ONGC Videsh bid for Talisman Sudan field progressing
By an OGJ correspondent
MUMBAI, June 18 -- ONGC Videsh Ltd. (OVL), a unit of Indian company Oil & Natural Gas Corp., is moving closer to buying a 25% equity stake in the Sudan-based Greater Nile Petroleum Operating Co. (GNPOC), Indian government officials have confirmed.
Various press reports have placed the proposed purchase price of the stake at $750 million, but that could not be independently confirmed.
A government panel involving officials from several ministries has approved ONGC's proposal to acquire the equity from Talisman Energy Inc., Calgary, and the panel forwarded its recommendation to India's Cabinet Committee on Economic Affairs.
OVL said last year that it was negotiating participation in 14-15 oil properties abroad, including projects in Sudan (OGJ Online, Oct. 15, 2001).
On June 14, Talisman issued a statement at the request of the Toronto Stock Exchange saying the company will make an announcement "if and when there is a material change in its affairs."
"Talisman reiterates its position that all of the company's assets are for sale at the right price and routinely evaluates transactions in the normal course of business. The company is frequently in discussions with a variety of parties interested in buying or selling assets, including Talisman's Sudanese assets," the statement said.
The GNPOC joint venture is run by a consortium that includes China National Petroleum Corp. 40%, Malaysia's Petronas Carigali Sdn. Bhd. 30%, and the Sudanese national firm Sudapet 5%, in addition to Talisman.
The JV currently produces 500,000 b/d of crude oil in the Heglig fields complex in southern Sudan. Prices of the Nile blend crude are around $2-3/bbl lower than those of Brent crude. Reserves from oil fields tapped by the consortium have been estimated at 300 million bbl. The surrounding vicinity also is believed to contain oil, but its reserves estimates vary widely.
Talisman stock volatility
Amir Arif, analyst for Friedman Billings Ramsey & Co. Inc., in Arlington, Va., said in a June 13 research note that Talisman's stock is experiencing volatility based upon news reports that ONGC is on the verge of offering $750 million for Talisman's Sudan assets.
"Such a sale would result in significant price improvement, since the sale would be at higher multiples and would also result in a multiple expansion for the remaining assets, given the reduced political risk and the removal of the controversial Sudan investment, which has kept some investors at bay," Arif said.
"A multiple expansion from 4.2 to 4.7 for cash flow associated with the remaining assets and a sale price of $750 million could result in an increase in the stock price to $76 (Can.) in the short term, implying a quick 12% rise in stock price," Arif added.
Talisman faced a barrage of criticism at its 2001 annual meeting for its involvement in Sudan. An estimated 200 protestors from civil rights groups and the Sudanese community demonstrated outside the meeting. One protestor waved a placard saying, "A share for Talisman is a share in genocide."
Pres. and CEO Jim Buckee told critics that Talisman shared the same values as themselves, and that the company was supporting a school and a hospital near the oil field in Sudan (OGJ Online, May 2, 2001).
Also last year, Talisman released its first independently verified corporate social responsibility report regarding its exploration and development operations in southern Sudan. The report outlined how Talisman was addressing human rights issues. Talisman made the report in compliance with the International Code of Ethics for Canadian Business that Talisman adopted in December 1999 (OGJ Online, Apr. 10, 2001).