Repsol to Buy Talisman Energy for $8.3 Billion

Repsol SA ’s $8.3 billion deal Tuesday to take over Talisman Energy Inc. brings new production capacity and risk for a company that less than three years ago saw a large portion of itself wrested away by a populist Argentine government.

 

The move by Repsol is a high-stakes bet on a recovery of crude-oil prices and a crucial piece of the Spanish company’s strategy to convert a string of recent successes in oil exploration into gushing wells.

 

Folding in Talisman, a Canadian owner of shale acreage and offshore oil rigs, will nearly double Repsol’s daily oil output and establish the Spanish company among the top 15 producers in the world. Just as important for Repsol: It will lower the company’s reliance on volatile Latin American economies by increasing its exposure to North America.

 

The two companies said on Tuesday that their boards would recommend a bid valuing Talisman’s equity at $8.3 billion. Under the bid’s terms, Repsol will assume $4.7 billion in debt. Repsol agreed to pay US$8, or 9.33 Canadian dollars, for each Talisman share, a 60% premium to the average price over the past month.

 

A nearly 50% drop in crude oil prices since the summer drained the debt-laden Calgary-based company of cash and was starting to hurt its ability to fund continuing projects. That, in turn, pushed down the value of Talisman’s shares by more than half.

 

”It was the right moment” to make a deal, Repsol Chairman Antonio Brufau told a news conference Tuesday. “From the beginning, Talisman was in our sights.”

 

Talisman Chief Executive Hal Kvisle said the company had failed to sell off enough assets in a piecemeal fashion to service its debts, and that the company faced a cash crunch exacerbated by the plunge in oil prices.