Talisman (TLM) to Sell Large Stake in UK North Sea Busines for $1.5B; Announces $500M Buyback Plan

July 23, 2012 8:10 AM EDT
Talisman Energy Inc. (NYSE: TLM) announced that it has reached an agreement in the North Sea with Sinopec International Petroleum Exploration and Production Corporation (Sinopec), whereby Sinopec (NYSE: SHI) will acquire a 49% equity interest in Talisman's UK North Sea business, Talisman Energy (UK) Limited (TEUK), for $1.5 billion.

The deal structure will be a corporate joint venture whereby Sinopec will buy 49% of the shares of TEUK for $1.5 billion, with adjustments for working capital. This will proportionately reduce Talisman's share of capital spending, production and abandonment liabilities for its UK business. The effective date of the sale is January 1, 2012, and the transaction is expected to close by the end of this year, subject to government and regulatory approval.

The joint venture plans to invest to improve ongoing operating performance, as well as infill drilling, exploration opportunities and major projects, thereby extending field life and deferring decommissioning. Talisman and Sinopec share a philosophy of safe operations, which will continue to be the number one priority of the joint venture.

TEUK will operate the assets, and Sinopec will appoint select personnel into key positions within the organization. TEUK is based in Aberdeen, Scotland and employs 564 full-time employees, with approximately 1,950 core contractors. No reductions to TEUK personnel are expected as a result of this transaction.

Talisman plans to repurchase approximately $500 million of its common shares, on both the TSX and NYSE, subject to regulatory approval. J.P. Morgan acted as exclusive financial advisor to Talisman on this transaction.

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