Talisman, Sasol deepen Montney partnership

By OGJ editors
HOUSTON, Mar. 8
-- Talisman Energy Inc. and Sasol Ltd. of South Africa have expanded their strategic relationship in the Montney shale gas play of Northeast British Columbia.

Sasol has purchased a 50% net working interest in Talisman’s Cypress A assets northwest of Fort St. John, BC, for $1.05 billion (Can.). Talisman will operate and manage the Cypress A and Farrell Creek areas as an integrated development project.

Sasol purchased a 50% net interest in Talisman’s Farrell Creek Montney properties west of Fort St. John in December 2010. That deal, in which Sasol acquired an estimated 4.8 tcf equivalent of net contingent resource, closed Mar. 1. Talisman said the Farrell Creek and Cypress A assets are similar.

Sasol Chief Executive Pat Davies said, “This additional acquisition of another high-quality natural gas asset will accelerate our upstream growth while also potentially advancing Sasol’s already strong gas-to-liquids value proposition utilizing our proprietary technology.”

Talisman said the Cypress A transaction represents the sale of 14% or 5.6 tcfe of its remaining estimated 39 tcfe of net contingent resource in the play and 17% or 28,600 net acres of its net Tier 1 acres of land in the Montney shale.

Sasol will pay $260 million (Can.) or 25% of the consideration in cash at closing and will also provide $790 million to fund 75% of Talisman’s future capital commitments in the integrated joint venture development area.

The Cypress A transaction is subject to regulatory approvals and is expected to close by the end of this year’s third quarter.

Upon closing, Talisman will hold an estimated 34 tcfe of net contingent resource and 139,000 net acres of Tier 1 acreage in the Montney shale play, including Farrell Creek, Greater Cypress, and the Greater Groundbirch area southwest of Fort St. John.

The companies do not expect to begin commercial development at Cypress A, which is less mature than Farrell Creek, for several years. A number of options for long-term egress from the area are being considered.

They have begun a feasibility study to examine a world scale GTL facility in western Canada, with Talisman having the option to participate as a 50% partner in the facility. Sasol is leading this study with a front-end engineering design decision likely in the second half of 2012.

This could provide a strategic alternative to traditional North America pipeline or LNG markets, the companies said.

Talisman’s web site said the company drilled 30 net Montney shale wells in 2010 and holds 194,000 Tier 1 net acres with 5,400 net drilling locations. It said the company will continue developing Farrell Creek and Greater Cypress in 2011 with the drilling of 35 wells.

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