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Talisman to Divest Montney Assets

Zacks Equity Research

Canadian energy explorer Talisman Energy Inc. (TLM), inked a deal with Progress Energy Canada Ltd. – a unit of Malaysia’s national oil firm, Petronas – to partly sell off its Montney assets in north-east British Columbia for a cash consideration of approximately $1.4 billion (C$1.5 billion). The move is part of its restructuring program.  

The natural gas asset sale involves about 127,000 net acres or 75% of Talisman’s holding in the Farrell Creek and Cypress areas. As of Oct 1, the Farrell Creek assets produced about 65 million cubic feet equivalent per day. The acreage is expected to see increased production in the fourth quarter as the company finishes its 2013 completion program. The deal also includes an $800 million drilling cost.

Per management, the Montney sale brings significant returns on the company’s investment. The divestment is in accordance with the $2–$3 billion asset sale the company plans to achieve by mid 2014. Following necessary regulatory approvals – expected in the first quarter of next year – Talisman plans to utilize the sale proceeds to lower the debt level and strengthen financials.

The Calgary, Alberta-based company would retain about 48,000 net acreage in the Montney area, through its Groundbirch and Saturn assets. The sale facilitates the company to give greater attention to its Edson-Duvernay assets.

Post announcement, shares of Talisman were up 1.3% from the previous close, settling at $11.86 on Nov 8.  

Talisman Energy is a major independent oil and gas exploration and production (E&P) company, with operations in North America (primarily Canada) and several international regions.

Talisman Energy currently retains 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, there are other companies in the E&P industry that are expected to perform better in the short term. These include Zacks Rank #1 (Strong Buy) TransGlobe Energy Corp. (TGA), Baytex Energy Corp. (BTE) and Bellatrix Exploration Ltd. (BXE).

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