IS THE DIVESTMENT CAMPAIGN AGAINST TALISMAN WORKING? “RIGHT ON THE MONEY,” SO TO SPEAK—
It’s hard to deny, in light of the findings reported by today’s Globe and Mail!
Eric Reeves [June 26, 2000]
Smith College ereeves@smith.edu
Northampton, MA 01063
413-585-3326
Steven Chase, in the current “Report on Business” for the Globe and Mail, puts oil analysts’ consensus on the “Sudan discount” in Talisman’s share price in the $15 – $25 range. This is sufficiently great to put Talisman on stage as a take-over target, despite being Canada’s largest independent oil and gas outfit. (See Chase’s analysis below.) For despite doubling production in the past five years with its many acquisitions, Talisman’s market capitalization has increased only 40% (see report by Cattaneo and McKinnon in the June 24 National Post).
Indeed, Talisman’s very successes outside Sudan–only about 10% of its business–make it especially vulnerable.
So why, given the size and persistence of the share price discount, doesn’t Jim Buckee sell the Sudan stake? Yes, yes he’s bull-necked stubborn. But maybe there’s another reason. Maybe, despite all his transparently self-serving bluster about buyers, there aren’t any! At least no one willing to pay a price that would make the sale look anything but highly distressed! and Buckee a bad judge of business risk!!
Note also in this context today’s AP and AFP reports on the dramatic victories by the SPLA in the proximity of the oil regions; these military developments will put significant additional pressure on any sale. The key garrison town of Gogrial fell on Saturday, June 24, and the only remaining towns under Government of Sudan control in Bahr el-Ghazal are Wau and Aweil–and they may fall next.
Look at a map, and it’s easy to see how increasingly vulnerable the oil fields are. The SPLA has declared them to be a strategic target; they have made it repeatedly clear that they will attack them; and now they are poised to do so.
How easy will it be to sell a 25% stake in the Greater Nile project if its wells are burning and a section of the pipeline, including some of the Weir pumps so critical in moving the paraffin-rich Sudanese crude, has been captured and is systematically destroyed??
The upshot? As the piece by Chase makes clear, Talisman can be bought, stripped of its burdensome Sudan asset, and the buyer still comes out ahead.
And what will the Khartoum regime make of such a development? What happens if a stake in their oil project becomes a liability, not an asset?! Suddenly, peace will be looking a whole lot more lucrative than war–and that’s the only way they’re going to be forced to the peace table in good faith.
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The Globe and Mail, Report on Business
Monday, June 26, 2000
By Steven Chase
Alberta Bureau
Oil patch targets: A list of possible takeovers
Analysts take aim at certain producers with the right financial fundamentals to attract a bid
With takeover season in Canada’s oil patch in full swing, Calgary executives may be feeling a bit like the island-bound contestants on TV’s hit series Survivor , all wondering who’s next to be voted out of the game by rivals.
‘Everybody’s looking at everybody,’ one Toronto-based analyst says.
The fact was driven home at an investment symposium in Calgary last week where, analysts report, four-fifths of the audience at some corporate presentations were rivals sizing up their quarry.
A group of Canadian oil patch analysts, speaking on condition of anonymity, offered The Globe and Mail their picks on mid-size and large producers most considered to be takeover targets — including several long shots.
In most cases, the shares of the companies mentioned are trading at a low multiple of annual cash flow — a traditional method of valuing petroleum producers. [Can we spell T-A-L-I-S-M-A-N???]
The analysts said continued lagging share values for many oil companies give rivals plenty of incentive to keep snapping up bargains in an industry that’s bullish about strong oil and gas prices. Takeovers are expected to continue despite the fact that billions of dollars have already been spent this spring on more than half a dozen major deals in Canada’s oil patch
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***Talisman Energy Inc.,*** with a market capitalization of nearly $7-billion: The firm boasts an impressive array of holdings that make it the envy of its peers. ‘Its whole asset base makes it a takeover target,’ one analyst says.
***Talisman’s only liability is its controversial stake in an oil project in Sudan — a venture slammed by critics who say it’s aiding the country’s long-running civil war by providing crude oil revenue for the African country’s regime***. ***Analysts estimate Talisman’s stock suffers from a $15 to $25 discount because of the controversy over Sudan*** — a situation that makes the company very attractive to deep-pocketed players from Europe or even the United States.
The American government’s opposition to investment in Sudan might present a problem for U.S. buyers, but analysts say a bidder could declare its intention to spin off the Sudan stake and thus avoid criticism.
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SPLA rebels capture strategic town in southern Sudan
News Article by AFP posted on June 25, 2000 at
17:12:32: EST (-5 GMT)
NAIROBI, June 25 (AFP) – The rebel Sudan People’s Liberation
Army (SPLA) has captured the strategic town of Gogrial in the Bahr el-Ghazal region of southern Sudan, SPLA spokesman Samson Kwaje said here Sunday.
Kwaje said the town fell at 4:00 p.m. (1300 GMT) on Saturday
after four days of heavy fighting, triggered when government forces
came out of Gogrial and started attacking SPLA positions and undefended civilian villages around the town.
“The government soldiers killed civilian men, abducted women and
children and looted thousands of cattle,” Kwaje told AFP here by telephone
He accused government forces of breaking the humanitarian ceasefire in effect in the Bahr el-Ghazal region.
SPLA forces intervened on the side of the population and as
government forces retreated, SPLA fighters pursued them into
Gogrial, the third-largest town in Bahr el-Ghazal after the capital
Wau and Aweil.
****The fleeing of the government soldiers to Wau and Aweil has
triggered fears that the SPLA could storm the two major strategic
towns which, along with minor areas, are the only ones still under
government control, Kwaje said.****
After four days of fighting in Gogrial, government forces abandoned the barracks and the town altogether, and were fleeing in disarray towards Wau and Aweil, with the SPLA in hot pursuit.
“We entirely blame the government of Sudan for the breaking of
the humanitarian ceasefire in Bahr el-Ghazal, as SPLA forces could
not sit and watch properties of the population being looted and atrocities being committed against them by the government soldiers,” Kwaje said.
The SPLA is still assessing the number of casualties on both
sides and the number of prisoners taken, Kwaje added.
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Rebels say they have captured southern town of Gogrial
News Article by AP posted on June 25, 2000 at
17:11:13: EST (-5 GMT)
NAIROBI, Kenya (AP) — Southern Sudanese rebels said Sunday they had captured the town of Gogrial in Bahr el-Ghazal province where a cease-fire had been in effect for months.
Samson Kwaje, the Nairobi-based spokesman for the Sudan People’s Liberation Army, said rebel forces had taken the town Saturday evening after four days of fighting provoked by government attacks.
He said since the beginning of the rainy season last month, government troops had been “harassing” rebel-controlled villages
around the town, 60 kilometers (37 miles) north of Wau, which is still in government hands.
There was no immediate information available on casualties or
prisoners on either side, Kwaje said.
It was not immediately possible to obtain comment from the Sudanese government.
Bahr el-Ghazal was the scene of widespread food shortages two
years ago brought on by heavy fighting in the province that drove
people off the land. Both the government and the SPLA agreed to a three-month cease-fire that has been periodically renewed to allow
international organizations to ferry relief food into the region.
The SPLA has been fighting government forces since 1983 in an
attempt to secure autonomy for the southern third of Africa’s largest nation where the population is mainly black and practices
either Christianity or traditional African religions.
The north is primarily Arab and Muslim.