abarrelfull wrote on 13 Nov 2012 09:00
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Oct. 20, 2005
Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) ("Talisman") has reached an agreement with Paladin Resources PLC on the terms of a cash offer by Talisman Energy Resources Limited ("Talisman Resources"), a wholly-owned subsidiary of Talisman, for all of the shares of Paladin at an aggregate price of approximately Pounds Sterling 1,218 million (C$2,521 million). Paladin is a UK oil and gas exploration and production company whose shares are listed on the London Stock Exchange. Paladin has a portfolio of production and exploration assets predominantly in the Norwegian, UK and Danish sectors of the North Sea, as well as in Australia, Indonesia and Tunisia. It also has exploration acreage in Gabon and Romania.
The Paladin directors have unanimously agreed to recommend that Paladin shareholders accept the offer and have irrevocably undertaken to accept the offer in respect of their own beneficial holdings representing 1.07% of the outstanding shares. In addition, shareholders beneficially owning an aggregate of approximately 6.3% of the outstanding shares have irrevocably undertaken to accept the offer in respect of such shares. Talisman Resources has also separately agreed to acquire 51,343,000 Paladin shares, representing approximately 14.96% of the existing issued share capital, from Aberforth Partners and Caledonia Investments. Goldman, Sachs & Co. is acting as exclusive financial advisor to Talisman in connection with this transaction.
"This is an attractive opportunity for Talisman and is a logical continuation of Talisman's successful business model," said Dr. Jim W. Buckee, President and Chief Executive Officer. "These assets materially enhance Talisman's production growth profile and offer significant cash generation potential.
"It is rare to have the opportunity to acquire a set of properties with the fit that we see here in the UK Central North Sea and Norway. These assets lie predominantly within our experience and expertise. Talisman will be able to continue existing exploration and development activities and add new programs readily. For example, we have overlapping interests in the Egersund basin in Norway where there are attractive redevelopment and exploration opportunities. Development drilling in the Montrose and Arbroath area will benefit from the application of modern 4D seismic techniques.
"We expect the acquisition to be accretive to cash flow in 2006 and at least through Talisman's detailed planning period which extends to 2008. It will help deliver production per share growth for Talisman which is now expected to be in excess of 10% per annum from 2006 through 2008."
Talisman estimates that Paladin's proved plus probable reserves are approximately 190 million boe. Paladin recently reported production of approximately 46,000 boe/d (1st half 2005). Talisman expects incremental production in 2006 to be in the range of 45,000-50,000 boe/d with potential for over 70,000 boe/d in 2009.
Talisman believes that the integration of Paladin's portfolio of assets will strengthen its position as a leading independent operator in the North Sea. The transaction also provides additional international opportunities in regions that are well suited to Talisman's operating style and skills.
Deal Rationale
The acquisition of Paladin is a logical continuation of Talisman's proven North Sea core area strategy which includes building a major position in Norway. Talisman has acquired assets in the North Sea and created value through low risk development and adjacent exploration opportunities.
- Approximately three quarters of Paladin's reserves and production are in the Norwegian, UK and Danish sectors of the North Sea.
- The acquisition will add a significant operated core area at MonArb in the Central North Sea (Montrose, Arbroath, Arkwright, Brechin, Wood). With the introduction of modern 4D seismic, a large number of prospects and leads have been identified in MonArb.
- Paladin will bring approximately 600,000 net acres of exploration acreage in Norway.
- Paladin's 40% working interest and operatorship of Production License 316 in Norway will give Talisman a strategic position in the Egersund basin. Talisman acquired a 30% interest in this area earlier this year. Talisman sees material upside potential here from both exploration and development.
This acquisition will allow Talisman to create value for its shareholders.
- Talisman will pay approximately Pounds Sterling 1,218 million (C$2,521 million) for all of the shares of Paladin.
- Talisman estimates that Paladin's proved plus probable reserves are approximately 190 million boe. In addition, Talisman sees significant additional exploration and development upside.
- Talisman expects to invest more than C$1 billion on Paladin acreage over the next three years, which represents a significant increase over recent spending levels on these assets.
The acquisition should allow Talisman to exceed its commitment to deliver 5-10% production per share growth.
- With this acquisition Talisman expects to deliver production per share growth in excess of 10% annually through 2008.
- Talisman believes it can grow current Paladin production (currently 46,000 boe/d) to over 70,000 boe/d in 2009.
- The acquisition is expected to be accretive to Talisman's cash flow. Assuming US$55.00/bbl Brent oil prices and a C$2.07 Pound Sterling exchange rate, this transaction is expected to increase Talisman's cash flow by over C$500 million in 2006.
- Talisman is making a cash offer for Paladin, which is non-dilutive for existing shareholders.
After the transaction, Talisman expects to maintain a strong balance sheet.
- After the completion of the acquisition, the Company expects that its debt to cash flow ratio will be in the 1.0 range by the end of 2006.
Talisman's debt to debt plus equity ratio is expected to be approximately 0.4 by the end of 2006.
Talisman knows the North Sea
- Talisman acquired a small non-operated position in 1994 and has grown its North Sea production from less than 20,000 boe/d to approximately 145,000 boe/d (1st six months 2005).
- Talisman acquired the operatorship of the Gyda field in Norway in 2003 and operatorship of Varg in 2005. The Company has built a strategic position in Norway with expected production of approximately 35,000 boe/d in the 4th quarter of 2005 and interests in 32 blocks, covering more than one million net acres.
- Approximately 77% of Paladin's current production is in the North Sea (37% Norway, 33% UK, 7% Denmark).
The UK and Norway provide attractive investment opportunities.
- Under the current fiscal regimes, exploration and development opportunities in Norway and the UK provide attractive economic returns.
In valuing the acquisition, Talisman has taken into account that Paladin has hedged approximately 7,800 bbl/d in 2006 and 6,600 bbl/d in 2007. Talisman may layer in additional hedges with a view to ensuring that the acquired properties pay for the anticipated capital programs at significantly reduced commodity prices.
Description of Paladin's Assets
In the UK, Paladin operates and has a 58.97% working interest in the MonArb Area, which is Paladin's largest core area and includes the Montrose oil field, three satellite oil fields, a satellite development and a number of exploration prospects. Paladin also has an extensive exploration portfolio in the UK, the vast majority of which is located in the Central North Sea, with a large number of prospects and leads. Paladin also has interests in certain fields where Talisman already has an interest.
In Norway, Paladin has an operated interest in the non-producing Egersund Basin area to complement Talisman's existing interest and non-operated interests in the producing Brage and Veslefrikk fields. In Denmark, Paladin has a non-operated interest in the producing Siri field.
In addition, Paladin has producing assets in Australia, Indonesia and Tunisia (all non-operated). Paladin also has exploration interests in Romania and Gabon.
- Assets
- Bittern Oil Field
- Blane Oil Field
- Brage Oil And Gas Field
- Goldeneye Gas Field
- Enoch Oil Field
- Laminaria Corallina Oil Fields
- Montrose Arbroath Oil And Gas Field
- Siri Oil Field
- Veslefrikk Oil And Gas Field
Deal Metrics
Talisman believes this transaction provides good value for its shareholders.
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