Talisman to Shed Coal Assets - Analyst Blog
10 March 2012 - 4:13AM
Zacks
Treading along with its divesture plan, Talisman Energy
Inc. (TLM) has agreed to sell its Sukunka coal property to
Australia-based Xstrata Coal for $500 million in cash. The
transaction is slated to be completed this month.
Located in the Northeast British Columbia, the coal holding is
about 37.3 miles south of Chetwynd, along the Peace River
coalfield. Talisman controls 100% working interest in the licenses
that spans across 20,000 acres and has a deposit of about 236
million tons of hard coking coal.
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 its asset base that would render high
returns. The deal also underlines the company’s attempt to cover up
the cash deficit as gas prices continue trade at a low level.
During the last few years, Talisman has been selling non-core
properties around the world, thereby accumulating capital to
concentrate on its core oil and gas lucrative prospects in Canada,
the U.S., the North Sea and Southeast Asia. The company has set a
target of asset divestitures worth $1 billion to $2 billion for
2012.
Early this week, Talisman entered into an agreement with Swedish
energy firm Lundin Petroleum AB to sell its 30% interest in the
Brynhild field, offshore Norway.
Talisman plans to utilize the proceeds from these sales to
support its capital expenditure program for 2012, which was lowered
by 11% from the 2011 level, in view of the weak North American
natural gas scenario 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).
CDN NTRL RSRCS (CNQ): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
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