Ticonderoga Maintains a 'Neutral' on Talisman Energy (TLM); Takeaways From Talisman and Sasol's BC GTL Presentation
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Price: $7.99 --0%
Rating Summary:
3 Buy, 9 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
3 Buy, 9 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Ticonderoga maintains a 'Neutral' on Talisman Energy (NYSE: TLM).
Ticonderoga analyst says, "Talisman and Sasol (NYSE: SSL)(Not-Rated) gave a presentation yesterday on their new JV in the Montney shale play of British Columbia and the potential for gas-to-liquids (GTL) production. We believe the project couldn’t be better timed or located. With oil trading at 25x gas and Canadian gas looking for market alternatives, the case for GTL appears compelling. But it has the potential to be very costly and is still years away. We like BC GTL in theory; in practice, there’s still much more to know before assigning it any value in TLM’s portfolio."
"The partners are putting together a feasibility study, expected to be completed mid-2012, after which they expect to make their Final Investment Decisions (FID). Since the ~20 Tcf of contingent gas in the Montney JV gas is split 50/50, in theory, they could go separate ways and SSL could choose to pursue GTL while TLM simply sells its gas as is."
"Should both companies decide at FID to build a GTL plant, it will be at least another 4-5 years to first production. The current outline calls for a pair of 24,000 b/d GTL trains producing clean diesel and naphtha, a premium product in Canada since it makes a good diluent for oil sands output."
"What matters most with GTL is the ratio between oil and gas prices. It’s a rule of thumb in GTL that it takes ~10 Mcf of gas to produce one barrel of liquids, so before considering capex, a GTL producer needs liquids prices at least 10x that of gas to break even (note that the ultra-clean product that GTL plants produce generally sells at a premium to crude). SSL wouldn’t be drawn on what the ratio has to be for the planned plant, but hinted that in today’s capex environment it would need at least 15x."
For more ratings news on Talisman Energy click here and for the rating history of Talisman Energy click here.
Shares of Talisman Energy closed at $24.49 yesterday.
Ticonderoga analyst says, "Talisman and Sasol (NYSE: SSL)(Not-Rated) gave a presentation yesterday on their new JV in the Montney shale play of British Columbia and the potential for gas-to-liquids (GTL) production. We believe the project couldn’t be better timed or located. With oil trading at 25x gas and Canadian gas looking for market alternatives, the case for GTL appears compelling. But it has the potential to be very costly and is still years away. We like BC GTL in theory; in practice, there’s still much more to know before assigning it any value in TLM’s portfolio."
"The partners are putting together a feasibility study, expected to be completed mid-2012, after which they expect to make their Final Investment Decisions (FID). Since the ~20 Tcf of contingent gas in the Montney JV gas is split 50/50, in theory, they could go separate ways and SSL could choose to pursue GTL while TLM simply sells its gas as is."
"Should both companies decide at FID to build a GTL plant, it will be at least another 4-5 years to first production. The current outline calls for a pair of 24,000 b/d GTL trains producing clean diesel and naphtha, a premium product in Canada since it makes a good diluent for oil sands output."
"What matters most with GTL is the ratio between oil and gas prices. It’s a rule of thumb in GTL that it takes ~10 Mcf of gas to produce one barrel of liquids, so before considering capex, a GTL producer needs liquids prices at least 10x that of gas to break even (note that the ultra-clean product that GTL plants produce generally sells at a premium to crude). SSL wouldn’t be drawn on what the ratio has to be for the planned plant, but hinted that in today’s capex environment it would need at least 15x."
For more ratings news on Talisman Energy click here and for the rating history of Talisman Energy click here.
Shares of Talisman Energy closed at $24.49 yesterday.
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