SO, JUST HOW SUCCESSFUL HAS THE DIVESTMENT CAMPAIGN AGAINST TALISMAN ENERGY BEEN SO FAR?
(and it’s far, far from cresting in bringing pressure to bear on TLM shareholdings!)
Eric Reeves [April 13, 2000]
Smith College firstname.lastname@example.org
Northampton, MA 01063
In a word (to borrow from Mr. Ingram’s Globe and Mail piece below): “STAGGERING”!
Talisman Energy is now trading, even with its recent move back above the $40 (Canadian) mark, at only 2.8 times forward cash flow projections! This is a MASSIVE discount to the 5 to 6 times that should define the share price for a senior producer like Talisman. In other words, a share price that should be over $80 is roughly half that.
Put yet another way: if we look back, we might seize upon the fact that after the divestment campaign began in earnest, Talisman sank as low as $34; this marked a 30% decline from its early September (i.e., pre-divestment campaign) high of over $49. But with its huge projected cash flow (the consensus is $14 a share!), the better measure of divestment success NOW is the 50% discount to the $80+ figure. And that much success should terrify those wondering whether there is a down-side limit to the amount of share price damage the divestment campaign can inflict.
At least the answer to the question is simple: there isn’t!
Searing news coverage continues to scorch the best efforts of Hill & Knowlton; Talisman can’t possibly put up better numbers; and the number of potential investors in TLM continues to decline rapidly, given the growing and broadening controversy around oil development in Sudan.
The most basic reality for TLM investors? The trading of the last 8 months should make utterly clear that, given the still-growing potency of the divestment campaign, there is no definitive share price downside to be established. Indeed, the abyss of share price “meltdown” continues to yawn widely!
From the Globe and Mail (Toronto), April 13, 2000
BY: Mathew Ingram
“But even Gulf doesn’t look that cheap compared with Talisman Energy. Talisman, whose stock has been under pressure for months as a result of its controversial investment in Sudan, is trading for just 2.8 times the cash flow projections of most analysts. The company is expected to spin off a staggering $14 a share in cash this year, and yet its stock is still only at about the $41 level — and that’s an improvement from a few weeks ago. Senior producers like Talisman often trade at five or six times cash flow.”