Talisman Energy continues to pay a fierce price for its immoral presence in Sudan. Today’s National Post reports an assessment by May Shen Chilton, an oil and gas analyst at J.P. Morgan in New York, declaring “the [Sudan] discount has widened to as much as 35%” (article attached: “Cheap Talisman getting cheaper: ‘Sudan discount’ grows”). What the National Post refers to as a “growing chorus of analysts on Bay and Wall streets” seems finally to have got the message about Sudan and the financial costs of Talisman’s vicious complicity with a genocidal regime.
Eric Reeves [September 26, 2001]
Northampton, MA 01063
As a response to 10% of Talisman’s business, that’s a brutal loss in total market capitalization, seriously diminishing Talisman’s ability to make acquisitions or to use its own paper in any deal. And that’s a lesson not likely to be lost on anyone contemplating a purchase of Talisman’s stake in Sudan—certainly not if they have capital market exposure in the United States.
Who is this “Japanese consortium” rumored to be interested in Talisman’s Sudan stake? Are they any more substantial than the figments of previous rumors? Does Talisman expect anyone to believe that “they” can be ignorant of the costs of entering Sudan?
Talisman was down another $.55 today, continuing a massive two-week slide. Divestment and other pressures insure that the slide can continue.
Cheap Talisman getting cheaper:
‘Sudan discount’ grows
Financial Post – Canada, Sept 26, 2001
BY PAUL HAAVARDSRUD
The punishment meted out to
Talisman Energy Inc.’s shares due
to its controversial involvement
in Sudan has left the
Calgary-based oil producer even
more deeply undervalued by a
number of key yardsticks,
according to a growing chorus of
analysts on Bay and Wall streets.
The “Sudan discount” has come to
be expected by analysts, with
Talisman shares (TLM/TSE) trading
at between 10% and 15% below its
peers’, based on assets and cash
However, with Talisman shares off
18.3% since the terrorist attacks
on Sept. 11, the discount has
widened to as much as 35%, said
May Shen Chilton, an oil and gas
analyst at J.P. Morgan in New
York, well above the 10% to 15%
discount Talisman’s stock had
been getting since it acquired
its Sudan operations in 1998.
Although rumours that Talisman
may exit Sudan helped the stock
recoup some of these losses late
last week, the prospect of
sliding commodity prices hurt the
oil-weighted producer’s stock
yesterday, sending it down $1.05
to close at $49.85.
Earlier this year, the “Sudan
discount” appeared justified as
the company faced being delisted
from the New York Stock Exchange
due to its involvement in the
unstable African country. This
threat was diminished on Monday,
after the U.S. Congress halted
the proposed legislation which
was aimed at preventing companies
that operate in Sudan from
raising money in U.S. markets.
The delay is being interpreted as
an early reward to Sudan for its
cooperation in helping track down
the terrorist network set up by
Osama Bin Laden, whom the country
expelled in 1996.
Despite the delisting threat and
other risks associated with
operating in an unstable
environment, analysts say the
weakness in Talisman’s stock is
disproportionate to its
involvement in the country.
Talisman’s Sudan assets represent
roughly 12% of production, 10% of
reserves and 13% of cashflow,
consisting of a 25% stake in the
Greater Nile Petroleum Co. and a
25% interest in a pipeline from
its oil fields to the Red Sea.
The risky Sudan exposure has
submerged the company’s shares,
which are trading at 2.7 times
estimated cash flow per share in
2001 and 2002, compared to a peer
average of 3.7 times and 4.2
times, said Ms. Chilton.
Stripping out cash flow from
Sudan entirely, the J.P. Morgan
analyst finds Talisman still
trades below its comparables at
3.3 times cash flow in 2001 and
3.2 times next year. Even if
Sudan is removed from the
equation the company’s shares are
still 22% below comparable
Ms. Chilton’s has a “buy” rating
on the stock and her 12-month
target price of $75 implies a 50%
return from yesterday’s close.
The Sudan assets are valued at
slightly more than $1-billion,
she said, noting the pool of
potential buyers, which includes
the national oil companies of
Sudan, China and Malaysia as well
as a consortium of Japanese
companies, has likely shrunk due
to the terrorist activity.