“Talisman Energy share price: still in the cross-hairs”
Amidst the flurry of reporting on the peace efforts in Sudan by US special envoy John Danforth, amidst the hope that barely allows itself to dare for a breakthrough in the tortuous peace negotiations, there is one constant: until peace comes, oil development in southern Sudan will remain the focus of relentless North American civil society activism, especially in the form of a divestment campaign against Talisman Energy—and the focus as well of US Congressional efforts. For nothing could be clearer than that the National Islamic Front regime in Khartoum will make peace only under the most extreme pressure; and that pressure derives in large part from the threat to oil development. It is a threat the regime rightly perceives to be growing steadily. Without such threat, the regime will play for time and oil money, hoping this translates into military victory.
Eric Reeves [January 15, 2002]
Northampton, MA 01063
Without the benefit of rumors about possible takers for its Sudan stake, Talisman has managed to keep its profile relatively low of late. The ten-day archives for the Globe & Mail (Canada) has only one entry, and that’s a piece on “Stock picks from the pros for ’02.” But even here we may learn something of significance. Angela Barnes reports (Jan 5) on the views of Shauna Sexsmith, vice-president and portfolio manager at Altamira Management Ltd:
“‘My favourite stock [in the oil sector] is Talisman Energy Inc. because I think it is unbelievably cheap relative to the rest of the group and I think they will resolve the Sudan situation within the next year,’ she said. Talisman has faced pressure to sell its Sudanese interests.”
Strikingly, Ms. Sexsmith made her opinion known just as Talisman was about to get a good deal cheaper: share price has declined 10% since the beginning of the year, even as Talisman has recently forecast a 10% increase in production for 2002. To be sure, slumping oil prices have taken a major toll here. But what Ms. Sexsmith reveals, with her glib comment that Talisman “will resolve the Sudan situation within the next year,” is a profound ignorance of the situation in which Talisman finds itself.
Of course there have been many in the past who’ve shared Ms. Sexsmith’s enthusiasm, and who’ve made similar predictions about Talisman extricating itself from Sudan; all have obviously been wrong. Unable to comprehend either the human realities of oil development in Sudan or the force of the civil society activism working for peace in this tortured country, oil analysts have continually made predictions that are laughable in retrospect. At C$55, Talisman shares are only $6 above their predivestment campaign high of early September 1999. In the intervening two and a half years, Talisman has posted blockbuster numbers, including a 400% increase in net income in 2000. Various Talisman press releases and wire reports have highlighted other gaudy numbers
But despite the constant cycle of echo-chamber rumors about there being a new buyer for Talisman’s Sudan stake, despite Talisman’s effort to convince the market that it really can sell its Sudan stake whenever it wants, there is no buyer who will consider Talisman’s price. If there were, Talisman would clearly have made its exit from Sudan long ago, as many analysts were predicting/hoping. As a result, a huge “Sudan discount” plagues Talisman share price, and will continue to do so long as they are in Sudan.
The only solution is for Talisman management to accept market-place defeat and sell the Sudan asset for what they can get. Such an ignominious departure will be an object lesson for those tempted in the future to enter irresponsible extraction ventures in Africa and other places in the developing world. It will also be a highly consequential setback for the oil development ambitions of the National Islamic Front (NIF).
For the reality is that the NIF regime is extremely reluctant to lose Talisman’s technical expertise, engineering and site management skills, and the moral cover a Canadian corporation provides for genocidal oil projects. Khartoum is making the sale by Talisman, especially to the Malaysians and Chinese, extremely difficult (the regime has no wish to see either Asian country become a majority partner in the Greater Nile project).
Compounding the problem is CEO Buckee’s stubborn determination to get a face-saving price for the Sudan investment, even as events continue to slash away at the value the company’s 25% stake in the Greater Nile project. Talisman’s Board of Directors is now authoritatively reported as being squarely behind the sale of the Sudan stake; but they’ve made their decision too late to escape a terrible ignominy and a significant loss on the sale.
The threat of US capital market sanctions against oil companies operating in Sudan remains very much alive in the US Congress. Final conferencing of the Sudan Peace Act should take place in February. If the House version passes (the original vote was 422 to 2), then Talisman Energy shares would face de-listing from the New York Stock Exchange. Buckee has publicly and emphatically declared that this would trigger an exit from Sudan. The bad news for Talisman investors is that for Buckee to have said as much insures that passage of the bill will make for another steep drop in the value of the Sudan asset. Any buyer would first have to be without US capital market exposure, but would also know that Talisman is making a distressed sale.
Moreover, the military threat to Talisman’s oil operations continues to grow significantly. The recently announced reconciliation between SPLA leader John Garang and his SPDF rival Riek Machar ratifies what has been occurring over the last year: military to military reconciliation and unification of the Dinka and Nuer forces in southern Sudan. Only their internal conflict has kept the oil regions of Western Upper Nile secure in the past few years. Working together, instead of fighting one another, the Nuer and Dinka military forces make an extremely potent threat to the oil companies operating primarily in Nuer lands, where the SPLA (chiefly Dinka) had largely refrained from entering in the past.
Even more ominously for Talisman and its partners, a new book-length study of the current situation in Sudan from the distinguished International Crisis Group reports that “the SPLA [Sudan People’s Liberation Army] has allegedly acquired surface-to-surface missiles from an eastern European source in order to increase its abilities to target oil-producing facilities” (“God, Oil and Country: Changing the Logic of War in Sudan,” International Crisis Group, Brussels 2002, page 25; forthcoming). The successful SPLA attack on the central Heglig facilities this past August has demonstrated the will and determination to attack Talisman’s oil infrastructure; surface-to-surface missiles could devastate Heglig and the oil pipeline.
Those who have put Talisman shareholding squarely in their activist sights desire nothing so much as peace for Sudan. But until peace comes, and as long as Talisman remains in Sudan, this corporate presence will be rightly understood as a primary obstacle to peace. Accordingly, Talisman will be the target of relentless divestment and other activist efforts, increasingly involving Canadian churches and church organizations. The company will also be at markedly increased military risk from the forces of the people of southern Sudan, the people who have suffered so terribly and unremittingly from oil development.