Spain's Repsol has agreed a deal to buy Canadian exploration and production company Talisman Energy for US$8.3 billion plus debt - amounting to the largest international deal by a Spanish company in five years.
The deal, which had been rumored for some months, has been approved and recommended by the boards of directors of both Talisman Energy and Repsol and is expected to complete mid-2015, says Repsol. Talisman's shares rose on the announcement, although they were still 44% down compared to when Repsol's interest was first leaked in July. In the same period, oil prices have slumped to a five year low.
Repsol has been seeking a deal to boost its production and reserves since it received compensation in May from Argentina for the 2012 nationalization of YPF SA, through which Repsol gave up almost half of its oil and gas reserves.
Under the deal to acquire Talisman, Repsol's output will increase 76% to 680,000 boe/d under the deal. Repsol's reserves will increase 55% to more than 2.3 billion boe.
Antonio Brufau, Repsol's chairman, said: “This is a transformative and exciting deal which will make us one of the world’s most significant players and which will allow us to grow as a company and reinforce Repsol as a solid and competitive integrated player.”
The move will see Calgary (Canada) become one of Repsol's largest corporate centers outside Spain, as well as the Spanish firm, based in Madrid and led by CEO Antonio Brufau Niubó, take on assets in North America (Canada and US), South-East Asia (Indonesia, Malaysia and Vietnam) as well as Colombia and Norway.
North America, which is mostly onshore acreage, will represent 50% of Repsol's capital employed in exploration, once the deal completes, with Latin America representing 22%. Under the new expanded company, Repsol will allocate 30% of its capital employed to the region, totaling approximately US$15 billion.
Josu Jon Imaz, Repsol's CEO, says: “The agreement with Talisman is the result of an exhaustive analysis of more than 100 companies and assets worldwide. In every area, Talisman has always been the best option, because of the excellent quality of its complementary global assets, including its talent. With Repsol’s ability to support growth of these assets there is much value to be realized - it is a win-win situation and will transform Repsol.”
Repsol has already been active in Canada, with exploration activity offshore East Coast. The firm is also a partner in the Canaport LNG facility located in New Brunswick.
The acquisition will be financed with cash essentially obtained from the recovery of value from YPF following its expropriation (US$6.3 billion) as well as other sources of liquidity available to the company.