Lauren Krugel, The Canadian Press
CALGARY - The Malaysian company that has shelled out billions of dollars to become a major player in Canada's natural gas industry is further expanding its position through a $1.5-billion deal with Talisman Energy Inc.
Calgary-based Talisman (TSX:TLM), which has been under pressure from investors to pare its holdings, is selling 75 per cent of its assets in northeastern B.C.'s Montney formation to Progress Energy Canada Ltd., a subsidiary of Malaysia's Petronas.
Progress will be buying more than 51,000 net hectares of land in the Farrell Creek and Cypress areas that Talisman owns through a 50-50 partnership with South Africa's Sasol. The all-cash deal also includes interests in wells, pipelines and processing plants.
"These natural gas interests are an attractive complement to our existing North Montney asset base in northeastern British Columbia and are among the largest remaining North Montney lands not dedicated to a potential liquefied natural gas project," said Progress CEO Michael Culbert.
"The location, resource potential and operational synergies of these assets make this an ideal fit that expands our British Columbia resource base and increases our land position to 1.2 million acres (about 486,000 hectares)."
Provided the deal receives Investment Canada and Competition Bureau approval — as the companies expect to happen early next year — it will go a long way toward meeting Talisman's goal of shedding between $2 billion and $3 billion in assets.
Once it closes, Talisman will still have acreage in the Groundbirch and Saturn areas of northeast B.C.
Petronas established its foothold in B.C.'s shale gas scene through its acquisition of Progress, announced last year. It has since said it intends to invest up to $11 billion in a liquefied natural gas export terminal near Prince Rupert, B.C., where the natural gas will be chilled into a liquid state and sent to lucrative overseas markets by tanker.
"When you think about it, the natural buyer was always the guys at Petronas for that property because it makes a ton of sense," said AltaCorp Capital's Dirk Lever, noting the Progress acreage is in the same area as Talisman's position.
"There's a motivated seller, there's a motivated buyer."
Several companies other than Talisman have had B.C. natural gas assets on the market over the past several months. As recently as Tuesday, Talisman CEO Hal Kvisle painted a bleak picture of the market, saying the company was having a tough time selling assets.
He did, however, say that the company was expecting to announce one or two deals before year-end.
"It is priced in line with recent major Montney transactions, further simplifies the company, and enables us to strengthen our focus on our Edson-Duvernay producing and development assets," Kvisle said in a release Friday.
He said proceeds from the sale will be used to pay down debt and strengthen Talisman's balance sheet.
The Talisman-Progress deal may look like a "one-off," but Lever said he sees a glimmer of hope in the acquisition and divestiture market.
"If you look outside that deal there are indications that things are starting to move a bit, but it's not a torrid pace," he said.
"There are signs that deals are starting to get done."
Under Talisman's partnership with Sasol, the South African company shoulders a higher proportion of the development costs. Progress said that $870-million "capital carry" will help offset its acquisition costs.
Talisman shares rose 21 cents to $12.43 in afternoon trading Friday on the Toronto Stock Exchange.