Calgary-based Talisman Energy Inc. on Tuesday deepened its strategic relationship with Sasol Ltd. by selling it a half-stake in its Cypress A assets in the Montney Shale for C$1.05 billion.
Talisman would operate and manage the Cypress A and Farrell Creek areas as an integrated development project. In December Talisman sold Sasol a 50% interest in the Farrell Creek properties in the Montney for C$1.05 billion (see Shale Daily, Dec. 21, 2010).
"This transaction allows Talisman and Sasol to unlock additional value in the world-class Montney Shale play and potentially accelerate development of the resources in the area," said Talisman CEO John A. Manzoni. "The Cypress A assets are very similar to Farrell Creek and, with our partner, we will now build an integrated long-term development plan for the area."
Sasol CEO Pat Davies said the additional acquisition would allow the producer to "accelerate our upstream growth while also potentially advancing Sasol's already strong GTL [gas to liquids] value proposition utilizing our proprietary technology."
With the deal Talisman would be selling about 14% (5.6 Tcfe) of its remaining estimated 39 Tcfe of net contingent resource in the Montney Shale, as well as 17% (28,600 net acres) of the company's net Tier 1 acres of land in the play.
Under terms of the agreement Sasol agreed to pay Talisman 25% (C$260 million) in cash at closing. Sasol also would provide an additional C$790 million to fund 75% of Talisman's future capital commitments in the integrated joint venture development area. The transaction is expected to close by the end of September.
After the transaction is completed, Talisman would hold an estimated 34 Tcfe of net contingent resource and 139,000 net acres of Tier 1 acreage in the Montney Shale, including Farrell Creek, Greater Groundbirch and the Greater Cypress area. The Cypress A properties are part of the Greater Cypress area, which are 25 miles northwest of Farrell Creek.
The Cypress A area is less mature than Farrell Creek, and the partners said they don't plan to begin commercial development there for "several years. A number of options for long-term egress from the area are being considered," said Talisman.
As they said in December, the companies have launched a feasibility study to examine a GTL facility in Western Canada, with Talisman having the option to participate as a 50% partner in the facility.
A GTL facility "could provide a strategic alternative" to traditional North America pipeline or liquefied natural gas markets, said Talisman. Sasol is leading the GTL study with a front-end engineering design decision likely in the second half of 2012.
Goldman, Sachs & Co. and Jefferies & Co. acted as Talisman's advisers for the transaction.