Talisman Energy Resources Ltd., a wholly owned subsidiary of Talisman Energy Inc., Calgary, (Toronto, NYSE: TLM) plans to acquire U.K.-based Paladin Resources Plc for approximately C$2.5 billion. Paladin has a portfolio of production and exploration assets predominantly in the Norwegian, U.K. and Danish sectors of the North Sea, as well as in Australia, Indonesia and Tunisia. The company also has exploration acreage in Gabon and Romania. Talisman has separately agreed to acquire 51.3 million Paladin shares from Aberforth Partners and Caledonia Investments. Goldman, Sachs & Co. is advisor to Talisman. "This is an attractive opportunity for Talisman and is a logical continuation of Talisman's successful business model," says Jim W. Buckee, Talisman president and chief executive officer. "These assets materially enhance Talisman's production growth profile and offer significant cash generation potential." Paladin's proved-plus-probable reserves are approximately 190 million barrels of oil equivalent, while its production from the first half of 2005 was approximately 46,000 barrels of oil equivalent per day. This acquisition will also add approximately 600,000 net acres of exploration acreage in Norway to Talisman's portfolio. After the completion of the acquisition, Talisman expects that its debt-to-cash-flow ratio will be in the 1.0 range by the end of 2006, while its debt-plus-equity ratio is expected to be approximately 0.4 by the end of 2006. Standard & Poor's has placed its BBB+ long-term corporate credit and senior unsecured debt ratings on Talisman Energy Inc. on CreditWatch with negative implications following this acquisition because it is not yet able to determine the transaction's full effect on Talisman's consolidated business and financial profiles. S&P adds that if Talisman demonstrates an ability and strategy to quickly restore its balance sheet following this acquisition, the ratings will be affirmed at their current level. "Assuming the purchase price will be initially financed with debt, this transaction will increase our calculation of Talisman's June 30, 2005, total debt by about 84%, which represents a substantial increase in leverage," says S&P credit analyst Michelle Dathorne.
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