Talisman sells 49% of North Seas interest to China's Sinopec
John Manzoni, president and CEO of Talisman Energy. REUTERS/Todd Korol
CALGARY -- Talisman Energy is selling 49% of its North Sea interests to China-based Sinopec, company officials announced Monday.
The deal, worth $1.5 billion, will see increased investment in the Calgary-based Talisman's operations in the United Kingdom.
"This will provide additional resources and energy to the talented team on the ground, creating an exciting future for this portfolio," Talisman president and CEO John Manzoni said.
"Collectively, we will invest more in the U.K. than Talisman would have on its own, leading to a stronger, more sustainable business."
The deal is expected to be completed by the end of 2012, pending government and regulatory approval.
Manzoni said the deal will also allow Talisman to recapitalize into growth areas.
"We are reducing our working interest and capital spending in the U.K. business by approximately half, allowing us to focus on and fund growth areas within our portfolio," he said.
"This brings our total divestment proceeds to approximately $2.5 billion so far this year.
"We plan to utilize approximately $500 million of the proceeds from this sale to repurchase shares."
Company officials expect the deal could extend the lifespan of its North Sea operations.
"The joint venture plans to invest to improve ongoing operating performance, as well as infill drilling, exploration opportunities and major projects, thereby extending field life and deferring decommissioning," Manzoni said.
Emerging Equities analyst Peter Linder said the nucleus deal likely came down to a need for capital.
"North Sea assets for the big guys are difficult because operations are expensive, the tax regime is somewhat onerous for the larger guys, there's always major abandonment costs and so on," he said.
"It's smart on Talisman's part -- they're selling mature assets for good money for a lot of growth opportunities in North America."
Based in Aberdeen, Scotland, Talisman's U.K. operation has 564 employees and some 1,950 contractors.
No layoffs are expected as a result of the deal.