TLM

Canadian energy explorer Talisman Energy Inc. (TLM) entered into an agreement with Swedish energy firm Lundin Petroleum AB to sell its 30% interest in the Brynhild field (previously known as Nemo), offshore Norway. The financial terms of the deal were not disclosed.

The proposed transaction – subject to approval from the Norwegian authorities – will provide Lundin Petroleum a 100% ownership in the Production License 148 in the North Sea. In November last year, Lundin, which was the operator with a 50% working interest, bought a further 20% stake in the block from Norwegian oil and gas company Noreco.

The Norwegian government, in November 2011, approved the Plan of Development of the Brynhild field that is expected to come online in late 2013 with a gross daily plateau production of 12,000 barrels of oil. The field will be developed with the help of three subsea wells.

This disposition is a part of Talisman’s strategy of divesting assets that do not fit into its long-term growth plan. The company intends to sell its high cost and low profit generating assets and concentrate on expanding the asset base that would render high returns.

During the last few years, Talisman has been selling non-core oil and gas properties around the world, thereby freeing up capital to concentrate on its longer-term prospects in Canada, the U.S., the North Sea and Southeast Asia. The company has set a target of $1 billion to $2 billion in asset divestures fo 2012.

Talisman has also trimmed its 2012 capital spending program by 11% from the 2011 level, due to weak North American natural gas prices and volatile economic conditions. However, the company expects to witness production growth of up to 5% in 2012 and believes that the projected expenditure planning will support the medium-term growth target of 5–10%. 

As such, we see the stock performing in line with the broader market and maintain a long-term Neutral recommendation. Talisman operates in the industry along with other players such as Canadian Natural Resources Ltd. (CNQ) and EnCana Corp. (ECA).

 
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