On Tuesday, Talisman Energy and Ecopetrol announced an agreement to acquire BP's Colombian exploration subsidiary for $1.9 billion. Talisman's share of the acquisition will be $858 million, resulting in a 49% interest in four fields, two offshore exploration blocks, an interest in the Cusiana gas processing facility, and interests in four pipelines. The purchase price is in line with recent comparable transactions; at current production levels of 25,000 barrels of oil equivalent per day, we arrive at about $76,000 per flowing barrel. Excluding nonreserve assets, Talisman estimates that the deal terms work out to $40,000 per flowing barrel, implying the value of the midstream assets to be about $900 million, or just shy of half the total.
Strategically, this acquisition appears to be a good fit. Talisman has increased its exploration efforts in Colombia as of late, and the addition of these interests will allow the company to continue to develop fields outside its main operating areas in North America, Southeast Asia, and the North Sea. The pipeline interests will also provide direct access to export markets and allow Talisman to move production in a cost-efficient manner, unlike trucking.
For BP, this asset sale marks its second after agreeing to a $7 billion deal with Apache in July. These Colombian oil and gas producing assets were truly noncore, producing just 25,000 boe/d, or 0.6% of BP's 2009 production. BP is now roughly a third of the way toward its $30 billion goal for asset sales over 18 months.
Catharina Milostan contributed to this note. Robert Bellinski and Catharina Milostan are equity analysts with Morningstar.
