Calgary-based Talisman is taking advantage of BP forced asset sale with an $858-million (U.S.) acquisition that dramatically extends its footprint in Colombia, one of Latin America's fastest growing oil producers.
Talisman and Colombia's state-owned Ecopetrol SA have agreed to purchase BP's operations - which include interests in producing properties, exploration acreage and oil and gas pipelines - for $1.9-billion, with the Canadian company taking a 49-per-cent stake.
The deal is part of BP's $30-billion disposal of assets announced last week as part of the company's effort to cover the costs of the disastrous blowout in the Gulf of Mexico, including the effort to kill the well, cleanup operations, compensation for local residents and businesses and anticipated fines.
Given the forced nature of the asset sales, analysts said BP received a good value for its Colombian assets, which lay adjacent to a recent discovery made by Talisman and its Ecopetrol partner.
In fact, the assets clearly held more value to the buyers than to BP, said Andrew Potter, analyst with CIBC World Markets Inc.
"When a super major like BP sells assets, there is incremental value that a company like Talisman can put on the assets because they are going to get more attention and there is underexploited opportunities, Mr. Potter said.
BP produced 25,000 barrels of oil equivalent (boe) per day in Colombia - a spit in the bucket compared to its 3.7-million-barrel total.
Talisman said its 12,000-barrel-per-day share of that total will provide immediate cash flow to fund the exploration and development opportunities it is gaining from the sale. The company is now producing some 425,000 boe per day.
"These are tremendous assets that our team knows well," Talisman chief executive officer John Manzoni said. "They are attractively priced, with excellent running room and we are partnering with the pre-eminent oil and gas company in Colombia."
The company has been operating in Colombia for the past decade but has dramatically expanded its operations as the country succeeded in reducing political violence and in attracting foreign capital, much of its from Canadian-listed exploration-and-production firms.
Talisman participated in the land sale held last month, picking up three blocs to add to existing acreage, which now total 14 blocs and 5.2 million net acres. It is also exploring in neighbouring Peru.
The company had been focusing its growth prospects on North American shale gas and southeast Asian oil and gas plays. Its purchase of BP's Colombia assets signals a greater emphasis on Latin America.
"This is clearly an indication that Talisman is very serious about growth in Colombia," said Rafi Khouri, a Calgary-based analyst at Raymond James Inc.
Talisman said it was paying roughly $40,000 per boe in daily production and $9 per barrel of proven and probably reserves - attractive prices, according to the analysts.
"This is lower than what several of the Canadian listed companies are trading for, but it is always very tough to gauge as the quality of the oil plays a big role in valuations," Mr. Khouri said.