Talisman Energy Inc. has reached a deal to sell its stake in a pipeline in Colombia, although at a lesser price than some analysts expected the company to fetch.
Talisman will sell its 12 per cent interest in the Ocensa pipeline for $595-million (U.S.), according to a statement it released Tuesday. The company retains the right to ship oil on the pipeline and trade excess capacity to others for cash. Talisman had previously announced its plans to sell its stake in Ocensa.
The sale means the Canadian company hit its target of selling $2-billion to $3-billion (Canadian) in the 18 months since March given it sold the majority of its Montney stake for $1.5-billion. Talisman, under the direction of chief executive Hal Kvisle but under pressure from a high-profile activist investor, is trying to clean up its balance sheet and create a company more focused on profit than size.
While the Ocensa pipeline sale does both of those things, the price tag is below what Talisman values it at and what some in the market expected.
When Pacific Rubiales Energy Corp. bought oil explorer Petrominerales Ltd. in September, a slice of Ocensa was part of the $935-million takeover. This prompted analysts to reconsider what Talisman might get for its 12 per cent stake.
Before the deal, analysts predicted Talisman could collect between $500-million and $600-million for its share of Ocensa. After Pacific Rubiales bought Petrominerales, some in the market believed this estimate was no longer valid. The range is “looking light all of a sudden,” one Calgary-based analyst said at the time.
Last month, Phil Skolnick, an analyst at Canaccord Genuity, speculated Talisman may be able to sell its stake in the Colombian pipeline for between $700-million and $800-million.
Talisman valued its holding at a higher number than the sale price, although its assessment includes both its slice of equity in the pipeline and value of the shipping rights. The company retained the right to move oil on the pipeline, thus making its previous appear calculation richer.
“In 2013, Talisman plans to ship third party volumes using its Ocensa transportation capacity,” the company says on its website. “Talisman has re-valued its interest in the pipeline to $662-million.”
Greg Pardy, an analyst at RBC Dominion Securities Inc., declared the Ocensa transaction “positive.”
The price tag “falls toward the upper end of our expected of $500-$600-million range,” he said in a note to clients Tuesday.
The Calgary-based company is under pressure from activist investor Carl Icahn to make Talisman more valuable for shareholders. Mr. Kvisle had launched a restructuring plan before Mr. Icahn purchased his 7 per cent stake in the oil and gas firm. Talisman last week gave Mr. Icahn’s firm two board seats, and on Monday Talisman and its Colombian partner, state-controlled Ecopetrol, declared an oil field in the South American country commercial.
An investment group led by Advent International agreed to purchase Talisman’s share of the Ocensa pipeline, the Calgary-based company said. Talisman retains the right to ship 63,000 barrels of oil equivalent per day on the line.
“Through this transaction, we have unlocked net value from our portfolio and retained our crude transportation rights,” Mr. Kvisle said in a statement. The money, along with the cash from the previously announced Montney sale, will be used to reduce debt and strengthen Talisman’s balance sheet.
Talisman has had difficulty selling some of its assets. It wanted to unload its north Duvernay property, but is now pursuing a joint venture deal because it could not find a buyer.
In Europe, Talisman is facing the same problems plaguing its potential Canadian asset sales. The company wants to ditch its stake in the North Sea in Norway, but on Talisman’s third-quarter conference call in November, Mr. Kvisle said “it’s clear that there’s a limited buyer universe for our asset base” there.
Roadblocks also exist for Talisman’s North Sea stake in the United Kingdom. “While we’re open to exploring new ideas around the U.K., we have statutory and contractual obligations to meet, and those restrict our ability to simply dispose of these assets,” he said.