South African energy and chemicals group Sasol (SSL) announced that it has completed the acquisition of a 50% participation stake in Canada’s Montney Shale Basin from Talisman Energy (TLM). Sasol paid a total purchase price of C$1.025 billion for the acquired assets. With the remaining 50% interest in the assets, Talisman will continue to act as the operator.
The assets included in the transaction comprise almost 51,000 acres of land in the Montney basin of British Columbia with an estimated reserve of 9.6 trillion cubic feet. The resource-rich Farrell Creek region, with its existing wells and processing facilities, is also a part of the deal and is expected to produce about 40 to 60 million cubic feet equivalent per day in 2011.
Out of the total consideration, Sasol made an initial payment of approximately C$237 million or 25% in cash for the Farrell Creek Assets on March 1, 2011. The outstanding C$788 million will be paid to Talisman for further development of the region.
Per the terms of the deal, both Sasol and Talisman will perform a feasibility study on the economic viability of a Gas to Liquids (GTL) plant in western Canada. The companies intend to work together on other Western Canadian natural gas opportunities as well.
Management of Sasol believes that the acquisition will boost its upstream asset portfolio. Sasol’s continuous focus on the commercialization of its GTL technology by constructing plants in gas-rich regions of the world will fortify its position in the industry.
We are maintaining our long-term Neutral recommendation on the stock. Sasol currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
SASOL LTD -ADR (SSL): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
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