JUST ANOTHER DAY IN THE LIFE OF TALISMAN ENERGY:
The Wall Street Journal, the world’s most well known financial newspaper, gives a splendid overview of TLM share price woes. More importantly, the piece from the Journal gives a compelling sense of why the stench of genocidal destruction in Sudan will never leave Talisman share price: even if they were to pull out now, Sudan’s agony will define the company indefinitely. Talisman will be linked to scorched earth warfare, the aerial bombardment of civilians and humanitarian efforts, and support for one of the cruelest and most destructive regimes in the world.
Oil prices may surge to record highs; Talisman may continue to post impressive numbers. But Sudan will never stop weighing heavily on Talisman share price
This is Talisman Energy now—and as far as anyone can reasonably claim to see.
Eric Reeves [August 18, 2000]
Smith College ereeves@smith.edu
Northampton, MA 01063
413-585-3326
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THE WALL STREET JOURNAL, August 17, 2000
Calgary Oil Firm Talisman Pays Painful Price for Sudan Investment
By TAMSIN CARLISLE
CALGARY, Alberta — At first glance, fast-growing Talisman Energy Inc. ought to be celebrating.
It says this year’s net income should be nearly four times last year’s. All told, it expects to pump more crude oil and natural gas this year than any other company in Canada. It would thus finally snatch the crown that Imperial Oil Ltd., the Canadian subsidiary of Exxon Mobil Corp., has held for more than half a century.
But there is a big catch: In many circles, Talisman has turned into a pariah. Influential church and humanitarian groups charge that oil-production earnings in Sudan are exacerbating a brutal civil war there and that Talisman’s participation in the country’s $1.4 billion Greater Nile Oil Project is part of the problem.
Talisman’s share of the project’s output accounts for only about 10% of the company’s total production. But the uproar shows how an investment thousands of miles from home can create havoc for a company.
*****Largely because of the Sudan cloud, Talisman’s stock languishes at only 10.3 times this year’s earnings as projected by First Call/Thomson Financial, compared with Imperial’s 12.9 times. Jonathan Wolff, an analyst with Dresdner Kleinwort Benson in New York, says Talisman’s stock trades at a 6% discount to net asset value, compared with a 20% premium before its Sudan involvement. Talisman’s critics have mounted a well-organized divestment campaign, and some institutions are dumping the stock.*****
Only two years ago, the Sudanese investment seemed a bargain. Talisman paid only $190 million in stock to acquire Arakis Energy Inc., a struggling Calgary oil concern whose major asset was its 25% stake in Greater Nile. The oil and pipeline project, whose other partners are Chinese, Malaysian and Sudanese state oil companies, started pumping crude last year, and recently achieved record production of 208,000 barrels a day.
But the U.S. bombed a suspected terrorist site in Sudan just days after Talisman announced its deal to buy Arakis. The raid drew international attention to Sudan’s internal woes and reinforced its status as a “pariah state” in the eyes of U.S. policy makers and others.
Talisman’s critics, including U.S. Secretary of State Madeleine Albright, insist that Sudan’s Islamic government, based in the country’s Arab-dominated northern capital, Khartoum, is using oil revenue, and Greater Nile’s service roads and airstrip, to wage war against black Christian and animist rebels in southern Sudan. They say Sudan’s government forcibly displaced southern villagers to make way for oil production and that Talisman is profiting from human suffering.
In November, Talisman hired public-relations firm Hill & Knowlton Inc., New York, to help pick up the pieces. But the task hasn’t been easy.
In May, Natalina Yoll, a Sudanese refugee living in Calgary, told Talisman’s annual meeting that she learned to hide in the bush when soldiers periodically raided her southern Sudanese village for crops, cattle and women. In tears, she said marauding government soldiers had tied up her ailing father and eldest brother, then thrust them into a hut with other men to be burned alive. She pleaded with Talisman: “Please stop supporting the genocide of my people.”
James Buckee, the company’s outspoken president and chief executive, told the meeting that Talisman aims to help impoverished southern Sudanese villagers by funding community programs and providing employment. The company also ensures that its operations and business practices comply with Canada’s
International Code of Ethics and tries to persuade Sudan’s government and its Asian partners to respect human rights, the executive added. He said he strenuously objected to the Sudanese government’s use of Greater Nile’s airstrip and that the practice has stopped. To help villagers in its oil-concession area and create goodwill, Talisman has built everything from hospitals to watering ponds for cattle. But critics say it isn’t enough.
To be sure, the furor over Sudan hasn’t entirely blinded investors to the company’s achievements elsewhere. Mr. Buckee points to Talisman’s expanding natural-gas-drilling program in western Canada, its recent acquisition of more North Sea oil properties and its plans to expand a big natural-gas project in Indonesia.
Lately, the company has pumped record crude and natural-gas volumes from four continents. Mr. Buckee predicts Talisman’s net income will reach a record 690 million Canadian dollars ($465 million) this year from C$177 million in 1999. Talisman’s stock is up 40% since April, but because other oil shares have fared even better, Talisman is vulnerable to a takeover, some analysts say.
Pressure on the stock continues. Several U.S. institutions dumped it last year; there was further selling after an advisory panel to the Clinton administration recommended in May that Talisman should be banned from raising money in the U.S. Recently, some Canadian members of Parliament have promoted a proposal that would force Canada’s national pension plan to sell its large position in Talisman.
So far, Parliament hasn’t acted and the Canadian government has declined to impose trade sanctions on Sudan. But a January government report concluding that Sudan’s new oil production is fueling armed conflict adds to Talisman’s woes.