Two affiliates of the Canadian energy explorer, Talisman Energy Inc. (TLM), have entered into an agreement with the investment group led by global private equity firm, Advent International, to sell their holding in the Ocensa Pipeline. This 12% interest in the largest crude oil transportation system of Colombia will be sold for a cash consideration of around $595 million.
Other affiliates of Talisman would retain the right to transport about 63,000 barrels of crude oil per day. Talisman plans to use this retained interest to transport proprietary crude and use the surplus to generate third party revenue. The Ocensa Pipeline is an important link between Colombia's Llanos region and the Atlantic Coast and transports about 60% of the country’s crude oil.
Per management, this sale is in line with the company’s 18-month divestment target of $2–$3 billion. Last month, the company sold its Montney Assets for C$1.5 million. When combining the Montney divestment with this equity interest sale and the sale of some smaller Canadian assets, the proceeds reach approximately $2.2 billion. The company plans to use the proceeds to reduce debt and strengthen its financials. Moreover, the funds would aid the company in unlocking greater potential from its core regions.
Apart from Talisman, the investment group led by Advent International will also acquire interest from Total Colombia Pipeline, an affiliate of Total S.A. (TOT) and from the Spanish multinational oil and gas company, CEPSA, resulting in a 22% holding in the pipeline. The majority rights however remain with a subsidiary of the Colombia-based petroleum company Ecopetrol S.A. (EC).
Talisman Energy is a major independent oil and gas exploration and production company that currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked energy sector stocks such as the Zacks Rank #1 (Strong Buy) Abraxas Petroleum Corp. (AXAS).