Under Icahn’s Watchful Eye, Talisman Sells Columbian Pipeline Interests For $600 Million

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
595MM
Description

Bought a 12% equity interest in the Ocensa Pipeline.

Activist shareholder Carl Icahn made waves in October by disclosing ownership of 61 million shares of Talisman Energy Inc. (TSX: TLM) (NYSE: TLM).

In December, Icahn said his record shows “our involvement on boards has created meaningful value for shareholders. I’m optimistic this will continue with TLM.”

So far, Icahn hasn’t had to do much to make that happen.

Talisman sold its interests in Columbia’s Ocensa Pipeline for $595 million, the company said Dec. 10. In November, the Calgary-based company sold off its Montney assets for $1.43 billion.

Icahn just negotiated two seats on Talisman’s board on Dec. 2.

Tudor, Pickering, Holt and Co. said Talisman’s take was greater than the $500 million it had estimated. Its second sale before 2014 shows the company is committed to rationalizing its portfolio.

Hal Kvisle, President and CEO of Talisman Energy, said he set a goal in March for the company to sell $2-3 billion in Talisman.

“When combined with some small Canadian assets and our equity interest in the Ocensa pipeline, (the deals) bring our sale proceeds to approximately $2.2 billion,” Kvisle said. “We will use these to reduce debt and strengthen our balance sheet, and will continue to progress additional opportunities to unlock value.”

As part of the deal:

  • Two Talisman affiliates will sell their 12% equity interest in the Ocensa Pipeline for approximately $595 million.
  • Other Talisman affiliates retain crude transportation rights for approximately 63,000 barrels of oil per day. Talisman will use these rights to transport proprietary crude, and will generate third-party revenue from surplus capacity.
  • The dispositions announced by Talisman are part of a larger Talisman-led sales process involving Total Colombia Pipeline, affiliates of Total S.A. and CEPSA, which will result in the investment group led by Advent International acquiring an aggregate 22% shareholding in the Ocensa pipeline.

“Through this transaction, we have unlocked net value from our portfolio and retained our crude transportation rights,” Kvisle said. “This enables us to maintain our competitive advantage by transporting oil from our own operations and generating third-party revenue from any surplus capacity.”

BMO Capital Markets and Credit Suisse Securities acted as joint advisors to Talisman.

Kvisle said the Montney and Columbian transactions provide strong momentum going into 2014. The company will continue to focus on its core areas: the Americas and Asia-Pacific, which represent 90% of its production and 80% of its cash flow.

The company said in November that it was in the process of monetizing assets or entering a joint venture in Norway, North Duvernay, Topkhana (Kurdistan) and Marcellus midstream. The company has exited Peru, Sierra Leone and Poland.

Icahn initially said he wanted to talk to management about strategic alternatives and board seats.

On Dec. 2, Talisman entered an agreement with Icahn and his affiliates to appoint two men to the company’s board of directors.

“I strongly believe in the potential of Talisman and I’m pleased to have reached this constructive outcome,” said Icahn, chairman of Icahn Enterprises LP. “We look forward to working with the board of directors and management with a common objective of creating sustainable value for all shareholders. Our record shows that our involvement on boards has created meaningful value for all shareholders. We hope and believe this will continue with Talisman.”

Icahn and his associates own 7% of the Talisman common shares outstanding. Icahn has agreed that he will vote the shares he controls in support of Talisman’s slate of director nominees at the company’s 2014 annual meeting of shareholders.