Talisman to Shed Coal Assets - Analyst Blog

Zacks Investment Research
Posted: Mar 09, 2012 5:13 PM
Talisman to Shed Coal Assets - Analyst Blog

Treading along with its divesture plan, Talisman Energy Inc. (TLM) has agreed to sell its Sukunka coal property to Australia-based Xstrata Coal for $500 million in cash. The transaction is slated to be completed this month.

Located in the Northeast British Columbia, the coal holding is about 37.3 miles south of Chetwynd, along the Peace River coalfield. Talisman controls 100% working interest in the licenses that spans across 20,000 acres and has a deposit of about 236 million tons of hard coking coal.

This disposition is a part of Talisman’s strategy of divesting assets that do not fit into its long-term growth plan. The company intends to sell its high cost and low profit generating assets and concentrate on expanding its asset base that would render high returns. The deal also underlines the company’s attempt to cover up the cash deficit as gas prices continue trade at a low level.

During the last few years, Talisman has been selling non-core properties around the world, thereby accumulating capital to concentrate on its core oil and gas lucrative prospects in Canada, the U.S., the North Sea and Southeast Asia. The company has set a target of asset divestitures worth $1 billion to $2 billion for 2012.

Early this week, Talisman entered into an agreement with Swedish energy firm Lundin Petroleum AB to sell its 30% interest in the Brynhild field, offshore Norway.

Talisman plans to utilize the proceeds from these sales to support its capital expenditure program for 2012, which was lowered by 11% from the 2011 level, in view of the weak North American natural gas scenario and volatile economic conditions. However, the company expects to witness production growth of up to 5% in 2012 and believes that the projected expenditure planning will support the medium-term growth target of 5–10%. 

As such, we see the stock performing in line with the broader market and maintain a long-term Neutral recommendation. Talisman operates in the industry along with other players such as Canadian Natural Resources Ltd. (CNQ) and Encana Corp. (ECA).

CDN NTRL RSRCS (CNQ): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
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