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Talisman Suitors Considering Merger Offers

Calgary-based Talisman Energy Inc. confirmed Monday that it was in talks with Spain's Repsol SA regarding a potential corporate merger. Another potential suitor also confirmed that it was considering a bid, which could be for more than $5 billion, sources said.

Repsol's board was scheduled to meet on Monday for what a spokesman confirmed were to include discussions regarding a vote on buying the global exploration company. The Canada Pension Plan Investment Board (CPPIB) confirmed Monday that it also was weighing a bid for Talisman.

Talisman, in response to a request from Canadian stock market regulators, said it has been approached "by a number of other parties regarding various transactions."

Most of Talisman's North American production is natural gas-weighted. From North America in 2013 Talisman produced 353,000 boe/d, including 883 MMcf/d of natural gas and 35,000 b/d of oil and liquids. About 65% of production is natural gas and 35% is liquids.

Talisman operates in the Eagle Ford and Marcellus shales. In 2013, production from these plays totaled about 630 MMcfe/d (105,000 boe/d). Most of the work now is in South Texas, where Talisman has interests in 61,000 net acres that it jointly operates with Statoil. This year the partners together were planning to run five rigs in the play.

The Marcellus leasehold production at the end of 2013 averaged 446 MMcf/d across 193,000 net acres in Pennsylvania.

In addition, Talisman has midstream assets in Pennsylvania consisting of 240 miles of gathering/transmission pipelines serviced by seven compression/gas dehydration facilities (74 units) with throughput capacity of 1.5 Bcf/d. The New York midstream assets include 195 miles of gathering/transmission pipelines and seven compression/gas processing facilities (nine units) with throughput capacity of 125 MMcf/d.

The Appalachian midstream assets now gather only volumes from wells in which Talisman currently has a working interest, although additional capacity is available for future use for third parties. Talisman currently holds 620 MMcf/d of gas pipeline capacity from the Marcellus area.

The Canadian assets are focused around liquids and gas in the Greater Edson area of Alberta, conventional oil in the Chauvin area of Alberta/Saskatchewan, liquids-rich gas in Alberta's Duvernay formation, and natural gas in the Montney play in British Columbia. Talisman's Canadian production in 2013 was 461 MMcfe/d (77,000 boe/d).

CPPIB, based in Toronto, owns most of Teine Energy Ltd. and is the largest stakeholder with 15% interest in Seven Generations Energy Ltd.

Repsol is a big international player. In the United States, it explores for oil and gas in the deepwater Gulf of Mexico, the North Slope of Alaska, Kansas and Oklahoma. In Canada, exploration and production assets are located offshore Newfoundland and Labrador. Repsol sold most of its global liquefied natural gas (LNG) assets earlier to this year but it continues to operate the Canaport LNG terminal in Saint John, New Brunswick with a 75% stake. The plant has a maximum send-out capacity of 1.2 Bcf/d, and Repsol has a 25-year contract for 100% of capacity, which serves the U.S. Northeast.

Since 2006, Repsol has more than doubled its U.S. workforce, and at the end of 2013, it had more than 450 employees in the country. A new Repsol office is under construction in Houston to serve as the regional headquarters.

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