Talisman selling 50% share in Montney Shale to Sasol

Talisman Energy Inc. is selling a 50% interest in its Cypress Assets in the Montney shale play to Sasol Limited (Sasol), for C$ 1050 billion. Talisman will operate and manage the Cypress A and Farrell Creek areas as an integrated development project.

"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 John A. Manzoni, President & CEO of Talisman. "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 have acquired the assets in the Montney Shale as there is significant opposition to shale gas extraction in South Africa due to the fracking process, which is used to extract the gas from the shale formation.

Sasol are world leaders in gas-to-liquid conversion technology and the two companies have also commenced a feasibility study to examine a world scale gas-to-liquids (GTL) facility in Western Canada, with Talisman having the option to participate as a 50% partner in the facility. This could provide a strategic alternative to traditional North America pipeline or LNG markets. The GTL process produces premium, clean liquids fuel. Sasol is leading this study with a front-end engineering design decision likely in the second half of next year.

"This additional acquisition of another high quality natural gas asset will accelerate our upstream growth while also potentially advancing Sasol's already strong GTL value proposition utilising our proprietary technology," said Sasol chief executive, Pat Davies.

Back in December 2010, Talisman and Sasol announced a similar transaction for the acquisition of a 50% net interest in Talisman's Farrell Creek properties in the Montney shale play.

The Cypress A transaction represents the sale of approximately 14% (5.6 trillion ft3) of Talisman's remaining estimated 39 trillion ft3 of net contingent resource in the play and approximately 17% (28,600 net acres) of the company's net Tier 1 acres of land in the Montney shale. Sasol will pay 25% of the consideration (approximately C$260 million) in cash at closing. Sasol will also provide an additional C$790 million to fund 75% of Talisman's future capital commitments in the integrated joint-venture development area.

Upon closing, Talisman will hold an estimated 34 trillion ft3 of net contingent resource and 139,000 net acres of Tier 1 acreage in the Montney shale play, including Farrell Creek, Greater Groundbirch and the Greater Cypress area. Commercial development is not expected to take place in the Cypress A asset for several years though.

Published on 09/03/2011

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