stephenson, portfolio manager at First Asset Investment Management, said the Montney sale is a “positive surprise” with a higher value than he would have expected.
“This is very welcome news. It’s higher transaction multiples than one would have thought, so that’s positive and the fact that they just got anything done is terrific,” he said.
Talisman is still aiming to find a joint-venture partner for its lands in Alberta’s Duvernay shale and buyers for offshore Norway operations and its stake in a Colombian oil pipeline.
A Petronas subsidiary that has shelled out billions of dollars to become a major player in Canada’s natural gas industry is further expanding its position through a $1.5-billion deal with Talisman Energy Inc, the Canadian Press reported. Calgary-based Talisman, which has been under pressure from investors to pare its holdings, is selling 75 per cent of its assets in northeastern British Columbia’s Montney formation to Progress Energy Canada Ltd., owned by Petronas. Progress will be buying more than 51,000 net hectares of land in the Farrell Creek and Cypress areas that Talisman owns through a 50-50 partnership with South Africa’s...
A Petronas subsidiary that has shelled out billions of dollars to become a major player in Canada’s natural gas industry is further expanding its position through a $1.5-billion deal with Talisman Energy Inc, the Canadian Press reported.
Calgary-based Talisman, which has been under pressure from investors to pare its holdings, is selling 75 per cent of its assets in northeastern British Columbia’s Montney formation to Progress Energy Canada Ltd., owned by Petronas.
Progress will be buying more than 51,000 net hectares of land in the Farrell Creek and Cypress areas that Talisman owns through a 50-50 partnership with South Africa’s Sasol. The all-cash deal also includes interests in wells, pipelines and processing plants.
If the deal closes as planned and Sasol doesn’t exercise its right of first refusal for the assets, the Malaysian and South African companies would be partners in the Montney.
“These natural gas interests are an attractive complement to our existing North Montney asset base in northeastern British Columbia and are among the largest remaining North Montney lands not dedicated to a potential liquefied natural gas project,” said Progress CEO Michael Culbert.
“The location, resource potential and operational synergies of these assets make this an ideal fit that expands our British Columbia resource base and increases our land position to 486,000 hectares.”
Provided the deal receives Investment Canada and Competition Bureau approval — which the companies expect to happen early next year — it will go a long way toward meeting Talisman’s goal of shedding between $2 billion and $3 billion in assets.
Once it closes, Talisman will still have acreage in the Groundbirch and Saturn areas of northeast British Columbia.
Under Talisman’s partnership with Sasol, the South African company shoulders a higher proportion of the development costs. Progress said that $870-million “capital carry” will help offset its acquisition costs.
Petronas established its foothold in British Columbia’s shale gas scene through its acquisition of Progress, announced in 2012. It has since said it intends to invest up to $11 billion in a liquefied natural gas export terminal near Prince Rupert, British Columbia, where the natural gas will be chilled into a liquid state and sent to lucrative overseas markets by tanker.
“When you think about it, the natural buyer was always the guys at Petronas for that property because it makes a ton of sense,” said AltaCorp Capital’s Dirk Lever, noting the Progress acreage is in the same area as Talisman’s position.
“There’s a motivated seller, there’s a motivated buyer.”
Several companies other than Talisman have had British Columbia natural gas assets on the market over the past several months. As recently as Tuesday, Talisman CEO Hal Kvisle painted a bleak picture of the market, saying the company was having a tough time selling assets.
He did, however, say that the company was expecting to announce one or two deals before year-end.
“It is priced in line with recent major Montney transactions, further simplifies the company and enables us to strengthen our focus on our Edson-Duvernay producing and development assets,” Kvisle said in a release on November 8.
He said proceeds from the sale will be used to pay down debt and strengthen Talisman’s balance sheet.
The Talisman-Progress deal may look like a “one-off,” but Lever said he sees a glimmer of hope in the acquisition and divestiture market.
“If you look outside that deal there are indications that things are starting to move a bit, but it’s not a torrid pace,” he said.
“There are signs that deals are starting to get done.”
Investors have been anxious to see a share-price turnaround at Talisman since Kvisle set out a new strategy for the company about a year ago.
Activist investor Carl Icahn disclosed he had a six per cent stake in Talisman last month, but Kvisle said earlier this week that it was still unclear what changes Icahn might be after.
John Stephenson, portfolio manager at First Asset Investment Management, said the Montney sale is a “positive surprise” with a higher value than he would have expected.
“This is very welcome news. It’s higher transaction multiples than one would have thought, so that’s positive and the fact that they just got anything done is terrific,” he said.
Talisman is still aiming to find a joint-venture partner for its lands in Alberta’s Duvernay shale and buyers for offshore Norway operations and its stake in a Colombian oil pipeline.
