Canada-based Talisman Energy (TLM) announced the sale of its 50% interest in the Farrell Creek gas assets to Sasol (SSL), a South African energy and chemicals group. The deal has been finalized at C$ 1,050 million or ZAR 7,119 million. Out of the total consideration, Sasol will pay approximately C$260 million or 25% in cash at closing. The outstanding C$790 million will be paid as development costs.
The assets included in the transaction comprise almost 51,000 acres of land in the Montney basin of British Columbia with an estimated contingent resource of 9.6 trillion cubic feet. Talisman’s lands, existing wells and processing facilities in the Farrell Creek region are a part of the deal.
With the remaining 50% stake of the Farrell Creek assets, Talisman will act as the operator. These assets involve the associated gas gathering systems and processing facilities.
Under the terms of the contract, both Talisman and Sasol will perform a feasibility study on the economic viability of a Gas to Liquids (GTL) plant in western Canada. The companies will also work together on other Western Canadian natural gas opportunities.
The deal, pending exchange control and other regulatory approvals, is expected to close within the first six months of 2011.
As elucidated by the Talisman spokesperson, this collaboration represents strong significance for the company in unveiling the value of the Montney assets and tapping the vast resources in that region. The company believes that Sasol’s experience in operating a GTL facility will help both the companies succeed in this venture.
Sasol’s management believes that the acquisition will enhance 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 strengthen its position in the industry in the coming years.
Both Talisman and Sasol currently retain 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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